REACH - International

REACH - International

REACH - International

04. IK acquires disruptive French asset manager Eres 10. Moving into specialist cables with 2Connect 14. Cybersecurity leader ­ Infradata joins the IK portfolio No 45/2019 A NEWSLETTER FROM IK INVESTMENT PARTNERS 18. Assessing the risks and opportunities as the world turns against single-use plastics International REACH LOCAL PRESENCE

REACH - International

2 ISSUE 45/SUMMER 2019 P – 04 DISRUPT AND GROW Eres is a pioneer in the French employee profit-share and retirement plan market. A genuine disruptor, the company has substantial growth potential, as part of the IK portfolio.

CONTENTS/EDITORIAL Editorial Director: Mikaela Murekian, mikaela.murekian@ikinvest.com Texts: Joanne Hart Art Direction: 25AH Design Studio AB, www.25ah.se www.ikinvest.com © 2019 IK Investment Partners Ltd. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying­ , recording or otherwise, without the prior per­ mission of IK Investment Partners. IK News is published twice a year by IK Investment Partners, ­ The Adelphi, 1–11 John Adam Street, London, WC2N 6HT, UK.

FOREWORD CONTENTS/IKNEWS /ISSUE45/SUMMER/ 2019 THIS YEAR, IK WILL BE 30 – something of a milestone in private equity, an industry that was in its infancy when we were founded in 1989. Our age confers distinct benefits, especially when political, economic and market conditions are hard both to gauge and predict. Fortunately, we have experienced a number of cycles during the past three decades and learnt valuable lessons along the way. As we look ahead, we feel confident and well prepared. We have grown rapidly in recent years, while remaining true to our roots as a Northern Continental Europe firm combining local knowledge with an international footprint.

Today, following the opening of our ­ Copenhagen office this summer, we have ­ offices in all the areas where we invest (see page 6). This both underlines and gives credence to our belief in the importance of a local presence. We are not just financial professionals, flying in to see companies without truly understanding where they come from and where they want to go. Instead, we speak their language, both literally and figuratively. Unlike most local firms, however, we have an international network too, so we can really help portfolio companies to expand beyond their borders. In recent months, this combination has helped us to secure investments in exciting businesses such as Eres (page 4), NetCo (page 8), SCHEMA (page 12) and Infradata (page 14).

All fast-growing enterprises, they recognise the need for established, external expertise to allow them to fulfil their potential. But growth is not enough: companies in our portfolio have to demonstrate that they are su­ stainable and build their businesses accordingly. At IK, environmental, social and governance (ESG) issues have long been integral to our investment approach but we are increasingly aware of their importance both among our investments and within our own firm. Climate change is a core focus for us: we are embedding it within our investment process and we are keenly aware of the need for action (see page 18).

We will also be publishing a report on our own carbon footprint this year, a yardstick against which we will measure ­ ourselves in future. We approach the rest of the year with optimism. And we hope you enjoy this edition of IK News. Mikaela Murekian EDITORIAL DIRECTOR P – 08 A FAMILY BUSINESS NetCo specialises in the repair and maintenance of conveyor systems. A family business for several generations, the French firm is now expected to expand internationally, with IK’s support. P – 14 SECURITY MATTERS Netherlands-based Infradata is a leading provider of cybersecurity solutions. Having been acquired by IK, the company is expected to consolidate and extend its position across Europe.

P – 06 OPEN FOR BUSINESS IK has opened a new office in Copenhagen, serving Denmark and Finland. The move means that IK now has a dedicated presence in all of its chosen investment markets.

P – 10 MAKING A CONNECTION 2Connect is a manufacturer of specialised cables and connectors. A leading player in its niche, the company has now been acquired by the IK Small Cap II Fund and is expected to deliver fast-paced growth over the coming years. P – 18 BEYOND PLASTICS Amid growing awareness of plastic’s impact on the environment, concerted efforts are underway to reduce waste. The new mood brings challenges, but also long-term opportunities.

REACH - International

ISSUE 45/SUMMER 2019 3 IK/SPOTLIGHT A NEW FIRE PROTECTION INVESTMENT FOR IK IK HAS ACQUIRED BST Brandskyddsteamet, a leading provider of active fire protection services in Sweden.

Founded in 2012, the company has grown rapidly since then to become the number one operator of sprinkler system services in Sweden, with a full-service offering and a blue-chip client base. “We are truly impressed with BST management and employees, and we look forward to supporting the company as it continues on its growth trajectory,” says IK partner Kristian Carlsson Kemppinen.

This is the third fire protection investment made by IK Funds, following the highly successful Minimax transaction and the investment by IK Small Cap I Fund in svt Group in Germany. FURTHER EXPANSION FOR COLISÉE COLISÉE, A LEADING elderly care provider in France, Italy and Spain, has ­ acquired Armonea Group, a senior care specialist in Belgium, with a growing presence in Spain and Germany. Backed by IK since 2017, Colisée has grown significantly over the past three years. Combined with Armonea, it will become the fourth largest player in the European elderly care sector, with around €1bn of revenues, more than 14,000 employees and almost 27,000 residents.

