Enterprise Capital Report 2011

Transcription

1 Enterprise Capital Report 2011 November 2011 CREATING LASTING VALUE

2 About EVCA The European Private Equity & Venture Capital Association EVCA is the voice of European private equity and venture capital. We promote the interests of our more than 1,200 members, to ensure they can conduct their business effectively. EVCA engages policymakers and promotes the industry among key stakeholders, including institutional investors, entrepreneurs and employee representatives. EVCA develops professional standards, research reports and holds professional training and networking events. EVCA covers the whole range of private equity, from early-stage venture capital to the largest buyouts. Disclaimer The information contained in this report has been produced by EVCA, based on PEREP_Analytics data and third parties information. While the EVCA has made every effort to ensure the reliability of the data included in this report, EVCA cannot guarantee the accuracy of the information collected and presented. Therefore, EVCA cannot accept responsibility for any decision made or action taken based upon this report or the information provided herein. Copyright information No part of this publication may be reproduced by any process except in accordance with the provisions of the Copyright Act Copyright enquiries should be directed to EVCA, Tel: Copyright EVCA November 2011

3 Contents 1. Introduction 7 2. Investments 8 Figure Investments by Size and Quarter - Amount 10 Figure Investments by Size and Quarter - Number of Companies 11 Figure Investments by Type and Quarter - Amount 12 Figure Investments by Type and Quarter - Number of Companies 13 Figure Investments by Type and Annual Equity Ratio Level - as % of Amount 14 Figure Evolution of Investments (Index Q = 100) and GDP Growth in Europe 15 Figure Investments by Size and Type - as % of Amount ( ) 16 Figure Investments by Size and Type - as % of Amount (2010-H1 2011) 17 Figure Overview Investment by Location - as % of Amount invested 18 Figure Overview Investment by Location - as % of Number of Companies 19 Figure Investments by Region and Type - as % of Total Amount ( ) 20 Figure Investments by Region and Type - as % of Total Amount (2010-H1 2011) 21 Figure Investments by Region and Type - as % of Number of Companies ( ) 22 Figure Investments by Region and Type - as % of Number of Companies (2010-H1 2011) 23 Figure Investments by Region and Size - as % of Total Amount ( ) 24 Figure Investments by Region and Size - as % of Total Amount (2010-H1 2011) 25 Figure Investments by Region and Size - as % of Number of Companies ( ) 26 Figure Investments by Region and Size - as % of Number of Companies (2010-H1 2011) 27 Table Buyout Split - Equity vs. Transaction Value (data only available for buyout) 28 Figure Sources of Buyouts (data only available for buyouts and since Q1 2008) - as % of Amount 29 Figure Investments by Sector - Amount ( billion) 30 Table Investments by Sector - Amount ( thousands) 31 Figure Investments by Sector - Number of Companies 32 Table Investments by Sector - Number of Companies 33 Figure Investments by Sector and Type - as % of Amount ( ) 34 Table Investments by Sector and Type - Amount ( thousands) ( ) 35 Figure Investments by Sector and Type - as % of Amount ( ) 36 Table Investments by Sector and Type - Amount ( thousands) ( ) 37 Figure Investments by Sector and Type - as % of Amount (H1 2011) 38 EVCA Enterprise Capital Report 2011 I 3

4 Table Investments by Sector and Type - Amount ( thousands) (H1 2011) 39 Figure Investments by Sector and Size - as % of Amount ( ) 40 Table Investments by Sector and Size - Amount ( thousands) ( ) 41 Figure Investments by Sector and Size - as % of Amount ( ) 42 Table Investments by Sector and Size - Amount ( thousands) ( ) 43 Figure Investments by Sector and Size - as % of Amount (H1 2011) 44 Table Investments by Sector and Size - Amount ( thousands) (H1 2011) 45 Figure Geographic Origin of Investments - as % of Amount 46 Figure Overview of Initial vs. Follow-on Investments - as % of Amount 47 Table Initial vs. Follow-on Investments by Type - by Amount 48 Table Initial vs. Follow-on Investments by Size - by Amount 49 Figure Syndication Trend by Type of Investment - as % of Amount 50 Figure Syndication as % of Buyout Investment Amount 51 Figure Syndication as % of Growth Investment Amount 52 Figure Syndication as % of Replacement Capital and Rescue/Turnaround Investment Amount 53 Figure Investment by Number of Employees - as % of Amount 54 Figure Investment by Number of Employees - as % of Number of Companies 55 Table Investments by Number of Employees and by Type of Investment (2007-H1 2011) - as % of Amount 56 Table Investments by Number of Employees and by Size of Investment (2007-H1 2011) - as % of Amount 57 Figure Investment Trend by Number of Employees - as % of Amount 58 Figure Investment Trend by Number of Employees - as % of Number of Companies Financing 60 Figure Senior Loan Volume - LBO Transactions 61 Figure European Pro rata vs. Institutional LBO Activity ( ) 62 Figure European Pro rata vs. Institutional LBO Activity (2009-H1 2011) 63 Figure Rolling Three-month Weighted Average Spreads of all European New-issue LBOs 64 Figure Maturity schedule by par outstanding 65 Figure Average P/E* ratios for European Private Equity-backed Buyouts 66 Figure Debt-to-EBIT Ratios for Buyouts* 67 Figure Average Deal Structures for European Private-equity-backed Buyouts: Deals below 100m 68 Figure Average Deal Structures for European Private-equity-backed Buyouts: Deals above 100m 69 4 I EVCA Enterprise Capital Report 2011

5 4. Divestments 70 Figure Evolution of Divestments by Type 72 Figure Divestments by Region - Amount at cost 73 Figure Divestments by Region - Number of Companies 74 Figure Divestment by Region and Type - Amount at cost 75 Figure Divestment by Region and Type - Number of Companies 76 Figure Divestment by Exit Method - Number of Companies 77 Figure Divestment by Exit Method and Type - Number of Companies 78 Figure Divestments by Sector - Amount at cost 79 Figure Divestments by Sector and Type - Amount at cost 80 Figure Write-offs by Sector 81 Figure Write-offs by Sector and Type - Amount at cost 82 Figure Divestments by Exit Method compared to Western Europe M&A and IPO market - Number of Companies 83 Figure Divestments by Exit Method compared to Western Europe M&A and IPO market - Number of Companies Value Creation 85 Figure Deals by Vintage Year and Exit Year 87 Figure Deals by Enterprise Value at Entry and Exit 87 Figure Deals by Geography 88 Figure Deals by Sector 88 Figure Gross IRR Return Attribution - Median (%) 89 Figure Gross IRR Return Attribution - Average (%) 89 Figure Gross Multiple of Cash Return Attribution - Median (%) 90 Figure Gross Multiple of Cash Return Attribution - Average (%) 90 Figure Earnings Enhancement vs. Returns 91 Figure Exit Method vs. Returns (Median) 91 EVCA Enterprise Capital Report 2011 I 5

6 6. Fundraising 92 Figure Funds Raised by Fund Stage Focus 2007-H Amount 94 Figure Funds Closed by Fund Stage Focus 2007-H Amount 95 Figure Fundraising per Region (% of European Total Amount) 96 Table Incremental Fundraising - by Region and Focus - Amount 97 Figure Fundraising by Type of Investor (LP) - as % of Amount 98 Figure Fundraising by Type of Investor (LP) and Focus - as % of Amount 99 Figure Geographic Sources of Funds raised - Amount 100 Table Ranking of Top Limited Partners Location per European Fundraising Year 101 Figure Number of Funds at Final Closings - Split by Fund Size 102 Figure Funds at Final Closings Split by Fund Size - Amount 103 Figure Funds at Final Closings by Region and Split by Fund Size - Number of Funds ( ) 104 Figure Funds at Final Closings by Region and Split by Fund Size - Number of Funds (2010-H1 2011) Methodology and Definitions I EVCA Enterprise Capital Report 2011

7 1. Introduction It is with pleasure that we bring you the 2011 EVCA Enterprise Capital Report on investment, fundraising and divestment activity across Europe in the year to June Further, the financing environment and value creation are illustrated. Venture Capital Minority Investments Private Equity Enterprise Capital Majority Investments Not only is this report in a new format, with contributions and analysis from practitioners and academics, but we have also changed the name. The terminology of our former Buyout Report failed to properly reflect the private equity investment life cycle. We have therefore introduced the concept of enterprise capital, which, like venture capital, sits under the umbrella of the private equity governance model, but pertains to investment in more established businesses that want to internationalise, professionalise or develop their products and services. There is still room for the term buyout in our industry lexicon, but its correct place is as a transaction type when private equity is used to acquire all or the majority of an established business using leverage rather than as a descriptor for our entire investment model. Enterprise capital is a vital component in the economy, providing both finance, expertise and sound governance to Europe s aspirational businesses. This report is intended to give an in-depth guide as to the activity of Europe s enterprise capital investors both GPs and LP. While 2011 may well turn out to be a game of two halves in terms of headline activity, patient investment, such as enterprise capital, is not unduly perturbed by short term volatility, but focuses on creating lasting value. My thanks go to colleagues on the Mid Market Council for driving this initiative, as well as contributors to this report, Craig Donaldson of HgCapital, Jon Herbert of Lloyds Acquisition Finance, Professor Tim Jenkinson of the Saïd Business School at the University of Oxford, Professor Dr Kaserer of the Technical University of Munich and to David Chamberlain of Capstone. Karsten Langer Karsten Langer has been a partner with The Riverside Company since He currently leads the firm s investment and portfolio management activities in the Benelux and France. Prior to this role, he spent three years building up Riverside s pan-european origination team. Previously, Karsten Langer was Managing Partner of an independent corporate finance firm in Brussels, advising on numerous transactions across Europe for blue-chip multinationals and private equity firms. He also spent five years with GE Capital Europe, including as Chief Operating Officer of TIP and Modular Space, and in corporate business development. Karsten Langer started his career with Danske Bank in Copenhagen. He holds a BSc (econ) from the Copenhagen Business School and a Masters in Management from EAP European School of Management (now ESCP Europe), and speaks English, French, Danish, German, Portuguese and basic Dutch. Karsten Langer is currently Chairman of the EVCA (European Private Equity and Venture Capital Association). EVCA Enterprise Capital Report 2011 I 7

