DealMarket Digest Issue_91

DIGEST

91

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 91

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New Study: What Happens When Deals are Leaked Investment in Clean Energy Trends

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Good News for US Startups: Angel Investment Stabilizes

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PE to Push European M&A Deal making in 2013

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Candle Company Attracts Buyout Offers of up to USD 2 billion Quote of the Week: Personal Flight

April 19, 2013

NEW STUDY: WHAT HAPPENS WHEN DEALS ARE LEAKED In the world of M&A it is a fact that information about deals often gets leaked to the press. A new study shows that leaded deals take longer and are less likely to complete. According to a report by M&A Research Centre at Cass Business School in London, and Remark while the number of M&A deals that leak has declined dramatically over the last two years, the risks from leaking are rising, as well as regulatory pressures. Researchers examined more than 4,000 transactions between 2004 and 2012, as well as interviewed M&A practitioners in Europe and the US. Key Findings • Most deal leaks are deliberate, with leaking by sellers responsible for driving higher bid premiums and leaking by bidders or third parties done to terminate bid discussions.

• The number of deal leaks has been falling.

• There has been a drop in leaked deals from a peak of 11% during 2008-2009, to 7% during 2010-2012.

• The study found that on average leaked deals took over a week longer to close than those that did not leak. In addition, in the last two years, leaked deals were 9% less likely to actually complete than deals that were not leaked.

• Leaking news is much more common in EMEA, particularly the UK, than in the US, though the gap is shrinking fast.

• Leaked deals that actually close are more likely to be good deals for both seller and acquirer

INVESTMENT IN CLEAN ENERGY TRENDS Investment worldwide in the first quarter of 2013 was down 22% on a year earlier, due to a downturn in large wind and solar project financings, according to Bloomberg New Energy Finance (BNEF). The figure is still a stunning USD 40.6 billion. Last year’s total investment was also down from a peak in 2011. Investment dropped by 11% to USD 269 billion for the year. The drop in the last eighteen months comes as a result of the ending of a number of significant support programs launched by governments in the aftermath of the financial crisis come. Also contributing to the fall is the plummeting cost of clean energy technology.

Activity has been high in terms of how many megawatts of capacity were installed, but not so much in dollar terms. BNEF warns that for a reduction greenhouse gases, an investment level would have to double to reach the goals set for 2020. It also said that the first quarter is typically lower and not necessarily an indication of how the activity will proceed the rest of the year.

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GOOD NEWS FOR US STARTUPS: ANGEL INVESTMENT STABILIZES

Image source: Helo Report Infographic

The latest Halo report says angel investing for the year was stable and comparable with prior years. Pre money valuations for early-stage companies remained steady at USD 2.5 million and round sizes were relatively consistent. The Halo report is from The Angel Resource Institute, Silicon Valley Bank and CB Insights and is based on a survey of US-based angel group investment activity.

Other findings • The sectors and geographies getting funding are shifting - most notably, mobile and telecom companies are gaining share of angel investment deals and dollars • Healthcare companies are losing share of angel investments.

• Companies in the Northwest and the Southwest US are gaining ground on the number of deals and total investments they receive over companies in California and New England.

• Median angel round sizes hit a five quarter high at USD 690,000 in Q4 2012 for the second quarter in a row. When angel groups co-invest with other types of investors, the median round size is higher at USD 1.5 million.

The trends in valuations, growth in investment size, and wide geographic activity among angel investors is evidence that angels are a reliable and a critical part of growing the next generation of great new companies, concludes the report

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PE TO PUSH EUROPEAN M&A DEAL MAKING IN 2013 A new survey by Roland Berger on M&A sentiment in 2013 says that just over half of those surveyed are slightly upbeat about the development of private equity-driven M&A this year.

The report says that a substantial improvement is expected in the availability of attractive acquisition targets. The situation in the financial markets and the development of the euro crisis are expected to improve slightly.

Some 52% of those surveyed expect to see an increase in the number of transactions. Scandinavia and Germany are seen as the leading countries for growth of private equity-driven M&A activity in 2013. Poland, the UK and CEE should grow slightly as well, while declines are expected in Iberia, Italy, France and Greece The sectors in favor are Pharma/Healthcare and Consumer Goods/Retail. Energy/Utilities as well as Technology & Media sectors are ranked second. At the bottom of the list are Automotive and Building/Construction. The mid-cap segment is forecast to dominate with a whopping 91% of the respondents expecting most deals businesses with values of less than EUR 250 million.

PE TO PUSH EUROPEAN M&A DEAL MAKING IN 2013 This week’s deal of the week is a USD 2 billion buyout for Yankee Candle. The US company has attracted offers from several private equity firms, according to unnamed sources, according to an exclusive by Reuters.

Some of the bidders are said to be Bain Capital, Advent International., CVC Capital Partners., Clayton, Dubilier & Rice and Ares Management. The company is owned by Madison Dearborn Partners, another buyout firm, which acquired Yankee Candle in 2006 for USD 1.6 billion Image source: Yankee Candle website.

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THE TEN LARGEST PE COMPANIES CONTROL HALF PE AUM The top 10 private equity managers control more than half of USD 959 billion in PE assets under management by the 50 largest managers, according to a report in PI Online. The three largest, Oaktree Capital Management, KKR and Bain Capital control almost a quarter of that total. Most of the managers in the top 10 are household names, and half of them are public. Information for the report came directly from the firms, their filings with the Securities and Exchange Commission and their websites. There is also data about exits and new fundraising by the top 50 PE companies worldwide. Interestingly, the researchers found that size does not matter when it comes to fundraising. Performance is what matters.

QUOTE OF THE WEEK: PERSONAL FLIGHT “The first footage I saw of the Martin Jetpack was interesting to me as an aviator, but it was clearly limited in its commercial application.

Recently, the company achieved a number of flight technology breakthroughs with their latest generation Jetpack and that’s when I really sat up and took notice. The team have created an aircraft that is fast, agile, and stable with a huge number of applications across a number of sectors.”

Who said it: newly appointed CEO of Martin Jetpack In context: The quote appeared in a press release this week. In a local news report the venture-capital backed New Zealand based Martin Aircraft Company was said to be mulling an IPO. It is about to release the First Responder Jetpack, a personal flight developed for police, search and rescue and other government uses. A slightly modified version, the Personal Martin Jetpack, would be released in 2015.

The company is raising funds of ahead of a potential IPO this year. The public offer is to fund the establishment of manufacturing operations and sales and marketing staff around the world.

It is not the only jetpack company on the market. Jetlev’s water-propelled Jetpack has also been getting a lot of press lately. It looks like personal flight is not only the stuff of cartoons and Hollywood movies Where we found it: Martin Jetpack website

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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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