Australian Private Equity

Australian Private Equity Investments Jump 14% 

Private equity investments in Australian assets jumped by an impressive 14%,  according to an Australian private equity report.  Venture capital firms, on the other hand, are still struggling to raise AUM and completing new deals.

A report released yesterday by the Australian Private Equity & Venture Capital Association reveals that private equity investment edged higher to $2.18 billion during the 2010 financial year, while venture capital investment declined 7 per cent to $187 million.

A total of 10 private equity funds raised a combined $1.45bn, up 3 per cent on the prior year, while proceeds raised by venture capital firms were slashed by almost half at $168m.

AVCAL chief executive Katherine Woodthorpe said in spite of the tough fundraising climate, overall investment levels had remained resilient.

However, she highlighted the ongoing uncertainty over the tax treatment of private equity proceeds, which was highlighted by the Australian Taxation Office's controversial grab for a $678m share of TPG's profit from the Myer float, as a factor that had led to some caution among investors.  Source

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Private Equity Mena

Increasing Private Equity Activity in Mena Region

Private equity firms are still having a difficult time fundraising in the Mena region but activity is increasing dramatically.  Results of the Mena Private Equity Confidence Survey 2010 show that while last year 71% of private equity firms responded that fundraising is going to be more difficult, only 25% expressed this sentiment in 2010. Saudi Arabia, Egypt and the UAE are expected to be the countries that will attract the most private equity investment.

The private equity fundraising environment in the Mena region remains tough, but sentiment appears to be moving in a positive direction, according to the findings of the fourth Mena Private Equity Confidence Survey 2010 by Deloitte.

There is a widely held view that global limited partners (LPs) appetite for the Mena will increase over the period, fuelled by market recovery and, in particular, interest in new and specialist sectors, the survey based upon 34 private equity respondents in the Mena region said.

The percentage of respondents who believe fundraising is going to be more difficult has sharply declined from last year. While in 2009 it was 71 per cent, this year only 25 per cent of respondents believe fundraising is going to be more difficult, according to the survey.

The generalist private equity fund that cannot offer much differentiation will find the fundraising market very difficult, but specialist funds with an identified pipeline and local presence will face less challenging conditions, it said. Source

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Federal Reserve Private Equity

Federal Reserve Says Banks Eased Credit to Private Equity

The Federal Reserve said that banks are easing credit to hedge funds and private equity firms. In the three months ended in August, more banks said that credit had "eased somewhat" than "tightened somehwhat" as hedge funds and private equity firms increased demands for concessions when negotiating price terms for deals.

More banks said credit terms “eased somewhat” than said terms “tightened somewhat” in the three months ended in August, the Fed said today. Hedge funds and other investors tried harder to negotiate favorable price terms for deals, with 50 percent of dealers saying that clients “increased somewhat” or “increased considerably” their demands for concessions.

Increased competition from rivals and improvements in the financial strength of counterparties were the main reason that terms were loosened, according to the survey released by the Fed in Washington. Five of six respondents cited each factor as “very important” or “somewhat important” in their easing of terms.

The Fed started the survey in part because the financial crisis “highlighted that a significant volume of credit intermediation has moved outside of the traditional banking sector,” the central bank said in a report posted earlier this year on its website. Source

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African Private Equity

Africa Private Equity Opportunities

Investors Meet to Talk Africa Private Equity Opportunities

Institutional investors from a few Southern African Development Community nations are meeting next week in Gaborone, Botswana to discuss private equity.  Specifically, the institutional investors will be talking about opportunities for investing in private equity in Africa.

The meeting is supported by African Venture Capital Association, the Southern African Venture Capital Association and Aureos Capital and organized by the Commonwealth Secretariat, The Botswana International Financial Services Centre (IFSC), African Development Bank, and Botswana’s Citizen Entrepreneurial Development Agency (CEDA).  Representatives from pension funds, insurance companies and other long-term investors in Southern Africa will meet to talk private equity.

“Sub-Saharan Africa is one of the biggest growth stories in emerging markets private equity,” said David Ashiagbor, an economic adviser at the Commonwealth Secretariat, one of the organisers.

Mr Ashiagbor added that fundraising activity by private equity fund managers in Sub-Saharan Africa has almost tripled from US$800 million in 2005 to over US$2.2 billion in 2008, and reached US$1 billion in the first half of 2009.  

Mr. Martin Poulsen, Chief Private Equity Officer of the African Development Bank, co-sponsor of the meeting, noted that the growth in fundraising has been led by development finance institutions, international commercial banks, pension funds and even private investors. 

