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1. DIGEST141
May 16, 2014
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Smaller and Newer Real Estate Fund Outper-
formance Soars
Dealmaking : M&A Terms and Conditions Are
Easing Up
Another German Billion Dollar Buyout
Fail and Talk About It: Conference Series for
PE Pro’s and Entrepreneurs
Which PE Firms Are Making Money in Asia
Pacific?
Quote of the Week: Patience With Dry Powder
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SMALLER AND NEWER REAL ESTATE
FUND OUTPERFORMANCE SOARS
New research from Preqin demonstrates
that despite a greater concentration of capi-
tal being raised among larger private real
estate funds in recent years, smaller funds
have often outperformed larger funds. Com-
mercial real estate is one of the areas that
can be listed in DealMarket’s online platform,
and therefore DealMarket Digest’s editor is
occasionally covering research into that seg-
ment. Funds of less than USD 500mn in size
that began investing between 2005 and 2011
have posted median returns of 5.9% com-
pared to 2.3% for funds over USD 1bn in size,
according to Preqin. Despite that trend, funds
of USD 1bn or more in size raised the lion’s
share of capital (at 56% of the total capital
DEALMAKING: M&A TERMS AND CONDI-
TIONS ARE EASING UP
raised in 2013 compared to 29% of capital the year before). Preqin attributes the seemingly counter-
intuitive trend as a result of the risk that often accompanies an investment in smaller newer vehicles.
Many large, established players have strong track records, according to Preqin, so institutional inves-
tors are looking to invest with managers that have evidence of generating consistent returns. Preqin
added that institutional investors who have the skill and resources to seek out attractive emerging
managers have the potential to be rewarded for doing so. (Image source: Preqin)
A new SRS|Acquiom study takes a deep dive into
its proprietary database to determine trends in
2014 M&A Terms and Conditions for privately-
owned companies. The report reveals that deal-
making is becoming less legally contentious,
management carveouts are increasing, and
while the time to exit remains steady at eight
years, the cost of getting there is on the decline.
In other words amount of capital required to
become an attractive M&A target is declining.
The information and data comes from a new
2014 SRS|Acquiom M&A Deal Terms study. The
report analyzes nearly 500 transactions valued
at USD 79 billion from 2010 through 2013 and

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ANOTHER GERMAN BILLION DOLLAR BUY-
OUT
provides deal parties with trends and insights into M&A deal terms.
Key Findings
• Stock deals increased: though cash is still king, deals involving buyers’ stock rose to 21%, up from
15% in 2012—a number that had remained steady since 2010.
• Leaner capital: median equity capital invested fell to USD 23 million in 2013 from USD 28 million in
2012, while the median time from founding to exit remained steady at 8 years. (See graph above)
• Management carveouts increasing: 89% of deals in which the transaction value did not exceed
amounts invested had a management carveout. Overall, deals with carveouts climbed to 22% in 2013
from 19% in 2012.
• Conflict waivers doubled: waivers allowing Seller’s counsel to represent the selling shareholders
post-closing in matters related to the acquisition nearly doubled to 40% in 2013, from 22% in 2012.
• Employee retention holdbacks increased: holdbacks contingent on employees’ continued employ
ment with Buyer rose dramatically year over year and were the second-most common use of special
escrows in 2013, but overall remain uncommon—only 8% of deals in 2013 included retention hold
backs.
• Fewer Legal Opinions required: deals requiring a legal opinion (non-tax) from Seller’s counsel have
declined by nearly half since 2011 to 38%.
US private equity firm Clayton, Dubilier & Rice has acquired German industrial packaging manufac-
turer Mauser for USD 1.7 billion from Dubai International Capital LLC, the private equity unit of Dubai
Holding, according to Bloomberg. The size makes it this week’s buyout of the week. It is the second
Germany based billion dollar buyout this month following Minimax announced last week. The US PE
fund is the third private equity owner of Mauser as DIC acquired it from JPMorgan Chase & Co.’s One
Equity Partners seven years ago. The article says that DIC doubled its money through the deal. Mauser
had an annual turnover of EUR 1.2 billion last year and employs more than 4400 people worldwide.
(Image source: Mauser)

