As private equity and M&A activity gains momentum in 2019, the question on everyone’s mind is, “How long can the current economic expansion continue?”
With purchase multiples at or near all-time highs and PE fundraising and dry powder at record levels, one can’t help but wonder how fund returns for recent vintages will be affected.
Not to mention all the competition: In 2018, SPS estimates that 1,400 different financial investors each led at least one transaction north of $10 million in enterprise value in the U.S. or Canada.
Perhaps the more important question to ask is: “How are private equity firms strategically adjusting to current market conditions to drive fund performance?” As SPS assesses current trends and PE data, two areas where PE firms are successfully differentiating themselves in today’s market come to light: buy and build and deal sourcing. Buy and build The thesis behind add-ons, or the buy-and-build strategy, is intuitive. Strategically, various smaller players in a particular market niche may well benefit from being parts of a larger platform, due to synergies created by economies of scale and reduced operational costs. Financially, smaller deals typically trade at lower purchase multiples. And as you add to both the top and bottom lines with multiple acquisitions, you get not only wider profit margins due to the cost savings but expanded multiples at exit. That’s a double win for IRRs.
While not easy to execute, the buy-and-build strategy is backed by logic. SPS data shows that 2018 saw 2,043 PE add-ons of $5 million or greater enterprise value, completed by 689 different investors.
This compares with 1,903 add-ons by 666 investors in 2017 and 1,634 add-ons by 669 investors in 2016. That’s a 25 percent increase in deals over the past two years. The three leading verticals for add-on activity during 2018 were industrial equipment and products, insurance, and specialty clinics and centers. A breakdown of the most active PE firms completing add-ons in 2018 is below: Deal sourcing The rise of the business development professional over the past decade is a strong testament to what SPS has long advocated: Deal sourcing is one of the most vital aspects of a private equity firm’s success in a competitive market.
Effective sourcing demands functional metrics to assess market coverage of relevant deal flow, prioritize and strengthen intermediary relationships, and identify which intermediaries run the most limited vs. broad processes.
Deal flow needs to be rigorously analyzed in the context of a buyer’s intermediary universe, which paves the way for streamlining deal-sourcing processes via intelligent automation and achieving top-quartile fund performance. In this spirit, SPS developed a new analysis based on the anonymized deal flow of 95 PE firms over the past two years, to examine topical trends. The median number of unique, active intermediaries from which a PE firm reviewed deals in the past 12 months increased 20 percent to 194 from 162.
This year-over-year increase proves that PE firms are dramatically increasing the number of relevant intermediaries from which they are seeing transactions. If your firm’s deal flow came from the same number of sources year over year, it may be time to expand your network.
An ongoing debate among PE firms asks where they should focus their sourcing efforts, i.e., the more active well-established intermediaries typically running efficient processes with a high likelihood of closing or lesser-known intermediaries closing fewer, typically less competitive deals. Let’s see what approach the industry pros take. The Best-in-Class Deal Originators, per the 2018 SPS Deal Origination Benchmark Report, shows 72% of their deal flow on average comes from intermediaries that show them more than three deals a year, compared with 62% for the overall market.
On the flip side, however, 71% of the unique intermediaries from which they see deals are boutique advisers that closed three or fewer deals a year.
Evidently, a holistic strategy to boost market coverage of relevant actionable deals strives to maintain consistent deal flow from those prolific banker relationships, while also continuing to focus on less active intermediaries often running more limited processes. Hence, it’s not just emphasizing one category over the other; rather, all intermediaries should be prioritized and marketed to accordingly, with new relevant intermediaries added in a timely manner. It almost sounds too simple.
While the market remains heated, PE firms still have opportunities to differentiate themselves and drive fund performance.
Maybe you should take a hard look at the buy-and-build strategy. Alternatively, perhaps your firm can better leverage analytics and automation to improve your deal-sourcing effectiveness and closing rates. Stepping away from the firehose of a hot M&A market and taking a strategic, data-driven review of how to best operate could pay great dividends down the road.