“Unlocking the full potential investment power of African institutional investors remains a challenge for the African private equity industry. This needs to be addressed—and we hope this roundtable will help to unlock this largely untapped potential,” he said.
Mr. Alan Boshwaen, Chief Executive Officer of the Botswana IFSC said that his organisation was hosting the roundtable to highlight Botswana’s continuing efforts to establish the country as an emerging, competitive domicile for Pan-African private equity and infrastructure funds. 

“Our partner organisation CEDA shares our common goal of mobilising African capital to make more investments in the region including projects in Botswana, through the use of private equity vehicles domiciled in Botswana” said Alan Boshwaen.  Source

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H&R TaxAct

H&R Block TaxAct

H&R Block Acquires TaxAct Digital Tax Prep Business

H&R Block Announces Agreement to Acquire TaxAct Digital Tax Preparation Business

• Cash purchase price of $287.5 million • More than 5 million tax filers used TaxACT solutions last season
• Estimated to add $0.05 to earnings per share if closed by calendar year end

FOR RELEASE OCT 13, 2010

KANSAS CITY, Mo. – H&R Block (NYSE: HRB) announced today it has signed a definitive merger agreement to acquire all of the outstanding shares of 2SS Holdings, Inc., developer of TaxACT digital tax preparation solutions, for $287.5 million in cash.

The company plans to combine its H&R Block At Home digital business and the acquired TaxACT business, into a single unit led by the TaxACT management team, but continue to offer both brands in the market place.

“This transaction is a significant step for H&R Block in a segment that is strategically important. This will provide us with innovative growth-oriented leadership to accelerate our digital tax offerings and results,” said Alan Bennett, president and chief executive officer of H&R Block. “I am looking forward to working with the TaxACT management team on developing our multi-brand digital strategy for the future.”

TaxACT has approximately 70 full-time associates and is headquartered in Cedar Rapids, Iowa. More than 5 million tax filers used TaxACT last season through online, desktop download and professional software, with the vast majority of those clients filing online.

Lance Dunn, president of TaxACT, said, “The entire team is excited by the opportunity to partner with H&R Block. We are committed to providing a tremendous value for customers by continuing to offer the TaxACT Free Federal Edition.”

H&R Block estimates the transaction would add $0.05 to earnings per share in its fiscal year ending April 30, 2011, assuming the transaction closes by the end of the current calendar year. The purchase will be funded by excess available liquidity from cash-on-hand or short-term borrowings. Completion of the transaction is subject to the satisfaction of customary closing conditions, including the expiration of the applicable waiting period under the Hart-Scott-Rodino Act.

Conference Call

At 9 a.m. Eastern time on Thursday, October 14, the company will host a conference call for analysts, institutional investors and shareholders. To access the call, please dial the number below approximately five to ten minutes prior to the scheduled starting time:

U.S./Canada (877) 247-6355 or International (706) 679-0371

Conference ID: 10673363

The call will be webcast in a listen-only format for the media and public. The link to the webcast can be accessed directly at http://investor-relations.hrblock.com.

A replay of the call will be available beginning at 9:30 a.m. Eastern time on Oct. 14, and continuing until Nov. 5, by dialing (800) 642-1687 (U.S./Canada) or (706) 645-9291 (International). The conference ID is 10673363. The webcast will be available for replay beginning on Oct.15 at http://investor-relations.hrblock.com

Forward Looking Statements

This announcement may contain forward-looking statements, which are any statements that are not historical facts. These forward-looking statements are based upon the Company’s current expectations and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties and speak only as of the date on which they are made, the Company’s actual results could differ materially from these statements. These risks and uncertainties relate to, among other things, uncertainties regarding the Company’s ability to attract and retain clients; meet its prepared returns targets; uncertainties and potential contingent liabilities arising from our former mortgage loan origination and servicing business; uncertainties in the residential mortgage market and its impact on loan loss provisions; uncertainties pertaining to the commercial debt market; competitive factors; the Company’s effective income tax rate; litigation defense expenses and costs of judgments or settlements; uncertainties regarding the level of share repurchases; and changes in market, economic, political or regulatory conditions. Information concerning these risks and uncertainties is contained in Item 1A of the Company’s 2010 annual report on Form 10-K and in other filings by the Company with the Securities and Exchange Commission. The Company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

About H&R Block
H&R Block Inc. (NYSE: HRB) is one of the world’s largest tax services providers, having prepared more than 550 million tax returns worldwide since 1955. In fiscal 2010, H&R Block had annual revenues of $3.9 billion and prepared more than 23 million tax returns worldwide, utilizing more than 100,000 highly trained tax professionals. The Company provides tax return preparation services in person, through H&R Block At Home™ online and desktop software products, and through other channels. The Company is also one of the leading providers of business services through RSM McGladrey. For more information, visit our Online Press Center at www.hrblock dot com.