8 2. Investments Living in an investment environment marked by significant sovereign debt problems, a weakened financial system and decelerating growth in Western economies, investor sentiment is, and will remain, very erratic in the short and medium term. Public markets are more volatile than ever, the private equity M&A market in which we operate oscillates in short cycles, and emotions trump experience and judgement. These conditions are the friends of the patient and diligent investor. Taking a focused approach and sticking to tested fundamental principles can still yield solid results. Taking a longer view, the combination of a patient, committed approach that private equity offers companies will continue to be attractive because the need for change in businesses will be greater than ever. The challenge of making radical changes, either as a listed company, a state owned enterprise or a family company will become more difficult in these volatile markets, and debt finance will be scarcer and often more expensive. Judiciously invested enterprise capital can help support and grow European businesses though this challenging period and yield substantial rewards for investors. Therefore it is promising to see that the latest EVCA investment data illustrates that the 12 months to June 2011 have seen the continued rebound, from the depressed levels of 2009, in investment levels for private equity transactions of all sizes. In particular Q4 of 2010 was the busiest period (by value and number of deals) since Q for investments above 150m EV size range [Figure 2.1]. Pleasingly, for almost all readers of this report, since the middle of 2010 we have also seen a decline in rescue and turnaround investments made in Europe [Figure 2.7]. Nevertheless, private equity operates with a clear time lag, as investments take months of due diligence and preliminary work. It is likely that the investment data for second half of 2011 will show a decline, as the euro-zone debt crisis and economic uncertainty continues to impact bank balance sheets and overall confidence. However, there is increasing evidence that strong private equity managers can outperform other asset classes across market cycles the long-term prospects for our industry are as solid as ever. There has been a marked, sustained increase in the value of mid-market buyout investments [Figure 2.3] announced from Q through to Q That this part of the market has been particularly buoyant should come as little surprise. Investment in small and medium sized enterprises is not overly dependent on capital market cycles. Supporting a small mid-market business does not require huge syndicated banking deals or leveraged loan issuance. As can be seen in Table 2.1 across more than 250 mid-market investments in 2010 and H the ratio of equity to debt averages over 50%. We should hope that such conservative capital structures will allow these businesses room to re-invest in growth and job creation over the next stage of the cycle. Indeed, return attribution studies of European middle market private equity investments have shown that revenue growth and margin improvement have historically been the primary drivers of private equity returns, across markets cycles, not leverage or market timing. We should therefore be hopeful that this remains the case for these recent investments. 8 I EVCA Enterprise Capital Report 2011

9 The starkest trend of the last months is the marked increase in secondary buyouts, with one private equity investor acquiring a business from a prior private equity backer [Figure 2.14]. Over the last 18 months around 40% of all private equity buyout investments were of this type. Much has been made in the press recently that the preponderance of these pass the parcel deals illustrate that public market investors are wary of private equity backed IPOs. While there may be some merit to this, to our mind not enough has been made of the other side of the equation. Management teams in companies backed by private equity look out at the public market and see flash-crashes, huge intra-day volatility, short-term earnings horizons and an inability to appreciate and support long-term investment for growth, and increasingly appreciate the benefits of private capital. A number of our own management teams strongly preferred further backing by enterprise capital over a return to public ownership or listed trade acquirers, and this is certainly true across the wider industry. Most of these investments should perform well, and display low volatility of returns. Across Europe, the majority of businesses involved in secondary investments will have been well-managed and grown strongly over the last three to five years with the support of their private equity backers, including through the downturn. Hopefully they will enjoy similar support and growth with their new backers. Craig Donaldson Craig Donaldson is a Partner of HgCapital and a member of its Executive, Investment, Portfolio Review and Valuation Committees. He has more than 20 years of experience advising institutional investors on alternative investment management strategies. Previous professional responsibilities have included investment acquisitions and dispositions, portfolio management, financial analysis, fundraising and client services. Craig has overall responsibility for client service and fundraising, he coordinates fund co-investment and manages the firm's annual business planning and strategy work. EVCA Enterprise Capital Report 2011 I 9

10 Figure Investments by Size and Quarter - Amount billion H in thousands Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 < 5 mil 5-15 mil mil mil mil > 300 mil 449, , , , , , , , , , , , , , , , , ,727 1,171,200 1,258,465 1,647,348 1,598,000 1,297,850 1,400,966 1,313,541 1,013, , , , , ,302 1,038, , , ,072 1,063,854 2,984,177 3,164,672 2,719,366 3,097,731 2,922,095 3,635,372 3,836,296 1,802, , ,334 1,470,154 1,386,185 1,033,946 2,485,754 2,260,013 1,985,354 1,633,677 1,788,583 4,896,853 3,470,532 3,393,632 4,380,077 2,603,109 3,156,421 2,898,263 1,957, , ,609 1,118,711 2,247,434 1,351,997 1,185,661 2,661,416 2,295,952 2,123,728 2,558,983 2,764,440 4,264,079 2,993,471 3,299,970 2,141,710 2,388,437 1,762, , , , ,000 1,991,632 2,300,697 1,818,331 1,871,577 2,604,629 1,477,931 1,889,738 3,126,115 3,834,481 6,819,510 2,026,013 2,390,602 1,765,094 4,348, , , , ,000 1,285,822 1,688,636 1,491,733 3,081,073 1,162,277 1,405, I EVCA Enterprise Capital Report 2011

11 Figure Investments by Size and Quarter - Number of Companies H Number of companies Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 < 5 mil 5-15 mil mil mil mil > 300 mil EVCA Enterprise Capital Report 2011 I 11

12 Figure Investments by Type and Quarter - Amount 10 8 billion H in thousands Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Large and Mega Mid-market Small Growth Replacement Capital and Rescue/ Turnaround 5,714,236 7,848,560 9,343,958 5,325,983 4,532,312 3,523,043 6,111,049 1,233,650 1,002, , ,000 2,072,182 3,027,293 3,105,760 3,073,809 5,685,701 2,401,401 3,295,109 6,780,734 5,685,702 5,137,141 6,186,635 4,324,568 5,314,630 5,215,292 2,817, , ,609 1,522,431 2,534,399 1,668,224 2,541,282 3,404,737 3,628,961 3,145,723 3,763,090 1,295,779 1,145,913 1,624,456 1,614,503 1,136,771 1,279,284 1,167, , , , , , , , , , , ,753 1,104,743 1,104,480 1,398,875 1,425,089 1,585,409 2,490,026 1,827,138 1,430,109 1,258, ,241 1,064,150 1,360,052 1,521,318 1,750,503 1,862,213 1,232,495 1,191,120 1,178, , , , , , , , , , , , , , , , , , , I EVCA Enterprise Capital Report 2011

13 Figure Investments by Type and Quarter - Number of Companies H Number of companies Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Large and Mega Mid-market Small Growth Replacement Capital and Rescue/ Turnaround EVCA Enterprise Capital Report 2011 I 13

14 Figure Investments by Type and Annual Equity Ratio Level - as % of Amount 100% 80% 60% 40% 20% 0% H in % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 l Large and Mega l Mid-market l Small l Growth l Replacement Capital and Rescue/ Turnaround Equity ratio level - Annual basis Standard & Poor's LCD (Source for Equity Ratio Level) 14 I EVCA Enterprise Capital Report 2011

15 Figure Evolution of Investments (Index Q = 100) and GDP Growth in Europe % H Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Enterprise Capital investments by amount (Index Q1 2007=100) GDP growth EU 27 (% q/q) EVCA Enterprise Capital Report 2011 I 15

16 Figure Investments by Size and Type - as % of Amount ( ) 100% 80% 60% 40% 20% 0% in thousands < 5 mil 5-15 mil mil mil > 150 mil < 5 mil 5-15 mil mil mil > 150 mil < 5 mil 5-15 mil mil mil > 150 mil l Rescue/Turnaround l Replacement Capital l Growth l Buyout 61,789 36,479 40, ,022 86, , , , , , , , , , , , , , , , , , , , , , ,573 1,629,484 1,650, , ,474 1,364,278 2,590,054 1,664, ,487 1,145,192 1,092,969 1,213, , ,605 1,247,367 4,433,284 10,006,067 13,784,146 28,232,737 1,252,238 3,138,191 8,919,480 8,752,402 15,400, ,341 1,649,676 2,554,847 3,337,020 3,913, I EVCA Enterprise Capital Report 2011

17 Figure Investments by Size and Type - as % of Amount (2010-H1 2011) 100% 80% 60% 40% 20% 0% 2010 H in thousands < 5 mil 5-15 mil mil mil > 150 mil < 5 mil 5-15 mil mil mil > 150 mil l Rescue/Turnaround l Replacement Capital l Growth l Buyout 141, ,185 79, , ,042 39,391 83, , , , , ,500 42,122 65, , ,368,051 1,264,227 1,940, , , , , , , , ,719 2,234,798 5,201,007 6,042,197 14,892, ,956 1,071,493 2,733,807 4,175,006 5,696,511 EVCA Enterprise Capital Report 2011 I 17

18 Figure Overview Investment by Location - as % of Amount invested 40% 30% 20% 10% 0% in % CEE region Benelux region Southern Europe France Nordic region DACH region The UK & Ireland l 2007 l 2008 l 2009 l 2010 l H I EVCA Enterprise Capital Report 2011

19 Figure Overview Investment by Location - as % of Number of Companies 40% 30% 20% 10% 0% in % CEE region Benelux region Southern Europe France Nordic region DACH region The UK & Ireland l 2007 l 2008 l 2009 l 2010 l H EVCA Enterprise Capital Report 2011 I 19

20 Figure Investments by Region and Type - as % of Total Amount ( ) 100% 30 80% 60% 40% 20% Total Amount in billion 0% in thousands Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround l UK & Ireland l Southern Europe l Nordics l France l DACH l CEE l Benelux Total Amount 9,084,838 6,262,558 1,122,628 1,725, ,548 4,032,560 4,532, ,659 2,008, ,855 1,250,203 1,102, ,475 1,062, ,360 2,403,761 2,516, , , ,803 1,917,157 3,505, ,407 1,243, , ,016 1,110, , , ,492 2,237,255 2,862, , , ,947 1,628,602 1,454, , , , , , , , ,124 4,292,928 4,378,264 1,666, , ,862 2,384,920 2,947,315 1,162,405 1,029, , , , , ,388 6,104,292 4,651, , ,930 80,332 3,683,872 3,407, ,251 1,057, , ,900 1,194, , , , , , , ,717 88, , , , ,157 5, , , , , ,545 3,544,601 2,590, , , ,501 1,362, , , , , , , , , ,771 28,232,737 23,790,213 5,680,651 5,033,188 2,182,853 15,400,055 17,671,882 4,390,428 7,332,681 1,695,399 3,913,987 5,891,867 2,461,016 4,488,503 2,693, I EVCA Enterprise Capital Report 2011

21 Figure Investments by Region and Type - as % of Total Amount (2010-H1 2011) 100% 30 80% 60% 40% 20% Total Amount in billion 0% H in thousands Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround l UK & Ireland l Southern Europe l Nordics l France l DACH l CEE l Benelux Total Amount 5,908,559 3,287, ,872 1,956, , ,654 1,751, , , ,623 1,954,217 1,101, , , , , , , ,740 83,130 1,962,430 1,662, , , , ,113 1,277, , ,542 45,085 1,944,322 1,838,063 1,012, , , ,931 1,135, , ,647 53,221 2,267,498 1,867, ,338 1,071, ,863 1,676,504 1,023, , ,070 17, , , , ,385 41, , ,628 83,745 89,541 3, ,538 1,148, , , , ,895 1,068,808 47, ,747 56,671 14,892,564 11,243,204 2,990,517 6,366,528 2,225,454 5,696,511 6,908,813 1,366,449 2,369, ,713 EVCA Enterprise Capital Report 2011 I 21

22 Figure Investments by Region and Type - as % of Number of Companies ( ) 100% 1,000 80% 60% 40% 20% Total Number of Companies 0% Number of companies Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround l UK & Ireland l Southern Europe l Nordics l France l DACH l CEE l Benelux Total Number of Companies I EVCA Enterprise Capital Report 2011

23 Figure Investments by Region and Type - as % of Number of Companies (2010-H1 2011) 100% 1,000 80% 60% 40% 20% Total Number of Companies 0% H Number of companies Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround Large/Mega Buyout MidMarket Buyout Small Buyout Growth Replacement Capital + Rescue/ Turnaround l UK & Ireland l Southern Europe l Nordics l France l DACH l CEE l Benelux Total Number of Companies EVCA Enterprise Capital Report 2011 I 23

