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Interview with Michael Phillips, Investment Partner at Castik Capital, By Johann Herz, Head of Events and Communication at LPEA as published in Insight/Out magazine #33
Over the past decade, Castik Capital has emerged as a robust Private Equity firm, specializing in long-term value creation through strategic consolidation. With €5 billion in AUM, Castik focuses on B2B services and software, executing its buy-and-build strategy across Europe and beyond. In this interview, Michael Phillips, Investment Partner at Castik, shares insights into the firm’s growth, investment philosophy, Luxembourg footprint and commitment to ESG integration.
Could you please tell us more about the history of Castik?
Castik Capital was founded in June 2014 when my partners and I spun out of Apax Partners. We started with just five people and a vision to build a Private Equity firm that could effectively execute long-term investment strategies. Our first fund raised €1 billion, supported by four large LPs who believed in our approach. Launching a Private Equity fund from scratch is a significant challenge, and we remain deeply grateful to those early investors who placed their trust in us.
Over the years, Castik has experienced steady growth, expanding our team to nearly 60 professionals. We now have 28 investment professionals based in Munich and 29 people in Luxembourg managing fund administration, risk, tax, and investor relations. Unlike many firms that outsource key functions, we have built an in-house operational structure that gives us greater control and transparency. This depth of capability differentiates us from firms that use Luxembourg purely as a legal base.
What significant changes have occurred since your last interview with LPEA in 2016?
When we last spoke in 2016, we had just completed our first deal. Since then, we have grown substantially. We have raised three additional funds, including a continuation vehicle, bringing our total assets under management to €5 billion. We have fully invested our first two funds, completing 13 deals—six in the first and seven in the second. Our current fund, with €2 billion, is targeting 10 transactions.
Strategically, we have refined our investment approach. Initially, we explored both majority buyouts and minority stakes in family-owned businesses. However, we found that minority investments did not align well with our long-term objectives, so we now exclusively focus on buyouts. This allows us to execute our consolidation strategies with greater efficiency and effectiveness.
Internally, we have prioritized promoting talent from within, ensuring that our team members develop alongside the firm. Luxembourg has become a true decision-making hub for us, reinforcing our long-term strategy.
What does Castik’s setup look like in Luxembourg and abroad?
Luxembourg is our operational hub, managing everything from fund administration to risk and tax functions. A key differentiator for Castik is that each of our portfolio companies holds its supervisory board meetings in Luxembourg, ensuring that major strategic decisions are made here. This level of local involvement sets us apart from firms that use Luxembourg primarily as a registration jurisdiction without substantive operations.
Beyond Luxembourg, we operate with a lean international footprint. We maintain just two offices: Luxembourg and Munich. The Munich office houses our investment advisory team. We have debated opening additional locations, but we have found that keeping our team consolidated fosters collaboration and knowledge-sharing. Europe’s strong transportation links allow us to be highly effective with our existing structure.
What are your verticals and geographic focus?
Our primary focus is on B2B services and B2B software, which together account for 90% of our portfolio. These industries are ideal for our buy-and-build strategy because they are often highly fragmented, allowing us to consolidate businesses and create stronger market leaders.
Geographically, we focus on Europe, where market fragmentation presents significant consolidation opportunities. Some of our deals are country-specific, such as insurance brokerage in Germany, where there are 25,000 independent brokers, while others are pan-European in scope. In certain cases, we’ve expanded beyond Europe, entering North America, South America, and Asia when business models are globally scalable.
What pillars is Castik’s strategy built on?
Our investment strategy is based on three core pillars:
- Creating Market Leaders – We specialize in acquiring founder-led businesses operating in fragmented markets. By consolidating these businesses, we transform them into industry leaders.
- Holding Winners Longer – Unlike many Private Equity funds that focus on short-term exits, we prefer to hold successful investments for five to seven years. This allows us to fully execute our value creation strategies and maximize long-term returns.
- Partnering with Founders – We prioritize working with business founders who share our vision for sustainable growth.
How does Castik provide value to its portfolio companies?
Value creation at Castik begins before we complete an acquisition. We conduct a rigorous analysis of a company’s financial structure, IT systems, sales strategy, and operational framework to develop a tailored roadmap for growth.
Once acquired, we implement strong financial reporting systems, optimize pricing strategies, and develop internal M&A teams to manage acquisitions efficiently. A significant part of our work involves ensuring seamless integration and maintaining company culture as businesses scale.
We focus on operational improvements, driving efficiency while maintaining a high level of talent retention. By supporting companies with structured systems and best practices, we position them for sustainable long-term growth.
How is Castik integrating ESG into its operations?
ESG is fully embedded in our investment philosophy. As an Article 8 fund under the EU Sustainable Finance Disclosure Regulation, we have strict ESG reporting obligations and conduct in-depth ESG due diligence on every potential investment.
After acquisition, we implement ESG tracking systems using specialized software and appoint dedicated ESG managers within portfolio companies. Our approach follows three phases:
- Data Collection & Compliance – Establishing robust ESG reporting standards and ensuring regulatory compliance.
- Sustainability Planning – Setting actionable ESG goals tailored to each portfolio company’s specific risks and opportunities.
- Long-Term Integration – Embedding ESG considerations into the day-to-day operations of our businesses, ensuring sustainability is part of their long-term strategy rather than just a compliance exercise.
To reinforce ESG best practices, we hold quarterly meetings with our portfolio companies, where we share insights, benchmark performance, and identify opportunities for improvement. Our goal is to ensure that ESG is not just a reporting requirement but a real driver of long-term value creation.