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Growth Private Equity Funds

Expansion, Not Restructuring, Fuels Private Equity Returns

The results of a recent study runs counter to the common idea that private equity funds make their returns largely through restructuring.  The study looked at 305 buyouts from 1988 to 2007 and found that 27% of private equity returns was from revenue growth through expansion of portfolio companies and just 11% of returns came from efficiency improvements through cutting costs and redundancies.  It is a widespread notion that private equity firms make their returns through cutting jobs and reducing expenses, this study paints a different picture. 

"This evidence goes against the widespread belief that buyouts are largely about restructuring and reveals the strong growth component at work in many transactions," said the report's authors—Oliver Gottschalg, professor at the HEC School of Management in Paris, and Bernd Kreuter of consultancy Feri Institutional Advisors.

The findings are "very positive" for the private equity industry because they show firms are not only about the restructuring and layoffs that have damaged their image, Mr. Gottschalg said.

Private-equity firms were criticized by trade unions and politicians during the peak of the market in 2007 for their handling of portfolio companies. In April 2005, Franz Müntefering, then chairman of the Social Democratic Party of Germany, hit the headlines by labelling private-equity firms as "locusts."

The industry subsequently made efforts to become more transparent in its practices.
"This study supports what we have been saying all along, namely that private equity is about building strong, sustainable companies and adding value," said a spokesman for the British Venture Capital Association, an industry trade body. "This is yet more evidence of the benefits of private-equity ownership."  Source

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Buyout Industry

Buyout Industry Rebound

Financial Times: UK "Buyout Industry Bouncing Back"

So far this year there were $19.9 billion of UK private equity deals, an increase of about $7.5 billion from the same time last year.  Private equity activity is still below pre-crisis levels but there are signs that the industry is indeed "bouncing back" as the financial markets recovery and the broader economy strengthens. 

In the first six months of the year, private equity buy-outs accounted for 73 per cent of all UK M&A by value, compared with 28 per cent last year. This is a record, exceeding even 2007 levels when private equity comprised 62 per cent of M&A.

There were no signs of private equity activity slowing down in the third quarter, when there were 32 buy-outs worth almost £4.2bn. This was a 22 per cent increase from the previous quarter and a more than sixfold rise from the same period last year. Much of the activity came from “pass-the-parcel” deals, in which private equity groups sell companies to each other. These accounted for 44 per cent of all UK private equity deals by value in the first nine months of the year, compared with only 20 per cent last year. The increase in pass-the-parcel deals boosted the value of private equity exits, which trebled to £7.6bn in the year to September.

“It is encouraging to see the exit market opening up, not just from financial buyers but an increased appetite from trade buyers, which has driven several larger realisations,” said Christiian Marriott at Barclays Private Equity, co-sponsor of the research.  Source

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Private Equity Training Course

Video Introduction to CPEP Private Equity Training Course

 By now, you have probably heard about the Certified Private Equity Professional program.  If you still haven't heard about this private equity training program or if you would just like to learn more about the program, a member of our team has created a great video to introduce the CPEP program to you.  If you are reading this via RSS or E-mail, click here to watch the video.

Ready to register?  Want to learn more?  Visit the Certified Private Equity Professional website.

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Private Equity Learning

Three Options for Learning More about Private Equity

Private Equity Courses offer students and career professionals an opportunity to learn more about a challenging industry.  Private Equity can be hard to understand without a professor or instructor explaining the key concepts.  This is why private equity courses are seen as very valuable to individuals looking to learn more about buyout firms and how they operate.

Terms like Enterprise Value and EBITDA can seem pretty intimidating if you do not have the resources to help you get through the fundamentals and complex aspects of the industry.  Buyout firms seem like a mystery if you do not have a course or training program that gives you a complete understanding of every part of the industry.

Luckily, there are many ways to learn more about the industry:

• Enroll in a PE Course:  Whether at a university or business school, or through a PE training program, you should definitely consider enrolling in a PE course.  These courses give you all the reading materials and resources that a typical classroom course would but focus entirely on the buyout industry.  How much more confident would you feel after completing a whole course on the subject?
• Attend a seminar or conference:  These can prove more challenging because the lecturers typically expect that you already know a good deal about the industry or even work for a PE firm.  So it might be over your head if you have not already spent a good deal of time studying the industry.
• Find free resources: There are many free resources available to you if you cannot afford a course or training program.  While I can't say that it will be more valuable than a PE course (you get what you pay for) you will be able to get a nice introduction to the industry without having to pay a dime.

Our team has put together a 100% online private equity training and certification program that provides you with career tools, resume feedback, career coaching, and video training modules. This program is called the Private Equity Certified Professional (CPEP) Designation Program.