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WHICH PE FIRMS ARE MAKING MONEY IN
ASIA PACIFIC?
FAIL AND TALK ABOUT IT: CONFERENCE
SERIES FOR PE PRO’S AND ENTREPRE-
NEURS
It is a rare thing to see failure in business
and investing under the magnifying glass,
despite the fact that more startups fail to
achieve their po- tential than succeed.
We much prefer to tell success stories,
but business flops and foibles are a gold
mine of informa- tion, especially when
the lessons learned are shared with others,
then the whole community of entrepreneurs, investors, and advisors can benefit. That is the innovative
idea behind of series of events that caught the DealMarket Digest eye this week, so this is not an en-
dorsement, it is just a pointer. FailCon’s website says it is a one-day conference for technology entre-
preneurs, investors, developers and designers to study their own and others’ failures and prepare for
success. It will be coming to Sydney, Tel Aviv, Tehran, Barcelona and San Francisco soon.
Setter Capital’s latest study of the hottest secondary
funds in the market gives a bit of welcome insight into
the Asia Pacific PE segment. It is welcome because the
PE industry headlines about Asia have been a bit nega-
tive of late. For example, Private Equity Beat writes:
“Asian Private Equity Fund Face Pressure to Invest
Capital Hoard”; A Forbes headline reads: “For China’s
Private Equity, A Long And Painful Path To Liquidity”,
while Finance Asia reports skepticism about China’s
financial reforms in a piece entitled “China Market
Blueprint Isn’t Black and White”. The Setter Liquidity
Report identifies PE firms that have been performing
well enough to be sought after in the secondary mar-
ket, basically who is actually making money in the re-
gion. According to the latest overview, the top names are CDH China Fund, a local Chinese fund man-
ager, CVC Asia, managed by European fund manager CVC Capital Partners, and Pacific Equity Part-
ners, which like CDH is also a local player that claims to be the largest PE fund manager in Australsia.
DealMarket’s Industry News has an in-depth report on Setter Capital and its latest data and insights
here.

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“The current environment is a tricky one for new investments. There is an excess of capital looking for
investment opportunities and this has driven up sellers’ price expectations. We have benefited from
this in our realisation programme, however as we review new investment we will need to continue to be
patient and disciplined.”
Who said it: Simon Borrows, Chief Executive 3i Group
in Context: UK-based 3i, one of the oldest publicly-traded PE fund manag-
ers, delivered its financials this week, announcing a “strong” total share-
holder return of 30%, a solid dividend for stockholders, and a 43% uplift
in its value. 3i results echo the trends we’ve been reporting about mid-
market buyout fund managers in the DealMarket Digest. Its top manage-
ment extolled the excellent economic envirionment for exits, but warned of
expensive equity in the mid-market deals it is screening. 3i says a “selec-
tive” investment strategy and cost-consciousness are integral to its “alpha-
generating economics”, and it is relying on “sourcing deal flow outside of
highly competitive processes”. He is not the only European fund manager expressing such a view EQT’s
chief, Thomas von Koch told the FT that from a PE investor’s point of view asset prices are in “danger-
ous territory”.
Where we found it: 3i Press Release
QUOTE OF THE WEEK: PATIENCE WITH DRY
POWDER

6. www.DealMarket.com/digest
The DealMarket Digest empowers members of DealMarket by providing
up-to-date and high-quality content. Each week our in-house editor sifts
throughscoresofindustryandacademicsourcestofindthemostnotewor-
thynewsitems,scopingtrendsandcurrentseventsintheglobalprivateeq-
uitysector.Thelinkstothesourcesareprovided,aswellasaneditorialized
abstract that discusses the significance of the articles selected. It is a free
servicethatembodiesthevaluesoftheDealmarketplatformdelivers: Pro-
fessional, 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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