Private Equity – DKBPE develops German plans

Kleinwort Benson Development Capital will this year celebrate its 20th birthday – and will do so under the new name of Dresdner Kleinwort Benson Private Equity (DKB Private Equity). The firm is by no means the first UK player to have made a similar adjustment to reflect the broader raft of funding models on offer to the market. New DKB Private Equity joint managing director Andrew Hartley says the change of name better reflects the changing nature of our business’, pointing to the firm’s focus on the four key sectors of technology, media, healthcare and manufacturing & engineering.

The firm is unlikely to have much free time in which

to celebrate its milestone anniversary since 2000 promises to be a busy year for all DKB’s European teams.

Hartley’s counterpart Richard Green has announced plans to launch a new fund later this year to continue our strategy of creating value as a sector specialist in mid-market private equity’ The planned UK-based fund raising, which looks likely to involve a wider European component, will overlap with the final phases of four other group efforts in Europe – a Central European vehicle, an Italian fund, and a recently unveiled German initiative to raise both mid-market private equity and dedicated technology investment funds.

Emyr Hughes has moved to Frankfurt after 14 years with DKB Private Equity in London to spearhead the new German Area Fund project. His brief as head of Dresdner Kleinwort Benson Private Equity Germany is to establish buyout and early-stage technology vehicles to complement the activities of DKB’s existing Frankfurt private equity arm, Beteiligungsgesellschaft fur die deutsche Wirtschaft (BdW). A long-established player in its domestic market, BdW has operated very much on the traditional’ German model, taking minority stakes, predominantly in development capital situations.

By contrast, the planned German buyout fund will focus on institutional control positions and aims to tap opportunities both among Mittelstand companies and quoted corporate or larger private group subsidiaries. The target for this vehicle has not yet been formally determined but is likely to be of the order of

Dm300 million to Dm500 million (euros 153 million to euros 255 million) according to Hughes.

The projected early-stage offering will be DKB Private Equity’s first dedicated technology offering in mainland Europe. Nevertheless, DKB as a group has considerable experience of the German venture market, gleaned through investments with groups including TVM Techno Venture Management and T-Venture.

Hughes says that the German venture fund will focus on IT, new media and telecommunications companies and will probably seek to raise around Dm100 million (euros 51 million). As in the UK, where DKB Private Equity’s venture-stage investments are carried out in conjunction with early-stage technology specialist Elderstreet, the German fund will target firms where revenues already exist or are imminent, rather than seed-stage enterprises.

Hughes, who is now faced with the challenge of recruiting teams of experienced German nationals for the two projected funds, hopes to begin marketing the buyout offering during the first half of this year.

Meanwhile, DKB Private Equity Italia expects to hold a mid-February first closing on its mid-market offering, which aims to raise euros 75 million to euros 100 million ($75.6 million to $101 million) in all. The Dresdner group is committing euros 25 million to the fund and Enrico Ricotto, head of the Milan-based management team, reports than an as yet unnamed European financial institution is expected to commit up to the same amount. A number of wealthy individuals and family investors are also likely to sign up for the first close. Going forward, DKB Private Equity Italia’s fund-raising effort will largely be directed outside its domestic market. Most Italian banks active in the sector have their own private equity arms and are therefore unlikely to support a rival banking group’s offering.

The fund will target established Italian mid-market companies and, says Ricotto, will focus particularly on enterprises in sectors such as mechanics, where Italy is a strong international player, and on the services sectors. The fund will undertake both buyouts/buy-ins and minority stake pre-IPO fundings.