24 Figure Investments by Region and Size - as % of Total Amount ( ) 100% % 60% 40% 20% Total Amount in billion 0% in thousands < 5 mil 5-15 mil mil mil mil >300 mil < 5 mil 5-15 mil mil mil mil >300 mil < 5 mil 5-15 mil mil mil mil >300 mil l UK & Ireland l Southern Europe l Nordics l France l DACH l CEE l Benelux Total Amount 548,414 1,159,155 3,469,901 4,251,998 3,519,390 5,884, ,750 1,008,367 3,327,767 2,459,019 2,189,624 2,305, , ,168 1,054, , ,370 1,181, , ,345 1,426,726 1,673,385 1,701,195 1,102, , ,728 1,980,555 2,510,921 1,534, , , , ,926 1,072, , , ,782 1,159,876 2,112,514 1,388, , , ,766 1,192, , ,452 1,025, , , , , , ,778 1,514,225 2,087,566 2,709,430 1,845,208 2,447, ,366 1,017,430 2,067,960 1,581, ,920 1,861, , , , , , ,545 1,855,523 3,111,621 2,076,737 4,027, , ,632 2,297,032 2,096,839 1,005,962 2,677, , , , , , , , , , , , , , , , , , , , , , , , ,057 1,329,855 1,903,833 2,625,369 1,095, , , , , , , , , , , , ,009,511 5,675,012 11,965,946 16,141,093 13,321,959 15,806,120 2,472,257 5,025,644 12,196,725 10,615,277 7,029,760 9,150,783 2,344,016 3,089,168 4,544,315 5,002,741 2,851,604 1,616, I EVCA Enterprise Capital Report 2011

25 Figure Investments by Region and Size - as % of Total Amount (2010-H1 2011) 100% % 60% 40% 20% Total Amount in billion 0% H in thousands < 5 mil 5-15 mil mil mil mil >300 mil < 5 mil 5-15 mil mil mil mil >300 mil l UK & Ireland l Southern Europe l Nordics l France l DACH l CEE l Benelux Total Amount 513, ,333 2,257,475 2,267,507 3,669,013 3,107, , , ,808 1,200, , , , ,035 1,066, ,865 1,321, ,000 72, , , , , , ,029 1,114,958 1,105,937 1,033, ,047 78, , , , , , ,794 1,169, , ,649 1,027, , , , , , , , ,701 1,103,481 1,273,995 1,104,971 1,544, , , , , , , , , , , , ,130 66, , , , , , , , , ,538 56,982 44, , , ,895 2,426,438 3,889,239 7,765,068 7,495,026 8,595,234 7,547, ,775 1,820,926 3,422,260 4,682,712 3,367,668 2,567,648 EVCA Enterprise Capital Report 2011 I 25

26 Figure Investments by Region and Size - as % of Number of Companies ( ) 100% 1,400 80% 60% 40% 20% 1,200 1, Total Number of Companies 0% Number of companies < 5 mil 5-15 mil mil mil mil >300 mil < 5 mil 5-15 mil mil mil mil >300 mil < 5 mil 5-15 mil mil mil mil >300 mil l UK & Ireland l Southern Europe l Nordics l France l DACH l CEE l Benelux Total Number of Companies , , I EVCA Enterprise Capital Report 2011

27 Figure Investments by Region and Size - as % of Number of Companies (2010-H1 2011) 100% 1,400 80% 60% 40% 20% 1,200 1, Total Number of Companies 0% H Number of companies < 5 mil 5-15 mil mil mil mil >300 mil < 5 mil 5-15 mil mil mil mil >300 mil l UK & Ireland l Southern Europe l Nordics l France l DACH l CEE l Benelux Total Number of Companies , EVCA Enterprise Capital Report 2011 I 27

28 Table Buyout Split - Equity vs. Transaction Value (data only available for buyout) Amounts in thousands Equity Value (Euro thsd) Transaction Value Euro thsd Number of companies Equity Value / Transaction Value 2007 Small 6,142,499 13,235, % Mid-market 19,708,887 55,437, % Large 10,748,262 37,113, % Mega 21,103, ,143, % Total buyout 57,703, ,930, % 2008 Small 5,606,882 11,380, % Mid-market 17,163,468 42,904, % Large 4,860,448 13,223, % Mega 9,831,568 35,693, % Total buyout 37,462, ,202, % 2009 Small 3,377,859 5,476, % Mid-market 6,222,731 10,357, % Large 1,128,225 2,415, % Mega 1,538,055 5,205, % Total buyout 12,266,870 23,454, % 2010 Small 4,820,803 8,138, % Mid-market 12,391,036 23,688, % Large 5,310,539 10,723, % Mega 6,603,907 20,616, % Total buyout 29,126,285 63,166, % H Small 1,927,756 3,433, % Mid-market 7,048,258 14,154, % Large 3,801,663 8,788, % Mega 1,194,095 3,634, % Total buyout 13,971,772 30,010, % 28 I EVCA Enterprise Capital Report 2011

29 Figure Sources of Buyouts (data only available for buyouts and since Q1 2008) - as % of Amount 100% 80% 60% 40% 20% 0% H in thousands Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 l Capital market l Corporate l Family & private l Institutional l Privatisation & state owned l Receivership l Private equity firm l Unknown 2,733,274 1,283,040 1,871, , ,350 82, , , , ,643 1,927,261 1,371,336 98, , ,202 1,630, , , , , ,827 1,912, ,541 1,299,192 1,180,676 1,195,873 1,924,717 1,978, , , , , , , , , ,249 1,427, , , , ,663 53,548 2,500 4, , , ,789 82, , , , ,609 1,310, , , , , , , ,056 46,349 20,646 23, ,810 1,091,135 1,602,322 2,364, , , , ,482 1,010,261 3,075,997 2,002,114 2,538,313 4,865,968 2,595,883 3,398,225 4,785,394 5,133,215 7,376,574 2,457, , , , , , , , , , ,964 EVCA Enterprise Capital Report 2011 I 29

30 Figure Investments by Sector - Amount ( billion) Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown l 2007 l 2008 l 2009 l 2010 l H I EVCA Enterprise Capital Report 2011

31 Table Investments by Sector - Amount ( thousands) H Agriculture 414, ,268 74, , ,540 Business & industrial products 9,945,041 8,408,086 2,237,142 3,842,326 2,186,602 Business & industrial services 8,100,430 4,491,788 1,879,161 3,302, ,553 Chemicals & materials 2,986,771 2,395, , , ,678 Communications 9,280,351 5,066,689 2,050,543 3,951,027 1,347,791 Computer & consumer electronics 2,494,495 2,347,349 1,308,154 3,052,533 1,892,582 Construction 2,995,863 2,327, , , ,156 Consumer goods & retail 8,941,744 6,441,555 2,719,311 7,917,855 2,762,649 Consumer services: other 6,358,255 3,067,423 1,707,178 3,776,944 1,902,969 Energy & environment 1,214,401 4,229,320 1,179,070 1,082, ,882 Financial services 3,193,337 2,495,042 2,084,348 2,252,045 1,283,822 Life sciences 5,298,985 3,607,718 2,345,510 4,649,952 1,924,668 Real estate 181,362 18,870 68, ,836 58,224 Transportation 3,348,380 1,229, ,680 2,077, ,180 Unknown 165, , ,403 27, Total investment 64,919,642 46,490,446 19,448,677 37,718,267 16,700,988 EVCA Enterprise Capital Report 2011 I 31

32 Figure Investments by Sector - Number of Companies Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown l 2007 l 2008 l 2009 l 2010 l H I EVCA Enterprise Capital Report 2011

33 Table Investments by Sector - Number of Companies H Agriculture Business & industrial products Business & industrial services Chemicals & materials Communications Computer & consumer electronics Construction Consumer goods & retail Consumer services: other Energy & environment Financial services Life sciences Real estate Transportation Unknown Total investment 1,805 1,911 1,654 1, EVCA Enterprise Capital Report 2011 I 33

34 Figure Investments by Sector and Type - as % of Amount ( ) Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% l Large/Mega Buyout l MidMarket Buyout l Small Buyout l Growth l Replacement Capital and Rescue/Turnaround 34 I EVCA Enterprise Capital Report 2011

35 Table Investments by Sector and Type - Amount ( thousands) ( ) Replacement Replacement Capital + Capital + Large/ MidMarket Small Rescue/ Large/ MidMarket Small Rescue/ Mega Buyout Buyout Buyout Growth Turnaround Mega Buyout Buyout Buyout Growth Turnaround Agriculture 192, ,828 35,106 14, ,752 37,292 43,819 3,405 Business & industrial products 3,207,030 4,556,402 1,348, , ,948 2,197,307 4,162,756 1,033, , ,756 Business & industrial services 3,750,213 2,753, , , ,222 1,270,542 1,650, , , ,089 Chemicals & materials 1,520,570 1,145, , ,536 12,185 1,463, ,615 66,821 96,062 38,994 Communications 4,956,280 2,607, , , ,694 2,682,208 1,077, , ,996 73,488 Computer & consumer electronics 622,549 1,118, , , , , , , , ,582 Construction 1,955, , , ,993 15,077 1,406, , , ,686 57,681 Consumer goods & retail 3,645,981 3,341, , , ,499 1,587,757 2,997, , , ,108 Consumer services: other 3,501,251 2,110, , ,282 28, ,669, , , ,141 Energy & environment 0 284, , , ,241 2,498, , , ,437 35,959 Financial services 1,579,639 1,045, , ,967 55, , ,039 70, , ,173 Life sciences 2,062,259 1,954, , , , ,643 1,921, , ,663 30,511 Real estate 0 89,825 5,316 86, ,498 5,339 5,033 Transportation 1,239,771 1,780, ,424 63,815 22, , , , ,615 59,671 Unknown 0 114,700 1,762 48, , ,160 6,700 16,806 Total investment 28,232,737 23,790,213 5,680,651 5,033,188 2,182,853 15,400,055 17,671,882 4,390,428 7,332,681 1,695,399 EVCA Enterprise Capital Report 2011 I 35

36 Figure Investments by Sector and Type - as % of Amount ( ) Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% l Large/Mega Buyout l MidMarket Buyout l Small Buyout l Growth l Replacement Capital and Rescue/Turnaround 36 I EVCA Enterprise Capital Report 2011

37 Table Investments by Sector and Type - Amount ( thousands) ( ) Replacement Replacement Capital + Capital + Large/ MidMarket Small Rescue/ Large/ MidMarket Small Rescue/ Mega Buyout Buyout Buyout Growth Turnaround Mega Buyout Buyout Buyout Growth Turnaround Agriculture 0 17,800 16,189 40, ,746 60,483 79,529 4,594 Business & industrial products 0 712, , , ,610 1,318,948 1,291, , , ,257 Business & industrial services 356, , , , , ,546 1,226, , , ,953 Chemicals & materials 0 203,856 63, ,455 99, , ,794 83,152 90,819 90,687 Communications 991, , , ,744 72,136 1,565,950 1,197, , , ,097 Computer & consumer electronics 0 709, , , ,049 1,159,966 1,080, , , ,355 Construction 0 153,864 94, ,820 7, , ,366 97,106 80,606 Consumer goods & retail 720, , , , ,348 3,579,334 2,456, , , ,090 Consumer services: other 270, , , , ,971 1,467, , , , ,782 Energy & environment 270, ,280 46, ,905 25, , , , ,878 28,770 Financial services 833, ,965 50, , , , ,469 97, ,634 1,714 Life sciences 472,856 1,102, , ,701 64,066 2,298,789 1,135, , ,337 54,692 Real estate ,280 9, ,376 3,020 19,696 7,743 Transportation 0 98, , , ,975 1,114, , , ,474 41,447 Unknown ,183 83,981 69, ,600 23, Total investment 3,913,987 5,891,867 2,461,016 4,488,503 2,693,304 14,892,564 11,243,204 2,990,517 6,366,528 2,225,454 EVCA Enterprise Capital Report 2011 I 37

