Inside DBAG’s €1bn war chest

Deutsche Beteiligungs AG – the listed German private equity firm otherwise known as DBAG – has raised €1 billion to invest in a “broader range” of investments, it said on Wednesday.

DBAG Fund VII is a €1 billion pool of capital comprising two parallel funds: the €800 million “principal” fund and a €200 million “top-up” vehicle.

The principal fund, €183 million of which is coming from DBAG’s balance sheet, is restricted on the amount of capital it can commit to any one deal. If DBAG sources a deal that requires an equity commitment of more than around €80 million – outside of the remit of its main fund – it can call on capital from the top-up fund. The €200 million top-up fund is expected to invest in three to four deals.

“Including assets from the top-up fund, up to €200 million can be invested per transaction, indeed up to €280 million, including bridge financing,” the firm said.

There are 31 LPs in DBAG Fund VII – mainly pension funds, funds of funds and insurance companies – and all are invested in both the main and the top-up fund.

The fundraising took place in less than three months in “a receptive market environment”, the firm said.

“We were able to agree attractive terms. We benefited from the investment performance of prior funds and the excellent investment pace of DBAG Fund VI,” said Rolf Scheffels, a member of DBAG’s management board.

Both funds have an 8 percent hurdle rate and 20 percent carried interest rate. The main fund is charging a 2 percent management fee, while the top-up fund has a slightly lower management fee, although the exact number was not disclosed.

One of the “attractive terms” the firm was able negotiate is an investment period of six years rather than five years, as was the case with the fund’s €700 million predecessor.

While the top-up fund has given DBAG more scope to invest in larger deals, it has also extended the remit of its smaller fund, DBAG Expansion Capital Fund. The original €242 million, 2011 ECF fund has invested exclusively in minority stakes in family run businesses.

“In the future, it will in select cases also take over a majority interest in companies and structure smaller buyouts. The equity capital investments will range from €10 million to €30 million,” the firm said.