This is the combination of two recognised players in their core geographies, with a clear alignment in terms of culture and shared values,” says Christine Jeandel, CEO of Colisée. “We are delighted to support Colisée in building the fourth largest European player, thus actively participating in the reshaping of a consolidating industry,” adds Dan Soudry, managing partner at IK. OPEN FOR BUSINESS HIGHLY REGARDED NORDIC payment company OpenSolution has ­ rebranded its entire business under the name OPEN. The Sweden-based group ­ became part of the IK Small Cap I Fund in 2016, since when it has made several ­ acquisitions, including KDR in Norway and Finnpos in Finland.

Now they will all use the OPEN brand.

OPEN covers the entire value chain of payment solutions, making it a single point of contact for more than 13,000 customers throughout the Nordics and ­ Baltics. In conjunction with the rebranding, OPEN will launch the next ­ generation of point-of-sale (POS) solutions to restaurants, convenience stores and cruise ships. “We know that an innovative payment solution can increase a company’s revenue by up to 30% as well as improve employee wellbeing in the ­ workplace. OPEN’s system is the market’s most complete cash register system with ­ everything from hardware, payment solutions, reporting tools, integrations and support,” says Mikael Hedlöf, CEO of OPEN.

We are proud and delighted to accept this award twice over the last three years. This rewards the hard work and dedication of the entire French team. RÉMI BUTTIAUX, PARTNER, IK ACQUISITION ADD-ON IK WINS IN FRANCE OR GRAND PRIX FOR IK IK INVESTMENT PARTNERS has been named Mid-Cap Fund of the Year in France at the annual awards ceremony of leading industry journal Private Equity Magazine. Collecting the award, IK partner Rémi Buttiaux said: “We are proud and delighted to accept this award twice over the last three years. This rewards the hard work and dedication of the entire French team. We also gain ­ invaluable support from the rest of IK and this award speaks volumes about the way the entire firm works and interacts with each other.” IK made its first investment in France 2000, and opened a dedicated office in Paris since 2006.

Mid-Cap Fund of the Year Private Equity Magazine, France AWARDS ­REBRANDING

REACH - International

4 ISSUE 45/SUMMER 2019 T HE FRENCH ASSET management industry is large, well established and dominated by banks and insurers. Most of these groups focus on products manufactured in-house and distributed by internal retail networks. ERES IS DIFFERENT Founded in 2005, the company structure ­ products from a range of leading international fund managers to create optimal plans for clients. Eres also works with more than 3,000 highly trained and independent distributors. As a result, clients have access to an extensive choice of products and can discuss them with genuine specialists in the sector.

As IK director Vincent Elriz explains: ­ “Under the conventional business model, financial institutions sell their own products via their own distribution network. But there are two flaws with this. First, their offer lacks diversity and external benchmarking allowing for best and independent advice to the end Eres is a leading provider of employee profitshare and retirement plans for SMEs and individuals in France. A disruptor in its field, the company has substantial growth potential. And it is now part of the IK portfolio. IK ACQUIRES LEADING PROVIDER OF EMPLOYEE PROFIT-SHARE AND RETIREMENT PLANS IN FRANCE client.

Second, profit-share and retirement plans are sometimes considered as non-core areas for them so their people are less trained and up to date on the technical and regulatory aspects. Eres has adopted an open-architecture model so it can select and promote the best asset managers for its products, and its salesforce have real expertise in the financial, HR and legal complexities associated with retirement and profit-share investment plans for both companies and individuals.” The numbers speak for themselves. The ­ market has been expanding at around 7% per ­ annum but Eres has been delivering annual growth of about 20% for several years.

It has amassed almost €3bn of assets under management and has a diversified base of around 140,000 end customers – focused on small and mid-sized enterprises (SMEs) and individual savers. The company is also extremely highly rated by clients, competitors and industry experts.

MAKING WAVES “Eres is a truly disruptive business in profit sharing and retirement savings management. It is swift, agile and taking share from the incumbents. It also operates in an area that has been under penetrated to date. Around 70% of large companies operate employee profit-share and retirement plans but that falls to just 10% in the SME space. As such, it is a very sound business with real scope for growth,” says IK partner Rémi Buttiaux. Eres was founded by four industry experts, Jérôme Dedeyan, Olivier de Fontenay, Hervé Righenzi de Villers and Nicolas Vachon, who met at the end of the 1990s.

Having already built successful businesses together, they ­ identified the gap in the employee savings market and set up Eres to fill it. The business has grown steadily from the ­ beginning, leveraging the founders’ ­ entrepreneurial spirit and their experience of the financial sector. Today, much of the distribution function is outsourced to specialist and independent operators (for example, wealth managers, insurance brokers) but some larger clients are handled by Eres’ own experts. The combination of internal and external salespeople has allowed Eres to establish a nationwide presence, while retaining a lean culture, with just 40 employees.

The company also has a strong management team, led by Mathieu Chauvin, who started his career in commercial banking and joined Eres soon after it was founded.

