In a recent post on mergers & acquisitions, I outlined some of my thoughts of the qualities of acquisitions that had the greatest probability of success:

• The rationale (strategic goals) for the transaction is compelling and well articulated.
• The target is much smaller in size than the acquiring company.
• The target has a similar culture to the acquiring company (the target is a "good fit" with the acquiror). 
• The target's systems are similar to the acquiring company or can be easily ported over to or integrated with the acquiror's systems.
• The due diligence has been comprehensive and any any issues (and there are always issues) have been resolved before the closing.
• The integration process is transparent and well-managed.  The integration team should be involved very early on in the due diligence process and continue through the post-closing integration process.  Communication is key.
  
• The retained employees of the target should be appropriately incentivized and aligned with the success of the merger.

Subsequent to that post, an article "Why so many mergers and acquisitions fail after the deal is closed" looks at why many middle-market M&A deals fail in the integration process.  The article lists four primary reasons why the post-closing integration period is so prone to failure, including that the importance of the integration process is under-appreciated, integration is complex and takes time, and the integration leader is often installed too late in the process.  It's a good article that builds on my thoughts above.

Here's the link:
http://www.denverpost.com/business/ci_27174636/why-so-many-mergers-and-acquisitions-fail-after

The California Public Employees' Retirement System, known as CalPERS, is considering changing the benchmark it uses to measure its Private Equity performance, according to the Private Equity Annual Program Review dated December 15, 2004 and media reports.  According to the report (page 10), the current benchmark for the private equity program is based on a combination of certain public stock indices plus 300 basis points, lagged by one quarter.  The report recommends that the benchmark should be reviewed as the current benchmark "creates unintended active risk" for the private equity program as well as for the total pension fund.  This report is really interesting, and I recommend that you download it and peruse it.

The report (on page 16) finds that their private equity performance has under-performed against the current PE policy benchmark over the 1, 3, 5 and 10 year periods.  It also finds that their PE performance has under-performed CalPERS' global equity performance in the last 1 year by 4.8%, but out-performed the global equity performance over the last 3, 5, 10 and 20 year periods: 1.5% over 3 years, 3.0% over 5 years; 5.7% over 10 years and 3.0% over 20 years.  The report also indicates that CalPERS has also an internal asset liability management assumption that the PE program will perform at 9% per year.

I'm always interested in the performance benchmarks used by private equity investors.  As every program is unique, I have found that the benchmarks used are as varied as the programs themselves.  If you're an LP investing in private equity, I'd be very interested to know what benchmark(s) you use to evaluate your private equity program's performance - please comment to this post or contact me through the About/Contact page.

Link to the CalPERS' Private Equity Annual Program Review:  
http://www.calpers.ca.gov/eip-docs/about/committee-meetings/agendas/invest/201412/item09c-01.pdf

There's an interesting article by Andrew Ross Sorkin in the NY Times DealBook called "The Mergers and Acquisitions Cycle: Buy. Divide. Conquer" that was posted recently.  As a private equity fund-of-funds adviser who follows the M&A industry, and as an investment banker and attorney who has worked on many acquisitions, I found the article of interest.  The article explores the value created and destroyed by mergers, acquisitions, spinoffs and divestitures.  The article states that mergers have a spotty record of creating value, but also adds that "when mergers are timed right - usually during a downturn in the market - and executed properly (usually with smaller acquisitions), much value can be created."  The article then goes on to discuss spinoffs and divestitures, and how these transactions usually perform better than M&A.  It's an interesting article and worth a read.

I agree with most of what was said in the article, but would add from my own experience that the most successful acquisitions are those that have the following qualities:

• The rationale (strategic goals) for the transaction is compelling and well articulated.
• The target is much smaller in size than the acquiring company.
• The target has a similar culture to the acquiring company (the target is a "good fit" with the acquiror). 
• The target's systems are similar to the acquiring company or can be easily ported over to or integrated with the acquiror's systems.
• The due diligence has been comprehensive and any any issues (and there are always issues) have been resolved before the closing.
• The integration process is transparent and well-managed.  The integration team should be involved very early on in the due diligence process and continue through the post-closing integration process.  Communication is key.
  
• The retained employees of the target should be appropriately incentivized and aligned with the success of the merger.

