A new AI roll-up fund is launching in Germany, as investor appetite for trying to yield returns by buying a group of established companies and revamping them with AI continues apace.
Generation Tech Partners has raised more than €50 million, with the funds used to acquire German SME service providers, then overhaul them with AI.
An AI roll-up strategy can be described as a company acquiring several companies in a sector, such as accounting, IT or insurance, and then leveraging AI to make the acquired companies more efficient.
Major US VC firms like General Catalyst, Lightspeed and Thrive Capital are making AI roll-up plays.
Earlier this year, Berlin-based investment firm Tenet emerged out of stealth with an €80m target for its debut AI roll-up fund.
Hamburg-based Generation Tech Partners will use an AI roll-up strategy to acquire German owner-managed service companies during succession planning and merge them into larger companies.
It said many owner-managed service companies face closure and struggle with a skilled-labour shortage.
The plan is to acquire around 30 companies, which will be restructured using AI. The plan is then to sell the companies on after five to seven years, according to Germany's Manager Magazin title.
The focus is on acquiring firms with between €0.5 and €5m EBITDA (earnings before interest, tax, depreciation and amortisation).
Generation Tech Partners said it will “bring them into the digital future with a proprietary AI transformation playbook. No cost-cutting, no job losses — on the contrary: the existing team stays on board, grows along, and delivers noticeably better service to customers”.
The founders behind Generation Tech Partners are Elias Bitzer, an M&A expert previously with Deutsche Bank, Sebastian Herfurth, a former lawyer and entrepreneur, and Daniel Szabo, an experienced operator for digital transformation.
The investment firm has raised the funds from funds of funds, Access Capital Partners and Qualitas Funds, as well as a European pension fund, and entrepreneurial private investors and family offices.
IMAGE: PIXABAY
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