DealMarket Digest Issue142 - 23 May 2014

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Information about DealMarket Digest Issue142 - 23 May 2014
Economy & Finance

Published on May 26, 2014

Author: haeusler1



- Insurance Asset Managers Have High Expectations for PE in 2014
- KKR Mulls Asia’s Largest PE Deal of the Year
- Preqin Confirms Where the Women Are in PE
- Why Brazil is a PE Dream Market
- Recovering European M&A Market Gets Hostile

DIGEST142 May 23, 2014 1 2 Insurance Asset Managers Have High Expec- tations for PE in 2014 KKR Mulls Asia’s Largest PE Deal of the Year Preqin Confirms Where the Women Are in PE Why Brazil is a PE Dream Market Recovering European M&A Market Gets Hostile Quote of the Week: Public Private Equity 3

2 INSURANCE ASSET MANAGERS HAVE HIGH EXPECTATIONS FOR PE IN 2014 Insurers are highly optimistic about private equity returns over the next 12 months, and continue to believe equity asset classes will outperform fixed income assets, according to the latest Goldman Sachs Asset Management Survey of 233 Chief Investment Officers (CIOs) and Chief Financial Officers (CFOs) represent- ing insurers with over USD 6 trillion in global balance sheet assets. The survey, which is considered an industry bellwether, revealed that a large proportion expect private equity (26%) to deliver the highest returns in the coming year. The second most favored as- set class in the ranking is US equities (17%), followed by European equities (13%). CFOs expressed greater optimism than CIOs, as 31% believe investment opportunities are im- proving, and only 29% believe they are getting worse. Risk is mainly perceived as a result of credit and equity market volatility. the results KKR MULLS ASIA’S LARGEST PE DEAL OF THE YEAR of the survey show that insurers are focused on the search for returns. They view corporate bonds and public equities as either overvalued or fairly valued; as a result, they are more willing to seek non- traditional asset classes that can offer higher total return potential and compensation in exchange for illiquidity. (Image source: Insurance Insider) This week’s buyout of the week is another packaging one, like last week’s Mauser deal. The WSJ says that KKR is in “advanced talks” to buy Singapore packaging company Goodpack Ltd. for at least USD1 billon. If the deal goes through, it could be one of the biggest acquisitions by a private-equity firm in Asia so far this year, says the Journal. The DealMarket Digest actually had several other choices for buyouts greater-than-one-billion-dollars this week. It is changed days since this time last year when deal sizes were smaller and large deals fewer and far between. Other large transactions in the works are Clayton, Dubilier & Rice rumored targeting of Healogics Inc, which would be a purchase from PE rival Metalmark Capital Holdings for about USD 1 billion, and the potential sale of Red Lobster, which has 680 outlets in the United States and Canada, to the private equity firm Golden Gate Capital for USD 2.1 billion in cash.

3 PREQIN CONFIRMS WHERE THE WOMEN ARE IN PE A research note from Preqin this week revealed that female senior execs are more prevalent by a large margin on the LP side than in the GP side of the private equity industry. Women account for 22% of institutional investors’ se- nior private equity investment professionals compared to just 11% of senior roles at private equity firms, reports Preqin. The data confirms what has long been observed when looking at the gender and title of speakers and panelists at PE industry conferences, at least by the Deal- Market Digest’s editor. Preqin says that North America-based institu- tional investors employ women in senior private equity positions at 26%, while PE firms employ women at about 11%. Institutional investors based in Asia-Pacific have a higher proportion of women at 17% in private equity investment staff, and in Eu- rope, women account for 17%, compared to 12% for private equity firms based in Asia-Pacific and 9.7% for firms based in Europe. Women are best represented in senior private equity roles at foundations (37%), followed by endowment plans (32%) and government agencies (27%). (Image source: Preqin) WHY BRAZIL IS A PE DREAM MARKET Brazil might be in the head- lines because it’s hosting the World Cup, but it is in the private equity media news for different reasons. Brazil has become the darling of Latin America’s private equity market, despite slowing in Brazil fundraising last year. When asked to explain why in a Bloomberg TV broadcast, Cate Ambrose, President of Latin American Venture Capi- tal Association, points to its stable economy over the last 10 years. It has moved beyond the uncertainty and volatility its economy was once known for, she said. Globalization and demand from China for its natural resources are contrib- uting to its attractiveness. Ambrose added that the region has recently found new oil and gas resources. Brazil was also relatively “unscathed” by the financial crisis in 2008 and 2009. “It was a blip on the charts for Brazil as the banks were secure with consumer demand coming back online much faster than the rest of the world,” says Ambrose. Target sectors for PE investors include those driven by the emerging Brazilian middle class, specifically retail, healthcare, education, and fast food.

