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 platform: Professional, Accessible, Transparent, Simple, Efficient, Effective, and Global. click here to access our Digest Archive: https://www.dealmarket.com/news?accTriggerId=digest

1. DIGEST 74
SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 74
1 Intralinks Data Shows M&A Dip in
Q3
2 Terra Firma buys Annington Homes
for USD3.2 billion
2 East Asian PE Dealmaking Doubles
in 2012
3 Zulily: The Latest Billion Dollar
Internet Startup
• And why getting a multi-billion dollar
valuation can be a pain
4 Top Five Buyout Funds of All Time
• Unquote analysis
4 Quote of the Week: Entrepreneur Country
November 23, 2012

2. INTRALINKS DATA SHOWS M&A DIP IN
Q3
Image source: Intralinks
There was a 7% overall decline in dealflow in the third quarter, which is not surprising, says Intralinks.
There was the US election underway, the usual summer slow-down, and there was a need to process
or digest the large amount of activity that started in the earlier part of the year. The news is in its latest
Deal Flow Indicator (DFI) which offers IntraLinks’ unique perspective on the level of due diligence
activity taking place in markets, over various time periods. In this case it is Q32012.
The excellent infographic provided by Intralinks says it all. But we can expand a bit here. M&A is
expected to keep up a robust pace as corporates clean up balance sheets, while streamlining
operations and divesting non-core assets, says Intralinks’ experts. Acquisitions are getting done but
with caution and a focus on “digestible” deals in the mid-market, rather than transformational M&A.
The sector most active as a result is banking and financial institutions, such deals rose in Europe by 23%
compared to last year, much higher than 7% tracked for the sector worldwide. Specific examples
include ING Group selling its UK-based savings and mortgage business to Barclays and its Hong Kong,
Macau and Thailand-based insurance units to Pacific Century Group for USD 2.1 billion, and its online
direct banking business in Canada in a USD 3.2 billion deal.
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3. TERRA FIRMA BUYS ANNINGTON
HOMES FOR USD3.2 BILLION
The deal of the week looks to be Terra Firma’s acquisition of a “blue chip” real estate holding company
for USD 3.2 billion. Reuters said that holdings include 40,000 homes with the UK government’s
Ministry of Defense as an important tenant. The PE firm already owns a similar venture in Germany,
which it might take public next year, according to the same report in Reuters.
One other sizable transaction that may emerge is the selling of a 50% stake in a UK-based
telecommunication venture called Everything Everywhere owned by France Telecom, which has
attracted interest from several un-named PE firms. It may be valued at a whopping USD 11 billion,
according to BW.
EAST ASIAN PE DEALMAKING DOUBLES
IN 2012
Private-equity transactions in Southeast Asia have already more than doubled in value this year to USD
3.6 billion, up from USD 1.3 billion last year, according to data from the Centre for Asia Private Equity,
and cited in the WSJ Deal Journal blog.
With that in mind, we digested the latest PE study about Asian markets published by Merrill Data Site.
Based on interviews with several regional experts, the report highlights PE trends and developments in
East Asia, including a discussion on take-privates (or delistings) and relisting on page 11 and 12.
Key trends
• An increase in controlling interest deals
• The market is maturing - there are fewer easy to target buyouts of
established businesses and market leaders as many have already
gone public and have become quite large
• PE firms are targeting second and third tier companies. e.g. instead
of a bank, people are investing in a leasing company; or instead in
investing in the leading shoe company, or leading milk company,
investors are moving to inland China, to the second, third, fourth tier
cities and investing in second, third, fourth tier companies in terms of
size and hoping to make them larger.
• Competition is increasing - in addition to the large global funds, more
regional funds and a lot more country specific funds, not only in
China but in South East Asia, Korea and Australia as well.
2 Image source: WSJ
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4. • Due diligence must include local inspection and deep consideration of regulatory and tax issues (a
confirmation of last week’s Deutsche Börse study findings that we highlighted here.
• The two most popular sectors for private equity in China are financial services, and retail &
consumer. There has also been a rise in deals in the industrial sector outside China
• China is not a single market – it looks more like an “amalgamation of 30 different provincial
markets.
