PE venturing into VC. December 11, 2017

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1 PE venturing into VC Mihir Jobalia Managing Director, KPMG Corporate Finance KPMG Corporate Finance David Cusimano Principal Accel-KKR Cheryl Strom Regional Director The Riverside Company December 11, 217

2 CPE Check-In Session PIN code: cc9f For CPE credit go on your app and select the CPE Check-In icon: Type in the Session PIN code above and submit Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS 52112

3 US PE Fundraising Environment

4 US PE Fundraising Spree Continues US PE FUNDRAISING ACTIVITY Capital Raise ($B) $3 $25 $2 $15 $1 $5 $ $269 $184 $185 $198 $199 $214 $195 $178 $12 $111 $72 $ * Capital Raised ($B) # of Funds Closed Funds Closed PE firms continue to raise larger sums across fewer funds In Q3 17, US-based funds garnered $62.4B in commitments across 58 vehicles more capital raised by fewer individual vehicles than any quarter since Q2 14 and Q2 16, respectively Apollo Global Management led the way by closing on $24.7B for the firm s ninth flagship buyout fund, surpassing The Blackstone Group s $21.7B 27 vehicle to become the largest buyout fund ever raised 4

5 Fund Sizes Have Skyrocketed US PE FUNDRAISING ACTIVITY $3 $262.5 $265. Median US PE Fund Size ($M) $25 $2 $15 $1 $5 $239. $257. $ * Buyout Funds All PE Funds Median US PE fund sizes at an all-time high since 26 Mega funds ($5B+ in commitments) have accounted for 54% of all capital raised by PE funds in 217*, which will likely lead to larger deal sizes as firms look to deploy newly-raised capital in larger tranches Recent strength in fundraising is largely driven by the private markets outperforming public markets over the recent years Institutional investors have been increasing their allocation to private equity in response to the low growth / low interest rate environment 5

6 Deal-making Remains Challenging US PE ACTIVITY US M&A MULTIPLES (INCLUDING PE BUYOUTS) $7 $6 $5 $4 $3 $2 $1 2,758 $289 3,11 $335 3,511 $372 3,39 $441 4,27 4,323 $531 $55 4,144 $578 2,82 $373 5, 4, 3, 2, 1, 12x 1x 8x 6x 4x 2x 8.9x 3.6x 5.2x 8.2x 3.8x 4.4x 7.3x 3.6x 3.6x 8.1x 3.5x 4.6x 9.2x 4.2x 5.x 8.5x 3.9x 4.5x 8.9x 3.5x 5.4x 9.4x 3.9x 5.4x 9.9x 4.3x 5.6x 1.5x 1.5x 5.3x 4.7x 5.2x 5.8x $ * Deal Value ($B) Estimated Deal Value ($B) # of Deals Closed x * Debt / EBITDA Equity / EBITDA EV / EBITDA PE firms invested $163B across 959 PE deals in Q3 17, bringing YTD deal value to $42B across 2,82 deals (estimated) Despite record fundraising levels, deal volume through the first three quarters in 217 is down 11% compared to the first three quarters in 216 Despite the pullback in PE deal-making and strategic acquisitions, median EV / EBITDA multiple in 217 has remained unchanged at 1.5x from 216 With higher prices, the number of viable targets is likely lower than normal following record levels of deal-making in 215 and 216 on both the strategic and PE front 6

7 US Mega Deal & Add-On Activity US MEGA PE DEAL ACTIVITY ($2.5B+) ADD-ON % OF US BUYOUT ACTIVITY $45 $4 $35 $3 $25 $2 $15 $1 $5 $ $ $14 $99 $3 $37 $51 $33 $19 $55 $ $177 $ * ,5 3, 2,5 2, 1,5 1, % 1,1 1,175 58% 57% 62% 61% 61% 64% 64% 955 1,185 1, ,166 1,369 1,549 1,467 1,928 1,986 2,1 1, * 1,129 66% 64% 62% 6% 58% 56% 54% 52% 5% Mega-deal Value ($B) # of Deals Closed Add-on Non Add-on Add-On % of Buyout 217* has not witnessed the type of mega-deals in previous years, such as PE-backed Dell s acquisition of EMC for $67B in 216 or the $55B acquisition of Kraft Food Groups by PE-backed Heinz in 215 The largest US PE deal to close this year has been BDT Capital Partners $7B buyout of Panera Bread Add-ons continue to be a key strategy, comprising 64% of all US-based buyouts in 217* A greater portion of PE firms are holding portfolio companies longer and utilizing add-ons to grow platform companies and enhance operations 7

8 Portfolio Holding Times Remain Prolonged US PE-BACKED COMPANY PORTFOLIO BY AGE 3, 2,5 2, 1,5 1, 5 16% 728 2% % 1,253 3% 1,626 34% 1,995 36% 32% 31% 2,188 2,49 2,13 32% 2,281 38% 2,718 4% 35% 3% 25% 2% 15% 1% 5% * # >5 yrs old % of Total Inventory > 5 years % IPOs remain below historical average The first two quarters of 217 saw the highest number of PE-backed IPOs of any half-year period since 215; however, IPO activity slowed in Q3 17 to just four offerings As the number of financial sponsors increases, it is becoming increasingly difficult to make the case to spend the time and money required to go through the IPO process when an greater or equal amount can be achieved through a private transaction 8

9 Contact us Mihir Jobalia Managing Director, Corporate Finance KPMG Corporate Finance T: E: