AltAssets Private Equity News

TA Associates surges to $1bn first close for seventh buyout fund

Mike Didymus — Wed, 16 May 2012 17:10:02 +0000

TA Associates is understood to have cleared a $1bn first close for its seventh buyout vehicle just months after it was launched.

The close, which was filed with the US Securities and Exchange Commission, puts TA well on the way to reaching the $1.75bn target it also managed for its 2007 buyout fund.

Its latest vehicle will continue to focused primarily on North America by investing in profitable, private companies in growth industries.

Although TA has not identified an investment range for the latest fund its previous buyout vehicle aimed for deals ranging from $50m to $600m.

A TA spokesman said the firm did not comment on fundraising activity.

The firm recently splashed out €380m for a 30 per cent stake in French fashion brand Zadig & Voltaire, which will see it take a seat on the company’s board.

It has also been linked with a bid for the Indian arm of Thomas Cook, which could cost it more than $260m for a 77 per cent stake.

The firm has raised $16bn since it was founded 44 years ago, and has invested in more than 400 portfolio companies.

Global private equity following Latin American lead to grow companies

Mike Didymus — Wed, 16 May 2012 16:46:21 +0000

Private equity investors around the globe are becoming more hands-on in their portfolio companies due to the benchmark set in Latin America, according to experts at Ernst & Young.

The operational approach by private equity partners on the continent has led to 80 per cent of returns being driven by organic growth, according to a joint report by the auditor and the Emerging Markets Private Equity Association.

It shows highly entrepreneurial buyers across the region are actively seeking out companies with management teams they can partner with to improve the business model.

About two thirds of deals sampled were proprietarily sourced according to the survey, and 75 per cent of all investments hinged on working with incumbent teams or entrepreneurs with a vision for the business.

Philip Bass, E&Y’s global private equity markets leader, added, “We are finding that the rest of the world is evolving to replicate the model in the emerging markets – focusing on minority deals, equity deals and working closely with portfolio companies to add value.”

EMPEA founding president and CEO Sarah Alexander said, “Our study illustrates that private equity investors in Latin America provide more than just capital, they employ strategies that are yielding larger, more professionalized companies ready for the next stage in the region’s development.”

The report showed mean IRRs compared favourably with returns from the best years of E&Y’s North American and European exit studies thanks in part to impressive growth in the region.

Among the Latin American deals sampled, underlying EBITDA growth averaged more than 45 per cent compared with only 13.5 per cent in the US and Europe.

Four fifths of returns from the continent’s private equity exits were driven by organic growth rather than bolting-on companies or reducing costs, the sources of most revenue growth within the US and Europe.

The report noted Latin American buyers tended to take an active ownership role even though they were minority partners in most deals.

Incentives and alignment with management were also key features in the deals studied, with senior management receiving equity incentives in 93 per cent of deals, while in 75 per cent of deals the PE firm exited by a path agreed upon with management at the outset.

The majority of deals studied saw exits to trade buyers or via IPO, with 55 per cent going to a single buyer.

Exits via sales to other PE firms represented only five per cent of those sampled.

Study co-author Jennifer Choi, EMPEA’s vice president for industry and external affairs, said, “A robust secondary market, and the greater cohesion that would bring to the ecosystem, may become more critical as these markets continue to attract investors.”

Priveq buys Inwido Home Improvement from Ratos

Mike Didymus — Wed, 16 May 2012 16:19:15 +0000

Priveq has bought the home improvement arm of Inwido from fellow Swedish buyout house Ratos for about $27m.

The Canadian private equity firm picked up the business through its €200m fourth investment fund, and said it expects the deal to be completed during the summer.

Inwido Home Improvement, which operates two companies under the Lundbergs and Duri brands, had 2011 sales of about $39m and an earnings before interest, taxes, depreciation and amortisation of $3.6m.

Inwido president and CEO Håkan Jeppsson said, “Home Improvement has a good position and development and has a good platform for continued Nordic expansion within its segment.

“Inwido’s focus is to be the leader in Europe within windows and doors.

“We have therefore decided to sell this business area since it is a retail operation with a totally different business model and therefore offers no economies of scale with our other operations.”

Priveq has raised capital for its four private equity funds from institutions including Skandia Life, the Fourth National Pension Fund and Credit Suisse Fund Investment Group.

The firm aims to invest in profitable Nordic companies with sales over $14m with the aim of making a trade sale or IPO within four to seven years.

Last month Ratos told AltAssets it was planning to expand its Denmark operation by hiring a fluent Danish speaker to pick up deals in the country.

