Deutsche Beteiligungs closed its eighth fund on more than 1.1 billion euros. Fund VIII is structured across two sub-vehicles: a principal fund with more than 910 million euros, of which 210 million euros came from DBAG for its co-investments; and a supplementary 199 million euro top-up pool, into which DBAG committed 45 million euros. The firm closed the prior fund, which closed on just over 1 billion euros, in 2016.
DBAG has closed the fundraising for DBAG Fund VIII, with over 1.109 billion euros in commitments. New investors have been accepted in recent weeks following the first round of subscriptions in December 2019. The volume raised slightly exceeded the company’s original target.
Deutsche Beteiligungs AG has co-invested 255 million euros. DBAG Fund VIII is of a comparable structure and term to its predecessor. The fund consists of two sub-funds: a principal fund with commitments in excess of 910 million euros, of which 210 million euros come from DBAG for its co-investments; and a supplementary 199 million euros top-up fund (DBAG’s share of which is 45 million euros). This structure facilitates larger transactions: including the resources from the top-up fund, equity of up to 220 million euros per transaction can be invested. The fund’s investment period lasts up to six years. DBAG’s assets under management and under advice increase to approximately 2.5 billion euros with the addition of DBAG Fund VIII.
The closing date for subscriptions comes four years after the closing of the fundraising for its predecessor DBAG Fund VII, which raised commitments of 1.010 billion euros. Since then, that fund has structured eight management buyouts, three of which were conducted using its top-up fund.
“Investors trust us to find and develop attractive mid-sized companies in Germany and selected neighbouring countries, despite these challenging times.” These were the comments of Torsten Grede, Spokesman of the DBAG Board of Management, on the closing of the subscription period. He continued: “We are particularly pleased that, at 86 per cent of the fund volume, the overwhelming majority of capital commitments came from investors who have entrusted us with their funds in the past.” This ‘re-up rate’ has increased even further compared to the fund’s predecessor: the figure for DBAG Fund VII was 80 per cent.
The investor base structure has remained largely unchanged. Among the newly acquired investors for DBAG Fund VIII are a Dutch pension fund, a UK foundation and a US asset manager. Pension funds account for the largest share of capital commitments at 36 per cent, followed by insurance companies with 25 per cent and family offices with around 12 per cent. Funds of funds, banks and foundations are also among the investors. Around 70 per cent of the capital commitments come from investors from Europe, 30 per cent of which are from Germany. A fifth of the volume is provided by US investors, while commitments from Asia account for almost a tenth.
There are several reasons why this new fund is so significant for Deutsche Beteiligungs AG. Drawing on its expertise in German mid-sized companies, as well as its experienced investment team and long-term outlook, DBAG is ready to provide constructive equity solutions once the current crisis is over. “The new fund will secure our financial capacity to act for many years to come – which is particularly advantageous in the current market situation,” DBAG CEO Grede explained. The addition of the new DBAG Fund VIII will increase the assets managed and advised by DBAG from 1.7 billion euros to around 2.5 billion euros. This includes not only the invested assets of DBAG and the funds, but also callable capital and DBAG’s available financial resources. DBAG receives income based on the callable capital and the invested resources of the funds. As a result, the new fund will increase the calculation basis for the income from Fund Services – another important milestone in the company’s development. In 2018/2019, DBAG’s last full financial year, income amounted to 27.0 million euros; an increase of more than 20 per cent is expected once the investment period of DBAG Fund VIII starts.
DBAG Fund VIII will predominantly structure equity investments of between 40 and 100 million euros in German mid-sized companies, equivalent to company values of between 75 and 250 million euros. The top-up fund will enable the company to make equity investments of up to 220 million euros. As with its predecessor, some of the investments may also be made in neighbouring European countries, particularly in Austria and Switzerland. The company succeeded in securing the favourable terms of its predecessor funds, and even improved on certain aspects of them.
Deutsche Beteiligungs AG, a listed private equity company, initiates closed-end private equity funds, and itself invests alongside those funds predominantly in well-positioned mid-market companies with development potential. DBAG focuses on those industry sectors where Germany’s ‘Mittelstand’ is strong in international comparison. A growing portion of DBAG’s equity investments is deployed in its new focus sectors of broadband/telecommunications, IT services/software and healthcare. Its long-term, value-enhancing entrepreneurial investment approach makes DBAG a sought-after investment partner in the German-speaking world. DBAG Group’s assets under management and under advice total 1.7 billion euros; with the new DBAG Fund VIII, this figure is set to rise to around 2.5 billion euros.