DealMarket Digest_Issue 41

DIGEST

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SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 41

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Turkey’s Fundamentals Attract PE

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Monster.com and Yelp’s Shares Buoyed

by M&A Speculation

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SingTel Goes Large with Mobile Ads Startup Buy

• Turkey is emerging onto the global PE scene again

The Top Trends in European Tech M&A and VC

• The latest statistics and analysis from Go4Venture

Europe is an “Emerging Market” • Said David Rubenstein at SuperReturn

Quote of the Week: Silicon Valley on the Volga

March 09, 2012

TURKEY’S FUNDAMENTALS ATTRACT PE A Reuters report on a panel about investing in Turkey at this week’s SuperReturn, noted that Carlyle, among other global buyout firms, such as TPG, are seeking investments there. A couple of exits in the region have validated the PE investment activity in recent years. The report says that M&A deals with Turkish targets shot up to 218 deals worth USD 24.9 billion last year from 167 deals worth just USD4.0 billion in 2009, when activity was decreased due to the global economic crisis, according to Thomson Reuters data in the report. But PE is much smaller than M&A activity, which at its peak in 2008 was about USD 2.8 billion worth of deals.

A high economic growth rate and the political unrest in neighboring countries means that ME focused funds are looking more at Turkey than other countries in the region. But there is stiff competition for the few deals that come to market. It is the local players and few global buyout firms with a domestic presence who tend to do well there, according to Reuters.

The fundamentals in Turkey are similar to BRIC emerging markets. In a recent advertorial (a sponsored article) in the WSJ, Catherine Bolgar writes, about the drivers of M&A, privatization and attractive demographics in a population of 72 million that has a high-percentage of young adults and an emerging middle class with rising incomes. The utilities sector, automotive, banking and financial services, fast-moving consumer goods are the sectors attracting the most investment, writes Bolgar.

THE TOP TRENDS IN EUROPEAN TECH M&A AND VC In its latest newsletter, which now bears the hefty title Monthly European TMT Private Investments and M&A Transactions Bulletin, Go4Venture provided an overview of data it has collected on M&A and VC investment activity in the European region.

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Image source: Go4Venture Feb Bulletin)

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Driving M&A is corporates who are increasingly following a trend set by big pharma, specifically buying into innovation and making money on it by distributing it.

Nowadays, growing tech companies are running dual track fund-raising and M&A exploration, according to Go4Venture. Currently M&A is “rather subdued”, especially compared to the same period last year. The reason for that is the “uncertain times the world economy is going through”.

As for investments, the value of deals is trending upwards (see chart above). The top five VC deals in Europe were SoundCloud (38.8 million), Amplitude Systemes (30 million), Neolane (20.9 million), Unruly Media (19.4 million), and Farftech (14 million). Three of these five are consumer Internet startups. All figures in Euros.

MONSTER.COM AND YELP’S SHARES BUOYED BY M&A SPECULATION Dealbook and BW (as well as several other news outlets) reported last Thursday that top management of the online job search giant, Monster Worldwide, announced that it is up for sale. The announcement by Monster’s CEO caused its stock price to spike, after falling by half in the last 12 months. In the meantime, Monster has retained corporate finance advisers, according to Dealbook in a later report. There was no mention of private equity stepping up as a potential buyer.

The growth of social media startups such as Facebook and LinkedIn threaten the Monster.com business model as they step up their potential to offer members job search features, according to an analysis published by Reuters late last year. Stock market investors are choosing social media and socalled Web 2.0 stocks over more traditional online business models. A case in point, money-losing consumer-generated review website, Yelp, which went public last week and is now worth about USD 1.47 billion or 17 times its 2011 revenue, according to Reuters. The same article suggests that investors here are also speculating that Yelp will be a takeover target for the likes of Google or Yahoo.

SINGTEL GOES LARGE WITH MOBILE ADS STARTUP BUY It was widely reported that SingTel is to pay up to USD 360 million for Amobee, a VC-backed mobile advertising startup. The size of the transaction puts it at the large end of the tech M&A scale, if one uses the top five technology deals in the past month published by Go4Venture as a reference (see chart below).

The Amobee investor consortium includes Sequoia Capital, Accel Partners, Globespan Capital Partners, Cisco Ventures, and Motorola Ventures. SingTel said in a press release that six year old Amobee has been “generating strong year-on-year revenue growth”.

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Amobee will remain an independent company that will serve operators, publishers, advertisers and agencies with leading edge mobile advertising technology and services. Headquartered in Silicon Valley, Amobee’s management team will remain in active control of the company.

EUROPE IS AN “EMERGING MARKET” Last week we reported that there has been a steady decline in PE dealmaking in Europe since June 2011, based on data from Zephyr. This week, Carlyle Group's founder and managing director on Tuesday called Europe an “emerging market”, adding that it was the best place to invest at the moment as the economy continued to be in distress and banks remained significantly exposed, according to a report in the WSJ. Carlyle’s David Rubenstein was speaking at SuperReturn. He said, "The EU is the single biggest opportunity in the world at the moment. It is the most attractive emerging market," reported the WSJ. Carlyle has been ramping up staff in the region in anticipation of desirable opportunities as prices come down.

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QUOTE OF THE WEEK “In computer science and materials science, the Russians are as good or better than anyone in the world.�

Image Source: Garage Technology Ventures

Who said it: Bill Reichert, Managing Director of Garage Technology Ventures In Context: Reichert was quoted in a report this week covering the increasing interest in Moscow and Russian ventures. He is one of handful of global venture capital investors that are eyeing Russian startups. Several success stories, such as Yandex, as well as opportunity to clone successful business model in the consumer internet segment, are driving interest and capital movements. In the past few years there has been an increase in incubators to help hone digital businesses to make them ready for international competition.

Where we found it: Russia Beyond the Headlines

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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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