December deals: A Christmas story

The sale process was officially launched late afternoon on December 21, the Friday before what most people treated as a long weekend, given that Christmas Day fell on the following Tuesday. The deadline for submitting letters of interest was December 26, with due diligence commencing on January 2.

Hahn & Co. was the preferred bidder but the deal fell through because the PE firm was uncomfortable with certain contingent liabilities. Still, 12 months on Hahn & Co. was back at the negotiating table, this time agreeing to buy bulk and liquefied natural gas (LNG) shipping businesses from Hanjin. A deal was announced in early January.

In mid-December 2014, the PE firm agreed the purchase of Visteon's Korean unit and talks over a controlling stake in steelmaker Posco's slag powder business were reportedly stretching on towards the end of the month.

Korea may be exceptional in terms of the nature of its bankruptcy auctions but in private equity, like many other industries, there is a desire to get business wrapped up before the end of the year. Timing may be beyond a PE firm's control, but governments and corporates have annual targets and also holiday requirements.

In Asia, it might be more accurate to say that the real deadline is Chinese New Year when most markets shut down for a few days. Cynics might suggest that productivity in between the Gregorian New Year and the Lunar New Year is not what it might be.

So, do more deals get done in December than at other points in the year? The answer is yes. According to AVCJ Research, $10 billion was transacted in the final month of 2014, second only to March and these are provisional figures so more deals are likely to come in.

December was by some distance the most active month of 2013 by capital committed and fifth-highest by deal numbers. In 2012, it ranked fifth in dollar terms and second in transaction volume. While 2011 was a bit of a blip - eighth by deal value, second by deal volume - December 2010 was the second most active of the 12 months in terms of capital committed and first in terms of transactions announced.

Unsurprisingly, February is a consistent low watermark and January often fares little better due to Chinese New Year. Meanwhile, the patterns for exits are less clear. This may in part be due to the historical prevalence of IPO exits and incremental sell-downs being driven by public market pricing cycles.

The kicker comes on the fundraising side. A common observation among GPs is that certain LPs like to push back commitments so they fall under the following year's allocation, which can lead to delayed final closes.

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• Topics
• Buyouts
• North Asia
• Asia
• South Korea