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An active summer for the investment team: New investments, disposals – several transactions structured in parallel

An active summer for the investment team: New investments, disposals – several transactions structured in parallel

 

“Business operations continue without interruption”, DBAG reported after the first two months of the pandemic. What this means became apparent a short while later. The investment team prepared and subsequently closed seven transactions in the summer months, despite the restrictions it faced. Four new management buyouts and the first long-term investment complement the portfolio. One company was sold in full, while another investment was partially sold.

DBAG invested a total of around 55 million euros in the five new investments that were agreed during August and September. The portfolio is thus complemented by three management buyouts (MBOs) that have meanwhile been (or will be) closed as at the reporting date. Another will follow in a few weeks. The first long-term investment was also agreed upon and closed at the end of September.

DBAG’s first MBO in Italy

With the MBO of PM Plastic Materials s.r.l., DBAG has structured its first transaction in Italy. PM Plastic Materials is Europe’s largest producer of pre-wired and empty cable conduits, used primarily for electrical installations. The founding family considers DBAG Fund VII and DBAG to be the best new owners for their company, which has posted strong growth in recent years. Sales have been rising by twelve per cent per annum on average since 2003. PM Plastic Materials has been successful in withstanding the impact of the pandemic to date, and thus to position itself for further growth in the years ahead – through organic growth in the markets it has covered so far, inorganic growth in adjacent product categories, or by way of consolidation of the highly fragmented market in some countries.

Further investment in fire extinguishing systems

The first company in DBAG Fund VIII is Multimon AG. The fund was closed in May with a volume of 1.1 billion euros. Multimon is a leading provider of fire extinguishing systems and the second company (after the investment in Kraft & Bauer Holding GmbH) in the portfolio related to this business. While Kraft & Bauer supplies fire extinguishing systems for tooling machines, Multimon installs fire extinguishing systems predominantly in high-rise buildings, shopping centres, warehouses, production plants, logistics centres, underground car parks, or listed buildings. The company’s key know-how lies in the efficient conception, installation and maintenance of the systems, in line with existing regulations. Fire protection regulations are becoming tighter; installed systems must be maintained regularly and retrofitted if necessary. This recurring service business already accounts for around a quarter of total revenues, with the prospect of generating more in the future.

Portfolio’s IndustryTech share is growing

The pandemic has provided another strong push for the Internet of Things and the concept of ‘Industry 4.0’. congatec Holding AG provides the requisite computer components and is expected to benefit from this momentum. congatec is a rapidly growing technology company in the area of embedded computing, focused on computer-on-modules (CoMs) and industrial single-board computers (SBCs). Established in 2004, the company is the global market leader in the CoMs segment. With this MBO, DBAG is once again investing in the IndustryTech sector – this time in a company whose products facilitate automation, robotics and digitalisation in the first place. DBAG has dealt intensively in recent years with companies operating in the embedded electronics segment. Thanks to its investment in duagon Holding AG, it has already invested in a comparable business model.

Another investment in broadband telecommunications

With the addition of Northern Access, a regional provider for fast internet and telephony, DBAG is expanding its portfolio with another investment in the fast-growing broadband telecommunications sector. To date, Northern Access’ development area has been limited to the region north-east of Hanover, but by 2021, the company aims to increase the number of accessible households by approximately 40 per cent (from 20,000 today), mainly by investing in expansion of its own fibre-optic network. With the investment in Northern Access, DBAG is also structuring a further MBO which will solve the issue of succession. In 13 out of the 15 MBOs structured over the last three years, company founders or family shareholders chose DBAG as their partner to launch the next step in their company’s development.

Long-term investment with strong growth prospects

The opportunity seldom arises to gain a foothold in an emerging market characterised by structural growth: With its investments in inexio and DNS-Net, DBAG seized the opportunity in 2013 to benefit from the development of an urgently sought-after infrastructure by investing in a fibre-optic network for powerful internet connections. With increasingly decentralised power generation and the resulting distribution tasks, the German Energiewende (switching the entire country’s energy supply to renewables) is now demanding intelligent measurement of production and consumption. Hausheld AG offers its customers – for example municipal utility companies – a full-service solution for developing a smart metering infrastructure, for which it then provides the corresponding metering services. Because the existing power grid has to be converted into an intelligent network, in which all of the electricity market’s players can be networked and controlled through communication technology, large numbers of common electric meters must be replaced. Hausheld is the only provider to date to offer a viable solution for the state-supported establishment of a scalable, interconnected, intelligent communications network. It has thus started to launch its solution with the municipal utilities for electricity metering. The Hausheld full-service offer can be transferred to other areas such as gas and water, where it will look to operate the same function. We therefore expect the company to grow at a dynamic pace in a market offering long-term growth potential. DBAG acquired a minority interest in this young company in September. This mirrors the approach it took in 2013 with inexio and DNS Net: after a seven-year holding period, inexio was sold in 2019 at more than seven times the original acquisition cost.

Rheinhold & Mahla attracts the interest of a strategic buyer

Rheinhold & Mahla GmbH has found a new shareholder. As a leading industrial services provider for ship interior fittings, the company attracted the interest of a strategic buyer, namely a subsidiary of the world’s largest shipbuilder, China State Shipbuilding Corporation. Even though Rheinhold & Mahla had substantially increased revenue in recent years, the original earnings expectations were not met. The sale will only cover part of the original acquisition costs. The transaction is expected to be concluded by the end of the year, subject to approval by the antitrust authorities.

Pfaudler Group: value appreciation realised in part

The investment in Pfaudler Group – an MBO from December 2014 – was realised in part. In the past few weeks, approximately 18 per cent of the shares in GMM Pfaudler Ltd. were placed from the holdings of DBAG Fund VI and DBAG. GMM Pfaudler, which is listed in India, had acquired 80 per cent of Pfaudler Group’s European and American core business together with GMM’s second-largest shareholder. Until now, DBAG Fund VI and DBAG had held just above 50 per cent of GMM’s shares. Following the placement, DBAG Fund VI and DBAG remain GMM’s largest shareholders with around 33 per cent of the shares; a stake of just over 6 per cent is attributable to DBAG on a look-through basis.