Private Equity & Venture Capital 2013
November 2013 | PRIVATE EQUITY
Financier Worldwide canvasses the opinions of leading professionals around the world on the latest trends in private equity & venture capital.
“PE activity remains robust in the US. Through 31 October, PE firms have announced deals valued at $113bn, which is up nearly 30 percent on a value basis versus the same period last year. However, the number of deals has fallen by almost 20 percent, so what we’re seeing is a smaller number of larger deals. That’s being enabled by robust credit markets..”
KPMG in Canada
“The market has fluctuated significantly in the last 12 to 18 months, particularly in the last six months. The period began with little transaction activity; however, it has increased rapidly. We believe this activity has been driven by high quality assets available for sale, capital availability, and easily accessible debt markets. In Canada, we are starting to see transactions trading at high multiples with greater involvement from US private equity funds in these types of acquisitions.”
Carlos Alexandre Lobo
“We continue to see substantial deal making activity in Brazil involving both domestic and international PE firms from the US and Europe. The sectors that are drawing the most attention are the ones related to the growing middle class, such as health, education and financial services. We have also seen private equity investments in public companies, mainly as a result of the poor performance of the capital markets this year and also due to depreciated stock prices..”
“The UK has remained resilient during 2013 and continues to lead the European PE market despite challenging market conditions. We have seen deal volumes improving during 2013 and, by the end of Q3 2013, there were 139 deals with a combined value of €12.4b. The relative safety that sterling offers in light of the eurozone volatility has made UK PE assets extremely attractive, in particular to North American investors.”
“On the structural side, one recent trend we have seen has been the extension of the life of limited partnerships due to realisations not having materialised as anticipated. This has occurred, pursuant to the terms of the limited partnership agreement, either with the investors’ consent or at the general partner’s sole discretion. Deal flow is not as fruitful as it used to be and we have seen decreased deal activity, especially on the secondary market.”
“As the pipeline of significant multi-billon euro deals materialises, Germany has been able to claim four of the top five largest buyouts completed by the end of Q3 2013. The appetite for deals in Germany has been strong throughout 2013 and the low levels of deal completions seen earlier in the year were not reflective of market activity. By the end of Q3 2013 we saw the combined value of buyouts in Germany – €11.3bn – exceed the total value of €8.3bn for 2012.”
“In 2012, Russian private equity witnessed what was probably the highest level of activity since the 2008 crisis, with a number of private equity deals completed in the $100m to $500m region. The Russian Direct Investment Fund closed its first year of operations and became a dominant player in the market with US$10bn in capital to deploy for infrastructure development projects, and a mandate to co-invest on every deal with foreign investment capital.”
“Although auctions are still seen, especially for the most valuable assets, proprietary deals are increasingly becoming the selected path for many players. Deal certainty, as opposed to price enhancement, is one of the most powerful drivers today. Transactions and deal negotiations continue to be protracted and usually extend far beyond six months before completion.”
“While activity levels remain below the long-term average for fundraising and transactions, they differ from region to region. Luxembourg, as a hub for investment structuring, has increasingly been focusing on Nordic countries, mainly due to their resilience to the crisis. The move towards emerging markets has also been consolidated – in addition to BRIC countries, we are seeing more investment in the Next Eleven, especially in natural resources and infrastructure investments.”
Amarchand & Mangaldas & Suresh A. Shroff & Co.
“The general trend has been a wait and watch approach by PE funds. There are investments taking place but not at the frenzied pace which was prevalent in 2007-2009. We have seen more small and mid-size investments, rather than big-ticket deals. There appears to be a high supply of capital chasing fewer attractive targets. The mood is largely one of caution also due to the regulatory uncertainty surrounding the Indian market and lack of efficient enforceability mechanisms for rights negotiated by PE investors with domestic promoters.”
“Over the last 12-18 months, PE activity has been slower and deals smaller. After the peak of 2006-2007, the market has quietened down as it waits to see out how those deals will work out. There is also the added impact of the global economic slowdown. Deals that we see have largely revolved around linking China with Taiwan. Taiwanese brands and products are very much favoured by Chinese consumers, and PE firms see Taiwan as a jumping board to the much larger Chinese market.”
KPMG South Africa
“Deal making in the South African private equity market over the past 12-18 months can be best described as flat. The main reason for this is that, given the current low growth market, the mature funds have extended their portfolio holding period mandates and the new private equity funds are yet to deploy. This is anticipated to change significantly over the next two years as the mature funds exit, and the significant capital raised in 2012 and 2013 requires deployment.”
Amarchand & Mangaldas & Suresh A. Shroff & Co.