Information on the Target

inexio Beteiligungs GmbH & Co. KGaA, commonly referred to as inexio, is a family-owned telecommunications company specializing in fibre-based internet services. Established in 2007, inexio has emerged as a prominent provider of high-speed internet connections in Southwest Germany, catering to both business and retail customers. The company has experienced significant growth, with customer numbers expanding fivefold since 2013, thanks to the increasing demand for high-speed connectivity driven by rising data usage and the adoption of video services.

By 2019, inexio provided high-speed connections to over 110,000 households and more than 6,000 businesses, predominantly mid-sized enterprises. The company is strategically positioned for further growth, with plans to enhance its fibre-to-the-home (FTTH) network, expanding the number of homes passed from 300,000 to two million by 2030.

Industry Overview in Germany

The telecommunications sector in Germany has seen a paradigm shift towards the adoption of high-speed broadband, primarily due to the increasing digitalization of both consumer and business activities. With the surge in data consumption, driven by streaming services, remote work, and the Internet of Things (IoT), the demand for efficient and reliable internet service has never been greater. This shift presents substantial opportunities for fibre optic providers like inexio.

Moreover, the German government has emphasized investments in digital infrastructure, aiming to improve broadband coverage nationwide, particularly in rural and underserved areas. This policy direction supports the expansion efforts of companies within the sector and highlights the necessity for robust fibre optic networks, aligning with inexio's growth strategy.

As a result, Germany's telecommunications market remains competitive, with various players striving to capture market share. The emphasis on high-speed connectivity is securing the status of fibre optics as the backbone of future telecommunications infrastructure, presenting an encouraging environment for companies such as inexio that are focused on expanding their services and enhancing their network capabilities.

In this context, inexio's success is also attributed to its commitment to serving smaller towns and rural communities, which have often been overlooked by larger providers. By addressing these markets, inexio has carved out a distinctive and valuable niche in a densely populated and competitive landscape.

The Rationale Behind the Deal

The recent sale of inexio by Deutsche Beteiligungs AG (DBAG) and its partners comes as a strategic move to realize the value achieved since their investment. The transaction not only underscores the growth of once underperforming areas through effective investments but also capitalizes on the significantly increased valuations within the telecommunications sector.

With the disposal proceeds anticipated to exceed the previously reported fair value of DBAG's stake, the transaction is expected to contribute approximately 30 million euros to DBAG's net income for the fiscal year 2018/2019. This unexpected financial boost affirms the successful partnership between DBAG and inexio.

Information About the Investor

Deutsche Beteiligungs AG (DBAG) is a prominent investment firm specializing in private equity, with a focus on mid-sized enterprises in the German Mittelstand. Established over two decades ago, DBAG has developed a robust investment strategy aimed at supporting family-owned businesses through long-term partnerships rather than seeking quick returns.

Through its Expansion Capital Fund, which launched in 2011, DBAG has demonstrated a commitment to providing not only financial capital but also strategic support to its portfolio companies, including inexio. DBAG's significant experience in the telecommunications sector further strengthens its ability to contribute effectively to the growth and development of its investments.

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The sale of inexio presents an exemplary case of a fruitful investment strategy, illustrating the potential for significant returns when investors engage meaningfully with family-owned businesses. DBAG's strategic input and long-term vision were pivotal in inexio's evolution, fostering its growth trajectory in a fiercely competitive market.

Furthermore, the value creation achieved through this investment demonstrates how targeted capital allocation in high-growth industries like telecommunications can yield substantial returns. The projected increase in net income reinforces the insight that well-timed exits can be just as critical as the entry strategy.

While the telecommunications landscape continues to evolve, the deal should be viewed as a validation of the broader investment thesis surrounding infrastructure, particularly within regions that have been underinvested. As demand for high-speed internet grows, companies positioned to capitalize on this trend are likely to see continued success, making this transaction a noteworthy one within the telecommunications investment spectrum.

Ultimately, the sale of inexio aligns with DBAG’s broader goals of generating value for its stakeholders, further substantiating the effectiveness of its strategy of investing in family-owned businesses with significant growth potential.

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