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DealMarket Digest Issue85 - 1st March 2013


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- Remarkable - PE Performance during the Financial Crisis
- IPO Positive: Institutional Investors
- Canada's Blowout Year for PE
- Heinz Buyout is a PE Mega-deal
- Is the Mega Buyout Back?
- Quote of the Week: PE’s Reputation Risk

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DealMarket Digest Issue85 - 1st March 2013

  1. 1. DIGEST 85SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 85 1 Assessing the PE Asset Class: Upticks and Downticks  • BNEF’s Views Mega Buyout for Compuware in the  Works? 2 Cyclical: M&A’s Coming Renaissance  • Bain Insights US Sentiment Mainly Positive  • ACG Survey of Dealmakers 3 Six Questions Entrepreneurs Should  Ask When Seeking PE Quote of the Week: Mega Deals and  Debt Availability March 01, 2013
  2. 2. ASSESSING THE PE ASSET CLASS: UPTICKS AND DOWNTICKS Image source: Cambridge AssociatesThis week Privcap broadcast a good panel discussion on the latest industry performance numbers. According to Cambridge Associates, which publishes PE Indices and Benchmarks, the third quarter last year registered at 3.1 percent positive growth over the previous quarter. This contributed to a good year‐to‐date number so far. The year‐to‐date number for 2012 is 8.6 percent. The 10‐year number from Cambridge is 11.8%, including both private equity and venture, which compares favorably to the 10‐year S&P, Standard & Poor 500, at 8 percent. The outlook for PE, based on the view that it is cyclical, like most other industries, is for an uptick in year‐over‐year performance commitments to funds, and a downtick in the size of the capital overhang (dry powder, or uninvested capital). (Image source: Cambridge Associates)MEGA BUYOUT FOR COMPUWAREIN THE WORKS?The US is the home base for this week’s deal of the week. Rumor has it that business software company Compuware is in talks with buyout firms for a take private transaction. According to Reuters, Blackstone Group LP, TPG Capital LP and Golden Gate Capital were approached. It said that the move follows the company’s rejection of a USD 2.3 billion bid from activist investor Elliott Management Corp in Jan, 2013 because the offer was not high enough.1
  3. 3. CYCLICAL: M&A’s COMING RENAISSANCEA new report from Bain says that M&A is about to ride the upside of the latest business cycle. In the first of a three part series, it discusses some of the surprises it discovered researching M&A in 2000’s. For example, data from this study showed “unequivocally that deal‐making paid off during that 11‐year period”. Companies that were actively engaged in M&A outperformed inactive companies’ sales growth and profit growth, and shareholder returns. As a rule, the more experience a company has doing M&A, the greater the likelihood that its deals will be successful. Companies in our study that were inactive—no mergers or acquisitions during the period— recorded 3.3% annual total shareholder returns (TSR), see above figure. Those that did between one and six acquisitions boosted their performance significantly, to 4.5%, and those that did more than six topped 5% TSR. These seemingly modest differences in annual TSR add up to significant disparities over a decade. The top group, for example, had 21% higher returns than the inactive group.  Image source: Bain InsightsUS SENTIMENT MAINLY POSITIVESenior middle‐market dealmakers and their advisors recently surveyed by ACG, the association of deal‐making professionals, are mainly optimistic on the US economy. A substantial minority (46%) say the US economy at the end of 2013 will be about the same compared with the end of 2012.  However, an almost equal number (43%) believes it will be better (40%) or much better (2%).  A noticeable group (11%) believes it will be worse (10%) or much worse (1%).  The optimists, believing the economy will be better or much better outnumber the pessimists, believing it will be worse or much worse by about four to one, said the report.2
  4. 4. SIX QUESTIONS ENTREPRENEURSSHOULD ASK WHEN SEEKING PEPrivate equity is an option many sellers encounter for the first time, and they might have little understanding of the industry. With that in mind a Cleveland business blog offered some insights from global PE executive. He suggests six questions for company owners to ask potential private equity investors. For example, have you ever done this before? Or how do you plan to grow my company? When and how will I be compensated? For each question there is some discussion provided in the article. It concludes with the advice that throughout the process of finding the right fit in a private equity partner, sellers always should keep the idea of partnership, cooperation and integrity in mind.  QUOTE OF THE WEEK: PE’S REPUTATION RISK “We are seeing some elements of pre‐crisis behavior…    we are seeing people engaging in bullish behavior.” Who said it: unquote, a PE industry trade publication In Context: Dealbook’s reporters covered this week’s SuperReturn  conference in Berlin. One of the reports contained the above  quote, one of several statements made by big names in PE on the  topic multibillion‐dollar deals and speculation that debt‐fueled  buyouts are back. The report says that over the last two years, investors have begun to tap debt markets with greater ease. The growing ability to finance deals has led to increasingly higher price tags on potential deals, according to another speaker at the event, Leon D. Black, chief executive of the private equity giant Apollo Global Management.Where we found it: Dealbook4
  5. 5. 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 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 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.