DIGEST
06
SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 06
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China’s Private Equity Winners and Losers • Recent activity highlights rewards and risks
Dealmaking in a Global Economy • PE Insiders speak out at the Milken Global Conference this week • Candid views and insider knowledge
Keeping LPs Happy • Grant Thornton’s latest study • LP’s call for alignment of interests • New fundraising data
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Social Networking Bubble
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Quote of the Week
• It’s not all just hot air • Technology legacy already making an impact
• David Rubenstein, Carlyle
TPG Tops Buyout giants List • TPG has raised USD 50 billion in past 5 years • The 300 largest fund managers ranked by PEI
May 6, 2011
CHINA AND PE: WINNERS AND LOSERS In an article with the unassuming title, Private equity: spanning the culture gap, the FT provides a very good insight into PE developments in China, covering the growth of domestic PE firms, and highlighting some deals that show dealmaking has its winners and losers in China. Winner: Carlyle Group with China Pacific Insurance - highly profitable deal Winner: TPG; Shenzhen Development Bank and China Grand Auto – billions made Loser: Permira when it sold shares in Hungarian investment Borsodchem to China’s Wanhua Industrial Group in a distressed debt deal at “bargain prices”. The lure of reaping brilliant returns in China remains strong, reports Reuters. GPs in the region are still able to resist pressure from pension funds and other investors to cut fees as they have had to in Europe and the US. It is a case of high demand and limited supply of funds over USD 1 billion in size. “Fees for large sized China oriented funds are still above an average of 2 percent a year,” says Reuters.
DEALMAKING IN A GLOBAL ECONOMY: PE INSIDERS SPEAK OUT Are VCs only investing in later rounds? Are additional megadeals in the cards? What are the opportunities in emerging markets? Are some the questions answered by industry insiders at this week’s Global Conference at the Milken Institute. Coverage was spotty in the usual media outlets, although Bloomberg covered some of the PE related news in an article titled titled Private Equity Managers Aim for Emerging Market Economies as Deals Shrink, and another one titled, Rubenstein Says Carlyle Moving Beyond Buyouts Ahead of IPO. If you want to hear and see for yourself what was said, the panels are available online. Here below we provide links to two PE-relevant videos. Venture capital: Panel discussion with top investors answers questions about trends. How well is the American-style VC and private-equity model being adopted around the world? What’s hot in VC, social or science? Biotech regenerative medicine or medical technologies? Energy deals or Growth Capital? Private Equity: Apollo, Providence and Carlyle are represented on this panel that discusses exits, blockbuster PE-backed IPOs, including HCA, Kinder Morgan and Nielsen, megadeals, the current outlook for fundraising and opportunities in emerging markets. Image source: Milken Institute
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HOW TO KEEP LP’S HAPPY In a new report from Grant Thornton, advisors and LPs express their views about large fees, and more. “To go to the heart of the matter, GPs can make money even if LPs can’t, and it ticks LPs off. Unless your returns have been spectacular, which now about 5 percent of firms can probably claim, LPs are asking for fee reductions and better alignment.” This was just quote of several to be found in Keeping LPs happy: It’s a whole new ballgame for private equity. The advisory firm spoke with professionals in the private equity industry, including LPs, GPs, regulatory professionals and fund managers. In addition, it researched data, including those from PitchBook Data, Dealogic, Standard & Poor’s, and Probitas Partners. Based on these sources and original reporting Grant Thornton delivers useful information on the context of the current fundraising and regulatory environment.
SOCIAL NETWORKING BUBBLE NOT JUST HOT AIR In the last Dealmarket Digest we pointed to several articles that suggested the social networking bubble would leave a rather unspectacular tech legacy. In the meantime, Read/Write Web revealed that in fact there is already some developments from social networking segments that are advancing technology. It argues a positive impact in the form of “a whole range of open source “big data and analytics tools”. The editor writes, “Thanks to this bubble, we've already got Apache Hadoop, Apache Cassandra, Membase and many other free open source tools for working with big data. If the bubble popped tomorrow, researchers in many fields would still have all of these tools.” Hadoop is based on research papers published by Google, and Yahoo funded and continues to fund much of its development, and Cloudera is productizing it. Cassandra, a database system, comes from Facebook and was open-sourced in 2008. Zynga was one of the original contributors to Membase, which was released in 2010. Twitter open-sourced FlockDB. LinkedIn open-sourced Project Voldemort. The article concludes: That the open source software benefit academic researchers, independent researchers with no funding, as well biotechnology startups….All these companies could go away. But the source code is forever.”
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QUOTE OF THE WEEK Who: David Rubenstein, Carlyle Group “I said to myself, what are the chances of this guy becoming the next Bill Gates? So I didn’t meet with him. So I have to work for a living now.” Context: When Facebook founder Mark Zuckerberg was planning on dropping out of Harvard to launch the social network, Mr Rubenstein’s son-in-law, a former high-school classmate of the young entrepreneur, asked him if he would like to meet with Mr Zuckerberg when was looking for investors to fund his new website. Where: Panel at Milken Institute Global Conference Where we found it: NetNet
TPG TOPS BUYOUT GIANTS LIST
TPG, Goldman Sachs, and Carlyle Group are the top three fundraisers according to Private Equity International magazine's proprietary fifth-annual ranking of the largest 300 private equity firms in the world. The PEI 300 ranks private equity firms around the world by size, using Private Equity International's unique, apples-to-apples methodology.
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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. To receive the weekly digest by email register on www.dealmarket.com. Editor: Valerie Thompson, Zurich
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