January 03, 2017

Founder of Opalesque

New Opalesque Private Equity Strategies out

Welcome to the latest issue of Opalesque's Private Equity Strategies.

In this issue, we spoke with IK Investment Partners which was wrapping up a banner year with its second fund to close in a single year. The firm has also had a number of high-profile exits.

In the Movers and Shakers section, we spoke to the Inkwell Group a new private equity fund that uses diversity as its core strategy. We also spoke with Harvest Exchange, a platform you, gentle reader, will be very familiar with. We talked to Harvest Co-Founder Peter Hans who in 2012 started to work on this software-based platform that would be a marketplace of expertise for investors and professionals to publish and network about critical finance topics.

In our Data Snapshot we look at the new priorities for private equity CTOs.

There is also an interesting real estate opportunity - an apartment complex with 181 apartments located in Riga, Latvia - featured in the Marketplace offering 7% NOI return featured in the Opalesque Market Place.

And finally, we have our usual features including Regs Watch and Quick Hits.

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

Welcome to the latest issue of Private Equity Strategies. In this issue,

we have our inaugural Opalesque Marketplace listing which high

lights a new real estate opportunity available through the Opalesque

Platform. If you are interested in listing your own assets please con

tact Matthias Knab at knab@opalesque.com

Leading off the issue, we talk to IK Investment Partners which is wrap

ping up a banner year with its second fund to close in a single year.

The firm has also had a number of high-profile exits.

In our Movers and Shakers section, we spoke to the Inkwell Group

a new private equity fund that uses diversity as its core strategy. We

also spoke with Harvest Exchange, a new platform for investors and

professionals to network about critical finance topics.

In our Data Snapshot we look at the new priorities for private equity

CTOs. And finally, we have our usual features including Regs Watch

and Quick Hits. We hope you have a great holiday season and will

return next year with fresh updates on the industry!

Issue 10 | December 22, 2016

In This Issue

IK Investment Partners Raises Second Fund

in 2016 ...................

.... 2

IK is having a banner year - we caught up with

them to learn more

Opalesque Marketplace ...........

Check out our new real estate listing

Modern Investor Tools.............

............ 4

We learn more about Harvest Exchange a new

financial information platform

Regs Watch.................................................. 6

Links and brief updates on changes to the

regulatory landscape for private equity, including:

new guidelines on valuation, international taxes,

and fund liabilities.

Movers and Shakers: A New Focus on

Diversity ............... 8

A new fund is using diversity as a strategy

Data Snapshot - Security Comes Into Focus ...

.................................................................. 9

CTOs are increasingly focused on security a new

survey says

What Does Trump Mean For Private

Equity?......................... 10

A look at our new president.

Quick Hits ....................................................... 13

Recent transactions, fund news, people moves,

and events.

Private Equity

strategies

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

Bailey McCann

Private Equity Strategies

uropean private equity firm IK Invest

ment Partners has closed its eighth

fund on €1.85 billion ($1.96bn), after

just nine months in market. The vehicle beat

its €1.6bn target and was oversubscribed.

Fund VIII is larger than its predecessor vehi

cle, which closed on €1.4 billion in 2013. This

is the second completed fundraise for IK this

year - the firm closed its first fund focused

on small cap investments, the IK Small Cap I

Fund on €277 million in March.

Fund VIII will run IK’s flagship strategy of

making majority investments in companies

with enterprise values up to approximately

€500 million in IK’s core markets:

Benelux, DACH, France and the Nordics. In

an interview, Mads Ryum Larsen, Head of

IR and Partner at IK Investment Partners

told Opalesque that IK came to market with

the fund sooner than expected as a result

of significant investment activity early this

year and strong investor demand. “We saw

several new investors during this round of

fundraising,” he said.

One of those new investors is the New York

State Common Retirement Fund (CRF),

which committed $196 million in August

according to investment disclosures released

by the fund. The commitment creates a

new relationship between IK and CRF. CRF

typically invests in private equity through

separately managed accounts and has rela

tionships with other, domestic firms.

