DealMarket Digest_Issue86

DIGEST

86

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 86

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Mutual Attraction: Family Offices and PE Fundraisers Survey Finds Investor Appetite for Big Buyout Funds • Preqin Research

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PE Investors Eye Ista for $3.9 bn Doubts Linger About IPO as Exit in Europe

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Investments on the Rise in Latin America Quote of the Week: Sales Booster

March 08, 2013

MUTUAL ATTRACTION: FAMILY OFFICES AND PE FUNDRAISERS Family Office and endowments plans are ranked as the top to most active PE investors, reports Financial News. Typically family offices account for only 5% of the PE industry’s total fundraising universe with an average of 24.5% of their assets under management committed to the asset class as of June 2012. This is nearly double that of endowment plans, according to data provider Preqin.

The importance of family offices to PE fundraising has been growing. According to a report by professional services firm Grant Thornton, a large proportion of buyout fund managers expect to see family offices more heavily represented in their next funds as uncertainty continues in the core institutional investor market. This is expected to be particularly strong in Europe. Some of the larger family offices have teams of 10 to 15 people dedicated to private equity and invest up to 70% of their net worth in the asset class, according to advisers. These include family offices such as Brenninkmeijer and Souter. No other names were disclosed in the report because “it’s still quite a private club area of capital raising”.

SURVEY FINDS INVESTOR APPETITE FOR BIG BUYOUT FUNDS

Preqin’s latest survey of over 100 limited partners from their institutional investor database reveals that 23% are targeting large to mega buyout vehicles in 2013, up from 9% in 2010. Small to mid‐ market buyout funds continue to be viewed by a significant proportion of investors as presenting the best investment opportunities, with 51% of respondents stating that they will be seeking to commit to this fund type in 2013.

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Nineteen percent of investors see large to mega buyouts as presenting the best investment opportunities, compared to 15% in December 2011.

Key findings • An increasing proportion of LPs are satisfied with their private equity returns, with the vast majority (85%) of investors interviewed by Preqin stating that their private equity investments have met or exceeded their expectations.

• Asia and Rest of World‐based investors were the most active, with 67% of the LPs saying that they made making new commitments, as the graph above illustrates.

• 24% of investors plan to commit more capital to private equity funds in 2013 than in 2012, with a further 10% planning to return to the asset class after not making any new commitments in 2012.

• 53% of LPs expect to make their next private equity commitment in 2013.

• 67% of investors feel that LP and GP interests are aligned, compared to 47% in December 2011.

• 49% of LPs feel that Asia is the most attractive region for investment within emerging markets.

• 41% of LPs are looking to increase the number of GP relationships in their portfolios over the next two years.

PE INVESTORS EYE ISTA FOR $3.9 BN This week’s deal of the week would be an exit for Charterhouse and CVC who are seeking bids starting at USD 3.9 billion for energy‐metering firm Ista. Reuters reports that potential Ista bidders include Apax, Bain, BC Partners, Blackstone, Hellman & Friedman, KKR and Ontario Teachers' Pension Plan, according to unnamed sources.

DOUBTS LINGER ABOUT IPO AS EXIT IN EUROPE In an article with several quotes from bankers and industry insiders, unquote reports that institutional investors are reluctant to pay the high multiples for an IPO that is backed by private equity. There are other more attractive exit opportunities than the listed capital markets. One industry insider said that there may be some tech IPOs next year as a result of PE buy‐and‐build strategies. At the moment tech IPOs are nowhere near as frequent as they were before the financial crisis of 2008, although there has been a slight improvement of late.

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INVESTMENTS ON THE RISE IN LATIN AMERICA Dealbook reports that PE and VC firms committed USD 7.9 billion last year to invest in Latin America, up by 21 percent over the previous year, according to the Latin American Private Equity and Venture Capital Association. The number of investments in 2012 grew to 237, which is a 37 percent increase over 2011. Consumer and retail are the hot sectors. According to LAVCA, the region still has a way to go to catch up to the UK and Israel, but the trend is positive. (see graphic above) Image source: Lavca

Brazil continues to be the biggest magnet for capital, region in receiving 72 percent of the total amount invested and 62 percent of the number of deals. Mexico had no appreciable increase in number of deals but total dollars committed grew by 50 percent.

QUOTE OF THE WEEK: SALES BOOSTER “We weren’t planning on doing an A round before this summer, but we saw some great momentum in the fourth quarter of 2012, and decided to add a little rocket fuel.”

Who said it: Jason Wesbecher CEO of Handshakez in an interview in AllThingsDigital In Context: The CEO of Handshakez, a salesforce productivity web software startup, just raised a first round of venture capital to finance the growth of the business. Its software attracted VC because of its traction in the market. it has already signed up several big names in IT, such as Corel and WinZip, while eference customers have noted remarkable results from using the application, which “moves interaction between customers and businesses out of the normal channels like email and into a private collaborative space on the Web”, such as a 45% increase in deal size and a reduction of data entry time. Every interaction is measured and assigned a value that gets reinterpreted as a “temperature.” The values are then shared within Salesforce.com and create an additional signal on the status of the customer relationship. It is an enhancement to lead‐scoring and solves reporting issues.

People on sales teams might underreport the nature of their relationship with the customer, or they might make it look better than it is.

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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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