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DealMarket Digest, Issue 98, 07 June 2013
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DealMarket Digest, Issue 98, 07 June 2013


Published on

Our weekly pick of Private Equity News …

Our weekly pick of Private Equity News

- New Trend: LPs Seek Local Managers in Emerging
Markets; PEI
- European VC Stable in April
- Global M&A Transactions Still Low Due to Uncertainty
- Mega Rockwell Deal May Attract PE
- Eight Tips to Work More Effectively with Boards and
- PE Investors to Increase Private Debt Exposure
- Quote of the Week: Growth Investing Without Borders

Published in: Economy & Finance, Business

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  • 1. DIGEST 98SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 98June 07, 201312New Trend: LPs Seek Local Managers inEmerging Markets; PEIEuropean VC Stable in AprilGlobal M&A Transactions Still Low Due toUncertaintyMega Rockwell Deal May Attract PEEight Tips to Work More Effectively withBoards and InvestorsPE Investors to Increase Private DebtExposureQuote of the Week: Growth InvestingWithout Borders345
  • 2. VC STABLE IN APRILNEW TREND: LPS SEEK LOCAL MANAGERSIN EMERGING MARKETS; PEIAccording to an article in Private Equity International, LP’s are increasingly using local managers to accessemerging markets and some of the big global funds are losing out as a result. The trend was spotted byPEI’s Research & Analytics division The numbers show that in the two years immediately after the financialcrisis, global funds raised about the same amount of money for investment in emerging markets as localmanagers in those countries (USD 34 billion vs USD 38.6 billion in 2008; USD16.5 billion vs USD 16.4 billionin 2009). However in both 2010 and 2011, global GPs raised USD 18.7 billion for emerging market funds –while local GPs in emerging markets raised much more, USD 31.4 billion and even more at USD 56.3billion, respectively . The gap narrowed slightly last year (USD 32.3 billion raised by the locals, USD 20.8billion by the globals), said PEI.. The article contains several examples of high profile global funds that havehad difficulty raising capital as a result of this trend.Transaction levels in April are roughly in line with last year, and the exit environment is also provingrelatively steady, according to the latest deal analysis by Go4Venture. From a funding standpoint, Aprilwas dominated, “somewhat surprisingly”, by medtech. In April half the funding transactions were fromthe medtech companies, driven by anticipated demand in an aging population in Europe and by atechnology shift that is creating some truly innovative products. Other transactions that Go4Venturehighlight were two Series A investments.
  • 3. M&A TRANSACTIONS STILL LOWDUE TO UNCERTAINTYThe level of announced IPO and M&A deals is below average but according to Goldman Sachs increasingactivity is possible as investors become more confident, according to an article on Term Sheet, the FortunePE blog. Referring to a presentation made by Goldman Sachs president Gary Cohn, the article says thatglobal M&A volume in 2013 is “artificially low” and only represents around 4% of global market cap,compared to a 20-year average that approaches 7%.IPO volume is also down to half the 20-year average. There is lots of room for improvement to get back tohundreds of billions that normally flow in global M&A and IPO activity.Image source: Goldman SachsThey were Motain, a mobile entertainment startups (Germany) which raised EUR 10 mln afterbootstraping its way to 3.5 mln Monthly Active Users (MAUs) and (UK/Estonia) raised capitalfrom Conor Ventures to grow its ecommerce technology business. The article said that the Europeanventure financing market is becoming fitter, with more experimenting at the early stage reflecting “lowerbarriers to entry as technology costs go down and more support is provided to budding entrepreneurs(e.g. incubators, tax subsidized funds and crowdfunding platforms such as the crowdfunding directory puttogether by NESTA)”.
  • 4. ROCKWELL DEAL MAY ATTRACT PEThe latest global PE Investment report from Zephyr says that the value of global private equityinvestment rose in April to reach one of its “best results of the last 12 months”. Volume also advancedmonth-on-month. There were 278 transactions worth an aggregate USD 35 billion, a 12 per cent increaseby volume and 59 per cent better by value compared to the previous month. The value was 73 per centhigher than the same time a year ago when USD 20 billion was recorded. It was the third highest of thelast 12 months under review.8 TIPS TO WORK MORE EFFECTIVELYWITH BOARDS AND INVESTORSAn informed and educated board benefits PE-backed companies and it is possible for CEO’s to makeinfluence that situation. In a blog post in Entrepreneur Country investor Mark Suster offers thefollowing eight tips which we summarized.1. Email updates frequentlyDo