The buyout house has invested across all of the Nordic countries since becoming a private equity investor more than 20 years ago, but just three of its current portfolio companies are Danish.

River Associates hits $222m final close for sixth fund

Mike Didymus — Wed, 16 May 2012 15:33:55 +0000

Lower mid-market private equity firm River Associates Investments (RAI) has beaten its fundraising target by closing its latest investment vehicle on $222m.

River VI, which was aiming to raise $200m, gathered more than double the amount in commitments of the firm’s previous fund, which closed on $110m in 2006.

The Tennessee, US-based buyout house said it received re-up investments from almost all of its existing investors and added new faces from the insurers, endowments, pension plans and funds of funds.

Buy and build specialist RAI targets investments in platform companies with earnings before interest, taxes, depreciation and amortisation of between $3m and $10m in the US or Canada.

RAI partner Mark Jones said, “We sincerely appreciate the support of our existing and new investors who see value in our time-tested track record and strategy.

“We are focused on continuing to differentiate ourselves with our longstanding tenure of supporting management teams of lower mid-market companies.

“We have always believed that all of our investments are equally important since behind each investment are management co-investors and numerous employees who look to us as economic and strategic partners.

“The larger fund size will allow us to acquire platform companies at the top end of our $3m to 10m EBITDA range as well as effect numerous add-on acquisitions.”

Fellow partner Mike Brookshire said, “We have already been able to invest almost $50m of River VI capital prior to the final closing and we are excited to now solely focus on identifying new platforms as well as working to grow existing River VI portfolio companies. “

The fund’s current investments include meat producer National Deli, gas turbine component manufacturer KK Precision and auto parts maker Omega Environmental Technologies.

RAI has completed 71 distinct investments, including platform and add-on opportunities, since it was founded in 1989.

Accel, Sequoia team up for $70m Qualtrics investment

Mike Didymus — Wed, 16 May 2012 15:01:41 +0000

Frequent venture partners Accel and Sequoia Capital have made their largest ever co-investment through a $70m funding deal for research company Qualtrics.

The cash will be supplemented by the pair offering their services to the company, which said it plans to expand its software services beyond market research and accelerate its global growth.

It is the first time the company, which claims to have been profitable since it was founded in 2002, has accepted outside funding.

Accel general partner Ryan Sweeney said, “Data continues to proliferate through the enterprise in areas beyond the data centre.

“As external data generated from customers, sales reps, channel partners, and employees also explodes, Qualtrics is uniquely positioned to help its customers proactively act on this information with its suite of professional-grade software products.”

Qualtrics CEO and co-founder Ryan Smith said “Today most research is still outsourced at great expense or hacked together with rudimentary tools and little coordination.

“We offer end users the do-it-yourself tools and rich analytics they need to be responsive to a fast-changing market, with the security and control IT demands.”

Accel and Sequoia have previously both invested in companies such as online storage startup Dropbox and mobile display ad technology business AdMob.

Italian public sector opens up to UK investors

Benjamin Chambers — Wed, 16 May 2012 12:33:50 +0000

Having recently confirmed and strengthened the process of liberalisation of it local public services, the Italian government has opened the door to privatisation, with many overseas investors taking an interest, writes Paolo Esposito and Chiara Chiosi at Italian law firm CBA Studio Legale e Tributario.

Such liberalisation is based on granting and managing local public services through an efficient procedure to promote competition and freedom of establishment and provision of services, and the limitation of the in-house awards.

The relevant regulation is set out in Law no. 27/2012 which entered into force on 25th March 2012. The new rules will apply to all the local public services, now including also the regional railway transport services, with the exception of those services pertaining to the following sectors: “water, gas distribution, energy distribution and chemistries”. With respect to the integrated urban waste management service, it has been clarified that the construction of waste disposal plants, and the collection and disposal of urban waste can now be awarded separately.

Regional and local entities must liberalise and open up to competition all the local public services of economic interest, provided that regularity, accessibility and quality of the local public services are ensured.

The minimum local public services requirements will be identified by regional and local entities; furthermore, if the operator is required to possess specific characteristics in order to manage the local public services, permission or registration in registers or lists for specific sectors may be required.

In order to encourage local entities to open up to competition the award of the local public services, priority to the granting of certain public financings or funds will be assigned, as of 1st January 2013, to such local entities or operators awarding the local public services by means of a public tender and/or providing such services efficiently and ensuring the quality of the services in question.

