While some commuters are travelling to the grand duchy each morning, Tom Alzin tends to be driving against traffic: he heads out to his office in Frankfurt from his home in Luxembourg each Monday, returning on Thursday or Friday.

Born and raised in Luxembourg, the spokesman of the board at Deutsche Beteiligungs AG (DBAG) joined the company 20 years ago as an intern. Today, he’s in charge of long-term investments, strategy and business development, plus PE investments in Germany and Italy. He was also instrumental in helping set up the Luxembourg office, which aims to have a staff of ten by end-2023.

Intelligent foresight

Alzin, whose father was a doctor, says he studied medicine for a year before realising “it wasn’t for me.” He went on to study economics with some of his closest friends at HEC Lausanne, later earning his master’s degree at The London School of Economics and Political Science. An early internship at Merrill Lynch exposed him to individuals launching high-yield bonds, private equity funds. “That was virtually non-existent in Europe,” Alzin explains. “And I told myself--we’re talking 2002 and 2003--that this will come to Europe, and when this comes to Europe, I want to be at the forefront.”

As he was applying for internships as well as director positions, he says he had been advised to “do ten years at Goldman Sachs or McKinsey and then come back,” but he had a sense that “by then, the train will have left the station.”

He noticed that Germany-based DBAG had launched its first PE fund and was seeking an intern, and so began his two decades-long career at the firm.

When he began at DBAG, the world was just coming out of the dotcom bust, which saw the likes of players like Enron going bankrupt--a period where Alzin says “we were quite downbeat but, nevertheless, DBAG always had a good angle to so-called ‘Mittelstand’ companies, the SMEs in Germany, which are really the backbone of the German industry because it’s by far, unlike France, not such a centralistic state and the economy has been consolidated as much.” This attracted him to stay, and new deals saw the firm growing quickly.

He attributes good foresight on the part of DBAG to grow “in a more consequential way, which is why they decided to go only for majority buyouts and do so via fundraising.”

Two years ago, DBAG opened its subsidiary in Milan, Italy, an initiative led by Alzin, who explains, “The market structure in Italy is quite the same, very granular, a lot of family businesses, first-generation who are looking for succession or needed help to internationalise.”

Today the firm is at its DBAG Fund VIII, active since August 2020, which invests in mid-market companies with a roughly €75m to €250m enterprise value. The fund has assets of €1,109m, making it one of the largest PE funds of its kind.

“We have €2.6bn AUM and now have the size to incorporate some of the services which were previously outsourced to mancos,” Alzin explains, adding this was one of the reasons for setting up its Cloche d’Or-based office this year as well.

PE in Luxembourg, outlook into 2024

As Alzin explains, the market in Germany is much more diverse. In terms of DBAG’s portfolio companies, around 36% are in the industry and industrial technology sector, followed by IT services and software (22%), industrial services (14%), broadband telecom (13%) and healthcare (11%).

In Luxembourg, the players are still quite small, “especially for a fund of our size,” although Alzin adds they’d love to do a deal in Luxembourg one day. “Luxembourg has really become a powerhouse with the rise of the alternative asset segment and the whole fund administration around the alternative assets space,” Alzin says. “We’ve seen some nice, homegrown companies, like IQEQ or Alter Domus.”

While Alzin is overall optimistic for Luxembourg, and he thinks the election results will result in a pro-business approach, “crucial for Luxembourg, given that it depends so much on successfully exporting financial services.”

More broadly, he anticipates a lot more M&A activity in the PE space moving forward. “It’s the first time the industry is consolidating; everybody’s rushing for scale and to have a platform with global, or at least Europe-wide, visibility. Money is flowing to bigger players… it’s the first time I see that.”

Investors are also expecting more professional services as a result. In September, DBAG announced a strategic partnership with ELF Capital, the leading German private debt provider, thereby expanding its own services and providing mid-sized enterprises additional solutions across the entire capital structure. 

This article was published for the Delano Finance newsletter, the weekly source for financial news in Luxembourg. .