According to Larsen, rather than being

spooked by Brexit and growth worries on

the continent, investor interest in Europe

remains strong. “There was some slight

nervousness around Brexit earlier this year,

but I think the fact that we don’t invest in the

UK and aren’t Sterling denominated actually

worked to our advantage,” he said. Data from

Preqin shows that European private equity

firms have raised over $50 billion for funds

year-to-date, a three year high.

IK Investment Partners Banks €1.85bn for

Fund VIII

Despite record amounts of cash

being raised and relatively low

growth prospects for Europe,

Larsen is upbeat about the outlook

for private equity heading into

2017. He says there is a heavy focus

on valuations at the moment, but

Europe’s quantitative easing policy

is advantageous for financing. “In

this environment, you have to be

clear with your segmentation and

go into opportunities with a solid

strategic agenda,” Larsen contends.

As more players enter the market,

competition for deals is getting

tighter but new exit routes have

also emerged. At the end of last

year, IK listed its first IPO on the

Nasdaq OMX Stockholm. The SEK8

billion float of Swedish home care

company Attendo, was successful

and IK exited its remaining shares

in the company in June. “The

process was almost like an M&A

transaction in some ways - it was

very institutionalized,” Larsen said.

Building on the year’s momen

tum, IK has already started

deploying capital out of Fund

VIII. Investments include- Ellab, a

manufacturer of thermal validation

solutions; ZytoService, a com

pounder of pharmaceuticals for

patient-individualised infusions;

and SCHOCK, a granite kitchen sink

manufacturer.

Based on the amount of capital

raised in Fund VIII and IK’s usual

investment size, the fund is likely

to invest in more than ten portfolio

companies and other investors are

set to lose a significant amount of

purchasing power over the course

of a decade should they elect to

stay in cash or fixed income.

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

New Listing:

7% NOI return residential real estate in Europe for 10.8 million Euros.

Apartment complex with 181 apartments located in Riga, Latvia.

Low price of 1,570 Euros per square meter. Priced 1.2 million below valuation.

6,865 sqm of leasable space and 3,175 sqm of land.

Contact Matthias Knab for an introduction to the seller:

Knab@Opalesque.com

or call +49 170 1890077.

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

Modern Investor Tools:

Harvest, The Place For Relevant Voices

efore co-founding the Harvest Exchange at the end of 2013, Peter Hans spent his whole career in the asset management industry, on the

buy side and on the sale side. At the time, he spotted a distinct lack of progress in the means of client engagement or client acquisition –

despite all the advances in communication technology, and the sheer wealth of expertise that is available from asset managers.

So in 2012, he imagined a software-based platform that would be a marketplace of expertise. That marketplace would prioritise two elements:

high quality compliance and relevant information. This led to the creation of the Harvest Exchange, a platform where asset managers can post

their views, and where those views are disseminated to the relevant audience.

“We have a robust publishing and syndication platform that has built-in compliance tools, as well as built-in security and permissioning tools,”

Hans explains to Opalesque. “And the way the platform works is why it has been so popular with the investors and has grown so well. Obviously

there is a lot of information and noise out there, and discerning what is high quality from what isn’t, and what is relevant to you from what isn’t, is

exceedingly difficult right now.”

Harvest’s job includes two main processes: first, it manually verifies the managers. “That process offers different layers of permissioning and dif

ferent layers of viewing, because we look at not only the content, but who it comes from.”

Secondly, it uses underlying algorithms to serve the content. “We get up to 400-500 pieces of content a week from asset management firms, but

the individual reader, which is the target investor, really sees what is relevant to them and that’s curated based on, not only what they say they

are interested in, the asset class, sector, strategy, but also based on their behavior: what are they reading, how much time do they spend on it,”

he says. “Then our recommendation engine, which algorithmically is the same as what Netflix or Amazon employ, will start to serve the most

relevant content and information to the most relevant end investor or reader.”

Building the framework was not the most difficult job in the world, he adds. And it gets smarter with time, tests and usage.

Hans estimates there will be about half a million readers by the end of the year. The platform grew predominantly through word of mouth, as

well as content syndication. Indeed, managers can disseminate their content from the platform to other channels such as LinkedIn or Twitter,

which then redirects back to their content or their page on Harvest.