I have known the founders for 18 years and helped them build up Eres almost from the beginning. We launched the first employee ­ savings product together,” says Chauvin. Having built up Eres into a highly profitable, well-rated and fast-growing disruptor, Dedeyan and his colleagues began thinking about selling the company. Fortunately, IK was already well prepared when the sales process started, because IK partner Thomas Grob knew the business well. Eres is a truly disruptive business in profit sharing and retirement savings management. It is swift, agile and taking share from the incumbents.

RÉMI BUTTIAUX, PARTNER, IK INVESTMENT: ERES

REACH - International

ISSUE 45/SUMMER 2019 5 A financial services expert, Grob was a managing director at Tikehau Capital and a partner at Equistone Partners before joining IK in 2018. He had been following Eres for some time. “I had identified the business as one to watch some time ago. I had studied it closely and recognised its potential so when I joined IK, it was an obvious target for us,” says Grob. “Thomas helped us originate and execute the deal. Thanks to him, we met the founders before the sales process officially started and we already had a good understanding of the business.

Because we had done our homework in advance, we were able to present them with a strategic plan for the future, which they really appreciated,” says Buttiaux.

AHEAD OF THE PACK When the sales process began, it was limited to a few parties who had demonstrated a real interest in Eres. Competition was keen but rival bidders were local French firms, against whom IK had a natural advantage. “The founders could see that we had a lot to offer, in terms of a local presence allied with an international footprint, that could help them expand inside France and abroad,” Buttiaux explains. The transaction was signed in March, with the founders reinvesting as minority shareholders. They remain associated with the company but will work on specific assignments, such as merger and acquisition opportunities and lobbying.

Chauvin and his team had already taken on day-to-day management of the business so the process has been extremely smooth. The transition is also well timed.

We are the only company in France that sells a complete suite of employee savings and retirement solutions. And the law has just changed in France to say that companies need to package these two products together. This is something that the founders called and now it has so it is a very exciting time for us,” says Chauvin. “Our employees are very excited too. It can be a difficult moment when founders leave a business but everyone is really committed to the business – and has invested significantly in it too,” he adds.

Looking ahead, there are multiple opportunities for growth. “The underlying market for retirement and employee profit-share plans is growing fast and is likely to continue doing so.

Eres is the only sizeable operator in its field pursuing the open-architecture and independent distributor model. The distribution network is growing too and Eres is both acquiring new clients and selling more products to existing ones. So there is a really strong base case for growth and we will look at appropriate add-ons in France and abroad on a selective basis,” says Elriz. “The scope for expansion is substantial. This is an excellent company and we are confident that it will deliver rewarding growth for all stakeholders,” says Buttiaux. ERES IS THE LEADING French independent player in the advisory and structuring, asset management and distribution of employee profit sharing plans (PEE, PEI, PERCO and PERCOI), retirement schemes (PERP, PERE) and employee shareholding plans.

Eres distributes its products through a network of more than 3,000 distributors (wealth management advisors, insurance brokers, accountants) and addresses small and midsized companies.

  • VALUE CREATION STRATEGY
  • Increase penetration of profit sharing and retirement products
  • Gain market share driven by its dynamic distribution network, open architecture and well-invested IT platform
  • Use existing granular and diversified distribution network to achieve product diversification ERES COUNTRY France FUND IK VIII Fund SECTOR Business services WEB www.eres-group.com ACQ. DATE July 2019 The underlying market for retirement and employee profit-share plans is growing fast and is likely to continue doing so. Eres is the only sizeable operator in its field pursuing the open-architecture and independent distributor model. VINCENT ELRIZ, DIRECTOR, IK INVESTMENT: ERES
REACH - International

6 ISSUE 45/SUMMER 2019 ARTICLE: IK COPENHAGEN IK has opened an office in Copenhagen to serve the Danish and Norwegian markets. The move highlights IK’s commitment to the Nordic region and its multi-local approach. IK OPENS UP IN COPENHAGEN

REACH - International

ISSUE 45/SUMMER 2019 7 ARTICLE: IK COPENHAGEN F ROM THE TIME that IK was founded in 1989, the firm has focused on combining international reach with local expertise. Regional offices in key locations have played a major role in that approach. Over the years, new sites have been opened, as IK has expanded across its chosen investment space of Northern Continental Europe.

These offices reflect and underline IK’s belief in the potential of certain jurisdictions and localities. In 2017, for example, IK opened a dedicated office in Amsterdam, a recognition of the role that Dutch and Benelux companies play within the IK portfolio.

We have completed a number of transactions in the Benelux over the years and we felt the time was right to establish a local presence with an on-the-ground team,” says IK partner and head of investors relations Mads Ryum Larsen. The opening of an office in Copenhagen this spring follows a similar logic. TRANSFORMATIVE M&A “It is a natural step for us. It completes the branching out of our deal teams, so they sit in the jurisdictions we invest in. The team covering Denmark and Norway was based in London but we have now reached a point where it makes more sense for us to be based locally,” says IK partner Thomas Klitbo.

