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DealMarket Digest - Issue 115 - 1st November 2013


Published on

- LPs Seek New Approaches to Achieving Returns in PE
- M&A Shunned in Favor of IPO in Tech Sector
- M&A Momentum Gaining Globally
- Frontier Growth Attracts Family Offices
- Rumored PE Interest Mega Deal for Grocery Stores

Published in: Economy & Finance, Business
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DealMarket Digest - Issue 115 - 1st November 2013

  1. 1. DIGEST 115 1 M&A Shunned in Favor of IPO in Tech Sector 2 M&A Momentum Gaining Globally 3 Rumored PE Interest Mega Deal for Grocery Stores 4 Quote of the Week LPs Seek New Approaches to Achieving Returns in PE Frontier Growth Attracts Family Offices November 01, 2013
  2. 2. M&A SHUNNED IN FAVOR OF IPO IN TECH SECTOR Higher valuations and the chance to retain control are two reasons why some tech CEO and founders are shunning acquisition billion dollar offers from larger tech companies, IBM, Citrix, and Cisco in favor of going public. Reuters is reporting that several tech startups, including cybersecurity company FireEye Inc, big data company Cloudera and cloud storage firm Box (whose CEO Aaron Levie is depicted in the photo above, rejected buyout bids in favor of initial public offerings in the future. The trend is not all-encompassing, however. Some companies are content to be sold. Security software company Sourcefire and data storage firm Whiptail agreed to be bought by Cisco. IBM bought Softlayer and Trusteer earlier this year, says Reuters. (Image source: blog) LPS SEEK NEW APPROACHES TO ACHIEVING RETURNS IN PE Returns offered by private equity are attractive to pension funds, but many have been hit by the poor fund performance of some private equity funds, says efinancialnews. It has led to several new trends in PE investment as institutional investors seek less traditional approaches for achieving returns in PE. For example, they are showing appetite to diversify fund types. They are switching from large buyout funds to specialist funds run by managers that can pick and navigate deals on a specific theme. Other pension funds could also diversify away from typical European buyout funds towards emerging markets and venture funds to generate returns, according to the report. “Buyout funds raised during the boom era have suffered from underperformance and, in some cases, firms have lost control of some of their portfolio companies,” says the report. The secondaries market is also a growing favorite of pension funds, particularly those seeking to sell certain investments and free up capital to reinvest elsewhere 2
  3. 3. M&A MOMENTUM GAINING GLOBALLY Ernst & Young came out with an upbeat view on global M&A this week, reporting that corporate executives are about to resuscitate the flatlining M&A market, as more than a third look to do deals. According to EY’s ninth bi-annual Capital Confidence Barometer, a survey of 1,600 senior executives in more than 70 countries, revealed that strength in core fundamentals is leading over a third (35%) of companies to pursue acquisitions in the next 12 months compared to 25% a year ago. The same sentiment was echoed earlier this month from another source that said that growing confidence amongst European companies will likely boost M&A in the coming months. At the recent Bloomberg Dealmakers Summit in London panelists said that the recent stability in the European economy should spur companies to acquire and sell assets in 2014. The pace of European transactions spurred by private-equity firms is also set to accelerate. The volume of M&A in the third quarter climbed 42 percent this year to USD 674 billion this year, according to Bloomberg. The figures were boosted by a mega-deal between Vodafone Group and Verizon Wireless for USD 130 billion, giving M&A totals in the telecommunications and technology industries a nudge upwards. The IPO and equities markets, which are hot, feed the M&A market with further confidence, said the report. The IPO market has raised USD 17 billion so far this year, compared to USD 10 billion in the same period last year. The stock market trend that began in the US is moving toward Europe and barring no major geopolitical issue arising, the momentum will continue. FRONTIER GROWTH ATTRACTS FAMILY OFFICES Frontier markets are the place to be, according to a family office fund manager quoted by Reuters. He said that valuations are like those for the BRIC (Brazil, Russia, India, China) countries 10 to 20 years ago. It is among private high-net-worth investors that frontier markets are gaining ground. “With both the capital and appetite for new ventures, along with the skill to create and quickly exploit opportunities, wealthy investors who have come through the financial crisis seem ready to explore new alternatives,” says ftse global . Reuters reports that the value of private equity deals completed i 3