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LOS ANGELES: Player spending in PUBG Mobile overtook the amount spent in the iOS version of Fortnite last month for the first time, according to Sensor Tower.
Global spending in PUBG Mobile was up 24% from December, with players spending an estimated US$45.2mil (RM184.37mil) on the App Store and Google Play versions of the game. Fortnite on mobile made Epic Games an estimated US$37.9mil (RM154.59mil) last month, by comparison. The caveat, as noted by mobile market intelligence provider Sensor Tower, is that this is only accounting for the iOS version of the dominating battle royale game, as compared to the Apple and Android versions of PUBG Mobile.
Mobile spending in Fortnite for Android devices was not taken into account because the title is available for download directly from Epic Games, and not from the Google Play store. Still, Epic Games saw a significant month-over-month decline in spending for the iOS version of its top title, as spending dropped 45% from December.
Many factors could be affecting the decline in the iOS version of Fortnite. The drop comes after the holidays, and since Fortnite appeals to a wide range of players, including the youth demographic, part of the decline could be that many young players’ holiday funds were spent in December. It could also be a sign that the massively popular battle royale game is simply starting to decline in public appeal.
PUBG Mobile and the original PlayerUnknown’s Battlegrounds has a more realistic, violent aesthetic and tends to attract older players, which could mean it is growing its playerbase at a more gradual pace than Fortnite. The mobile game’s total revenue is an estimated US$242mil (RM987.14mil) worldwide, compared to Fortnite’s US$500mil (RM2.03bil) on iOS alone.
Tencent cannot offer in-app purchases on PUBG Mobile in China, which would further boost sales. Still, the mobile title has a long way to go to match the success of its competitor.
Sources: Reuters
Organizations in every industry are rapidly embracing artificial intelligence (AI) to enable and accelerate their business transformation — with machine learning proving to be foundational to gaining insights - fueled by data. With the advent of GPU-accelerated data science businesses are realizing faster time-to-insight, making organizations more productive and cost-efficient, gaining competitive advantage.
Capital One is one such business that has integrated AI and machine learning at scale, even developing its own Machine Learning Center of Excellence, an in-house consolidation of expertise and technology that enables the financial services giant to expand innovation across many businesses. Senior director Zach Hanif shares his insights on what every business should know as they seek to tap into the power of AI and machine learning.
Understand the definition of “good data.” Data is the lifeblood of machine learning efforts. When there isn’t great data management then the system may be spending more time categorizing and deciphering every data gathered. Having data accessible, discoverable, and maintainable can keep the data high quality. Making it easily available will pay off immediately to your efforts.
Identify the key use cases you want to solve in your business.
Machine learning is an investment of time and energy on multiple fronts. By identifying which use cases are most important to solve then businesses can benefit from learning how others have stepped up to the particular challenge. In this webinar on data management and scaling AI infrastructure, Hanif talks about how Capital One leverages AI/machine learning for key use cases such as financial crimes. There are transformative opportunities in business processes with machine learning in any industry.
Scaling AI infrastructure is important.
Machine learning experts should spend their time deciding what success means, not mechanically determining if success was achieved in order to scale more effectively. There are multiple solutions to scaling infrastructure as AI and machine learning demands grow. First: Orient the data around the natural software development cycle with predefined metrics. Second: Embed good software engineering practices will see a far more predictable process in the infrastructure.
The UK's population is getting older with 18% aged 65 and over and 2.4% aged 85 and over. In 50 years’ time, there are likely to be an additional 8.6 million people aged 65 years and over - a population roughly the size of London.
Around 2 million elderly require home care, with 3.6 million family members acting as carers. Ageism is widespread in the UK, with negative attitudes towards the elderly prevailing.
As a teenager, Parmentier watched his grandfather, who was battling with Parkinson's, be put into a care home.
"His Parkinson’s disease became too difficult for him to manage living independently. Our family decided that putting him in a care home was the safest, most prudent step in ensuring his ongoing physical wellbeing. The rationale was of course that his every need could be met in an environment built specifically for residents with complex medical needs." ‘Captain Marvel’ Crowdfunding Campaign to Hold Free Theater Screenings for Girls Tops $60,0002/27/2019
A crowdfunding effort to pay for free theater screenings of “Captain Marvel” for girls and young women has now raised more than $60,000, three times its original goal.
