DIGEST 123

January 10, 2013

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M&A Trend: Global Wealth Management Sec-tor 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 Street4

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M&A TREND: GLOBAL WEALTH MANAGE-MENT 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 man-agers. 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 acqui-sitions as a proportion of assets under manage-ment 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

PREQIN SAYS... HIGHS HIT FOR FUNDRAISING, DEALMAKING & EXITS ’13End of year tallies from Preqin reveal that PE raised the largest amount of capital globally since the financial cri-sis of 2008. Global private equity fun-draising 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 signifi-cant drop in fundraising levels. An-other Preqin study revealed that the aggregate value of PE-backed buyout

Deutsche Bank’s Tilney wealth management arm, as well as Bestinvest, and Carlyle Group, which ac-quired 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.

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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 success-ful 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)

BILLION DOLLAR BRAZIL HEALTHCARE BUYOUT

deals also hit a high with 2,830 private equity-backed buyout deals announced throughout 2013 rep-resenting 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”.

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This issue of DealMarket Digest is full of news this week about a record-breaking year for the PE industry. Not only exits, LBO deal-making and fundraising are up, so are cash returns to limited partners. The WSJ is reporting that private equity firms are expected to return more than USD 120bn to their limited partners in 2013, topping the previ-ous year’s record of USD 115bn, ac- cording to estimates by Cambridge Associates, which advises investors on allocations to the asset class. Buyout groups returned USD 60.8bn to investors in the first half of this year, according to the report which cited Cambridge Associates re-search. Strong capital markets were the enabling force, particularly returns generated via initial public offerings of portfolio companies.Debt refinancing was enabled by low interest rates last year. The result was that PE -backed companies sold USD 66.2bn worth of bonds and loans in 2013 to deliver cash back to shareholders, eclipsing the record USD 64.2bn of 2012, according to data provider S&P Capital IQ LCD in the WSJ report. The article concludes that this kind of activity will continue in 2014 as private equity funds still have many assets they need to exit from.

TECH STOCKS’ IPO POPS WERE TOPS IN 2013

PE RETURNS RECORD AMOUNT OF CASH IN 2013

Dealogic says that US technology IPOs and the highest average one-day return since 2000 with a performance of 41% gains, the high-est 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

since 2009 (46%).

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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. Pri-vate equity employment is outgrowing hedge funds and investment banking for employment growth, according to Job Search Digest. It says that “overall, since Janu-ary 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

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.

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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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