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Third Quarter Registers as the Weakest Quarter for European Private Equity Activity

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Photo source: PitchBook
Reading Time: 3 minutes

European Private Equity Industry Remains Healthy Overall, in spite of Downward Trend in Dealmaking, Exits and Fundraising in 3Q 2018

European private equity dealmakers have completed 2,327 deals worth a combined €276.8 billion through 3Q 2018 —14.8% and 15.3% decreases, respectively, compared to the same timeframe in 2017, according to PitchBook’s 3Q 2018 European Private Equity Report. The third quarter represents the weakest quarter in 2018 for PE activity in terms of PE deal count and value, with just 731 completed deals totaling €82.6 billion. What’s more, European PE exit activity also recorded a noteworthy dip in 2018. PE-backed exits at €2.5 billion or greater are on pace to make up the lowest proportion of total PE exit value since 2009. 3Q was also the slowest quarter for PE fundraising this year with €9.4 billion raised across 19 vehicles. Despite weak quarterly results, 2018 dealmaking is on pace for the third-best year on record and fundraising has already hit the third-highest annual level in the past decade thanks to fervent activity earlier in the year. Exit activity is also expected to pick up as GPs seek to profit from their investments.

“European PE investors experienced a banner year in 2017, reaching decade-highs in dealmaking and fundraising; therefore, while we’ve recorded significant declines in 2018 activity, the European PE market is still shaking out to be a strong year on a historical basis,” said Wylie Fernyhough, analyst at PitchBook. “The slowdowns across deal flow, exits and fundraising can be explained by several reasons including, record activity in 2017, lingering concerns over Brexit as well as the highly-priced and highly competitive market.”

Investment Activity

  • Coming off a record-setting year in 2017 in terms of PE deal value, 2018 has experienced a shortage of PE deals closing above €2.5 billion – a key contributor to diminished deal value. Only eight such deals have closed YTD, compared to 14 completed deals in the same period in 2017.
  • Despite the overall slowdown in dealmaking at the top end of the market, European PE investors continued to gravitate towards larger deals as evidenced by the 22% increase in median PE deal value (€24.4 million).
  • Additionally, EV/EBITDA multiples have risen to an all-time high at 10.0x, driven in part by the ease with which general partners (GPs) can finance deals with leveraged loans, an attractive alternative to high-yield bonds.
  • PE investors have consistently increased its share of carveout deals throughout 2018, accounting for more than 20% of all carveouts YTD – up from 14% in 2009. Private equity’s growing involvement in the broader M&A market is expected to continue as PE’s assets under management rises faster than growth in European asset value.

Exits

  • Through the first three quarters of 2018, PE firms have recorded 718 exits for a combined €150.5 billion across all exit types, down 24.3% and 30.4%, respectively, from the same period in 2017. Exit activity fell short most notably at the top end of the market (€2.5 billion+), which saw the lowest proportion of PE exits since 2009.
  • Secondary buyouts (SBOs) continued to proliferate as an exit strategy throughout 2018. YTD, SBOs accounted for 55.0% of total exit value and 52.2% of total exit count on an absolute basis —both annual records if those figures hold through 4Q. The €1.5 billion sale of North Sea Midstream Partners as well as the €1.3 billion sale of Exclusive Networks by a consortium to Permira, were the largest SBOs completed in the third quarter.
  • Europe’s exit market saw the fewest PE-backed IPOs (five) since 3Q 2012, down from 19 PE-backed IPOs in 2Q 2018, another significant factor in the overall decline in exit value.

Fundraising

  • Private equity fundraising remains healthy on a historical basis, with €55.8 billion raised across 54 funds in the first three quarters. Though, 2018 activity is skewed by 1Q 2018 PE fundraising results – More than half of 2018’s total capital raised was accounted for in the first quarter where 15 funds raised €31.5 billion, which included three mega-funds—the only mega-funds to close in 2018.
  • The UK and Ireland continued to be stable hubs for PE fundraising, making up nearly half (44%) of the proportion of total PE fundraising, followed by the Nordic region (33%), which is more than twice the record-setting proportion of PE fundraising the region recorded in 2008 (16%).
  • Following the trend witnessed in the broader PE market, investors continued to raise fewer, larger funds to keep pace with ballooning deal sizes. To date, 77.9% of all capital raised was in funds above €1 billion, outpacing the record of 73.5% in 2013.

Additional coverage in this report includes:

  • Overview
  • Deals by sector & size
  • Deals by region
  • Spotlight: Carveouts
  • Exits
  • Fundraising

Download the full report here.

Editor - With a passion photo photography, webdesign and content, it made sense for me to also integrate news editing and press release publishing. I am also passionate about the car industry, so you will surely find some exciting news reporting from my side about the automotive industry.

