DealMarket Digest_Issue 76

DIGEST

76

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 76

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Big Bang Year-End for European VC Investment • Go4Ventures’ Latest Analysis

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Perception, PR and Italy’s PE Market • Unquote Looks at Italy

European Buyout Funds Find the Exits Cleantech Predictions for 2013 • Kachan Consulting Looks Ahead

Two More Highly Valued Internet Startups Secure Funding US Online Brokerage Targeted by Buyout Funds Quote of the Week: India PE Backslides

December 07, 2012

BIG BANG YEAR-END FOR EUROPEAN VC INVESTMENT

The volume of European venture financing climbed for the third month in a row, putting the total for 2012 ahead of 2011 by a good 25%, according to the latest Go4Venture newsletter. Despite a worrying flat-lining in VC exits, October proved to be a record month for investments, says Go4Venture. There were seven deals of greater than EUR 20 million.

The current drivers • VCs are investing in later and larger rounds in order to achieve the kind of absolute returns that will enable them to stay relevant in the eyes of increasingly cautious LPs • US-based VCs are providing the financial firepower for large and growth stage VC transactions in Europe, namely Accel Partners, Canaan Partners, Redpoint Ventures, Stripes Group. Many of the newly funded companies were initially funded by European-based funds such as A Plus Finance, Balderton, CM-CIC, Creathor Venture, Eden Ventures, Idinvest and Index Ventures.

• Growth equity financing is the hot trend in Europe rather than early stage venture

PERCEPTION, PR AND ITALY’S PE MARKET A report on the Italian PE market was published by unquote this week suggesting the region has a public relations problem. Investors are apparently concerned about investing in Italy, despite the country's relatively good long-term track record of returns.

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Image source: Tourism in Italy website

Much of the uncertainty is perception, argues one local industry insider. Italy tends to get grouped together with southern European neighbors such as Spain or even Greece. But the economies are not comparable, say industry insiders quoted in the report. Its primary surplus is one of the highest in Europe and the country has a “reasonably stable banking system” that has not needed outside help. High public debt is the nation’s real problem.

As a result of the public perception, fund managers in Italy have to improve communication, transparency and professionalism, said the report. Perhaps the PE industry should take a look at how appealing the Italian tourism board makes travelling, winemaking tours, dining, and hiking.

EUROPEAN BUYOUT FUNDS FIND THE EXITS European VC may be having trouble finding the exit as reported by Go4Ventures above, but PE funds are on a roll. This week Charterhouse and CVC started the process of selling their energy-metering firm Ista, in what reporters are saying may be one of the biggest private equity transactions in Germany next year with a price tag of up to about EUR 3 billion, according to Reuters. Elsewhere, a single issue of PEI daily newsletter, reported several mid-market PE exits, including Avista Capital Partners sale of Anthony International for USD 603 million, rumored to be a 2.1x return multiple. Dunedin sold one of its portfolio firms for a 3x multiple, as while High Road also made an exit, as did EQT sold Gambro. Norwest also exited an agricultural processing company for USD 1 billion, according to PEI.

CLEANTECH PREDICTIONS FOR 2013 December is always the month when consultants, bloggers, and magazine editors publish their predictions for the upcoming New Year. This week cleantech consulting firm Kachan & Co. offered its predictions about cleantech venture investment. It says to expect investment to decline even further than it did. This year’s estimated 680 billion is down by more than 25% from 2010 and 2011 volumes.

The consultancy also said there are some long-term risks coming in solar, wind, electric vehicles and elsewhere. At issue is the lack of cost-efficient grid-scale power storage technology which is essential to smooth out intermittent power production (due to weather, seasons etc.) inherent in wind and solar power generation.

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Other predictions include a return of the combustion engine due to innovations which will put electric vehicle markets at risk, and a bold forecast for progress in clean coal tech. All in all there are thirteen predictions for cleantech in 2013 from Kachan.

Image source: Kachan and Co.

TWO MORE HIGHLY VALUED INTERNET STARTUPS SECURE FUNDING This week two large rounds were announced for Internet platform providers, specifically Evernote and 1stdibs (first dibs). Evernote, which runs a notes-recording and publishing platform, confirmed that it raised USD 70 million in a deal that valued the web-based notes company at a billion dollars, according to TechCrunch. The Series D round for the software company is meant to fund international expansion that will include China, some M&A activity, and the development of business-oriented accounts, as well as better technical and customers support features.

Elsewhere, the high-end antiques marketplace 1stdibs raised USD 100 million this year from Benchmark Capital, Spark Capital, and Index Ventures, according to PE Hub. The investors hope that 1stdibs can increase profits by improving the underlying technology and business processes. Today the platform connects buyers and sellers and they transact offline, and handle things like logistics themselves. The founders say the plan to add support for logistics and payments and other services for the high end market niche that the 11 year old web service company has successfully established.

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US ONLINE BROKERAGE TARGETED BY BUYOUT FUNDS This week’s deal of the week is the bid to acquire Knight Capital Group. The USD 1.1 billion buyout has attracted at least two buyers, both are private equity-backed, namely Getco, which is backed by General Atlantic Partners, and Virtu, a rival trading company backed by Silver Lake Partners and now Cerberus Capital Management , according to press reports.

QUOTE OF THE WEEK: INDIA PE BACKSLIDES "There are too many India-focused private equity funds. It is like a cottage industry. There will be a shake-up�

Who said it: Sameer Sain, co-founder of Everstone Capital, an India-focused private equity firm with assets worth over USD 1.6 billion In Context: Sain was quoted in an article reporting declining LP allocations to Indian PE funds and a fall in the number of private equity investments in the region this year. Activity was down by 25% and India now lags compared to Brazil and Russia. Indian private equity investment deals are valued at USD 3.98 billion in the second part of the year, down from USD 5.2 billion in the first half of the year. Three reasons were given by Sain for the current trend in India - negative headlines on local political and regulatory situation, unimpressive return on investments and a precarious global economy.

Where we found it: India 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.

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Editor: Valerie Thompson, Zurich

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