ZULILY: THE LATEST BILLION DOLLAR
INTERNET STARTUP
This week Reuters reported that two-year old flash-sales site Zulily raised USD 85 million in a funding
round that valued the company at USD 1 billion. The company sells baby products and home-decor
merchandise in the US and UK. The round was led by Andreessen Horowitz, an up and coming VC firm
that raised one of the largest funds this year, as we mentioned last week.
In a relevant BITS blog post, Nick Bilton suggests that getting a billion dollar valuation might seem
exciting, almost like “winning the lottery” but it has certain drawbacks. A high valuation limits exits
because then only the likes of Apple, Google and Microsoft can finance big ticket transactions like that,
and Apple rarely makes such acquisitions.
Another problem with start-ups with
higher valuations is attracting talent.
If an engineer joins a company
valued at USD 10 million that grows
to USD 1 billion, there is an
opportunity to get very rich, but it is
not the case when joining a company
already valued at 10 figures, which
might slip due to a down round or
poor post-IPO performance.
Based on recent financing rounds and stories about the companies, the billion dollar startup club now
includes Twitter (USD 8.5 billion); LivingSocial (USD5 billion); Dropbox, (USD 4 billion); Airbnb (USD 2.5
billion); Pinterest (USD 1.5 billion) along with European examples (Spotify and Rovio), according to
Bilton. He says that only some of these companies’ valuations might be justified by revenue and
growth, e.g. DropBox which has USD 500 million in revenue and 100 million users. Others, like Pinterest
and Fab, may be as “overhyped” as Pets.com during the Tech Bubble 1.0.
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5. TOP FIVE BUYOUT FUNDS OF ALL TIME
Last week, Advent International announced it raised one of the biggest private equity funds investing in
Europe in recent years, showing that the appetite for PE amongst institutional investors has hardly
dwindled if the right opportunity presents itself, as we reported. This week Unquote did some number
crunching to see how it compared to the largest buyout funds ever raised. It said that Advent's fund
may have been the biggest in years, but it didn’t even make the ranking for its top five biggest funds of
all time.
Here’s Unquote’s list (reverse order)
• Blackstone Capital Partners VI – USD 16 billion and it closed at the beginning of this year.
• KKR Fund 2006 closed in March 2008 on USD 17.6 billion, and backed primarily by from large North
American pension funds.
• CVC European Equity Partners V USD €11bn and closed in 2009.
• TPG Partners VI closed in Sept 2008 on USD 19.8 billion
• GS Capital Partners VI the only one to close a USD 20 billion fund (in early 2007)
QUOTE OF THE WEEK: ENTREPRENEUR
COUNTRY
“What do organizations fear most, disruption or
destruction? His answer was disruption, and that does not
bode well. The evidence shows that company destruction
remains a massive risk both for organizations and people
alike. In turn, disruption is often the most powerful
Image source: Seven Hills
antidote for the avoidance of failure.”
Who said it: Michael Hayman, co-founder of Seven Hills public relations firm and co-founder of Startup
Britain, as well as being a columnist and holding several chairmanships in the UK.
In Context: In a blog post about innovators and big company strategies, or lack thereof, Hayman points
out that the CEO of 3M said that companies fear disruption. He argues that it is the wrong thing to fear
because disruption driven by innovation is probably the only real tool for companies can leverage to
avoid failure or destruction. The mindset does not bode well for companies like 3M IBM and Fujitsu,
which were on hand at a summit in London where Hayman spoke. Using high profile examples from
recent decades, like Kodak and Brother (typewriter company), Hayman suggests that innovation in
large companies seems to be the preserve of the R&D team, a “flaccid process” to affect product
design rather than to drive company transformation. He argues that the driver of innovation must
come from the top of the company. An innovator would have driven a photography business like Kodak
to dominate digital in the last decade, he writes, or taken Brother from typewriters to PCs in the 1990s.
His conclusion is that survival and growth in markets involves innovative ideas, people, and capital. Big
businesses need to seriously seek innovation, even it if means disruption, in all three areas.
Where we found it: Entrepreneur Country Magazine
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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
platform delivers: Professional, Accessible, Transparent, Simple, Efficient,
Effective, and Global.
To receive the weekly digest by email register on www.dealmarket.com.
Editor: Valerie Thompson, Zurich
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