Equity Capital Group Moves into Germany

The stampede into Germany’s private equity market continues. GE Capital Equity Capital Group Europe (ECG Europe) is the latest firm to announce the establishment of a German office. ECG Europe, which is a division of GE Capital Services, is headquartered in London and already has offices in Italy, Warsaw and Stockholm. Nick Money-Kyrle has been recruited from 3i Germany to head the new Frankfurt operation and will divide his time between Frankfurt and London.

The German operation will target development capital and buyout opportunities. ECG Europe managing director Andrew Beaton said the firm plans to staff up the office in due course. In the interim, a number of German-speaking executives based in London will be able to provide the Frankfurt operation with any support it needs.

GE Capital Services re-entered the European private equity market in 1996 (EVCJ February/March 1997, page 3), with a strategy of investing in companies where either GE itself or GE Capital Services can add value beyond the mere provision of funding. The group regards the strategic value added through access to the global GE network as a primary feature differentiating ECG Europe from its competitors.

ECG Europe anticipates its industrial parentage will carry considerable weight in the German market. Although GE itself is less well represented in Germany than elsewhere, thanks to the fact that some of its major global competitors are German-owned groups, GE Capital has massive investment interests in the country, encompassing insurance, leasing, consumer finance and VARs. The group’s established network of contacts, together with its strong reputation, should ensure that a healthy proportion of ECG Europe’s German deal flow is proprietary. Last year, the group invested DM 45 million of development capital in IFCO, a major German logistics business that is slated for a flotation “in the foreseeable future”, according to Andrew Beaton.

Normally, the group invests between $5 million and $50 million (ecu 4.5 million-ecu 46 million) per deal. As well as investing directly on its own behalf, ECG Europe deploys capital through a co-investment agreement with Advent International. This agreement was the source of ECG Europe’s largest investment last year, when the group provided $35 million of equity for the HRC transaction. In all, ECG Europe disbursed more than $200 million in 1997: deals led by the group during the past 12 months included Gemplus in France; Silvertech and Card Clear in the UK; Panta Electronics and Euralcom in the Netherlands; Vimercati in Italy; and Euronet Holdings in Central Europe.

Andrew Beaton indicated that the opening of a Paris office would be the likely next step in ECG’s international expansion.