By 30th June 2012 Regions must identify local areas (“ambiti o bacini territoriali”), according to which the supply of local public services has to be organised. Such local areas must be optimal and homogeneous, correspond to or exceed the territory of a province, and allow a sufficient economy of scale and product flexibility in order to maximize the efficiency of the service.

On the other hand, if a market analysis evidences that the free private economic initiative is not sufficient and appropriate to ensure the community’s needs, the local entity may award exclusive rights (“diritti di esclusiva”) to provide the local public services by means of public tenders to private, public or mixed public-private, in the latter case provided that the private partner is granted with a participation equal to or exceeding 40% and specific operative duties connected with the service.

The awarding procedure must comply with the principles of the Treaty on the Functioning of the European Union and the general principles governing public procurement such as economy, impartiality, transparency, adequate publicity, non-discrimination, equal treatment, mutual recognition and proportionality.

As an exception to the above, if the annual value of the service is equal to or less than €200,000, the local entity may award the local public services directly (i.e. without a public tender) to an entirely public company (in-house award) provided that (i) the contracting entity exercises over the legal entity a degree of control which is similar to that which it exercises over its own departments and, (ii) at the same time, that legal person carries out the essential part of its activities with the controlling contracting entity or entities, as set forth by the relevant European Union law and case-law.

The Italian Competition Authority will assess, in respect of those entities having a population exceeding 10,000 inhabitants, the suitability and sufficiency of the reasons for awarding any exclusive rights and/or several LPS by means of a single public tender, on the basis of inquiries to be carried out by the local entities for taking the relevant resolutions which have to be submitted by 13th August 2012 (and thereafter periodically in accordance with the applicable statutes); the opinion has to be delivered within 60 days of the date of the request.

The existing local public services awarded in-house not in compliance with the new rules will be subject to early termination in accordance with a transitional regime, commencing from the end of this year; particularly, (i) in case of direct awards (“affidamenti diretti”) of local public services whose value exceeds Euro 200,000 and/or which do not meet the requirements for the in-house award, on 31st December 2012; (ii) in case of direct awards of local public services to mixed public-private companies where the public tender has not been carried out in respect of both the selection of the partner and the awarding of operating functions related to the provision of the local public services, on 31st March 2013; (iii) in case of direct awards of local public services to mixed public-private companies where the public tender has been carried out in respect of both the selection of the partner and the awarding of operating functions related to the provision of the local public services, upon termination of the respective service contract; and in case of local public services granted as of 1st October 2003 to a company controlled by local entities and listed on a stock exchange since that date, by 30th June 2013 and by 31st December 2015 if the stake owned by the local entities is not reduced to below 40% and below 30%, respectively, by these dates.

The early termination will operate automatically on the given dates, and therefore no specific declaration, act or deed need be adopted by the local entities. Nevertheless, those companies whose local public services award has been subject to early termination in accordance with the above have, in any event, to ensure a regular continuation of their activities (even following the end of the transitory period), in compliance with the principles set out by respective service agreements and the new regulation, until the taking over of the local public services by a new operator, without however being entitled to any indemnity or compensation for these additional activities.

However, the existing local public services in-house awards may survive for a 3 year-term if, on or before 31st December 2012, the relevant companies, previously awarded with certain local public services either directly or in-house, have merged to reorganise and provide the LPS at optimal local level area.

This is causing a trend of privatisation and concentration of local public services companies controlled by local entities.

German venture firm Earlybird hires Linkedin co-founder

Alec Macfarlane — Wed, 16 May 2012 12:30:55 +0000

Earlybird, a Berlin-based venture capital firm with more than $700m of assets under management, has taken on Linkedin co-founder Konstantin Guericke as a venture partner.

Guericke will help grow the firm’s portfolio companies especially as they expand from Europe into the US market, in addition to identifying and evaluating attractive areas of opportunity for investment.

“As a successful entrepreneur who is highly-networked in Silicon Valley, Konstantin’s role is a perfect fit for our new tech fund based in Berlin: his wealth of experience and extensive connections will help our portfolio companies scale faster,” Earlybird partner Jason Whitmire said in a statement released today.

Guericke co-founded LinkedIn, where, as vice president of marketing, he led the company’s marketing activities from launch to first six million members and profitability.

He also served as CEO of jaxtr, a social communications start-up with over ten million registered users that was purchased by SabSeTechnologies.

Earlybird recently secured $100m in commitments for the first close of its fourth venture fund, taking the Berlin-based growth investor halfway to its $200m target.