Donors to cause — to send girls to Marvel’s first female-led superhero movie — include Ellen DeGeneres’ “The Ellen Show” and NBCUniversal’s E! News, which each gave $10,000 to the GoFundMe campaign. Also ponying up for the “Captain Marvel” free screenings was Oculus co-founder Brendan Iribe, who donated $2,500. Currently, 1,170 donors have given $60,825 to the campaign at gofundme
“Every girl deserves to know she can be a hero,” says the campaign’s page on GoFundMe, which launched Jan. 8.
The #CaptainMarvelChallenge crowdfunding initiative was started by We Tell Stories, the organizer behind the #BlackPantherChallenge, which last year raised more than $1 million and provided free screenings of “Black Panther” for 73,000 children. The “Captain Marvel” campaign was launched in partnership with Girls Inc. of Greater Los Angeles, which serves girls in Title I schools in South Los Angeles, Watts and Compton.
“Captain Marvel,” starring Brie Larson in the title role, hits theaters Friday, March 8, which is also 2019 International Woman’s Day (during Women’s History Month). The film is expected to generate over $100 million in North America over its opening weekend.
The movie is significant because of its female-empowerment message, according to We Tell Stories and Girls Inc. LA. “Everyone should have an opportunity to see women in roles they can aspire to one day be, roles that show women as strong, smart and bold,” the organizers say on the GoFundMe page. “From a teacher to a fighter pilot — or a superhero. This is an opportunity to continue to empower girls to be just that.”
Funds from the campaign will go toward purchasing tickets and renting out theaters for “Captain Marvel” showings. Any additional funds raised will go toward Girls Inc. LA and We Have Stories to support different programming efforts, according to the organizers.
At the current donation amount, the #CaptainMarvelChallenge will provide free tickets to nearly 2,000 kids. The cost breakdown, per the organizers, is estimated to be $13 per child ticket, $13 in refreshments per child and $17 per chaperone ticket. GoFundMe charges a transaction fee of 2.9% plus 30 cents per donation.
KUALA LUMPUR (Feb 15): There are currently no registration forms for Airbnb hosts to register their properties with municipal authorities, despite amendments having been made to the Tourism Industry Act recently to extend registration requirements to all homes, said Airbnb.
In a statement today, it said registration forms are now only available for hotels, which do not apply to Airbnb properties.
"Registration processes are currently being updated to reflect this expansion. Once MOTAC’s (Ministry of Tourism, Arts and Culture's) new registration process is in place, we will actively work to inform hosts of the registration requirements, as we have done with DBKL (Kuala Lumpur City Hall) last year and in hundreds of jurisdictions around the world," Airbnb said.
It was responding to news reports yesterday that Minister Datuk Mohammadin Ketapi was urging unlicensed hotel operators and those offering vacation rental services on Airbnb to register with MOTAC immediately to avoid legal action. Mohammadin also said the Ministry was actively tracking down unlicensed operators.
"We understand that new rules are needed for new technology, and we believe in regulations that are clear, fair and progressive. This means collaborating closely with key stakeholders to facilitate understanding of the growing short-term accommodation market, and identify opportunities where Airbnb can support the hospitality industry, local communities and tourism infrastructure. "As part of our Memorandum of Collaboration with the Malaysia Productivity Corporation (MPC), we have participated in feedback sessions and shared key policy recommendations with the working group that is studying short-term accommodation regulation. We also continue to work with authorities on collecting and remitting a broad-based tourist tax at a national level," Airbnb said.
"We have worked with Governments around the world to successfully craft and implement regulations that ensure respectful and responsible home sharing, and we are committed to doing the same in Malaysia," it added.
