ANNUAL REVIEW

Private Equity & Venture Capital 2016

December 2016  |  PRIVATE EQUITY

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Against a background of ongoing macroeconomic and political volatility in certain jurisdictions, private equity and venture capital activity has been something of a mixed bag in 2016. In the US, for example, the number of deals fell year-on-year compared to 2015. The Japanese PE market, by contrast, was particularly attractive. In other jurisdictions, such as Ireland, there was an increase in new PE players into the national market, but the volume and value of deals fell markedly as Brexit and other issues began to have an impact.

 

UNITED STATES

Frank Fumai

Deloitte & Touche LLP

“Private equity (PE) activity remains strong in the US. While industry research indicates a slowdown in the number of deals closing, parties are busy striving to put limited partner (LP) money to work. Competition for deals in the marketplace is robust, with PE dry powder and excess cash on corporate balance sheets both at record high levels. This competition, along with higher values, has only intensified the search for the perfect deal. One result is that higher quality deals are closing, which could favourably impact future returns.”

 

CANADA

Benjie M. Thomas

KPMG Canada

“Canada’s private equity (PE) markets have been quite robust over the past 18 months. The second half of 2015 saw 150 PE transactions valued at $21bn, bolstered by an additional 191 deals, with a combined valuation of $31bn during the first three quarters of 2016. Although deal value and volume has dropped year-over-year, Canada’s market continues to attract foreign capital from both US PE firms and international investors. The generational transfer of wealth that people have been waiting for is now also coming into full swing, which is driving increased activity from strategic buyers – a trend that is likely to continue for some time to come.”

 

CAYMAN ISLANDS

Simon Raftopoulos

Appleby

“The bulk of activity in Cayman continues to occur in the middle market. Significant investments by private equity (PE) firms into multijurisdictional trusts and corporate services continue as well. Asset classes that provide key historic earnings growth, the potential for strong new business flows and opportunities for expansion are always going to be attractive. I would also not be surprised if we see more substantial acquisitions for this sector, and perhaps a few exits in the luxury real estate sector. Five Mile Capital’s significant investment into Cayman has elevated the Ritz Carlton to the premier resort destination in the Caribbean.”

 

GUERNSEY

Adam Moorshead

JTC Fund Solutions (Guernsey) Limited

“We have seen encouraging levels of transactions over the last 12-18 months; however, YTD 2016 is trailing its corresponding period from 2015. The short term economic and political uncertainty means a mismatch in the valuation expectations, so depressing deal activity. This is understandable given this has been a year of surprises, with the UK referendum and the US election producing unexpected results. There remains a lot of competition at the deal level, with managers holding onto assets for longer and an increasing amount of dry powder in the market as PE firms wait patiently for investment opportunities.”

 

IRELAND

Colin Farrell

PwC Ireland

“After seeing strong volumes of dealmaking in 2015, which was predominantly driven by greater confidence in an improving economic environment and better access to finance, we have noted a slowdown in the volume and value of deals in 2016. This has been predominantly driven by macroeconomic uncertainty over events such as Brexit, effects from which Irish corporate activity – in line with corporates globally – has not been immune. Nonetheless, the past 12-18 months have seen some new private equity entrants to the Irish markets. Commercial real estate was yet again one of the most active sectors over the past year, followed by significant activity in the IT and FinTech sectors.”

 

PORTUGAL

Ricardo Andrade Amaro

Morais Leitão, Galvão Teles, Soares DA Silva & Associados

“Private equity (PE) dealmaking in Portugal in 2016 has been marked by the interest of international fund managers in infrastructure assets, particularly in the energy sector. Such interest has resulted in several high-profile deals being struck. However, transaction values are generally not disclosed. Also, venture capital activity appears to be gaining pace in the country with several ‘seed investment rounds’ being made by national and international funds in Portuguese based start-ups. This reflects the flourishing entrepreneurial environment in Portugal’s capital city, Lisbon.”

 

SWITZERLAND

Konstantin von Radowitz

Deloitte AG

“The decoupling of the Swiss franc from the euro at the beginning of 2015 has made investments in Switzerland generally more expensive for private equity (PE) funds denominated in euros. In addition, recent global political developments, as well as the relative scarcity of relevant Swiss assets, are a challenge for PE funds. The dealmaking volume in Switzerland has increased over the last few years, and the PE M&A environment in German-speaking Europe has been stable, driven by positive economic momentum and financially well-resourced PE firms.”

 

CZECH REPUBLIC

Helen Rodwell

CMS

“Central and Eastern Europe (CEE) is traditionally mid-market territory, with the odd ‘mega deal’ exceeding the €500m mark. Over the last year or so, we have witnessed an unusually high level of activity in the higher value bracket, including the acquisition of Allegro by Cinven and Permira in Poland, the acquisition of supermarket chain Profi Rom Food by Mid Europa Partners in Romania and the forthcoming sale of the CEE brewery assets of SABMiller. In contrast to previous years where there were fewer attractive targets in CEE for global funds, the current mega deals have put the region back on the map for global investors and have increased the competition for deals.”

 

JAPAN

Shigeki Tatsuno

Anderson Mori & Tomotsune

“The last year or so has seen a dramatic increase of deals in Japan involving private equity (PE) funds, which points to the heightened appeal of the Japanese market. In particular, PE funds, from both home and abroad, have shown increasing interest, not only in large buyout type transactions, but also in Japanese ventures involving the latest technologies, such as the internet of things (IoT), artificial intelligence, FinTech, life science companies and innovative manufacturing. This, in turn, has intensified competition among PE funds and other investors in identifying and acquiring ventures with high-growth potential.”


CONTRIBUTORS

Anderson Mori & Tomotsune

Appleby

CMS

Deloitte & Touche LLP

Deloitte AG

JTC Fund Solutions (Guernsey) Limited

KPMG Canada

Morais Leitão, Galvão Teles, Soares DA Silva & Associados

PwC Ireland

 


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