Private Equity Capital Briefing

Transcription

1 February 218 Monthly insights and intelligence on PE trends Strong start for PE in 218 Deal activity busiest since January 26

2 The Private Equity Capital Briefing has been designed to help you remain current on capital market trends. It captures key insights from subject-matter professionals across EY and distills this intelligence into a succinct and user-friendly publication. provides perspectives on both recent developments and the longer-term outlook for private equity (PE) fundraising, acquisitions and exits, as well as trends in global M&A, cross-border deal flows, IPOs and the debt and bond markets. Please feel free to reach out to any of the subject-matter contacts listed on the back page of this document if you wish to discuss any of the topics covered.

3 Contents Section 1 Private equity: fundraising 4 Private equity: acquisitions 5 Private equity: exits 6 Section 2 M&A 9 Section 3 IPOs 1 Section 4 Loans 11 Section 5 Bonds 12 Appendices Appendix A PE activity by geography 14 Appendix B M&A activity monthly flash 23 Appendix C M&A multiples and bid premium 24 Appendix D Capital Confidence Barometer 25

4 1.i. Private equity: fundraising Executive summary After a record year last year, firms continue to close new funds. January saw PE firms close on US$41b in investments from LPs. Dry powder continues its climb into record territory. PE firms have nearly US$63b in capital available to fund deals. According to EY s 218 Global Private Equity Survey, 55% of CFOs said they expect to raise a new fund this year, and 6% said they expect the new fund to be larger than the last fund raised. Current state Fundraising remains active after a record year in 217 After a record year in 217, PE fundraising activity remains robust. PE firms closed 56 funds in January with US$41b in commitments from investors. Buyout fundraising accounted for the most activity, with 14 funds raising US$15b from investors, more than double the amount closed in January 217. Dry powder continues its climb into record territory. As of January, PE firms have nearly US$63b in capital available to fund deals. PE dry powder (in US$b) Source: Preqin PE fundraising by month (US$b) Source: Preqin $1 $9 $8 $7 $6 $5 $4 $3 $2 $1 $ $7 $6 $5 $4 $3 $2 $1 $ Commitments PE fundraising by type since Jan. 217 Source: Preqin Other, 23% Number of funds closed Buyout, 42% Environment and horizon Capital is expected to continue to flow into the asset class Capital is expected to continue to flow into PE in 218. According to EY s 218 Global Private Equity Survey of 11 PE CFOs, 55% said they expect to raise a new fund this year, and 6% said they expect the new fund to be larger than the last fund raised. The Coller Capital Global PE Barometer Winter found that 72% of LPs expect PE firms to increase their hiring of women over the next three years, while 55% believe the same is true for LPs. While the majority (75%) indicated they were in favor of implementing aspirational targets to increase the hiring of women in the industry, few (just 5%) were in favor of formal quotas. PE, infrastructure and private debt are the top priorities for LPs in 218. According to Preqin s 218 Global Private Equity and Venture Capital Report,, 53% of LPs expect to increase their allocations to PE over the longer term; 54% expect to increase their allocations to private debt; and 55% are seeking increased exposure to infrastructure. Real estate and natural resources, by contrast, saw greater proportions of LPs looking to trim their exposures. Long-term funds continue to see strong interest from investors. BlackRock recently announced that it was raising a new fund targeting US$1b in commitments from institutional investors for investment over long periods. And on its fourth quarter earnings call, KKR announced that it had raised US$8.5b for its Core Investment strategy, which expects to hold companies for 15 years or more. Preqin survey of institutional investors percentage seeking to increase of decrease allocations by asset class Source: 218 Preqin Global Private Equity and Venture Capital Report % of LPs seeking to decrease exposure 8% Real estate, 19% Infrastructure, 1% Private equity 1% Private debt 42% 16% Real estate 26% 1% Infrastructure 39% 19% Natural resources 11% Growth, 6% % of LPs seeking to increase exposure 37% 4