In a separate statement, however, the Malaysian Association of Hotels lambasted Airbnb for its lack of actual action to comply with existing laws, despite having openly declared their willingness to cooperate with the Malaysian government. "If Airbnb is sincere to be part of the tourism industry of Malaysia, it must demonstrate its compliance to the laws of Malaysia and ensure that hosts and listings that do not comply with registration and licensing requirements are removed from its platform immediately," it said.
It went on to laud the Minister's call to have home-sharing regulated as timely, in view of the amount of revenue the country lost due to such unregulated businesses.
"A popular home-sharing platform recently announced that it served over two million guests over the last year in Malaysia alone, making the assumption of two guests per room and average of two nights stay each room, an average daily rate of RM100 conservatively, that adds up to RM200 million in transactions that would have contributed RM12 million in SST alone, not considering other taxes. "The Government and the industry should not be made to bear such losses when on the other end home-sharing hosts and operators are reaping fruits of what they did not sow," the association added.
Delivery is a high priority for McDonald's CEO Steve Easterbrook, and a big worry for franchisees.
Easterbrook expects a rapidly expanding delivery partnership with UberEats to drive sales growth. Franchisees grumble that delivery costs put more pressure on their tight profit margins.
"Our margins do not allow for the commissions that Uber is taking nor the added rent and service fees McDonald's is enjoying," a newly formed organization representing most U.S. franchisees told members last month in an email obtained by Crain's. "Delivery is a growing segment of our business and it will one day cannibalize our on premise restaurant sales. If we allow this to occur under the current arrangement, our net cashflow will go down."
The dispute over delivery marks another flashpoint in the increasingly tense relationship between Easterbrook and franchisees who bear much of the cost of his effort to remake McDonald's as a "modern, progressive burger company." Restaurant owners are spending up to $315,000 per restaurant to remodel their stores to corporate-mandated standards that include $965 chairs and the construction of a wall separating the kitchen from customers, install self-order kiosks and buy new refrigerators to store non-frozen beef. That comes on top of steadily rising labor and food costs.
The tensions arise from a conflict baked into McDonald's business model: The company makes money off top-line sales, but franchisees make money only if their sales exceed their costs. When headquarters issues edicts designed to boost sales, they often create new expenses that eat into franchisees' profits.
After McDonald's shifted almost all stores to franchises in an effort to boost corporate-level profitability, those owners now control 95 percent of its restaurants. In October, many franchisees voted for the first time in McDonald's history to form an independent association. The National Owners' Association drew about three-quarters of the chain's 1,700 U.S. franchisees to its second meeting in December. The group is advocating for reduced remodeling costs and a change to the delivery deal, among other issues. The stakes are rising quickly. Delivery has become a $3 billion global business for the fast-food giant over the past two years, and "we've been moving at a pace that is unprecedented in the McDonald's system" to expand delivery, Easterbrook said on an earnings call last summer. More than 19,000 locations globally now offer delivery—up 144 percent in 18 months—including about 8,000 U.S. restaurants.
"We are confident that delivery offers additional growth potential for our business," Easterbrook told analysts in late January. "Even with the momentum we already have established, we know we have an opportunity to let more customers know that McDonald's will bring meals to their homes, offices and college dorm rooms."
McDonald's says delivery orders are about twice the size of an average in-restaurant check. Easterbrook argues delivery also will spur customers to order more frequently. Franchisees say they understand that delivery is critical to future growth but warn it will cannibalize existing sales eventually. They also say the current deal unfairly benefits UberEats and McDonald's. Right now, UberEats takes a 20 percent cut of every order, according to three franchisees who requested anonymity. Franchisees pay that fee. Then McDonald's comes in to take its cut.
McDonald's charges franchisees a 5 percent royalty on every sale. It also requires its franchisees to lease their locations from the company, with rent based on a percentage of sales, usually about 10 to 12 percent. Franchisees gripe that McDonald's is currently charging royalties and rent on the full amount of the order, including the 20 percent they never see. This whittles an already slim profit margin to untenable levels, they say.
