DealMarket Digest_Issue 94

DIGEST

94

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 94

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Consumer Internet Dominates Europe’s VC Ecosystem: Clipperton Other findings from the report BMC Software Acquired by PE Team

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China’s IPO Backlog to Spur M&A

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Quote of the Week: Outliers and Risking Stupid Investments

PE Fundraising Down by 17% : PEI Research

May 10, 2013

CONSUMER INTERNET DOMINATES EUROPE’S VC SMALL BUT THRIVING ECOSYSTEM: CLIPPERTON

Image source: Go4Venture

European tech startups have received USD 1.4bn so far this year (first quarter of 2013), which is roughly four times less than what was invested in the US, according to Clipperton Finance. The European ecosystem for innovative company financing is covered in a new research based newsletter from Clipperton, leveraging data provided from Digimind. Intel leads worldwide as the top investor.

Other findings from the report • Information technology dominates the European scene with two thirds of overall investment value in Q1 2013. Within IT, Consumer Internet is the number one investment segment in Europe; • UK is the top investment destination, followed by France and Germany at comparable levels; • The value per deal analysis shows some signs of polarization. There were only a few larger transactions of >USD 50 million • A good level of activity in Seed and in the USD 1 to 5 million range, while Series B and Series C rounds (USD 5 to 30 million ) are scarce; • Consumer Internet deals are growing in value, but exhibit a low median value per deal ($1.7m); • Cleantech start-ups seem to be experiencing a “severe financing crunch but Q1 2013 was much better than the end of 2012.

BMC SOFTWARE ACQUIRED BY PE TEAM

This week’s deal of the week looks to be the take private of BMC Software by a private equity group made up of Bain Capital and Golden Gate Capital Corp, according to an exclusive in Reuters. The deal is worth about USD 6.55 billion.

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CHINA’S IPO BACKLOG TO SPUR M&A There are more than 7,500 PE-backed companies in China, according Finance Asia many of which may now seek trade or M&A sales as a way to exit rather than try to list in China, Hong Kong and New York. The IPO flow reached a peak of around 350 transactions, but PE equity funds invested at triple that rate. As a result, there are now more than 7,500 unexited private equity deals in China.

Your DealMarket editor notes that Asia Pacific represents only 16.7% of global IPOs compared to 51.5% in the US according to Renaissance Capital. IPOs may start again, but it will never be like it was say insiders.

Foreign acquirers are likely to step in to acquire some of the ventures. Leverage will likely be involved. Some of those deals may involve trade sales to other PE funds, as a number of funds have recently raised capital to deploy in Asia and are well placed to take advantage of the opportunity, despite the challenges.

PE FUNDRAISING DOWN BY 17%: PEI RESEARCH

Image source: PEI

The top 50 PE fund managers have raised 17% less capital over the past five years, down to USD 586 billion, compared to a five year period starting in 2007, according to an article in FT. com reporting on a study of the 300 biggest companies by PEI. The image above shows the top 10 funds by size globally.

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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. The article says that in 2007 there were 18 megafunds alone, which raised more than USD 182 billion from investors. Other notable news is that Asia now equals Europe in terms of the number of private equity groups in the top 300, with 53 in each region. The US continues to dominate, however, with 171 of the largest 300 groups, including 18 of the top 20. Some PE firms have not returned to the fundraising trail including Lehman Brothers and ABN Amro, and London-based Candover Investments.

QUOTE OF THE WEEK: SELLERS MARKET “It’s in the nature of venture capital and start-up investing that there are always stupid investments. The problem is that you never know which ones are which. I get these things as wrong as anybody else. But if you’re afraid to make any investments that might be stupid, you’ll never get any big winners—because the big outlier winners tend to look crazy at the start.”

Who said it: Marc Andreesen, co-founder and general partner of Andreessen Horowitz.

In Context: In an interview with an editor of Harvard Business Review, Marc Andreessen talks about the complex challenges in current technology investments, the hazards of missing a good investment, and how large tech companies sometimes initiate takeover talks just to “screw up” the business of a startup company for 18 months. The tech entrepreneur turned venture capitalist at Andreessen Horowitz, a Menlo Park venture capital fund, has lots more to say on preparing for IPOs, handling compliance, lean startups, cloud computing, and how software is changing almost industries far beyond what was foreseen as recently as a decade ago. (Image Source: Forbes Video Wochit Tech) Where we found it: HBR

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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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