This weekly digest from Dealmarket summarizes recent news and trends in the private equity industry: 1) A study found that private equity deals from 2006-2008 significantly outperformed stock markets during the financial crisis. 2) A survey found that institutional investors are more positive about investing in IPOs and pre-IPO stocks in 2013 compared to recent years. 3) Canada had a record year for private equity activity in 2012, driven by mega-deals totaling over $11 billion Canadian dollars.

1. DIGEST 84
SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 84
1 Remarkable ‐ PE Performance
during the Financial Crisis
IPO Positive: Institutional Investors
2 Canada's Blowout Year for PE
Heinz Buyout is a PE Mega‐deal
Is the Mega Buyout Back?
3 Quote of the Week: PE’s Reputation
Risk
February 21, 2013

2. REMARKABLE – PE PERFORMANCE
DURING THE FINANCIAL CRISIS
PE performance stands out from the equities crowd. Contrary to a commonly held assumption that
private equity investments performed badly during the financial crisis in comparison with other asset
classes, a study released this week by Golding Capital and performed by HEC revealed it is in fact
performing rather well. Claiming to be the first empirical analysis of the relative performance of private
equity during the financial crisis, the study reports that transactions closed in the years 2006 to 2008
achieved an “exceptionally positive alpha” of 20.5 %. It says that even measured in absolute returns,
these private equity deals were positive at 2.7 % and 5.1 % respectively.
Comparable stock market returns were negative at ‐2.4 % and ‐15.4 %. Private equity's long‐term
average alpha is 9.7 %. This average value is calculated on the basis of more than 5,200 relevant
transactions completed between 1977 and 2011. Founded in 1999, Golding Capital is a PE advisory firm
guiding about EUR 2.5 billion in assets. It clients include German insurance companies, pension funds
and banks, particularly savings banks and cooperatives.
IPO POSITIVE: INSTITUTIONAL
INVESTORS
A new Ernst & Young global survey of 300
institutional investors shows that this
group is increasingly positive about the
IPO market this year.
A vast majority ‐ 82% ‐ have invested in
pre‐IPO and IPO stocks in 2012 compared
to only 18% in either 2010 or 2011. Going
forward investors cite the prospect of a
brighter corporate earnings outlook,
an improving macro‐economic
environment and more stable equity
markets as the key drivers of sustained
positive market sentiment through 2013.
The E&Y info graphic does an excellent
job at explaining the sentiment on IPOs.
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3. CANADA'S BLOWOUT YEAR FOR PE
Canada set records for activ‐ity and high
investment levels with CDN 11.6
billion of new investments via 313 transactions
buyout PE deals in 2012, according to
a statistical report from CVCA‐ Canada's
Venture Capital & Private Equity Association
and research partner Thomson Reuters.
The figures signal a rebound in activity post‐
financial crisis, says CVCA. Mega‐deals (those
greater than one billion CDN dollars) drove the
increase, including the Apax take private of
Montréal's Garda World Security Corp., and
BCE‐led buyout of Toronto's Q9 Networks Inc.,
but mid‐market deals actually played the “vital
role”, according to the report. Canadian Image source: CVCA
buyout‐PE funds were also more active deal‐makers on an international basis in 2012.
HEINZ BUYOUT IS A PE MEGA‐DEAL
Warren Buffett's Berkshire Hathaway and the private equity firm 3G Capital are set to buy ketchup giant
H.J. Heinz for a USD 23.2 billion, according to Reuters. That makes it the deal of the week by a long shot.
The news came out on Thursday. This is not the first time 3G Capital has been in the news in the past
year. We noted their involvement in a Burger King buyout, and Reuters has several other deals the firm
was involved in, including some background on the principle partners in 3G.
IS THE MEGA BUYOUT BACK?
Preqin’s latest analysis of deal activity says that
there is scope for more mega‐sized buyout deals in
the coming months. It points to activity so far in
2013, which saw the two largest PE‐backed public‐
to‐private transactions announced since the
buyout boom period of 2006‐2007. mega buyout.
The two deals are: the USD24.4bn Silver Lake ‐
backed privatization of Dell Inc. and the Berkshire
Hathaway and 3G Capital‐ backed buyout of H.J.
Heinz Company.
Image source: prequin
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4. QUOTE OF THE WEEK:
PE’S REPUTATION RISK
“Unfortunately, for those GPs doing things
right, these scandals continue to taint the
public image of private equity, making it
difficult to convince the public and investors
that the private equity model can be good
for business.”
Who said it: unquote, a PE industry trade publication
Image source: unquote
In Context: unquote researched and described PE’s most embarrassing moments in recent years, an
effort sparked by the recent horse meat debacle (horse meat made its way into European‐branded
frozen lasagna in addition to the beef that was supposed to be in it). The company in question was
backed by PE.
Here is its summary of PE’s recent embarrassing moments
• Lion Capital‐backed Findus and Comigel, which is backed by Céréa Capital
• CVC‐backed Formula One corruption case
• PE‐backed care home patient neglect ‐ KKR, Triton, and Blackstone
• Habbo Hotel fails on child protection – online kids network was backed by 3i and Balderton
The article and quote above picked up on the public relations aspect, pointing out an opportunity for
PE players.
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Editor: Valerie Thompson, Zurich
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