DBAG portfolio companies vitronet and DING merge
Frankfurt am Main — vitronet GmbH (“vitronet”) and Deutsche Infrastruktur und Netzgesellschaft mbH (“DING”), two investments from the portfolio of the private equity fund DBAG ECF managed by Deutsche Beteiligungs AG (DBAG), are merging and will in future operate as the vitronet Group in the fiber optic and energy infrastructure market. The merger now agreed will create a group whose pro forma sales in 2020 amounted to around 340 million euros and which now employs around 2,300 people at more than 30 locations in Germany.
In the fast-growing market for the expansion of fiber-optic and energy infrastructure, a provider is emerging with broad regional coverage and a range of services that covers all the main value-adding steps, from planning and construction of the facilities to operation and service. The vitronet Group continues to see good opportunities to actively drive forward the consolidation of this fragmented market.
In 2017, Deutsche Beteiligungs AG (DBAG) initially structured the management buy-out (MBO) of vitronet GmbH alongside DBAG ECF. This was followed in 2019 by the MBO of the STG Braunsberg Group, which has since been operating under the name Deutsche Infrastruktur und Netzgesellschaft mbH. In the year of acquisition, vitronet generated sales of 42 million euros, DING 18 million euros. In recent years, both companies have grown strongly; 15 corporate acquisitions to date have contributed to this to a considerable extent. The Group’s pro forma sales have thus increased almost six-fold.
Since the start of the investment, DBAG and DBAG ECF have invested 49 million euros in the two companies, of which DBAG accounts for 22 million euros. DBAG will hold a stake of around 39 percent in the newly formed vitronet Group, while DBAG ECF will hold 46 percent; most of the remaining shares will be held by the Group’s management. The transaction will have no further impact on the valuation of the investments in DBAG’s balance sheet. However, as of the most recent reporting date of March 31, 2021, the value of the latest company acquisitions has been increased; these have also already been included in the forecast for fiscal 2020/2021, which was raised on March 26, 2021.
vitronet, based in Essen, Germany, has so far focused on acting as a general contractor for fiber-optic projects. In recent years, various specialist companies along the value chain have been acquired and integrated. vitronet has thus developed into one of Germany’s leading end-to-end partners in what is known as FttH expansion (FttH: fiber to the home), meaning that it can offer all the essential process steps for this expansion. DING, based in Bochum, has so far stood for efficient infrastructure expansion in the areas of telecommunications (fiber optics, FttH, mobile communications), energy (district heating, electricity, eMobility) and utilities (gas, water, pipeline) in Germany.
High market demand meets tight capacity
The Group is benefiting from the dynamic growth in demand for high-performance Internet connections. This is triggering strong demand for network expansion services, which is being met by a shortage of corresponding capacity in the market. To date, around 70 percent of revenue has been generated by the fiber-optic infrastructure business. The Group’s services range from project planning for new networks and their construction to the operation and servicing of fiber-optic networks. The service share in particular is to grow. Business in the energy and utilities market, which has so far accounted for around 30 percent of sales, is set to benefit from the energy transition, among other things: To enable eMobility on a large scale, for example, the infrastructure will have to be transformed. The Group sees itself as one of the leading service providers for infrastructure expansion in Germany.
In 2013, DBAG began investing in companies that expand or operate fiber-optic networks. The first two investments (inexio and DNS:Net) were sold in 2019 and March 2021. In addition to vitronet and DING, DBAG, together with DBAG ECF and DBAG Fund VIII, holds investments in three other companies in the sector (netzkontor nord, BTV and Deutsche Giga Access).
Larger projects of telephone companies, utilities and public utilities
“We have invested in a growing market in which, however, speed in the further development of the companies is decisive for investment success,” expressed Torsten Grede, Spokesman of the Management Board of DBAG on the occasion of the transaction with regard to the 15 company acquisitions. “We will also support the newly formed group to continue to watch inorganically.” This involves, for example, closing existing gaps in the regional offering.
“Our customers are increasingly looking for providers who can independently handle ever-larger projects throughout Germany,” says Marc Lützenkirchen, Chairman of vitronet’s Management Board. “We can now fulfill this claim even better with the synergies of the Group and the decades of experience of our subsidiaries.” Last but not least, the new size of the Group will also improve its access to the capital market and thus the financing options for further corporate acquisitions.
DBAG has made six platform investments related to broadband telecommunications expansion in Germany since 2013. — Deutsche Beteiligungs AG, a listed company, initiates closed-end private equity funds and invests — predominantly alongside DBAG funds — in well-positioned medium-sized companies with potential. One focus for many years has been industry. An increasing proportion of equity investments are in companies in the growth sectors of broadband telecommunications, IT services/software and healthcare. The long-term, value-enhancing entrepreneurial investment approach makes DBAG a sought-after investment partner in the German-speaking region. Assets managed or advised by the DBAG Group amount to €2.5 billion.