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1. DIGEST
SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 80
80
1 Zephyr Says Global PE Activity Was
Up in 2012; Deals Down
1 Europe’s Next Billion Dollar VC Exit
2 M&A Activity Forecasts for 2013
• KPMG
3 Do Fees Match Performance?
• TorreyCove Capital Partners
Secret Success Factors for Family
3 offices
• NZZ
4 Quote of the Week:
PE Growth
Still Lots of Room For
January 25, 2013

2. ZEPHYR SAYS GLOBAL PE ACTIVITY WAS
UP IN 2012; DEALS DOWN
Image source: Zephyr
The latest figures from Zephyr’s research team reveal that global private equity investment grew for the
third consecutive year in 2012, as the graph above shows. The value of deals done increased and is the
highest recorded since 2008, but the total value is still significantly down on the pre-financial crisis
investment peak.
The size of deals is up, which means that the actual number of deals fell for the second successive year
to just 3,785 deals from 4,033. All of the top 20 deals by value were greater than USD 2 billion,
accounting for 26 per cent of the total value global private equity investment in 2012. The largest was
the USD 10.7 billion acquisition of Singapore based beverage-to-real estate conglomerate Fraser and
Neave by a consortium comprising Farallon Capital. US and Canadian targets accounted for 11 of the
top 20 deals in 2012.
EUROPE’S NEXT BILLION DOLLAR VC
EXIT
Magister Advisors, an investment banking boutique, says in IPTV News that there is a next wave of
European tech companies maturing into high value businesses. Its list includes Shazam (which IPTV says
has big ambitions for the TV market), Rovio (developer of the Angry Birds franchise), Wonga, a personal
and business loans site, Klarna (e-payments), and online food deliveries platform Just-Eat.
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3. The momentum has been building for several years, according to a Magister press release. European
exits had a value of around USD 15 billion against USD 30 billion in the US. The VC-backed technology
exits in Europe in 2009-10 were remarkable compared to the US because they delivered half the
amount of money but with one fifth of the capital resources. Funds invested in VC in the US amounted
to USD 25 billion while in Europe it was only USD 6 billion.
M&A ACTIVITY FORECASTS FOR 2013
The latest heads up research for 2013 says that
M&A activity is expected to remain stable, with a
possible slight improvement in the coming year.
According to a recent survey conducted by KPMG
LLP and SourceMedia, the publisher of Mergers &
Acquisitions magazine, the responses of more than
300 M&A professionals at U.S. corporations, PE
firms, and investment funds about the expected
activity for 2013 revealed that despite economic
challenges, dealmakers are cautiously optimistic
and the vast majority of them said that they will be
pursuing acquisitions this year.
Image source: KPMG
Selected Findings
• According to 60 percent of the M&A professionals, companies’ large cash reserves will drive deal
activity and 40 percent acknowledged favorable credit terms as a supporting factor.
• Opportunities in emerging markets will also be a catalyst for deals, said 26 percent of respondents.
• Primary reasons for making acquisitions varied among the survey population, with 20 percent of
respondents reporting that expanding geographic reach would be their primary motivator, while 19
percent cited a quest for profitable operations, followed by 17 percent who anticipated making
acquisitions in order to enter a new line of business.
Elsewhere KPMG said that M&A in 2013 will likely be characterized by those companies looking for long-
term opportunity.
• Deals will be smaller and more strategic, as companies fill product gaps and seek new market
opportunities.
• Ongoing European instability may also present opportunities for US buyers with healthy balance
sheets. If a resolution is reached around the fiscal cliff and there is more stability in the Eurozone
there could see a real spark in M&A activity in 2013.
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4. DO FEES MATCH PERFORMANCE?
In an article on PI Online, TorreyCove Capital Partners said that there does not “seem to be a bankable
relationship” between management fees and performance. Just looking at fees, thinking that the higher
they are the better the performance might be, misses the point with private equity, says the report.
First of all most funds, including those with higher fees, performed well enough to cover the higher
fees. But TorreyCove's research found a “slight negative correlation” between management fees and
performance. The snapshot of a pool of 200 hundred fund revealed that the worst-returning group,
with an average performance of -8.64% as of June 30 charged higher management fees than the
middle-performing group and the highest-performing group — with an average return of 25.7% — had
an average management fee of 1.677%.
SECRET SUCCESS FACTORS FOR FAMILY
OFFICES
The NZZ had a feature this month on the secrets to growth in wealth amongst Family-Offices. We read it
because it highlights where the world’s wealthiest are investing for returns during the current slump.
Here is our summary of the German article, which referenced several different experts as sources.
Selected Findings
• Stocks, real estate and private equity are tops
• Industries such as Energy, Healthcare, Biotech are favored, as are
• Emerging markets
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5. PE Manager Gets Creative to Find the Exit in Current Slump
Bloomberg reports that Standard Chartered, the British bank said its private equity business is exploring
“creative” exit options in the Middle East and North Africa after share markets slumped, making trade
sale and IPOs more difficult. To avoid being in a position six or seven years into an investment with no
exit in sight, the bank will try to be creative. One tactic might be a sale back to the company and
another might be the conversion of equity into debt or a preferred dividend, he said.
QUOTE OF THE WEEK:
STILL LOTS OF ROOM FOR PE GROWTH
“People ask .. what's the most important
thing that you've learned over time from
private equity? … it has been and I think it
will continue to be a people business. It's
about relationships. It's about contacts.
It's about being able to do business with
people. That is still, I think, a very
important component of the business.”
Who said it: Russell Steenberg, Managing Director, Global Head, BlackRock Private Equity Partner
In Context: The above quote was Russell Steenberg’s view on the most important thing he’s learned
about PE in 28 years. Another equally interesting idea presented in the interview is that his company
sees growth ahead for PE. He said that there is more money chasing public securities in the world today
than there is in the private equity world. And yet the number of private companies that exist in the
world today is far greater than the 40,000 or so publicly tradable companies globally that his research
team has tracked. So PE has only “scratched the surface” on private equity, he said. This does not mean
that PE is not highly competitive or that there is more capital available for it than before. But relative
to the other markets and the other choices people have to put their capital in, it is still small and has
lots of room to grow. BlackRock manages USD 100 billion in assets
Where we found it: Privcap
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6. 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
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To receive the weekly digest by email register on www.dealmarket.com.
Editor: Valerie Thompson, Zurich
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