Read what's new and noteworthy in Private Equity this week.

1. DIGEST173
February 20, 2015
1
2
3
Pruning PE Fees
Can PE Learn from Venture Philanthropy?
If The Shoe Fits, Buy the Company
Where in the World is the Next Billion Dollar
Startup?
European PE& VC Tops ILPA Benchmarks,
Again
Quote of the Week: Add a Zero To That Offer
Platform for fundraising & deal flow management

2. 2
www.DealMarket.com/digest
Pruning PE Fees
Large pension funds are in-
creasingly going public about
their opinions on PE manage-
ment fees. The latest example
is a report in the FT where
CalPERS’ decision to reduce
its PE relationships to around
150 fund managers from 300
was endorsed by the head of
Melbourne-based Australian
Future pension fund. He said
that best practices means
keeping a tight rein on fees.
The Australian local govern-
ment pension fund grew by
some AUD 13bn in 2014 and
reported a return of 13.2 per
cent, which it said outper-
forms the “majority of Austra-
lian pooled pension funds”. It has about 25 fund managers in its portfolio and practices diversification.
Besides PE, it has allocations to property and infrastructure programmes, which it says have “signifi-
cantly” outperformed public equities. CalPERS has about 10.5% of its portfolio allocated to PE and
aims to reach 10%, as it reported in Oct 2014. (Image source: CalPERS)
Can PE Learn from Venture Philan-
thropy?
The way that private equity reports returns and an increasingly tense relationship between the limited
partner and fund manager could improve if buyout houses learned some lessons from impact inves-
tors, says a report in unquote”. GPs would not only be able to measure and report returns more ac-
curately, they would also have a greater awareness of the wider implications of how portfolio company
profits are generated, which is important as LPs move towards more socially responsible investing.
The article provides a case study of a social impact fund, highlighting the techniques it uses, for re-
porting, which is based on both qualitative and quantitative feedback (measurements are frequent,
some are real time), management professionalization (fund manager provides workshops, strategic
support and encourages development of business skills) and origination (very deep and long term
partnership principles applied). When it comes to due diligence, the impact fund actually uses best
practices from PE, acquiring pro bono services from large and successful buyout houses, but with one
small difference, both investment director and chief executive are held accountable for championing
the deal.

3. 3
www.DealMarket.com/digest
Where in the World is the Next
Billion Dollar Startup?
Atomico, the venture capital investment company
created by tech entrepreneur Niklas Zennström, is
publishing its research about “unicorns”, that is,
billion dollar startups. So far, it has identified 156
billion dollar startups. Interestingly, they are not all
located in Silicon Valley. According to Atomico, the
majority (63%) come from Europe and China, as well
as from other parts of the US. The top six hubs are
Beijing (20), New York (8), Stockholm (5) and Berlin,
Los Angeles and London (4). The graph here shows
that the Silicon Valley began to yield its share in 2011
as more and more companies outside the region
garnered investors willing to grant a billion dollar plus valuation to their businesses.
Other findings
• It typically takes six years to reach a billion dollar valuation, but of late time shortened (32 did it
within three years of being founded).
• On average 14 startups a year are hitting the billion dollar valuation point
• Vintage year was 2007 when 25 companies achieved unicorn status
• Stick with founder CEOs as they drive value growth (85% of Atomico’s list had the founding CEO at
the helm)
If The Shoe Fits, Buy the Company
A footwear trade publication says its industry is ripe
for dealmaking. The trend has already started with a
PE-assisted buyout of Rockport shoes by New Balance,
along with a spate of M&A transactions, says Foot-
wearnews. Brand names such as Reebok and Puma are
being bandied about as acquisition targets. Mid-market
oriented PE players have shown interest in several bid-
ding processes of late, says the report, but they lost out
to strategic acquirers.
There may be activity in fashion and footwear in the
US however it is not moving the needle in the wider PE
community as much as other sectors, according to the
latest survey by Mid-Market Pulse, published in part-
nership with McGladrey. In fact, the expectation is that
the most M&A activity in the mid-market over the next
six months will be in healthcare, followed by technology,
media (survey results shown here) and telecommunications, manufacturing, energy. Consumer goods
and retail are at the bottom of the trends barometer.

4. 4
www.DealMarket.com/digest
Quote of the Week: Add a Zero To
That Offer
“The valuations they were offering, I felt offended. I remember telling them, listen, if you don’t add a
zero to that; we’re not going to consider it.”
Who said it: Abdulaziz Al Loughani, Vice Chairman of Kuwait National Fund for SME Development
In context: Valuations for Internet startups were below other regions in the
world four years ago when Kuwait-based Abdulaziz Al Loughani was trying
to raise capital for Talabat, a fast food ordering startup, operating in several
Middle East region countries. It looks like valuations have improved as this
month Rocket Internet, the publicly traded early stage investment company
founded by the Samwer brothers, acquired Talabat for EUR 150 million. In the
meantime, Abdulaziz Al Loughani exited - well before the Rocket takeover - at
four times money. He is now part of a new fund meant investing in small and
medium sized ventures in Kuwait. The Gulf country has the basis for an innovation ecosystem say local
insiders, particularly in oil and gas industry (energy efficiency, data analytics and exploration); marine
biology and life sciences. Its location also makes it a potential hub for global trade and commerce, ac-
cording to Nish Acharya, in a guest blog in Forbes.
Where we found it: WAMDA
European PE& VC Tops ILPA Bench-
marks, Again
The top ten year returns are
being generated by European
PE&VC fund managers, fol-
lowed by US/Canadian Private
Equity, according to the latest
ILPA Private Markets Bench-
mark study. This segment
was also the top performer
when DealMarket Digest
last covered the ILPA bench-
marks. The US/Canadian PE
segment is the leader when
it comes to five year returns.
For one year returns the US/
Canadian VC segment is best
performing, with Asian PE
&VC close behind. The benchmarks are based on 3,105 unique funds that are backed by ILPA mem-
bers. The fund data is a subset of Cambridge Associate’s dataset. The snapshot of the pooled Net IRRs
is shown here in USD (unless otherwise noted) as of September 30, 2014. (Image source: ILPA)

5. www.DealMarket.com/digest
The DealMarket Digest provides up-to-date and high-quality con-
tent. Each week our in-house editor sifts through scores of indus-
try and academic sources to find the most noteworthy news items,
scoping trends and currents events in the global private equity sec-
tor. 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.
To receive the weekly digest by email register on www.dealmarket.com.
Editor: Valerie Thompson, Zurich
DealMarket
DealMarket is a global online platform for fundraising and deal flow
management – a one-stop shop for Private Equity & Corporate Finance
professionals. The company was founded in 2011 and is growing fast.
Four years after launch, DealMarket counts more than 61,000 recurring
users from 159 countries, over 3,000 deals and service providers pro-
moted or listed on the platform. Also global leading banks like UBS use
DealMarket’s deal flow management tools like hundreds of Investors,
Associations and Networks trust our comprehensive service offering for
Private Equity.
DealMarket was voted the “Best Global Private Equity Platform for
2012, 2013 and 2014” by Corporate LiveWire.