DealMarket DIGEST Issue 120 // 06 December 2013
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DealMarket DIGEST Issue 120 // 06 December 2013

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Our weekly pick of Private Equity News and Trends

Our weekly pick of Private Equity News and Trends

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  • 1. DIGEST 120 1 2 3 The Qualities of Successful CEOs of PE and VC-backed Companies Global M&A Trends: Expansion and Internationalization Study Says PE Increasingly Important in African Mid Market A-list Bids for Buyout of India’s SourceHove Poland Dominates Deloitte’s Fast 50 Central European Ranking Quote of the Week: Complexity Reengineering December 6, 2013
  • 2. THE QUALITIES OF SUCCESSFUL CEOS OF PE AND VC-BACKED COMPANIES The right CEO can make or break a business, says Stephen Lowry of Frog Capital in an article in TechCityNews. He cites academic research that found that successful CEOs of PE-backed firms have about 30 common characteristics and these can be identified through a structured process put in place by investors. Unstructured discussions with management teams are unlikely to reveal the make or break qualities. Lowry says a CEO has to be able focus on hiring great people and developing a high-performance leadership team; be able to provide and allocate resources and capital to support the business plan; and position the business strategically to partners. Good execution skills trump good interpersonal skills. What Frog Capital looks for is a CEO that is bold, responsible, open to feedback, and can handle the independent nature of being the CEO of a rapidly growing company. GLOBAL M&A TRENDS: EXPANSION AND INTERNATIONALIZATION Globally M&A dealmaking was down in October both in volume and number of deals, according to the Merrill Monthly M&A Insider report published in November. But some regions are showing robustness. For example, China Daily reports that a drive towards internationalization is underlying M&A activity in China, positioning China to overtake Japan as the leading country doing overseas M&A this year. According to the newspaper report, Chinese companies have made USD 56.2 billion in overseas M&A deals, led by Shuanghui International Holdings’ USD 7.1 billion purchase of Smithfield Foods Inc. Deals mentioned were mainly in the US. The trend looks set to increase in the coming year due to political will and directives. Elsewhere, Reuters reports that companies expect a 17 percent rise in mergers and acquisitions activity next year that would push global deal volume to its highest level since 2008, citing a survey done by Thomson Reuters and Freeman Consulting Services. The driver of the uptick in dealmaking is expansion and transformative acquisitions, which is a shift from today’s M&A driven by getting rid of noncore assets and bargain hunting for undervalued companies and assets. 2 www.DealMarket.com/digest
  • 3. STUDY SAYS PE INCREASINGLY IMPORTANT IN AFRICAN MID MARKET Globally M&A dealmaking was down in October both in volume and number of deals, according to the Merrill Monthly M&A Insider report published in November. But some regions are showing robustness. For example, China Daily reports that a drive towards internationalization is underlying M&A activity in China, positioning China to overtake Japan as the leading country doing overseas M&A this year. According to the newspaper report, Chinese companies have made USD 56.2 billion in overseas M&A deals, led by Shuanghui International Holdings’ USD 7.1 billion purchase of Smithfield Foods Inc. Deals mentioned were mainly in the US. The trend looks set to increase in the coming year due to political will and directives. Elsewhere, Reuters reports that companies expect a 17 percent rise in mergers and acquisitions activity next year that would push global deal volume to its highest level since 2008, citing a survey done by Thomson Reuters and Freeman Consulting. Services. The driver of the uptick in dealmaking is expansion and transformative acquisitions, which is a shift from today’s M&A driven by getting rid of non-core assets and bargain hunting for undervalued companies and assets. A-LIST BIDS FOR BUYOUT OF INDIA’S SOURCEHOVE This week’s deal of the week is out of India. At least three of the top PE firms globally are bidding on business process outsourcing company SourceHOV, which is jointly owned by Citigroup Venture Capital International and Mumbai-listed HOV. According to the Times of India, Apax Partners, Carlyle Group and Baring Asia are among the bidders offering about USD 1 billion, according to unidentified sources. Infosys, India’s third largest IT services giant, is not expected to participate in the auction. India’s technology sector is a favorite for global VC 3 www.DealMarket.com/digest
