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What do financial services, scrap metal, and pro sports teams have in common? • They are all targets of PE buyouts


Carlyle goes for growth by acquisition


Billion Dollar Startup: Square Inc.


Billion Dollar Secondary Vehicle: Coller

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• Interview reveals details on global strategy

• Mobile payments venture raises venture capital • Elicits speculation of over-valuation

• Coller Capital’s new fund attracts almost $1.5 bn

American Wholesale Chain Target of Buyout Firms • Two PE investors make multi billion dollar offer for publicly traded company

Quote of the Week • Silver Lake and the vested share question

July 1, 2011

WHAT DO SPORTS TEAMS, SCRAP METAL, AND FINANCIAL SERVICES HAVE IN COMMON? They are all targets of private equity funds. A spate of articles this week describes target trends for private equity dealmaking. In Europe and Australia, it is recycling srap metal companies to benefit from high demand for metals in China. In the UK it is financial services companies, a sector poised for consolidation. And in the US it is pro sports teams. Apparently in the US market, wealthy sports teams owners are looking to liquidate assets, and new owners look to diversify. It is interesting to note that the level of maturity of PE in each region is seen in the kinds of assets being acquired in buyouts.

CARLYLE’S GROWTH STRATEGY Several large American private equity firms that have a global brand of private equity are moving quickly to diversify out of private equity and into other alternative areas. These would be Blackstone, TPG, KKR, Carlyle, Apollo, Bain, Oaktree, says David M. Rubenstein, co-founder and managing director of The Carlyle Group, in an interview in PIOnline . Carlyle recently acquired Alpinvest, the Dutch fund of fund manager, and Emerging Sovereign Groupa hedge fund manager. It is also considering an IPO. The idea is to diversify and add to the core buyout business so that new products can be sold to core investors. Rubenstein also said that while pension funds are still important as contributors of capital their relative investing power is decreasing, so PE funds are seeking new sources, such as sovereign wealth funds and high-net-worth individuals .

BILLION DOLLAR STARTUP: SQUARE INC. The days of the billion dollar startup seemed to have been gone for good from the technology sector for quite a while, but just this week Dow Jones reported that a venture capital consortium, with Kleiner Perkins on board, is buying a stake in mobilephone payments company, Square Inc. that pegs the startup's value at more than USD1 billion. The report says that Square's “rapid ascent shows how technology valuations continue to climb, despite widespread critiques that the values are not economically sustainable”.


BILLION DOLLAR SECONDARY VEHICLE Secondary transactions have been forecast to grow quickly this year due to changes in regulations and industry consolidation. So it is not terribly surprising that Coller Capital is raising a new fund to partake in the trend, but its size is a tad surprising. The secondaries fund manager has raised close to USD1.5 billion for its latest vehicle. The details are reported in PENews. Already this year, USD25.3 billion in private-equity fund stakes have changed hands globally, according to Dealogic. It is a 13 percent increase over the same period last year.

AMERICAN WHOLESALE SHOPPER CLUB TARGET OF BUYOUT This week’s most interesting PE investment is an offer for BJs Wholesale in the US for USD 2.8 billion. It is interesting because it is a take-private and because of its size. Leonard Green & Partners and CVC Capital Partners are buying America‘s third-largest wholesale club, which competes with Costco and Whole Foods Market in various parts of the USA, according to the WSJ. Leonard Green has a track record in the sector, for example, WFM , The Container Store, Petco, and Sports Authority, while CVC has been successful with a number of supermarket and department store investments across Europe.

QUOTE OF THE WEEK Quote of the week: “The question is: at what time is an option that is vested actually vested?” Who said it: journalist reporting for British technology website The Register Context: Some legal disputes have emerged following the Microsoft Skype deal with private equity firm Silver Lake Partners getting some negative press due to its handling of options and vested shares of former employees. In this article, the Register says that the argument is an echo of the Bill Clinton/Monica Lewinsky controversy over what the meaning of "is" was. In this case what is at issue is the meaning of the word "vested". As in, at what time is an option that is vested actually vested? Dan Primack at Fortune takes a more PE industry neutral stance in an article entitled, “Defending Skype and Private Equity”. Where we found it: The Register


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