We describe IK as pan-European but really we are multi-local and the Copenhagen office reinforces that approach,” he adds. The Copenhagen team will include six professionals focused on the mid-cap market, as well as a local small-cap team and Ryum Larsen. “I will still be travelling a lot to meet with investors but it’s going to be great to be back in Denmark after such a long time,” he says. IK currently has three Norwegian and two Danish companies in its portfolio and has a long history of successful investments in both countries. Looking ahead, Ryum Larsen and Klitbo believe there is considerable potential to develop IK’s regional presence still further.

We already have a good network in ­ Denmark and Norway and we are highly proactive in our deal sourcing but being on the ground will give us a lot more flexibility. We can meet more companies, engage in more bilateral discussions and develop even stronger long-term relationships,” says Klitbo. “Being in Copenhagen will help us to build out the IK brand and franchise. There will be clear advantages, as we know from our experience in other regions,” Ryum Larsen explains. LOCAL ADVANTAGES The decision has environmental benefits too. Currently, the Danish/Norwegian deal team spends hours on planes each week.

Now companies and intermediaries are just a short car or bike ride away.

Everything becomes that much easier and more convenient, and it really helps our environmental footprint,” says Klitbo. Some investors have asked why IK has chosen to open the Copenhagen office now, as it has already been investing in Denmark and Norway for many years. “It is a process and the time is right. The team is ready, IK is ready and, with ESG rising up the investor agenda, being local is more important than ever,” says Ryum Larsen. IK is already working on several add-on transactions and there is a strong pipeline of new deals.

We are already seeing the benefits of moving here.

And we believe it will only get better. Above all, this underlines our commitment to the Nordics and our local approach,” says Klitbo. There is a personal element for both Klitbo and Ryum Larsen too. Both are Danish and both have spent more than a decade away from home. “It will be really interesting to return to ­ Copenhagen, after all this time,” says Ryum Larsen. “Being based in the place where you were born does have certain lifestyle benefits,” adds Klitbo.

Being in Copenhagen will help us to build out the IK brand and franchise. There will be clear advantages as we know from our experience in other regions. MADS RYUM LARSEN, PARTNER, IK We are already seeing the benefits of moving here. And we believe it will only get better. Above all, this underlines our commitment to the Nordics and our local approach. THOMAS KLITBO, PARTNER, IK

REACH - International

8 ISSUE 45/SUMMER 2019 INVESTMENT: NETCO NetCo has real opportunities to expand in Europe, particularly in Germany, the Nordics and Spain. We see this business becoming a genuine pan-European player.

PIERRE GALLIX, PARTNER, IK N ETCO CAN TRACE ITS ROOTS back to 1902, when Monsieur Perriez opened a small business in Bordeaux, providing general supplies to the navy, industry and agriculture. Today, NetCo is still run by descendants of the founder but the company has evolved to become a leading provider of conveyor belt maintenance services, with clients in various end-industries such as, food manufacturing, waste management quarries and logistics. “NetCo’s business is key. Customers have carry conveyor belt systems, which are subject to extreme weather conditions and constant use. Over time, the belts break and when that happens, they need to be repaired or replaced as soon as possible.

Otherwise, the full ­ production lines are down and factories are left sitting idle,” says IK partner Arnaud Bosc. The work is complex, highly technical and IK INVESTS IN CONVEYOR MAINTENANCE SPECIALIST GROUPE NETCO NetCo is a European specialist in the maintenance of conveyor systems, with a leading market position in France. A family business for several generations, NetCo is now expected to expand internationally, with IK’s support and expertise.

REACH - International

ISSUE 45/SUMMER 2019 9 INVESTMENT: NETCO NETCO Founded in 1902 in France, NetCo has grown to become a European leader in the maintenance of conveyor systems across key industries including quarries, food and heavy goods. Thanks to its robust operating model, NetCo has become a strategic partner for customers by supporting critical parts of their industrial processes. NetCo is headquartered in Bordeaux and operates 55 agencies with 500 employees across France. The business has a further presence across Belgium and Luxembourg.

  • VALUE CREATION STRATEGY
  • Strengthening organic growth in existing geographies
  • Consolidation of the fragmented European market
  • International expansion of the Distribution Business line
  • Further consolidation within the French market INVESTMENT HISTORY
  • Acquired from Andera Partners in March 2019 NETCO COUNTRY France FUND IK Small Cap II Fund SECTOR Business services WEB www.groupe-netco.com ACQ. DATE March 2019 ­ non-core so very few companies have the ­ expertise to do it in-house. Repairs are ­ generally regarded as emergency operations so proximity is essential. Yet the industry is ­ fragmented, comprising hundreds of small players across Europe.

In recent years, NetCo has proven to be the natural consolidator on the French market: the company has made 30 acquisitions since 2000, 12 of which have been completed in the past three years. As a result, sales have soared from €50m in 2016 to €110m last year. The pace of change reflects the ambition of the current managers, Samuel and James Perriez. Samuel, 47, joined the family business in 2000 and began to run the company in 2008. James, 40, joined from international consultancy Mazars in 2009.

