PRINT THIS PAGE Growth is unbroken
20/03/2007. Source:Deutsche Beteiligungs AG.
2006 was a good year for German mid-market buy-outs, finds Deutsche Beteiligungs AG, with more transactions and higher value than ever. The growth trend in the mid-market segment of management buyouts is unbroken: There were a total of 34 transactions in 2006, clearly topping the 25 deals recorded the preceding year and reaching another all-time high – for the fourth consecutive year. The same holds true for the transaction value, or the sum paid for the (debt-free) companies.
In 2006, financial investors in Germany backed mid-sized management buyouts to the sum of about four billion euros; this is one billion euros more than the previous year. A market overview Deutsche Beteiligungs AG (DBAG) issued today brings these trends to light. The statistics relate exclusively to majority takeovers by financial investors in which the target companies' managements co-invest which have a transaction value of 50 million to 250 million euros for the debt-free company. The data is based on publicly accessible sources and own estimates by Deutsche Beteiligungs AG.
Although enterprise values have risen again, DBAG estimates that transaction values average around 120 million euros, which is similar to the prior year's level, but considerably tops that of 2004 (102 million euros). "These figures underscore the fact that private equity is now firmly established as a financing provider to Germany's 'Mittelstand'," said Wilken von Hodenberg, Spokesman of the Management Board of Deutsche Beteiligungs AG, at this quoted private equity company's press conference in Frankfurt today.
Management buyouts are still most often triggered by structural change in large corporations wishing to part with peripheral activities. Of the 34 transactions in 2006, 15 are attributable to that category. Secondary buyouts, accounting for 14 of these 34 deals, now have an almost equal share of the market. In addition to a public-to-private transaction, four buyouts settled the succession issue in previously family-run businesses.
Competition in the mid-market buyout segment is intense: 27 financial investors were involved as buyers in the 34 transactions recorded in 2006; none of the investors structured more than two transactions in this segment. Deutsche Beteiligungs AG, who invests alongside its co-investment funds, is on the list of transactions with its investment in Heim & Haus Holding GmbH; a further DBAG deal transacted in 2006 (Homag) does not come under this segment due to its size.
Von Hodenberg pointed out that Deutsche Beteiligungs AG invested with a certain restraint in 2006: "We encountered high prices and a competitive field in which banks were frequently willing to provide more leverage than we considered appropriate. We chose not to enter into a number of investments in 2006, because we felt the prices were exaggerated. If, for that reason, we occasionally lose out in making a deal, that is certainly something we can live with. In return, we were spared insolvencies with our buyouts here in Germany, even in the difficult economic period from 2002 to 2004."
In 2007, Deutsche Beteiligungs AG again plans to structure two or three buyouts, von Hodenberg said: "Many attractive companies are up for sale. But we do not feel any pressure to invest; our investors – the stockholders as well as our funds' limited partners – share our philosophy of approaching new investments prudently."
Deutsche Beteiligungs AG is a leading publicly listed private equity company. With a track record of 40 years, it is the oldest private equity firm in Germany. Deutsche Beteiligungs AG focuses on market-leading mid-sized enterprises in Germany. It invests from its own balance sheet and from the assets of co-investment funds. Currently, the company has approximately one billion euros under management.
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