DealMarket Digest Issue 95 - 17th May 2013


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- IPO Pipeline Pops in Q12013
- Water Utility Buyout Attracts Bids
- The Buyout Bubble’s Exit Bottleneck: Preqin
- LPs Spend on PE Funds Targeting Oil, Gas, and Natural Resources; Preqin
- Families Vie With PE in Consumer Deals
- Quote of the Week: Hitting a BRIC Wall

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DealMarket Digest Issue 95 - 17th May 2013

  1. 1. DIGEST 95SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 95May 17, 201312IPO Pipeline Pops in Q12013Water Utility Buyout Attracts BidsThe Buyout Bubble’s Exit Bottleneck: PreqinLPs Spend on PE Funds TargetingOil, Gas, and Natural Resources; PreqinFamilies Vie With PE in Consumer DealsQuote of the Week: Hitting a BRIC Wall3
  2. 2. PIPELINE POPS IN Q2013US companies are raising the largest amountof money through IPOs since before thefinancial crisis, reports The Deal Pipeline. Agreater willingness for risk among investors ispushing the US stock market to new highs.Activity has picked up recently as investorssearch for higher-yielding assets. But thetrend has mainly benefited dividend-payingcompanies such as real estate investmenttrusts. The article says that smaller growth-industry companies are less attractiveImage source: PWC IPO Watch 2013WATER UTILITY BUYOUT ATTRACTS BIDSThis week’s deal of the week is a potential USD 8.11 million takeover bid by a consortium of funds forSevern Trent, a UK water utility. The WSJ says the deal is potentially the largest takeover of a UK-basedwater company since the industry was privatized in 1989. The utility said it had received bids frominstitutional investors including Borealis, which invests on behalf of, the Ontario Municipal EmployeesRetirement System. Other bidders are Kuwait Investment Office and Universities SuperannuationScheme. These are typically the kind of investors that invest in GP funds but as has been reported inearlier newsletters, they are doing more direct deals these days.
  3. 3. BUYOUT BUBBLE’S EXITBOTTLENECK: PREQUINFund managers are struggling to realize investments made in the Buyout Boom, according to Preqin.They are finding the exit but it takes longer than it used to. The average holding for PE portfoliocompanies that were sold in 2012 reached five years, years, compared to 3.9 years in 2008.Megadeals (over USD 1bn) exited so far in 2013 had an average holding period of 6.2 years, up fromjust 2.1 years in 2008.Other findings• A significant 63% of portfolio companies purchased in 2006 and 73% purchased in 2007 have yet tobe sold, as fund managers have struggled to exit companies purchased during the buyout boom.• The average holding period for deals exited so far in 2013 has dropped slightly to 4.9 years.• European portfolio companies have the longest average holding period at 5.2 years for deals exitedso far in 2013, compared to 4.8 years for North American portfolio companies.• The aggregate value of exits dropped to just $5.2bn in Q1 2009, but has been on an upward trendsince, reaching a high of $126bn in Q2 2011.• Investors continue to favor buyout funds. 51% of LPs looking to make new commitments in 2013plan to target small to mid-market buyout funds and 23% expect to commit to large or megabuyout vehicles.The first quarter of 2013 saw an aggregate USD 9.7billion raised by six natural resources funds,according to Preqin. It was the highest quarterlyamount since the peak of USD 16.6 billion seen inQ2 2009. Last year was a particularly successfulfundraising year for natural resources funds as 22natural resources funds secured an about USD22.5bn, which is similar to the peak levels of capitalfunds that closed in 2006 and 2009, raised USD24.0bn and USD 23.6bn respectively.Image source: PEILPS SPEND ON PE FUNDS TARGETINGOIL, GAS, AND NATURAL RESOURCES;PREQUINNorth America-based GPs led the fundraising trail for this type of investment last year, due to afavorable regulatory environment for oil and gas investments.
  4. 4. six natural resources funds that held a final close in Q1 2013 met or exceeded their target size, saidPreqin. Currently, 30 natural resources funds are currently in market, seeking to raise USD 26.8bn.FAMILIES VIE WITH PE IN CONSUMERDEALSReuters is reporting that family-run investment firms are making waves in the consumer deals market,squeezing out private-equity players. It is believed that families are willing to wait longer for returns, givingthem the edge over private-equity funds looking for a quick turnaround. One of the reasons PE firms are notcompeting head on with family funds is that multiples on some valuations are too high to make the returnswork. Family-funded investments in the sector are expected to grow. Food and beverage continues to be avery attractive industry.QUOTE OF THE WEEK: HITTING A BRICWALL“Korea is a remarkable economic success story along with Taiwan.Its the only economy in the world to have grown at 5 percent ormore for five decades in a row… The other countries where I thinkthat expectations can be surpassed versus what the consensus areIndonesia, Turkey, Philippines. I think even Thailand has a chanceof doing so. Then a bunch of frontier markets such as Nigeria, SriLanka. I think all these countries have a chance of surpassingexpectations.”Who said it: Ruchir Sharma, Morgan Stanley, Head of Emerging MarketsIn Context: In an interview with an editor of Harvard Business Review, Marc Andreessen talks about thecomplex challenges in current technology investments, the hazards of missing a good investment, andhow large tech companies sometimes initiate takeover talks just to “screw up” the business of a startupcompany for 18 months. The tech entrepreneur turned venture capitalist at Andreessen Horowitz, aMenlo Park venture capital fund, has lots more to say on preparing for IPOs, handling compliance, leanstartups, cloud computing, and how software is changing almost industries far beyond what wasforeseen as recently as a decade ago. (Image Source: Forbes Video Wochit Tech)Where we found it: CNN TranscriptsImage source: Foreign Affairs Focus on Youtube
  5. 5. DealMarketDealMarket launched in 2011 and is growing fast. Just one year afterlaunch, DealMarket counts more than 52,000 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 Newswire.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