“We also have a large means of user growth,” he continues, “because earlier this year, we started white-labeling out our underlying software and

platform, so that managers can use what we have built to really turnkey, create their own private channel or portal to disseminate information to

their closest relationships, engage with them, analyze that data to see where that engagement lies. That has been very effective.”

The managers take care of marketing regulations, he says. “When it boils down to it, all the regulations stem around the same underlying issues,

which is, if you are going to publicly disseminate something, it needs to be first approved by a compliance officer and properly archived. Then

any publicly disseminated information or responses or third party comments also needs to be properly archived.”

“So if you are a hedge fund manager under an SEC-regulated investment advisor,” he explains, “you might feel that it’s fine to put something out

publicly that represents the SEC-regulated RIA, but not the underlying private security or the hedge fund. If your compliance officer can approve

that, you can put it out there, but you still might want to say it is only for qualified purchasers and you are not actively soliciting or advertising

publicly.”

Harvest, which is based in New York, employs a team of 18, mainly software and data scientists, and earns revenue through software licensing

and white-labelling.

“The important thing is the focus on compliance and customised permissioning,” Hans concludes. “One of the things that is resonating with

managers is the element of targeting. Obviously every manager has their different strategy and ideal end-investor, and through our algorithms

we are constantly looking to put the most relevant managers and content in front of the most relevant end-investors. And that’s working well.

You can see it in the data in terms of engagement rates.”

Opalesque has recently partnered with Harvest Exchange - for a limited time you can try Opalesque.TV for free -

learn more here.

by Benedicte Gravrand,

Private Equity Strategies

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

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opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

s journalists like me and lawyers

have written ad nauseum, new

and ever more regulations are

in the pipeline for private equity and

alternatives as a whole. Here we will

hit on some of the cases of note and

provide links to new guidance over the

past month.

Election Impact on Exempt Offer

ings and Private Fund Advisers

The results of the U.S. presidential election

have left many people wondering about

the impact that President-elect Trump and

the Republican-controlled Congress will

have on the U.S. capital markets.

here.

Have your say: commission consul

tation on EU merger regulation

The European Commission is consulting on

procedural and jurisdictional changes to EU

merger control.

Read more here.

Private equity leads the way in cor

porate governance

Although academics tend to agree that, on

average, private equity-backed companies

perform better than their peers, the reasons

for that success are still hotly debated. Earlier

studies generally focused on more easily

measurable potential success factors, while

the impact of corporate governance was

somewhat overlooked.

Read more here.

Private Equity Placements In China

A new paper by G. Nathan Dong and two

other scholars investigates private equity

placements in China and their consequences

for the issuing firms.

Read more here.

Texas Republican Quiet on Private

Equity in Regulation Speech

Could some congresspeople be changing

their opinions of private equity regulation?

Read more here.

U.K. Private Equity Cos Still Lack

Transparency, Report Says

Private equity firms and their portfolio

companies in the U.K. need to improve trans

parency and timeliness of annual reports

and disclosures to meet the standards set by

the industry, or face the risk of being named

for lack of compliance, a compliance review

body said.

Read more here.

Founders Advantage Capital offers a

twist on private-equity model

Canadian private equity firm Founders

Capital has taken a new twist on traditional

private equity with its unique model.

Read

more here.

The private equity takeover of

America’s neighborhoods

Private equity owns more and more of

America’s homes - what does that mean for

housing in the US?

Read more here.

Just How Much Do the Top Private

Equity Earners Make?

To determine just how much money private

equity titans receive, The New York Times

asked Equilar, a board and executive data

provider, to compile information from the six

largest publicly traded private equity firms.

The Times then analyzed the data, which

covered the period from 2012 to 2015, and

verified Equilar’s findings with the firms

themselves.

Read more here.

Regs Watch: Brief Updates on Changes in

Regulation for Private Equity

Big Papi Gets Into PE

Professional baseball player David

“Big Papi” Ortiz is joining up with

several other baseball veterans to

create a private equity firm called

Dugout Ventures.

