What is Private Equity and Private Equity in practice 28 April 2014 Björn Savén, Founder & Chairman, IK Investment Partners

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1 What is Private Equity and Private Equity in practice 28 April 2014 Björn Savén, Founder & Chairman, IK Investment Partners

2 Contents Section 1 Section 2 Section 3 What is Private Equity? Introduction to IK Investment Partners Private Equity in practice: Minimax Viking Group

3 Section 1 What is Private Equity?

4 Private Equity What is it? Definitions Confidential 4 Private Equity An equity investment in private companies not quoted on a stock market A separate and alternative asset class for institutional investors

5 Private Equity What is it? Buyout investments & business lifecycle Confidential 5 Cash Flow Venture Capital Buyout Capital Maturity Cash flow is normally negative in seed and start-up investments Expansion High leverage opportunities in buyouts Decline Seed & Start-up Time

6 Private Equity What is it? Why does the Private Equity model work? Confidential 6 As active owners, we have unique alignment to drive value We are informed through our experience, diligence and vertical expertise We are intensively engaged in asset selection, governance and value-creation We focus on the long-term, not short-term results We have unique capabilities/ experience to execute transactions and support our companies Source: EVCA. PEREP_Analytics (2011)

7 Development of Private Equity Private equity s new role Confidential 7 Private equity has now overtaken the stock market as a medium for transacting small to mid-size companies Governance of private equity firms now incorporate more frequent and detailed investor reporting and valuations Significant employer currently 21,000 private equity owned companies employ approximately 8 million people in Europe Private equity and venture capital funds have invested 233 billion in Europe since 2007 Source: EVCA. PEREP_Analytics (2011)

8 Section 2 Introduction to IK Investment Partners

Introduction IK a leading pan regional private equity firm Confidential 9 Who we are IK, founded in 1989, has consistently targeted the European mid-market for 25 years IK s latest fund, IK VII,

9 Introduction IK a leading pan regional private equity firm Confidential 9 Who we are IK, founded in 1989, has consistently targeted the European mid-market for 25 years IK s latest fund, IK VII, closed on commitments of close to 1.4 billion IK Funds have raised a total of 7 billion. 64 exits across 88 investments IK s partners have worked together for 14 years on average, managing a team of about 70 IK Markets 1990 Sweden 1991 Denmark/Norway 1994 Finland 1995 Benelux 1997 Germany 2000 France 2008 Poland Distinct and consistent strategy Unique geographic focus and active ownership proposition Source on a proprietary basis national champions and transform them into international leaders Objective of doubling earnings of portfolio companies Triple diversification focus on (i) geography, (ii) sector and (iii) risk / reward Institutionalised best practices via the IK Way cemented by dedicated Strategy, Operations and Business Control team and core Industrial Adviser network Investment teams Investment advisory offices

10 IK VII fundraising IK VII commitments of close to 1.4 billion Final close 21 October 2013 Confidential 10 Geography Institution North America Europe (ex Nordic) Nordic GP Asia Fund of funds Public pension plans Asset managers Banks Insurance companies Corportate pension plans GP Selected investors Alberta Teachers Retirement Fund bcimc Dansk Vækstkapital HarbourVest Hermes Lexington Partners MetLife Investments Minnesota State Board of Investments NYSTRS Pantheon Partners Group SL Capital Partners SPEAS Varma

Distinct and consistent strategy Portfolio

Southern Europe Sector Consistent focus Size &

France Benelux 1/3 Nordics 1/3 Consumer goods

11 Distinct and consistent strategy Portfolio construction Confidential 11 Geography No UK, no Southern Europe Sector Consistent focus Size & Risk Focus on low volatility 40% Equity m France Benelux 1/3 Nordics 1/3 Consumer goods Stable, Co-invest Care Business services DACH 1/3 Industrial goods 60% Equity m Transformational Triple diversification * Breakdown by number of investments

Initiation Ownership Exit Distinct and consistent strategy IK s positioning and investment approach Confidential 12 Local champions / niche market leaders Clear idea / concept of value creation

