Our weekly pick of Private Equity News

1. DIGEST 82
SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 82
Endowments and Pension Funds
1 Still Liking Alt Asset Class
Towers Watson’s Top Five
2 Predictions for Global M&A Market
in 2013
2 India’s Biotech Sector Potential is
USD 100 in Next Twelve Years
3 Dell LBO’s Big Buzz
Tectonic Shift and a 10X Exit for
3 European Venture Capital
Quote of the Week:
4 Google’s Larry Page on 10X
February 08, 2013

2. ENDOWMENTS AND PENSION FUNDS
STILL LIKING ALT ASSET CLASS
Image source: NACUBO
Several articles this week report on the preferences for alternatives and private equity as expressed by
pension funds and endowments. They are still putting money into PE, it seems. The top 200 pension
plans are benefitting financially from alternative investments, according to Pensions & Investments
latest retirement plan survey, although the survey results noted a decrease slightly in some of the PE
categories, with buyouts increasing by 4%. The article said that private equity's share of assets was
down 60 basis points to 9.4%. The WSJ says that US endowments are still increasing their allocations to
PE on a steady basis. They are allocating about 54% on average to alternatives, which includes private
equity (see image). Another study reported by Reuters says that pension funds in Australia, Canada,
Japan, the Netherlands, Switzerland, Britain and the United States have upped alternative investments,
including property, hedge funds, private equity and commodities, from 5 to 19 percent since 1995. The
funds add riskier, higher-yielding assets to portfolios to compensate for shortfalls in funding. Britain has
increased its exposure to alternative assets the most, from 3 to 17 percent, followed by Switzerland,
Canada, the United States and Australia.
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3. TOWERS WATSON’S TOP FIVE
PREDICTIONS FOR GLOBAL M&A
MARKET IN 2013
It is still the season for prediction. This week, we learn that Asia Pacific is still strong in M&A, but
European-initiated deal volume won’t be. These are just two ideas developed in a good article from
Towers Watson.
Key points in the top five predictions
• The Asian market will continue to grow, led by Chinese and Japanese firms.
• Chinese firms to Acquire in Europe in a big way. Expect some big-name companies to be targeted by
cash-rich Chinese organizations.
• European deal volumes to remain subdued. 2012 was bad for European acquirers and 2013 volumes
are unlikely to show much improvement.
• Surge in late 2012 is not a trend that will continue. Despite the large number of transactions
completing in the final few weeks of the year, this is more likely to be a rush to the finish line for
existing deals rather than signaling an upward trend.
• North American stability to continue. Not much change expected in M&A in North America during
the first half of 2013, but there may a surge in activity if the economic conditions continue to
improve and confidence grows.
INDIA’S BIOTECH SECTOR POTENTIAL IS
USD 100 IN NEXT TWELVE YEARS
2 Image source: ABLE Indian Biotechnology Roadmap to the Next Decade and Beyond
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4. India has a wealth of intellectual capital in biotechnology and healthcare to be developed, and its
government is aiming to create a framework to develop it, according to The Hindu Business Line, which
could be good news for private equity investors. As a reference, the article points out that Singapore’s
Tamasek doubled its assets under management by investing in high tech industries. India could emulate
such strategy for the kind of investment involved in growing it biotech sector into a USD 100 billion one
by 2025.
DELL LBO’S BIG BUZZ
The deal of the week is the USD24.4 billion take private of Dell by Silver Lake, a deal which also involves
Microsoft Corp. The announcement adds details to our earlier coverage of the rumor in a digest last
month. The size of the deal is mind-boggling after the smallness of LBO transactions since late 2008. As
a result, it has everyone from CNET to Reuters as well as the PE trade press writing about it. If you are
curious about the Silver Lake partner who is behind the deal, Egon Durban, see the WSJ’s Private Equity
Beat short feature on him. Information on the advisers and some details are on PE Hub, and some
analysis of the debt implications are provided by two Bloomberg writers here.
TECTONIC SHIFT AND A 10X EXIT FOR
EUROPEAN VENTURE CAPITAL
Image source: Go4Venture
Go4Venture’s latest research says there’s a “tectonic shift” in European venture. Deal value has been
increasing over the past three or four years, but the number of deals is down, illustrating the shift in the
venture market.
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5. The key points are highlighted below:
• Venture financing and venture capital are separating into two distinct fund categories
• VCs have largely deserted early-stage and are now focusing their attention on expansion capital.
• High risk/high reward, early-stage investment is being left to business angels, government-
subsidized funds, and a handful of the larger VCs which can afford to subsidize this largely money-
losing activity to feed their larger later-stage funds.
• December’s activity reflects the trends state above with five late-stage and five Series B transactions
– no real Series A.
• Trivago was acquired for EUR 0.5 billion by Expedia, for an estimated 5x historical revenues. The
analysts estimate that the deal was a ten-bagger for Trivago’s investors. “A trade sale over EUR
100mn is not that common in European venture, so a deal of half a billion euros and a ‘ten bagger’ is
an exceptional event,” writes Go4Venture. (This editor adds that a 10-bagger in VC is an exceptional
event anywhere, including Silicon Valley)
• The implication of the exodus from European VC is that the first steps of any company will have to
be bootstrapped, funded by family, friends and fools or simply by the founders themselves. And
even internet companies need to have market traction before VCs are prepared to commit.
QUOTE OF THE WEEK:
GOOGLE’S LARRY PAGE ON 10X
"Page expects his employees to create
products and services that are 10
times better than the competition. …
Thousand-percent improvement
requires rethinking problems entirely,
exploring the edges of what’s
Image source: Google Jobs website
technically possible, and having a lot
more fun in the process.”
Who said it: Steven Levy, Wired magazine
In Context: When private equity experts talk about a ten-X deal, it means one thing but when Larry
Page, CEO and cofounder of Google, talks about ten x or ten times better, he’s describing the high goals
he sets for Google’s product and R&D teams. The “moon shot” kind of activity is underway at Google,
according to a Wired profile of Page by Steven Levy this week. In Page’s view, a ten percent
improvement means that a company is doing pretty much the same thing as everybody else. It might
not be a fail strategy, and yet it is not going to be a great success-story either. It is the philosophy
behind the search giants R&D effort, Google X, which is running projects on a self-driving car, a
wearable computing system and an “artificial brain”, in which a cluster of computers running advanced
algorithms learn from the world around them, much like humans do.
Where we found it: WIRED
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6. 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
noteworthy news items, scoping trends and currents events in the global
private equity 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
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To receive the weekly digest by email register on www.dealmarket.com.
Editor: Valerie Thompson, Zurich
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