Investec bets on mid-market M&A in Europe
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Investec, the international specialist bank and asset manager, is doubling down on its commitment to global mergers and acquisitions (M&A) amidst a world of constant change.
The bank’s head of investment banking,Jonathan Arrowsmith,believes that periods of uncertainty,like those experienced in recent years,present unique opportunities for agile organizations like Investec to gain market share.
“Every year there’s something big hitting, and you just get used to it being part of life,” Arrowsmith says, reflecting on the pandemic, the war in Ukraine, and the ongoing cost-of-living crisis.
Building a Global M&A Powerhouse
Investec’s strategy for navigating this volatile landscape involves strategic partnerships and a focus on client needs. In 2018, the bank established a strategic advisory partnership with Capitalmind, a leading European corporate advisor. This move aimed to bolster Investec’s presence within the EU and gain a foothold in European corporate deals.
The partnership proved accomplished, leading Investec to acquire a 30% stake in Capitalmind in 2021, which was increased to 60% in 2023, forming Capitalmind Investec (CMI). From next year, CMI will be fully integrated into Investec.
“From our outlook, we felt [Capitalmind] as a standalone M&A outfit is excellent,” Arrowsmith explains. “They are very complementary to the M&A activity we do and are also a good cultural fit.”
A Shared Vision for Growth
Capitalmind,founded in 1999,had grown considerably and was looking for a partner to help it serve buyers in the US,UK,and Asia-Pacific. Investec stood out from a shortlist of potential partners due to its entrepreneurial culture and lack of organizational complexity.
“It was just very clear [investec was the right partner] as we found an entrepreneurial culture alongside very little organizational complexity that many of the other [banks] come with,” says Ervin Schellenberg, managing partner at CMI.
Schellenberg and his colleagues at Capitalmind were keen to retain their focus on clients and avoid becoming product sellers, a risk they saw with larger organizations. These concerns were alleviated by Investec’s commitment to a client-centric approach and its focus on emerging markets, which are crucial for many of Capitalmind’s clients.
Importantly, several Capitalmind partners will retain a 40% stake in the European side of the business, ensuring continued alignment and commitment to the partnership’s success.
Looking ahead
The integration of Capitalmind into Investec marks a meaningful step in the bank’s global M&A strategy. By combining Investec’s international reach and expertise with Capitalmind’s deep European market knowledge and client relationships, the combined entity is well-positioned to capitalize on opportunities in an increasingly complex and interconnected world.
Investec Capital Duo Bridges UK and Germany for Mid-Market M&A Success
Investec Capital is leveraging a unique transatlantic partnership to drive mid-market mergers and acquisitions (M&A) activity in the UK and Germany. Jonathan Arrowsmith, head of UK M&A, and Ervin Schellenberg, head of German M&A, have forged a close working relationship that transcends geographical boundaries, fostering a collaborative approach to dealmaking.
“We have a fantastic prospect in front of us and we are excited about the future,” says Schellenberg.
Now, Arrowsmith and Schellenberg speak regularly, focusing on selling mid-market corporates in the €50 million to €500 million range.
Close Working Relationships Drive Success
Arrowsmith manages the UK business while Schellenberg focuses on the German market. Their relationship is built on mutual respect and a shared commitment to valuing each other’s expertise.
this collaborative spirit is a departure from conventional banking models, where requests from partners in other geographies may not be prioritized. Internal politics and individual client focus can often hinder cross-border collaboration.
However, at Investec Capital, teams operate as a unified entity, sharing knowledge and providing “sell-side” support regardless of location.
“when Ervin is really interested in an chance and asks for some sector knowledge, research or prospective buyers in the UK, I treat that with respect and vice versa,” says Arrowsmith.
Schellenberg echoes this sentiment, personally handling requests from the UK side of the business.
“Even if the request doesn’t come to you directly, you trust that your partner needs it and do not delegate it to a junior analyst or member of the team,” he says.
This close collaboration aims to increase cross-border transactions for Investec capital.
“if we develop the German business,the European business and international business,then the whole [all the transactions] is much greater than the sum of its parts,” says Arrowsmith.
Outlook for UK and Germany
While both Arrowsmith and Schellenberg focus on mid-market corporates, the sectors they target reflect the unique economic landscapes of the UK and Germany.
The outlook for UK M&A in 2024 is positive,bolstered by stabilizing inflation and interest rates,coupled with a definitive election victory for Labour.Arrowsmith sees opportunities in healthcare, professional services, infrastructure, and technology.
This optimism contrasts with 2023, when rising interest rates dampened debt-driven private equity deals.
“the mid-market is slightly bigger in the UK than it is in germany, because it is a bit more developed here,” says Arrowsmith.
“There’s a huge amount of opportunity for consolidation in the mid-market and that’s where we can play a meaningful role.”
Germany’s political landscape is less stable, with an election scheduled for February 2025. The German economy has faced challenges in recent years,with M&A activity dropping by 50% as 2022.
Schellenberg has adapted to these shifts by diversifying the business model. While industrials was once a stronghold, it has now become the fourth-largest sector. Business services has emerged as the most vital sector, driven by the “servitisation” of German industry, where traditional manufacturers are expanding into service offerings.
“This is a good business but I would say that industrials is now our fourth-largest sector only,” Schellenberg says.This transatlantic partnership between Arrowsmith and Schellenberg exemplifies Investec Capital’s commitment to a collaborative, client-centric approach to M&A. By leveraging their combined expertise and fostering a culture of knowledge sharing, they are well-positioned to capitalize on opportunities in both the UK and German markets.
