SEE WHATS NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 132 - March 14th, 2014: - Five Traits of Blockbuster PE Exits - Fund of Funds Still in the Game, But Pressure is on Performance - More Women Active in Private Equity - PE Firms Seek Manufacturing Company Buyout - M&A Healthcare Deals Grow in More Ways Than One - Quote of the Week: Not So Dumb Money and VC Evolution

1. DIGEST132
March 14, 2014
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Five Traits of Blockbuster PE Exits
Fund of Funds Still in the Game, But Pressure
is on Performance
More Women Active in Private Equity
PE Firms Seek Manufacturing Company
Buyout
M&A Healthcare Deals Grow in More Ways
Than One
Quote of the Week: Not So Dumb Money and
VC Evolution

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FIVE TRAITS OF BLOCKBUSTER PE EXITS
When PE News published a well-investigated list of 25 of the best private equity-backed sales of Eu-
ropean businesses in the last 10 years, it revealed some common strategies exploited in these large
exit deals. The Tally blog selected five and discussed them in a short article. Some of the strategies are
what one would expect, like buying cheap (which is getting harder and harder to do), make operational
improvements and getting the timing right, but there were two that are maybe less obvious. One is that
secondary deals are not likely to deliver a blockbuster exit. Only five of the 25 top exits were secondary
deals. Yes, there is lower volatility of returns in a secondary deal, but the cost-cutting and expansion
work will most likely have been done by the earlier investors, said The Tally. The other common trait
was a holding period for longer than usual five years. According to Tally, almost half of the deals listed
were held for five years or more, which suggests that success in European buyouts can often take time
to achieve.
Private Equity Fund of funds are having a tougher time closing new funds and the amount raised
by such funds has been trending downwards since peaking in 2007, despite improved fundraising
amounts in other segments of the PE market, according to a special report from Prequin.
The relatively poor performance of FoFs compared to other PE segments is one reason. It only slightly
outperforms venture capital, according to the data analyzed by Preqin. The segment is still a key part
of the market, representing some USD 288 billion raised in the past ten years. And an investor survey
says they are satisfied with the returns of their FoFs, according Preqin, but its analysts also said that
the FoFs will need to generate superior returns in order to justify the double layer of management fees
intrinsic to such vehicles. (Image source: Preqin)
FUND OF FUNDS STILL IN THE GAME, BUT
PRESSURE IS ON PERFORMANCE

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PE FIRMS SEEK MANUFACTURING COM-
PANY BUYOUT
This week Preqin’s latest research on women in the alternative investments industry captured head-
lines, as did the new book by high profile Silicon Valley venture capitalist Ben Horowitz. What do they
have in common? The answer is they both show that women have some way to go in the domains of
technology and pri- vate equity. Horowitz in-
advertently revealed just how male dominated
Silicon Valley can be, despite trying to be pro-
female leadership in his text, according to BW,
while Preqin, con- cluded after studying the
fact sheets of some 7000 fund managers
that statistics show small improvements in
the level of female representation in PE.
The percentage of women in PE has in-
creased slightly at buyout, real estate, and
funds, and stayed the same in VC, according
to Preqin. However “the overall proportion of
leadership roles that women occupy in private
equity is still nota- bly low”. This all might
sound like bad news for women who seek to
forge a career in PE (and also for institutional
investors that seek to put money to work in female-led PE teams), however it is worth noting that there
is clearly progress. One sign is that the Annual Women’s Private Equity Summit, which is a two day
event for senior-level women in private equity and venture capital, reported this week that it would
have 450 attendees. It is the “largest gathering yet” for the event, which is now in its seventh year. (Im-
age source: Preqin)
MORE WOMEN ACTIVE IN PRIVATE EQUITY
This week’s buyout of the week is USD 5.5 billion acquisition of Gates Global. PE investors, Blackstone
Group and TPG are reportedly in the running for the Denver-based manufacturing company, accord-
ing to the WSJ. The company is also mulling an IPO. If a deal is struck, says the WSJ, it would be the
second-largest private-equity buyout of the year after Cerberus Capital acquisition of Safeway for USD
9.5 billion.

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In Asian M&A news this week, IHH Healthcare,
Asia’s largest hospital operator, was reported
to be mulling a USD 4.5 billion bid for Austra-
lia’s Healthscope, also a hospital operator,
according to Bloomberg. Healthcare invest-
ment is up and coming, particularly in the US.
Dealogic reports that its data revealed that
healthcare was the third most active in seg-
ment in its 2013 global M&A studies. Only Tele-
comm and Real Estate saw more activity.
More proof was published by WSJ Private
Equity Beat blog which discusses the trends in
the latest deals, saying that a USD 500 valua-
tion for information technology company Ability
Network “is an indication of how hot it’s getting in the health-care market”. The valuation is 17 times
earnings before interest, taxes, depreciation and amortization while the valuation multiple for health-
care information technology deals is typically in the 10 to 12 times EBITDA range, says the report. One
driver of the valuation jump is that private equity and strategic acquirers are now competing amongst
themselves for targets. Another driver is climbing stock market values, which affect both the selling
and buying prices. There has been a 36% jump in one of S&P’s healthcare stocks indices in the past
year.
M&A HEALTHCARE DEALS GROW IN MORE
WAYS THAN ONE
QUOTE OF THE WEEK - NOT SO DUMB
MONEY AND VC EVOLUTION
“We believe in transparency. If a startup that takes our money wants to publicize the terms of our
investment, we’d generally support that… The average pre-money valuation of our investments for the
year to date in 2013 was $6M. (We intend to update this number from time to time, but not too fre-
quently to avoid inadvertently disclosing the terms of any one deal). ”
Who said it: The Bloomberg Beta Team
In Context: Bloomberg Beta is a USD 75 million
corporate venture fund that launched about a year
ago. It has taken the unusual step of publishing
also published a handbook for entrepreneurs
that are seeking funding, which is where we t
ook that quote from. It has already disclosed
publicly terms of at least one deal it did last
year with a startup called ThinkUp, with the permission of the startup. “We invested USD 200,000 in
Photos from l to r: Roy Bahat, Karin Klein, Partner, James Cham, Partner

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ThinkUp in a convertible note with a 20% discount and a $6 million conversion cap,” writes Roy Bahrat,
who heads up the fund. By revealing such details, Bloomberg Beta challenges the prevailing secrecy
around funding for startups. The fund also considers investing in wannabe entrepreneurs that still have
their day job, which is quite unusual in the VC world. And, not surprisingly, the fund was an early par-
ticipant in AngelList.
Bahrat challenges some of the prevailing practices in VC, asking why do startups have to raise money
in time-consuming and distracting (for the founders) discrete rounds rather being more continuous,
and why keep things so intransparent. It is quite a change because in the not too distant past corporate
venture funds rarely disclosed their investments, much less revealing their terms, their preferences,
and a willingness to invest at the seed stage (typical corporate VCs invest in businesses with a proven
business model and in need of growth financings). TechCrunch recently wrote about the widely held
belief that corporate venture was dumb money and how it is changing as the likes of Google Ventures,
Intel Capital, and SAP Ventures shift strategies and exert greater influence. It is too soon to tell if the
Bloomberg Beta team’s approach will deliver significant returns, but it is clearly sending a signal about
the need to evolve the VC model.
Who we found it: Bloomberg Beta Operating Manual

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