DIGEST
22
SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 22
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Alibaba in $1.6 billion PE Deal • Silver Lake and DST Global lead
M&A in Asia Pacific Rebounds • Private equity dealmaking is part of the reason
Warburg Pincus Raising Megafund • Discounts and fee breaks to oil the fundraising wheels
PE’s Busiest Dealmakers Revealed • Bloomberg data and rankings for PE and VC
Solid Returns Outside the US This Year • Cambridge Associates’ crunches the number
Renewables Attract PE in the UK • Driven by attractive returns and government goals
Quote of the Week • The loyalty of an LP
July 22, 2011
ALIBABA IN $1.6 BILLION PE DEAL DST Global, the Russian technology-focused private equity firm and California-based Silver Lake Partners have made a bit to acquire 5 percent of Alibaba for USD 1.6 billion. The equity deal valued the internet venture at USD 32 billion, according to anonymous sources in an article in Financial Times. Forty percent of the company is owned by Yahoo. It is China’s largest ecommerce group by revenues. Other investors are Yunfeng Capital, a fund owned by Chinese entrepreneurs including Alibaba’s chairman and founder Jack Ma, and Temasek, the Singapore investment fund.
M&A DEALS IN ASIA-PACIFIC HIT $449 BN YEAR TO DATE Mergers and acquisitions in Asia-Pacific have hit a record high, driven by transactions in materials and oil and gas sector, according to Reuters, specifically the value of M&A deals for the region, excluding Japan, in the first three quarters of 2011 reached USD 449.1 billion, an increase of nearly 16 percent from the same period in 2010. The volume of dealmaking is at a level that has not been since 2007. PE funds have about USD 70 billion in unused capital for deals. The Reuters graphic here shows global M&A to put the figures reported here in context.
WARBURG PINCUS RAISING MEGAFUND According to the Bloomberg and WSJ, Warburg Pincus is raising a USD 12 billion “megafund” with incentives to LPs that commit at least USD200 million, including a fee discount. It raised its last fund of USD 15 billion in 2008. The firm is said to refrain from charging certain fees to its portfolio companies and direct any other fees it gets toward reducing management fees. According to the report, the Warburg Pincus decision to offer a reduction in fees echoes is similar to concessions by other buyout teams, including Kohlberg Kravis Roberts & Co. and Providence Equity Partners in a highly competitive fundraising market.
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PE BUSIEST DEALMAKERS REVEALED Blackstone Group is this year's busiest PE dealmaker, with transactions valued at USD 20.3 billion, according to data compiled by Bloomberg. Second on the buyout blockbuster list is Avista Capital with USD 14.2 billion in transactions. Avista is a New York-based firm made up from the former DLJ Merchant Banking unit. Rounding out the top five are Nordic Capital AB of Stockholm, Credit Suisse Group AG in Zurich and EQT Partners AB, also of Stockholm. Nordic Capital was the biggest seller in privateequity deals at USD 14.1 billion. Private-equity transactions increased 51 percent to USD 287 billion this year over the same period a year . earlier, according to Bloomberg. But recently dealmaking has slowed, which will not come as news to regular Dealmarket Digest readers. It is due to economic uncertainty and volatile equity and debt markets. Transactions in September were only USD 8.2 billion compared to USD 29 billion in August.
Deal advisers who top the Bloomberg list include, JPMorgan Chase & Co which handled 51 deals valued at USD 66.8 billion this year, and in the second position was Goldman Sachs Group with 46 deals totaling USD 64.6 billion. In venture capital, Kleiner Perkins Caufield & Byers was number one. Its holdings include Groupon and it put USD 2.54 billion in 46 companies to work. In second place, is Digital Sky Technologies (DST Global) of Russia, which contributed USD 2.26 billion to six ventures.
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The most popular industries targeted were Internet ecommerce and digital meda companies such as Facebook Twitter Inc. and 360Buy.com. Investments by the end of September are almost triple the same period last year, according to Bloomberg.
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PE AND VC OUTSIDE THE US GENERATING SOLID RETURNS Private equity and venture capital funds that invest primarily in global developed markets outside of the U.S. and emerging markets generated solid positive returns for the quarter ending March 31, 2011. While funds in developed (ex-U.S.) and emerging markets earned lower returns than they had in the prior quarter, they outpaced their respective public market counterparts, according to a commentary on alternative asset classes published by Cambridge Associates .
RENEWABLES ATTRACT PE IN UK The UK law firm, McGrigors, found that the value of buyout deals in the UK, where investors have bought a majority stake in existing renewable projects grew rapidly in the first half of 2011 to GBP 585 million, a figure which is nearly ten times greater than in 2010. The decision to invest is based on belief it offers superior returns because the technology is more proven, the infrastructure in many cases is up and running, and UK government commitment is “clear and strong”.
QUOTE OF THE WEEK “As long as the management more or less behaves, investors are usually not willing to pull the plug. There is often a loyalty towards management and the feeling that they are the best persons to deal with the portfolio as they know it inside out…” Who Said It: Thomas Kubr, chief executive of Capital Dynamics Context: A report on PE fund secondaries and the prospects of industry consolidation in the FT. Where we found it: Financial Times
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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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