DealMarket Digest_Issue 33

DIGEST

33

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 33

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Fundraising Up in 2011 Driven by Buyout Appeal

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Australian Cyclicals a Target for PE TakePrivates

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• Dow Jones LP source’s latest figures

• KKR bid for Pacific Brands is the latest example

Solar Powers Up VC and M&A in 2011 • Activity level high, says Mercom

Capital Flows to Growth Funds Five Facts About Fundraising in 2011 LPs Favor Founders in Venture Capital • VC fundraising easier for founders’ funds

Quote of the Week

from Carmen Busquets - founder of CoutureLab

January 12, 2012

FUNDRAISING UP IN 2011 DRIVEN BY BUYOUT APPEAL Buyout fundraising ended the year more positively than it started, but VC fundraising fizzled, according to the latest figures from Dow Jones LP Source. For the entire year, there was a slight decline in the number of funds that held closings but a 22% increase in capital raised compared to 2010, when 409 funds raised $100.5 billion. During the fourth quarter of 2011, limited partners committed $29 billion to 104 fund closings.

Graphics Source: Dow Jones LP Source

Europe had its strongest quarter of the year as 2011 came to close. LPs committed EUR14.9 billion in total. Some 140 European funds raised USD 52.9 billion in 2011, again fewer funds raised more money than the previous year. There was a 53% increase in capital committed to PE in Europe.

Other fundraising trends • Secondaries were up in Europe and down in the US. Overall, the Secondary market collected USD5.8 billion for 20 funds in 2011, a 44% drop in capital collected from 2010. It is the first year of decline breaking a three year trend.

• Funds of funds did better in 2011 than the previous year (45 funds raised USD 8.9 billion, a 37% increase. European FoF are continuing to be unpopular. Only seven were raised for a total of USD 398 million, just 10% of the total FoF capital raised in 2010.

• It was a strong fourth quarter for VC fundraising, but the year’s total were lackluster compared to previous years – slightly more than half the 2008 total was raised last year. In Europe, venture capital fund-raising set a record low at just USD3 billion in 2011, a 20% decline.

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AUSTRALIAN CYCLICALS A TARGET FOR PE TAKE-PRIVATES KKR has made an unsolicited offer for Australia's Pacific Brands, which owns Everlast, Clark, Berlei, and several other well-known brands in a deal that could be worth $614 million, reports Reuters.

Private equity firms have been active in Australia in recent months because cyclical goods are trading at a discount. The article says that buyouts hit a peak last year not seen since 2006. Including Pacific Brands there are USD 2.05 billion deals underway in Australia.

KKR has only one investment in the country at the moment, Seven Media Group, which merged with West Australian Newspaper Holdings last year.

SOLAR POWERS UP VC AND M&A IN 2011 Mercom Capital Group, which provides services to the cleantech and energy sectors, published its latest research on solar investment and M&A in 2011, describing the year’s activity as robust.

“The so-called “Solyndra effect” has not been a factor yet, as more than 700 million VC dollars went into over 40 deals since Solyndra announced it would be shutting its doors in August 2011.

Thin-film was the most popular technology for VC investment by far, with $600 million going into the sector. Within thin-film, copper indium gallium (di)selenide (CIGS) thin-film technology raised $467 million,” writes Mercom.

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Solar continued to gain attention and dollars for technology and innovation through venture capital funding, says Mercom, despite several financial difficulties faced by several high profile manufacturers, a reduce in subsidies in certain key markets, and oversupply of modules in the market, which caused prices to plummet. Venture capital funding and M&A activity were strong in 2011, setting record numbers.

Key findings • VC investment in solar totaled USD 1.9 billion in 111 deals in 2011, more deals than ever before in a single year.

• Thin-film technology raised the most VC funding (USD 595.5 million), beating downstream companies, ($339M), crystalline silicon PV (USD 338 million), concentrated solar power ($308M), and concentrated PV (USD 129 million).

• Within thin-film, copper indium gallium (de)selenide (CIGS) companies were the most popular, raising $467M. • The top VC investor was Kleiner Perkins Caufield & Byers, which completed eight transactions.

• Fourth quarter VC funding totaled USD 511M, compared to USD 372M in Q3.

• M&A doubled activity in 2010, both in volume and number of deals, with over USD4B in 65 deals, compared to USD2B in 44 deals in 2010.

• The largest M&A transaction was Total's 60 percent stake in SunPower for USD1.4B. Dealmaking was driven by falling panel prices and oversupply, which brought about a lot of consolidation activity. Valuations of publicly-traded solar companies were at record lows.

Get a copy of Mercom's annual solar funding report and other reports, here

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CAPITAL FLOWS TO GROWTH FUNDS Growth funds are enjoying a renaissance of late, says Preqin. A steady increase in both the number of funds closed and aggregate capital has been underway since the economic downturn hit in 2008.

Those growth funds focusing on investment in Asia are proving to be particularly popular with investors.

FIVE FACTS ABOUT FUNDRAISING IN 2011 Fireworks might have been exploding in the world’s largest city at midnight but 2011 in private equity fundraising closed with a wimper, according to Preqin’s latest stats on fundraising.

Key Facts 1. The most popular fund type was buyouts; 92 such funds closed having raised about USD 70 billion.

2. The most numerous were venture funds; 133 finished fundraising and pulled in an aggregate USD 32 billion.

3. Good news is that it took less time for fund to close. It took 16.5 months, which two less than in 2010.

4. The largest fundraising of the year was a USD 7 billion secondaries fund raised by Lexington Capital Partners VII. 5. Despite a strong second quarter, in which 189 funds closed having collected $88.4bn in commitments, the total amount raised in 2011 was USD 263 billion, less than the USD 274 billion raised in 2010.

LPS FAVOR FOUNDERS IN VENTURE CAPITAL Raising venture capital funds may be difficult in recent times, but founders’ funds, those created by super-wealthy, tech entrepreneurs are having no problem, it seems. It was widely reported that PayPal founder and serial entrepreneur, Peter Thiel, has just raised a large oversubscribed USD 625 million fund. It is the Founders Fund fourth fund to date and its biggest.

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As a VC, Thiel backed startups like Facebook, SpaceX, and Spotify. Dealbook says that there is “no cash crunch” for Silicon Valley’s one percent, the elite of VC investing, adding that Thiel’s new fund is bigger than his three earlier funds combined. The report says that investors are “flocking to younger venture capital funds, with prominent technology leaders”. Another example given by Dealbook was Revolution Growth, a fund created by Steve Case, a co-founder of AOL, which recently closed a USD450 million fund for later-stage start-ups on the US East Coast.

Source: http://dealbook.nytimes.com/2011/12/01/peter-thiels-founders-fund-raises-625-million/

QUOTE OF THE WEEK “I decided that if I made enough money I would reinvest it and risk it on new ideas and new companies, rather than have it in my bank and then have somebody lose it.”

Who said it: Carmen Busquets, the Venezuelan luxury-goods maven, founder of CoutureLab, and a venture capital investor who made a profit of almost GBP100m from the sale of online luxury fashion website Net-a-Porter last year.

In Context: Busquets made the comment when she was interviewed about her investment style and strategy in England’s Telegraph newspaper last year when she announced acquiring a 5% stake in Lookk.com, an innovative designer fashion shopping and style site in London, which originally was founded in Vienna. Other investors in the Internet startup include venture capital group Eden Ventures, Kima Ventures, a fund created by Xavier Niel, a French Internet billionaire and owner of Le Monde newspaper, among others.

Where we found it: The Telegraph Image source: couturelab

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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.

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Editor: Valerie Thompson, Zurich

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