  4. 4. n sub-Saharan Africa rose nearly 10 percent in 2012 to USD 1.16 billion, according to the Emerging Markets Private Equity Association (EMPEA), similar to the amount completed in Russia. This year the investments are already at USD 850 million, according EMPEA said. African private equity funds outperformed US venture capital over the 10 years to September 2012, says Reuters, posting an 11.2 percent annualised return, citing a study by Cambridge Associates and the African Venture Capital Association. Frontier markets in Asia are Sri Lanka and Pakistan, while Argentina is the target in Latin America. In Africa, investors are looking at Ghana, Tanzania, and Kenya. And in Europe, there is nascent investment activity in tiny states like Macedonia, Bosnia, Belarus, and Armenia, according to ftse globlal markets. Family offices named in the article include One Thousand & One Voices, based in South Africa, Fleming Family & Partners, and France’s Wendel family office. (Image Source: Pyramid Research) RUMORED PE INTEREST MEGA DEAL FOR GROCERY STORES A Reuters report sparked the rumor that grocery retail chain, Safeway, may be the target of PE buyout funds. In an exclusive report it cited undisclosed sources who said that a “handful” of buyout firms, including Cerberus Capital Management, are exploring a deal for all or part of supermarket chain. If it goes through the deal could shape up to be one of the largest leveraged buyouts since the financial crisis, according to Reuters, explaining that Safeway is the second-largest grocery store operator in the US and its market cap is USD 8 billion. The only PE fund mentioned by name in the report was Cerberus Capital. Safeway is undergoing some restructuring. It announced last week that Canada’s Competition Bureau has entered into a consent agreement with Sobeys, a major Canadian retailer, to sell the net assets of Canada Safeway. 4
  5. 5. QUOTE OF THE WEEK – FROM PE PARTNER TO WINEMAKING ENTREPRENEUR “There’s a great joy in creating a product outdoors in one of the most beautiful places in the world... This morning I was out walking through a vineyard to see if we were ready to pick, and the fog was burning off and the sun was coming up and the birds were chirping. Pretty great way to spend your workday” Who said it: William “Bill” Price III Context: The quote is from former TPG private equity partner Bill Price who now spends part of his time investing in and building a thriving California wine business, according to a feature article in Forbes where we found the quote. His California grown wines are highend and high-margin, which no doubt has established winemaking labels standing up and taking notice. He is a co-founder and a partner emeritus of TPG Capital, which he left in 2006 for personal pursuits. He controls seven wine brands and five vineyards, including Classic Wines, and Price Family Vineyards, Durell Vineyard and Gap’s Crown Vineyard, to name a few. Classic Wines has ownership interests in Kistler, Buccella, Three Sticks and LUTUM. Price is chairman of Kosta Browne Winery and Gary Farrell Winery, according to Lutum’s website. Price was involved with all of TPG’s investments, most notably Beringer, Continental Airlines, Petco, Ducati and Grohe, according to Wikipedia. (Image source: Lutum) Where we found it: Forbes 5
  6. 6. The Dealmarket Digest empowers members of Dealmarket by providing up-to-date and high-quality content. Each week our in-house editor sifts through scores of industry and academic sources to find the most noteworthy news items, scoping trends and currents events in the global private equity sector. The links to the sources are provided, as well as an editorialized abstract that discusses the significance of the articles selected. It is a free service that embodies the values of the Dealmarket platform delivers: Professional, Accessible, Transparent, Simple, Efficient, Effective, and Global. To receive the weekly digest by email register on Editor: Valerie Thompson, Zurich DealMarket DealMarket launched in 2011 and is growing fast. Just one year after launch, DealMarket counts more than 61,000 recurring users from 154 countries, and over 3,000 deals and service providers promoted or listed on the platform. DealMarket is an online platform enabling private equity buyers, sellers and advisors to maximize opportunities around the world – a one-stop shop for Private Equity professionals. Designed by Private Equity professionals for Private Equity professionals, the platform is easy to use, cost effective and secure, providing access, choice and control across the investment cycle. DealMarket’s offering includes • DealMarketPLACE, brings together buyers, sellers, and PE advisors from around the world. PLACE gives access to deals (direct invest ments, funds, and secondaries), investors, and PE service providers. Searching and postingis free. (no commissions). PLACE PRO is the exclusive deal exchange platform made for engaged professionals and companies with a truly unique value added proposition. • DealMarketSTORE offers affordable access to industry-leading thirdparty 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 and 2013” by Corporate LiveWire.