Deustche Bank will retain direct control of Morgan Grenfell Private Equity’s €100m Italian fund. Carlo Pirzio-Biroli, part of Deutsche Bank’s fund-of-funds team has become acting chief executive and has brought in a new team of Deutsche executives to manage the fund.
The current head of MGPE Italy Dante Razzani is to leave the fund later this month with three other members of the team following a failed attempt to buyout the fund from Deutsche Bank. MGPE UK managed a successful secondary transaction of part of the portfolio earlier this year when Goldman Sachs Asset Management took over the third party investor’s stakes in the portfolio of four companies and Vision Capital, an investment banking boutique took over the management. The acquisition included interests in Deloro Stellite, Abrasive Technologies, AB Cerbo and Shearings.
MGPE Italy has six companies left in its portfolio including Piaggio, the Italian scooter manufacturer which recently secured refinancing with existing banks after bank covenants for its 1999 buyout were breached – see EVCJ September 2003, page 31. Italian entrepreneur Roberto Colannino put in €100m cash for a 31% stake while Piaggio’s lending banks converted €140m debt into 38% of the company’s equity.
The goal of the bank is not to liquidate the whole portfolio immediately, but to actively manage the investments to realise the maximum possible value for investors. A spokesperson for the bank said this could take at least two to three years. The fund has two possible exits in the pipeline from its majority stakes in König and Valli Zabban and talks with buyers are said to be at advanced stages.
Deutsche Bank has almost halved the size of its private equity portfolio over the last year as part of its restructuring to focus on the bank’s core businesses. As of June 30, 2003 the total book value of the bank’s private equity funds was €1.6bn. The book value of the bank’s remaining direct investments stands at €1.8bn.
Most recently the bank sold a third part of its private equity portfolio to Credit Suisse Strategic Partners. And earlier this year Deutsche Bank disposed of its €1.5bn portfolio of late stage direct investments in a management buyout led by Ted Virtue and Graham Clempson of DB Capital Partners. They are now known as MidOcean Partners and their funds are owned by a mix of dedicated secondaries players including Coller, HarbourVest and Paul Capital Partners and also a range of international institutional investors – see EVCJ March 2003, page 18.