Our weekly pick of Private Equity News and Trends

1. DIGEST 125
1
FinTech: Disrupting Financial Services with
Technology
Tiger21 Says Smart Money Favors Private
Equity
2
This Week’s $1.3 Billion Sweetspot
Pension Funds Lagging Family Offices in Private Equity Invesment
3
Larger Players Benefit from PE Recovery
Quote of the Week: Talent Management –
Funny is good
January 24, 2014

2. FINTECH: DISRUPTING FINANCIAL SERVICES WITH TECHNOLOGY
Financial technology deal flow is growing at a
steady pace and the banks are taking note, reports unquote this week. There was about USD
11bn invested in financial technology businesses
globally last year, of which the US accounted for
61% and the UK 30%. The hotspot globally is the
UK, which although it only accounts for half of
the amount of venture capital raised last year in
the US, is pro-rata (per population) the UK is two
times ahead of the US, with most of that activity
taking place in London. The types of companies
attracting VC money in Europe include payments
software, behavioral analytics and security and
fraud prevention technology. Mentioned in the
report are European high flyers such as Wonga (personal loans), which raised around USD 145m and
payment solutions provider Klarna, which raised USD 150m, money transfer startup TransferWise, and
Tradeshift, an e-invoicing which signed a USD 3bn working capital deal with CapitalAid. The top 7 most
innovate companies at Finovate 2012 (US conference for financial tech) are highlighted in the datadriven infographic above. (Image source: Quid)
TIGER21 SAYS SMART MONEY FAVORS
PRIVATE EQUITY
In an effort to follow the smart money and its relationship to private equity, we viewed an interview
with Tiger21 founder on CNBC this week. Private equity was a popular investment choice last year for
Tiger 21’s high net worth (HNW) members to the tune of about 21% of assets under management, according to Michael Sonnenfeldt. Tiger21 is an investment club of sorts whose members, many of
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3. whom are HNW entrepreneurs and seasoned business angels, pay USD 30,000 in annual membership
fees to belong to what Tiger21 calls a peer to peer network.
Sonnenfeldt said that publicly traded stocks are interesting at the moment, but his wealthy clients are
more interested in private equity because these “aren’t passive investments”. There is an “opportunity
to roll up our shirt sleeves and get involved”, and it is “where people can use their skills”, he said. (Image source: CNBC )
THIS WEEK’S $1.3 BILLION SWEETSPOT
Two deals are tied for this week’s private equity buyout of the week spotlight. They are both USD 1.3
billion transactions, making that a sweetspot for buyouts. All the big names in PE are in the running
to acquire a Tyco security division based in South Korea, called Caps Co. It is a regular auction with
Kohlberg Kravis Roberts & Co., Bain Capital, IMM PE and Carlyle Group LP bidding, according to Reuters which cited anonymous sources. The other deal is a similarly sized PE buyout of the US-based
pizza chain, Chuck E Cheese by Apollo group, which aims to take the company private, according to
various sources. The chain is present in ten countries and 47 states in the US, and the deal has thrown
the limelight on it dynamic founder (the founder of Atari, a serial entrepreneur, and the man that gave
Steve Jobs his first job), according to Inc. magazine.
PENSION FUNDS LAGGING FAMILY OFFICES IN PRIVATE EQUITY INVESMENT
Pension funds are lagging more sophisticated
asset managers when it comes to allocation
to private equity, according to new research by
the London Business School’s Coller Institute
and Adveq, (based on 1,208 US and UK pension
funds’ annual reports). The study claims to be
the “first empirical, academic analysis of pension funds’ private equity allocations”. Allocations to the asset class have grown significantly,
but they are still lagging behind other more
experienced or well-staffed investor categories,
says the study. From 2005 to 2012 public pension
funds’ allocations to private equity have increased, on average, from 4.5% to 5.64%. Allocations from private pension funds have increased, on average, from 4.99% to 5.33% but their activity
has not been as great as more sophisticated or experienced investor groups, such as family offices
and sovereign wealth funds, which have actually doubled their percentage capital allocations to private
equity between 2007 and 2012. (Image Source: Coller Institute/Adveq)
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4. LARGER PLAYERS BENEFIT FROM PE
RECOVERY
The news of Apollo’s recent closing of a giant USD
18 billion PE fund generated a lot of media coverage this past month. The announcement prompted
PE industry information provider, Preqin, to take a
closer look at the private equity buyout fundraising
market. It is clear from the data that fewer funds
raised money last year but this group as a whole
raised much larger funds. The trend suggests
that larger players are benefitting the most from
the recovery in PE market, at least for now. These
kinds of statistics are typically an indication of a
flight to quality, or at least a flight to brand name
fund managers. The stats also show that 2013 was
the best year since the financial crisis hit in 2008.
Forbes reporters speculate that the new money is bound likely to “heat up” the buyout market with
fund managers awash in new cash. (Image source: Preqin)
QUOTE OF THE WEEK - TALENT MANAGEMENT: FUNNY IS GOOD
“Most of these folks are non-conformists. Sometimes when you hire people who
have to pass a Mr. Congeniality test, you end up losing some of the non-conformists who will give you different views and perspectives… Fact: Funny people tend
to be more creative than unfunny people.”
Who said it: Nolan Bushnell, serial entrepreneur, writer,
Silicon Valley legend
In Context: Nolan Bushnell describes how to attract the kind of talent that enable companies to grow, remain agile, and adapt in today’s fiercely competitive business environment.
He writes, “When looking for employees, ignore credentials. Hire the obnoxious (in limited numbers).
Demand a list of favorite books. Ask unanswerable questions. Comb through tweets. Just because
you’ve hired creatives doesn’t mean you’ll keep them. Once you have them, isolate them. Celebrate
their failures. Encourage ADHD. Ply them with toys. Encourage them to make decisions by throwing
dice. Invent haphazard holidays. Let them sleep.” Bushnell has been inducted into the Video Game Hall
of Fame and the Consumer Electronics Association Hall of Fame, received the BAFTA Fellowship, and
was named one of Newsweek’s “50 Men Who Changed America.” He’s a frequent subject of media coverage and was prominently featured in Walter Isaacson’s bestselling book, Steve Jobs. (Image source:
BAFTA)
Where we found it: Amazon.com Book Excerpt
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5. 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
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Editor: Valerie Thompson, Zurich
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