38 Figure Investments by Sector and Type - as % of Amount (H1 2011) H Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% l Large/Mega Buyout l MidMarket Buyout l Small Buyout l Growth l Replacement Capital and Rescue/Turnaround 38 I EVCA Enterprise Capital Report 2011

39 Table Investments by Sector and Type - Amount ( thousands) (H1 2011) Replacement Capital + Large/ MidMarket Small Rescue/ Mega Buyout Buyout Buyout Growth Turnaround H Agriculture 0 88, ,850 1,650 Business & industrial products 946, , , ,606 63,275 Business & industrial services 0 392, , ,310 33,737 Chemicals & materials 476, ,670 27,651 8,708 47,042 Communications 0 1,007,181 98, ,829 11,410 Computer & consumer electronics 1,238, , , ,361 16,080 Construction 215, ,026 82, ,222 4,684 Consumer goods & retail 953,641 1,093, , , ,660 Consumer services: other 187,146 1,407, , ,792 43,849 Energy & environment 234, ,000 42,465 78, Financial services 392, ,479 57, ,871 0 Life sciences 702, , , ,251 23,434 Real estate 0 20,299 29,325 8,600 0 Transportation 350, ,412 56,597 64,010 2,278 Unknown Total investment 5,696,511 6,908,813 1,366,449 2,369, ,713 EVCA Enterprise Capital Report 2011 I 39

40 Figure Investments by Sector and Size - as % of Amount ( ) Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% l < 5 mil l 5-15 mil l mil l mil l mil l >300 mil 40 I EVCA Enterprise Capital Report 2011

41 Table Investments by Sector and Size - Amount ( thousands) ( ) < 5 mil 5-15 mil 50 mil 150 mil 300 mil >300 mil < 5 mil 5-15 mil 50 mil 150 mil 300 mil >300 mil Agriculture 27,235 22,667 68, , , ,123 38,393 55, Business & industrial products 367,243 1,269,854 2,154,125 2,946,789 1,990,144 1,216, ,099 1,073,610 2,643,061 1,906,009 1,424, ,475 Business & industrial services 274, ,606 1,807,746 1,386,617 1,245,955 2,504, , ,122 1,434, , , ,498 Chemicals & materials 50, , , , , ,552 45,142 97, , , ,463,000 Communications 218, , ,792 2,317,499 2,241,989 3,140, , , , ,135 1,181,683 1,650,525 Computer & consumer electronics 157, , , , , , , , , ,128 Construction 53, , , , ,767 1,101, , , , , , ,000 Consumer goods & retail 288, ,940 1,953,214 1,769,262 1,720,863 2,244, , ,701 2,012,602 1,661,799 1,121, ,024 Consumer services: other 164, ,758 1,071,470 1,196,854 1,558,520 1,942, , ,930 1,174,801 1,336, Energy & environment 87, , , , , , , , ,872 1,302,866 1,195,736 Financial services 43, , , , , ,985 98, , , , , ,397 Life sciences 181, , ,220 1,648, ,445 1,383, , ,133 1,079,170 1,356, ,643 0 Real estate 13, ,743 56, ,657 11, Transportation 71, , ,888 1,338, , , , , , , ,487 0 Unknown 10, ,000 50, , ,586 15, Total investment 2,009,511 5,675,012 11,965,946 16,141,093 13,321,959 15,806,120 2,472,257 5,025,644 12,196,725 10,615,277 7,029,760 9,150,783 EVCA Enterprise Capital Report 2011 I 41

42 Figure Investments by Sector and Size - as % of Amount ( ) Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% l < 5 mil l 5-15 mil l mil l mil l mil l >300 mil 42 I EVCA Enterprise Capital Report 2011

43 Table Investments by Sector and Size - Amount ( thousands) ( ) < 5 mil 5-15 mil 50 mil 150 mil 300 mil >300 mil < 5 mil 5-15 mil 50 mil 150 mil 300 mil >300 mil Agriculture 5,573 30,969 37, ,041 76,601 66, Business & industrial products 434, , , , , , , , ,366 1,147,583 Business & industrial services 264, , , , , , , , , ,204 0 Chemicals & materials 58,130 65, , , , , , , ,579 0 Communications 250, , , , , , , , , , , ,707 Computer & consumer electronics 216, , , , , , , , , ,392 Construction 69,826 94, ,205 56, , , , , Consumer goods & retail 313, , , , , , , ,871 1,513,094 1,496,354 2,437,445 1,328,422 Consumer services: other 149, , , , , , , , ,906 1,277, ,038 Energy & environment 103, , , , , , , , , ,655 Financial services 77,623 96, , , , ,628 89, , , , ,818 Life sciences 222, , , , , , , , ,531 1,097,141 1,201,648 Real estate 11,912 12,243 44, ,493 17,966 50, , Transportation 59, , , , , , , , , ,000 Unknown 107,302 69,774 45, ,830 13, Total investment 2,344,016 3,089,168 4,544,315 5,002,741 2,851,604 1,616,833 2,426,438 3,889,239 7,765,068 7,495,026 8,595,234 7,547,263 EVCA Enterprise Capital Report 2011 I 43

44 Figure Investments by Sector and Size - as % of Amount (H1 2011) H Agriculture Business and industrial products Business and industrial services Chemicals and materials Communications Computer and consumer electronics Construction Consumer goods and retail Consumer services: other Energy and environment Financial services Life sciences Real estate Transportation Unknown 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% l < 5 mil l 5-15 mil l mil l mil l mil l >300 mil 44 I EVCA Enterprise Capital Report 2011

45 Table Investments by Sector and Size - Amount ( thousands) (H1 2011) < 5 mil 5-15 mil 50 mil 150 mil 300 mil >300 mil H Agriculture 3,500 10, , Business & industrial products 93, , , , ,570 0 Business & industrial services 99, , , , Chemicals & materials 38,033 10, , , , ,895 Communications 82, , , , Computer & consumer electronics 93, , ,112 85, ,000 1,013,171 Construction 48, , , ,000 0 Consumer goods & retail 127, , , , , ,499 Consumer services: other 50, , , , ,146 0 Energy & environment 54,794 67,088 20,000 88, ,000 0 Financial services 19, , , , , ,201 Life sciences 67, , , , ,291 0 Real estate 9,381 28,544 20, Transportation 50,850 46, , , ,883 Unknown Total investment 839,775 1,820,926 3,422,260 4,682,712 3,367,668 2,567,648 EVCA Enterprise Capital Report 2011 I 45

46 Figure Geographic Origin of Investments - as % of Amount 100% 80% 60% 40% 20% 0% H in thousands Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 l Outside Europe l Intra-European l Domestic 500,103 1,274, , , , , ,528 99,322 3,467 37, , ,204 26, , ,880 11, , ,626 6,422,987 4,835,730 4,029,073 4,152,302 2,868,068 3,970,337 2,782,938 1,661,849 1,092, , ,650 2,666, ,341 2,459,785 2,009,221 2,987,262 3,328,461 1,688,934 8,468,948 10,298,632 13,594,556 9,903,017 8,920,675 8,383,868 11,628,648 4,889,551 3,100,254 2,755,974 3,188,833 4,635,399 6,521,633 5,980,531 7,152,166 8,626,383 4,118,876 7,285, I EVCA Enterprise Capital Report 2011

47 Figure Overview of Initial vs. Follow-on Investments - as % of Amount 100% 80% 60% 40% 20% 0% H in % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm EVCA Enterprise Capital Report 2011 I 47

48 Table Initial vs. Follow-on Investments by Type - by Amount Replacement Capital + in % Large/Mega Buyout MidMarket Buyout Small Buyout Growth Rescue/ Turnaround 2007 Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm H Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm I EVCA Enterprise Capital Report 2011

49 Table Initial vs. Follow-on Investments by Size - by Amount in % < 5 mil 5-15 mil mil mil mil >300 mil 2007 Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm H Initial for the company Follow-on investment for the company Unknown Initial for the private equity firm EVCA Enterprise Capital Report 2011 I 49

50 Figure Syndication Trend by Type of Investment - as % of Amount 60% 50% 40% 30% 20% 10% 0% in % H l Buyout l Growth l Replacement Capital + Rescue/Turnaround I EVCA Enterprise Capital Report 2011

51 Figure Syndication as % of Buyout Investment Amount 100% 80% 60% 40% 20% 0% in % H l < 5 mil l 5-15 mil l mil l mil l mil l > 300 mil EVCA Enterprise Capital Report 2011 I 51

52 Figure Syndication as % of Growth Investment Amount 100% 80% 60% 40% 20% 0% in % H l < 5 mil l 5-15 mil l mil l mil l mil l > 300 mil I EVCA Enterprise Capital Report 2011

53 Figure Syndication as % of Replacement Capital and Rescue/Turnaround Investment Amount 100% 80% 60% 40% 20% 0% in % H l < 5 mil l 5-15 mil l mil l mil l mil l > 300 mil EVCA Enterprise Capital Report 2011 I 53

54 Figure Investment by Number of Employees - as % of Amount 100% 80% 60% 40% 20% 0% in % H l Up to 250 employees (SMEs) l 250-1,000 employees l More than 1,000 employees I EVCA Enterprise Capital Report 2011

55 Figure Investment by Number of Employees - as % of Number of Companies 100% 80% 60% 40% 20% 0% in % H l Up to 250 employees (SMEs) l employees l More than 1,000 employees EVCA Enterprise Capital Report 2011 I 55

56 Table Investments by Number of Employees and by Type of Investment (2007-H1 2011) - as % of Amount Replacement Capital in % Large/Mega Buyout MidMarket Buyout Small Buyout Growth and Rescue/Turnaround 2007 Up to 250 employees (SMEs) ,000 employees More than 1,000 employees Up to 250 employees (SMEs) ,000 employees More than 1,000 employees Up to 250 employees (SMEs) ,000 employees More than 1,000 employees Up to 250 employees (SMEs) ,000 employees More than 1,000 employees H Up to 250 employees (SMEs) ,000 employees More than 1,000 employees I EVCA Enterprise Capital Report 2011

57 Table Investments by Number of Employees and by Size of Investment (2007-H1 2011) - as % of Amount in % < 5 mil 5-15 mil mil mil mil >300 mil 2007 Up to 250 employees (SMEs) ,000 employees More than 1,000 employees Up to 250 employees (SMEs) ,000 employees More than 1,000 employees Up to 250 employees (SMEs) ,000 employees More than 1,000 employees Up to 250 employees (SMEs) ,000 employees More than 1,000 employees H Up to 250 employees (SMEs) ,000 employees More than 1,000 employees EVCA Enterprise Capital Report 2011 I 57

58 Figure Investment Trend by Number of Employees - as % of Amount 100% 80% 60% 40% 20% 0% H in % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Up to 250 employees (SMEs) 250-1,000 employees More than 1,000 employees I EVCA Enterprise Capital Report 2011

