Options in mezzanine financing
Lampe Capital Finance GmbH, a subsidiary of Bankhaus Lampe KG, has launched Lampe Mezzanine Fonds I, a closed-end investment fund in accordance with the German Investment Code (KAGB). Bankhaus Lampe itself invested EUR 10 million as a sponsor. The remaining thirteen investors are insurance companies, pension funds, family offices and investors from the church sector.
The fund is suitable for all types of institutional investors as it offers an attractive risk-adjusted return, has no correlation to other asset classes and pays ongoing distributions. This week we are subscribing to our fourth investment and have thus allocated around EUR 20 million of the volume. The companies were carefully selected from more than 150 investment opportunities and come from the guardrail/road construction, medical and industrial technology, and IT/software solutions sectors.
Target companies should have sales of at least EUR 30 million and a five-year company history. In addition to an appropriate equity ratio, sustainable, stable profitability and positive operating cash flows should have been achieved in the last 3 financial years, which will also lead to sufficient debt service capability in the future. — Key qualitative criteria are convincing management without so-called “key man” risks, a viable business model and a solid market position. In addition, a clear corporate strategy and sustainable positive development prospects should be evident. Our focus is on German small and medium-sized enterprises.
The target size for our mezzanine investments is between EUR 3 — 10 million per company; we realize larger individual tickets with co-investments by customers of Bankhaus Lampe KG. The advantage for the target companies is that, with us as fund manager, there is only one contact person.
Mezzanine investments are generally structured as equity-like funds with maturities of between five and seven years. Typical instruments are silent partnerships or profit participation rights. The interest claim lies between the conditions of long-term loans and the expectations of minority direct investments. Compensation regularly consists of a fixed and a variable component, often supplemented by an equity kicker. They vary depending on the design of the risk parameters; in total, however, they are in double digits.
Mezzanine finance is particularly suitable for companies that want to strengthen their growth or expansion organically or through acquisitions. To do this, they need equity-like funds, at least temporarily, but do not want to give up any shares in the business. Other typical occasions are company successions or the reorganization of the shareholder structure, and occasionally also recapitalizations for asset diversification of entrepreneurial families.
Our investments are individually tailored to the needs of each company. Bankhaus Lampe is part of the Oetker Group and has an industrial background. We are deeply rooted in the German SME sector. The investment team also has many years of experience in medium-sized investment, capital market and corporate client business, enabling us to provide ideal support to companies. Especially in complex situations that are not standard, we are the right contact.
About Ole Klose
Ole Klose has extensive experience in turnaround management, restructuring, investment banking and private equity. He worked for the Treuhandanstalt in the early 1990s, later for Bankgesellschaft Berlin and since 2002 for Bankhaus Lampe KG. In the course of his activities for Bankhaus Lampe KG and Lampe Beteiligungsgesellschaft mbH, Ole Klose successfully entered into numerous investments, e.g. in Vapiano SE, for Bankhaus Lampe KG. Ole Klose studied business administration at the University of Hamburg, graduating with a degree in business administration.