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Banking/Financial Services

Endor (EDR) Gets Listed on OKEx’s First Partner Exchange CoinAll

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Photo source: twitter.com / @OKEx
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CoinAll (www.coinall.com), OKEx’s first partner exchange, has announced it will be listing Endor, a well-reputed protocol utilizing AI prediction technology. EDR deposits are now in effect. Trading started at 17:00 Nov 14th (HKT, UTC+8). To celebrate the listing of EDR on CoinAll, EDR has launched a campaign. During the promotion period, traders can deposit and trade EDR to win 6 BTC.

After years of research at MIT, Endor invented the “Google of predictive analytics”, providing automated AI predictions for companies. Leading banks, large retailers and Fortune 500 companies such as Coca-Cola and Mastercard have utilized Endor to predict consumer behavior, make data-driven decisions and increase revenue.

The Endor protocol is the world’s first predictions protocol, enabling an ecosystem that provides automated, accurate, affordable and censorship resistant AI predictions for the long tail of businesses – working on fully encrypted data. The EDR token is the exclusive means of payment for services on the Endor Protocol.

Recently, the deliberations of the Congressional Blockchain Caucus have been finally unveiled in the report: “The Impact of Blockchain for Government: Insights on Identity, Payments, and Supply Chain”. Endor stood out among the latest projects featured in this report as an exemplary landmark of how tokens can be used to achieve the true power of decentralization.

Report:

http://businessofgovernment.org/sites/default/files/The%20Impact%20of%20Blockchain%20for%20Government.pdf

As the world’s first community-based autonomous exchange, CoinAll adopts the advanced and secure technology of OKEx, including the world-class order matching system, digital asset wallet, and funds settlement system. CoinAll shares OKEx’s massive user base of more than 20M users. All OKEx accounts can be used to log into CoinAll and trade without further registration.

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Banking/Financial Services

Bitcoin BCH Hash War Will be Decided by Sustained – Not Temporary, Rented – Hash Power

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Photo source: oracletimes.com
Reading Time: 4 minutes

 

With the Bitcoin BCH network upgrade on November 15, a hash war has begun with miners voting between Bitcoin SV and Bitcoin ABC – two competing implementations of the BCH protocol. As fully expected, Bitcoin ABC appeared to take a temporary lead on the first day by receiving an artificial boost from temporary, “rented” hash power subsidized by Roger Ver’s organization Bitcoin.com, which announced it would use its pool customer hash on BCH for just 24 hours, and from ABC’s main supporter Bitmain Technologies, the Chinese manufacturer of crypto mining rigs. However, Bitcoin SV has strong support from CoinGeek, the largest BCH miner, and nChain, the leading blockchain research & development firm. CoinGeek and nChain have the resources to fight long term with their own sustained hash, long after Bitmain cannot afford to bleed money for rented hash. Therefore, the BCH hash war will not be decided in 1 or 2 days,but over many days and possibly weeks by on-going miner votes with sustained Proof of Work. Until a dominant chain emerges, cryptocurrency exchanges, wallet and service providers are advised to remain neutral, and to run a Bitcoin SV node to be prepared for the best interests of users.

CoinGeek founder Calvin Ayre expressed his determination to fight the BCH hash war as long as it takes:

“CoinGeek and nChain are in this battle for the long haul. We will mine BCH and fight as long as it takes to protect the original Bitcoin from Bitmain, Jihan Wu, and their Bitcoin ABC development group who all want to change BCH into some alt-coin Wormhole token technology. Roger Ver’s company Bitcoin.com is subsidizing hash for only 24 hours, taken from his own customers. As for Bitmain, to keep up with us in this hash war, Bitmain will have to spend millions of dollars a day from its investors’ money and shareholder assets, while also trying to raise more investor money for its shaky IPO. This will bleed Bitmain’s cash and cryptocurrency reserves, because we are prepared to fight for months and months. If I were a shareholder or investor in Bitmain, I’d be asking why Jihan Wu is spending all your money to control BCH when Bitmain’s business supports multiple cryptocurrencies.”

Bitcoin SV is the new full node implementation for Bitcoin Cash that seeks to restore the original “Satoshi Vision” for Bitcoin and allow it to massively scale. For the November 15 upgrade, Bitcoin SV’s feature set is not compatible with that of competing client Bitcoin ABC. When there is a disagreement between rule sets, the original Bitcoin white paper described the “Nakamoto consensus” method for miners to vote with their computing power (1 CPU = 1 vote) to enforce any rules: “The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it.”

The current hash war is the world’s first test of Nakamoto consensus. After the November 15 upgrade, Bitcoin ABC appeared to temporarily lead with a higher portion of the BCH network’s total hash power. But ABC’s perceived first-day advantage comes from a sudden burst of hash presumably rented from the Bitcoin Core (BTC) network to move over to BCH. By November 14, the day before the hard fork, Bitcoin SV’s support consistently grew for weeks and dominated with a clear 72-78% lead over ABC (18-22%):

Bitcoin ABC even dropped to tying for 3rd place with Bitcoin Unlimited, another implementation which is compatible (as a configurable option) with both Bitcoin SV and Bitcoin ABC rule sets.

