DIGEST 140

May 09, 2014

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Buoyant: MENA M&A Gains Momentum

Fire Sale: PE Bidders Sought in Billion Dollar Minimax Deal - Draft

Price is No Object in Silicon Valley’s Race for Technology Dominance

Big Deals: SWFs, Family Offices Go Directly Into Euro Venture Capital Market

First-Time PE Fundraising Bottoming Out?

Quote of the Week: Getting Emotional Post-M&A

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BUOYANT: MENA M&A GAINS MOMENTUM First quarter M&A dealmaking in the Middle East (excl. Israel) was up to USD 2 billion, double the Q4 2013 val-ue of USD 1bn, according to Merger-market data. The region is definitely trending upward after hitting a low in 2011. The report said that a mere five trans-actions represented 85.3% of the total M&A value in the region during Q1 2014, which means that deal size is also growing. The top deal was the acquisition of the Qatari based Bar-wa Bank by Qatari Diar Real Estate Investment Company, for USD 0.7 bil-lion. Foreign investments into the reg-

ion have seen a dramatic increase at over twelve times the value seen in Q1 2013. The Netherlands invested almost half of the total inbound value in the region. Outbound deals were also dramatically up 104.2% compared to Q1 2013. Excluding 2008, the United Arab Emirates has been the most active out-bound investor for eight years, accounting for a total of USD 4.4bn (67% of the total outbound value). Private equity funds are expected to flow to key markets, such as Saudi Arabia, UAE and Turkey, and the favored sectors are consumer, healthcare and education. (Image source: mergermarket)

FIRE SALE: PE BIDDERS SOUGHT IN BIL-LION DOLLAR MINIMAX DEAL

This week’s buyout of the week is a rumored sale of Minimax, a Germany-based fire extinguisher systems and device manufacturer. It is up for sale for USD 1.8 billion in a transaction initiated by its current PE owner, according to unnamed sources reported by Reuters. Bids are hoped to come from the likes of Blackstone, Cinven, Permira, CVC and Onex. The valuation would enable its current owner, IK Investments, to double the money it invested in the group. The Minimax has a little over billion in revenues. If one of the PE groups win the bidding, it will be the third time the company has been traded amongst PE owners since Investcorp first purchased it in 2003. (Image source: Minimax website)

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A new study by PrivCo, a data and information provider, ranks private company ac- quirers by number of acquisi-tions in 2013. YAHOO! was the top acquirer last year and it also paid hefty multiples for its purchases, according to Privco. For example, it paid USD 1.1 Billion for Tumblr, which was an 84.6x multiple of the previous year’s revenue. Google was number two with 19 deals. And Autodesk, which has a very long and very active tradition of acquiring rivals and innovators, was number three with 11 deals. The tech M&A is enabled by the high stock prices of publicly traded tech compa- nies who use their stock as currency for expensive acqui- sitions and increasing the size of their “war chests”. Com- ing in at number nine was the only PE company that made the ranking, Marlin Equity Partners, which was actually tied in 2013 with IBM, Groupon and Twitter. See more here. (Image source: Privco)

PRICE IS NO OBJECT IN SILICON VALLEY’S RACE FOR TECHNOLOGY DOMINANCE

In recent weeks, many of the larger trans-actions in the European venture capital market have been led by US investors and other “unusual” investors, such as Sovereign Wealth Funds and family of-fices, according to the latest analysis from Go4Venture Advisors. Some of the inves-tors named are Victory Park Capital (credit investment), Fidelity International (large institutional investor), GIC Private Limited (sovereign fund), Vulcan Capital and MSD Capital (both family offices of high-profile

tech entrepreneurs). Clearly, this is a much more diverse set of investors representing a deep pool of capital. These developments show how much the European market is maturing, says Go4Venture, albeit from a base that is far below that of Silicon Valley. The analysts note that there the European VC market is seeing a “high-energy, cross-border, international” dynamic with a focus on sizable exit opportunities, rather than risk mitigation, which is more typical for European venture. (Image source: Go4Venture Monthly Bulletin)

BIG DEALS: SWFS, FAMILY OFFICES GO DIRECTLY INTO EURO VENTURE CAPITAL MARKET

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FIRST-TIME PE FUNDRAISING BOTTOM-ING OUT?

LP sentiment has waned significantly for maiden vehicles in recent years but that may change this year, according to the latest analysis of fundraising data from Preqin. Since 2011, the amount raised by first time fund managers has been on a steady year on year decline. While the trend is a tad depress-ing, there are still some first-time funds that are able to reach a successful close, say the analysts. An example from 2014 YTD is SwanCap Investment Management which raised USD 1.2bn for its debut vehicle, SwanCap Opportunities Fund, a secondary buyout fund. The reluctance to invest by LPs stems from the risks associated with placing their money with a firm that does not have any track record of success in private equity fund management, says Preqin.The analysts at Preqin seem optimistic about a change in LP sentiment this year, saying that there are still three-quarters of the year to go and 2014 “already seems to be painting a promising picture for first-time fundraising”, with much potential for last year’s figure of USD 35 billion. In other words, the downward trend may be bottoming out after hitting its peak year in 2007 when first-time private equity fund managers raised an aggregate USD 96 billion for investment. (Image source: Preqin)

QUOTE OF THE WEEK - UNCORRELATED RETURNSThe penny really drops when teams can see a shared vision of what the new company looks like. It shows that the leaders mean business, and creates a sense of excitement about the ambition of the new organisation.

Who said it: Martin Clarkson, Chairman and Founder of The Storytellers

in Context: With M&A markets heating up to record breaking levels, this quote from Clarkson is timely. The main focus during due diligence for M&A is often on financials

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and governance, but considering cultural difference is critical factor too, and often overlooked, says a report recently pub- lished by Mergermarket and The Storytellers, which is where we found this quote. Post-merger, the most important factor leading to success is “integrating systems and processes”, and second most important is “integrating people and cultures”, says the report, which was based on a survey of 100 senior executives with experience of the M&A process using a mixture of quantitative and qualitative questions. The survey results reveal that making employ- ees feel “emotionally at-tached” and “proud” of the new organization created are key factors for an easy integration and “high level of synergies”. Clarkson, who is a high-profile UK-based corporate communications and management consultant, knows how emotional fac-tors contribute to M&A success stories. He’s built a thriving He’s built a thriving consulting company based on helping business leaders do just that and his company website has published case studies to prove it. His thesis is that if business leaders get the emotional part right, they can drive a workforce that is determined to achieve a successful outcome. And just how long does it take to get employee “buy in”? It takes about 48 days, according to 93% of respondents. See the graphic (left) for more in-sight from Clarkson and his colleagues.

Where we found it: The Storytellers Report - The Missing Chapter

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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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