Plenty of dry powder but opportunities scarce in DACH, says 3i's Wirtz

Harriet Bailey: What is your current view of the DACH market?

Peter Wirtz: At the moment I think it's rather quiet. There's a bit of a summertime lull and not a lot is going on. The main issue is the assets that have been sold in the past six months were quite expensive and received very healthy valuations. I think that's where we are at the moment: there's a lot of money available but not a lot of assets around.

HB: How is this playing out at 3i?

PW: Like most of our competitors, we would like to do more deals. We are finding it difficult to find good targets with attractive valuations, because valuations are generally pretty high and robust. It helps with the exits though – we sold Hilite two months ago in a very attractive M&A market. It was bought by a Chinese trade buyer and I think there was a lot of confidence and money out there that allowed us to run a competitive process and achieve a good price. This could help in the future too as, with a portfolio as big as 3i's, we are always looking at selling businesses.

HB: How do you view the recent decline in Germany's GDP?

PW: In principle, the German economy is still pretty robust. You don't really see the impact of being 0.2% down in just one quarter's results; you shouldn't put too much weight on it. Here in Germany we expect to grow between 1.5-2% this year and this is pretty good compared to European standards. The UK is probably growing faster than that but there are a lot of countries who are not seeing such rates of growth. All in all, I think we are looking at a robust macro.

HB: What about the debt financing available in Germany?

PW: There are a lot of players outside the traditional sources from whom you can get money. I think really there's just a lot of money out there in different asset classes trying to get a return and the debt market remains pretty buoyant and strong as well. With regards to the main lenders in the space, DZ Bank, IKB and Commerzbank have all been pretty active in the alternative lending space.

HB: Does German private equity still tend to rely mainly on banks or are alternative lenders getting a look in?

PW: I can't speak for everybody, but at 3i we have tended – so far – to stick with the traditional lenders. If you do traditional deals – nothing too fancy – then in my opinion you are best placed with them. And we have known them and worked with them for many years. There is nothing wrong with the alternative providers but, at 3i, we see no necessity to work with them. We are, of course, open to new offerings in the marketplace but so far traditional lenders fully satisfy our needs.

HB: What would you like to see happen in the German market?

PW: Perhaps more quality dealflow. Good, interesting, primary dealflow.

Enjoyed reading this article? Meet more than 80 GPs and LPs at the annual unquote" DACH Private Equity Forum taking place on 7 October in Munich. For more information on the agenda and speakers confirmed, visit the website here.

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