4 Dealogic has news this week that M&A dealmaking is getting hostile globally as the above graphic shows. In Europe, the volume jump was largely driven by Pfizer’s USD 122.6bn hostile bid for Astra- Zeneca announced on the 2nd May 2014. It is the third largest hostile M&A deal on record, according to dealogic. As a result, Europe is the most targeted region for global hostile M&A transactions with USD 143.8bn due to six deals, up from just USD14.8bn in the same 2013 period. It is also the highest year to date volume since 2007, reports dealogic. North America follows with USD121.2bn in 2014 year to date, again the highest year to date level on record. (Image source: dealogic) RECOVERING EUROPEAN M&A MARKET GETS HOSTILE QUOTE OF THE WEEK: PUBLIC PRIVATE EQUITY “As a CFO, I never market, or make a pitch. My approach is: give people the facts and let them make their own decisions. Who said it: Laurence Tosi, Blackstone Group Chief Financial Officer In context: Laurence Tosi is the CFO of one of a handful of publicly traded PE giants in the US. He not only is involved in Blackstone’s busy dealflow (acquisitions and exits), he oversees four divisional CFO’s and about 65 CFOs in underlying portfolio companies and business units. Tosi was in the news back in 2011 when Apple tried to poach him from Blackstone. The quote above is from an interview published this week by Bloomberg confer- ences where he spoke for 30 minutes about his experience after joining

5 Blackstone post-IPO. It was a challenge because potential buyers of the stock did not understand the private equity business. He says investors would look at the financial reports which showed USD 85 billion in assets, at the time, and a lean payroll, 800 employees at the time, and say to him, “It is great. What is it? I don’t know what it is, but it’s great!” In the meantime, he’s learned how to communicate the PE story and he makes it attractive by delivering the facts. Blackstone now has more than USD 272 billion in assets under management as of Mar 2014. His view on M&A between companies is that the rash of deals underway right now should have been done two years ago when prices were lower. He said, “The time to buy is when growth is scarce”, but he conceded how hard it is to get businesses to take that kind of risk when the cycle is not clearly bottoming out. He still believes Blackstone stock is undervalued compared to other asset managers, given his company’s 50% profit margin, 25% growth rate, and high dividend payouts to shareholders. Where we found it: Bloomberg 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 Editor: Valerie Thompson, Zurich DealMarket DealMarket launched in 2011 and is growing fast. Just one year after launch, DealMarket counts more than 61,000 recurring users from 154 countries, over 3,000 deals & service providers promoted or listed on the platform. DealMarket is an online platform en- abling private equity buyers, sellers and advisors to maximize op- portunities around the world – a one-stop shop for Private Equity professionals. Designed by Private Equity professionals for Private Eq- uity professionals, the platform is easy to use, cost effective and se- cure, providing access, choice and control across the investment cycle. DealMarket’s offering includes • DealMarketPLACE , brings together buyers, sellers, and PE advisors from around the world. PLACE gives access to deals (direct invest ments, funds, and secondaries), investors, and PE service providers. Searching and postingis free. (no commissions). PLACE PRO is the exclusive deal exchange platform made for engaged professionals and companies with a truly unique value added proposition. • DealMarketSTORE offers affordable access to industry-leading third- party information and services on demand; and • DealMarketOFFICE is a state-of-the-art deal flow management tool, helping Private Equity investors to capture, store, manage and share their deal flow more efficiently. DealMarket was voted the “Best Global Private Equity Platform for 2012, 2013 and 2014” by Corporate LiveWire.

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