Matthias Knab
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.

Copyright 2016 © Opalesque Ltd. All Rights Reserved.
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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 ...........
3
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
Copyright 2016 © Opalesque Ltd. All Rights Reserved.
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Opalesque Private Equity Strategies
Issue 20 | December 22, 2016
Bailey McCann
Private Equity Strategies
E
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.
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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:
Email
Knab@Opalesque.com
or call +49 170 1890077.
Copyright 2016 © Opalesque Ltd. All Rights Reserved.
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Opalesque Private Equity Strategies
Issue 20 | December 22, 2016
Modern Investor Tools:
Harvest, The Place For Relevant Voices
B
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
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Opalesque Private Equity Strategies
Issue 20 | December 22, 2016
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Copyright 2016 © Opalesque Ltd. All Rights Reserved.
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Opalesque Private Equity Strategies
Issue 20 | December 22, 2016
A
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.
Read more
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.
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Opalesque Private Equity Strategies
Issue 20 | December 22, 2016
Movers & Shakers: New Private Equity Firm
Focuses On Diversity
by
Bailey McCann
Private Equity Strategies
T
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.
Copyright 2016 © Opalesque Ltd. All Rights Reserved.
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Opalesque Private Equity Strategies
Issue 20 | December 22, 2016
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Opalesque Private Equity Strategies
Issue 20 | December 22, 2016
Data Snapshot - Private Equity CTOs Focus on Security
by Bailey McCann
Private Equity Strategies
A
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.
Copyright 2016 © Opalesque Ltd. All Rights Reserved.
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Opalesque Private Equity Strategies
Issue 20 | December 22, 2016
What Exactly Does a Trump Presidency
Mean for Private Equity?
A
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
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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)
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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.
Copyright 2016 © Opalesque Ltd. All Rights Reserved.
opalesque.com
13
13
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
January 26th, 2017| New York
Hosted By: Capital Roundtable
Private Equity Investing in Retail
Companies
February 02 | New York
Best Practices for Independent
Sponsors & Their Capital
Partners
February 16, 2017 - New York, NY
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.
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