The firm will invest in companies

manufacturing the next

generation of baseball equipment.

Batter up!

CalPERs Rolls Back PE Expectations

CalPERs the largest pension fund in the US is taking a hard look

at alternatives and doesn’t like what it sees. The pension made

news a year ago when it pulled out of hedge funds and now it

is changing its expectations of private equity and of overal net

return potential for its broader portfolio.

CalPERs announced this week that it plans to cut its private eq

uity allocation target from 8 percent to 10 percent.

Will other pensions follow? Watch this space.

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

Movers & Shakers: New Private Equity Firm

Focuses On Diversity

Bailey McCann

Private Equity Strategies

he Inkwell Group, a new private equity firm based in Cleveland, Ohio and Washington D.C. is launching with a unique

strategy - they want to focus on executive diversity. Co-founders Chijioke Asomugha and Marques Martin tell Private Equity

Strategies that they think it is important to help their portfolio companies realize the power of diverse management teams.

“We want to work with our companies to embed diversity throughout their organizations and put those folks in positions with

real decision making power,” Martin says.

In addition to providing operational expertise and strategic support, The Inkwell Group will work with lower middle-market com

panies to add diverse executive and boardroom leadership. Numerous studies have shown a correlation between diversity and

financial performance, including a 2015 McKinsey report which found companies in the top quartile of gender and racial diversity

were 15 and 30 percent more likely to have financial returns above the industry median, respectively.

“We are focused on driving growth and believe in the additive impact that diverse executive perspectives and an inclusive culture

can have on that process,” said Asomugha. “Small businesses rarely have complete management teams and tend to seek support

within their existing network, resulting in group think that runs contrary to igniting innovation. Our approach directly addresses

this obstacle to growth.”

The Inkwell Group targets control investments in healthcare, financial services, industrial manufacturing and media & telecom,

where it has strong experience and relationships. The firm will invest from $3 million to $30 million of equity per platform in

proven lower middle-market manufacturing and service companies with up to $10 million in annual EBITDA. The Inkwell Group is

currently investing on a deal‐by‐deal basis prior to a debut formal fund within three years.

“Our goal is to help owners receive partial liquidity while remaining invested in the growth of their companies, should they so

choose,” Martin explains.

As part of its strategy, The Inkwell Group has created and oversees The Inkwell Executive Suite, a leadership platform attracting

experienced women and minority executives. The suite acts as a deal sourcing network for the firm and is a mentoring and coach

ing resource for Inkwell Group portfolio executives.

Both founders are long-time private equity investors. Asomugha was previously an investor with Cyprium Partners, a middle

market private equity firm. Prior to that, he was in the investment management group at Goldman Sachs. Martin was a senior vice

president at Key Bank, a Cleveland-based regional bank that invests in middle market businesses.

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

Data Snapshot - Private Equity CTOs Focus on Security

by Bailey McCann

Private Equity Strategies

new survey from Eze Castle Integration, a provider of technology for the financial services industry, asked private equity CTOs what they

are concerned about over the next year. Above all, cybersecurity is a key focus area for the industry and IT departments.

Notably, some 70 percent of firms included in the survey reported having some type of cyber issue within the past 12 months, highlighting the

need for a more robust security response.

While two-thirds of firms expressed confidence that they are prepared to address cybersecurity risks, cybersecurity budget findings indicate

that increased spending is necessary to keep pace with the growing threat landscape.

The survey was conducted in partnership with IDG Research and includes responses from 101 senior-level executives. Findings encompass four

primary areas: business priorities, cybersecurity, outsourcing trends and the evolution of the private equity CTO.

Looking ahead, cloud computing was identified by nearly 90% of respondents as a planned investment area, with respondents preferring pri

vate cloud solutions over the public cloud.

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

What Exactly Does a Trump Presidency

Mean for Private Equity?

s unpredictable as Donald Trump was as a candidate, the impact of his presidency seems equally difficult to forecast. As a candidate,

Trump’s economic and fiscal policies lacked detail, shifted frequently, and at times, were contradictory. As President-elect, he has already

walked back several of his more signature campaign promises. Once his cabinet appointments are made and confirmed, and Republi

can leadership in the House and Senate galvanize around a set of legislative priorities, his administration’s policy objectives may become clearer.

