LONDON – Deutsche Bank plans to channel E1 billion ($915.9 million) into European telecommunication companies, Internet and technology ventures over the next five years through a new dedicated venture unit, DB Venture Partners. The investment bank has hired managing directors Roy Merritt and Michael Patton to manage the operation. Only last year the twosome joined Providence Equity Partners to establish its European operations.
DB Venture Partners forms part of DB Capital Partners, a unit of the global investment banking business, which in turn slots into the bank’s Global Corporates and Institutions (GCI) division. Despite the formal corporate structure, Patton and Merritt aim to run DB Venture Partners along independent lines.
“In order to compete against smaller, more nimble firms, you need a nimble, independent decision-making process,” Patton said. The two managing directors report to Graham Clemson, Deutsche’s head of European private equity and co-head of global investment banking.
Deutsche Bank has led or co-led 26 venture investments totalling more than E135 million in Europe and the U.S. over the last year and a half.
“[DB Venture Partners] formalizes what Deutsche Bank has historically done elsewhere on a more ad hoc basis within the Equity Capital Markets division,” Merritt said.
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At E1 billion, DB Venture Partners stands in the top echelon of European capital pools focusing on converging technologies. Its geographic remit will encompass Europe and Israel. The bulk of the new unit’s investments will be between $10 million and $30 million, and Patton and Merritt said deals will generally gravitate toward the upper end of that range. However, DB Ventures would not rule out making either larger or smaller investments in special circumstances. DB Ventures will cover the entire stage spectrum from start-ups involving proven management teams through pre-IPO mezzanine financings, and the unit will also target opportunities among old economy companies looking to add Internet components.
“We feel this space in Europe hasn’t been taken up in any way,” Patton said. “And DB Ventures has aspirations to become a premier franchise in this area.”
The new unit will benefit from deal flow generated through Deutsche Bank’s industrial and commercial relationships, while Patton and Merritt will source deals proactively through their personal contacts.
Before joining Providence, Patton spent six years at Morgan Stanley developing its corporate finance activities in the alternative telecoms and Internet sectors. Merritt, spent three years at Apax Partners before joining Esprit Telecom Group as chief financial officer. The pair believe their long experience in DB Venture Partners’ target sectors will provide a distinct competitive advantage.
“What we have seen in the past when competing against major funds is that management finds personal experience and empathy attractive. Now, at DB Ventures, we are adding a third factor to the equation in the shape of Deutsche Bank’s network and the services it can provide,” Patton said.
At present DB Venture Partners has a team of three, including associate Yeppe Zink. Three vice presidents were expected to join in May, and Patton and Merritt plan to hire another technology partner to complement their telecom and Internet backgrounds. They expect DB Venture Partners to have a ten-strong team within the next few months.