We founded Keyhaven Capital Partners in 2003 with the primary objective of maximising risk-adjusted returns for our investors, coupled with prudent risk management. The lower mid-market is overlook by the mainstream private equity ecosystem and represents the most attractive investment opportunity in Europe today, as it is characterised by less competition, less intermediation, and deal flow which tends to be relationship-driven. In our experience, this results in lower pricing and debt levels, better value creation, alignment, and ultimately lower volatility and higher returns.
This market segment also comprises the largest opportunity set in Europe, with 99% of all EU businesses and an average of two-thirds of all private equity transactions each quarter falling into this category.
Lower mid-market investing benefits from many of the attributes which have historically been hallmarks of successful private equity performance.
European industries such as manufacturing and services are dominated by smaller companies, including niche businesses whose growth rates are forecast to be significantly above those prevailing in the broader EU economy and which are ripe for consolidation.
It can be difficult for institutional investors to access this attractive market segment, as private equity funds operating in the lower mid-market space in Europe tend to be smaller, country specific, and often are only marketed to local investors, or those who proactively search them out. Language and cultural barriers, together with divergent local business practices can further work to impede the selection process, further emphasising the requirement for specialist skills and experience to navigate this area effectively.
Research shows that lower mid-market funds have historically outperformed mid cap and larger private equity funds, and we believe that this dynamic is set to continue.