Interim financing for the acquisition of a new investment. Occasionally, DBAG initially uses proprietary capital when making an acquisition to bridge the time until the acquisition financing can be secured. When this is arranged after completion of a transaction, it replaces part of the capital employed, which is then returned to the investors.
A private equity fund focused on > MBOs.
Capital management company (Kapitalverwaltungsgesellschaft – KVG)
Company with its registered office and headquarters in Germany whose business operations are aimed at managing domestic investment assets, EU investment assets or foreign alternative investment funds. Only one capital management company can be responsible for each investment fund category, which is also answerable for compliance with the rules of the German Capital Investment Code (KAGB). DBAG is a registered capital management company under the KAGB.
Carbon Disclosure Project (CDP)
Non-profit organisation whose objective is worldwide transparency regarding environmental data. Within the scope of the CDP, DBAG issues detailed annual reports on its greenhouse gas emissions.
An earnings-related bonus that is paid to investment managers as a result of the success of managed or advised funds, as long as certain conditions are met. This bonus is disproportionate in terms of the capital employed and is typical in the private equity industry. Carried interest provides an incentive to investment managers and creates an alignment of interests between the investment managers and the fund investors.
DBAG invests in portfolio companies alongside the DBAG funds. The ratio of DBAG’s co-investment and the other investors in a fund is fixed for the fund’s entire term; DBAG holds a minority interest in the respective investment.
Companies via which DBAG has structured its co-investments alongside the DBAG funds.
The auxiliary functions for the investment process and administrative tasks. These responsibilities also include portfolio valuation and risk management.
Cost of equity
Calculatory return on the equity employed. Similar to providers of borrowings, equity providers (shareholders) expect a return on their invested capital. This is usually achieved through share price increases and distributions. The cost of equity can be determined by various models and generally exceeds that for borrowings, since equity capital entails greater risk. DBAG uses the capital asset pricing model (CAPM) to determine the cost of equity. For this method, a company-specific risk premium calculated using a mathematical formula is added to a risk-free interest rate.
Short for DBAG Expansion Capital Fund, which is managed by DBAG and alongside which DBAG co-invests in growth financing.
Funds that are managed and/ or advised by Deutsche Beteiligungs AG, alongside which DBAG co-invests. The principle: investors commit a certain amount of capital that is drawn down stepwise as soon as suitable investment opportunities arise. Upon an investment’s ultimate disposal, the proceeds are distributed to the investors.
Investment opportunities available to an investment company such as DBAG.
The process of seeking and selecting potential portfolio companies.
Discounted cash flow (DCF) method
Procedure used to measure the value of an enterprise, determined by the sum of discounted cash flows expected in the future. Discounting is performed using an interest rate for a long-term risk-free investment plus a risk premium.
Systematic and detailed collection, investigation and analysis of data on a target company preceding a commitment to invest. The purpose is to determine the strengths and weaknesses of that company as well as the risks involved.
Short for “Environmental, Social and Governance”. DBAG regularly reports on these aspects.
Disposal of an investment from a financial investor’s portfolio. Principally, there are three exit routes: trade sale (sale to a company), initial public offering (stock market listing) or secondary buyout (sale to another financial investor). DBAG considers all three variants in realising its investments.
The current amount for which an investment could be exchanged between knowledgeable, willing and independent parties. According to > IFRS accounting rules, financial assets such as corporate investments are to be valued based on this concept.
German Corporate Governance Code
Lists key statutory rules and regulations on the management and oversight of German listed companies and contains internationally and nationally recognised standards of good responsible corporate governance by way of recommendations and suggestions.
German Capital Investment Code (Kapitalanlagegesetzbuch – KAGB)
Legal framework for managers of open and closed-end funds.
German Special Investment Company Act (Gesetz über Unternehmensbeteiligungsgesellschaften – UBGG)
In 1985, Deutsche Beteiligungs AG was the first firm to be recognised as a special investment company. This law, for example, exempts companies – subject to certain conditions – from municipal trade tax and is aimed at creating indirect access to the capital market for mid-sized companies.
Minority stake in a company – the majority remains with the past owner. Both early-stage and established companies may seek expansion capital to finance their next phase of growth. More information: http://www.dbag.de/expansion-capital-investment.
Short for “International Financial Report- ing Standards” (formerly IAS). Accounting rules that have been obligatory for the consolidated accounting of listed companies in the European Union since 2005.
Investment entity (as in IFRS 10)
Accord- ing to the pronouncement by the International Accounting Standards Board (IASB), a company which, by definition, is an investment entity must not consolidate its subsidiaries, but must carry them at fair value through profit or loss. Subsidiaries that provide services related to the investment activities of the parent company are required to be consolidated. As a parent company, DBAG meets the typical characteristics of an investment entity in terms of IFRS 10.
Short for “Internal Rate of Return”. Financial mathematic method of determining the return on an investment.
A specific cooperative arrangement in which two or more parties establish a legally independent business in which each of the participants has a right to net assets. The parties jointly bear the financial risk of the investment and jointly exercise control over the enterprise.
Short for “mergers and acquisitions”. General term for such transactions in the corporate sector.
Management buyout (MBO)
The takeover of a company by its management with the support of one or more financial investors who largely finance the transaction and assume the majority of the voting rights or share capital.
Hybrid capital ranking between voting capital and first lien debt.
The market for investment transactions is divided into three segments: transactions with a value of less than 50 million euros are considered “small“; the mid-market segment comprises transactions valued from 50 to 300 million euros; transactions with a value of more than 300 million euros form the upper market segment.
Procedure used to value an enterprise. Expressed as the product of an indicator (e.g. earnings) and a multiple derived from current market prices. That multiple is based on the quotient of the market prices for a group of similar companies and their respective performance indicators.
Net asset value
Sum of the portfolio’s fair value at the valuation date, less minority interest in the co-investment vehicles (primarily carried interest), other assets/liabilities of these vehicles (such as capital drawn down, but not yet invested), other non-current assets and financial resources, less (any) bank liabilities.
A group of companies similar in terms of industry, structure, products and revenues, used for comparison purposes.
All of the investments of DBAG.
Method of measuring the creditworthiness or credit quality of debt issuers or securities. Credit ratings are usually issued by credit rating agencies.
Replaces part of the relatively expensive equity tied in a company by lower-cost debt. The aim is to optimise the capital structure. The free funds are then distributed to the shareowners.
For transactions in the corporate sector, an existing loan is substituted for a new loan. For example, in an acquisition a shareholder loan can be replaced – or refinanced – by acquisition financing.
Return on equity per share
Key target and performance indicator of DBAG. The closing return on equity per share at the end of the financial year is set against the opening equity per share at the beginning of the financial year, less the dividend paid in the course of that year.
Secondary / tertiary buyout
An investment that is sold by a financial investor to another financial investor.
Term used in the IFRS. An entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity.
Will invest together with the principal fund DBAG Fund VII in larger transactions (investment amounts that exceed 10 percent of the assets of DBAG Fund VII).
A type of credit facility in which first-lien and second-lien components are combined in one tranche.