DealMarket Digest Issue_90

DIGEST

90

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 90

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Global IPO Trends

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Globalizing PE: Chinese Fund Invests in Detroit Electric Car Company

PE Fundraising Trends in First Quarter: Preqin

PE Investors Target Scandlines in a $1.8 billion Buyout Family Offices Look To Increase PE Holdings, Including Going Direct

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Quote of the Week: Career Choices in PE

April 12, 2013

GLOBAL IPO TRENDS New research from Renaissance Capital, an investment advisory firm, reports an upsurge in IPO filings this past quarter. Twenty companies filed to go public in the past three weeks, eight of which published their prospectuses the week ending April 5, according to an article in CFO. The numbers reflect an increase in IPO activity, at least in the pipeline. It was the highest number of prospectus filings since the week of March 19, 2012.

Data from PwC, cited in the CFO article confirms the trend. As has been said elsewhere in earlier editions of this newsletter, there is pent-up demand and supply for IPOs. According to Renaissance Capital external pressures and economic crisis had “virtually froze� the IPO market from the between 2009 and 2011.

Image source: Pension Pulse Blog Image source: Renaissance Capital

The risks in banking and finance have not been fully resolved but they are largely known, which is having a positive effect on the IPO sentiment, it said. The heat map at the top of the infographic shows that the US has raised the most proceeds from IPOs this year.

PE FUNDRAISING TRENDS IN FIRST QUARTER: PREQIN

Image source: Prequin

More PE funds are on the fundraising trail than the same period last year. As of April 2013, there are 1,914 private equity funds on the road aiming to raise USD 797 billion, an increase compared to January 2012 when 1,845 funds were seeking USD 758 billion, according to the latest research from Preqin.

The outlook for continued robust fundraising looks good for the rest of the year, according to the report. The majority of institutional investors still remain positive towards private

equity, says the report, with 76% of investors planning to commit either the same amount of capital or more to private equity funds in 2013 than 2012. A further 10% expect to return to the asset class in 2013, having made no new commitments in 2012, says Preqin. Buyout funds continue to dominate as the favorite for PE capital. Distressed private equity fundraising decreased significantly in Q1 2013, with eight funds closed raising an aggregate USD 1.6bn, compared to 13 funds that raised USD14.2bn in Q1 2012.

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CHINESE FUND INVESTS IN DETROIT ELECTRIC CAR COMPANY Detroit Electric, a US-based 100+ year old manufacturer of electric vehicles, has raised capital from Hong Kong private equity firm, according to Dow Jones LBO Wires. This is the latest example of how PE is going global.

The report says Detroit Electric is the first deal by the Associates, founded by a former Carlyle Group executive. The fund aims to make lifestyle and socially responsible investments. The company's first commercial model is an upscale one.

It is a two-seater sports car that retails for USD 135,000.

Image source: Detroit Electric

PE INVESTORS TARGET SCANDLINES IN A $ 1.8 BILLION BUYOUT Reuters reports that ferry group Scandlines is attracting takeover bids from PE funds. It is a USD 1.8 billion deal, making it this week’s deal of the week. The company is currently owned by PE investors and those that may have shown interest in Scandlines from them include Apollo, Axa Private Equity and Nordic Capital. However, it is not clear if they were among the bidders, said the report.

FAMILY OFFICES LOOK TO INCREASE PE HOLDINGS, INCLUDING GOING DIRECT The majority of family offices are convinced of the industry's merits, according to a recent poll conducted at an industry event in March, according to a report in unquote. The poll was conducted by Investec Family Office Intelligence. It revealed that nearly 60% are considering investing in private equity. This is inline with another survey we covered earlier in the DealMarket Digest.

The unquote survey found that only 54% plan to invest through a fund manager and the majority 59.5% has plans to back businesses directly. Not all family offices are set up for direct deals, says the report, highlighting the need for a variety of skills to do the due diligence, make the investments and monitor them. Direct deals are attractive because they allow the family office to retain control over how capital is allocated, said experts in the report. If the family office can see dealflow and make decisions on a case-by-.

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case basis, it creates a choice about whether or not to invest in funds, with management fees and lockups, or directly in viable in companies. The report says that family offices account for roughly 2% of investors in private equity, but roughly 4% of private equity secondaries sales

QUOTE OF THE WEEK: CAREER CHOICES IN PE “In 2012, financial professionals were much better off, on average, in terms of compensation when working for a private equity firm than for a venture capital firm… At the principal level, an individual working in private equity could expect to earn approximately USD 450,000 a year, while his peer in venture capital would expect, on average, approximately USD 210,000 per year in total compensation.”

Who said it: Brendan Kennedy, general partner Privateer Holdings

In context: Kennedy was quoted in an article about his recently founded private equity firm that is targeting investments in the legalized marijuana trade in the US market. He estimates the market for cannabis to be USD 50 billion. There are huge hurdles to overcome with the legal of cannabis status in the US, according to the article. Colorado and Washington have legalized possession. Eighteen states allow medical marijuana even though the federal government still considers it illegal. (Image source: Privateer Holdings). Kennedy sees lots of potential in the professionalization of the trade in the coming years.

Where we found it: Upstart Business Journal

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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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