DevCo Partners raises €180m for next platform deal

Established in 2014, DevCo aims to manage long-term, hands-on investments in medium-sized companies with revenues of €50-500m. It previously raised two vehicles in order to finance two platform investments, Vexve Armatury Group (2016) and Medix Biochemica (2018), and their associated bolt-ons. The amount raised for these previous vehicles remains confidential.

The fund will have a five-year investment period, with a holding period of up to 15 years. "We founded DevCo because we realised that the traditional private equity holding period puts limits on how you can create value," DevCo founding partner Otto Kukkonen told Unquote. "We felt this different offering could address some of these issues: with a five-year investment period for a single platform, we are never in the position of being a forced buyer and can be really selective. After that, the longer holding horizon means we are never forced sellers either, and we really have time to get hands-on and oversee a real step-change in the growth of the business."

The fund's terms and conditions, on the other hand, closely mirror the traditional private equity offering to entice LPs familiar with the model, Kukkonen says.

Investors
The firm launched its latest vehicle before the summer of 2019 and aimed to attract a broader base of investors, in addition to its previous backers. The fund's LP base consists of Finnish and northern European investors, with a mix of high-net-worth individuals and institutions – including Finnish billionaire Antti Herlin, EQ chair Georg Ehrnrooth, Supercell co-founder Ilkka Paananen, and institutions Keva, Ilmarinen, Rettig Group, Tesi and Argentum.

LPs have been receptive to the deal-by-deal strategy, Kukkonen says: "Some of them had been knocking on the door since we set up in 2014, asking how they could get in. In effect, they are getting all the benefits of a traditional co-investment strategy, but without some of the drawbacks: we have a single pipeline of deals, for instance, unlike some GPs that might only offer co-investment on the side for some of their deals."

Investments
DevCo is flexible on investment structures, and Kukkonen says the firm is happy to invest in various ways and go beyond vanilla funding, as long as it can have hands-on impact on the company's strategy. DevCo's workflow focuses on one partner being responsible for a single platform investment, including taking an operational position if necessary. Kukkonen notably took on the role of CEO at Vexve for a year when DevCo originally acquired the valves manufacturer, even relocating full-time to the small Finnish town of Sastamala. Another constant is that management teams (and sometimes the founders) are investing in the deals as well.

DevCo has not yet formally identified a firm target for its next platform, to which the latest fund will be dedicated. "However, I'd say our pipeline has never been so strong," says Kukkonen. "But dialogues can take a very long time when you look at family-owned companies, as we tend to do. We have a pretty good idea of what the investment might be, based on these ongoing conversations, but we'll see what happens." All acquisitions (platforms as well as bolt-ons) made by DevCo so far have been from founders, according to Kukkonen.

People
DevCo Partners – Otto Kukkonen, Teemu Alahuhta, Juhani Laakso, Lauri Stadigh (partners); Matti Alahuhta (chair, partner).

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