SEE WHATS NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 123 - January 10, 2014 - M&A Trend: Global Wealth Management Sector Dealmaking Heats Up - Preqin Says… Highs Hit for Fundraising, Dealmaking, and Exits ’13 - Billion Dollar Brazil Healthcare Buyout - PE Returns Record Amount of Cash in 2013 - Tech Stocks’ IPO Pops Were Tops in 2013 - Quote of the Week: PE Most Desired Gig on Wall Street

1. DIGEST 123
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M&A Trend: Global Wealth Management Sector Dealmaking Heats Up
Preqin Says… Highs Hit for Fundraising,
Dealmaking, and Exits ’13
Billion Dollar Brazil Healthcare Buyout
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PE Returns Record Amount of Cash in 2013
Tech Stocks’ IPO Pops Were Tops in 2013
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Quote of the Week: PE Most Desired Gig on
Wall Street
January 10, 2013

2. M&A TREND: GLOBAL WEALTH MANAGEMENT SECTOR DEALMAKING HEATS UP
Mergers and acquisitions in the global wealth
management industry were up in 2013 which
is attributed to lower valuations as regulatory
pressures put the costs squeeze on wealth managers. There were over 60 deals worth USD 760
billion in this segment of the financial industry
in 2013, according to Scorpio Partnership in a
press release. The average price paid for acquisitions as a proportion of assets under management was 1.22 percent this year, down from 1.98
percent in 2012 and 4.81 percent in 2009, says
Scorpio.
Reuters reports that private equity groups active
in the market include Permira, which acquired
Deutsche Bank’s Tilney wealth management arm, as well as Bestinvest, and Carlyle Group, which acquired Diversified Global Asset Management and TCW.
Scorpio expects the pace of new deals to remain high in 2014 driven by the same forces that affected
dealmaking in 2013. The report has the 2013 activity, but also tracks a total of 236 wealth deals which
took place from 2008.
PREQIN SAYS... HIGHS HIT FOR
FUNDRAISING, DEALMAKING & EXITS ’13
End of year tallies from Preqin reveal
that PE raised the largest amount of
capital globally since the financial crisis of 2008. Global private equity fundraising throughout 2013 totaled USD
431bn, 13% up on 2012 levels. The
previous high point was when USD
688bn was raised by funds closed in
2008. Preqin’s research shows that
this growth in capital raised has been
led by strong fundraising activity for
North America- and Europe-focused
funds, while funds focused on Asia
and other regions have seen a significant drop in fundraising levels. Another Preqin study revealed that the
aggregate value of PE-backed buyout
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3. deals also hit a high with 2,830 private equity-backed buyout deals announced throughout 2013 representing an aggregate value of USD 274bn, the highest value since USD 661bn worth of deals were
announced in 2007 (See chart). Preqin said that PE “buyout firms have had their strongest year of
dealmaking since before the global financial crisis…though this the number of deals taking place has
actually fallen by 11% from the year before”.
BILLION DOLLAR BRAZIL HEALTHCARE
BUYOUT
This week’s deal of the week is a rumored proposed USD 1.2 billion take private of Brazil-based Fleury
SA. Several PE groups are bidding for the hospital and medical service providers, which Bloomberg
describes as the worst performing stock in its category in recent times.
PE bidders include Carlyle Group and KKR. The report says that Gavea
Investimentos and Apax Partners have also looked at Sao Paulo-based
Fleury. This healthcare deal is interesting because with one single
transaction, Brazil out-punches US sector activity for 2013. It says a
lot about the low level of healthcare industry activity in the US and the
PE view that there are better opportunities in faster growing emerging
BRIC countries.
