Read what's new and noteworthy in Private Equity this week.

1. DIGEST167
December 19, 2014
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Study Shows PE Returns Boosted
by Specialization and Skin in the Game
Another IT Giant Goes Private
LP’s Bullish on Returns in 2015
The Worst CEOs of 2014
Ten M&A Predictions for Asia Pacific in 2015
Quote of the Week: Making Wantrepreneurs
into Entrepreneurs

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Study Shows PE Returns Boosted by
Specialization and Skin in the Game
Adveq and Coller Institute have published a new report on LPs and PE performance links using SEC
data, which only recently became available. The study took a deep dive into the data covering 3,847
US-based private equity advisors. The goals were to expose common GP over-performance character-
istics and glean some insights into the LP universe, particularly pension funds, targeting US PE. Here
are the key findings on what drives returns, according to the study. Info about LPs can be found in the
report here.
• A higher capital commitment by advisors to the private equity funds they manage correlates with
better performance. More “skin in the game” better aligns the incentives of the advisor with the
investors.
• Specialization in PE is associated with higher return performance
• Smaller private equity firms have better incentive alignment (high investment and high ratio of port-
folio managers to capital)
• Lack of regulatory compliance hurts performance (compliance means fewer felonies & legal issues)
(Image Source: Adveq)
Another IT Giant Goes Private
Last week we quoted Michael Dell’s prediction that other large IT
companies would be teaming with PE to go private and this week
Riverbed announced that it struck a deal with Thoma Bravo and the
PE arm of Ontario Teachers’ Pension Plan in a USD 3.6 billion take-
private deal.
The investment is the largest in Thoma Bravo’s history and its fifth
IT vendor buy in recent times. Riverbed is a developer and solution
provider in the enterprise networking space.

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LP’s Bullish on Returns in 2015
The Worst CEOs of 2014
This is a list of CEOs that lack sound managerial practice
and judgment, a top five ranking that nobody wants to be
on, nor would you likely want to own shares in, nor be a
supplier to the companies on it. It is created by Sydney
Finkelstein, a Dartmouth B-School professor (pictured
left). It’s his fifth annual list.
Number 1: Ricardo Espirito Santo Silva Salgado, Banco
Espirito Santo (BES) - lack of judgement,
appointed 250 family members into manage-
ment and leadership jobs
Number 2: Dov Charney, American Apparel – sexual ha
rassment claims and inability to form C-level
team
Number 3: Philip Clarke, Tesco – lacks ability to compete
Number 4: Eddie Lampert, Sears Holdings – red-ink for nine straight quarters
Number 5: Dick Costolo, Twitter – it was given low marks for sales and market growth
The latest Coller Capital Barometer says “almost all” LPs
it surveys are expecting annual net returns of more than
11%. LPs believe private equity returns could get even
stronger with further enhancements to General Partners’
operational skills and more specialised funds. (Image
source Coller Capital Barometer)
Other findings
• Two fifths of private equity investors will raise their target
allocation to the asset class in the next year
• LPs are continuing to grow their exposure to PE funds
focused on ‘real assets’
• Three in five PE investors believe GPs would benefit from
having more gender-diverse
• Co-investments and Asian PE allocations are also ex
pected to increase

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Ten M&A Predictions for Asia
Pacific in 2015
Herbert Smith Freehills, a large Asia Pacific-based law firm, makes the following prediction for M&A
trends in 2015. It also evaluated its performance on predicting this year’s trend, which is always help-
ful to establish credibility.
01. Increased M&A activity in 2015 as companies seek to grow, driven in part by PE
02. Favored sectors are property, resources and financial services.
03. Increased M&A activity from Chinese acquirers post Free Trade Agreement
04. Developments in Chinese regulatory approvals that will favor M&A
05. Target companies to scrutinize bidders carefully to reduce risk & uncertainties on deal structuring
06. Lack of disclosure by public companies to continue as it is seen to encourage M&A activity
07. Competition law reform underway to encourage more M&A
08. Truth in takeovers rule to remain in force, despite some market commentators criticising the rule
09. Creative deal structures
10. Limited law reform, unless it can cut red tape significantly
Quote of the Week: Making Wantre-
preneurs into Entrepreneurs
“We don’t just want the elite to be able to access business education. We think it should be open to the
24-year-old in Bangalore looking to start a company himself who is nowhere near a business school
but has a smartphone.”
Who said it: Frank Meehan, Partner SparkLabsGlobal
In context: Helping entrepreneurs to fill the gaps in their business acumen
has typically been the job of VCs and angels. Sometimes that kind of know-
how doesn’t get transferred and that is where SmartUp, which is developing
a platform for educational Apps, sees an opportunity. SmartUp itself has
some famous founders behind it, Henry Lane Fox and Brent Hoberman who
worked together at LastMinute.com. Hoberman is also a super-angel. Mee-
han is currently the chief executive, according to FT.
He has an impressive venture track record too, particularly in mobile. He
describes SmartUp as “BuzzFeed for learning”. It delivers lessons about
common business challenges, which Google also claims for its recently
launched marketing educational App (Primer), as do some other competitors mentioned in the article.
The claim is not necessarily that this can replace an MBA from Harvard or Stanford -- because online
cannot create the “network” of colleagues and friends one gains at a top B-school according to Mee-
han, but they believe there’s a niche market, one serving a global opportunity.
Where we found it: FT

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Editor: Valerie Thompson, Zurich
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