We could really see NetCo’s potential: we have focused on growth over the past decade but we know there is still room for further expansion in France and huge opportunities abroad,” says Samuel.

TIME TO GROW The company now operates from more than 50 locations in France and has also moved into Belgium, supported by former minority shareholder Andera Partners. NetCo has also developed a distribution arm, leveraging its purchasing power to procure conveyor belts for its own use and for competitors’.

This new business brings several advantages. It provides NetCo with another string to its bow, it bolsters margins and it gives the company access to rivals, which can then be acquired, if appropriate,” IK partner Pierre Gallix explains. IK first came across NetCo soon after the Andera investment, keeping a close eye on the business, particularly after the 2017 Belgian acquisition. “We knew Andera from a previous transaction and, given the firm’s size and focus, it was clear that NetCo would need a larger partner in time,” says Bosc.

The business duly came on the market in late 2018, by which point IK had already made some preliminary assessments of the company and gauged its potential.

First, the company is a clear leader in France but still has a clear scope for further consolidation. Second, the client base is extremely diverse: the top ten clients are responsible for less than 20% of sales between them. Third, the company has delivered impressive growth in recent years, not just through acquisition but organically too. And of course, there is significant ­international potential. “NetCo has real opportunities to expand in Europe, particularly in Germany, the Nordics and Spain. We see this business becoming a genuine pan-European player with an even more dominant position in France and a strong second leg in Northern Europe and the Iberian Peninsula,” says Gallix.

The distribution arm has scope for growth too. It has already begun to expand in Europe and discussions are underway with potential clients in Asia and Latin America. LEVERAGING KNOWLEDGE From the start, conversations with the Perriez brothers were constructive. IK’s international footprint and strong European presence meant it was ideally placed to help NetCo achieve its ambitions. In addition, IK recently completed a successful exit from German conveyor belt specialist Transnorm and is currently invested in LINXIS, a French engineering firm focused on specialised equipment solutions.

Our pan-European presence and previous investment in Transnorm increased our credibility and gave us access to people with in-depth knowledge of the sector. Samuel and James could see that we had experience in their industry and that we were relevant partners to accompany the European expansion and, over time, we developed a good relationship with them,” Bosc explains. The transaction was completed in March and there is already considerable momentum around the investment. “This is a real buy-and-build story with strong potential at home and abroad. We are very excited to be working with the Perriez brothers and are really optimistic about the future,” says Bosc.

Our pan-European presence and previous investment in Transnorm increased our credibility and gave us access to people with in-depth knowledge of the sector. ARNAUD BOSC, PARTNER, IK

REACH - International

10 ISSUE 45/SUMMER 2019 INVESTMENT: 2CONNECT 2Connect is a manufacturer of specialised interconnection solutions. A leading and differentiated player in its niche, the company has now been acquired by the IK Small Cap II Fund and is expected to deliver fast-paced growth over the coming years. MAKING A CONNECTION IN THE BENELUX H ARLEY-DAVIDSON MOTORBIKES are famously loud, so much so that riders’ behaviour is restricted in certain locations.

The Jekill & Hyde Company has created a novel solution to this problem. The firm specialises in GPS-linked exhausts, which allow Harleys and other bikes to roar when they are on the open road but quieten down in builtup areas.

The technology is highly effective and the wiring that makes it possible is designed and manufactured by 2Connect, a Dutch company based in the town of Waalwijk. Founded by Marc van der Put in March 2000, 2Connect produces bespoke interconnection devices, used in a vast array of end products, from MRI scanners to ­ agricultural vehicles to smart lighting. The market is ­ extremely dynamic, driven by growing ­ automation, miniaturisation and digitisation across industry. “2Connect is a truly impressive business. It’s focused on a niche segment of industry, it’s highly specialised and it’s delivered doubledigit organic growth since Marc founded the business nearly 20 years ago,” says Sander van Vreumingen, IK partner and adviser to the IK Small Cap II Fund.

The bespoke nature of the product range is highly beneficial too. “Larger peers are not interested in this area because volumes are lower and the ­ solutions custom made, which requires a specific ­ business set-up. The cables and connectors are embedded into the end products’ design so customers are very sticky,” says IK director Frances Houweling. REACHING OUT Most of 2Connect’s clients are based in the Netherlands but they ship their ­ products around the world, giving the firm a real ­ international footprint. Apart from the ­ Waalwijk headquarters, there are two factories in ­ Romania and an office in Hong Kong to serve clients operating in the Asian market.

However, as van der Put himself explains, the ­ opportunity in his home country has been so great that he has not really needed to look for customers elsewhere.

More than 80% of our sales are generated by companies operating within a 150-mile radius from our offices,” he says. When van der Put launched 2Connect in 2000, there were no customers, no orders and no office. But there was an idea – to supply specialised cables for original equipment manufacturers (OEMs). The strategy resonated with van der Put’s target audience and the business grew. “Initially, we outsourced production. But

ISSUE 45/SUMMER 2019 11 INVESTMENT: 2CONNECT over time, we brought production in-house and extended our range to specialised connectors.