In my experience, acquisitions that have the above elements have a much greater probability of success than those without these elements.

Here's a link to the NYTimes DealBook article:
http://mobile.nytimes.com/blogs/dealbook/2014/12/10/the-mergers-and-acquisitions-cycle-buy-divide-conquer/

With Uber's recent $1.2 billion financing round that valued the company at $40 billion, it is only natural that the valuation would be questioned.  Here are some of the posts from around the web:

Aswath Damodaran's Crowd Valuation of Uber
This is a fascinating post which enables the reader to analyze Uber and derive a valuation based on the reader's inputs. There's a spreadsheet to create a valuation and then another one to share it.  Highly Recommended.
http://aswathdamodaran.blogspot.com/2014/12/up-up-and-away-crowd-valuation-of-uber.html

Fortune: Uber is now more valuable than 72% of the Fortune 500.  
This post highlights that at a $40 billion valuation, Uber is valued higher than companies including Charles Schwab, CBS, Viacom, KKR, Aflac, Hilton, DISH Netowrk, etc.
http://fortune.com/2014/12/04/uber-valuation-40-billion-fortune-500/

Forbes: The Five Keys to Uber's Valuation.  
This post looks at Uber's valuation from a marketing and branding perspective.  I'm not sure I agree with the points, but it's interesting.
http://www.forbes.com/sites/jonathansalembaskin/2014/12/05/the-5-keys-to-ubers-valuation/

AP: Surge Pricing: Uber's $40B valuation.  Worth it?  
This post looks at the pros and cons of an investment in Uber.  Interesting analysis.
http://bigstory.ap.org/article/b13630d27c304c5984e5f68345818570/uber-car-service-really-worth-40-billion

I'll add to this list as I find more interesting posts.  If you have any you'd like to share, please submit a comment.  Thanks.

Uber, the mobile ride-booking company, has today announced that it has raised a new $1.2 billion Series E preferred stock financing round.  This financing round values the company at a jaw-dropping $40 billion valuation, according to NY Times Dealbook.  The financing could ultimately raise a total of $1.8 billion with an additional close.  This financing is separate from a convertible debt offering that Uber is selling to Goldman Sachs' high net worth clients, according to Fortune.  

This valuation is a steep mark-up from the $18 billion valuation Uber obtained in June, when it raised $1.2 billion.  This is a mark-up of 2.2x in about 6 months.  In two previous blog posts, the $18 billion valuation was explored.  Here are the links to the prior blog posts:

Is Uber Worth $18.2 Billion?: 
http://www.allenlatta.com/allens-blog/is-uber-worth-182-billion

Gurley v. Damodaran on Uber's Valuation:
http://www.allenlatta.com/allens-blog/gurley-v-damodaran-on-ubers-valuation


Links:
Uber's blog post announcing the financing:  http://blog.uber.com/ride-ahead

NY Times DealBook article:
http://dealbook.nytimes.com/2014/12/04/uber-files-to-sell-1-8-billion-in-new-shares/

Fortune article:  
http://fortune.com/2014/12/04/uber-files-to-sell-1-8-billion-of-new-stock/

Pantheon Ventures has released a study of nearly 700 private equity and venture capital funds to determine whether there is an inflection point in a fund's life where expected value creation and distributions become negligible relative to the fund's total value that it has already achieved.  The study "Residual Value in Mature Private Equity Funds" is very thoughtful and has some interesting findings:

• By year nine, the median fund had generated 96% of its total gain when measured by Total Value to Paid-in-Capital (TVPI) and had generated 80% of its distributions.
• There was no statistically significant evidence that venture funds behaved differently than buyout funds, although the degree of dispersion in the TVPI profiles was greater for venture funds.
• The results were generally not skewed by any specific vintage or associated market conditions.
• Lower-quartile funds funds in the study (compared to top and second quartile funds) were late bloomers, and more of the total value creation and distributions occurred later than the top and second quartile funds.

This is a very good research effort, and I recommend it.

Link to Pantheon's website: http://www.pantheon.com/

Link to the study page: http://www.pantheon.com/news-publications/534-replicating-investment-strategy

Link to the study .pdf:  http://www.pantheon.com/images/stories/pdfs/residual_value_in_mature_private_equity_funds.pdf