SEE WHATS NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 98DIGEST 99June 07, 20131234What’s Hot in PE for Europe?; CollerCapital BarometerM&A Global Activity Up and DownBillion Dollar Dole Buyout in the WorksHollywood Star Ashton Kucher’sDealmaking To Go InstitutionalPE Optimism Driven By IncreasedLiquidity and Deal Flow; RothsteinKass SurveyQuote of the Week: Blackstone’sEnergy Fund Gets Returns
1www.DealMarket.com/digestWHAT’S HOT IN PE FOR EUROPE?;COLLER CAPITAL BAROMETERThree quarters of LPs see attractive PE op-portunities in Europe in the next two to threeyears with target allocations to private equityand real estate rising, according to the latestColler Capital Global Private Equity Barom-eter – Summer 2013.Investors believe that GPs are improving theoperations of their portfolio companies. Halfof LPs surveyed are targeting investments inprivate debt funds. Interestingly, many LPsface hostility to PE from influential colleagueswithin their own organizations, which willcause the industry to respond and justify itsinvestments and its attractiveness.Other key findings• Three quarters of LPs think European restructuring will provide good PE opportunities in thenext couple of years, though most (63%) think these will be restricted to parts of Europe –Northern Europe especially.• 88% of LPs said they don’t plan to accelerate their commitments to large buyout funds in thenext 2-3 years.• Over two thirds of LPs said they regard PE funds raised by publicly-quoted GPs as less attrac-tive than those raised by private managers.• Also noted in the report was that the appetite for hedge funds remains mixed, with the sameproportion of LPs planning to decrease their target allocation to the asset class as increase it.M&A GLOBAL ACTIVITY UP AND DOWNVarious news outlets are reporting M&A revivals in the UK and US. In the Middle East the news is alsopositive where there is talk of a “revival”, according to Reuters. But India is down 66% this year, ac-cording to Silicon India and so is Europe, according to CityAM. Clearly, the picture is not the sameacross the world’s economic zones.Bloomberg reports that UK stocks advanced this week due to an increase in M&A activity which areongoing despite concern that central banks may scaleback stimulus measures. The US is a particular-ly bright spot, according to InvestorPlace, which published a longer report with views on why dealmak-ing is stronger this year, but still not as strong as last year to date, and how long the trend might last.
2www.DealMarket.com/digestBILLION DOLLAR DOLE BUYOUT IN THEWORKSThis week’s deal of the week comes from Reuters, which says that 90 year old David H. Murdock, theCEO and currently largest shareholder of Dole Food Co., has made an offer to take private the world’slargest fresh produce company in a USD 1.1 billion deal. It is not the first time Murdoch has stepped into acquire large chunks of the company best known for its pineapple products. He’s been involved withit for more than a decade and last took it private in 2003.HOLLYWOOD STAR ASHTON KUCHER’SDEALMAKING TO GO INSTITUTIONALA-Grade Investments LLC, a small early stage and seed inves-tor based in the US, is about to open up to outside investors,according to a report on TechCrunch. A-Grade’s move is newsbecause one of its founders is Hollywood producer and filmstar, Ashton Kutcher. He created the venture fund with twoother high profile Hollywood executives, Ron Burkle and GuyOseary. What’s interesting for DealMarket Digest readers isthat it is one more example of the going-international trendamongst PE and VC investors. A-Grade, despite its size andlocation, has been international from the start. Its investmentportfolio has several European startups, such as Y-plan (Lon-don), Spotify (Sweden), Shazam (London), Soundcloud, andAmen, both founded in Berlin. The potential valuation for such companies, most of which are digitalmedia and mobile plays, just went up a notch this week with Google reportedly offering more than abillion dollars for a tiny Israel-based Internet startup called Waze.(Image Source: Yahoo.com
3www.DealMarket.com/digestNEW TREND: LPS SEEK LOCAL MANAG-ERS IN EMERGING MARKETS; PEIPE OPTIMISM DRIVEN BY INCREASEDLIQUIDITY AND DEAL FLOW; ROTHSTEINKASS SURVEYPrivate Equity firms are predicting strong returns and hoping for more investment opportunities de-spite heightened competition and ongoing regulatory pressure, according to the latest Rothstein Kassprivate equity outlook survey. There is a new optimism driven by the recovering US economy and ananticipated liquidity boost from increased exit opportunities, along with a strong belief that there willbe more attractive investment opportunities in 2013 than there were in 2012. The majority of the sur-vey respondents are US-based (83%) with Europe and Asia combined representing a little over 8%.Other findings• The overwhelming majority of firms polled (80 percent) are targeting double digit returns for 2013.Only eight percent of firms are targeting returns between five and ten percent• More than three quarters of respondents (78 percent) believe there will be more investment opportunities in 2013 than there were in 2012.• Co-investment will likely increase in the months and years to come, creating both upside and downside for general partners and investors• Roughly five percent of those polled currently face an “invest it or lose it” situation with un-deployedcash(Image Source: RK
4www.DealMarket.com/digestNEW TREND: LPS SEEK LOCAL MANAG-ERS IN EMERGING MARKETS; PEIQUOTE OF THE WEEK: BLACKSTONE’SENERGY FUND GETS RETURNSWho said it: Stephen Allen Schwarzman - Co-Founder, Chair-man of Blackstone Group Management L.L.C, Chief ExecutiveOfficer and Chairman of Executive CommitteeIn Context: The quote about the outstanding PE returns andhigh rate of return on a USD 2.5 billion energy fund are from atranscript of Schwarzman speaking to attendees of the Mor-gan Stanley Financials Conference 2013 this week. Schwarz-man was answering a question about where he sees goodinvestment opportunities and the quote above was part of thatresponse. Energy, as indicated by the quote above, is whereBlackstone is targeting investment due to a number of rea-sons, which Schwarzman details. Other areas where Black-stone sees growth in Detroit’s auto industry, as well as hous-ing and real estate, and while there are opportunities“We have a large private equity fund. The returns we’re getting on our BCP VI fund are really strong…[they have] been 30s -- 20s, net 20s. For the investments we’re making in Private Equity that’s not sobad for those of you in the investment business. Our energy fund is only compounding at the momentat around 88%, and that is not a typo. There aren’t many people who compound at 88%. … Our historicrecord in energy has been a 40% compound rate of return.”and the quote above was part of that response. Energy, as indicated by the quote above, is whereBlackstone is targeting investment due to a number of reasons, which Schwarzman details. Otherareas where Blackstone sees growth in Detroit’s auto industry, as well as housing and real estate, andwhile there are opportunities in Europe and Asia, the deals are under constraints and made with aninformed view, which he generously outlines at length in the transcript. Fund Evaluation Group has agood report on the private energy investing universe with historical returns for those of you interestedin learning more.(Image Source: YouTube Forbes Summit)• Regulatory pressures, tax uncertainty and fee pressures weigh on the minds of most firms accord-ing to the survey. In fact, 79 percent of respondents believe that private equity funds will more frequently turn to outside consultants to understand evolving regulatory demands.• More than 60 percent of the private equity respondents believe there will be more exit opportunitiesfor portfolio holdings in 2013 compared with 2012. Nearly 58 percent agree that there will be increased initial public offering (IPO) activity this year. However, those polled were almost unanimousin their belief that mergers and acquisitions (M&A) activity will provide the lion’s share of liquidity in2013.
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