59 Figure Investment Trend by Number of Employees - as % of Number of Companies 100% 80% 60% 40% 20% 0% H in % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Up to 250 employees (SMEs) 250-1,000 employees More than 1,000 employees EVCA Enterprise Capital Report 2011 I 59

60 3. Financing 2010 saw a very welcome and material rebound in leverage loan volumes in Europe, admittedly from the depressed levels of This trend has continued into the first half of 2011 with volumes exceeding the whole of However, the outlook for the remainder of 2011 looks much weaker as the political and economic issues facing Europe increase caution amongst investors and lenders. The growth in 2010 started largely as a bank club market but as confidence grew through the year and as institutional debt investors returned, bank underwriting volumes started to grow. In part this reflected the strengthening of secondary debt prices, such that primary issuance could compete with the returns available to secondary buyers also saw the emergence of a healthy high yield bond market in Europe, for the first time, offering sponsors an attractive alternative to the loan markets. This gathered pace in the first half of 2011, though volatility has returned to the market in the third quarter and new high yield issuance for the LBO market has paused. The 2010 loan vintage was characterised by low leverage, strong margins and deals funded with large equity cheques. Documentation was also robust. These characteristics have mostly continued into 2011, though the trends have been towards higher leverage and lower margins. In part this has been driven by a substantial uplift in institutional loan liquidity, not via new issuance, but from early repayments and refinancing of existing credits within loan portfolios, and a desire to reinvest in new deals. This liquidity has reduced in Q3, and with rising funding costs for banks, the trend in loan margins is upward, and appetite to underwrite has receded. The outlook for deal volume and loan issuance for the remainder of 2011 looks challenging, though full year volumes will show good growth over Jon Herbert Jon Herbert is the Head of Acquisition Finance at Lloyds Banking Group. Prior to the integration with Bank of Scotland, he ran Lloyds activities within the structured debt market which included Acquisition Finance, as well as businesses in Project Finance, Ship Finance, Rail Finance and Equipment Leasing. Jon has spent his entire career within the bank, mostly in Structured Finance and Corporate Banking. 60 I EVCA Enterprise Capital Report 2011

61 Figure Senior Loan Volume - LBO Transactions billion in billion H l European Market l US Market Source: Standard & Poor's LCD EVCA Enterprise Capital Report 2011 I 61

62 Figure European Pro rata vs. Institutional LBO Activity ( ) billion in billion Institutional Pro Rata Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Source: Standard & Poor's LCD 62 I EVCA Enterprise Capital Report 2011

63 Figure European Pro rata vs. Institutional LBO Activity (2009-H1 2011) billion H12011 in billion Institutional Pro Rata Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Source: Standard & Poor's LCD EVCA Enterprise Capital Report 2011 I 63

64 Figure Rolling Three-month Weighted Average Spreads of all European New-issue LBOs Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Institutional Pro Rata Source: Standard & Poor s LCD Wtd. Avg. ProRata spread (WAPR) is the average RC/TLa spread weighted by the sizes of the RC and TLa tranches. Wtd. Avg. Institutional Spread (WAIS) is the average TLb/TLc spread weighted by the size of the TLb and TLc tranches[1]. E refers to Euribor. 64 I EVCA Enterprise Capital Report 2011

65 Figure Maturity schedule by par outstanding % % % % % % % Year Billion l l l l l l l l Source: Standard & Poor s LCD Based on all facilities in the European Leveraged Loan Index (ELLI) universe, priced and unpriced % EVCA Enterprise Capital Report 2011 I 65

66 Figure Average P/E* ratios for European Private Equity-backed Buyouts H m mil mil mil > 500 mil Source: cmbor.com/barclays Private Equity/Ernst & Young * P/E ratios here are defined as deal price divided by EBIT 66 I EVCA Enterprise Capital Report 2011

67 Figure Debt-to-EBIT Ratios for Buyouts* H m mil > 500 mil Source: cmbor.com/barclays Private Equity/Ernst & Young * The sample includes all buyouts, not only private-equity backed buyouts. However, as non-private-equity-backed buyouts are typically smaller in size (i.e. sub- 10m deals), the data is still representative for private-equity-backed buyouts. EVCA Enterprise Capital Report 2011 I 67

68 Figure Average Deal Structures for European Private-equity-backed Buyouts: Deals below 100m 100% 9,000 8,000 80% 60% 40% 20% 7,000 6,000 5,000 4,000 3,000 2,000 million 1,000 0% H l Other Finance l Loan Note l Debt l Mezzanine l Equity Total financing ( million) ,740 6,252 4,601 4,796 5,010 4,886 4,560 5,455 4,078 1,799 2,590 1,425 Source: cmbor.com/barclays Private Equity/Ernst & Young 68 I EVCA Enterprise Capital Report 2011

69 Figure Average Deal Structures for European Private-equity-backed Buyouts: Deals above 100m 100% 120,000 80% 100,000 60% 40% 80,000 60,000 40,000 million 20% 20,000 0% H l Other Finance l Loan Note l Debt l Mezzanine l Equity Total financing ( million) ,591 27,468 42,136 41,258 44,344 69,936 87,499 96,536 37,756 60,49 29,214 10,071 Source: cmbor.com/barclays Private Equity/Ernst & Young EVCA Enterprise Capital Report 2011 I 69

70 4. Divestments The private equity model is explicitly one of buy-to-sell. A healthy market for exits enables the cycle to keep turning. If realizations dry up, LP s asset allocation often goes off-target, fundraising dries up, performance particularly as measured by IRR suffers, carried interest hurdles are missed, or the payment of carry is delayed, and the whole system operates less smoothly. The financial crisis in 2008 hit exits hard but have things recovered in Europe since? Before looking at the evidence in this section it is worth remembering that there were unprecedented levels of investment into portfolio companies in 2006 and Normally, these might reappear into the system as exits 3 or 4 years later so we should see lots of realization activity in 2010 and So the relevant benchmark is not really the historical levels the expected level should be much higher given the growth of investment. So what does the data show? Before trying to answer that question, it is worth remarking that this data does NOT track realized cash. Since it can be difficult to obtain information on exit values, the data focuses on two measures divestments according to their cost, upon which good data is available, and the number of realization events. Both need careful interpretation. Cost will usually be a fraction of the realized amount, at least in aggregate. And there can be multiple realization events for a single company for instance if there is an initial distribution followed by a final sale. So the number of realization events does not refer to the number of companies exited. However, the time series variation in these measures is certainly informative on the state of the market for exits. Overall, there are clear signs of increased realizations in Europe in 2010, after the low level of activity in 2008 and The number, and cost value, of exits for both buyouts and growth capital increased noticeably in 2010, with particularly strong recoveries in the UK, France and Benelux. Secondary sales bounced back in 2010, but were still in number only half the level of There was also some opening of the IPO window, which had been firmly shut in 2008 and 2009 during which there were only 4 PE-backed IPOs. The 15 IPOs in 2010 were certainly a welcome reversal. However, for all these rays of sunshine there remains the issue that the stock of portfolio companies waiting to exit is probably at an all-time high given the pre-crisis level of investment activity noted earlier. The market will have to recover much more strongly to clear this backlog. Of course, many of these investments may take much longer to turn a profit, having been bought at high multiples and facing lower exit multiples. 70 I EVCA Enterprise Capital Report 2011

71 It is probably too early to call a sustained recovery on exits. The first half of 2011 held up well for buyouts, but it is noticeable that the number, and cost value, of growth capital divestments fell sharply. Continued turbulence in financial markets, and the Eurozone crisis, hardly make this a good time to sell with only brave buyers prepared to venture into the market. The other critical factor is the return of the IPO market for the large and mega buyouts that constitute a large proportion of the current stock of portfolio companies. For many of these, secondary sales or purchases by trade buyers are unlikely, but IPOs remain extremely challenging in Europe. Without stronger exits, fundraising will remain very challenging and the prospects of carried interest payments fade, or are, at best, delayed. And as the revenues of the GPs are revised downwards, so teams shrink or fragment. Continued patience will be required before the cycle of investment and exits gets back into equilibrium. Tim Jenkinson Tim Jenkinson is Professor of Finance at the Saïd Business School at the University of Oxford, and is Director of the Oxford Private Equity Institute. He is also Chairman of the economic consulting firm Oxford Economic Research Associates (Oxera), a director of the UK-listed investment fund PSource Structured Debt (LSE: PSD), and an academic adviser to KPMG's Global Valuation Institute. He has consulted for a large number of companies, regulators, government agencies and industry associations. He is a Professorial Fellow of Keble College, Oxford. Tim joined the Saïd Business School in He was previously in the economics department at Oxford University, which he joined in 1987, and has also spent periods as a Visiting Professor at Dartmouth College. He initially studied economics as an undergraduate at Cambridge University, before going as a Thouron Fellow to the University of Pennsylvania, where he obtained a Masters in Economics. He then returned to the UK and obtained a DPhil in Economics from Oxford. EVCA Enterprise Capital Report 2011 I 71

72 Figure Evolution of Divestments by Type 25,000 1,000 20, Amount at cost in million 15,000 10,000 5, Number of Companies H Amount at cost ( million) l Rescue/Turnaround l Replacement Capital l Growth l Buyout , ,441 2, ,842 9,924 7,189 14,185 9,065 Number of Companies Rescue/Turnaround Replacement Capital Growth Buyout I EVCA Enterprise Capital Report 2011

73 Figure Divestments by Region - Amount at cost 100% 80% 60% 40% 20% 0% in million H l UK & Ireland l Southern Europe l Nordics l France l Dach Region l CEE l Benelux 6,834 2,960 2,179 6,170 3,040 3,199 1,718 1,720 1, , ,064 1, ,660 2,109 1,648 3,223 1,258 4,338 2,369 2,116 3,074 1, ,303 2,813 1, , EVCA Enterprise Capital Report 2011 I 73

74 Figure Divestments by Region - Number of Companies 100% 80% 60% 40% 20% 0% Number of companies H l UK & Ireland l Southern Europe l Nordics l France l Dach Region l CEE l Benelux I EVCA Enterprise Capital Report 2011

75 Figure Divestment by Region and Type - Amount at cost 100% 80% 60% 40% 20% 0% H in million Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround l UK & Ireland l Southern Europe l Nordics l France l Dach Region l CEE l Benelux 6, , , , , , , , , , , , , , , , , , , , , , , EVCA Enterprise Capital Report 2011 I 75

76 Figure Divestment by Region and Type - Number of Companies 100% 80% 60% 40% 20% 0% H Number of companies Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround l UK & Ireland l Southern Europe l Nordics l France l Dach Region l CEE l Benelux I EVCA Enterprise Capital Report 2011

77 Figure Divestment by Exit Method - Number of Companies 100% 80% 60% 40% 20% 0% Number of companies H l Repayment of silent partnerships l Trade sale l Sale to management (MBO) l Write-offs l Sale to another private equity house l Repayment of principal loans l Sale of quoted equity l Divestment by other means l IPO l Sale to financial institution l Unknown EVCA Enterprise Capital Report 2011 I 77

78 Figure Divestment by Exit Method and Type - Number of Companies 100% 80% 60% 40% 20% 0% H Number of companies Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround l Repayment of silent partnerships l Trade sale l Sale to management (MBO) l Write-offs l Sale to another private equity house l Repayment of principal loans l Sale of quoted equity l Divestment by other means l IPO l Sale to financial institution l Unknown I EVCA Enterprise Capital Report 2011

