German private equity house Deutsche Beteiligungs has held a first closing for its latest fund, having raised E120m in a difficult fundraising environment.
The fund, the firm’s fourth, is hoping to raise E250m for investment in industrial Mittelstand companies with turnover of between E50m to E500m and based in German-speaking countries. The fund is the first raised by the firm to seek commitments outside its traditional shareholder base. So far institutional investors from both Europe and the US have made commitments.
Deutsche Beteiligungs spokesperson Thomas Franke attributed the strong first close to the performance of the firm’s previous funds. “Although many investors are concerned by the weak economy and difficulties over German tax laws, we have managed to close on target because investors like our story.”
Despite a strong investment performance in the long term, the firm has suffered from a lack of exits and a mark-down in the its portfolio. In the nine months to July 31, the group registered a pre-tax loss of E12.8m and write-down’s on the investment portfolio of E19m.
The new fund will make investments over the next three to five years, investing between E10m to E60m per investment. Deutsche Beteiligungs AG will have around E100m available annually from its own assets and those of its managed funds to invest in management buyouts.
“Despite the downturn in the economy, we think it is a good time to be investing a fund,” added Franke. “Multiples have been coming down and there are some interesting deals in the pipeline.”
The fund has made two investments since it was launched late last year. The first of these, automotive supplier AKsys, which the firm acquired in October 2001, has since increased its turnover to E370m with the acquisition of the Fiast Automotive Group. In May the fund acquired Hochtemperatur-Engineering GmbH, formed from the industrial engineering business of RHI AG.
Franke said the firm is “very confident” of achieving the initial target of E250m and that a second close was scheduled for early 2003. “A number of investors have told us that they are keen to come on board at the second closing, which makes us confident of achieving our E250m some time in mid-2003.”