Today, we are responsible for design, manufacture and assembly. We become involved with our customers’ needs at a very early stage so we are much closer to them. In essence, we have evolved from a component supplier to an integrated solutions provider,” says van der Put. Having built up the business over the years, however, van der Put realised he needed some external support.

The company was growing at a really fast pace, but I realised that we needed external support to take it to the next level. There were highly skilled people in the business but it was not enough and, to be honest, I’d been running the business for 19 years and I felt it was time to get an external perspective. Ultimately, IK seemed like the best partner. Their approach to the business was really appealing, we had several constructive meetings and the feeling was right. In the end, that was the most important thing for me – that they had the skills, the resources and the mindset to take 2Connect to the next stage,” says van der Put.

GROWTH OPPORTUNITIES For IK, the appeal of 2Connect was clear. “It’s an excellent business in an interesting sector and Marc is a really dynamic and entrepreneurial guy. We clicked with him immediately and we could really see the potential of his company,” says van Vreumingen. Keen to partner with van der Put, IK did extensive due diligence to understand the business, its growth drivers and the opportunities for expansion early on.

We worked hard early on in the process, we were very enthusiastic about the business and we had ideas for the future that even Marc had not thought about. He really responded to our vision for the company, we developed a great connection, established a relation of trust and everything fell into place,” says Houweling. The transaction was noteworthy too because it was IK’s first small-cap investment in the Benelux, highlighting the benefits of opening an office in Amsterdam and establishing a dedicated small-cap team for the region. “We’re happy to have signed such an exciting first transaction here and it is always good to work with a founder too, especially someone who is so passionate about his business,” says van Vreumingen.

The deal was signed at the end of 2018 and work is now underway to strengthen, ­ professionalise and grow the business. A COO and a CFO have been appointed and a strategic plan has been drawn up, focused on expansion and efficiency. In terms of client acquisition, van ­ Vreumingen and his colleagues are working with IK’s Operations team, particularly the representative in Amsterdam. “We are also developing a greater understanding of the existing client base so we can find out more about their needs and increase 2Connect’s share of wallet from these businesses. And we intend to drive operational excellence, not least through the appointment of the new COO,” says van Vreumingen.

There may be M&A opportunities further down the line but for the moment, there is so much organic growth potential that we are concentrating on that and making sure we remain focused,” he adds.

  • 2CONNECT is a leading manufacturer of specialised cables and connectors, designing, developing and producing tailored interconnection solutions for OEM and ODM customers worldwide. VALUE CREATION STRATEGY
  • Continue to grow share of wallet with its current customer base
  • Intensified focus on new customer acquisition
  • Broaden end-market applications within adjacent niche segments
  • International expansion 2CONNECT COUNTRY Netherlands FUND IK Small Cap II Fund SECTOR Business services WEB www.2-connect.info ACQ. DATE November 2018

12 ISSUE 45/SUMMER 2019 INVESTMENT: SCHEMA M ARCUS KESSELER AND STEFAN FREISLER first met at an academic event in Nuremberg in 1992 where they discussed hypertext, a content presentation concept, which allows users to click on a link and jump to different content.

Three years later, the duo was captivated by the flotation of Netscape, the first commercial web browser. The highly successful IPO gave Kesseler and Freisler an idea: “We thought this World Wide Web could be the next big thing,” says Kesseler. Shortly afterwards, they founded SCHEMA, a company that helps clients to manage content in a modular format.

Our business works with companies – generally high-tech engineering and manufacturing firms, but also top-tier MedTech and Pharma firms – to solve their product ­ information challenges,” says Freisler. These challenges are many and varied. Companies need to offer detailed explanations of their products in an accessible online ­ format. In addition, most of SCHEMA’s customers are ­ export oriented and need to provide information in multiple languages, often over 20, and are subject to different regulatory requirements. Companies also need to ensure that information is kept up to date, as technology evolves and specifications change.

They also need to deliver comprehensive health and safety information, online, in print Nuremberg-based SCHEMA is a market-leading developer of software solutions for the management of technical content, with a broad list of blue-chip clients across multiple industries. Over the coming years, the company is expected to continue to deliver strong growth through the addition of new customers, services and geographic expansion. and even on the machines themselves. Finally, companies have to produce dynamic maintenance guidance and ensure that product information is adapted if their customers ask for machines with individual specifications.

A MODULAR APPROACH “All these demands can be very costly, but we provide an optimal solution through our ­ Component Content Management and ­ Distribution System,” says Kesseler. In essence, this allows SCHEMA’s customers to manage complex content in a modular fashion, increasing compliance, ensuring reliability and improving efficacy through reuse in a costeffective way. SCHEMA enables ­ customers to realise substantial cost and time savings while also increasing their process security of ­technical content.

The business model has proved highly successful. SCHEMA is deeply integrated within its clients’ core IT systems in conjunction with having a high level of recurring sales from its existing and continuously growing customer base. SCHEMA has over 400 blue-chip customers, including some of the biggest names in German industry such as Bosch, Miele, Bayer, ZEISS, Lufthansa Systems, Diebold Nixdorf and Siemens. Moreover, SCHEMA has begun to successfully acquire customers in Sweden, the Netherlands, the UK and Japan.

