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Business model
DBAG’s business model, which is geared towards increasing value for its shareholders, rests on two pillars – Private Markets Investments and Fund Investment Services. The Funds provide a strong link between the two segments. Because the Funds are at the core of our business model, we refer to it as being integrated.
The Private Markets 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 Funds. To that end, DBAG has concluded co-investment agreements with the 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 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 Funds.
The Fund Investment Services business line provides advisory services to the Funds. We steer this process with our own resources in tried-and-true workflows, primarily through the investment advisory 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 (“support”),
- 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.
Target system
Target system comprising financial and non-financial objectives
The core business objective of Deutsche Beteiligungs AG’s activity is: we aim to increase the value of DBAG in the long term. In this context, we have defined financial and non-financial targets.
This objective will be achieved by increasing the value of the two business segments, namely Private Markets Investments and Fund Investment Services, while taking ESG aspects into account – i.e. environmental and social aspects of our business activities, as well as the principles of good corporate governance. It is consistent with the long-term nature of our business that we take responsibility for the impact that our decisions have on others, both now and in the future.
As is common in our sector, a long period of time is required before DBAG can be judged on its success. This is why, for us, “sustainable” first of all means “in the long term”. Income from investment activity is influenced to a significant degree by the appreciation in value of our portfolio companies. DBAG generally supports MBOs over a period of four to seven years, and enters into Long-Term Investments for typically more than seven years. Income from Fund Services is significantly influenced by the initiation of new funds. A Fund is launched approximately every four to five years, while the usual lifetime of a Fund is ten years.
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. This can also be attributable to external factors that can change significantly at short notice. This is the case, for example, with the valuation levels of listed peer group companies when we measure the fair value of our equity investments on a quarterly basis.
Financial objectives:
- Build the value of the Private Markets Investments business segment
- Build the value of the Fund Investment Services business segment
Non-financial objectives:
- Reduce or avoid greenhouse gas emissions
- Improve employee satisfaction
- Prevent compliance breaches
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