DealMarket_Issue_87

DIGEST

87

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 87

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Why PE Industry Needs Data Standardization Life Technologies Rumored to Interest Buyout Group IPO Entering Seasonal High: US Market Global M&A Revival

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Private Equity Confidence in Latin America Quote of the Week: Clean Energy Growth

March 15, 2013

WHY PE INDUSTRY NEEDS DATA STANDARDIZATION

Image source: E&Y

An article in Investment Europe makes the call for data format standardization between GPs and LPs. It is a report that reflects a growing awareness that PE needs to make a shift to a more mature information management model for data exchange. Ernst & Young said as much in its recent report entitled PE Evolution of the Operating Model (See Infographic). The flow of information between GPs and LPs could be improved considerably if such a move was made, say both sources. Nevertheless, the industry has come a long way from suffering from a sheer lack of information being provided by GPs to LPs and intransparency. In recent years, there has been recommendations and guidance from industry bodies such as the Institutional Limited Partners Association (ILPA). One result of which is that large GPs may be producing 20‐30 investor‐specific packs of information every quarter. For the LPs it means that, if they have 2 to 300 fund positions, they are getting the data in 2 to 300 different formats. Many firms are using PDF and Xcel formats to deliver information, but the data is not standardized. If it was standardized, there could be a freer flow of information electronically, which would save everyone time and money. The IE article points out that the situation facing private equity is in sharp contrast to other areas of financial services.

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LIFE TECHNOLOGIES RUMORED TO INTEREST BUYOUT GROUP Bloomberg reports that DNA sequencing equipment company Life Technologies has attracted interest from a buyout group comprising Blackstone Group, Carlyle Group, TPG Capital and Temasek Holdings Pte. At a USD 10 billion price tag, this would make it the deal of the week, and actually one of the biggest take private buyouts in some time.

IPO ENTERING SEASONAL HIGH: US MARKET News in Reuters this week about a large sized IPO for CDW, which is a PE backed IPO, highlights a trend reported in Forbes, which says that the IPO market is reviving after a dismal period from 2007 to early 2010. Even industrial companies have gotten a warm reception from investors, it said. In 2012 technology companies dominated the IPO market, accounting for 24% of deals. But according to investment boutique Renaissance Capital, the IPOs in the pipeline span many sectors.

GLOBAL M&A REVIVAL Financial Times reports that abundance of cheap debt is helping to “resuscitate” the world of M&A. It is helped by a rise in business confidence, with rallying equity markets, is combining with the re‐ emergence of interest in M&A by companies and boards. The total value of global M&A reached USD 492.7 billion by the end of February, up 24 per cent on the first two months of 2012, according to data provider Image source: FT.com

Dealogic. Persistent talk of a wide range of large‐sized or blockbuster deals has some advisers believing that the revival this year will be more long‐lived than a similar revival in early 2011. Activism from investors has emerged as a big driver of deals. According to bankers, of the 40 biggest deals of 2012, 20 of them had an activist shareholder on the register before the transaction.

M&A deals in the US are up 94 per cent on the same period last year, while European deal making is up just 1 per cent, although at its highest level year‐to‐date since 2008, according to Dealogic. Reaching emerging markets is another driver for more deal making, particularly with consumer‐oriented companies. The article notes that the strength of the debt markets is not only serving to fund larger deals, it is also increasing sellers’ price expectations, which may ultimately put a damper on PE buyout activity.

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PRIVATE EQUITY CONFIDENCE IN LATIN AMERICA

Image source: Prequin

Preqin’s latest research reveals that 43% of private equity investors active in Latin America will look to increase their allocations to the region over the longer term. Furthermore, of 28% of investors with existing exposure to or an interest in investing in Latin America will be increasing their private equity allocations to the region over the next 12 months, and 61% will be maintaining their current allocations in 2013.

Other Key Findings: • 38% of investors stated that they will be committing to a Latin America‐focused fund in 2013, and 7% will look to make a commitment in 2014.

• 59% of Latin America investors view Brazil as presenting the best investment opportunities within Latin America. However, investors are increasingly looking to diversify their investments, with 52% of investors stating that Colombia presented the best investment opportunities, followed by Mexico (41%) and Peru (17%).

• Venture capital deal flow in Latin America increased significantly in 2012, with a 70% increase in the number and a 143% increase in the aggregate value of venture capital deals compared to 2011.

However, the number of buyout deals completed in Latin America remained at 59 for both 2011 and 2012, and the aggregate value of buyout deals decreased slightly from USD3.1bn to USD3bn over the same time period.

• Deal flow in Latin America may increase in the next 12 months as December 2012 saw the amount of uncalled capital available for investment (dry powder) reach an all‐time high of USD35bn for Latin America‐focused funds.

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QUOTE OF THE WEEK: CLEAN ENERGY GROWTH BOOSTER

“Lower prices for clean‐tech goods and services are helping wind and solar powers reach cost parity in both utility‐scale and distributed markets, making the value proposition increasingly attractive. Even amidst the carnage of 2012, clean energy has continued its ascent as a major economic force, with an increasing focus on deploying technologies that are ready and available now.”

Who said it: Ron Pernick, Clint Wilder, Trevor Winnie, authors of Clean Energy Trend Report 2013 In Context: Last year saw a global decline in venture capital and private equity investment in Cleantech, yet the actual deployment of solar, wind, and biofuels deployment continued to grow, according to a Clean Edge report released this week. Combined global revenue for solar PV, wind power, and biofuels grew year‐to‐year slightly from USD 246.1 billion in 2011 to USD 248.7 billion in 2012. The outlook is positive. Clean Edge forecasts these three sectors will continue to grow over the next decade, nearly doubling from USD 248.7 billion in 2012 to USD 426.1 billion in 2022. U.S.‐based venture capital investments in clean technologies totaled USD 5.0 billion, down for the first time in three years. It saw a 26 percent drop from USD 6.6 billion in 2011, according to data provided to Clean Edge by Cleantech Group. Globally, investment declined by 11 percent to USD 269 billion, down from USD 302 billion in 2011, according to Bloomberg New Energy Finance.

Where we found it: Clean Edge Clean Energy Trends Report

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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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