79 Figure Divestments by Sector - Amount at cost 100% 80% 60% 40% 20% 0% in million H l Agriculture l Business & industrial products l Business & industrial services l Chemicals & materials l Communications l Computer & consumer electronics l Construction l Consumer goods & retail l Consumer services l Energy & environment l Financial services l Life sciences l Real estate l Transportation l Unknown ,465 2,338 1,414 2,174 1,285 2,955 1, , , ,599 2, ,302 1,903 2,984 1, ,797 1,840 2,304 4,107 1,120 2, , , , , , EVCA Enterprise Capital Report 2011 I 79

80 Figure Divestments by Sector and Type - Amount at cost 100% 80% 60% 40% 20% 0% H in million Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround l Agriculture l Business & industrial products l Business & industrial services l Chemicals & materials l Communications l Computer & consumer electronics l Construction l Consumer goods & retail l Consumer services l Energy & environment l Financial services l Life sciences l Real estate l Transportation l Unknown , , , , , , , , , , , , , , , , , , , , , , , , I EVCA Enterprise Capital Report 2011

81 Figure Write-offs by Sector 100% 80% 60% 40% 20% 0% in thousands H l Agriculture l Business & industrial products l Business & industrial services l Chemicals & materials l Communications l Computer & consumer electronics l Construction l Consumer goods & retail l Consumer services l Energy & environment l Financial services l Life sciences l Real estate l Transportation l Unknown , ,053 42, , ,509 42,925 19,921 68, ,349 13,364 75, , , ,871 35, , ,079 1,887, , ,464 53,658 62,706 11, , , , , , , , ,588 64, , ,788 1,365,113 16, ,805 17,200 17, , ,910 77, , , ,230 72, , ,094 14,823 13,834 16,368 2,680 1,000 1,995 0 EVCA Enterprise Capital Report 2011 I 81

82 Figure Write-offs by Sector and Type - Amount at cost 100% 80% 60% 40% 20% 0% H in thousands Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround Buyout Growth Replacement Capital + Rescue/ Turnaround l Agriculture l Business & industrial products l Business & industrial services l Chemicals & materials l Communications l Computer & consumer electronics l Construction l Consumer goods & retail l Consumer services l Energy & environment l Financial services l Life sciences l Real estate l Transportation l Unknown , , ,000 40,495 1, ,023 35,679 26, ,321 8,675 54,513 22,371 20, , ,915 2, ,438 5,548 2,363 4,341 2,881 6,142 75, , , ,871 35, ,065 70, , , ,886, , ,472 6, ,064 2, ,042 8, ,116 9, , , , ,588 2, ,027 1,267 36, ,519 3, ,208 5,895 22, ,737 95, , ,000 53, , , , ,300,717 64, ,998 1, , , , ,847 1, , ,910 38,271 39, , ,597 2, ,857 3, , , ,551 3,350 2,193 7,073 7, , , , , , , I EVCA Enterprise Capital Report 2011

83 Figure Divestments by Exit Method compared to Western Europe M&A and IPO market - Number of companies ,000 Number of companies ,000 15,000 10,000 5,000 Number of companies (M&As all Western Europe only) 0 0 Number of companies H l Repayment of silent partnerships l Trade sale l Sale to management (MBO) l Write-offs l Sale to another private equity house l Repayment of principal loans l Sale of quoted equity l Divestment by other means l IPO l Sale to financial institution l Unknown IPOs - Western Europe M&As all Western Europe (excl. IPOs, joint ventures and share buybacks) ,314 16,398 14,790 14,503 8,142 - Source of Western Europe M&A and IPO Data: Zephyr, a Bureau van Dijk product EVCA Enterprise Capital Report 2011 I 83

84 Figure Divestments by Exit Method compared to Western Europe M&A and IPO market - Number of companies ,000 Number of companies ,000 15,000 10,000 5,000 Number of companies (M&As all Western Europe only) 0 0 Number of companies H l IPO & Sale of quoted equity l Sale to another private equity house l Trade sale / Sale to management (MBO) / Sale to financial institution IPOs - Western Europe M&As all Western Europe (excl. IPOs, joint ventures and share buybacks) ,314 16,398 14,790 14,503 8,142 - Source of Western Europe M&A and IPO Data: Zephyr, a Bureau van Dijk product 84 I EVCA Enterprise Capital Report 2011

85 5. Value Creation Return Attribution in Mid-Market Buyout Transactions New Evidence from Europe The following contribution is an excerpt from Kaserer, Christoph (2011): Return Attribution in Mid-Market Buyout Transactions New Evidence from Europe, CESifo Research report No , CESifo Group Munich. I. In this study we use a data set provided by the European Private Equity and Venture Capital Association (EVCA). On a fully anonymous basis financial information on 332 European fully exited mid-market buyout deals undertaken by 15 different EVCA member firms over the period 1990 to 2011 was collected. Compared to other studies it turns out that average (median) deal size is relatively low at 125mn ( 68mn). Similar is true for the average debt ratio which is at 35%. Also, the average percentage of ownership acquired by the private equity firm is at a relatively low 55%, indicating that several minority participations are in the data set. All these numbers suggest that this data set is unique in the sense that it does not primarily cover the large LBO market (as is done in most other studies), but actually the midmarket buyout segment. II. The average (median) money multiple of the sample deals is 2.93 (2.36), while the average (median) IRR is 40.2% (29.0%). It should be pointed out that these return estimates are in a similar range as reported in other studies. III. IV. As far as the different exit methods are concerned, it consistently turns out that exiting a deal via a secondary transaction (i.e. selling to another private equity or financial investor) generates a significantly higher return. In fact, the median money multiple for a deal exited via a secondary transaction was 3.0. For trade sales or IPOs the median multiple is only 2.4. As far as the regional distribution of the deals is concerned we do not find significant differences in a consistent manner. Also other deal characteristics, like entry and exit dates, stage focus, syndication and duration do not have a statistically measurable impact on deal returns. We report weak evidence that deal size has a positive impact on deal returns. We find that sales growth has a statistically and economically significant impact on deal returns. Doubling the revenues from entry to exit generates an increase in the IRR of 7.9 percentage points or an almost 0.9 increase in the money multiple. Also the effect of an EBITDA margin improvement is economically relevant according to our estimation, even though this effect cannot be identified from a purely statistical perspective. EVCA Enterprise Capital Report 2011 I 85

86 V. As far as multiple enhancement is concerned we consistently do not find any evidence supporting the hypothesis that it is a significant performance driver in European mid-market buyout transactions. Also, in accordance with other findings in the literature we do not find any statistically significant impact of the leverage on deal returns. Moreover, the effect seems to be rather small from a pure economic perspective. In fact, the median money multiple of the 50% of the deals with the highest debt to EBITDA ratio was 2.5, while it was 2.3 for the 50% of the deals with the lowest leverage. This supports the view that even if there is a leverage benefit, in a competitive bidding process its value may be reaped by the seller of the target firm instead of the buyer. VI. In order to quantify the relative impact of earnings enhancement, multiple enhancement and the leverage effect on the overall deal return in European buyout transactions we develop a novel methodology for the return decomposition. This is due to the fact that decomposition techniques used in the literature tend to be biased because of methodological problems. VII. We estimate that the IRR contribution stemming from earnings enhancement is in the range of two thirds to three quarters of the overall deal return. Among the different earnings enhancement drivers sales growth turns out to be the most important one. The return contribution due to multiple enhancement is very small or even negative. The contribution stemming from the leverage effect is in the range of about one third. An overview of this IRR decomposition is given in Figure 6.6. This leverage contribution is, of course, a substantial effect from an economic perspective, even though it is clearly lower than other estimates reported in the literature. However, as we do not find any statistically significant impact of leverage on deal returns, we do not know to what extent this result is driven by an estimation bias or data noise. Money multiple decomposition in principle comes to similar results, even though there is much more variation in relative return contributions. This may be caused by data noise or other technical reasons. VIII. Crosschecking the robustness of this return decomposition by an OLS regression approach corroborates the expedience of our methodology. Dr. Christoph Kaserer Christoph Kaserer is co-director of the Center for Entrepreneurial and Financial Studies (CEFS) and Full Professor of Finance at Technische Universität München (TUM). His area of expertise is private equity, corporate finance, financial markets, and asset management. Christoph Kaserer published his research in leading international and German academic journals. He is among the top 100 worldwide downloaded authors on the Social Science Research Network (ssrn.com). He is also active as an adviser of large private companies, private equity funds and public institutions. Recently, he acted as an expert to the German Government in the context of private equity and venture capital regulation. Since 2008, he is the Chairman of the Governing Body of the Private Equity Research Exchange Platform (PEREP) established by EVCA. Before joining TUM School of Management, he became Full Professor of Financial Management and Accounting at Université de Fribourg, Switzerland, in From 2005 to 2010 he was the Dean of TUM School of Management at Technische Universität München. The School of Management was founded in According to recently published university rankings, TUM School of Management is among the top 10 business administration departments at German universities. 86 I EVCA Enterprise Capital Report 2011

87 Figure Deals by Vintage Year and Exit Year Figure Deals by Enterprise Value at Entry and Exit 50% 50% 40% 40% 38% 40% 30% 20% 10% 0% 2% 0% 8% 0% 14% 0% 18% 0% 28% 2% 24% 6% 17% 3% 0% 0% 30% 20% 10% 0% 7% 4% 12% 8% 19% 14% 21% 18% 23% 15% 13% 27% 5% 14% before after 2010 <10m 10m-25m 25m-50m 50m-100m 100m-200m 200m-500m >500m l Entry l Exit l Entry l Exit Source: C. Kaserer (2011) Source: C. Kaserer (2011) EVCA Enterprise Capital Report 2011 I 87

88 Figure Deals by Geography Figure Deals by Sector 50% 25% 40% 37% 20% 21% 18% 18% 30% 26% 15% 14% 20% 10% 19% 16% 10% 11% 9% 10% 8% 9% 8% 13% 8% 13% 3% 3% 10% 5% 9% 6% 3% 3% 2% 2% 2% 2% 0% 0% United Kingdom l Country of office l County of deal Source: C. Kaserer (2011) Scandinavia France Benelux Southern Europe DACH EEC Others Industrial goods Business & industrial services Consumer goods & retail Communications Healthcare Consumer services Energy & environment Chemicals & materials Other Construction Consumer electronics Transportation Source: C. Kaserer (2011) 88 I EVCA Enterprise Capital Report 2011

89 Figure Gross IRR Return Attribution - Median (%) Figure Gross IRR Return Attribution - Average (%) 50% 50% 40% 40% 15% -1% 40% 30% 11% 6% 29% 30% 11% -2% 31% -4% 20% 9% 1% 20% -5% 20% 15% 7% 10% 7% 2% 10% 0% 0%... Sales Growth... Margin Improvement... FCF Effect... Combination Effect... Earnings Enhancement... Multiple Enhancement... Leverage Effect... Combination Effect Overall... Sales Growth... Margin Improvement... FCF Effect... Combination Effect... Earnings Enhancement... Multiple Enhancement... Leverage Effect... Combination Effect Overall Source: C. Kaserer (2011) Source: C. Kaserer (2011) EVCA Enterprise Capital Report 2011 I 89

