- Henko Partners had the opportunity to talk about its recent journey and future plans in the March 2024 edition of Capital & Corporate magazine.
Madrid, 21 March 2024. - In 2021, Lars Becker, Íñigo Urbón, Ricardo Mellado and Jules de Meeus launched Henko Partners to support the growth and internationalisation of the low middle market in Spain and Portugal. In less than three years, the fund manager has invested almost all of its first €70M fund in six platforms that it has promoted through 9 add ons and has laid the foundations for the fundraising of its Fund II, a follow-on vehicle that will double the size of its predecessor and confirms Henko's successful investment thesis.
Henko Partners was born less than three years ago, but in this time it has demonstrated its investment thesis of supporting Spanish companies in their internationalisation with a good number of deals. What is your approach? Our investment philosophy is based on three main pillars: specialising in sectors with solid fundamentals and clear growth prospects, focusing on fragmented markets with room to implement consolidation strategies, and working with entrepreneurs and management teams with the ambition to elevate their companies and make them international benchmarks. We prefer to take majority stakes in B2B companies. Once we have agreed to become a shareholder in a company, we agree on an organic and inorganic growth plan with our partners. Very often this plan includes international expansion into other key EU countries.
Your latest operation has been the Portuguese company Quadrante Engenharia. What expansion plans do you have for the firm? We met Quadrante's partners in 2022 and by summer 2023 the deal was closed, subject to completing the typical pre-closing conditions precedent. We were convinced by the quality of the founding team and their motivation to accelerate the international growth of their company. The project we have defined with Quadrante's partners is to create an international reference engineering company specialised in sustainability with a relevant presence in Europe and the US. Therefore, inorganic growth will follow this line, starting with several acquisitions in Spain and Portugal during 2024. From 2025 we will also look at acquisitions in the US market.
Also in the Portuguese market you have acquired Link, leader in IT services in Portugal, what attracted you to this company? The IT sector is one of the verticals that we have been working on for years with the ambition of implementing a consolidation plan at European level. In Spain we had not managed to find the platform that fitted us and Link meets all the necessary requirements to lead a project of these characteristics: a highly qualified management team with international experience, being one of the main players in Portugal, a mature organisation with the capacity to take on integration processes and a vision of growth shared with the management team.
Among your most advanced investments is Astrum CRO, the group created from the acquisition of BioClever and the integrations of PopsiCube/MissionTEC, BlueClinical and Pharmalog, how are you building this group? When we invested in BioClever, the seed of what Astrum is today, we did so with the clear conviction of creating a European benchmark group in clinical research services. Before closing the deal, we began work on an acquisition plan focused on expanding into key European geographies, completing the portfolio of services and bringing in world-class talent. The investments made to date follow this strategy and have allowed us to have a relevant presence in Germany, France, Portugal and Spain, key countries for clinical research, as well as to reinforce the service portfolio with our own hospital Phase I unit in Porto or experience in decentralised clinical trials. We are building this thanks to very high-level human teams in the acquired companies, complemented by executives that we have incorporated into the project with very relevant experience in this industry.
You also have control of Revergy. How did you become part of the Sevillian company? We have a lot of experience with investments in the renewable world and when we met Revergy in 2021 we liked it from the very first moment. The company is dedicated to asset management, operations and maintenance of wind and photovoltaic farms. It is an attractive business model with a very recurring turnover and Revergy stands out for its high degree of technical specialisation in the wind and photovoltaic sector, the multi-year contracts it has with the main global asset owners and a very professional team. The growth of the renewable sector has not only produced a lot of growth in the markets where Revergy already had a presence, but also pushed us to enter new markets, such as Brazil, Italy and Peru. In addition, going forward, we are also considering the company's entry into the US.
Defeder Alcolea is another of your most important investments. In it, you have included Oscafos. What strategic plan are you developing in this company? Agriculture is undergoing a profound transformation focused on making it more sustainable in the long term without losing production efficiency and organic fertilisers, as well as other soil regeneration products, will play a key role in this change. Defeder is one of the leading European companies in this new segment and, together with the founders and management team, we have outlined an investment and acquisition plan to consolidate our leading position. This plan has included significant investments to increase and automate our production in Spain, as well as to acquire new capacities (Oscafos) or to improve our entry into other markets (Calcisol for the French market). This year we expect to continue with this plan with acquisitions outside Spain.
Among the fund's first investments are the Galician firms MMYPEM and Teiga-TMI, which have joined forces to create Voltan, a group that has integrated companies such as Garoc and Aplipem How did they develop? these operations? The transactions follow a strategic plan that seeks to consolidate Voltan's position throughout the energy value chain (from generation to transmission and distribution). Both Aplipem and Garoc have been strategic acquisitions to strengthen existing capabilities (in the case of Apliplem, electrical commissioning) and enter new markets (with Garoc, in the substations and high voltage lines segment). Henko continues to believe in the long-term future of the energy industry and we are delighted to accompany our partners in Voltan in this process of sector consolidation. In the coming months we want to bring more companies into the project. Voltan today is already a very international company, with experience in many countries in Europe, Latin America and Africa. To strengthen our international presence, we are now looking at acquiring companies in Europe.
