In a recent ION Influencers fireside chat hosted by Giovanni Amodeo, Wolf Stein, Head of Asia at DBAG (Deutsche Beteiligungs AG), shared his invaluable insights into the current and future state of the private equity market, particularly in the context of Asia’s rapidly evolving role in the global economy. Here’s a summary of the key topics discussed:

1. Wolf Stein Background and Role at DBAG

Wolf Stein, a seasoned private equity professional, provided a glimpse into his career, which spans over 25 years. Originally from Germany, after completing an MBA in Asia, he remained in the region and has been deeply involved in private equity ever since. As the Head of Asia at DBAG, his role encompasses supporting the portfolio in Asia, facilitating divestments to Asian buyers and building and managing relationships with limited partners across the continent.

2. DBAG’s unique positioning in the current market driven by focus on family-owned hidden champions and matching cultural competence “of speaking Mittelstand”

Stein provided further insight on DBAG’s secret sauce: DBAG speaks “Mittelstand” and positions itself as partner of choice for family-owned hidden champions from DACH and Italy. Those companies typically possess a strong technological DNA but are operated in a way that, starting a dialogue with them, requires a unique skillset that DBAG has been honing since inception in 1965. After the acquisition, DBAG supports the management to create value through a highly institutionalized approach and to further professionalize the respective company. Once the asset went through this transformational process, DBAG seeks to realize the value created through identifying and concluding a transaction with the future owner who derives most value from ownership of the portfolio company, regularly transacting with non-European counterparties.

3. Asia re-emerging as Economic Center of the World

Stein shared his view on long-term development of Asia, emphasizing its increasing economic importance. He pointed out that 20 years ago, Europe had a larger economy than Asia while now Asia is already the continent with the highest GDP and projections show that Asia will soon surpass both Europe and North America combined. This shift is driving changes in many sectors. For example, in the automotive sector China has positioned itself as a competitor to Europe. As a consequence, Asia is becoming crucial for future growth, innovation, and market opportunities—and this applies to an increasing number of sectors. Therefore, European companies operating in sectors that are international in nature need to develop sound Asia strategies or risk declining in relevance.

4. Advantage of Asian Presence for PE Firms

Stein outlined that as Asia reemerges as the economic center and companies need to adapt their strategies, private equity has a natural role of supporting this transition for their portfolio companies in this journey. Asia presence for private equity firms makes eminently good sense as this enables them to provide the insight and support that many SMEs require for the development of their Asia strategies.

5. The Rise of Asia as a Buyer in Mergers & Acquisitions (M&A)

The discussion turned to the growing role of Asian companies in M&A activities. Stein noted that Japanese companies were the first major buyers from Asia as this country was the first to modernize and form their own MNCs. Approximately a decade ago Chinese buyers emerged as acquirers on international markets. More recently, Indian companies have emerged as significant buyers too. Stein predicts that all three of these major economies—Japan, China, and India—will have more and more companies that are globally competitive and will internationalize, which often includes becoming active in international M&A. Moreover, Southeast Asia is also expected to develop local champions, some of which will eventually become global players. As an example for leading SE Asian players on the world stage Stein referred to the Singapore-based investment powerhouses Temasek and GIC which already are leading global players.

6. Asian investors often aim at forming win-win Partnerships

When it comes to Asian investors Stein shared his observation that not only superior risk-adjusted returns are important in Asia but that in addition win-win partnerships that generate additional value are being targeted. Instead of “IR”, a true “partnership management” approach based on understanding the needs and objectives of Asian investors can hence be the basis of forming long-term partnerships that create more value to all parties involved than a purely transactional approach.

7. Long-Term Trends vs. Short-Term Fluctuations

Stein highlighted his focus on long-term trends: When looking at global economic history, the economic dominance of the West in the last two centuries is the outlier and not the norm, making Asia’s economic re-emergence a trend that will not be substantially affected by short-term market volatility. He believes that the gradual and inevitable rise of Asia as a global economic center is a trend that businesses and investors should embrace as they plan for the future.

8. Conclusion: The Future of Private Equity in Asia

Wolf Stein’s insights underscored the transformative role Asia is playing in the global economy, especially in private equity. As Asia continues to grow in influence, companies must not only look at local markets but also reimagine their strategies in light of the continent’s potential. As DBAG’s core value proposition lies in unlocking and subsequent further professionalization of family-owned hidden champions from DACH, supporting them in the formulation of their Asia strategy and execution opens further potential for the companies and DBAG’s fund investors.

Key timestamps:

00:09 Introduction to the Fireside Chat
00:48 Guest Background and Experience
01:55 Understanding DBAG’s Role
02:39 Evolution of Value Creation in Private Equity
05:42 Defining Hidden Champions
07:31 Strategies for Growth through Acquisitions
09:27 Investment Activity and Management Changes
12:45 Talent Acquisition Challenges in Asia
14:07 Advantages of Asian Presence for PE Firms
18:23 Investor Relations and Partnership Management
22:59 Future Economic Prospects in Asia
24:57 The Impact of Asia on Global Industries
26:32 The Rise of Asian Economies as Global Players
27:17 Long-Term Trends in Economic Development