90 Figure Gross Multiple of Cash Return Attribution - Median (%) Figure Gross Multiple of Cash Return Attribution - Average (%) Sales Growth... Margin Improvement... FCF Effect... Combination Effect... Earnings Enhancement... Multiple Enhancement... Leverage Effect... Combination Effect Overall... Sales Growth... Margin Improvement... FCF Effect... Combination Effect... Earnings Enhancement... Multiple Enhancement... Leverage Effect... Combination Effect Overall Source: C. Kaserer (2011) Source: C. Kaserer (2011) 90 I EVCA Enterprise Capital Report 2011

91 Figure Earnings Enhancement vs. Returns Figure Exit Method vs. Returns (Median) 60% % % 52% % 51% % 40% % 42% % % % % % % 18% % 10% % 1.0 0% 0.0 0% 0% Below median Above median Below median Above median Secondary Trade sale IPO Others Write-off Sales growth Margin growth l IRR l Money multiple l IRR l Money multiple Source: C. Kaserer (2011) Source: C. Kaserer (2011) EVCA Enterprise Capital Report 2011 I 91

92 6. Fundraising The environment for fundraising in 2010 and the first half of 2011 remains challenging. Clearly general macroeconomic conditions set the tone. However the lack of large buyout funds in the market, rather than an outright failure of GPs to raise funds, is negatively biasing the data. This has particularly been the case in the UK which has suffered substantial declines in fund raising in years 2009/10 but a noticeable recovery in the first half of This is a positive indicator that conditions will most likely improve. The large and mega buyout funds traditionally account for a significant portion of the capital raised. There have been some notable closes in the mid and upper mid-market with the successful closes of funds such as those managed by Montagu, BC Partners and EQT Partners, which will have a positive impact on the full 2011 figures. Therefore, we expect to see significant improvement in fundraising statistics that will continue into 2012 as other large fund managers such as Apax and Cinven come to market. The overall capital at work in the market is probably not substantially less than that in 2006/7 but, due to maturing European investment portfolios, there is now less to invest in new relationships. GPs, on average, can only expect to get re-ups of 60-70% of commitments from existing investors. Those that do not source their target amount from existing investors will be competing for a smaller pool of total available capital. Investors are also scrutinising their investments, replacing relationships with better performing managers. Hence, we are witnessing the development of a two-speed market with, on one side, GPs with fast fund raises and, on the other side, GPs struggling to raise their funds. In regards to regional activity and certain investment themes, the data is surprising. For H1 2011, the statistics show that no capital has been raised by any type of GP operating in the CEE. This is probably incorrect. The data also reports Portugal as being the fourth most important source of capital, particularly for buyouts, ahead of France, Germany, Switzerland and the Nordics. The buyout statistics are further skewed by banks which would appear to be the source of almost 90% of buyout capital in H This would infer that Portuguese banks have been particularly active during this year of the Eurozone crisis. This is not what we see in the market and we expect this anomaly to be ironed out when full year 2011 data become available. The recovery in growth capital fundraising in Q is a positive indicator of overall market sentiment: in tough times investors look for investment opportunities with less leverage and more growth orientated value creation strategies. This renewed interest in growth capital funds is shared across the LP investor universe, being far more diversified than that of buyouts and mezzanine. 92 I EVCA Enterprise Capital Report 2011

93 It is also interesting to note the significant absence of fundsof-funds as a source of capital in H for buyout and mezzanine funds. This is a trend that we see set to continue. Funds of funds as a whole have raised less capital for primary fund investing than in previous years. This is a reflection of increasing competition in the fund-of-funds market and a decline in the number of investors that seek exposure to private equity through funds-of-funds: for example smaller insurance companies and pension funds have pulled back from the asset class due to uncertainty around capital requirements under Solvency II and an increasing need for more liquid assets generating a current yield. This in part may explain the shift by a number of fundof-funds managers from primary European markets to secondaries, co-investments and emerging markets. Overall, Europe has now become a mature market for private equity, which is experiencing a profound transformation as a reflection of the evolution in investors appetite and sophistication. David Chamberlain David is responsible for fundraising and origination in the United Kingdom and Scandinavia. David also oversees business development with new clients within Europe. David Chamberlain has over 25 years of experience in private equity and financial management. David spent 16 years with Unigestion, a leading European alternative asset management firm. As Managing Director, he built one of Europe s foremost private equity fund management businesses, exploiting all facets of the primary and secondary markets. He also served as Finance Director of Unigestion and previously worked in investment and financial management with the Continental Grain Group and Deloitte Haskins & Sells in London and Paris. David has a degree in business & accountancy from the City of London Business School and is a qualified Chartered Accountant. EVCA Enterprise Capital Report 2011 I 93

94 Figure Funds Raised by Fund Stage Focus 2007-H Amount 100% 80% 60% 40% 20% 0% H in million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 l Mezzanine l Buyout l Growth capital 2,578 1, , ,018 17,986 11,193 11, ,736 20,212 16,278 15, ,518 1,827 3,602 2, ,845 2,604 2,335 1, ,004 5, ,297 1, , , I EVCA Enterprise Capital Report 2011

95 Figure Funds Closed by Fund Stage Focus 2007-H Amount 100% 25 80% 20 60% 15 40% 10 20% 5 0% H Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Amount ( thousands) l Mezzanine l Buyout l Growth capital 2,507,300 1,672, , , , , , , , , , ,788,620 16,261,140 6,420,000 26,898,640 10,435,490 19,227,830 16,020,710 13,541,940 5,234, ,000 2,330, ,040 5,060,280 4,415,370 1,766,260 1,675,440 1,520,000 5,916,880 50, , , ,890 50,000 1,181,000 1,150, ,740 15,000 85, , ,300 1,268,190 20, , ,210 Number of Funds Mezzanine Buyout Growth capital EVCA Enterprise Capital Report 2011 I 95

96 Figure Fundraising per Region (% of European Total Amount) 100% 80% 60% 40% 20% 0% in % H l UK & Ireland l Southern Europe l Nordics l France l Dach Region l CEE l Benelux I EVCA Enterprise Capital Report 2011

97 Table Incremental Fundraising - by Region and Focus - Amount in million CEE DACH Nordics Southern Europe UK&Ireland France Benelux Grand Total 2007 Mezzanine , ,890 Buyout 456 4,292 4,668 3,245 38,677 4,839 2,613 58,792 Growth ,574 Grand Total 461 4,803 5,544 3,830 42,524 5,480 2,613 65, Mezzanine ,526 Buyout 893 2,240 8,358 2,027 44,013 5,653 2,224 65,408 Growth 118 1, , ,048 Grand Total 1,011 3,718 8,774 2,311 45,381 6,483 2,304 69, Mezzanine Buyout ,736 4, ,297 Growth ,028 Grand Total 203 1, ,872 4, , Mezzanine Buyout , ,498 1,937 1,601 11,517 Growth , ,573 Grand Total 265 1,578 1, ,050 2,377 1,769 15,037 H Mezzanine Buyout ,012 2, ,680 Growth , ,903 Grand Total ,968 2, ,433 EVCA Enterprise Capital Report 2011 I 97

98 Figure Fundraising by Type of Investor (LP) - as % of Amount 100% 80% 60% 40% 20% 0% in % H l Academic institutions l Banks l Capital markets l Corporate investors l Endowments and foundations l Family offices l Fund of funds l Government agencies l Insurance companies l Other asset managers (including PE houses other than fund of funds) l Pension funds l Private individuals l Sovereign wealth funds I EVCA Enterprise Capital Report 2011

99 Figure Fundraising by Type of Investor (LP) and Focus - as % of Amount 100% 80% 60% 40% 20% 0% H in % l Academic institutions l Banks l Capital markets l Corporate investors l Endowments and foundations l Family offices l Fund of funds l Government agencies l Insurance companies l Other asset managers (including PE houses other than fund of funds) l Pension funds l Private individuals l Sovereign wealth funds Growth Buyout Mezzanine Growth Buyout Mezzanine Growth Buyout Mezzanine Growth Buyout Mezzanine Growth Buyout Mezzanine EVCA Enterprise Capital Report 2011 I 99

100 Figure Geographic Sources of Funds raised - Amount 100% 80% 60% 40% 20% 0% H in million l Outside Europe l Within Europe Growth Buyout Mezzanine Growth Buyout Mezzanine Growth Buyout Mezzanine Growth Buyout Mezzanine Growth Buyout Mezzanine 72 23,528 1, , , , , ,433 34,794 3,877 2,782 31,894 1,459 1,014 8, ,149 9, ,601 3, I EVCA Enterprise Capital Report 2011

101 Table Ranking of Top Limited Partners Location per European Fundraising Year Ranking H All Funds 1 USA USA United Kingdom United Kingdom United Kingdom 2 United Kingdom United Kingdom USA USA USA 3 Australasia Australasia France France Australasia 4 Germany Canada Italy Switzerland Portugal 5 Netherlands France Germany Germany France Buyout Funds 1 USA USA United Kingdom United Kingdom USA 2 United Kingdom United Kingdom USA USA Australasia 3 Australasia Australasia Italy Switzerland United Kingdom 4 Germany Canada Netherlands France Portugal 5 Netherlands France Germany Belgium France Growth& Mezzanine Funds 1 Germany Switzerland France Australasia United Kingdom 2 Spain France United Kingdom Austria USA 3 United Kingdom Finland Greece Baltic countries Australasia 4 Sweden United Kingdom Austria Belgium Germany 5 Australasia USA Spain Finland - Growth Funds 1 Spain Switzerland France United Kingdom United Kingdom 2 Sweden Greece Greece Australasia Germany 3 Germany Spain Spain France USA 4 United Kingdom USA United Kingdom Germany Spain 5 Denmark United Kingdom Austria Italy Australasia Mezzanine Funds 1 Germany France France Germany USA 2 United Kingdom Finland United Kingdom United Kingdom Australasia 3 Australasia Denmark USA Austria - 4 Sweden Germany Austria Finland - 5 Switzerland United Kingdom Germany Switzerland - EVCA Enterprise Capital Report 2011 I 101

102 Figure Number of Funds at Final Closings - Split by Fund Size H l >= 1,000 l l l l l < I EVCA Enterprise Capital Report 2011

103 Figure Funds at Final Closings Split by Fund Size - Amount 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 in million H l >= 1,000 l l l l l <50 38,642 45,937 5, ,599 7,208 7,304 1,878 3,660 3,140 8,353 4,456 2,301 3, ,949 2, ,532 1,913 1, , EVCA Enterprise Capital Report 2011 I 103

104 Figure Funds at Final Closings by Region and Split by Fund Size - Number of Funds ( ) Number of funds <50 mil mil mil mil mil >= 1,000 mil <50 mil mil mil mil mil >= 1,000 mil <50 mil mil mil mil mil >= 1,000 mil l UK & Ireland l Southern Europe l Nordics l France l Dach Region l CEE l Benelux I EVCA Enterprise Capital Report 2011

105 Figure Funds at Final Closings by Region and Split by Fund Size - Number of Funds (2010-H1 2011) H Number of funds <50 mil mil mil mil mil >= 1,000 mil <50 mil mil mil mil mil >= 1,000 mil l UK & Ireland l Southern Europe l Nordics l France l Dach Region l CEE l Benelux EVCA Enterprise Capital Report 2011 I 105

