Why we invested in Carl Finance

We are very excited to announce our investment in Carl Finance, the European transaction platform for SMBs

By Nina Jetter

We are very excited to announce our investment in Carl Finance, the European transaction platform for SMBs. We look forward to working with the founders Kurosch Habibi and Pascal Stichler to help solve the succession problem of European’s SMBs!

To digest our reasoning for the investment, let’s go through the hypothesis one by one: the positive underlying market drivers, the scalable go-to-market approach, the unique positioning as well as Carl Finance’s very dedicated and driven founder team — Kurosch and Pascal.

The German “powerhouse” is facing a succession crisis — many others in Europe, too

Let’s start with a closer look at the German “Mittelstand”. The German powerhouse currently faces a succession crisis with ~40% of the family-owned firms not having a succession plan in place. Many business owners ask themselves the same questions: Who will take care of my company in the future? Who might be a suitable new owner? At what price should I sell my company? And this is not a German problem only, many business owners in Europe are facing the same challenges when it comes to succession.

In this market environment, Carl Finance is the go-to “one-stop-shop” for SMB owners, who want to sell their company in a structured M&A process. Carl Finance covers the full sell-side M&A process: from buyer identification and reach-out to bid-submission and closing — all powered by smart software. Thanks to the extensive network of accredited buyers in the small- and micro-cap segment, Carl Finance is a strong partner for SMB owners solving the succession problem end-to-end.

Looking closer into the buyer side: While PE investors’ and M&A attention has been for many years mainly focused on the mid- and large cap segment, the small- and micro-cap segment should not be underestimated in terms of volume and size. Investors increasingly enter the segment but are mostly underwhelmed by the current level of professional service and transparency — many processes being handled manually by individual M&A advisors/ brokers one by one.

We strongly believe in the growing sophistication of the small-/ micro cap segment in the upcoming years, where sellers and investors will increase their expectations. High-quality standards, speed and an extensive buyer network will therefore be key to differentiate and win over customers. Carl Finance, empowered by their smart software modules eliminating costly manual work, is well-positioned to do so.

The seller market is still opaque — efficient lead generation is key

Of course, the small-/ micro-cap segment is fragmented and SMBs can be found even in the smallest towns in Germany.

To be able to cover a country efficiently, Carl Finance found some pretty amazing ways to be close to their potential customers. From relevant content online to powerful partnerships with local banks such as the R+V or Sparkasse Mainz, Carl Finance has a challenger mindset. They provide value-add for all relevant stakeholder in the market involved in a transaction: the seller — with high-quality advice, the buyer — with a smooth and well-managed process and the deal originator (e.g. bank advisor) — with the feeling that the seller will be in good hands at Carl Finance. We are certain that their highly scalable and tech-enabled approach is superior to the existing manual transaction management for all parties involved.

A good spot to be in — to further accelerate growth

In M&A transactions, the whole company setup is reviewed and questioned. Often times this is an opportunity to change things for the years to come. Changes can range pretty much form the financial situation, insurance setup, real estate/ property management, etc.

With proprietary access to M&A deals involving new company owners, we definitely see the potential of Carl Finance to offer additional products in the future. Succession and M&A transactions are the first steps. Minority equity, secondaries, and mezzanine are only some of the many opportunities for Carl Finance in the future, which we think will give them room to further scale the business.

Kurosch & Pascal — a team that knows each other and the market inside out

We are super happy to partner with Kurosch and Pascal. Both have known each for many years — even went to school together. Both are passionate about M&A transactions and have in-depth knowledge about the market dynamics. We love their energy and drive to set new standards in an industry that today still is rather “old-school”.

We are very much looking forward to the journey ahead. Let’s together solve the succession problem in Europe!

If you would like to read more about it, check out the recent Capital article here [German only] or https://www.carlfinance.de/home/