After more than 20 years of steady growth, IK ACQUIRES SOFTWARE SPECIALIST SCHEMA Kesseler and Freisler felt that SCHEMA could benefit from external support.

We felt that we needed a partner to help us grow to the next level – a partner with experience working with companies of our size and acquisition expertise and an understanding of internationalisation,” says Kesseler. In 2018, SCHEMA was put up for sale and IK quickly realised that the business was, in the words of IK partner Nils Pohlmann, “a hidden gem”. “It is in a niche area but one that has significant growth drivers, such as increased document complexity, digitalisation, regulatory requirements and automation. Companies also need to be able to display information on different devices and software needs to be adaptable to different IT systems and infrastructures.

SCHEMA is at the centre of all these trends and able to address and manage the complexity of semi-structured data,” he says. Having recognised SCHEMA’s potential, IK worked hard at getting to know the management team and gaining a deeper understanding of the business. “The basis of the business was strong – a clear market leader with sophisticated software solutions deeply integrated into its blue-chip clients’ IT infrastructure and a high share of recurring revenue, but we could see that there were opportunities to expand its position both organically and through acquisitions,” says

ISSUE 45/SUMMER 2019 13 INVESTMENT: SCHEMA Pohlmann. Together with the founders, IK developed the growth strategy and vision for the company in the future. PREPARATION PAYS IK’s efforts and enthusiasm did not go ­unnoticed. “It was clear from an early stage that IK was the best partner for us. The sheer competence of the team and their understanding of our business was really striking. And they moved quickly and efficiently through the investment process, which was also very helpful,” says Freisler.

By December 2018, the deal had closed. Freisler has moved to the advisory board and Kesseler is joint CEO with a colleague who has been at SCHEMA for 15 years.

In April 2019, the company made its first acquisition, TID Informatik, a market-leading e-catalogue software provider which enables customers to manage their service and spare parts information in an efficient and automated way and thereby improve their service value chain as well as better support their sales organisation. TID clients, including Bosch, Kärcher, Voith, ZEISS and Leica, benefit from significant process and cost improvements. SCHEMA already had a minority stake in TID: now it has acquired the entire business, with IK’s support. “Both SCHEMA and TID are impressive in their own right but putting them together will create cross-selling and upselling opportunities and create a broader, tech-enabled services offering.

Together, the two companies form the fundament for tech-enabled services and enable customers to unlock further service sales potential,” says Pohlmann. Looking ahead, there is significant potential for growth and expansion.

SCHEMA is a leading software company in its chosen field, with strong development ­ opportunities through further penetration of its existing customer base, as well as the ­ acquisition of new customers in Germany, ­ Austria and Switzerland (the DACH region) and more globally,” says Pohlmann. “In combination with TID, we can create an intelligent content provider that allows enterprises to become more efficient across a range of different services. Over time, we can add features and partners to this platform so it becomes increasingly comprehensive and effective,” he adds.

The first few months have already delivered progress, as IK has worked with SCHEMA to professionalise processes and the company’s sales approach.

It’s all working out as we hoped and expected. IK has continued to act professionally, reliably and supportively, just as they did during the due diligence process. We are excited about the future and looking forward to jointly growing the business,” says Kesseler. SCHEMA is an innovation leader and has set international industry standards regarding the range of features and standardisation of CCMS over the last 20 years. Its products enable customers to realise substantial cost and time savings and increase content processes efficiency.

  • VALUE CREATION STRATEGY
  • Upselling opportunities and increased customer penetration
  • Roll-out of new content delivery solution (CDS)
  • Expansion into new end-industries and international markets
  • Strategic add-on acquisitions SCHEMA COUNTRY Germany FUND IK Small Cap II Fund SECTOR Business services WEB www.schema.de ACQ. DATE November 2018

14 ISSUE 45/SUMMER 2019 INVESTMENT: INFRADATA T HE EUROPEAN CYBER AND NETWORK security market is estimated at c. €40bn, of which c. €25bn worth is in countries where Infradata has a presence, and is expected to substantially outpace the broader IT market growth on the back of rising cybercrime, increased network complexity and digitisation, ­ regulation and technology developments.

Infradata is ideally positioned to benefit from that growth trajectory. Founded in 2004, the company has expanded rapidly to become a highly regarded player in both cybersecurity and secure networking solutions, ensuring that networks are safe, scalable and reliable. With a presence in the Netherlands, France, Germany, the UK, Belgium, Poland and the US, the group focuses on large enterprises and communication service providers with complex and wideranging IT needs.

Infradata provides software, hardware and ongoing services to clients that tend to use a lot of data and have complex IT infrastructures. These enterprises need outside help managing their infrastructure and keeping it secure. ­ Infradata can design, build and manage networks for them,” says IK partner Norman Bremer. “Infradata is renowned for its technical capabilities and deep knowledge of its clients’ IT network, so it builds trusted relationships and close, long-term partnerships,” he adds. These clients include telecommunications groups such as KPN and TalkTalk, as well as multinationals such as eBay and Arcelor­ Mittal.

