DealMarket Digest Issue122 - December 20, 2013


Published on

- Glut of Capital Has PE Scouring the Globe for Deals
- M&A Take Private Predictions for 2014 -US Market
- PE Boosts Stellar Returns at World’s 2nd Largest Medical Charity
- Private Equity’s Report Card for US M&A
- Global M&A Rainmakers of 2013
- Quote of the Week: Equities and PE on the High Net Worth Radar

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

DealMarket Digest Issue122 - December 20, 2013

  1. 1. DIGEST 122 1 Glut of Capital Has PE Scouring the Globe for Deals M&A Take Private Predictions for 2014 -US Market 2 PE Boosts Stellar Returns at World’s 2nd Largest Medical Charity Private Equity’s Report Card for US M&A 3 Global M&A Rainmakers of 2013 4 Quote of the Week: Equities and PE on the High Net Worth Radar December 20, 2013
  2. 2. GLUT OF CAPITAL HAS PE SCOURING THE GLOBE FOR DEALS The FT has a feature this week about where private equity funds may be deploying capital in the next year. It highlights the fact that PE funds are still sitting on large amounts of capital but the pace of investment has been slow. Fundraising has also been brisk this year, much higher than previous few years. So where will the money go, asks the FT. The answer it came up with is Southeast Asia and other emerging markets, such as Brazil. The pros and cons of both regions are weighed. Looking still further, the FT says that “traditional markets” in Europe and North America “will continue to attract investment despite the financial crisis and growing regulatory regimes” with Asia-based investors attracted to European investments. The report was not bullish on European venture capital. M&A TAKE PRIVATE PREDICTIONS FOR 2014 -US MARKET The Deal Pipeline came out with its predictions for take privates in 2014. Since PE was involved in some of the largest take privates of 2013 (see PE Report Card above), we highlight here some of the companies it for M&A and LBO activities. The Deal says two American apparel retailers Abercrombie & Fitch Co and American Eagle Outfitters, which both have low attractive share prices (see graphic from MSN Money), could come into play in 2014, as might Internet hosting company Rackspace Hosting. It has a low valuation which makes it a target and it may at tract mainstream PE firms after the success PE had with GoDaddy (Internet technologies). The magazine also sees potential for carve outs and divestments of underperforming divisions at technology giants such as Yahoo!, eBay and HP. The last one on its shortlist is Pep Boys an auto parts and aftermarket retailer whose sales and profit margins are disappointment the public market 2
  3. 3. PE BOOSTS STELLAR RETURNS AT 2ND LARGEST MEDICAL CHARITY The DealMarket Digest keeps a watch out for smart money moves in the LP universe. This week we spotted signs of success at The Wellcome Trust. The world’s second-biggest medical charity achieved returns of 18 percent this year, about GBP 2.6 billion. The trust provided some insight into its portfolio management strategy in its Annual Report, attributing it to steady investments in public and private equity since 2008. The Annual Report said that at Wellcome Trust, “market timing is an important tool”. It reduced exposure to public and private equity from 80% of the portfolio in 2005 to 58% in 2008, and then used the period between 2008 and 2011, “when most investors were highly risk averse”, to restore it to 69%. It is now 74% of the portfolio. The trust says it has been “rewarded for this initially counter -cyclical action as returns have exceeded £7 billion (57%) since the beginning of the Global Financial Crisis in September 2008, with five consecutive years of positive performance.” Its Annual Report is here. Among medical research charities, the trust’s endowment is exceeded only by that of the Bill & Melinda Gates Foundation in Seattle, reports Bloomberg. (Image source: Wellcome Trust Annual Report) PRIVATE EQUITY’S REPORT CARD FOR US M&A This week Dealbook posted a list of notable US regional M&A transactions. Several of them were PE deals. Some received an A and some received an F. One of the deals highlighted was Thoma Bravo’s sale of Digital Insight to NCR for USD 1.65 billion, which it bought just 124 days earlier for USD 1.025 billion. It got an A. The venture capitalists that backed Twitter received an A for running a clear and 3
  4. 4. transparent IPO. Dealbook says it was the antiFacebook IPO because Twitter did not get “tricky with pricing or numbers or try to push boundaries. Twitter simply sold shares to the public with great success.” This was another A. European PE firm, Apax got not quite an F for doing something that is not yet clear will benefit its LPs. Apax bought Rue21, the fashion retailer, giving an exit to an earlier Apax fund. When Rue21 announced a sharp downturn in sales, the transaction was called into question. “The deal highlighted the conflicts when a private equity firm buys a company that it already holds shares in. It’s a warning for future private equity deals, says Dealbook. Hight marks went to the founder of Dell for navigating a tough road to take his company private, but and MBO by the management at Dole received a low mark due to its pricing and legal controversies. (Image Source: Twitter) GLOBAL M&A RAINMAKERS OF 2013 It is that time of the year when the PE and financial media publish yearly highlights. Institutional Investor published is top ten Deals of the Year, ranked by total advisory fees (based on estimates by investment consulting firm Freeman Consulting Services and Thomson Reuters). The focus is on the ten investment banks that played key roles in a wide range of “remarkable” pending and closed transactions. Barclay’s was number one because it raised USD 9.1 billion, the “biggest capital raising” by a British bank since 2009. Telecom giant Verizon Communications came in second with its USD 130 billion acquisition of U.K. rival Vodafone Group’s US unit. Number three was the largest tie-up of the past decade as Shuanghui International Holdings acquired American company Smithfield foods for USD 7 billion. Two of the ten largest included PE funds, specifically number 4 and number 2. (See the graphic from II for all ten top deals). The magazine says that dealmakers will “face a test” in 2014 as differing monetary policies play out. Higher interest rates in the US may affect debt markets while the European Central Bank and the Bank of Japan are both expected to keep them interest rates low. 4
  5. 5. QUOTE OF THE WEEK - EQUITIES AND PE ON THE HIGH NET WORTH RADAR “Over the longer term however, UHNWs and advisers clearly anticipate that equities will provide superior returns, led by emerging market stocks…followed by developed world equities, agricultural land, and private equity.” Who said it: Ian Marsh, CEO Asset Management, Fleming Family & Partners In Context: In an executive summary of a new report on where wealthy families are investing and why over the next 30 years, Ian Marsh of FF&P made this statement above. Later on the exact figures are presented with emerging market equity coming out on top with 24% and private equity coming in fourth at 16% (see graphic). The report is entitled The World in 2043. Investing with a 30 year horizon may seem hard to grasp but FF&P is specialized in that kind of investment activity, which it calls “the management of long-term family wealth”. It is also an active PE investor with several new investments this year and some stellar exits, according to its website. The report is based on a survey and interviews with ninety Ultra High Net Worths (UHNW) and advisers, collectively representing over GBP 100 billion of net assets. The key takeaways were that 71% of identified “real capital preservation” as the greatest challenge and were quite consistent in their view of what threatened that goal, namely lack of strategic planning, fragmentation on inheritance, excessive risk taking, dispute and family breakdown, and Inflation/ Taxation. Other findings: the super-wealthy like real estate as an investment; the majority believe that the US Dollar will remain the global reserve currency in 30 years, notwithstanding the US’s anticipated loss of economic pre-eminence to China. And London is expected to remain a leading financial centre for wealthy families, with 93% of the sample believing that it will continue to be one of the top three globally in 2043. (Images Source: FF&P) Where we found it: FF&P Publications 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.