SEE WHATS NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 121 - December 13, 2013: - US M&A Momentum to Continue in 2014 - More Direct Dealing by LPs - Billion Dollar Buyout of Volvo Rents - Pass the Salt: PE Poised for Five Billion in Food Industry Exits This Week - M&A Global Trend: Mid-Market is the Core - Quote of the Week: Entrepreneurs’ High-Impact

1. DIGEST 121
1
US M&A Momentum to Continue in 2014
More Direct Dealing by LPs
2
Billion Dollar Buyout of Volvo Rents
3
M&A Global Trend: Mid-Market is the Core
4
Pass the Salt: PE Poised for Five Billion in
Food Industry Exits This Week
Quote of the Week: Entrepreneurs’ High-Impact
December 13, 2013

2. US M&A MOMENTUM CONTINUES IN 2014
The US M&A market had strong momentum
during the second half of 2013 and is expected
to continue the pace well into 2014, according to
PwC US. A growing business confidence and the
search for growth opportunities are driving dealmaking, according to PwC’s year-end M&A outlook, released today. “The improved macroeconomic environment and solid fundamentals for
deal making in the U.S. that have been in place
over the past two years have increased the level
of business confidence in the market, fostering
continued M&A activity in 2013,” said Martyn Curragh, PwC’s U.S. Deals leader.
There has been 9,280 transactions representing
USD 944 billion in disclosed deal value. International dealmaking is expected to increase next year. Private equity players accounted for 17 percent of
total deal value as of November, representing USD 163 billion worth of disclosed transactions. They
are benefitting from debt markets to recapitalize their companies and create liquidity for their investors while building strong long-term businesses, which includes making acquisitions.
(Image source: PWC)
MORE DIRECT DEALING BY LPS
The trend towards direct investments by limited partners continues unabated, notes your DealMarket
Digest edtor. This week, Financial News reported that Adveq and The London Pensions Fund Authority
did a co-investment in parcel delivery venture, Secured Mail, whose customers include Amazon, Domino’s Pizza and British Gas owner Centrica. Also this week, Partners Group, a Swiss limited partner
and PE fund manager, announced it had acquired Die Menü-Manufaktur Hofmann, a market-leading
catering services company and provider of frozen food products, according to Reuters. The Secured
Mail deal is the first one for the London Pensions fund, but it is reportedly shifting its strategy towards
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3. direct investments. Partners Group has a bit more experience, claiming more than 100 direct deals
since 1996. In a joint press release with Adveq, the LPFA said it was one of the largest Local Government Pension Schemes funds in the UK. The two co-invested with Next Wave Partners, a UK based
growth capital investor. The trend was spotted and studied by several research organizations this year,
as well as industry media, including Preqin.
BILLION DOLLAR BUYOUT OF VOLVO
RENTS
This week’s deal of the week is a buyout of Volvo’s equipment rental unit to Platinum Equity, a US private equity fund manager for USD 1.1 billion. The information we used to spot the deal is from
Thomson Reuters.
Volvo, which competes head to head with Germany’s Daimler, is reportedly going through a restructuring process to improve the bottom line globally. Besides passenger cars, Volvo makes construction
equipment, buses and engines as well as trucks, according to the report. The sale is part of its strategy to “focus on core business” and to cut debt.
PASS THE SALT: PE POISED FOR FIVE
BILLION IN FOOD INDUSTRY EXITS THIS
WEEK
Private equity firms are divesting portfolio companies in the food and beverage sector at a profit, according to the WSJ. They are selling to strategic buyers and the public (through IPOs). Mentioned in the
report is the acquisition of US Foods Inc to Sysco, which will net investors Clayton Dubilier & Rice and
KKR more than 1.5 times their original investment in US Foods. Other deals include Kainos Capital’s
sale of organic food company Earthbound Farm Inc. to WhiteWave Foods Co., and Post Holdings acquisition of food companies from Tricor Pacific Capital and TA Associates. The report says four exits are
trade sales. The other exit is the IPO of Aramark Holdings, a catering and food services which is
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4. Private equity firms are divesting portfolio companies in the food and beverage sector at a profit,
according to the WSJ. They are selling to strategic buyers and the public (through IPOs). Mentioned in
the report is the acquisition of US Foods Inc to Sysco, which will net investors Clayton Dubilier & Rice
and KKR more than 1.5 times their original investment in US Foods. Other deals include Kainos Capital’s sale of organic food company Earthbound Farm Inc. to WhiteWave Foods Co., and Post Holdings
acquisition of food companies from Tricor Pacific Capital and TA Associates.
The report says four exits are trade sales. The other exit is the IPO of Aramark Holdings, a catering
and food services which is backed by Warburg Pincus, Thomas H. Lee Partners, CCMP Capital Advisors and GS Capital Partners.
M&A GLOBAL TREND: MID-MARKET IS
THE CORE
The large-sized buyouts around the world this year might make the headlines, but mid-market deals
are the cornerstone of global M&A activity. Deals between USD 10 million to USD250 million “consistently” represent about 30% of the overall M&A market over the last five years, according to a new
report called The Mid-Market: M&A’s Core, by NASDAQ OMX and Mergermarket. However the trend for
mid-market M&A is trending slightly downwards due to the economic prospects in Europe and slower
growth in Emerging Markets. Private equity plays a role in these kinds of deals but not as big a role as
one might expect. Year-to-date 2013, there have been 452 buyouts by PE players worth USD35 billion
or about 12% of deals in the mid-market, while there were 393 exits worth USD 35 billion or about 11%
of totals.
Key findings:
• M&A by private equity players has gone down in the past two years (See chart above). Global
mid-market private equity volume saw a drop in 2012 from 2011’s levels, although 2013’s numbers
are currently keeping pace with last year’s volume.
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5. • The Asia-Pacific region saw the most deal activity with 1,317 transactions for 2013 year-to-date
• Cross-border mid-market activity in the same deal range comprises 42% of deal volume and 45% of
deal value compared with the overall mid-market deal volume of 3,719 deals worth USD 246bn
(Image source: Mergermarket)
QUOTE OF THE WEEK - ENTREPRENEURS’
HIGH-IMPACT
“To create and maintain economically stable communities, it takes a diverse blend of high-impact
entrepreneurs. The capital markets need them. The economy needs them. And most of all, our communities need them...”
Who said it: Bryan Pearce, Americas Director Entrepreneur Of The Year and Venture Capital Advisory
Group Leader
In Context: Private equity and venture capital companies are entrepreneurial but their real strength is working with and nurturing great
entrepreneurs running businesses, so it is fitting that we highlight
some research on entrepreneurs by EY this week. On the occasion
of its 27th annual “EY Entrepreneur of the Year Award”, EY analyzed
the performance of more than 650 nominated entrepreneurs that are
running quick growing companies to find the key success factors,
and put out a report about it last month. It describes in detail the
qualities, concerns and performance of the candidates for the award.
These entrepreneurs are running both public and private companies.
They particularly excel in the areas of revenue growth, with median
sales growth of more than 30% per year in each of the last two years,
and headcount, with the average headcount of more than 30% per
year in each of the last two years. Most of the finalists are running privately owned companies, representing 88% of the finalists for the awards.
Where we found it: The vital entrepreneur: High impact at its best
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abstract that discusses the significance of the articles selected. It is a free
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Editor: Valerie Thompson, Zurich
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