Netherlands-based Infradata is a leading provider of cybersecurity and secure networking solutions. Now part of the IK portfolio, the company is expected to consolidate and extend its position in key geographies across Europe. In each case, Infradata operates a vendor-­ agnostic business model, working with a ­ variety of skilled vendors across its operations. FLEXIBLE MODEL “Infradata owns the relationship with clients whereby it acts as a reseller of third party products combined with in-house ­ technical skills and services. This means it works with multiple vendors and can introduce new ones when the need arises.

That flexibility is particularly useful in a field like ­ cybersecurity, which is changing all the time,” says IK ­ associate ­ director Frederik Jacobs. Infradata is also one of the very few ­ players in its field with a footprint that extends beyond its home market, a position that can be ­ particularly helpful when ­ developing partnerships with large, multinational clients. As Bremer explains: “The market is highly fragmented, ­ especially when it comes to ­ cybersecurity. There are plenty of small ­ consultancies and systems integrators but very few operators work across multiple regions.” “Large enterprises often prefer ­ partnering with a larger, international business, like ­ Infradata, and the company itself benefits from its geographic spread as people within the group have different skills and ­ relationships that can drive cross-selling and upselling ­ opportunities,” says Jacobs.

Over time, IK intends to leverage Infradata’s position and knowledge base to accelerate We knew the sector, we liked its position in it and we could see the ­ opportunities for growth. We also have experience in the field, thanks to, for ­ example, our investment in Visolit. NORMAN BREMER, PARTNER, IK IK ACQUIRES CYBERSECURITY SPECIALIST INFRADATA growth in the company’s core markets and beyond.

We will continue to pursue organic growth in Infradata’s biggest markets, France and the Netherlands. We plan to scale up in Germany and the UK, as there are some interesting op-

ISSUE 45/SUMMER 2019 15 INVESTMENT: INFRADATA portunities in both these markets and we will build out the business in Poland and Belgium,” says Bremer. Given the current market fragmentation, there is scope for add-on acquisitions as well, both to consolidate Infradata’s position in key geographies and gain access to new vendors, new clients and new technical capabilities. Fortunately too, the company has already proven its ability to absorb acquisitions and develop greenfield opportunities overseas, including key transactions in France and the UK in recent years.

STRONG KNOWLEDGE BASE IK first came across Infradata several years ago when the firm was looking at opportunities in the IT space. Having spotted the business as one to watch, IK followed Infradata over the years, and was in a prime position when it came on the market in 2018. “We knew the sector, we liked its position in it and we could see the opportunities for growth. We also have experience in the field, thanks to, for example, our investment in Visolit. We started talking to people close to Infradata well before it was officially put up for sale,” says Bremer.

The actual sales process was both swift and competitive.

The deal was done in a few weeks but that was perhaps because we were well prepared and dedicated significant time and resource to the transaction,” Jacobs adds. IK’s blend of local presence and inter­ national footprint was a real advantage too. “We are based in the Netherlands so it was great to work with a firm that has a full-time team here, especially one with offices and ­ investments across Europe,” says Infradata CEO Nino Tomovski.

DRIVING OUTPERFORMANCE Looking ahead, the potential is clear. Infradata’s underlying markets are growing fast and expected to continue doing so but the company is expected to outperform peers, by building on its strong, blue-chip client base, established reputation for excellence and broad set of relationships with skilled vendors. “The space that we work in is really ­ attractive and we are ideally placed to grow, in terms of cross-selling, upselling and recurring management services. There are also plenty of opportunities to continue and accelerate our geographical expansion,” says Tomovski.

Having closed the transaction earlier this year, IK has already begun to strengthen the Infradata team and the underlying business. Founder Leon de Keijzer has moved onto the board as a non-executive director, paving the way for Tomovski, previously international vice-president at Infradata, to become CEO. IK’s strategy, operations and business control (SOBC) team is working with Infradata to analyse the company and identify the best opportunities for future growth.

INFRADATA was founded in the Netherlands in 2004, where it continues to be headquartered. The company has an additional presence in Germany, the UK, France (Nomios), Belgium, Poland and the US, with ambitious expansion plans. The company provides cybersecurity and secure networking solutions, from design and delivery to aftermarket support and managed services. Infradata supports many large ­ bluechip clients with high security and data requirements across the industrial, advanced manufacturing, financial, telecommunications and e-commerce sectors.

  • VALUE CREATION STRATEGY
  • Organic growth via geographical expansion
  • Leverage cross selling potential between countries (networking & security solutions)
  • Product-mix shift (shift towards more recurring revenue streams via managed services offering)
  • Buy & build to enable acceleration of organic growth trajectory
  • First add-on has already been completed (DIM in Poland) INFRADATA COUNTRY Netherlands FUND IK VIII Fund SECTOR Business services WEB www.infradata.com ACQ. DATE January 2019