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 | PitchBook Newsletter | | Private Equity Edition |
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| Powered by the PitchBook Platform. Learn more» | | 515,811 Deals | 33,960 Funds | 22,483 Limited Partners | 26,191 Advisors | |
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FRIDAY, MARCH 11, 2016  | |
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Software targets: When blended diligence is required PitchBook Dealmakers Column
Software companies have increasingly become prime targets for PE firms. Attractive exit multiples, strong EBITA, and rapid growth and bolt-on prospects for targets in this segment are attracting more attention. However, software companies exhibit a unique risk profile, which may be overlooked using traditional due diligence approaches. When software is the core product, the typical separation of due diligences can leave risks unidentified and exclude opportunities to consider. Diligence teams should address the technical, operational and commercial risks and opportunities within the context of a single due diligence to fully understand all the implications. Blending these components during the diligence will provide insight into the present and future risks that can greatly impact scale and growth. Some examples include: - Technical: Assessing architecture, infrastructure and data impact on scalability and growth scenarios and if (and how much) technology remediation investment is required
- Operational: Assessing SDLC and PDLC processes, helpdesk tools, talent and key-person flight risks impact on product strategy, roadmap and velocity
- Commercial: Assessing IP, code base, customer acquisition/retention and pricing model impact on adjacent market options and competitive threats
On one target, with aggressive revenue expectations, we were able to help reset revenue and product expansion expectations after careful analysis of their planning efforts, SDLC, bug/fix velocity and skill gaps. This allowed the target to better link their operational maturation with growth plans and lead to a reduction in time required for the PE firm to manage day-to-day activities.
To read more on Liberty Advisor's Group M&A Services:
http://www.libertyadvisorgroup.com/services/mergers-acquisitions/
This article represents the views of the author only and does not necessarily represent the views of PitchBook. |
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Here are highlights from our PE content this week:
• Goldman Sachs has announced the retirement of partner Eric Dobkin, who forever changed the IPO by pitching offerings to institutional rather than retail investors. As a tribute to the father of the modern-day IPO, we highlighted notable PE-backed public offerings underwritten by Goldman: click here for a look back.
• For years now, the increase in PE-backed company inventory in North America and Europe has essentially plateaued. This is in stark contrast to the steady ramp-up in inventory during the buyout boom era. Get more insight on PE's other overhang here.
| • The first half of this decade has seen a marked uptick in PE investment in the U.K., with 388 PE investors completing 820 deals there in 2015, both five-year highs. Activity, though, has slowed so far this year. A Brexit effect, perhaps? Click here for more, including the most active PE investors in U.K. companies since 2011.
• Featured in our new Benchmarking Report is a breakdown of top-performing funds, sliced and diced by type, size and vintage. Curious about the different strategies firms employ, we decided to examine one benchmark in particular to see what might go into a successful fund. Check out our findings. |
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Co-Investors and Signals now on PitchBook Mobile Seeking a better way to get intelligence on companies or investors when you're away from your desk? Wish you had one go-to app on your phone for all the meaningful business information you need?
We're here to help you keep crushing it with a couple big additions to the PitchBook Mobile app, where you can access all of our in-depth data from the PitchBook Platform on the fly. Click here for details. |
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Draghi’s got a gun: ECB easing boon for fintech This week, European Central Bank president Mario Draghi announced that the ECB would be cutting rates once again, pushing deposit rates deeper into negative territory. More notably, he expanded the size and scope of quantitative easing in the region. Monthly bond purchases will increase to €80 billion and the list of assets eligible for monetization will now include investment-grade corporate debt. How this silver age of the central banker ultimately plays out is unpredictable, but the policies will only force banks to directly compete with and invest in fintech as a source of future growth.
What does this mean for PE and i-banks? Click here to read more. |
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2006 Vintage U.S. Buyout Funds | $1 billion - $5 billion | | | Median IRR: | 10.80% | | Top Quartile IRR Hurdle Rate: | 13.97% | | Median TVPI: | 1.6x | | Average Amount Distributed: | $2.26 billion |
| | | Select Top Performers (based on net IRR) | | |
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Carlyle seeks to spur sprout supplier | The Carlyle Group has announced an investment in GGC Group, the owner of Kyushu GGC, a supplier of bean sprouts in Japan. Equity for the deal came from the firm’s Carlyle Japan Partners III, a roughly $1 billion vehicle that closed last September. | Food Products Okayama, Japan | | |
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Cornerstone, Oaktree to acquire ProService from Highlander Capricorn Venture Partners announces Punch Powertrain sale agreement | Along with other shareholders, Capricorn Venture Partners has agreed to sell Punch Powertrain to the Chinese Yinyi group in a transaction that gives the company an enterprise value of about €1 billion. Upon closing of the agreement, the Capricorn Cleantech Fund will receive a multiple of 17x its original investment and realize a gross IRR of roughly 60%. Punch Powertrain develops and produces continuously variable transmissions for cars. | Automotive Manufacturing
Sint-Truiden, Belgium | |
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| Natixis has hired Tom Flanagan as managing director and senior originator in the firm’s Acquisition & Strategic Finance Americas division. Flanagan was previously a managing director at Jefferies. |  Tom Flanagan, Managing Director, Senior Originator in Acquisition & Strategic Finance Americas Investment Bank Paris, France |
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VSS sells Navtech interest to Airbus ProSky | VSS has announced that its Structured Capital II fund completed the sale of its interest in Navtech, a flight operations software provider for the commercial aviation industry. The business was acquired by Airbus ProSky, part of the Airbus (EPA: AIR) group of companies. | Application Software SaaS
Waterloo, Canada | | |
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Paragon Partners launches $200M India fund | Paragon Partners has raised $50 million toward a $200 million target for its Paragon Partners Growth Fund I, a vehicle established last August that will invest in middle-market companies in India. | Mumbai, India PE Growth-Expansion |
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FOCUS represents IMS in acquisition Longtime exec Hannah Tobin leaves HarbourVest | After 20 years with the firm, Hannah Tobin has left her position at HarbourVest Partners as a principal focused on investor relations in Europe, the Middle East and Africa. She will remain with HarbourVest as a consultant through the end of the year. | |
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