DIGEST
11
SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 11
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PE in Africa: Growing interest
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KKR and TPG Back Away From Nokia Siemens Deal
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Attracted to Education
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AXA in Giant Secondary Deal
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Pandora IPO Pans Out for VCs
• International investors scope Sub Saharan market
• Only one consortium left
• PE goes into schools – global trend
• Buys Citigroup PE portfolio
The Appeal of the Single Family Office • Study shows that HNW segment as attractive source of capital for companies and funds
• Late stage VCs benefit from lofty valutaion
Quote of the Week • Buy low, sell high works for Oaktree
June 17, 2011
PE IN AFRICA: GROWING INTEREST PE in Africa is a making news these days. The WSJ weighed up the challenges and opportunites of investing Africa, sub-saharan Africa, to be exact. On the plus side there is high economic growth rate of 5.5 percent (much higher than European growth rates), Asian and domestic investors have capital to invest in Africa's commodity riches and rapidly urbanizing one billion population. On the risk side, there is a lack of a track record in PE. There is political „unpredicatability“, issues about legal recourse, lack of skilled managers, a fragmented market and lack of liquidity in exit markets. Africa has only one percent share of global PE investment, according to the article. New capital targeting Africa is also mentioned, such as Helios Investment Partners USD 900 million buyout fund and Carlyle Groups activities in SA. .
KKR AND TPG BACK AWAY FROM NOKIA SIEMENS DEAL Telecoms deals are not as attractive as they used to be for PE investors, it seems. The FT published an insider scoop on the negotiations for telecoms equipment manufacturer Nokia Siemens Networks. It reports that big name PE investors, KKR and TPG have backed away from bidding for a majority stake, leaving only one interested consortium. The deal has been „slow and cumbersome“ to close. The remaining bidder for the company is a team that includes, the Gores Group and Platinum Equity. Perhaps one of the reasons that telecommunications equipment is not as attractive as it once was is the what happened with Telcordia, which was sold this week to Ericsson in a trade sale for USD 1.5 billion, annoucned this week. PE industry observers , such as Deal Journal blog, published commentary that despite its size, it was not much of an exit for the buyout funds that had acquired the US telecommunications-software company back in 2004 for USD1.35 billion.
ATTRACTED TO EDUCATION Dealmkaing in educational software and companies on the increase. It is a trend as reported by Bloomberg, which rounds up recent investments in private-owned educational companies in an article on the current negotiations to acquire online educational tool and software company, Blackboard, a USD 1.5 billion deal. There has been a good number of such private equity deals of late. Providence bought educational services provider Study Group Pty last year while Goldman Sachs Capital Partners and Leeds Equity Partners bought college operator Education Management Corp and Barings Asia PE fund bought a private school operator in Singapore this month, according to Reuters .
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AXA IN CITIGROUP SECONDARY DEAL The biggest fund news of the week was a secondary transaction. Marketwatch reports the sale of Citigroup’s USD1.7 billion private equity portfolio to France’s Axa Private Equity, saying that the portfolio included 18 direct stakes in companies and a package of 207 investments in buy-out funds from groups such as Blackstone, Carlyle, KKR. Citigroup is selling in order to comply with the DoddFrank financial reform law. AXA has stated publicly that it intends to benefit from the shift in legal compliancs. It recently acquired a portfolio from Bank of America in a USD 1.9 billion. AXA executive is quoted in the article estimating that some USD 30 billion to USD 40 billion of private equity assets will be up for sale this year and next. AXA manages USD14 billion of assets.
THE APPEAL OF THE SINGLE-FAMILY OFFICE FOR RAISING CAPITAL A new survey report from Rothstein Kass titled, Raising Capital from Single-Family Offices Considerations for Financial Firms, was in the news this week. It was co-authored by Forbes Insights and Russ Alan Prince. It surveyed 151 executive directors at family offices. Among other assets categories, such as hedge funds, high net worth investors are active in private equity sector investments, with nearly 70 percent planning to increase allocations in 2011. Private equity investment preferences include direct investment in established company, mezzanine financing and second-round financing. RK lists the attractions of the family office for PE funds and companies looking to raise capital, such as single-family offices typically represent vast pools of wealth, the rapid proliferation of the family office model has deepened the sector’s resources. And third, they tend to have long-term investment horizons that make their assets “sticky,” helping to promote fund stability.
2 www.DealMarket.com/digest
PANDORA IPO : CLUB DEAL PANS OUT FOR VC FUNDS Floatation of internet radio pioneer Pandora rewards PE investors . The money-losing company was backed by late stage VC funds managed by Crosslink Capital, Walden Venture Capital, Greylock Partners, Labrador Ventures and Granite Global Ventures. With an IPO valuation of USD 3billion, the VC investors which own about 70 percent of the company, stand to benefit when they are allowed to sell their shares, reports PI Online.
QUOTE OF THE WEEK Quote of the week: ‘There’s no such thing as a bad asset. It’s a question of pricing.’ Who said it: Howard Marks, chairman of Oaktree Capital Management Context: Marks was quoted in a Bloomberg article as saying there are no such things as a bad assets as long as the pricing is right. The private equity and debt investment firm is mulling an IPO. Its chairman is known for his buy low - sell high strategy for distressed debt dealmaking. The report says Marks formed his investing philosophy in the 1980s, a time when Michael Milken was pioneering the junk-bond market Where we found it: Bloomberg
3 www.DealMarket.com
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 www.dealmarket.com. Editor: Valerie Thompson, Zurich
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