In its largest single deal to date, the quoted German investment company Deutsche Beteiligungs AD Unternehmensbeteiligungsgesellschaft (DBAG) acquired a portfolio of 18 unquoted holdings for DM 160 million (ecu 82 million) from DBG Fonds I KG (Fonds I). The 18 holdings all related to investments jointly underwritten by DBAG and the parallel investment vehicle Fonds I since January 1995, when DBAG revised its strategy to focus on investment in larger medium-sized firms with sales of DM 100 million or more.
DBAG has recently benefited from a spate of profitable realisations. These, coupled with strong portfolio performance and a recent amendment to German private equity legislation that has enhanced DBAG’s ability to raise funds for investment from the capital market, gave the group sufficient liquidity to acquire the portfolio.
Fonds I entered its realisation phase at the beginning of the 1997/98 financial year. The deal was executed under the terms of a call option previously agreed with the Fonds I shareholders, Deutsche Bank and Schmidt Bank. DBAG and Fonds I retain a number of common investments made before 1995 in their respective portfolios.
Earlier this year, DBAG raised a DM 200 million parallel fund from two major domestic investors, the Gerling insurance group and Wilhelm von Finck, which was intended to provide co-investment funds over the next five years. Thereafter, the group expected to be able to finance all new investment solely from its own resources. However, in view of strong performance, freer access to the capital market and the expectation of a relatively short realisation horizon for the transferred portfolio, DBAG expects to be able to dispense with the need for parallel funds within a much shorter time frame.
DBAG forecasts pre-tax profits of DM 75 million in the current year. Director Karl-Heinz Fanselow said he expects DBAG’s performance to improve further during the next financial year, in part as a result of realisations from the Fonds I portfolio, together with four planned investee IPOs.