Granville Closes Maiden German Deal

In its debut German deal, Granville acquired Elmeg GmbH Kommunikationstechnik, GermanyOs leading manufacturer of small ISDN telephone exchanges and line testing equipment, from its family founders for an undisclosed sum.

The December announcement of the financial purchase coincided with the opening of its Frankfurt joint venture with Steffens Alvano & Partner, Granville Private Equity Deutschland (story, page 7).

Granville invested DM24.4 million (ecu 12.3 million) alongside debt provided by Hamburgische Landesbank and has initally acquired 100% of Elmeg’s equity. Joachim Muller-Wende, joint managing director of Granville Private Equity Deutschland, said that Elmeg’s managers are committed to subscribing for a share of the equity; meanwhile, Granville is in the process of selling down a portion of its investment to an unnamed London-based venture fund. This is largely because of the size of the investment in Elmeg in relation to the 20% of Granvilles’ current fund which may be invested outside the UK, but Joachim Muller-Wende said that the decision to syndicate “also involved an element of reciprocity”.

Telecommunications is one of Granville’s preferred investment sectors and in Elmeg the group says it has acquired “not a giant, but an outstanding company with a good share of the strongest ISDN market in Europe”. Elmeg, which works closely with Deutsche Telekom as a component and equpment provider has a 32% share of the German market for small ISDN PABX telephone systems and is the world market leader for ISDN and analogue telephone line testing equipment. Sales of SM90 million are forecast for the year ending December 1997.

Joachim Muller-Wende said that Granville believes there will be opportunities to expand Elmeg through German and international acquisitions. Potential for growth from Elmeg’s existing domestic base is strong, and is likely to be enhanced by the effect of deregulation of the German telecommunications market. Elmeg will also aim to step up the flow of its products into markets such as France, the UK, the Netherlands, Austria, Switzerland and Spain, which currently lag Germany by some two years in terms of ISDN connections.