DealMarket Digest_Issue 32

DIGEST

83

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 83

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Corporate Venturing Grows in Importance Cleantech Predictions 2013 • BNEF’s Views

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Global Warming in Secondaries Market Taking a Little Private Time • Privcap’s M&A Trends in Technology in 2013

A Ten Billion Pound Telecoms Buyout in the UK?

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Highs and Lows for PE in Emerging Markets

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Quote of the Week: The Wine Industry Indicator

February 15, 2013

CORPORATE VENTURING GROWS IN IMPORTANCE In venture capital circles it appears that corporate venture capital investors are gaining power and effectiveness. We reported on it last year. And the word now is that they are more desirable to include in club deals than ever before and to reduce risk and share capital requirements. Nine of the 10 possible IPOs this year identified by news provider CNN have corporate venturing backing, according to Global Corporate Venturing. Intel Capital is one of the groups that has emerged as a leader in this segment. Here are some key datapoints from its latest newsletter, received by DealMarket Digest’s editor.

• • • • •

USD 352 million invested in 150 deals 64 companies joined the Intel Capital portfolio 57% of investments made outside North America 35 companies exited the portfolio: 7 IPOs, 28 M&As 3,500+ engagements between portfolio companies and Global 2000 customers

Since 1991 Intel Capital’s track record • USD 0.8 billion invested in 1,276 companies in 54 countries • 201 IPOs and 317 M&As

CLEANTECH PREDICTIONS 2013 Clean energy investment fell 11% in 2012, to USD 268.7 billion, the biggest year‐on‐year setback since Bloomberg New Energy Finance has been tracking the figures (starting in 2004) but it predicts that the main influences that caused that reverse will unwind during 2013, leading to improved investment figures for 2013.

BNEF 2013 Predictions of Changes Impacting Clean Energy 1. Recovery in Clean Energy Investment 2. Shale Gas Price to Change 3. Financial Innovation Grows From a Trickle to… a Bigger Trickle 4. Europe Focuses On Energy Market Reforms 5. Technology, Environment ad Development In The Driving Seat 6. China, Africa and Latin America To Drive Solar Growth 7. Installations Becalmed but Financing Picks Up for Wind 8. Boring Bioenergies Make Money 9. Electric Vehicle Sales Show Sparky Acceleration 10. Fuel Cells – A Ray of Light After Decades of Smoke

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GLOBAL WARMING IN SECONDARIES MARKET There is a good article in Institutional Investor this week on secondary deals, describing how the growing market has developed and why there are more of such deals taking place these days. Secondary transactions, the buying and selling of pre‐existing investor commitments to private equity and other alternative investment funds, have regional variations and trends in pricing which are topics touched on in the article. There a several data points to take away, for example, Pantheon Ventures says that the global market is now estimated to be about USD25 billion a year, up from USD2 billion in 2001. Ten European funds raised USD11 billion last year to buy secondary stakes. And yet experts quoted in the feature article say that there are still more deals in the market than there is capital.

TAKING A LITTLE PRIVATE TIME Activists will be competing with PE deal making professionals more this year than last years in several categories of the technology M&A market, says Jeffrey Liu of Ernst &Young in an interview on Privcap. He says a lot more about trends in technology M&A but we know how busy you are so here are some of the key points that he expressed.

Tech M&A Trends in 2013

Image source: Privcap

• Unrepatriated cash held abroad by large profitable tech companies will drive foreign acquisitions • Take privates in the mid‐cap with low performing stocks and thin margins • Margin crunch and concentration on the core will lead tech companies of various sizes into divestment of non‐performing consolidated divisions, improving supply of deals • Take privates targeting cash‐rich mature companies will be a trend. “They just may need a little bit of private time to get their products, divisions, margins in order,” said Liu. • Need to scale drives consolidation in companies at the top end of the market • Internet hotter than ever with cloud, data and analytics, mobility creating growth.

A TEN BILLION POUND TELECOMS BUYOUT IN THE UK ?

This week’s deal of the week is the rumor that private equity firms are considering a GBP 10 billion pound buyout of the UK's biggest mobile operator EE, reports Reuters.

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EE, formerly known as Everything Everywhere, is the biggest mobile operator in the highly competitive British market with more than 27 million customers. The PE firms mentioned include Apax, KKR, CVC, and Blackstone. India has a wealth of intellectual capital in biotechnology and healthcare to be developed, and its government is aiming to create a framework to develop it, according to The Hindu Business Line, which could be good news for private equity investors. As a reference, the article points out that Singapore’s Tamasek doubled its assets under management by investing in high tech industries.

India could emulate such strategy for the kind of investment involved in growing it biotech sector into a USD 100 billion one by 2025.

DELL HIGHS AND LOWS FOR PE IN EMERGING MARKETS

Image source: beyond brics

Private equity in emerging markets has seen its share of global private equity fundraising quadruple from 5 per cent in 2003 to 20 per cent last year, reports beyond Brics. In its Chart of the week, FT looks at the highs and lows of private equity across the Brics and sub‐Saharan Africa over the past decade, courtesy of data compiled by the Emerging Markets Private Equity Association. Funds raised to invest in these regions went from a few hundred million dollars in 2003, to many billions by 2007. China funds have raised over USD 14 billion in 2008.

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Africa and Russia orientated private equity funds are smaller, but their growth was “still dramatic – from next to nothing to almost two billion in half a decade”, says the report. All fell together post‐2008, but China and Brazil stand out with strong rebounds – in 2011 they both managed to smash pre‐crisis fundraising records.

QUOTE OF THE WEEK: GOOGLE’S LARRY PAGE ON 10X “It’s another good‐news, bad‐news year in fine wine. While we are quite optimistic about the future prospects in the US wine business, a combination of events will continue to hold back robust growth in 2013.”

Who said it: Rob McMillan, founder of Silicon Valley Bank’s Wine Division and author of the report the SVB Wine Report.

In Context: Wine sales forecasts are often a good indicator of growth and prosperity in an economy, just like low apartment vacancy rates, and rising housing prices indicate a booming economy. It is the kind of information that is useful for private equity investors, particularly those that invest in consumer good sectors and that is why we included it here, not to mention that some of our readers might be interested in buying wine when prices are low. Silicon Valley Bank, which provides banking services to the wine industry, released its Annual State of the Wine Industry Report this week to highlight trends and issues facing the US wine industry. The SVB report says that economic uncertainty, slowing domestic GDP, lack of economic leadership worldwide, aging [Baby] Boomers, not to mention the quantity of the 2012 harvest which will slow higher growths for wine market participants. It says to look out for improved consumer demand only after improved hiring and better housing markets figures appear. It concludes that the first half of 2013 will prove more difficult than most expect, but the back half of the year should see improvement.

Where we found it: SVB

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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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