5 1.i. Private equity: acquisitions Executive summary PE deal activity is off to its most active start since 26, led by the US$17b acquisition of Thomson Reuters Corp. s financial and risk business by Blackstone, Canada Pension Plan Investment Board and GIC Special Investments Pte. Ltd.. Overall, January 218 saw 11 PE deals valued at more than US1b each. EY s 218 PE survey found that while asset growth remains firms number one priority, talent management is close behind, with 47% of firms identifying it as a top strategic priority. Current state PE deal activity is off to its most active start since 26 as PE firms pursue larger deals PE deal activity is off to its most active start since 26. Firms announced 156 deals valued at US$37.8b, more than double the value of January 217. The month saw 11 deals valued at more than US$1b, including the US$17.b buyout of Thomson Reuters Corp. s financial and risk business by Blackstone, CPPIB and GIC. PE deals valued at US$1b or more since 215 by month 15 1 PE acquisition values and volumes in January $5. $4. $3. $2. $1. $. Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan Value Jan 15 Mar May Jul Sep 16 Nov 15 Jan 16 Mar 16 As a result of the Thomson Reuters deal, activity in the Americas was up nearly 3% versus the same period a year ago. Even excluding the deal, activity was up nearly 9% from last January. The EMEA region, by contrast, saw relatively little PE activity last month, with just US$6m in deals announced. Firms announced US$4.6b in deals in the Asia-Pacific region, up 16% from last January. Environment and horizon Jun 16 Aug Oct Dec Feb Private equity positioned for an active year in 218 EY s 218 Global Private Equity Survey found that firms continue to focus on operational maturity through a number of lenses. While asset growth remains a priority for firms of all sizes, talent management isn t far behind, with 47% of firms especially smaller and middle-market firms identifying it as a top strategic priority. Cost management was identified as a chief concern of smaller managers, while strategies focused on technological transformation were more prevalent at larger managers. Overall, 66% of PE CFOs said they plan to invest in next generation technology. Thirty-seven percent of firms said they are already investing in digital data delivery; 2% are investing in predictive analytics; and 4% are investing in robotics to automate routine tasks (another 14% said they plan on investing in robotics in the future). PE firms continue to work to understand the net impact of US tax reform. According to an analysis by Hamilton Lane published in Private Equity News, lower corporate tax rates and the ability to deduct capital spending upfront should more than offset restrictions on the deductibility of interest payments, leading to a potential rise in portfolio company values of 3% to 17%. The effects are expected to be most pronounced at companies with lower levels of debt and high capital spending. Once debt levels exceed five times Ebitda, the benefits of reform begin to wane, and at 7.5 times Ebitda, equity values begin to fall. Apr 17 Jun 17 Aug Oct Dec Linear () PE acquisition values and volumes in January Company Type Region Value (US$b) Thomson Reuters Corp. (financial & risk business) PE firms areas of focus by size Source: EY 218 Global Private Equity Survey $17. Technology Canada Pension Plan Investment Board-CPPIB; GIC Special Investments Pte Ltd.; Blackstone Group LP Blackhawk Network Holdings Inc. $3.3 Technology Silver Lake Group LLC Pure Industrial Real Estate Trust $2.9 Real estate Blackstone Group LP Ply Gem Holdings Inc. $2.3 Construction Clayton Dubilier & Rice LLC ehi Car Services Ltd. $1.4 Transportation MBK Partners Ltd. 5 Executive Briefing

6 1.i. Private equity: exits Executive summary Firms announced just 7 exit deals valued at US$13.b in January, down 49% from the same period a year ago. Declines were evident in both M&A exits and IPOs. Secondary buyouts have seen a slight increase in activity as PE firms compete more aggressively with corporate acquirors for deals. Current state Exits see modest decline in early 218 after an uptick last year PE exits by month (US$b) Source: Preqin After an uptick in 217 that saw PE exit deals increase 1% by value, 218 began the year on a slower note. Firms announced just 7 exit deals valued at US$13.b in January, down 49% from the same period a year ago. Declines were evident in both M&A exits and IPOs. PE firms announced 64 exits by M&A valued at US$9.4b in January, down 56% from the same period in 217. PE-backed IPOs declined 15% by value, to US$3.7b; just six IPOs priced in the month of January. Over the last 12 months, secondary buyouts have seen a slight increase in activity as PE firms compete more aggressively with corporate acquirors for deals. PE-to-PE sales have accounted for 39% of PE M&A exits by volume over the last 12 months, up from 37% over the prior 12 months. The value of such deals increased from 26% to 28%. $5 $45 $4 $35 $3 $25 $2 $15 $1 $5 $ Commitments Number of funds closed Percentage of PE M&A exits to other PE firms Largest PE exit deals in January % 39% Company Type Value (US$b) Sponsor 26% 28% ADT Inc. IPO $1.5 Apollo Global Management LLC Gates Industrial Corp. plc IPO $5.5 Blackstone Group LP Prior 12 months Value Volume Last 12 months Ply Gem Holdings Inc. M&A $2.3 CI Capital Partners LLC Americold Realty Trust IPO $2.3 Goldman Sachs Capital Partners; Yucaipa Companies LLC Environment and horizon PE firms to remain focused on selling into a strong market While the exit supercycle continues to wind down, PE firms will remain focused on exiting portfolio companies into a strong sellers market. PE firms currently hold more than 13, portfolio companies across the globe. PE firms saw strong gains in their portfolios in 4Q 217, in line with equities markets that appreciated substantially. In the last three months of the year, the S&P 5 climbed 6.1%; The Carlyle Group reported that its PE portfolio appreciated by 8% over the same period; Apollo Global Management and Blackstone reported similar strength, with portfolios up 9.1% and 6.8% respectively. At the same time, firms took the opportunity to caution that the elevated valuations, increased market volatility and the possibility of higher interest rates would make similar gains more challenging in 218. Liberty Oilfield Services Inc. IPO $2. Riverstone Holdings LLC PE-backed IPOs over the last 12 months (US$b) $9 $8 $7 $6 $5 $4 $3 $2 $1 $ Commitments Number of funds closed 6 Executive Briefing