over-communicate. Investors and board members who know your strategic objectives canadvocate on your behalf when they have chance encounters with your partners, customers orpotential future investors. The more they know your strategic objectives the more laterally they canact on your behalf in key situations. If you email members with short updates more frequently theyare more up to speed when you do need them to weigh in. Make your emails actionable. If you wantsomebody to take action make it clear what you want them to do.2. Send Text messaging for rapid responsesIt is common for an investor to read the email but not immediately reply. After all – she is just tryingto get through 99 unread emails. If the email requires an action then send a follow-on text 24 hourslater. It should simply say, “I wanted to call your attention to the email I sent yesterday – it has 1action for you.”3. Ask for short conference callsI would say the norm for many early-stage companies is somewhere between 6-10 in-person meetingsper year. The earlier stage the more likely it is 10 meetings and the later stage the more likely it is 6. Ineither case it is very helpful to have a series of 30-45 minute calls in between. Don’t have calls for callssake. Have topics.4. Always seek inputAasking your board about market entry strategies, new launces etc. will keep them engaged. It willalso often yield unexpected results. For starters your board may have a different perspective thanyou. That role as sparring partner can be useful if for nothing else than to test your resolve.5. Assigns tasksAsk for help reviewing your press release. Ask your VC to send a critical email to a contact. Ask themfor a meeting to review your pricing strategy with you. Ask for intros. Ask them to mention you to thepress, speak about you on stage when they do public events, whatever.
  • 5. Fight hard, yield when appropriate and always be willing to take feedbackBe willing to take feedback when warranted to achieve credibility.7. Manages board meeting expectations (before & after)Ask after the board meeting, “How did it go? Where could we improve? What worked for you? Where didwe fall short?” And give feedback on performance.8. Results & Measurement orientedSet clear goals for what needs to be achieved. E.g. not just setting revenue goals but “quality of revenue”goals and goals “for revenue diversification”. By offering metrics board discussions are a lot morequantifiable and objective.PE INVESTORS TO INCREASE PRIVATEDEBT EXPOSUREAccording to the latest research from Preqin, 42% of PE investors have exposure to private debt, andthe proportion is set to increase as more investors consider committing to private debt in the future.About 18% more, of those who have not invested in the category, are now considering gainingexposure to private debt in the near future, demonstrating the growing appetite for these funds.The trend is driven by the retrenchment of banks from the leveraged loan space and limited activity inthe European CLO market has resulted in many companies turning to alternative sources for privatedebt. Both institutional investors and alternatives managers have identified this as an opportunity.
  • 6. OF THE WEEK:“Private equity is a natural fit for ESG; it has the uniqueopportunity to change companies … As a result, it is apositive sign for the industry as a whole that more and moreinstitutional investors are now taking ESG seriously.”Who said it: Tim Creed, Managing Direct AdveqIn Context: The optimistic and open minded quote above comes from one of the PE industry newgeneration of rising stars, Jeff Horing. His company Insight Ventures, a growth capital investor, justannounced raising a USD 2.75 billion fund. Horing was interviewed by TechCrunch about strategy,trends, and regional scope. To date, Insight has raised USD 7.6 billion. His first fund raised USD 16million fifteen years ago. Horing said that Insight regularly sends its dealmakers to Europe and SouthAmerica from its New York base. About 40 percent of their investments are overseas. Someinteresting investments that Insight has made include Twitter, Zumba Fitness Franchise, andTumblr. In other regions of the world it has backed Privalia, Photobox/Moonpig, GFI and KabumWhere we found it: TechCrunch
  • 7. DealMarketDealMarket launched in 2011 and is growing fast. Just one year afterlaunch, DealMarket counts more than 61,000 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 advicemarketplace, where searching is free and postings are the price of acappuccino a day (with no commission).• DealMarketSTORE offers affordable access to industry-leading third-partyinformation 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 sharetheir deal flow more efficiently.DealMarket was voted the “Best Global Private Equity Platform for 2013”by Corporate LiveWire.www.DealMarket.comThe 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 Valerie Thompson, Zurich