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National Penn Bancshares Warburg Pincus

Warburg Pincus Invests $150m in National Penn Bancshares

Warburg Pincus is investing $150 million in National Penn Bancshares through a direct stock purchase.  The private equity firm is buying nearly 25 million shares at a price of $6.05 that will give Warburg Pincus 16.4% ownership of the bank's shares.  Warburg Pincus will initially invest $63.3 million in the next 9 days and then invest the rest of the amount upon receipt of the required antitrust and bank regulatory approvals.

Warburg Pincus is acquiring a total of 24.8 million common shares at $6.05 per share, upon receipt of all necessary regulatory approvals — with the price approximating the average closing price of the stock over the last 30 days.

Warburg Pincus will initially fund $63.3 million of its investment within 10 days, with a second funding of $86.7 million following the receipt of necessary antitrust and federal bank regulatory approvals, which are anticipated in the fourth quarter.

Scott V. Fainor, president and CEO of National Penn, said the incremental capital will accelerate the bank’s ability to repay the U.S. Treasury Department’s TARP investment, further strengthen the balance sheet and position the bank for longer-term growth when economic conditions improve.  Source

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Goldman Sachs Private Equity IPO?

Goldman Sachs Considering Spinning Off Private Equity Arm

Goldman Sachs (GS) is considering a spin off of its huge private equity fund.  This possible move is to comply with the Volcker Rule which probably will not come into effect for a few years still.   Goldman Sachs could decide to spin off its private equity arm or even launch an initial public offering.  According to a senior correspondent for Fox Business News, calls it a heightened discussion involving the highest levels of Goldman Sachs including CEO Lloyd Blankfein.  If you are reading this via RSS or e-mail, click here to watch the video.

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Q3 2010 Private Equity Data 

 Private Equity Has Strongest Quarter Since Financial Crisis

Private equity deal flow increased for the third straight quarter in what was the strongest quarter for the industry since the financial crisis.   Preqin's latest data shows that there were 515 private equity deals announced in the third quarter of 2010 with an aggregate value of $66.7 billion--a 29% boost in value from the previous quarter.  This quarter's aggregate value was a 147% increase from that of Q1 2010.   The other key findings in the report are as follows:

• In Q3 2010, North American aggregate deal value increased 6.5% from the previous quarter, with 249 deals valued at $34.2 billion announced in Q3 2010, up from the 233 buyouts valued at $32bn in Q2 2010.
• Furthermore, Q3 2010 deal flow in North America represents a significant 165% increase on the aggregate deal value seen in the region in Q1 2010, and remains notably higher than deal flow witnessed in the region during 2009.
• European aggregate deal value increased significantly from the previous quarter, with 186 buyouts valued at $26.3bn announced during the quarter, a notable 120% increase from the $12bn in deal value witnessed during Q2 2010.
• Almost half of all deals announced globally in Q3 2010 were leveraged buyouts, and such deals accounted for nearly two-thirds of the aggregate deal value worldwide during the quarter.
• Growth capital investments accounted for 23% of all deals completed in Q3 2010, and add-on deals made up 20% of all private equity buyout-backed investments.
• Buyouts valued at over $1bn accounted for 60% of global aggregate deal value of deals in Q3 2010, and public-to-private deals accounted for 23%.   Read more of Preqin's report.

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$10 Billion Private Equity Deal

Will There Be a $10 Billion Private Equity Deal in 12 Months

Will there be a $10 billion deal in the next 12 months? The Journal puts it as the "$10 billion question" for private equity.  Professionals in the industry polled at the Dow Jones Private Equity Analyst conference we split over the possibility of such a deal occurring in the next 12 months with 52% voting yes and 48% voting no.

This wasn't a real poll, just a test of the audience at a recent conference, but it shows mixed feelings about the possibility of mega-buyouts in the next 12 months.  The $15 billion almost buyout of Fidelity National Information Services made such a deal seem at least feasible, so a $10 billion is not beyond the realm of possibility especially with $400+ billion in dry powder.

The industry came close to the mark earlier this year. A consortium of buyout firms lead by New York-based Blackstone Group tried to seal a roughly $15 billion deal for payment processing firm Fidelity National Information Services Inc. That deal fell apart in May after the buyers and sellers failed to reach an agreement on price.

However, some participants at the conference said that recent improvements in the leveraged loan markets, combined with an abundance of capital remaining in private equity firm’s coffers, have created ripe conditions for a mega deal.
“The capacity exists in the market today to do it,” said Stephen Murray, president and chief executive of New York-based CCMP Capital Advisors, LLC.

Julie Richardson, managing director at Providence Equity Partners LLC, a media- and information-focused buyout firm, said the first $10 billion deal is likely to involve a company that performed well amid the recent recession.  Source

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