European Fund Briefs, May 2011

Wellington Combines Cleantech, Digital Media

Wellington Partners seems a quintessentially British name, but the Munich-based firm, which focuses on digital media, cleantech and life sciences, is actually one of the leading lights of Germany’s venture capital sector.

That sector took a famous hammering after the dot-com bubble, contracting almost 80%, but has revived since, albeit with fewer, more powerful players.

“Germany is vibrant and there’s a lot of great talent in Berlin, Hamburg and Munich. Obviously there was a big dot-com fallout so there aren’t many major VC firms there, but there are still enough people to make it interesting,” says Daniel Waterhouse, a Wellington partner with 12 years of experience of the digital media sector.

Uniquely, Wellington also operates a London office that invests on an equal footing to its home base.

“We’re in the two biggest capital markets in Europe—Munich and London—and that fits well with our Pan-European investment strategy,” Waterhouse says.

Wellington’s cleantech and digital investments are made through a €265 million ($382 million), 2008-vintage fund, now more than half invested, but still with significant capital to deploy.

Waterhouse reports ever-increasing deal flow for both cleantech and digital media, though this year he expects his firm to roughly match the six deals made in 2010.

Internet companies feature heavily in Wellington’s portfolio, and include local business reviews service Qype and Europe’s leading music streaming service Spotify, in which the firm led a €31 million ($45 million) Series B round in 2009. Wellington’s latest foray into the cleantech market was a €15.5 million ($22 million) growth financing round in German LED-focused semiconductor company Azzurro.

“We’re quite unique in that we believe in a balance between cleantech and digital media,” Waterhouse says. “Digital Media can have strong capital efficiency, but models shift quickly and competition can be intense; Cleantech is more capital intensive, but businesses often have stronger intellectual property and operate in larger markets.”

Avowedly stage-agnostic, Wellington considers opportunities from €500,000 to €25 million, though each industry can trend differently.

“Cleantech tends to be earlier stage because of the maturity of the industry,” he says. “With digital media it can be all stages but it’s tended to be more seed-focused recently.”

The digital media specialist also describes a shortfall of mid-stage funding in his sector.

“There is a lot of capital at the early stage and lots later on where investment from VC, PE and U.S. firms seems to converge, but that’s made it tougher for the middle-Series B rounds are difficult.”

Waterhouse says the firm’s competitors for cleantech deals include London-based Zouk Ventures and Swiss firm Emerald Technology Ventures.

Among its chief rivals in digital media are Balderton Capital and Index Ventures.

Capital Warms to German Distressed Fund

Berlin-based Capital Management Partners (CMP) has closed its German Opportunity Fund II at €175 million ($249 million).

CMP invests across German-speaking regions in distressed companies and expects to divest the 10th and final portfolio company—packaging provider Rebhan—from its first fund in Q2 2011.

CMP Director Andreas Boettger told VCJ that there was probably less competition among German turnaround firms than elsewhere in Europe due to banks’ heavy involvement in Germany’s distressed sector.

The new fund was fully raised from institutional investors in Europe, Asia and the United States, including Cincinnati-based fund-of-funds manager Fort Washington and London-based Veritas Asset Management.

“Although CMP has been investing for 10 years, CMP Fund II was our first institutional fundraising. The process was different as we marketed to a global audience of prestigious investors and they were very detailed in their due diligence and referencing, which we encouraged,” Boettger told VCJ.

CMP’s last exit was the sale of household goods manufacturer Schock to Equita Management for an undisclosed return.

Synergia Races Ahead with Second Fund

Fundraising in 2011 may be better than last year but in no way will we see a return to pre-crisis levels.

Daniel FinesteinManaging PartnerInfinity

Milan-based mid-market investor Synergo can begin allocating its second fund, Sinergia II, after holding a first close at €350 million ($500 million).

Sinergia II was raised from institutional investors in the United States and Europe, and brought the firm’s total assets under management to €450 million ($643 million).

The fund will target growth opportunities in mid-sized, profitable companies operating outside regulated industries, investing from €20 million ($29 million) to €50 million ($71 million).

Synergo’s current portfolio consists of 13 companies, many in niche sectors; these include valve manufacturer Valvitalia and automated gate and shutter specialist V2.

The firm’s last reported exit in September 2010 was the sale of charter airline Air Italy to strategic investors.

Infinity Fund: To PE and Beyond

Reporting “exceptionally harsh market conditions,” Infinity, the Manchester-based private equity and real estate investor, has closed its third fund at $200 million.

“It took us about nine months to raise this fund and we were put under more scrutiny than ever before, both in terms of past performance and the composition of our team,” Daniel Finestein, managing partner at Infinity, told VCJ.

“Fundraising in 2011 may be better than last year but in no way will we see a return to pre-crisis levels,” he added.

With a preference for profitable companies, the fund will invest between £5 million ($8 million) and £25 million ($40 million) at a time, with more than $100 million to be committed outside the United Kingdom.

The fund will target private equity and real estate investments, the first of which was the £13.5 million ($21.8 million) purchase of Manchester International Office Centre in March.

Finestein said that though there was no planned weighting between real estate and private equity, neither one would dominate the other.

Alchemy Conjures Record Second Fund

Alchemy Capital Partners has raised Europe’s largest fund since the financial crisis to target distressed companies.

Closed at £500 million ($806 million), Alchemy’s second special opportunities fund tempted back many of the investors from its first, £306 million fund, but also won support from fresh institutional capital in Europe and the United States.

Investing in the debt and equity of listed and private companies, Alchemy’s second turnaround fund will adopt a similar strategy to its first, but will run for seven years rather than five, investing over a four-and-a-half-year period.

A spokesman with London-based Alchemy said that the firm was well-placed to exploit the need for European banks to offload extensive debt portfolios over the coming years.

Research by Preqin estimates that turnaround funds based in and focused on Europe will seek $8 billion in 2011 after raising $5.4 billion last year.

Cinven Commences €5B Buyout Fund

Hot on the heels of BC Partners’ mammoth first close in March, fellow London-based private equity firm Cinven has launched a similar ambitious fundraising effort.

Cinven plans a fifth, €5 billion ($7.1 billion) fund, with a first close penciled in for autumn, according to a report by Reuters.

BC Partners stuck to a comparable schedule with its new €6 billion buyout fund, which held an initial close at €4 billion in March 2011 after six months of fundraising.

Cinven, which focuses on large European buyouts, has extended the investment period until mid-2012 for its last fund, which was closed at €6.5 billion in 2006, but still retains €2 billion of uncommitted capital.