7 Appendices

8 Appendix A Global PE fundraising activity Global PE fundraising (in US$b) $7 12 $6 1 $5 8 $4 6 $3 $2 4 $1 2 $ ytd Commitments Number of funds closed Source: Preqin Dry powder buyout funds by region (in US$b) $7 $6 $5 $4 $3 $2 $1 $ ytd North America Europe Asia-Pacific Rest of the world Source: Preqin 12

9 Appendix A Global PE acquisition activity PE acquisitions by year (in US$b) $8 4, $7 3,5 $6 3, $5 2,5 $4 2, $3 1,5 $2 1, $1 5 $ ytd Global PE value and volume quarterly trend (in US$b) $14 7 $12 6 $1 5 $8 4 $6 3 $4 2 $2 1 $ 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 13

10 Appendix A Global PE acquisition activity by region Americas Americas PE acquisitions (in US$b) $8 35 $7 3 $6 25 $5 2 $4 $3 15 $2 1 $1 5 $ 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Americas PE acquisitions the top deals with disclosed financial terms 218 ytd Announcement date Completion date Company Sector Value (US$b) Acquiror 3-Jan-18 Thomson Reuters Corp. (financial & risk business) Technology $17. Canada Pension Plan Investment Board (CPPIB); GIC Special Investments Pte Ltd; Blackstone Group LP 16-Jan-18 Blackhawk Network Holdings Inc. Technology $3.3 Silver Lake Group LLC 9-Jan-18 Pure Industrial Real Estate Trust Real estate $2.9 Blackstone Group LP 31-Jan-18 Ply Gem Holdings Inc. Construction $2.3 Clayton, Dubilier & Rice LLC 4-Jan-18 OneMain Holdings, Inc. Finance $1.4 Apollo Global Management LLC 9-Jan-18 AmTrust Financial Services Inc. Insurance $1.4 Stone Point Capital LLC 3-Jan-18 3-Jan-18 Property Portfolio (US student housing portfolio) Real estate $1.1 Canada Pension Plan Investment Board (CPPIB) 5-Jan Jan-18 Prometric Inc. Professional services $1. Baring Private Equity Asia Ltd. 3-Jan-18 3-Jan-18 Armour Group Holdings Ltd. Insurance $.5 Aquiline Capital Partners LLC 4-Jan-18 4-Jan-18 WPEngine Inc. Technology $.3 Silver Lake Group LLC 14

11 Appendix A Global PE acquisition activity by region EMEA EMEA PE acquisitions (in US$b) $6 3 $5 25 $4 2 $3 15 $2 1 $1 5 $ 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 EMEA PE acquisitions the top deals with disclosed financial terms 218 ytd Announcement date Completion date Company Sector Value (US$b) Acquiror 5-Jan-18 BOSAL Automotive Carrier Protection Systems GmbH Automotive $.3 TowerBrook Capital Partners LP 17-Jan-18 Compagnie Stephanoise de Sante - C2S Health care $.1 Eurazeo SA 7-Jan-18 7-Jan-18 OKA Direct Ltd. Retail $.1 InvestIndustrial LP 15