The firm’s new fund will be dedicated to early-stage investments in disruptive global consumer and enterprise internet and technology businesses originating from Europe, with an emphasis on German speaking countries.

RDIF, Macquarie ink Russia’s biggest ever PE-backed power sector deal

Alec Macfarlane — Wed, 16 May 2012 12:12:12 +0000

A private equity consortium comprised of the Russian Direct Investment Fund (RDIF), Xenon Capital Partners’ Rusenergo Fund, AGC Equity Partners and the Macquarie Renaissance Infrastructure Fund (MRIF) has bought a 26.43 per cent stake in Russian power producer OJSC Enel OGK-5.

The investment by AGC Equity Partners, a private equity firm whose investors are Middle East institutions, represents the largest private equity investment in Russia by a Middle East investor to date.

Rusenergo Fund and AGC Equity Partners have each invested $175m in the transaction, while the RDIF and MRIF have invested $137.5m each for a total deal value of $625m.

The structure of the transaction allows for an additional payment to the seller, though this is contingent on the investment generating an attractive level of returns for the investor consortium.

In addition to the largest Middle East investment into Russia, the transaction represents the largest-ever private equity deal in the Russian power sector. The consortium of investors becomes a partner of Italian energy company Enel, the controlling shareholder in Enel OGK-5.

“This consortium of private equity investors has acquired a blocking stake in the premium asset of the Russian power sector at an attractive valuation,” RDIF CEO Kirill Dmitriev said in a statement. “The transaction represents a strong vote of confidence from leading international investors for the Russian utilities industry.”

The RDIF is a $10bn vehicle launched by the Kremlin six months ago to entice overseas investors to commit to private business opportunities in the country.

Last month the fund announced plans to partner with China to create an investment fund worth up to $4bn, which will comprise a $1bn contribution from the $10bn investment vehicle launched by the Kremlin in September last year.

The newly formed Russian-Chinese Investment Fund (RCIF) will be pooled from the RDIF and China Investment Corporation (CIC), the country’s $410bn sovereign wealth fund.

Belgian’s Gimv exits Accent Jobs stake to Naxicap Partners

Alec Macfarlane — Wed, 16 May 2012 12:00:35 +0000

Belgian’s Gimv is selling its 33 per cent stake in recruitment and selection agency Accent Jobs to French private equity firm Naxicap Partners.

The management will remain the majority shareholder in Accent Jobs.

Accent Jobs was set up in 1995 and is part of The House of HR, which also includes other specialist HR businesses.

The company is aimed at the upper segment of the temporary employment market, with a focus on temporary jobs with the option of a permanent contract.

Since Gimv came on board in 2006, besides its organic growth in Belgium, Accent Jobs has also expanded across Europe through the roll-out of activities and acquisitions in the Netherlands.

The group around Accent Jobs currently has a network of 227 branches with over 700 permanent employees.

Turnover has grown from €92m in 2006 to over €330m in 2011. Over the same period, EBITDA has increased from €6.9m to over €30m.

Gimv, which ranks as Belgium’s biggest private equity firm, recently made a €5.4m capital injection into photovoltaic component-maker NovoPolymers.

The company, which designs and converts polymer formulations into photovoltaic encapsulant sheets, said it will use the funds to boost innovation and its international presence.

KKR inks $150m growth investment in crowdsourced photo site Fotolia

Alec Macfarlane — Wed, 16 May 2012 09:25:33 +0000

KKR has made a rare $150m growth equity investment in stock photography website Fotolia, in a deal that includes a $150m senior financing facility put in place by the global private equity firm, management and TA Associates.

New York-based Fotolia was founded in 2005 and received its first growth investment from TA Associates in 2009. This recent deal will give KKR a 50 per cent stake in the business, and values Fotolia at around $450m.

The company, which considers itself as a “crowdsourced” photography service, provides a marketplace for photographers to sell their images, offering users more than 17 million digital images and videos.

The business will serve as a platform for acquisitions of other digital rights groups, similar to KKR’s partnership with music publisher Bertelsmann in 2009. The firm will own 50 per cent of the business following completion of the deal.

“The company has grown significantly since 2005 and has consistently demonstrated the kind of innovation and leadership that we look for in our digital media investments,” KKR head of European media investments Philipp Freise said in a statement.

“Today’s investment is about fuelling even more growth and fostering a new phase of development, to which we will contribute the whole suite of KKR’s capabilities.”

Barclays acted as sole financial advisor to KKR, while NOAH Advisors acted as sole financial advisor to Fotolia.