DIGEST
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SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 15
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Mega-buyout Trend: LPs Going Direct • More LPs participating in club deals
Hollywood’s Lack of Luster for VCs • Need for innovation in content industry
Big Pharma Seeking M&A • KPMG survey says innovation and growth the drivers
India : Buyouts continue to hit records • Billions invested. Hottest sectors : IT and engineering
In Venture Capital Brand Name Funds Win • Recent exits show the prowess of Sequoia and Co.
Private Equity Looks to Indian Family Offices • India’s super wealthy and PE funds get together
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Quote of the Week • Go Daddy’s founder makes domain name registry sexy
July 15, 2011
LBO FUNDS SPEED UP FUNDRAISING This week’s most interesting, and probably largest PE transaction, was the acquisition of healthcare product company, Kinetic Concept, by an Apax Partners’ led consortium for USD 6.3 billion. It was a take private deal announced on Wednesday. Interesting is that the consortium is not the typical “club deal”, according to WSJ. Rather than two or more buyout funds teaming to complete the buyout, Apax teamed with two large LPs, or institutional investors, namely Canada Pension Plan Investment Board and the Public Sector Pension Investment Board of Canada. Before the 2008 financial crisis, megabuyouts were the territory of buyout pros.
But these deals often exposed LPs to the same deals via different GP agreements, thereby causing a greater risk. In the past only a select group of LPs have had the expertise and infrastructure, or interest to co-invest with GPs. Today it is different, says the report, various global insurance companies, pension funds and sovereign-wealth funds are in discussions to participate in upcoming buyouts after boosting their roster of specialists and experts in recent years. For the private-equity firms, bringing in an LP as a co-investor “can reduce the chances of friction” that can occur with a competing PE fund manager. Image source: Dealogic via WSJ
HOLLYWOOD LACKS LUSTER FOR VCS This week venture capital managers gave a panel discussion on why they don’t show Hollywood more “love”, that is, make more investments and buyouts in Hollywood and film industry companies. According to Variety, a venture panel at Variety's Venture Capital & New Media Summit lauded Hollywood talent-finding skills but lamented its innovation capacity. One speaker pointed out that high value companies like Netflix, which rents videos over the Internet, did not emerge from the film industry and even though an established player like Blockbuster had the chance to acquire the startup company, it did not. Today Blockbuster is worth USD 300 million compared to Netflix’ USD 14 billion.
BIG PHARMA SEEKING M&A A new KPMG survey published predicts a boom in M&A in pharmaceutical sector. Some 83 percent of executives in the US say it is likely their company will be involved either aas a buyer or seller in the next two years. Strategic acquisitions are highest priority investment, followed by expansion into new markets by 22 percent.
1 www.DealMarket.com/digest
INDIA : BUYOUT PACE UNABATED Private equity investments in India reached USD 6.3 bn in the first half of this year, reports Rediff. The largest PE investment during the second quarter is a commitment by Apollo Management to Welspun Group, an export oriented manufacturer of textiles, steel, building materials, with engineering service subsidiaries. Other large deals, a USD 150 million investment in thermal power generation firm Diligent Power by Warburg Pincus, and a similarly sized investment in hospitality industry company Samhi Hotels by GTI Group. The information technology sector received the most number of investments at 34 deals worth USD 325 million. Elsewhere, experts warn that more exits are required in India, or it will “spoil” the private equity party in 2011.
IN VENTURE CAPITAL, BRAND NAME FUNDS WIN .Silicon Valley's technology sector renewal is giving a lift to the venture-capital industry, but it is mainly the brand names Accel Partners, Sequoia Capital and Redpoint Ventures that are reaping the rewards, observes the WSJ. Compared to peers, these brand name VC firms have the biggest volume of IPO and trade sales so far this year, with all three firms each reporting nine such "exits" in the first half of 2011. Out of more than 200 venture firms it is more common to have had only one exit each so far this year, and many have none
PRIVATE EQUITY LOOKS TO INDIAN FAMILY OFFICES A large and new source of capital is emerging in India for PE funds, reports the WSJ. Each year, five to seven family offices are getting set up in India. The country’s population of rich individuals, at 153,000, became the world's twelfth largest in 2010, according to the recently World Wealth Report of Capgemini and Merrill Lynch Global Wealth Management.
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QUOTE OF THE WEEK
Quote of the week: “We noticed two things that most always happen when someone hears the name Go Daddy for the first time. 1) They smile. We like that. 2) They remember it. We love that.” Who said it: Bob Parsons, founder and CEO of GoDaddy who last week announced he’d sold an undisclosed stake in GoDaddy to private equity firms Kohlberg Kravis Roberts and Silver Lake for an estimated USD 2.25 billion. Context. Parson’s thoughts on the value of his company and why private equity investors acquired a share of his company demonstrate the business and branding savvy this American Internet executive. As the photos above shows, GoDaddy uses hot cars and beautiful women to attract attention to its brand, even if the actual business activity is on the duller side of the Internet boom, registering and maintaining databases of internet domain names. Where we found it: Smart Company
3 www.DealMarket.com/digest
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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