In the meantime, early signs of consensus between the incoming administration and Republicans on Capital Hill suggest significant changes

could be looming for the U.S. private equity industry and deal-makers more generally.

Tax Changes

Donald Trump’s electoral win and Republican control of Congress make it likely that significant tax reform is coming, perhaps in 2017. If passed

via Congress’ budget reconciliation process, the bill could conceivably be enacted without Democrat support. Key features of President-elect

Trump’s business tax proposals include:

—

Reducing the corporate tax rate to 15%.

—

Limiting the top individual tax rate on pass-through income to no more than 15%.

—

A limit on the deductibility of interest expense (as a trade-off for full business expensing for manufacturers).

—

Simplified individual income taxes, with a top income tax rate of 25% and a top rate of 20% for capital gains and long-term dividends.

—

Taxing carried interest at ordinary income, rather than capital gains, tax rates.

The tax reform “Blueprint” released in June 2016 by Speaker Paul Ryan and House Ways and Means Chairman Kevin Brady is similar in many

respects to the Trump plan, though with smaller rate cuts. Highlights of the Blueprint include:

—

Reducing the corporate tax rate to 20%.

—

Reducing the top rate for pass-though business income to 25%.

—

A limit on deductibility of interest expense to no more than interest income.

—

Full expensing for capital business expenditures.

—

Simplified individual income taxes, with a top rate of 33%.

—

Significant cuts in rates on investment income, allowing individual filers to exclude half of their income from capital gains, dividends

and interest.

—

The Blueprint is silent on carried interest.

The proposed rate cuts to pass-through income could be a focal point of debate, even among Republicans. Some observers note that if pass-

through income rates fall dramatically lower than ordinary income rates, or even capital gains rates, taxpayers will restructure their business

and income generating activities to take advantage. According to the Tax Policy Center, a consequence would be that, “carried interest would be

taxed at a much lower rate than under current law, notwithstanding its reclassification as ordinary income (rather than capital gains), because

the entities that earn carried interest income are organized as partnerships.”1 Carried interest is currently taxed at a rate of up to 23.8%, while

under the Trump plan (absent higher rates for carried interest) it would be taxed at a maximum rate of 15%. Trump’s campaign advisors, includ

ing Wilbur Ross, the announced nominee for Commerce Secretary, insisted during the campaign that a set of rules would be adopted to exclude

carried interest from eligibility for the 15% rate. So far, it remains unclear what these rules will be and when they will be advanced.

Whatever emerges on tax reform will likely involve a compromise of both the Trump Plan and the Ryan-Brady “Blueprint.” Even Senate Demo

crats appear prepared for compromise. Incoming Senate Minority Leader, Senator Chuck Schumer, has signaled a desire to compromise on a

plan that would cut corporate taxes if proceeds from Trump’s proposal for a one-time tax on accumulated foreign earnings -- an estimated $2.6

trillion -- are reinvested in infrastructure improvements. Nonetheless, it remains unclear the extent to which Democrats in the House and Sen

ate will be involved in shaping any compromise tax reform legislation and what any final reforms will ultimately entail.

(Continued next page)

by Brian Curran, Hogan Lovells

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

Financial Services Deregulation

Dismantling regulation of the financial services industry is also likely to be an area of particular focus for the incoming administration. During

his campaign, candidate Trump repeatedly pledged to “get rid of ” Dodd-Frank, the set of sweeping financial services reforms passed in the wake

of the 2008-9 financial crisis without a single House Republican vote and only three Senate Republicans supporting it (Senators Scott Brown of

Massachusetts, and Olympia J. Snowe and Susan Collins of Maine).

Title IV of the Dodd-Frank Act mandated that many previously unregistered advisers to private funds (such as hedge funds and private equity

funds, but not venture capital funds) register with the SEC, making them subject to its oversight and enforcement jurisdiction.

