DealMarket Digest_Issue_88

DIGEST

88

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 88

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PE Deal Value Soars Boosted by Two Blockbuster Transactions • Zephyr

Israel: Private Equity Deals Down 10% In 2012

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Family Offices Positive on PE

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Sequoia Tops VC IPO Pipeline Ranking by CB Insights

• Somerset Capital Survey

European Venture Philanthropy and Social Investment 2011/2012: The EVPA Survey

Quote of the Week: NFL Goes PE

March 22, 2013

PE DEAL VALUE SOARS BOOSTED BY TWO BLOCKBUSTER TRANSACTIONS The value of global private equity transactions more than tripled in February 2013 to a new year‐high of USD 60.4 billion, up from USD 18 billion in January 2013, according to Zephyr’s latest numbers and analysis. The value is also more than double the USD 22.7 billion recorded for February 2012. The total value of PE transactions was boosted by two blockbuster deals, HJ Heinz Company and Dell Inc., which combined are worth USD 52.4 billion, or 87 per cent of the month’s total.

Image source: Zephyr M&A portal

Important to note, says Zephyr, is that despite the improvement in monetary terms, volume failed to follow suit, declining 40 per cent to a new 12 month‐low of just 202 deals from 337 in January. Volume was also down 27 per cent from February 2012 when 278 private equity transactions were signed off.

ISRAEL: PRIVATE EQUITY DEALS DOWN 10% IN 2012

Investment in Israel private equity sector decreased in 2012, falling to USD2.6 billion from the USD 2.9 billion invested in 63 deals in 2011, according to are report in Globes. The survey covered 82 private equity funds. Investment in high tech companies in 2012 came in at USD 1.9 billion. A buyout of oil and gas exploration software developer Paradigm Geophysical Inc. by Apax Partners and JMI Equity for USD 1 billion accounted for 39% of total private investments in 2012, which pushed the annual total upwards.

The average deal size rose to USD56.2 million in 2012 from USD 45.6 million in 2011.

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FAMILY OFFICES POSITIVE ON PE In January 2013 Somerset Capital conducted its third annual survey of the family office investors in its network in order to determine their investment plans for the year ahead. A total of 51 family offices participated in the survey, of which 75% were single family offices (SFO). The investors in question were predominantly located in the UK and Europe.

• Around half of the participants, over the course of the next twelve months, plan to increase their allocations to real assets (50%), equities (48%), and private equity (46%).

• A similar number plan to decrease their allocations to bonds (52%), and cash (43%).

• Over the next two years, a majority of the investors surveyed stated an interest in continuing to back existing managers through re‐ups, new managers, and to invest in co‐investments and direct investments. 39% stated an interest in secondary transactions.

Image source: Somerset Capital

• The participants demonstrated a strong preference for growth equity transactions, with 67% showing an interest, compared with 60% who were interested in mid‐market buyouts, 48% in secondary, 44% in turnaround and 37% in venture capital. Only 15% showed interest in large buyouts. Geographically, 83% showed an interest in private equity investments in Europe, versus 60% in the US and 40% in emerging markets, although it should be borne in mind that for the most of these investors Europe is the home market.

• 19% of investors had a preference for control deals, versus 26% non‐control, with 56% showing no preference.

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EUROPEAN VENTURE PHILANTHROPY AND SOCIAL INVESTMENT 2011/2012: THE EVPA SURVEY

Image source: EVPA

This month the EVPA released its second annual survey of European venture philanthropy (VP) and social investment. The survey collected data from 61 VPOs from July to September 2012. Who knew that there were more than five dozen VP organizations in Europe alone? We didn’t and so we read and summarized the survey for you. The survey found that 753 people are employed by the organizations contacted for the survey, employing 13 people on average. The size of teams dedicated to VPI activities is increasing.

The average annual financial spend per organization increased in 2012 to EUR 5.2 million from EUR 4.1 million.

Key findings: • Societal returns remain the primary focus, but more venture philanthropists are looking for a financial return (48% in 2011, compared with 38% in 2010) or are putting societal and financial return on an equal footing (25% in 2011, compared with 10% in 2010).

• Use of tailored financing is evidenced by the significant increase in the use of equity and debt instruments, and in the variety of financing instruments. Debt and equity emerge as the most commonly used financing instruments, closely followed by grants.

• European VP organizations are increasingly focusing on social enterprise as a target investee and are continuing to invest in small organizations with limited track records. This indicates they are taking their role as risk‐takers very seriously.

• VP is filling a market gap by focusing on early‐stage social enterprises and non‐governmental organizations with financing tailored to their needs, rather than aiming to achieve market rate returns.

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SEQUOIA TOPS VC IPO PIPELINE RANKING BY CB INSIGHTS In its Tech IPO Pipeline Report, CB Insights identified 472 tech companies with valuations greater than USD 100 million, as potential tech IPO candidates. It subsequently detailed the top investors in Tech IPO Pipeline companies providing a view into which VCs are best at investing in technology high fliers. The top three VCs in the new risk adjusted ranking by CB Insights are Sequoia, Intel Capital, and Accel partners. The report analyzed the venture capital investors behind the Tech IPO Pipeline using a rather complicated methodology that aims to reveal a so‐called adjusted investor effectiveness ratio. The ratio sought to (1) reward investors who invested early in Tech IPO Pipeline companies and (2) not penalize investors who make many investments (seed deals for instance). Based on pure volume of IPO candidates, Intel Capital tops the ranking.

QUOTE OF THE WEEK: NFL GOES PE “The NFL is the world’s premier sports and entertainment property and is in a unique position to help and benefit from the growth of a wide range of media assets. We believe there are many traditional and digital media properties that complement the NFL’s business and can add lasting value. We look forward to a long and fruitful partnership.”

Who said it: Paul Salem, a Senior Managing Director at Providence Equity Partners In context: The quote is from a press release announcing the NFL’s intention to team up with Providence to invest in digital media businesses that benefit the NFL and its fans. It is not unusual for large organizations to create corporate venture funds, Intel Capital, is a classic example, but it is unusual to see one in the area of professional sports franchising, and the announcement generated quite a bit of press coverage. According to the WSJ, the two entities plan to jointly invest about USD 300 million. The two will target start‐ups that work within sports, media and technology, specifically innovative media assets.

The deal with Providence highlights the league's new push to find revenues beyond the traditional sources of media‐rights fees, ticket sales and licensing, says the WSJ. Where we found it: NFL Communications

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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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