106 7. Methodology and Definitions 7.1 Financing Section Standard & Poor s LCD data > Pro-rata loans are loans made up of revolving credit facility and an amortising term loan. Amortising term loan (TLa or A-term loan) is a term loan with a progressive repayment schedule. These loans are normally syndicated to banks along with revolving credits as part of a larger syndication. > Institutional term loan (B-term, C-term or D-term loans) is a term-loan facility with a portion carved out for non-bank, institutional investors. These loans are priced higher than amortising term loans because they have longer maturities and bullet repayment schedules CMBOR data Transactions by real estate funds and infrastructure funds are excluded from CMBOR s data. Deals in which a private equity firm buys property as an investment are not included. All quoted values derive from the total transaction value of the buyout (enterprise value) and include both equity and debt. > Deal pricing CMBOR computes the average P/E ratios for different deal value ranges by dividing the deal price by EBIT (earnings before interest and tax). > DEBT/EBIT Ratios CMBOR computes DEBT/EBIT Ratios as the Senior Debt divided by EBIT (Earnings before interest and tax). 7.2 Activity Section Coverage The overall statistics for Europe include: Austria Belgium Baltics Bulgaria Czech Republic Denmark Ex-Yugoslavia Finland France Germany Hungary Norway Ireland Regions were aggregated as follows: Italy Luxembourg The Netherlands Poland Portugal Romania Spain Slovakia Sweden Switzerland Ukraine United Kingdom Benelux (Belgium, Luxembourg, the Netherlands) CEE (Bulgaria, The Baltic countries, Bulgaria, Czech Republic, ex-yugoslavia, Hungary, Poland, Romania, Slovakia, Ukraine) DACH (Austria, Germany, Switzerland) France Nordic (Denmark, Finland, Norway, Sweden) Southern Europe (Greece, Italy, Portugal, Spain) UK & Ireland 106 I EVCA Enterprise Capital Report 2011

107 A precise response rate for the activity figures covered in this report cannot be computed since some buyout activity is done by generalist funds. However, the coverage rate is representative for the European activity, both by number of private equity players and by the capital they manage. Most of the data is collected via surveys and complemented with reliable public sources of information Fundraising The funds included in the statistics are: buyout funds making direct private equity investments growth funds mezzanine private equity funds co-investment funds for buyout, growth or mezzanine deals rescue/turnaround funds The following funds are excluded from the statistics: venture funds generalist funds infrastructure funds real estate funds distress debt funds primary funds-of-funds secondary funds-of-funds Fundraising is captured by two methods: by incremental amount raised in an year if a fund has an intermediary closing of 200m in 2010 and the cumulative amount raised for this fund stands at 500m, 200m only is captured in the 2010 fundraising by final closings captures the total cumulative amount raised at final closing Investments Unless stated otherwise, the approach taken in this report is market approach (i.e. investments and divestments are represented by location of the portfolio company). At European level, this means investments in European companies or divestments from European companies, regardless of the location of the private equity firm. > Buyout split Buyout investments are split into four classes: small, mid-market, large, and mega. In this report, the classification is based on the transaction value of the buyout deals. If two syndication partners invest equity values of 100m and 200m respectively for a total transaction value of 600m, the deal will be classified under large deals with equity value of 300m and transaction value 600m. Buyout deals Equity value ( m) Transaction value ( m) Small <15 <50 Mid-market 15 X < X <500 Large 150 X < X <1,000 Mega 300 1, Divestments Divestments are measured by cost of investment, not proceeds. This is done in order to be able to compare divestments with investments on an equivalent basis. EVCA Enterprise Capital Report 2011 I 107

108 7.2.5 Number of companies The number of companies represents a distinct list of entities receiving investments throughout the reporting year. For example, if Company A receives two investments in a year, the number of companies will equal one, while the number of investments will equal two. In some cases, subtotals and totals may not appear to add up to the same number of companies as individual items in the tables. This can be explained by understanding the issue of counting distinct entities. For example, if a company received multiple distinct rounds of financing in a year a growth investment of 30m by one investor in January, followed by a 50m buyout in November with two investors the tables would indicate the following: Stage Amount Number of investments Number of companies Growth 30, Buyout 50, Total investment 80, The total number of companies corresponds to the number recorded under Total investment. Any one company can be recorded under several subcategories. The sum of all subcategories can exceed the number stated under Total investment. Therefore, it would appear to have incorrect totals in the number of companies (for both investments and divestments) as the table appears to add up to 2, but the total only shows a total of 1. This will only affect counts of companies, not amounts. However it will make any average more accurate Data updates PEREP_Analytics offers to the players the potential to submit surveys and validate previously populated data captured from public information sources at a later stage. Moreover, if a player submits a divestment at a later stage, and the corresponding investment has never been reported or captured, the PEREP_Analyst will create the investment so that no portfolio company is reflected with negative capital flow in the database. Moreover, some information is disclosed on the website of the private equity players at a later stage, after the cut-off for producing our activity reports, and thus is processed in the database at a later moment. For all the above reasons, figures may be updated year on year to reflect the latest available statistics for previously released years starting with Definitions Type of investors (fundraising figure): > Corporate investor: Corporations that produce products (manufacturing companies) or deliver non-financial services (it excludes banks, funds-of-funds, insurance companies, pension funds, and other asset managers). > Endowment: An institution that is bestowed money (and possibly other assets) via a donation with the stipulation to invest it and use the gains for specific objectives so that the principal remains intact (for perpetuity, for a defined period of time or until sufficient assets have been accumulated to achieve a designated purpose). > Family office: An office that provides services to one or several families, which include investment management and other services (accounting, tax and financial advice etc). > Foundation: A non-profit organisation through which private wealth is contributed and distributed for public purpose (most often charitable purposes). It can either donate funds and support other organisations, or provide the sole source of funding for their own charitable activities. > Fund-of-funds: A private equity fund that primarily takes equity positions in other funds. 108 I EVCA Enterprise Capital Report 2011

109 > Other asset manager: Financial institutions (other than bank, endowment, family office, foundation, insurance company or pension fund) managing a pool of capital by investing it across asset classes with the purpose to generate financial returns. It may include direct private equity funds that occasionally do indirect investments, but excludes funds-of-funds that are a stand-alone option. > Public sector: Country, regional, governmental and European agencies or institutions (including structures such as EBRD or EIF). Fund stage focus (fundraising table): > Growth fund: Funds whose strategy is to invest in or acquire relatively mature companies that are looking for capital to expand or restructure operations. They usually represent the first private equity investment in the company. > Buyout fund: Funds whose strategy is to acquire other businesses. > Mezzanine fund: Funds which provide (generally subordinated) debt to facilitate the financing of buyouts, frequently alongside a right to some of the equity upside. Stage definitions (investment tables): Several financing stages can be identified in relation to the stages of development of a private-equity-backed company. These are described as follows and were the stages included in the survey questionnaire: > Growth: It is a type of private equity investment, most often a minority investment but not necessarily, in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition without a change of control of the business. As a round of financing, growth capital tends to be the first private equity backing of the company. Additionally, most investments made by buyout funds into venture type of stages should be defined as growth capital. > Rescue/turnaround: Financing made available to an existing business, which has experienced trading difficulties, with a view to re-establishing prosperity. > Secondary purchase/replacement capital: Minority stake purchase of existing shares in a company from another private equity investment organisation or from another shareholder or shareholders. > Refinancing bank debt: To reduce a company s level of gearing. > Management buyout: Financing provided to enable current operating management and investors to acquire existing product line or business. > Management buy-in: Financing provided to enable a manager or group of managers from outside the company to buy-in to the company with the support of private equity investors. > Public to private: A transaction involving an offer for the entire share capital of a listed target company for the purpose of delisting the company. Management may be involved in the offering. > Other PIPE: A private investment in public equity as a minority or majority stake without taking the company private. > Other (leveraged) buyout: Financing provided to acquire a company (other than MBI, MBO, public to private or other PIPE). It may use a significant amount of borrowed money to meet the cost of acquisition. Mapping the above stages into the main five stages presented in this document leads to the following classification: > Growth: Growth > Rescue/turnaround: Rescue/turnaround > Replacement capital: Secondary purchase/replacement capital, refinancing bank debt > Buyouts: Management buyout, management buy-in, public to private, other PIPE, other (leveraged) buyout Amounts definition: > Equity value: Stricto sensu, amount of capital invested to acquire shares in an enterprise, amount that originates from funds raised by private equity firms focused primarily on direct investments (including also co-investment funds) or incorporated direct private equity firms investing from the balance sheet (evergreen and also direct captive private equity programmes). The equity value includes equity, quasi-equity, mezzanine, unsecured debt and secured debt financing provided by the above mentioned structures. EVCA Enterprise Capital Report 2011 I 109

110 > Transaction value: The sum of the equity value as described above, to which financing coming from the rest of the syndicate is added (LP co-investors, individuals, entrepreneurs, business angels, management, corporates, funds-of-funds, other asset managers and/or financial institutions), together with the leverage (debt provided by banks or other providers). In other words, stricto sensu transaction value is equal to enterprise value multiplied by percentage ownership by the acquiring syndicate in which at least one financial sponsor (private equity firm) is involved. Sectoral definitions (investment tables): For a complete picture of the sectoral classification and its mapping to the NACE standardised sectoral classification of Eurostat (NACE Rev. 2, 2007), please go to the link: Sources of buyouts (investment tables): > Capital market: The transaction involves an offer for the partial or entire share capital of a listed target company. > Corporate: The seller of the company is an industrial corporation or the deal is the result of a corporate spin-off. > Family & private: The seller of the company is a(n) (group of) individual(s) or family office(s). > Institutional: The seller of the company is a financial institution (e.g. bank, pension fund, insurance company, endowment, foundation, other asset managers excluding private equity firms). > Privatisation & state owned: The seller of the company is the state either undergoing privatisation or liberalisation of an industry. > Receivership: The sale of the company is triggered by reorganisation procedures to avoid liquidation with the help of a court-appointed trustee. > Private equity firm: The seller of the stake in the company is another private equity firm (secondary buyout). Divestment methods (divestment table): > Divestment on flotation (IPO): An IPO (initial public offering, which is the sale or distribution of a company s shares to the public for the first time by listing the company on the stock exchange) is one way in which a private equity firm can sell its shares and exit an investment. > Repayment of preference shares/loans: If the private equity firm provided loans or bought preference shares in the company at the time of investment, then their repayment according to the amortisation schedule represents a decrease of the financial claim of the firm into the company, and hence a divestment. > Repayment of silent partnership: A silent partnership belongs to the so-called mezzanine financing instruments. It is similar to a long-term bank loan, but in contrast to a loan, a silent partnership is subject to a subordination clause, so that, in the event of insolvency, all other creditors are paid preferentially to the silent partner. The company has to repay the partnership and has to pay interest and possibly a profit-related compensation. The subordination clause gives the capital the status of equity despite its loan character. This financing instrument is well known and often used in Germany. > Sale of quoted equity post-flotation: It includes sale of quoted shares only if connected to a former private equity investment, such as sale of quoted shares after a lock-up period. > Sale to another private equity house: see sale to financial institution. > Sale to financial institution: The sale of company shares to banks, insurance companies, pension funds, endowments, foundations and other asset managers other than a private equity firm. > Trade sale: The sale of company shares to industrial investors. > Divestment by write-off: The write-down of a portfolio company s value to zero or a symbolic amount (sales for a nominal amount). The value of the investment is eliminated and the return to investors is zero or negative. 110 I EVCA Enterprise Capital Report 2011

111 Fundraising to the next level We have a successful track record in raising capital for private equity and real estate Our ability to differentiate our clients in a highly North America Europe Asia Securities placed through CSP Securities, LP Member FINRA/SIPC