The document discusses recent trends in the private equity industry, including slowing global IPO momentum, Yale Endowment reducing its PE allocation, and family firms taking more risks than PE-owned firms. It also notes that a study found most PE professionals believe the current PE business model needs changes, and that exits from Asia are weakening so PE firms are poised to invest more. The weekly digest provides updates on private equity news and trends from various sources.

1. DIGEST175
March 06, 2015
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Global IPO Momentum Slowing
Yale Endowment to Shave PE Allocation
PE Takes Fewer Risks than Family Owners
Europe Looking to Improve Capital Markets
Tweaking the PE Business Model
Quote of the Week: With Asia Exits
Weakening, PE Poised to Invest
Platform for fundraising & deal flow management

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Global IPO Momentum Slowing
Yale Endowment to Shave PE Allo-
cation
Considered in the past by many
as a smart alternative asset
investor, the USD 24 billion Yale
Endowment is in the news this
week with its latest financial
reports. We note that PE is still
the largest asset class in the
Yale Endowment portfolio but
some small changes are ex-
pected this year, according to its
latest report. For example, it is
reducing cash and increasing
foreign equities. And despite its
PE portfolio returns outperform-
ing its benchmarks (see graphic
above), Yale Endowment)
The IPO as an exit strategy is
still viable but activity is down
compared to the same period
last year, according to the lat-
est data from dealogic. The
data provider says that IPOs
this year are pricing well, nine
IPOs managed to price above
the bookbuilding range. How-
ever, both volume and activity
are down year-on-year, from
USD 20.2 billion and 166 trans-
actions. So far this year there
have been 150 listings raising
USD 24.8bn. The largest IPO
to price above bookbuilding
range in 2015 is from Aena SA, followed by Shake Shack’s IPO. (Image source: dealogic)
will reduce its exposure to PE by 2% this year. It is sticking to its strategy despite receiving critical
comparisons from in business media. (Image source: Yale

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Europe Looking to Improve Capital
Markets
For all the talk about PE and risk-taking, it turns out that family run firms are actually doing more
diversifying to achieve growth than many of their peers, with 38% having entered a new industry in
the past few years, compared to only 25% of businesses owned private equity and owner-managed
firms, according to PWC’s new report, Business as Usual is Private Companies Biggest Threat. PWC
says the ownership structure of family owned firms enables them to make more risky moves than
publicly-traded or private equity owned firms. Decisions about diversifying are made with an eye on
longer-term pay-offs. Driving risk-taking is the need to transform and address the biggest challenges
to growth over the next five years. The survey revealed that the challenges are expected to come from
technological advances, followed by a shift in global power and demographics. (Image source: PWC)
PE Takes Fewer Risks than Family
Owners
Some support for VC and PE is coming from EU policy makers, who
just published a Green Paper on economic development in the re-
gion. It said, that compared with the US, medium-sized companies,
which it sees as the engines of growth in many countries, receive
five times more funding from capital markets than they do in the EU.
Data comparing size of stock markets in various regions found in
the paper is shown here. If the EU venture capital markets were as
deep, as much as EUR 90 billion of funds would have been available
to finance companies between 2008 and 2013, says the paper.

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“It is not a great time to exit. Markets are pretty choppy. IPOs are hard to access. Trade buyers are
somewhat better. I would say this is a good time to be investing, rather than divesting, although we try
to do both each year if we can.“
Who said it: Guy Hands, CEO and Chairman, Terra Firma Capital Partnersment
In context: In an interview with CNBC, Jean Salata talked at length about PE
and Asia, as a representative of the largest PE fund manager targeting Asia
with USD 9 billion. He’s bullish on investments this year due to market „dis-
locations“ (slowing economic growth in China). He sees opportunities to buy
businesses ripe for transformation and operations optimization. He points
out that Baring made a billion worth of investments in India in 2013 at a time
when others were more risk-averse. He also talked about the dry powder is-
sue, which he says is overblown. In fact, Salata said, the amount of dry pow-
der is almost equivalent to what gets invested on annual basis in Asia in recent years, including new
and old money raised.
Where we found it: CNBC on Yahoo
Tweaking the PE Business Model
Quote of the Week: With Asia Exits
Weakening, PE Poised to Invest
A new study from Roland Berger reveals a strong view that the
PE business model needs some changes, according to the
views of the 800 professionals in Europe polled for the report.
It is the first time ever that three quarters of PE professionals
no longer believe in the robust- ness of the current business
model or are at least neutral to- ward it (2014: 64%). Financial
engineering is definitely not in favor, according to the study,
with 95% saying that active involvement in (major) busi-
ness decisions of the portfolio companies is a key tactic.
Roland Berger suggests that the sentiment is largely driven
by an outlook on lower levels of M&A activity in the European
market this year.

5. www.DealMarket.com/digest
The DealMarket Digest provides up-to-date and high-quality con-
tent. Each week our in-house editor sifts through scores of indus-
try and academic sources to find the most noteworthy news items,
scoping trends and current events in the global private equity sec-
tor. 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.
To receive the weekly digest by email register on www.dealmarket.com.
Editor: Valerie Thompson, Zurich
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