European Deutsche, Dresdner Merger Prompts Speculation –

Morgan Grenfell Private Equity (MGPE) has announced that it has capped Deutsche European Partners IV LP at E1.5 billion. News of the closing came just a couple of weeks after the announcement of the Deutsche Bank/Dresdner Bank merger. Meanwhile, MGPE, which has been investing from a Deutsche Bank bridge facility while raising its latest fund, plans to launch its fifth fund before the end of the year, since e681 million of Fund IV is already committed.

The surprise merger between Deutsche Bank and Dresdner Bank, as well as creating a European banking behemoth, has sparked speculation in the private equity community regarding the format of its future unquoted investment activities.

Judging from sources close to the two groups, internal curiosity is also running high but, because under German law, integration of the two groups cannot formally begin until shareholders approve the merger at an extraordinary general meeting towards the end of November, the eventual shape of the private equity business may not be known for some time. In the interim, each bank remains independent and is required not to act as if the merger had been completed.

Several discrete private equity operations are involved across the two banks. Deutsche Bank covers MGPE, part of Deutsche Asset Management; Deutsche Bank Capital Partners (DBCP), the private equity arm of its investment banking division; DB Investor; and DB AG, which is also active in France through its sponsorship of Quadran.

Dresdner Bank, meanwhile, operates Dresdner Kleinwort Benson Global Private Equity business, with operations in Germany, Spain, Italy, Central Europe, the U.K., the U.S. and Hong Kong. There is relatively little significant overlap between the two bank’s private equity operations for instance, Dresdner Keinwort Benson focuses on mid-market deals which fall well below the radar screen of MGPE.

Rumors Denied

Rumors that the merged entity was to sell off Dresdner Kleinwort Benson have been flatly denied by executives of both banks. However, for the time being at least, predictions that DKB’s private equity team are going to follow in their mezzanine colleagues’ footsteps and go independent, look unlikely to come true. Equally, MGPE’s declared intention to return to the market with fund number five, plus recent recruitments to the Deutsche Bank Capital Partners Team, indicate that the Deutsche Bank private equity businesses expect to continue with business as usual for the foreseeable future.

Four new partners have been appointed to Deutsche Bank Capital, which is headed by Graham Clempson, also Euroean joint head of global investment banking.

Three of the new partners are external hires, whereas Andreas Zombanakis has transferred from Deutsche’s credit risk management division. Stephen Robertson was formerly a managing director in Merrill Lynch’s leveraged finance team, while Christian Purslow was a managing director at Salomon Smith Barney specialising in media and telecommunications. Paul Murray has joined from 3i, where he focused on larger deals in Scottland and the North of England.