WPP Buys TNS for $1.93 Billion

NEW YORK – Media holJinfí company WPP Group PLC ended a six-month struggle to acquire the marketing research firm Taylor Nelson Sofres (TNS) in mid-October hy agreeing on a $1.93 billion buyout, reports DMNews.TNS, a long-time research partner oi Response (see this month’s shortform media billings on page 20), has fought to avoid the acqui,sition and rejected several of WPP’s initial bids.

But last month, rhe executives changed their minds and began urging shareholders to accept the deal. On the final
vote, WPP had support ior the deal from 83 percent of its investors and announced its offer to be unconditional.
TNS originally believed the offer The Brand DRTV Agency Innovative marketing through direct response television.
http://www.atomi :direct.com was t<x) low, stating that it had strtmg leadership in the market sector and finished the first half of 2008 with a strong financial perfomiance.

In September, WPP extended its deadline for TNS to accept its offer of $2.2 billion for the third time. At that
point, management was still urging sharehtiiders to reject the offer. But as many as 34 percent <if the outstanding shareholders were in favor of the acquisition as October approached, up from 11 percent just two weeks prior.
For WPP, the acquisition of TNS means that it will be able to ofïer more sophisticated services to clients and help them more efficiently measure the effectiveness of advertising efforts.

“We are delighted ti> he a step closer to welcoming such a fine company with strong people, clients and brands that
will enhance our client offering,” says Martin Sorrell, CEO of WPP.

Other recent deals in the marketing analytics industry’ include the Nielsen Company acquiring IAG Research in
April and Forrester Research Inc. acquiring JupirerResearch LLC in July.

Top of the asset class

an interview, Universities Superannuation Scheme (USS) head of alternative assets Mike Powell talked about how his organization plans to cope during these lean times. Powell said the USS is the second largest pension fund in the UK and the principal pension fund for academic and senior non-academic staff of the UK universities sector. Underpinning USS’s investment strategy is a commitment to long-term investing which they believe aligns closely to private equity as an asset class. A key part of their strategy is an active co-investment program to invest alongside their core managers. The intention is to have a global private equity program and their program already has around 50% of its commitment outside of Europe. USS will continue to grow its alternative asset program and exploit its position as a long-term provider of capital. One of the core aims of the alternatives program is to exploit synergies across all the asset classes managed by USS.

THE GREEN AGENDA

With a rush of international firms raising cleantech funds, this sector has become one of the most popular areas for investment almost overnight. Globally, the amount of venture capital invested in this up and coming sector in just Q2, 2008 was $2 billion, double the amount recorded last year, according to Cleantech Group. But the Nordic region has something of a head start in this area. Sweden, for example, cut its carbon emissions by 9% between 1990 and 2006 — a time when other economies were busy increasing theirs or missing their Kyoto treaty targets by some margin. And, in addition to more generalist funds investing in the sector, Scandinavia now has its own specialist cleantech investors.

STORM CLOUDS GATHERING

It would be easy to dismiss Germany as being of little interest to private equity and venture capital investors right now. And contrary to earlier expectations that it would ride out the credit crisis, Europe’s largest economy appears to be stumbling, with some economists warning it could even slip into recession. The perceived inadequacies of Germany’s legislative framework, its labor laws and its ‘social market’ culture can also be problematic for private equity players. A further reason the industry remains underdeveloped in Germany is that institutional demand for alternative assets is much lower than in other markets, partly as a result of the structure of the country’s state-sponsored pension system. Holger Schmieding, chief European economist at Bank of America in London, is confident that Germany will not actually suffer a recession, believing the weakening euro will offer respite to exporters, and that the weakening oil price will relieve inflationary pressures.

No way out

The Centre for Management Buyout Research’s ‘Buyout Review’ for January to June shows there were 174 UK exits in the first half (H1) of 2008, a robust 43% of 2007’s full year total, but Continental Europe managed 89 H1 exits, only 32% of the 2007 total. This latest analysis confirms that IPOs remain practically no-go for private equity while depressed stock market valuations make it impossible to get flotations away at acceptable prices. Under ‘mark to market’ conventions, falling stockmarkets and hence lower price to earnings ratios are moving valuations downwards even for private companies with good underlying performances. The take-home message is that secondaries and trade buyers will likely remain the principal exit routes in the short-term, albeit volume will fall and pricing will come under pressure.

Locust protection

Germany has provoked a storm of controversy with its latest legislative changes. A new law will allow the government to block any unwanted foreign investors from buying 25% or more in a German company when “public order and security” are at stake. The new rules are mainly aimed at cash-rich sovereign wealth funds from countries such as Russia, China and Gulf States who many fear will exert influence in strategic sectors. In spite of the fact that few will be affected by the law, SJ Berwin partner Julian Lemor is critical of the changes. He believes the amendments are unclear as to where the real threat is.

How to start again

Jon Moulton, founder, Alchemy Partners, and unofficial spokesman, European private equity industry, explained in February that he had little sympathy for the private equity players who were feeling the brunt of the credit crunch. In the same speech Moulton warned of trouble on the horizon and said there will be large private equity failures this year. Startling in its accuracy, the premonition is all the more apt as the Fed rushed into rescue AIG and Fannie Mae and Freddie Mac. But in a warning that maybe taken more seriously, Moulton cautions that there are more defaults to come. Opportunities for the private equity industry lie in making changes to the status quo.

Healthy buyouts

In the second largest buyout this year, New Jersey-based Bristol-Myers Squibb sold wound care specialist ConvaTec to Nordic Capital Fund VII and Avista Capital Partners for USS4.1bn. Johnson & Johnson followed suit, securing a deal with One Equity Partners in the sale of its Ethicon unit for an undisclosed sum. There are many demographic factors that have led to the recent surge of interest in the healthcare market. With aging populations in Europe and America, the need for higher volumes of pharmaceuticals and wound care supplies is growing. There have also been steady advances in technology and products as demand increases for higher quality wound care and pharmaceutical products.

GROWING OPPORTUNITY

Since the credit crunch hit in the second half of 2007, large leveraged buyout (LBO) deals have all but dried up, as evidenced by the 76% drop in private equity deal volumes globally during the first half of 2008. Although LBO financing has been scarce, private equity growth capital for small-to-midsize companies remains plentiful. The three key issues to consider are control, capital structure, and how value is created. By offering financial resources, continued management control, and additional strategic guidance, private equity has proven to be a powerful mechanism for growth. Buyout mania may be dormant for now, but it will return. In the meantime, growth-oriented private equity remains robust.

FADING LIGHT

When Nordic Venture Partners (NVP) invested in mobile address book business Zyb in 2006, it knew it was on to a good thing. The company was becoming the preferred back-up system in the industry and was adding social components to its offering. Earlier this year, NVP sold the business to Vodafone for DKK235 million, netting NVP a very tidy 209% IRR. Local limited partners, which until recently had been investing strongly in local VC teams, have become much more reticent about committing to venture funds overall in the absence of the kinds risk-adjusted returns they were seeking. In addition to stunting the growth of companies and preventing the kinds of home runs US VCs expect to find in their portfolios, the lack of capital has caused wide-ranging consolidation of funds, particularly in the early stage arena. Other countries are overhauling their seed investment programs, with some essentially privatizing them.