In a survey by the National Owners' Association, 785 franchisees responded "yes" to the question, "Do you support an effort to negotiate a better commission/split with our third-party provider and McDonald's?" Eight said "no." Similarly, 758 owners said they were not statisfied with current delivery economics, while only 23 said they were. Some 565 said that delivery is not contributing positive net cash flow, compared with 198 who said that it was.
"I believe in delivery, but the commissions everyone else gets from us is much higher than what we get, if we get anything at all," one franchisee wrote in the survey's comment section.
McDonald's says delivery orders mostly generate new revenue that doesn't supplant in-restaurant purchases that are more profitable for franchisees. In January, Easterbrook said that "incrementality still remains encouraging, in that . . . 70 percent-ish range." Owners, again, are skeptical. "While I may be getting a very small cash flow benefit from my restaurant that does $4,000 (per week) in delivery sales, I do not believe the benefit is substantial enough to sustain it," another franchisee wrote in the NOA survey. "It will eventually begin to replace store sales and the pass-through is not equal." Owners also point out that while they're technically allowed to increase their prices in the UberEats app to offset their increased expenses, McDonald's discourages the practice.
McDonald's has shown it's willing to listen to franchisees and the National Owners Association. In November, the chain pushed back the 2020 deadline for remodeling restaurants by two years after franchisees complained about the costs.
"As McDelivery continues to evolve, we remain committed to working with our franchisees to evaluate the program, as well as ensuring they have the support they need to run great restaurants and provide quality experiences and convenience for our guests," a spokeswoman says.
One of the most searched questions on Google about entrepreneurship is "are entrepreneurs born or made?"
I feel I’m in a good position to answer it. I run an entrepreneur accelerator in the UK, Australia and the USA. We’ve had over 2500 entrepreneurs join our cohorts and since 2010 I’ve interviewed thousands of entrepreneurs who have applied for a position on the program.
I’ve also written four books on entrepreneurship and spoken at conferences around the world alongside some of the world's most successful business leaders.
The answer is very clear to me, you must be born AND made. Let me address both aspects. Born: Finding the thing that's right for you. Every successful entrepreneur is a born entrepreneur. The good news, however, is that there’s not one type of entrepreneur. Oprah Winfrey would have made a terrible fund manager and Warren Buffet would have made a boring talk show host. Richard Branson would have failed as a software developer and Bill Gates would not have been able to run a cool music label.
Being a born entrepreneur is not about being born in a particular way, but it is about finding something that suits your nature.
There are entrepreneurs crushing it in areas as diverse as finance, entertainment, media, software, sport, engineering, aged care and childcare; this is why you’ll see extremely diverse personalities who all have the badge “entrepreneur”. Successful entrepreneurs can be introverts, risk-averse, gregarious, shy, conservative, liberal, wildly optimistic or rather sceptical in their outlook. You could name almost any personality trait and I would be able to show you a successful entrepreneur who has it.
The key is to get a good fit with your personality and the venture you pursue. What works for someone else may be a disaster for you if your nature isn’t suited to that business.
There are just a few key exceptions of characteristics that I find are common to most entrepreneurs who make it. The first is bravery; entrepreneurship does involve stepping into the unknown. Some entrepreneurs feel bravery a careful analysis, some feel emboldened after a well-received pitch that leaves people buzzing. However you get yourself to be brave, every entrepreneur must step outside of their comfort zone time and time again. Secondly, successful entrepreneurs have a passion for what they do, beyond making money. Money is a great way of keeping score but if it’s only about the money the game of entrepreneurship will find a way of weeding you out. Many entrepreneurs make serious money after 10 years of struggle, if money is the only driver, a decade is an awfully long time to be waiting for your rewards.
The third unique characteristic of successful entrepreneurs is tenacity. This requires the ability to focus on things that make an impact for a longer amount of time than most people would. Successful entrepreneurs have a sixth sense as to the most meaningful problem that needs solving and they can stay with them for prolonged periods of time - sometimes decades.
Made: Developing the core skill of an entrepreneur. After finding a business that fits with your nature, you have to develop one key skill - influencing others. Whether it's buying your product, joining your team or investing in your vision, you will need to influence the behaviour of others.
