Our weekly pick of Private Equity News and Trends

1. DIGEST 120
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The Qualities of Successful CEOs of PE and
VC-backed Companies
Global M&A Trends: Expansion and Internationalization
Study Says PE Increasingly Important in
African Mid Market
A-list Bids for Buyout of India’s SourceHove
Poland Dominates Deloitte’s Fast 50 Central
European Ranking
Quote of the Week: Complexity Reengineering
December 6, 2013

2. THE QUALITIES OF SUCCESSFUL CEOS OF
PE AND VC-BACKED COMPANIES
The right CEO can make or break a business, says Stephen Lowry of Frog Capital in an article in TechCityNews. He cites academic research that found that successful CEOs of PE-backed firms have about
30 common characteristics and these can be identified through a structured process put in place by
investors. Unstructured discussions with management teams are unlikely to reveal the make or break
qualities. Lowry says a CEO has to be able focus on hiring great people and developing a high-performance leadership team; be able to provide and allocate resources and capital to support the business
plan; and position the business strategically to partners. Good execution skills trump good interpersonal skills. What Frog Capital looks for is a CEO that is bold, responsible, open to feedback, and can
handle the independent nature of being the CEO of a rapidly growing company.
GLOBAL M&A TRENDS: EXPANSION AND
INTERNATIONALIZATION
Globally M&A dealmaking was down in October both in volume and number of deals, according to the
Merrill Monthly M&A Insider report published in November. But some regions are showing robustness.
For example, China Daily reports that a drive towards internationalization is underlying M&A activity in China, positioning China to overtake Japan as the leading country doing overseas M&A this year.
According to the newspaper report, Chinese companies have made USD 56.2 billion in overseas M&A
deals, led by Shuanghui International Holdings’ USD 7.1 billion purchase of Smithfield Foods Inc. Deals
mentioned were mainly in the US. The trend looks set to increase in the coming year due to political
will and directives.
Elsewhere, Reuters reports that companies expect a 17 percent rise in mergers and acquisitions activity next year that would push global deal volume to its highest level since 2008, citing a survey done by
Thomson Reuters and Freeman Consulting Services. The driver of the uptick in dealmaking is expansion and transformative acquisitions, which is a shift from today’s M&A driven by getting rid of noncore assets and bargain hunting for undervalued companies and assets.
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3. STUDY SAYS PE INCREASINGLY
IMPORTANT IN AFRICAN MID MARKET
Globally M&A dealmaking was down in October both
in volume and number of deals, according to the Merrill Monthly M&A Insider report published in November. But some regions are showing robustness. For
example, China Daily reports that a drive towards internationalization is underlying M&A activity in China,
positioning China to overtake Japan as the leading
country doing overseas M&A this year. According to
the newspaper report, Chinese companies have made
USD 56.2 billion in overseas M&A deals, led by Shuanghui International Holdings’ USD 7.1 billion purchase
of Smithfield Foods Inc. Deals mentioned were mainly
in the US. The trend looks set to increase in the coming year due to political will and directives.
Elsewhere, Reuters reports that companies expect
a 17 percent rise in mergers and acquisitions activity next year that would push global deal volume to
its highest level since 2008, citing a survey done by
Thomson Reuters and Freeman Consulting. Services.
The driver of the uptick in dealmaking is expansion
and transformative acquisitions, which is a shift from
today’s M&A driven by getting rid of non-core assets
and bargain hunting for undervalued companies and
assets.
A-LIST BIDS FOR BUYOUT OF INDIA’S
SOURCEHOVE
This week’s deal of the week is out of India. At least
three of the top PE firms globally are bidding on business process outsourcing company SourceHOV, which
is jointly owned by Citigroup Venture Capital International and Mumbai-listed HOV. According to the Times
of India, Apax Partners, Carlyle Group and Baring Asia
are among the bidders offering about USD 1 billion,
according to unidentified sources. Infosys, India’s third
largest IT services giant, is not expected to participate
in the auction.
India’s technology sector is a favorite for global VC
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4. and PE players, according to Business Standard online. Total investment in Indian assets by PE fund
and strategic players was USD 1.32 billion this year to date, compared to USD 154.7 million spent by
Indian firms to invest in assets outside the country.
POLAND DOMINATES DELOITTE’S FAST 50
CENTRAL EUROPEAN RANKING
Every year Deloitte publishes a series of ranking about quick growing companies in various regions.
The rankings are a favorite tool of private equity investors for deal spotting and intelligence on business trends. This month its Fast 50 Growth Tech Ventures revealed Poland’s leading position in the
Central European region. Twenty two of the companies with fast growing revenues were based in Poland, putting it way ahead of Hungary which came in second with 8 ventures.
The fastest growing company with an amazing 5700 % growth in revenue over the past five years is a
Romania-based air travel online platform, Vola.ro. You can download the report here. (Image Source:
Deloitte)
QUOTE OF THE WEEK - COMPLEXITY REENGINEERING
“ We do what we call ‘complexity arbitrage’. We try to buy confusion at a discount and sell clarity at a
premium.”
Who said it: Dipanjan “DJ” Deb, Francisco Partners Managing Partner
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5. In Context: In an interview with Deirdre Bolton on
Bloomberg Television’s Money Moves, Dipanjan
“DJ” Deb described where the opportunities are to
be found in the tech sector for PE investors, highlighting his funds catchy signature idea ‘complexity arbitrage’, which is about acquiring companies
in a complex industry or a difficult to understand
niche and then working on the strategy and the
story to make it a more valuable venture. Francisco
Partners has had a good run on exits this year with
both IPOs and strategic acquisitions of portfolio
companies. Buyouts in the tech sector are a fairly
recent phenomenon. It is usually the territory for
VCs, but the sector has matured and has become
the fast middle market. It is now attracting the kind
of investors that only invest in established industries with regular revenues and relatively predictable
economics and growth prospects. Unlike consumer Internet valuations in this area of tech are low. According Deb there are about 6000 “orphan” companies in the US market alone. An “orphan” as defined
by Deb is a publicly traded company with around a billion in market cap – and only a few stock analysts
covering it, or a division of a larger technology company, either privately or public owned, that can be
spun off and grown.
Where we found it: Bloomberg
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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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