12 Appendix A Global PE acquisition activity by region Asia-Pacific Asia-Pacific PE acquisitions (in US$b) $5 14 $45 $4 $ $3 8 $25 $2 6 $15 4 $1 $5 2 $ 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Asia-Pacific PE acquisitions the top deals with disclosed financial terms 218 ytd Announcement date Completion date Company Sector Value (US$b) Acquiror 2-Jan-18 ehi Car Services Ltd. Transportation $1.4 MBK Partners HK Limited 5-Jan-18 Shopping Centres (2 retail malls in China) Real estate $1.1 Hopu Investment Management Co. 27-Jan-18 I-MED Holdings Pty Limited Health care $1. Permira Ltd. 23-Jan Jan-18 Trimco International Holdings Ltd. Textile $.5 Partners Group Holding AG; Affinity Equity Partners (HK) Ltd. 29-Jan-18 Hotels (Novotel Beijing Sanyuan and Ibis Beijing Sanyuan) Dining and lodging $.2 TPG Capital LP 9-Jan-18 9-Jan-18 APIIT Education Group Professional services $.2 KV Asia Capital Pte Ltd. 9-Jan-18 9-Jan-18 Beijing Lotus Medical Beauty Clinical Co. Ltd. Technology $.1 HG Capital Co. Ltd. 16

13 Appendix A Global PE exit activity Global PE-backed exits by M&A value and volume quarterly trend (in US$b) $12 35 $1 3 $ $6 15 $4 1 $2 5 $ 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Global PE-backed IPOs value and volume quarterly trend (in US$b) $45 9 $4 8 $35 7 $3 6 $25 5 $2 4 $15 3 $1 2 $5 1 $ 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 17

14 Appendix A Global PE exit activity Americas Americas PE exits (in US$b) $9 18 $8 16 $7 14 $6 12 $5 1 $4 8 $3 6 $2 4 $1 2 $ 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Americas PE exits top exits with disclosed values 218 ytd Announcement or filing date Completion or priced date Company Sector Value (US$b) Sponsor Type 21-Dec Jan-18 ADT Inc. Professional services $1.5 Apollo Global Management LLC IPO 27-Dec Jan-18 Gates Industrial Corp. plc Machinery $5.5 Blackstone Group LP IPO 31-Jan-18 Ply Gem Holdings Inc. Construction $2.3 CI Capital Partners LLC M&A 14-Nov Jan-18 Americold Realty Trust Real estate $2.3 Goldman Sachs Capital Partners; Yucaipa Companies LLC IPO 14-Feb Jan-18 Liberty Holdings, Inc. Oil and gas $2. Riverstone Holdings LLC IPO 4-Jan-18 OneMain Holdings Inc. Finance $1.4 Fortress Investment Group LLC M&A 9-Jan-18 1-Feb-18 FCX Performance Inc. Metal and steel $.8 Harvest Partners LP M&A 31-Jan-18 ECS Federal LLC Technology $.8 Lindsay Goldberg LLC M&A 2-May Jan-18 Nine Energy Service Inc. Oil and gas $.6 SCF Partners, LP IPO 19-Dec Jan-18 PlayAGS Inc. Consumer products $.5 Apollo Global Management LLC IPO 18 14

15 Appendix A Global PE exit activity EMEA EMEA PE exits (in US$b) $7 18 $ $5 12 $4 1 $3 8 $2 $ $ 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 EMEA PE exits top exits with disclosed values 218 ytd Announcement or filing date Completion or priced date Company Sector Value (US$b) Sponsor Type 9-Jan Jan-18 Northgate Public Services Ltd. Technology $.6 Cinven Ltd. M&A 5-Jan-18 Schoeller Allibert Group BV Forestry and Paper $.2 One Equity Partners LLC M&A 26-Jan Jan-18 Concept Life Sciences Ltd. Professional services $.2 Equistone Partners Europe Ltd. M&A 17-Jan-18 Compagnie Stephanoise de Sante - C2S Health care $.1 Bridgepoint Advisers Ltd. M&A 18-Jan Jan-18 Cellular Italia SpA Technology $.1 Catterton Management Co. LLC-L Catterton; Motion Equity Partners LLP M&A 7-Jan-18 7-Jan-18 OKA Direct Ltd. Retail $.1 Stonehage Fleming Private Equity Ltd. M&A 19 15

16 Appendix A Global PE exit activity Asia-Pacific Asia-Pacific PE exits (in US$b) $45 6 $4 $35 5 $3 4 $25 $2 3 $15 2 $1 $5 1 $ 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Asia-Pacific PE exits top exits with disclosed values 218 ytd Announcement or filing date Completion or priced date Company Sector Value (US$b) Sponsor Type 27-Jan-18 I-MED Holdings Pty Ltd. Health care $1. EQT Partners AB M&A 23-Jan Jan-18 Trimco International Holdings Ltd. Textile $.5 Partners Group Holding AG M&A 16-Jan-18 9-Feb-18 Apple World International Co., Ltd. Professional services $. Ant Capital Partners Co. Ltd. M&A 2 16 Capital Briefing

17 Notes 17

18 Notes 18

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