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DIGEST 73SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 73 M&A Deals Increase in Size in EU 1 and NA in October 1 Apax Buys into Canada’s Garda Early Stage VC Fundraising Upward 1 Trend Continues • Preqin Data 3 Ups and Downs: VC-Backed Internet Exits 3 The Art of Valuation in China’s PE Market • New Study from Deutsche Börse and CMS Hasche Sigle 4 Advent Breaks Away From the Pack in Fundraising 4 Quote of the Week: Nomura Fund Piggy- backs on PE Trends November 16, 2012
M&A DEALS INCREASE IN SIZE IN EUAND NA IN OCTOBER Image source: ZephyrThe value of North American M&A was up significantly in October (see graphic), as it was in Europetoo, reports Zephyr. Deals valued at USD 119.2 billion in North America took place and in Europe, thetotal value of transactions was up over the previous two months to 54.2 billion.APAX BUYS INTO CANADA’S GARDAThis week’s deal of the week looks to be the Apax-backed take-private of Garda for about USD 1.1billion. The only other large buyouts in the news over the past seven days are the previously coveredBest Buy deal and the USD 1.9 billion Douglas bid by Advent, which has now reached its board seekingapproval, according to Reuters. Both are take-privates.EARLY STAGE VC FUNDRAISINGUPWARD TREND CONTINUESPreqin is reporting that fundraising to November this year is improving for VC early stage funds, with58 funds coming to a final close, raising USD 10 billion. This is a distinct upward shift for VC comparedto last year’s total USD 8.7 billion, and 2010’s aggregate total of USD 7.1 billion.1 www.DealMarket.com/digest
Preqin said that the largest fund to close so far in 2012 is Andreessen Horowitz Fund III at USD 1.5billion. The largest fund currently in market is the EUR 300 million is Atomico Ventures’ third fund,managed by a team of entrepreneurs turned investors targeting internet and tech ventures.Just less than half of the 158 early stage VC funds in the market have had at least one interim close,representing an aggregated total of USD 2.5 billion. The US remains home to most of the VC funds inmarket, with 23% targeting opportunities in Europe, and the rest targeting Asia and Rest of World. Image source: Correlation VenturesWe take it that the ability of some VCs to close new funds is based on improved returns, but thatinformation is not easily accessible for journalists. What we do get are clues and pointers to wheresuch datasets can be found. For example, a dataset released by Correlation Ventures to LifeSciVcshows that indeed realized returns have been steadily improving over the past several years (seegraphic above). The top decile of VC financings is delivering 4X multiples, while the top 1% is actuallydelivering 15X. No further details on what, who, or where the top 1% invest are located, except to saythat it was in the US market. Correlation Ventures is a new VC fund manager in California that primarilyco-invests with established lead VCs, and promises to make decisions within two weeks, according toits website.2 www.DealMarket.com/digest
UPS AND DOWNS: VC-BACKEDINTERNET EXITS Up: Four months after its IPO, Kayak the travel website operator has been acquired by Priceline in a deal. It is good news for at least some of its VCs as they are able to sell their shares that could not sold during the IPO. Down: One of the largest VC-backed IPOs of the year was Groupon but its performance since IPO has been dismaying. This week its shares were down 90% since IPO, according to a number of sources. Image source: Kayak.comTHE ART OF VALUATION IN CHINA’S PEMARKETWhen it comes to investing in Chinese private companies, standard financial analysis and due diligencepractices cannot automatically be transferred, some adaptation is required, says the latest study byDeutsche Börse and CMS Hasche Sigle on China’s private equity market. For example, there is often alack of data for making comparisons with publicly traded companies and sorting out tax issues remainstroublesome.The report also said that price/earningsmultiple averages have decreased from60x, in 2010, to 48x, in 2011, and 30x, bythe end of Q2 2012, but they are “relativelyhigh” by international standards.This year the focus for investors shifted andthey are less focused on export-dependentsectors and much more on tapping Chinasgrowing domestic market in sectors likeconsumer goods industry or the healthcaremarket. Furthermore, with growth slowingPE/VC investors have become morecautious, particularly in valuing targetcompanies. There is also information aboutIPOs and valuation from an auditor’sperspective.3 Image source: Deutsche Börse www.DealMarket.com/digest
ADVENT BREAKS AWAY FROM THE PACKIN FUNDRAISINGAdvent International announced closing its latest buyout fund at EUR 8.5 billion with the plan tocontinue its established strategy in developed markets of North America and Western Europe andselectively on other global markets. Advent said it is the largest buyout fund closing since the fall ofLehman, according data-provider Preqin. Deal Pipeline says it remains to be seen if Advents new fundwill keep its position as the largest buyout fund since the “Great Recession” for long because WarburgPincus’ current fund is targeting USD 12 billion and Apollo just announced it is also raising a big one too.The article also said that Blackstone raised a larger PE-related fund last month, but it was targeted atreal estate investments.QUOTE OF THE WEEK:NOMURA FUND PIGGY-BACKS ON PE TRENDS “Research indicates that if we know when buy-out managers invest and divest in various companies, the value can be captured by investing in similar publicly traded securities…” Image source: Stony Brook University AMSWho said it: Matthew Peakman, head of funds derivatives trading at Nomura.In Context: The above quote is from an article in the FT about a new index that Nomura has createdcalled PERI. Nomura’s press release about the new fund says that PERI is the “first daily investible indexwhich targets returns similar to those which may be achieved through a global broad-based investmentin private equity buyout funds”. The index is based on research that shows that a substantial portion ofPE returns can be attained through an investment in the “public market equivalents”, implying that PEmanagers are as good at deriving returns from market momentum, as exploiting other skills such asselecting targets and executing operational improvements, explains the FT. Nomura is in talks withasset managers about launching exchange traded and mutual funds that would track the index.Where we found it: FT4 www.DealMarket.com/digest
The Dealmarket Digest empowers members of Dealmarket by providingup-to-date and high-quality content. Each week our in-house editor siftsthrough scores of industry and academic sources to find the mostnoteworthy news items, scoping trends and currents events in the globalprivate equity sector. The links to the sources are provided, as well as aneditorialized abstract that discusses the significance of the articlesselected. It is a free service that embodies the values of the Dealmarketplatform delivers: Professional, Accessible, Transparent, Simple, Efficient,Effective, and Global.To receive the weekly digest by email register on www.dealmarket.com.Editor: Valerie Thompson, ZurichDealMarketDealMarket launched in 2011 and is growing fast. Just one year afterlaunch, DealMarket counts more than 35,000 recurring users from 154countries, and over 3,000 deals and service providers promoted or listedon the platform.DealMarket is an online platform enabling private equity buyers, sellersand advisors to maximize opportunities around the world – a one-stopshop for Private Equity professionals. Designed by Private Equityprofessionals for Private Equity professionals, the platform is easy to use,cost effective and secure, providing access, choice and control across theinvestment cycle.DealMarket’s offering includes• DealMarketPLACE, an unfiltered view of the global deal and advice marketplace, where searching is free and postings are the price of a cappuccino a day (with no commission).• DealMarketSTORE offers affordable access to industry-leading third-party 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”by Corporate Newswire. www.DealMarket.com