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DIGEST                                                              82SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS...
ENDOWMENTS AND PENSION FUNDSSTILL LIKING ALT ASSET CLASS                                                                  ...
TOWERS WATSON’S TOP FIVEPREDICTIONS FOR GLOBAL M&AMARKET IN 2013It is still the season for prediction. This week, we learn...
India has a wealth of intellectual capital in biotechnology and healthcare to be developed, and itsgovernment is aiming to...
The key points are highlighted below:• Venture financing and venture capital are separating into two distinct fund categor...
The Dealmarket Digest empowers members of Dealmarket by providingup-to-date and high-quality content. Each week our in-hou...
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DealMarket Digest Issue 82_08 february 2013


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Our weekly pick of Private Equity News

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DealMarket Digest Issue 82_08 february 2013

  1. 1. DIGEST 82SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 82 Endowments and Pension Funds 1 Still Liking Alt Asset Class Towers Watson’s Top Five 2 Predictions for Global M&A Market in 2013 2 India’s Biotech Sector Potential is USD 100 in Next Twelve Years 3 Dell LBO’s Big Buzz Tectonic Shift and a 10X Exit for 3 European Venture Capital Quote of the Week: 4 Google’s Larry Page on 10X February 08, 2013
  2. 2. ENDOWMENTS AND PENSION FUNDSSTILL LIKING ALT ASSET CLASS Image source: NACUBOSeveral articles this week report on the preferences for alternatives and private equity as expressed bypension funds and endowments. They are still putting money into PE, it seems. The top 200 pensionplans are benefitting financially from alternative investments, according to Pensions & Investmentslatest retirement plan survey, although the survey results noted a decrease slightly in some of the PEcategories, with buyouts increasing by 4%. The article said that private equitys share of assets wasdown 60 basis points to 9.4%. The WSJ says that US endowments are still increasing their allocations toPE on a steady basis. They are allocating about 54% on average to alternatives, which includes privateequity (see image). Another study reported by Reuters says that pension funds in Australia, Canada,Japan, the Netherlands, Switzerland, Britain and the United States have upped alternative investments,including property, hedge funds, private equity and commodities, from 5 to 19 percent since 1995. Thefunds add riskier, higher-yielding assets to portfolios to compensate for shortfalls in funding. Britain hasincreased its exposure to alternative assets the most, from 3 to 17 percent, followed by Switzerland,Canada, the United States and Australia.1
  3. 3. TOWERS WATSON’S TOP FIVEPREDICTIONS FOR GLOBAL M&AMARKET IN 2013It is still the season for prediction. This week, we learn that Asia Pacific is still strong in M&A, butEuropean-initiated deal volume won’t be. These are just two ideas developed in a good article fromTowers Watson.Key points in the top five predictions• The Asian market will continue to grow, led by Chinese and Japanese firms.• Chinese firms to Acquire in Europe in a big way. Expect some big-name companies to be targeted by cash-rich Chinese organizations.• European deal volumes to remain subdued. 2012 was bad for European acquirers and 2013 volumes are unlikely to show much improvement.• Surge in late 2012 is not a trend that will continue. Despite the large number of transactions completing in the final few weeks of the year, this is more likely to be a rush to the finish line for existing deals rather than signaling an upward trend.• North American stability to continue. Not much change expected in M&A in North America during the first half of 2013, but there may a surge in activity if the economic conditions continue to improve and confidence grows.INDIA’S BIOTECH SECTOR POTENTIAL ISUSD 100 IN NEXT TWELVE YEARS2 Image source: ABLE Indian Biotechnology Roadmap to the Next Decade and Beyond
  4. 4. India has a wealth of intellectual capital in biotechnology and healthcare to be developed, and itsgovernment is aiming to create a framework to develop it, according to The Hindu Business Line, whichcould be good news for private equity investors. As a reference, the article points out that Singapore’sTamasek doubled its assets under management by investing in high tech industries. India could emulatesuch strategy for the kind of investment involved in growing it biotech sector into a USD 100 billion oneby 2025.DELL LBO’S BIG BUZZThe deal of the week is the USD24.4 billion take private of Dell by Silver Lake, a deal which also involvesMicrosoft Corp. The announcement adds details to our earlier coverage of the rumor in a digest lastmonth. The size of the deal is mind-boggling after the smallness of LBO transactions since late 2008. Asa result, it has everyone from CNET to Reuters as well as the PE trade press writing about it. If you arecurious about the Silver Lake partner who is behind the deal, Egon Durban, see the WSJ’s Private EquityBeat short feature on him. Information on the advisers and some details are on PE Hub, and someanalysis of the debt implications are provided by two Bloomberg writers here.TECTONIC SHIFT AND A 10X EXIT FOREUROPEAN VENTURE CAPITAL Image source: Go4VentureGo4Venture’s latest research says there’s a “tectonic shift” in European venture. Deal value has beenincreasing over the past three or four years, but the number of deals is down, illustrating the shift in theventure market.3
  5. 5. The key points are highlighted below:• Venture financing and venture capital are separating into two distinct fund categories• VCs have largely deserted early-stage and are now focusing their attention on expansion capital.• High risk/high reward, early-stage investment is being left to business angels, government- subsidized funds, and a handful of the larger VCs which can afford to subsidize this largely money- losing activity to feed their larger later-stage funds.• December’s activity reflects the trends state above with five late-stage and five Series B transactions – no real Series A.• Trivago was acquired for EUR 0.5 billion by Expedia, for an estimated 5x historical revenues. The analysts estimate that the deal was a ten-bagger for Trivago’s investors. “A trade sale over EUR 100mn is not that common in European venture, so a deal of half a billion euros and a ‘ten bagger’ is an exceptional event,” writes Go4Venture. (This editor adds that a 10-bagger in VC is an exceptional event anywhere, including Silicon Valley)• The implication of the exodus from European VC is that the first steps of any company will have to be bootstrapped, funded by family, friends and fools or simply by the founders themselves. And even internet companies need to have market traction before VCs are prepared to commit.QUOTE OF THE WEEK:GOOGLE’S LARRY PAGE ON 10X "Page expects his employees to create products and services that are 10 times better than the competition. … Thousand-percent improvement requires rethinking problems entirely, exploring the edges of what’s Image source: Google Jobs website technically possible, and having a lot more fun in the process.”Who said it: Steven Levy, Wired magazineIn Context: When private equity experts talk about a ten-X deal, it means one thing but when LarryPage, CEO and cofounder of Google, talks about ten x or ten times better, he’s describing the high goalshe sets for Google’s product and R&D teams. The “moon shot” kind of activity is underway at Google,according to a Wired profile of Page by Steven Levy this week. In Page’s view, a ten percentimprovement means that a company is doing pretty much the same thing as everybody else. It mightnot be a fail strategy, and yet it is not going to be a great success-story either. It is the philosophybehind the search giants R&D effort, Google X, which is running projects on a self-driving car, awearable computing system and an “artificial brain”, in which a cluster of computers running advancedalgorithms learn from the world around them, much like humans do.Where we found it: WIRED4
  6. 6. 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 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.