German Industrial Tech Leads the Charge as Investec Capital Shifts Focus
Investec Capital is betting big on German industrial technology, seeing it as a key driver of growth in the coming year.
The firm, a leading provider of financial services, has strategically realigned its portfolio, placing a strong emphasis on this sector. This shift reflects a broader trend in the market, with investors increasingly recognizing the potential of German innovation in areas like automation and life cycle services.
“German industrial technology is still at the forefront of this and it is a huge market,” says Michael Schellenberg, Head of Investec Capital Germany.
Beyond industrial tech,Investec Capital is also focusing on healthcare,notably clinics,radiology,and micro-labs. Software services, technology, media, and telecommunications round out the firm’s key areas of interest.
A New Era for Consumer Business
Investec Capital in Germany has also made a significant move by shifting its consumer business to food and agriculture. Schellenberg highlights this as another crucial development, reflecting the growing importance of sustainable food production.
“We’re looking positively to next year with a different sector mix,” Schellenberg adds. “Probably 30 per cent of our businesses are now capital solutions where we use debt and equity financing for buy and build concepts which are taking advantage of suppressed multiples, and that is also a very good source of revenue.”
Words of Wisdom for Young Bankers
With decades of experience in the financial industry, Schellenberg and his colleague, David Arrowsmith, offer valuable advice to aspiring bankers.
“In our industry we work very hard and we enjoy what we do but sometimes you can just be so driven in the job, so I just think make sure you have fun when you can,” Arrowsmith advises.
Schellenberg encourages his younger colleagues to remain calm and focused amidst market fluctuations. “Sandy Weill [the famed former chief] of Citigroup, once said: ‘Everything that goes up comes down, and everything that is down comes up’. You just have to stay steady and do the best you can.”
NewsDirectory3, London – In a world buffeted by uncertainty, Investec, the international specialist bank and asset manager, is doubling down on its commitment to global mergers and acquisitions (M&A). Head of Investment banking,Jonathan Arrowsmith,believes periods of upheaval present unique opportunities for agile organizations like investec to gain market share.
“every year there’s something big hitting, and you just get used to it being part of life,” Arrowsmith remarked, reflecting on a period marked by the pandemic, the war in Ukraine, and the ongoing cost-of-living crisis.
Investec’s strategy for navigating this volatile landscape hinges on strategic partnerships and a relentless focus on client needs. In 2018, the bank formed a strategic advisory partnership with Capitalmind, a leading European corporate advisor, bolstering its presence within the European Union and gaining a foothold in European corporate deals. This proved so successful that Investec acquired a 30% stake in Capitalmind in 2021, increasing this to 60% in 2023, forming Capitalmind Investec (CMI).
CMI: A Powerhouse in the Making
From next year, CMI will be fully integrated into Investec. “We felt [Capitalmind] as a standalone M&A outfit was excellent,” Arrowsmith explained. “They are very complementary to the M&A activity we do and are also a good cultural fit.”
Capitalmind, founded in 1999, was seeking a partner to help it serve buyers in the US, UK and Asia-Pacific. Investec stood out from a shortlist of potential partners due to its entrepreneurial culture and lack of organizational complexity.
Ervin Schellenberg, Managing Partner at CMI, echoed this sentiment. “We found an entrepreneurial culture alongside very little organizational complexity that many of the other [banks] come with.”
Schellenberg and his colleagues were keen to retain their focus on clients and avoid becoming product sellers, a risk too frequently enough encountered with larger organizations. Investec’s commitment to a client-centric approach and its focus on emerging markets,critical for many Capitalmind clients,alleviated these concerns.
Importantly, several Capitalmind partners will retain a 40% stake in the European side, ensuring continued alignment and commitment to the partnership’s success.
UK and Germany: A Transatlantic bridge for M&A Success
Further cementing Investec’s commitment to European M&A, Jonathan Arrowsmith and Ervin Schellenberg are spearheading a unique transatlantic partnership, linked by their shared responsibility for mid-market M&A activity in the UK and Germany.
This close working relationship transcends geographical boundaries, fostering a collaborative approach to dealmaking that sees them working in tandem to sell mid-market corporates in the €50 million to €500 million range.
“We have a fantastic prospect in front of us and we are excited about the future,” said Schellenberg.
Breaking Down Conventional Banking Silos
This approach is a departure from conventional banking models, where requests from partners in other geographies may not be prioritized.
Investec Capital, however, emphasizes teamwork.
“When Ervin is really interested in an prospect and asks for some sector knowledge, research or prospective buyers in the UK, I treat that with respect and vice versa,” Arrowsmith explained.
Schellenberg echoes this, personally handling requests from the UK. He said, “Even if the request doesn’t come directly to you, you trust that your partner needs it and do not delegate it to a junior analyst or member of the team.”
Future Outlook: Growth and collaboration
The integration of Capitalmind inline with Investec’s transatlantic partnership marks a significant step for the bank’s global M&A strategy.
By combining Investec’s international reach and expertise with Capitalmind’s deep European market knowledge and client relationships, this combined entity is positioning itself to capitalize on opportunities in an increasingly complex and interconnected world.
The focus on close collaboration and client-centric approach is set to drive robust cross-border transactions and solidify Investec’s position as a major player in the global M&A arena.
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