  • 4. and PE players, according to Business Standard online. Total investment in Indian assets by PE fund and strategic players was USD 1.32 billion this year to date, compared to USD 154.7 million spent by Indian firms to invest in assets outside the country. POLAND DOMINATES DELOITTE’S FAST 50 CENTRAL EUROPEAN RANKING Every year Deloitte publishes a series of ranking about quick growing companies in various regions. The rankings are a favorite tool of private equity investors for deal spotting and intelligence on business trends. This month its Fast 50 Growth Tech Ventures revealed Poland’s leading position in the Central European region. Twenty two of the companies with fast growing revenues were based in Poland, putting it way ahead of Hungary which came in second with 8 ventures. The fastest growing company with an amazing 5700 % growth in revenue over the past five years is a Romania-based air travel online platform, Vola.ro. You can download the report here. (Image Source: Deloitte) QUOTE OF THE WEEK - COMPLEXITY REENGINEERING “ We do what we call ‘complexity arbitrage’. We try to buy confusion at a discount and sell clarity at a premium.” Who said it: Dipanjan “DJ” Deb, Francisco Partners Managing Partner 4 www.DealMarket.com/digest
  • 5. In Context: In an interview with Deirdre Bolton on Bloomberg Television’s Money Moves, Dipanjan “DJ” Deb described where the opportunities are to be found in the tech sector for PE investors, highlighting his funds catchy signature idea ‘complexity arbitrage’, which is about acquiring companies in a complex industry or a difficult to understand niche and then working on the strategy and the story to make it a more valuable venture. Francisco Partners has had a good run on exits this year with both IPOs and strategic acquisitions of portfolio companies. Buyouts in the tech sector are a fairly recent phenomenon. It is usually the territory for VCs, but the sector has matured and has become the fast middle market. It is now attracting the kind of investors that only invest in established industries with regular revenues and relatively predictable economics and growth prospects. Unlike consumer Internet valuations in this area of tech are low. According Deb there are about 6000 “orphan” companies in the US market alone. An “orphan” as defined by Deb is a publicly traded company with around a billion in market cap – and only a few stock analysts covering it, or a division of a larger technology company, either privately or public owned, that can be spun off and grown. Where we found it: Bloomberg 5 www.DealMarket.com/digest
  • 6. The Dealmarket Digest empowers members of Dealmarket by providing up-to-date and high-quality content. Each week our in-house editor sifts through scores of industry and academic sources to find the most noteworthy news items, scoping trends and currents events in the global private equity sector. The links to the sources are provided, as well as an editorialized abstract that discusses the significance of the articles selected. It is a free service that embodies the values of the Dealmarket platform delivers: Professional, Accessible, Transparent, Simple, Efficient, Effective, and Global. To receive the weekly digest by email register on www.dealmarket.com. Editor: Valerie Thompson, Zurich DealMarket DealMarket launched in 2011 and is growing fast. Just one year after launch, DealMarket counts more than 61,000 recurring users from 154 countries, and over 3,000 deals and service providers promoted or listed on the platform. DealMarket is an online platform enabling private equity buyers, sellers and advisors to maximize opportunities around the world – a one-stop shop for Private Equity professionals. Designed by Private Equity professionals for Private Equity professionals, the platform is easy to use, cost effective and secure, providing access, choice and control across the investment cycle. DealMarket’s offering includes • DealMarketPLACE, brings together buyers, sellers, and PE advisors from around the world. PLACE gives access to deals (direct invest ments, funds, and secondaries), investors, and PE service providers. Searching and postingis free. (no commissions). PLACE PRO is the exclusive deal exchange platform made for engaged professionals and companies with a truly unique value added proposition. • DealMarketSTORE offers affordable access to industry-leading thirdparty information and services on demand; and • DealMarketOFFICE is a state-of-the-art deal flow management tool, helping Private Equity investors to capture, store, manage and share their deal flow more efficiently. DealMarket was voted the “Best Global Private Equity Platform for 2012 and 2013” by Corporate LiveWire. www.DealMarket.com/digest