In 2012, after the SEC’s Office of Compliance Inspections and Examinations launched a Presence Exam Initiative, examining more than 150

private equity firms, the SEC very publicly intensified enforcement activity over fund expenses, expense allocation, undisclosed fees, conflicts of

interest, and issues related to the marketing and valuation of private equity funds. This left many private equity funds, particularly those in the

middle market, to view themselves as having been unwittingly swept up in an impulse to over-regulate. In a July 2015 article in The Hill marking

the 5-year anniversary of Dodd-Frank, the Association for Corporate Growth’s President, Gary LaBranche wrote:

Regulating private equity has not enhanced the robust and highly rigorous due diligence process already performed by PE’s sophisticated inves

tors, before committing to a ten-year partnership. This due diligence is precisely why private equity outperforms most other investments over 3,

5, and 10 year periods... Dodd-Frank has caused small and midsize private equity firms to divert resources from investing activities to navigating

the Act’s complex regulatory framework. Instead of focusing on what private equity does better than any other investment class – providing

returns for investors – private equity firms have been forced to spend roughly $100,000 annually on compliance.2

Another cornerstone of Dodd-Frank that has impacted private equity is the “Volker Rule.” Among its restrictions, the rule restricts banks and their

affiliates from investing in and sponsoring private equity funds. Notwithstanding his opposition to Dodd-Frank, when asked about the rule dur

ing the campaign, Trump was noncommittal.3

House Financial Services Chairman Jeb Hensarling introduced legislation earlier this year that could become the foundation of a body of finan

cial services deregulation moving through Congress in early 2017.4 Hensarling’s proposals, referred to as the “Choice Act,” include repealing the

Volcker Rule and lifting the threshold for bank regulation by the Consumer Financial Protection Bureau from $10 billion in assets to $50 billion.5

The Volker Rule is blamed (rightly or wrongly) for hurting institutional fundraising by virtue of its restricting investment capital from banks.

The Volker Rule is also widely credited with leading to the significant growth of the secondaries market after banks were forced to divest their

“higher risk” investments. Many fund managers point to these regulatory changes as having had a negative impact overall on general lending

activities among banks, leading to a decline in loan origination for buyouts and the corresponding rise of unregulated institutional investors

lending via private markets funds and business development companies.6

In light of the above, it is reasonable to expect a roll-back of Dodd-Frank, or at least portions of it, though timing, and the fate of some of its

more controversial aspects remain unknown.

Antitrust Enforcement

Deal-makers in the private equity industry will be keeping an eye on the direction of antitrust enforcement under the new administration.

Under President Obama, antitrust review and enforcement was widely regarded as more aggressive than in prior administrations, as evidenced

by an increasing willingness by regulators to challenge transactions that fell below filing thresholds of the Hart-Scott-Rodino Antitrust Improve

ments Act of 1976.

While Republican administrations are generally viewed as less aggressive in their enforcement posture, the Trump administration’s populist

orientation could mean a more idiosyncratic antitrust posture. Citing AT&T’s bid to acquire Time Warner as an “example of the power structure

I’m fighting,” Trump famously pledged during his campaign that he would seek to block the deal.7 Moreover, if Trump makes good on pledges to

clamp down on global trade, U.S. companies could be forced to find M&A opportunities at home, leading them to buy their domestic competi

tors, and potentially complicating competition regulation.

(Continued next page)

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

National Security Review

The incoming Trump administration’s approach to foreign direct investment (FDI) in the United States and to national security reviews

conducted by the Committee on Foreign Investment in the United States (CFIUS) is difficult to predict, but private equity investors would

be well advised to keep an eye on developments in this area in the coming months. CFIUS is an inter-agency committee with the power

to review the national security implications of transactions that could result in control of a U.S. business by a foreign person. CFIUS

member agencies include the Departments of Treasury, Justice, Homeland Security, Commerce, Defense, State, and Energy, as well as the

White House Offices of the U.S. Trade Representative and Science & Technology Policy. Therefore, the individuals selected to head these

agencies may be the best early indication of the direction of CFIUS reviews under a Trump presidency.

