Private Equity – Private Equity business as usual as bank giants merge

At press time, Morgan Grenfell Private Equity (MGPE) announced that it has capped Deutsche European Partners IV LP on Euro 1.5 billion ($1.45 billion); further details of the fund will appear in the next issue of EVCJ. Announcement 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 Euro 681 million of Deutsche European Partners 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 Morgan Grenfell Private Equity (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 presences in Germany, Spain, Italy, Central Europe, the UK, the US and Hong Kong. There is relatively little significant overlap between the two banks’ private equity operations for instance, DKB Private Equity focuses on mid-market deals which fall well below the radar screen of MGPE.

Rumours that the merged entity was to sell off Dresdner Kleinwort Benson have been flatly denied and, for the time being at least, predictions that DKB’s private equity team were 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 (story, page 24), indicate that the Deutsche Bank private equity businesses expect to continue with business as usual’ for the foreseeable future.