What factors do you take into account when deciding which companies to invest in, and are you finding a good deal flow? Our focus is on four major verticals that we believe have structural growth dynamics: healthcare (health services and pharmaceuticals), technology, sustainability - and energy - and industrial automation. Within the verticals in which we are specialising, there is a lot of dynamism, so the volume of M&A activity is high. And because we have been working in our key sectors for years, our network of contacts is getting better and better at identifying interesting companies. We are looking for companies with teams eager to continue building growth projects, with international exposure and seeking excellence in the performance of their activity.
One of the common points of your portfolio is its strong international character. Is the possibility of promoting an international growth project a key issue for Henko? Henko's team has a fairly international profile so it is, in a way, natural that we look for markets in Northern Europe and America as a way to grow. It is not a "sine qua non" condition but we feel very comfortable with this profile of projects and we understand that in most cases it increases the probability of success and the value of our companies.
Your investment strategy is focused on the Spanish and Portuguese markets. Do you have specific allocations for these two countries and are you open to investing in other markets? To date, we have always invested in Iberia as an entry platform. We don't have specific allocations to Spain or Portugal, but just because of the size of the market, Spain will always be more relevant. Among the latest add-on purchases, we have also made acquisitions in France and Germany. We are currently looking at opportunities in other regions and countries in Europe, such as Benelux, Poland, Italy and Scandinavia. We believe that M&A is a key lever to accelerate the international growth of our investees and we will continue in this line.
You have completed several direct investments since your first fund, how many more investments do you expect to close through this fund? What average tickets are you moving on? We have invested in 6 platforms, which will make up the portfolio of the I fund. To date we have made 9 acquisitions to complement the various companies in the portfolio and we expect to continue to grow inorganically in all projects. The usual size of companies in which we invest at the time of our entry, in terms of ebitda, is usually in the range of €2M-€6M, but we have actually executed transactions with lower ebitda and higher ebitda. Our focus is mainly on the business potential.
Are you planning to start moving forward with portfolio rotation, and are you seeing market interest in your assets? The portfolio is still young, we have only been invested for two years in the first platforms we entered, but it is true that some of our companies are starting to generate interest in the market. In the short term, we have no plans to exit any assets.
Your first fund Henko Partners I reached its final closing with €70M in a few months, thanks to the good reception in the market, was the experience of the Henko team decisive to successfully complete the fundraising of your debut fund in such a short time? Raising a first vehicle is always complicated, even if there is great liquidity in the market, even more so at a time marked by the pandemic and the uncertainty it generated, but we are very satisfied with the reception it received in the market. We believe that there were two factors that contributed to the success of Henko I's fundraising: a differentiated investment proposal and beginner's luck. Having previous successes is always a plus, both when starting up the fund management company and when entering new companies. To complete the fundraising process, the fund's previous credentials have helped. For the closing of this first fund, we had the support of an investor base composed mainly of European institutional investors and Spanish entrepreneurs who trusted in our project.
You are already working on your second fund, will it follow a continuity strategy? The investment strategy of fund I has worked very well and we will continue with the same strategy for the next fund. For the time being, we have already registered Henko II with the CNMV and during 2024 we will launch the fundraising process with a target of €150M, which would double the size of the first vehicle.
During this time you have also significantly increased your team, is your goal to continue to grow in structure? Our buy and build strategy requires a lot of resources to execute the number of transactions annually. In 2023, we acquired 9 companies and brought in 10 new executives and 5 new Board members in our investees, but as the portfolio is growing, we will bring in more resources during 2024.
Sector volume has contracted in 2023, but activity is expected to pick up in the coming months. How are you seeing the market? What are your prospects for 2024? For us, 2023 has actually been a very active year, but that trend may not be representative of the market, as we are a very small fund and focused on a few sectors. We expect to continue in 2024 with a similar or even slightly higher level of activity compared to previous years, and so far it looks good. This year we want to add two new platforms to our family of investees. In addition, we will continue to grow inorganically in almost all of our investees, with acquisitions in Spain and abroad.
About Henko Partners:
Henko Partners is an independent private equity firm focused on supporting Spanish and Portuguese SMEs in markets with long-term growth trends. The strategy is to work with entrepreneurs and management teams to develop high potential businesses. In partnership with companies, the firm drives strategic initiatives and practical operational improvements. As entrepreneurs for entrepreneurs, the firm supports companies to accelerate their growth and transform into more resilient and sustainable businesses. The Henko team has extensive investment experience and a strong track record of execution in business services, energy-technology, and healthcare. Henko Partners is a responsible investor committed to strict environmental, social and governance principles.
For more information, please visit https://henkopartners.com/es/