Mr. Trump has criticized certain foreign investments in the United States8, but his trade-related critiques have focused largely on U.S. free

trade agreements and the loss of U.S. manufacturing jobs to foreign countries. Nonetheless, according to CNN9, a Trump transition team

draft memorandum outlining Mr. Trump’s trade policy for the first 200 days of his presidency indicates that Mr. Trump would mandate

that CFIUS reviews be expanded to consider food security and reciprocity by foreign countries in their treatment of U.S. investments

abroad.

Members of Congress previously have made similar proposals related to food security, including in connection with Chinese acquisitions

of pork producer Smithfield Foods, Inc.10 and the U.S. subsidiaries of Swiss agribusiness Syngenta AG.11 In a September 15, 2016

letter12, members of Congress, noting the upcoming presidential transition, called for the U.S. General Accountability Office (GAO) to

examine whether CFIUS’s regulatory and statutory powers “have effectively kept pace with the growing scope of foreign acquisitions

in strategically important sectors in the U.S.” and to consider whether CFIUS should (i) use a net economic benefit test in its reviews of

foreign investments and (ii) mandate reviews of Chinese government-backed investments. GAO agreed to conduct the review. Last

month the U.S.-China Economic and Security Review Commission, created by Congress in 2000, advocated outright barring Chinese

state-owned enterprises from acquiring or otherwise gaining control of U.S. companies.13

Under existing law, CFIUS reviews are focused on threats to U.S. national security. “National security” is not a defined term under the

relevant regulations and statute, so even without regulatory or statutory changes, the Trump administration could seek to expand the

scope of CFIUS’s reviews by interpreting “national security” to include food security and reciprocity in cross-border investments. Chinese

media reports and our discussions with Chinese investors suggest that, at least in the short term, some Chinese investors might be

cautious about certain investments in the United States until they better understand the Trump administration’s likely approach to FDI in

the United States.

For more information on the incoming administration’s approach to FDI and potential CFIUS changes, please see our most recent

information here.

It remains too early still to predict the precise contours of Trump’s policy agenda, and because of that, the impact he will have on private

equity and deal-making generally. Nonetheless, changes are coming, many potentially profound. We will continue to monitor these

developments closely and inform you of their potential impacts.

opalesque.com

Opalesque Private Equity Strategies

Issue 20 | December 22, 2016

Events

Quick Hits

Silicon Valley-based Plutora, a pro

vider of release, test environment

and quality management solutions

for enterprise IT, has secured $13.4

million in growth equity funding. The

investor was Macquarie Capital.

Maroon Group LLC, which is owned

by CI Capital Partners, has acquired

Stamford, Connecticut-based

Cadence Chemical, a specialty

chemicals provider. No financial

terms were disclosed.

US-based private equity house Veronis

Suhler Stevenson (VSS) has sold its

stake in British HR software provider

Thomsons Online Benefits to listed US

trade buyer Marsh & McLennan.

Warburg Pincus said Dec. 22 that it

agreed to buy Gabriel Brothers Inc

(Gabe’s). Financial terms weren’t an

nounced. Alvarez & Marsal Capital,

Gabe’s current majority owner, is

exiting.

UK-headquartered oil and gas consul

tancy EPI Group has secured a £4.75m

mezzanine loan from Connection

Capital.

Private equity-backed healthcare clinic

service provider Dedalus has raised a

€72m bond from asset management

firm Tikehau IM.

Coalfire has acquired cyber security

company Veris Group. No financial

terms were disclosed. Coalfire is

backed by The Chertoff Group and The

Carlyle Group.

Austin design maven Kendra Scott

has secured a large investment in her

eponymous jewelry, fashion acces

sories and home decor business from

private equity firm Berkshire Partners

LLC.

Private Equity Investing in

Education-Focused Companies

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Hosted By: Capital Roundtable

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Companies

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Electra Private Equity announced the

final results of its tender offer, which

was first announced on 8 November,

on Thursday, with the offer closing at

1800 GMT on Wednesday.

Spearhead Integrated Marketing

Communication Group has acquired

San Francisco-based Smaato, a real-

time advertising platform for mobile

publishers and app developers.

The price of the acquisition is $148

million. Smaato’s backers included

Aeris Capital.