Dealmarket Digest-10

DIGEST

10

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 10

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Apax Blockbuster Valuation

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India Dealmaking Soars

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Shift to Cleaner Energy Fires up M&A

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Corporate Elbow PE in Auctions

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Germany: Honeybees or Locusts

• IPO Value of $1.6 billion of a take-private

• May delivers a six year high for PE investment in Indian private companies.

• Clear trends in Germany, Italy, Spain • Geothermal M&A warms ups

• Cash rich balance sheets provide dry powder for acquisitions

• PE largely misunderstood in German HNW segment.

Chinese Companies Seek M&A in Europe.

• Brands and deep know-how in demand

Quote of the Week • Skeptic on social networking’s real value

June 10, 2011

APAX WITH BLOCKBUSTER IPO The private equity (potential) exit of the week is Apax Partners and its portfolio company, Bankrate, which has an IPO file that values this publisher of online personal finance content at about USD 1.6 billion. According to a Reuters report, its largest shareholder is Ben Holdings, an investment vehicle backed by Apax Partners, which took the company private in 2009 for USD 571 million. Bankrate, which started out as a newsletter publisher of info about bank rates, loans and personal finance data, now runs various financial websites, including its flagship Bankrate.com. The valuation and the company’s business model makes it yet another hot dotcom company, as is evident in a quote in the article: "Private equity is looking to book some profits on the deal at a time when valuations of companies involved in social media, technology and the Internet are rising," attributed to Josef Schuster, founder of Chicago-based IPO investment firm IPOX Schuster LLC. The article reviews the development of recent Internet company IPOs, including LinkedIn, whose shares more than doubled on their first day of trading, and Yandex NV, which also increased in value by 55 percent in first day of trading. The article also mentions that it is one of several PE-backed IPOs. It says that London-based research firm Preqin reports 201 PE-backed exits so far this quarter, valued at $85 billion. That is 5 percent higher than the record level reached in the fourth quarter of 2010.

INDIA : DEALMAKING SOARS A six year high for investment in Indian private companies is being reported by local database provider. This week new data on PE investments in India reveals that size of transaction and volume is up. Last month saw the highest amount of deal volume in the last six years, across angel, venture capital and private equity investments, according to VC Circle. In May, there were 28 private equity transactions worth USD1.25 billion recorded. There were also five deals over USD100 million with infrastructure segment accounting for four of these transactions. International PE firms are active in India in this segment. Largest deals were Morgan Stanley Infrastructure Partners committing USD200 million in a joint venture with Isolux CorsĂĄn Concesiones to develop road projects. Another large deal was Standard Chartered Private Equity, Jacob Ballas and JM Financial Old Lane Capital investing USD200 million in GMR Infrastructure's airport holding company. .

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CLEAN ENERGY GOALS FIRES UP M&A The shift to cleaner energy, especially in light of the Fukushima disaster, is creating a boom in M&A activity in clean energy. In 2010 there were 202 transactions, a growth rate of four percent over the previous year.

The strength of the sector is expected to continue this year and some large billion dollar sized deals earlier this year back that up, according to a new study, titled 'M&A In Renewable Energy - Global Outlook 2011', created by Mergermarket und Rödl & Partner.

The study provides statistics in the sector and insights into the unique characteristics of the market in several countries in Europe which are strong in renewable energy. Of interest to PE industry insiders is the news that in Spain, private equity will be involved in the roll-up of the still highly fragmented wider, renewable energy industry. In Germany, the trend will see M&A driven consolidation of smaller companies.

In Italy, the activity is dominated by transaction in the solar sector and private equity has a key role with local funds having the upper hand over international players. The report also provides some insight into geothermal’s role in the M&A market.

There are some highlights of recent dealmaking activity, such as the acquisition of a German geothermal technology company Zent-Frenger Gesellschaft fur Gebaudetechnik mbH in March.

It concludes that activity will be robust this year.

Cross-border deals and large sized transactions are expected to establish a new trend.

PE FACES COMPETITION FROM STRATEGICS IN BUYOUTS Corporations are competing more aggressively with buyout firms for attractive buyout opportunities, reports Bloomberg news. Cash rich balance sheets provide make acquisitions easier for corporates.

About USD1 trillion of acquisitions has been announced by companies worldwide this year, a 22 percent increase on the same period a year earlier, Bloomberg data show. The article leads with the example of TPG Capital lost out twice in private company auctions in the same week. Both times, it lost to a corporation offering to pay more. Two transactions mentioned were the acquisition of London-based shoe designer Jimmy Choo Ltd and Tokyo-based Toshiba Corp’s acquisition of Landis+Gyr AG, the Swiss electronic-metering company. The article says that some PE firms don´t even try to enter auctions with industrial competitors. .

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HONEYBEES OR LOCUSTS? A new German-study reveals HNW individuals´ view of private equity as an asset class. Germany´s Wealth Management Capital Holding GmbH published the results of a PE study whose aim was to reveal current attitudes and opinions about PE and buyout funds. The results reveal that private investors are skeptical about PE, and their opinions make PE as an asset class unattractive to them, according to WealthCap. Private investors seek attractive investments but they also want to understand the asset classes they invest in, says Wealthcap. Intransparency and risk are two of the issues. Complexity and difficult to access, are two more. It is up to the PE industry to learn how to communicate, concludes Thomas Perry, CEO of Q Agentur für Forschung GmbH, one of the companies involved in the research.

CHINESE BUYERS SEEK M&A IN EUROPE The WSJ reports that acquisitions by Chinese corporations is becoming a bigger M&A trend in Europe. The number of transactions is at record levels, according to Dealogic. The news suggests that VC and PE fund managers could find new buyers for portfolio companies amongst Chinabased corporations. The article mentions Jomec, a European corporate finance boutique that has specialized in "road shows showing delegations of Chinese businessmen around Europe".

The accompanying graphic illustrated the trend, highlighting a broad range of industries and sizes of companies that were recently acquired

by Chinese buyers. Six of the transactions were greater than one billion dollars, and about half of the fifteen transactions have taken place in the last 14 months. The top three however, took place in between 2007 and 2009, suggesting the trend is to acquire smaller but well-known brands and specialized or deep know-how in a range of industrial sectors.

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QUOTE OF THE WEEK Quote of the week: "... it is interesting to see some Goldman alumni attempting once again to push water back uphill with Ocado.“ Who said it: Tim Price, Director of Investment PFP Wealth Management Context: An article entitled Dotcon by Tim Price that discusses the LinkedIn IPO and its investment bankers. He writes, Pets.com (online petfood delivery) was also pretty facile, and it had a talking sock puppet mascot to boot. Boo.com (online fashion) showed that Americans did not have a monopoly on torching easily raised venture capital‌ So the inexplicable popularity of LinkedIn"s recent IPO will prompt uncomfortable (or simply hysterical) memories on the part of those of us who lived through dotcom insanity the first time around.

Where we found it: PFP Wealth Management via FullerMoney blog

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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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