Yet suddenly on the November 15 upgrade date, a huge wave of hash magically came to support Bitcoin ABC. This came from Bitcoin.com’s pool which announced it was boosting its BCH hash for only 24 hours, by moving customer hash from the BTC chain. In addition, Bitcoin ABC is receiving more support from “rented” or subsidized from BTC mining pools controlled by (Antpool.com, BTC.com, ViaBTC) or friendly (BTC.top) to Bitmain. To obtain rented hash, Bitmain must pay to subsidize the difference in lower revenue miners receive on the BCH chain when total hash rate grows, compared to mining on the more profitable BTC network. BTC.top’s CEO Jiang Zhuoer estimates this can cost over 100 million yuan or USD $14 million per day. The rented hash supporting Bitcoin ABC is temporary, and will leave the BCH network when not subsidized. This is a losing proposition for Bitmain; each day a hash war continues, Bitmain must pay millions of dollars to give Bitcoin ABC an artificial advantage. But when Bitmain can no longer afford to pay for it, the rented hash will leave BCH and Bitcoin SV will again dominate by virtue of its long-term, sustained hash support.

In contrast, Bitcoin SV’s support comes from CoinGeek and nChain’s BMG mining groups, which are 100% dedicated to support Bitcoin SV with their genuine hash. SVPool, a personal initiative of nChain Chief Scientist Craig Wright and the newly-formed Mempool also run Bitcoin SV; those pools gather miners supporting the Satoshi Vision and do not pay added subsidies to miners beyond the amount actually earned from participating in their pools.

Ayre explained why sustained hash power should decide:

Bitcoin is about Proof of Work (PoW), not Proof of Rented Hash (PoRH). To decide which chain should be the true Bitcoin BCH, you should pick the longest chain with the most legitimate, sustained Proof of Work invested. It is ridiculous to count transient, rented hash which comes onto BCH artificially for short bursts of time because it is subsidized to do so, but then disappears and does not really sustain Proof of Work on the network. That is like paying a person to show up in a foreign country to vote in a political election, without meeting citizenship requirements to vote. At CoinGeek’s BCH Miners Choice Summit on November 2, we were offered thousands and thousands of petahash to rent for this battle. While we can afford to pay for more rented hash than Bitmain can, we decided to set a better precedent for Bitcoin and fight with honest hash invested to support BCH long term.”

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Majority of micro VC LPs and GPs plan to invest internationally in 2019, Silicon Valley Bank survey finds

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A majority of micro VC limited partners and general partners seeking new deals say they expect to make an international investment in 2019, according to a survey by Silicon Valley Bank (SVB), the bank of the world’s most innovative companies and their investors. Two-thirds of LPs and GPs surveyed at the sixth annual Micro VC Summit, hosted by SVB and Cendana Capital in San Francisco in October, said they are looking for investments abroad in 2019.

The survey asked investors to name which new regions they are considering that they haven’t previously explored, with 23 percent citing Asia, 18 percent saying Canada and 13 percent choosing Europe. In U.S. regions in which they had never invested previously, 18 percent said they are looking at the Midwest and Southern California, 13 percent said the Northwest and 12 percent chose the East Coast.

The survey also found that half of GPs expected to raise a new fund in 2019. Asked separately about the VC fundraising environment, 38 percent expected it to become more difficult next year, while 50 percent expected no change. Many acknowledged that the overabundance of capital would lead to increased competition for deals and higher valuations.

LPs that invest in VC-backed companies reported that they are nearly equally interested in life science/healthcare (48 percent) as they are in crypto/blockchain (45 percent). Ten percent said they are interested in investing in cannabis funds.

Jim Marshall, Head of SVB’s Emerging Manager Practice, said the results underscore the strength of micro VCs, especially as their reputations and track records are growing.

“With growing interest in the innovation sector from nontraditional investors, we’re predicting ample new opportunities for emerging managers. We have found that the majority of LPs are looking to invest in emerging managers for their greater likelihood to generate alpha,” Marshall said.

He added, “We also expect more VCs to look internationally for new investment opportunities. Many tell us they are exploring regions in which they have never invested previously. They are in search of new talent and lower startup operational costs, notably in Asia and Canada.”

Methodology
Silicon Valley Bank surveyed 111 micro VC LPs and GPs at its sixth annual Micro VC Summit in San Francisco on October 11, 2018. The Micro VC Summit is an invite-only annual education and networking event attracting more than 300 early-stage investors, largely comprised of general partners and limited partners in seed funds.

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