According to S&P Capital IQ Global Markets Intelligence, the entire US
leveraged buyout market for healthcare sector generated only USD 1
billion in transactions in 2013 (see graphic), the lowest turnover in the
last 13 years. The numbers in 2014 for the US healthcare sector could
be quite different compared to last year, that is, if Carlyle is successful in its bid to acquire a diagnostic unit from Johnson & Johnson for
USD 4 billion. The rumored mega-buyout was reported by Reuters last week and is expected to reach a
closing in mid-January. (Image source: Fleury; Graphic source S&P)
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4. PE RETURNS RECORD AMOUNT OF CASH
IN 2013
This issue of DealMarket Digest
record-breaking year for the PE
making and fundraising are up, so
The WSJ is reporting that private
more than USD 120bn to their limited
ous year’s record of USD 115bn, acAssociates, which advises investors
Buyout groups returned USD 60.8bn
year, according to the report which
search. Strong capital markets were
returns generated via initial public
Debt refinancing was enabled by low
was that PE -backed companies sold
loans in 2013 to deliver cash back to
USD 64.2bn of 2012, according to
the WSJ report. The article concludes
in 2014 as private equity funds still
from.
is full of news this week about a
industry. Not only exits, LBO dealare cash returns to limited partners.
equity firms are expected to return
partners in 2013, topping the previcording to estimates by Cambridge
on allocations to the asset class.
to investors in the first half of this
cited Cambridge Associates rethe enabling force, particularly
offerings of portfolio companies.
interest rates last year. The result
USD 66.2bn worth of bonds and
shareholders, eclipsing the record
data provider S&P Capital IQ LCD in
that this kind of activity will continue
have many assets they need to exit
TECH STOCKS’ IPO POPS WERE TOPS
IN 2013
since 2009 (46%).
Dealogic says that US technology IPOs and
the highest average one-day return since 2000
with a performance of 41% gains, the highest average one-day return since 2000 (91%)
and up from an average of 30% in 2012. This
is great news for PE and VC investors who are
planning on floating portfolio companies. It is
not just the US that is doing well, although it
is tops in performance compared to the other
regions. The global technology IPO average
one-day return for 2013 stands at 37%, which
was a better capital market performance than
2012. The global figure is up by 12% over 2012
numbers, highest average one-day return
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5. Other findings
• US Technology IPO volume reached USD 6.7bn representing 31 deals. The figure is down compared
to the USD 20.3bn (32 deals) raised in 2012.
• Technology ranks third in the US IPO sector ranking so far this year, behind Oil & Gas (USD 9.5bn via
17 deals) and Healthcare (USD 9.5bn via 51 deals)
• Best performing in 2013 was Benefitfocus Inc’s USD 150m IPO. It recorded a 1-day return of 102%,
• Twitter Inc’s USD 2.1bn IPO was the largest US Technology IPO of 2013, and recorded a one-day
return of 73%
• Goldman Sachs leads the global Technology IPO bookrunner ranking in 2013 YTD with a 19.6% mar
ket share, followed by Morgan Stanley and Deutsche Bank with 18.2% and 14.5%, respectively.
QUOTE OF THE WEEK - PE MOST DESIRED
GIG ON WALL STREET
“The most desirable places to work aren’t the big banks, but rather private-equity firms such as the
Carlyle Group and hedge funds like Fortress Investment Group…
Who said it: John Ricco of Atlantic Group, an executive search firm
In Context: Today, the most desirable places to work
are private-equity firms, such as the Carlyle Group, and
hedge funds while major investment banks, such as
Goldman Sachs and Morgan Stanley, are moving more
jobs out of New York to lower-cost cities such as Salt
Lake City and Tampa, says John Ricco in an interview
with Crains. Although he is upbeat about the prospects
for financial industry professionals in 2014, he says that
the employment situation on Wall Street is nowhere near
what it was prior to the financial crisis in 2008. Another
recent study confirms Ricco’s view of the job market. Private equity employment is outgrowing hedge funds and
investment banking for employment growth, according
to Job Search Digest. It says that “overall, since January 2008, private equity industry employment is up about 1.5 percent, while over the same period hedge
fund industry employment is still down 1.7 percent and investment banking industry employment is still
down 4.5 percent”. Readers interested in switching to a career in PE can look at efinancialnews, which
has a good tip sheet on the skills and talents required. (Image source: Crains)
Where we found it: Crains NYC
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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 platform delivers: Professional, 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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