DIGEST 112

October 11, 2013

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PE Outbid in Darling-Vion Mega Deal

PEI Identifies PE World’s Operational Leaders

Twitter IPO Offers Rare Insight into HNW In-vestors Lack of IPOs in Brazil offers PE opportunities

Raising Private Financing for the first time? Some tips from PrivCo

Quote of the Week: Mobile Messaging VC Trend

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PE OUTBID IN DARLING-VION MEGA DEAL

This week’s deal of the week is about one that got away. Reuters reports that US-based food business Darling International is to buy Dutch meat producer Vion’s ingredients division for EUR 1.6 billion. It was a “blow to private equity firms bidding for the unit”, say the report, which explained that Darling won a competitive auction to buy the business that attracted interest from private equity firms Advent, Apollo, CVC and Permira as well as German trade buyer Saria and private equity firms. In a back-ground section, Reuters said that Vion Ingredients is headquartered in the Netherlands. It employs 6,000 staff and produces gelatine, proteins and fats from slaughterhouse byproducts which are then sold to the pharmaceutical, cosmetics, food, feed, tech, and energy.

PEI IDENTIFIES PE WORLD’S OPERA-TIONAL LEADERS A lot of PE funds make the claim of adding value operationally. According to PEI, they have been talking the talk, but its mission was to find out who really can walk the walk. Its Operational Ex-cellence Awards in 2013 answer that question again this year. In the large cap category it recog- nizes 3i, Terra Firma and KPS, along with nine others, including second-time winners Headland Capital and Nordic Capital. In the Americas, 3i won the large-cap category for its investment in moldings company Mold Masters, which saw revenues grow 60 per- cent under the firm’s ownership. In the EMEA region, the large-cap category went to Terra Firma for its investment in residential landlord Deutsche Annington, which grew from a set of ten German Fed-eral Rail housing portfolios into the largest privately owned residential landlord in Germany.

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this is the second time that the awards were made to acknowl-edge the achievements of the PE industry’s best-in-class opera-tors. Entries were invited from three regions – Americas, Asia and EMEA, then divided up into three distinct size categories, according to the value of the original deal – large cap (greater than USD500 million), mid-cap (USD50 million to USD500 million) and small-cap (less than USD50 million). Apparently the nominations were so numerous in the mid-cap

category that PEI had to split that category into two – lower mid-market and upper mid-market. From the four groups, 36 finalists emerged. Picking the 12 winners was no easy task for PEI’s three regional panels of industry experts, but tough decisions were made and votes were cast.

Two firms that won awards in last year’s competition took home prizes once again: Headland Capital in the large-cap category in Asia and Nordic Capital in upper mid-cap category EMEA. The rest are first time winners. The judges included David Currie, former chief executive officer of SL Capital Partners; Wai Kay Eik of PwC’s Pri-vate Equity Transaction Services group;the University of Chicago’s Steve Kaplan; Tim Kelly of Adams Street Partners and Conor Kehoe of McKinsey’s European private equity practice.

TWITTER IPO OFFERS RARE INSIGHT INTO HNW INVESTORS

Last week we wrote about the trend that sees more family offices and high-net worth individu-als participating in venture capital rounds before mezzanine financing, and this week the Twitter IPO filings provide some more insight into who some of these typically low-profile investors cur-rently are. Forbes and Reuters, as well as AllTh-ingsDigital studied the SEC filings and did quite a bit of research to find out more about who will benefit from a Twitter IPO.Reuters wrote about the “little known” Hollywood media PE investment fund that ventured into technology investing, a fund called Rizvi Traverse, which holds a valuable stake in Twitter. It also re-minded readers about another investor, pointing

to its exclusive interview with billionaire Prince Alwaleed Bin Talal Alsaud who told Reuters he had invested USD 300 million in late 2011 and his long term view onthe stock. He said he did not plan to sell any shares in the public offering. Forbes wrote about the larg

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A cooling economic growth rate, which affects valuations, and closed IPO market, which limits avail-able capital for business to use for growth investments, is making PE more attractive in Latin America, writes Euromoney in an article that discusses the latest research from Latin American Venture Capital Association (Lavca). Noteworthy is that fundraising is up 100% over the same period last year, to USD 3.8 billion with final or partial closings for 36 separate funds raised in the first six months of 2013. Furthermore, proceeds from exits were up 67% on the first half last year, to USD 1.5 billion (See Euro-money graphic for more information).

Currency depreciations are affecting Brazils PE market, while Mexico is seeing fewer large cap deals. At one time Brazil was the main target for PE dollars, and it still attracted 70% of the money in this latest reporting period but Peru, Columbia, and Mexico are coming online.

LACK OF IPOS IN BRAZIL OFFERS PE OPPORTUNITIES

est shareholders, saying that two are billionaires, one newly-minted after his stake in the company was revealed, namely Evan Williams who owns 12% of Twitter, and current chairman, Jack Dorsey, who holds about a 4.7% equity stake, not including options. Director Peter Fenton also holds 31.6 million shares for Benchmark Capital. And AllThingsDigital contributed to the topic with a discussion of the messaging startup’s revenues and losses, but also highlighted its earlier reports that revealed the other “5% Stockholders”, which include, Rizvi Traverse, Spark Capital, Benchmark, Union Square Partners and DST Global.

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This week we discovered a useful article for entrepreneurs in PrivCo’s knowledge bank online. It is useful if you are considering taking on a private equity investor and want to see the bigger picture. The article is published by PrivCo, a business and financial information provider specialized in including family owned, private equity owned, venture backed, and international unlisted companies. While the private company financing overview is targeted at US-based business owners, much of it has a wider value. It is the kind of info that can help business owners looking sell shares in their company to make better decisions and manage risk. The tutorial includes detail on the types of funding available for en-trepreneurs considering a private equity investment, as well as practical advice, such as, making sure you adhere to regulatory frameworks early on. It says, for example, “Even to raise the most basic An-gel Investor funding, it’s very important that private companies follow securities laws, make full writ-ten disclosure to investors of the terms of the offerings and how risky the investment is…” And there is the reminder to raise money primarily or solely from sophisticated investors, knows as “accredited investors”. A concise history of Private Equity and Venture Capital, including the three boom and bust cycles of PE, as well as details on the advantages and disadvantages of raising angel capital. Informa-tion about term sheets, terminology, and evaluation criteria used in venture capital are also provided. It is a great backgrounder for anyone new are coming back to PE.

QUOTE OF THE WEEK – MOBILE MESSAG-ING VC TREND“From South Korea-based KakaoTalk to Cypriot startup Viber, mobile messaging apps are being used by millions globally. And as mobile messaging startups continue to proliferate, venture capital investors are stepping in to fund them.

Who said it: CB Insights

Context: In an excerpt from one of its latest VC funding research reports, CB Insights said that financing for mobile messaging startups has increased by 60% this year. The segment is hovering up money, USD 212 million in 35 deals. Over half of that funding came in Q2’13, as Snapchat, Kik Interactive and MessageMe all took financing rounds in the tens of millions from prominent VCs including Benchmark Capital, Andreessen Horowitz and Union Square Ventures, it said. Geographically, mobile messaging has evolved into a global, and rather fragmented, market. For ex-ample, international markets including Japan, South Korea, Finland and Canada all saw at least one mobile messaging venture deal over the past two years. Venture-backed mobile messaging startups in the U.S. tend to reside in either Silicon Valley (40% of all deal activity) or SoCal (17%).

Where we found it: CB Insights

RAISING PRIVATE FINANCING FOR THE FIRST TIME? SOME TIPS FROM PRIVCO

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