Running a business is a complex job that involves finance, sales, communications, intellectual property, product creation, organizational culture, marketing, systemization, technology deployment, branding and the list goes on.
No human is born with the ability to control their bladder so you can forget about the idea that an individual was born with these skills. This means that entrepreneurs can only succeed if they surround themselves with talented people who bring the resources needed. Therefore the core skill of an entrepreneur is influence - enrolling people into using their time, creativity, expertise or resources in a way they hadn't initially thought of. Fortunately, this core skill is a learned behaviour that you can and must develop.
In my experience, the core influencing skills are pitching, publishing, productizing, profile building and partnering. These five skills sit outside the usual set of technical skills we learn at school or university but they can be developed and improved like any other skill.
Are entrepreneurs born or made? Both. Entrepreneurs must find something they feel they are born to do and then develop the skills of enrolling people into their vision.
New Year’s Eve and Valentine’s Day have long been among the two biggest money makers for the hotel and restaurant business. Lush dinners, plush suites and dining packages attract regulars and newbies alike.
California wine country is a particularly appealing destination as the weather tends to be mild in February and more wineries and hotels are offering indulgent packages than ever before. Here’s a quick peek at what some lucky visitors maybe be enjoying next week and how operators can build revenue from these kinds promotions in California and other parts of the country.
Sonoma Experiences The recently refurbished Vintner’s Inn in Santa Rosa—an hour outside of San Francisco—is home to John Ash & Co., where the menu focuses on lots of local vegetables, meats and cheese. “Our business for Valentine’s Day is huge. Actually, it is one of the busiest holidays of the year,” says Percy Brandon, the hotel’s general manager.
He continues that, “Our ‘3 Days to Say I Love You’ campaign runs every year when 2/14 falls on a Thursday, Friday, Saturday, Sunday or Monday and yields 600 to 700 diners for the three days that it runs. Generally, Valentine’s Day [itself] yields 285 to 300 guests for dinner.” In comparison, on an average Saturday night the restaurant generally hosts 200 guests.
What is more, he adds that, “95 percent of our business that night is tables for two [whereas] on normal nights party sizes range between two and ten. Check average is high as we feature a pre-fixe dinner for Valentine’s Day itself. On average, Valentine’s Day shows a 50 percent revenue growth from a busy Saturday dinner.” He notes that the restaurant already has 312 reservations booked for the 14th and that, “Friday and Saturday continue to fill up as the 14th is already booked.” At the Sonoma Mission Inn, just outside of the historic town of Sonoma, dining and spa packages featured around Valentine’s Day are expected to bring in a “10 percent year-over-year growth during the long V-Day weekend in rooms, food and beverage and spa areas,” according to the Inn’s director of hotel operations JoAnn Lenhardt.
Some of the specials include swanky suite accommodations, a multi-course dinner paired with local wines and a Champagne-oil massage for couples followed by chocolate and sparkling wine. For the ladies the hotel is also offering a chocolate-based manicure, followed by a chocolate face mask and a foot massage.
A Texas Take on the Holiday Outside of Austin, in Texas’ Lake Country, at the Lakeway Resort and Spa, general manager Blake Doran says that, “Valentine’s Day promotions drive ROI largely by introducing guests to an experience that will continue to bring them back for years to come. We’ve found that couples who enjoy a romantic getaway for Valentine’s Day are exposed to our fantastic wedding venue overlooking the lake, which contributes to the return we see from the wedding market.”
The hotel offers scenic Lake Travis views from its suites and Champagne- and rose-filled dinners. Doran adds that these specials also attract locals looking for a unique night out. “The special menus featured on holidays, like Valentine’s Day, engage the local community and create loyalty and more frequent business. We find that the experience at the resort creates a basis for lifetime memories that our guests want to celebrate throughout the year, resulting in repeat business and high return across the board, from weddings and events to rooms, food and beverage.”
Offering unique dining, drinking and spa experiences is always a great way to increase ROI for restaurants and hotels on special occasions. |
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