DealMarket Digest_Issue 59

DIGEST

59

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 59

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European VC Fundraising Improving • DowJones VentureWire research

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PE Figures Prominently in Top Alt Asset Managers’ $3 trillion Pool • Towers Watson survey

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Latest Quarter’s Data Shows PE Dealmaking Increasing

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Dealmaking Trend: Beverages and Beer

• Preqin Research

Quote of the Week: Indexing Fear and Greed

July 13, 2012

EUROPEAN VC FUNDRAISING IMPROVING

As of June, the data for both US and European venture capital funds show a positive trend compared to last year. More capital is being raised, according to a release from VentureWire. The US funds have raised USD 13 billion (82 fundraisings) while 27 European venture funds raised USD 2.3 billion. Both sets of figures are a markedly greater than last year, increasing by 31% and 26% respectively, says the report citing data from Dow Jones LP Source.

Other Findings • US early-stage fundraising more than doubles. Forty-three early-stage funds raised USD 3.1 billion, more than double the USD 1.3 billion raised for 40 funds during the same period last year.

• Late stage declined with twelve late-stage venture funds raising USD2.1 billion, a 28% decline in fundraising compared to first half of 2011.

• Twenty-seven European venture funds held closings during the first half, matching the total from the year-ago period. As in the US, early-stage funds attracted most of the capital, raising USD1.5 a 34% increase in capital committed from the same period last year.

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PE FIGURES PROMINENTLY IN TOP ALT ASSET MANAGERS’ $3 TRILLION POOL Towers Watson added up the assets managed by the Top 100 alternative investment managers globally and found that they now manage USD3 trillion. The consulting company’s Global Alternatives Survey now includes individual private equity so we digested the report for this week’s newsletter. The report offers a handy list of the top 50 PE firms by assets under management. The top three are Carlyle, Goldman Sachs, and Blackstone Group (see more names in chart below).

Image source: Towers Watson Global Alternative Survey)

The report shows that of the Top 100 alternative investment managers, real estate managers have the largest share of assets (35%, at USD 1.1 trillion) followed by private equity managers (22%, at USD 696 billion), hedge funds (21%, at USD 643 billion), private equity fund of funds (PEFoF) (9%, at USD 288 billion), fund of hedge funds (FoHF) (6%, at USD 187 billion), infrastructure (4%, at USD 119 billion) and commodities (3%, at USD 101 billion). The figure above shows the percentage of assets in each class.

The analysts at Towers Watson surmise that the ongoing global economic crisis has driven institutional investors towards more diversified investment portfolios. The trend benefits investment managers that offer significant alternative capabilities. The report points out that allocations to alternative assets now account for 20% of all pension fund assets globally, up from 5% 15 years ago. (Image source: Towers Watson Global Alternative Survey).

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LATEST QUARTER’S DATA SHOWS PE DEALMAKING INCREASING It is not just fundraising in venture capital that has increased in recent months; dealflow in the buyout sector is on an upward course too. According to Preqin's latest research, aggregated PE exit value grew by 65% compared to the first quarter 2012. The actual number of deals announced during Q2 2012 has remained virtually unchanged from the previous quarter, indicating this rise in both private equitybacked buyouts and exits has resulted from an increase in large-cap activity.

The number of buyout deals also increased. (See Figure 1) There were 705 private equity-backed buyout deals in Q2 2012, totaling USD 60.4 billion, which is a 37% increase in deal value from Q1 2012, and a 6% increase from the USD 56.8 billion in Q4 2011. That was the good news. The bad news is that despite the quarterly improvement, this year’s private equity-backed deal flow for the first half is still down 25% from the same period last year.

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Other Findings • European dealflow increased by 33% however, dealflow in the region remains significantly below the average value of deals per quarter during 2011.

• Dealflow in Asia and Rest of World climbed by 25% nearing the postLehman high achieved in Q1 2011.

• 44% of all deals in Q2 2012 were leveraged buyouts, with almost twothirds of all capital invested in the quarter attributed to this deal type.

• The industrials sector was once again the most prominent area of buyout activity in relation to number of deals, with 22% of all transactions in this sector. (See figure 6) • The consumer sector represented the largest industry in relation to the value of deals, representing 29% of deal value. Three of the 10 largest buyout deals announced occurred in the sector, including the largest of the quarter – the USD 2.69 billion recap of Party City Corporation by Thomas H Lee Partners.

DEALMAKING TREND: BEVERAGES AND BEER Instead of a deal of the week, this week, we did a quick round-up of beverage deals after reading Pitchbook’s analyst newsletter which listed the top dealmakers in the beverage industry. It is perhaps not that surprising that interest in beverage sector is high given the consolidation trend amongst the world’s largest foods and drinks companies, particularly the beer brewing industry. For example, this week Anheuser-Busch InBev acquired the 50 percent of Grupo Modelo (which brews the Corona brand) which it did not already own for USD 20.1 billion in cash, according to BW. Mergermarket says that a PE backed Korean brewery may seek overseas buyers, while Bloomberg recently published a report about M&A plans by EFES, and last but not least, one of the largest exit transactions from a PE point of view was one done by CVC. Three weeks ago Molson Coors reportedly closed the acquisition of Eastern European StarBev, for EUR 2.65 billion. The seller was CVC which acquired the former Anheuser Busch InBev unit for EUR 1.5 billion back in 2009.

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QUOTE OF THE WEEK: INDEXING FEAR AND GREED “In the first quarter of 2012, stocks staged their best run in decades, and the index showed pure greed.�

Who said it: CNNMoney's Fear & Greed index analyst In Context: The statement above is from a recent report on the Fear and Greed Index, which was launched back in May by CNNMoney. It is a new tool tracking how emotion is driving the stock market on a daily basis. Currently the index is in Neutral (as the graphic above shows), halfway between fear and greed style investing. The index uses seven indicators, for example stock price momentum, stock price strength (number of stocks hitting 52-week highs and lows on the New York Stock Exchange), volume of shares trading in stocks on the rise versus those declining, put/call ratios and several others.

Where we found it: CNNMoney's Fear and Greed Index

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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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