DIGEST 134

March 28, 2014

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African Private Equity Players Are Confident as Track Records Deepen Billions for Secondary Buyout of Florida Digi-tal Media Company

Asia Pacific PE-backed M&A Highest on Record Family Offices Expect High Returns for PE and Real Estate

M&A Quarterly Trends: Up in the Middle East and Down in Europe, Nordics and CEE Quote of the Week: An Enviable Funnel

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AFRICAN PRIVATE EQUITY PLAYERS ARE CONFIDENT AS TRACK RECORDS DEEPEN

Strong PE fundraising and brisk dealmaking in the extraction sector are the two big trends in the African PE market in 2013, according to the latest survey by Deloitte. Confidence in PE in Africa is increasing. Kenya figures prominently by number of deals, as does South Africa, followed by Nigeria. Track records are deepening, growth is strong, risks are man-ageable and LPs continue to rate the region highly amongst their emerging market options, said Deloitte. The extractive industries had the highest value of reported deals in Sub Saharan Africa in 2013. Three large energy deals accounted for 63% of the year’s total reported investment. In 2011, the top three deals by value only accounted for 43% of the year’s total, and were spread across three different sectors. The largest deal done in 2012 barely topped USD 200m, said the report. The largest deal in this sector was a USD 1.53bn transaction, involving Helios Investment Part-ners alongside BTG Pactual in a 50/50 joint ven-ture with Petrobras International Braspetro B.V.,

a subsidiary of Petrobras, to explore and produce oil and gas in Africa, through a specialized invest-ment vehicle. Measured by the number of deals, the manufacturing and financial sectors recorded the highest number of transactions (13 each), followed by agribusiness (12), TMT (7) and infrastructure (6). The Deloitte survey is based on 42 GP survey responses and three responses from Limited Partners. (Image source: Deloitte).

BILLIONS FOR SECONDARY BUYOUT OF FLORIDA DIGITAL MEDIA COMPANYThis week several mega deals that we’ve selected in the past for our private equity buyout of the week item are still in the news ( Compuware, Gates Global and Safeway) as acquirers try to win bidding wars. What is new this week is a USD 2.5 billion buyout of Catalina Marketing by Berkshire Partners, according to Reuters. Catalina Marketing is a St. Petersburg, Florida company that provides loyalty and digital media services solutions for consumer retail companies, has been owned by Hellman & Fried-man since 2007. It reportedly paid USD 1.7 billion for the company.

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FAMILY OFFICES EXPECT HIGH RETURNS FOR PE AND REAL ESTATE

ASIA PACIFIC PE-BACKED M&A HIGHEST ON RECORD Asia Pacific private-equity-backed mergers and acquisitions (which includes Entries, Exits & Port-folio transactions but excludes add-ons) were up a whopping 185 % compared to the same period last year ( up from USD 9.6bn in 2013 YTD to USD 27.4bn in 2014 YTD). It is the highest YTD on record, according to Dealogic. China is the most targeted nation for Asia Pacific deals. South Korea and Ja-pan follow. The most targeted sector is Real Estate, followed by Food and Beverage and Professional Services. One large deal drove Real Estate sectorand China volume, specifically when a consortium

of investors, including financial sponsor CDH China Holdings Management, of Greenland Holding Group, was acquired by Shanghai Jinfeng Investment for USD 10.7bn. The sale of a PE-backed Korean beer brewing company to ABInBev drove the Food & Beverage sector and South Korea volume. (Image Source: Dealogic)

Family offices recently polled by Complementa and Bayerischen Finanz Zentrum expect modest re-turns of between zero and five percent for their entire portfolios, but for private equity and stocks their expectations are much higher. According to their latest family office survey of 75 family offices in Germany, Austria, and Switzerland, the most important investment objective of more than half of the family offices surveyed (65 percent), is the preservation of capital, in addition to a constant cash flow adjusted for the inflation rate. Asset managers surveyed said they favored stocks, with 25 percent of respondents giving them the greatest allocation. The cash portion of the portfolio has averaged 9.6 percent. In addition, the respondents favor real estate, allocating 16 percent to it, and 10 percent to private equity. Other allocations are much smaller, e.g. hedge funds 3.5 % and commodities 2.3 %.

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M&A 4TERLY TRENDS: UP IN THE MIDDLE EAST & DOWN IN EUROPE, NORDICS & CEE Zephyr recently released first quarter Mergers and Acquisitions (M&A) figures for 2014, revealing that deals targeting companies based in Western Europe declined for the third consecutive quarter and volume slipped to the lowest recorded since Q3 2012. A similar trend was evident in the Nordics in the last available quarterly report (Q42013) where value fell by 17 per cent in Q4 2013 as a result of fewer big ticket deals announced during the quarter.A bright spot was the Middle East, with the value of deals targeting companies there increasing by a whopping 57 per cent in Q1 2014 to USD 3.06 billion up from USD 1.94 billion in Q4 2013. The volume increase was boosted by three very large transactions, which accounted for 57% of the total. In Cen-tral and Eastern Europe (CEE) M&A failed to continue the momentum achieved in the previous quarter, which marked a two-year high.

QUOTE OF THE WEEK - AN ENVIABLE FUNNEL“We have consciously dedicated substantial resources to building out our investment platform so that we can select from an even larger and in-creasing set of investment opportunities.”

Who said it: André Frei, Partner and Co CEO Partners Group (Switzerland)

In Context: Partners Group announced its annual figures this week, re-porting a healthy performance and growth for the year 2013, which is the source of the quote above. Frei’s statement refers to the remarkably privileged deal flow and selection process that Partners Group has in place. For example, it screened 764 PE direct deals last year and it also screened USD 69.6 in billion in secondary PE transactions. The graphic here illustrates its enviable deal flow funnel in 2013. According to its annual report, a highly selective investment ap-proach means a 97% decline rate on all investments screened.

Partners Group is one that can be given the label smart money investor. It has become a major player in private equity, as an institutional investor, as direct investor, and as debt finance provider in the past decade or so. It clearly sees its main business line as being PE and the figures back up that claim, specifically it has EUR 20.1 billion in private equity, EUR 4.9 billion private real estate, EUR 3.0 billion private infrastructure and EUR 3.4 billion private debt. It is worth noting Partners Group has EUR 31.6 billion in assets under management and a head count that is trending towards 1000 professionals em-ployed around the globe. (Image source: Partners Group)

Where we found it: Partners Group website

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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 notewor-thy news items, scoping trends and currents events in the global private eq-uity 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:  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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