DBAG's business model, which is geared towards increasing value for its shareholders, rests on two pillars – Private Equity Investments and Fund Investment Services. They are strongly interlinked through the DBAG funds. Because the DBAG funds are at the core of our business model, we refer to it as being integrated.
The Private Equity Investments business segment largely encompasses investments which are held through investment entity subsidiaries. DBAG co-invests via these companies on the same terms, in the same companies and in the same instruments as the DBAG funds. To that end, DBAG has concluded co-investment agreements with the DBAG funds that provide for a fixed investment ratio for the lifetime of a fund. These ratios also apply upon an investment’s disposal. Income is generated from the value appreciation and sale of these investments.
In addition, DBAG uses investment opportunities that exceed the terms of standard private equity funds (Long-Term Investments). DBAG makes these investments from its own resources, i.e. not as a co-investor alongside one of the DBAG funds, which is its usual strategy. The approach also generally opens up the scope for other investment scenarios that are not consistent with the investment strategies pursued by the existing DBAG funds.
The Fund Investment Services business line provides advisory services to DBAG funds. We steer this process with our own resources in tried-and-true workflows, primarily through the investment team.
The advisory services provided to the funds can be split into three material processes:
- First, we identify and assess transaction opportunities (“invest”);
- second, we support the portfolio companies’ development process (“develop”),
- before thirdly, we realise the value appreciation (“realise”) upon a portfolio company’s well-timed and well-structured disinvestment.
As is customary in the industry, DBAG receives volume-related fees for these investment services, which constitute a continual and readily forecastable source of income.
Core objective: Sustainable increase in the Company’s value
The core business objective of our activity is to sustainably increase the value of Deutsche Beteiligungs AG. We achieve this aim by increasing the value of our two business segments, Private Equity Investments and Fund Investment Services.
As is common in the private equity sector, a long period of time is required before we can be judged on our success. The income from investment activity is influenced to a significant degree by the appreciation in value of our portfolio companies. Exploiting development potential requires patience; on average, we support the companies over a period of four to seven years. Income from Fund Services is largely influenced by the launch of new funds, something that happens every four to five years or so, while the lifetime of a fund generally extends to ten years and extensions of up to two years are common. Key indicators can also be headed on a downward trajectory in the short term. This is partly a typical feature of the business because, for example, income from Fund Services falls after investments are disposed of. In part, however, it is also attributable to external factors that can fluctuate considerably in the short term, such as the valuation levels of listed peer group companies in the context of the portfolio valuation process. This means that a single quarter and even an entire financial year say very little about the success of our business activities. It is only when viewed over a sufficiently long period of time that it is possible to assess whether we have reached the core objective of our business activity.