DealMarket Digest_Issue 93

DIGEST

93

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 93

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Logistics Company’s Billion Dollar Buyout to Attract PE Google and Intel Dominate Corporate VC in 2013 Emerging Markets Dealflow Update

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Why Big Buyouts Lack Luster: Analyst‘s View Record VC Activity in Europe; Latest Figures from Go4Venture

Quote of the Week: Sellers’ Market

May 2, 2013

LOGISTICS COMPANY’S BILLION DOLLAR BUYOUT ATTRACT TO PE This week’s deal of the week looks to be a buyout of Syncreon Logistics for about USD 1 billion, according to Bloomberg citing anonymous sources. The report says that PE bidders are the likeliest buyers, though logistics firms including Deutsche Post AG may also take a look. Syncreon handles logitstics for the likes of General Motors and Dell Inc. It is based in Michigan and is active in 25 countries with about 12,000 employees, according to a November press release, quoted in the article.

GOOGLE AND INTEL DOMINATE COPORATE VC IN 2013

Image source: Global Corporate Venturing

A new report from Global Corporate Venturing says that Intel and Google are currently the most active investors in startups and technology companies. German-based firms and financial institution-backed corporate venturing units were also busy.

The first quarter also saw 222 investments in corporate venturing-backed companies worth USD 4 billion in the first quarter. This compared with 231 investments in the fourth quarter of 2012 worth USD 3.6 billion, and 249 investments worth USD 5.2 billion in the first quarter of 2012. On the exit front: there were 22 exits worth USD 1.4 billion which was a drop compared with 34 exits worth USD 6.3 billion in the fourth quarter of 2012.

RECORD VC ACTIVITY IN EUROPE, LATEST FIGURES FROM GO4VENTURE Late stage investment drove European VC to a record level this month in terms of number and value, according to the latest research from Go4Venture.

By contrast the M&A market as a whole is fairly lifeless, but there may be a few glimmers of hope as strategic buyers snap up successful startups.

Image source: Go4Venture

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Key trends: • Germany is Europe's largest investment destination, and Russia is now third • More US investors targeting European ventures (6 out of 16 large transactions) • M&A exits slow in Europe, part of global trend for technology companies

WHY BIG BUYOUTS LACK LUSTER ANALYST‘S VIEW

Despite some high-profile mega-buyouts announced this year, the private equity industry's capacity for leveraged buyouts continues to decline. Some reasons for this trend are provided by SoberLook blog.

• Difficulty finding the exit - reducing PE fund capacity for redeployment in new funds or in some cases for recycling in existing funds.

• Fundraising slowdown - even established managers have increasingly difficult time raising the same amounts of capital they did in earlier funds. Large institutional investors have been cautious on private equity due to liquidity constraints they encountered in 2008 as well as poor return expectations for the whole sector.

• Pensions are shifting from defined benefits to defined contribution pensions - slower growth in defined benefits accounts limits the overall demand for private equity, says SoberLook, making fundraising for LBO shops enormously challenging in an already competitive environment.

• Co-investment trend squeezes mega-fund managers- Major investors are less attracted to mega-fund and if they do invest in large LBO funds, they often demand to directly co-invest with these funds on buyout deals, says SoberLook. Some years back when deals were too large for a single fund, LBO firms would call each other to club on transactions. Now they call their investors to present co-investment opportunities, but those investors have limits to how many deals they can do.

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EMERGING MARKETS DEALFLOW UPDATE

Investment activity in terms of the number of deals done increased in the first quarter of the year but deal size shrunk, according to the latest figures from the Emerging Market PE Association (EMPEA). There were 178 deals completed raising a total of USD 3.2 billion through 31 March, compared to 227 deals and USD 4.9 billion in the first quarter of last year. There was also a huge dip in fundraising, according to EMPEA, 25 funds raised USD 6.0 billion through 31 March, compared to 53 funds that raised USD 13.4 billion in the first quarter of 2012.

QUOTE OF THE WEEK: SELLERS MARKET “Over the last 15 months we've been a net seller," Black said. "We're selling everything in our portfolio that's not nailed down, and if it is nailed down, we're refinancing it. It's almost biblical. There's a time to reap and a time to sow. We’re harvesting.“ Who said it: Leon Black who heads up PE industry giant Apollo Group In Context: In a report from the recent Milken Global Conference, Black said this is a great time to be selling companies and equities.

He expected credit and equity markets to keep rising as Federal Reserve policy holds interest rates very low. The concern about overvaluations could be the reason why, despite the availability of relatively cheap money, there has been so little M&A activity this year.

Where we found it: CNBC

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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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