12 Initiation Ownership Exit Distinct and consistent strategy IK s positioning and investment approach Confidential 12 Local champions / niche market leaders Clear idea / concept of value creation Potential to double earnings in 5 years Platforms for export / internationalisation Complexity Proprietary angles Valuation and Exit Develop on European/ Global scale through buy and build Strategic realignment Internationalise / professionalise standards Reinforce management team Active ownership Further international expansion Attractive for larger buyers Multiple exit routes Substantial potential buyer universe Debt availability for middle market IK looks at 300 deals per year over 5 regions IK actively pursues 20 deals per annum IK invests approximately 400m per annum across its regions Source of investments: 2/3 primary, 1/3 secondary 79% of deals no auction or limited competition* IK always in majority control (no club deals) More than one IK professional per portfolio company 50% of professionals time dedicated to portfolio management 2.5x MM since inception Average hold: 4-5 years 16% IPO, 55% trade buyer, 26% financial sponsor Low loss rate 3 write offs since 1989 * Limited competition is defined as a sale process (whether auction or not) which involves or quickly reduces to a limited number of viable bidders

13 Supporting tools Review tollgates Methodical execution and approach Our toolkit the IK Way Institutionalising of best practice across the firm Confidential 13 Methodical approach to replicate and maximise operational improvement and earnings growth A mature Strategy, Operations and Business Control team combined with a select group of Industrial Advisers form an integral part of IK s investment strategy Sourcing & Selection Execution Active Ownership Exit Annual reviews / management assessments by Partner group 1 st year of ownership 2 nd year of ownership 3 rd year of ownership 4 th year of ownership 5 th year of ownership 100 day plan 100 day review Mid term review 1 st exit check 2 nd exit check Holistic checklist Management evaluation Governance guidelines Business control system Operations toolkit

Private Equity in Finland IK s transactions in Finland Confidential 14 Investments Other activities Ingman was a co-owner (20%) in Hjem-Is (Kotijäätelö) Lithells sold to Atria Oyj in 1997 Nobia

14 Private Equity in Finland IK s transactions in Finland Confidential 14 Investments Other activities Ingman was a co-owner (20%) in Hjem-Is (Kotijäätelö) Lithells sold to Atria Oyj in 1997 Nobia acquired Novart and Parmavalmiste in 1998 Sale of MacGREGOR to Kone Cargotec in 2004/2005 Attendo acquired MedOne in 2007 Team IK has a dedicated team of native Finns with a broad experience in the Finnish market and established network in the Finnish industrial and financial communities IK is a leading actor in the Finnish private equity market

15 Distinct and consistent strategy Active ownership growing companies internationally Many of IK s portfolio company seek growth opportunities outside Europe Confidential 15 Sourcing Platform Sales Position Significant Add-on/ Capex Exit

16 Private Equity vs Public Equity Private equity versus public equity Confidential 16 Private equity Public equity Clear strategic mandate from majority owner Constantly need to sell strategy to new potential shareholders Focus on hitting mid-term targets Focus on hitting short-term targets Easy access to new capital Unreliable access to new capital Optimised capital structure Structurally overcapitalised Small, efficient Size of boards will increase coordination and process problems Majority owner in direct interaction with management Politeness and courtesy at the expense of truth and frankness Board motivated to reduce adverse publicity and potential liabilities

17 Section 3 PE in practice: Minimax becomes Minimax Viking Group

Minimax Viking Group Case study Minimax Viking Group (MVG) a global and fully integrated leader in fire suppression products, systems and service Confidential 18 Market leader in fire protection

18 Minimax Viking Group Case study Minimax Viking Group (MVG) a global and fully integrated leader in fire suppression products, systems and service Confidential 18 Market leader in fire protection systems, primarily for the industrial market with a special focus on special hazard situations Operates an integrated business model - MVG can supply fire suppression components to third-party installers and is able to offer a complete service consisting of all components, planning and installation - Customers tend to source after-sales service (e.g., inspection) from MVG, which provides a high-margin and recurring revenue stream for MVG Broad technology range (i.e., water, mist, foam and gas systems & industrial detection) IK acquired Minimax from a private equity firm in 2006, being familiar with the business through historic contacts and discussions with management

Minimax Viking Group Case study MVG is organised along three divisions and displays a number

, sprinklers Engineering and installation of detection and suppression systems Key attractions

share of recurring revenues Diversified end-customer base Based on 2013 revenues Based on 2013

19 Minimax Viking Group Case study MVG is organised along three divisions and displays a number of attractive business characteristics Confidential 19 Revenues: ~ 1,1bn+ 33% 40% 27% Products Systems Service Manufacturing and distribution of fire protection components, e.g., sprinklers Engineering and installation of detection and suppression systems Key attractions Inspection, maintenance and repair of fire protection systems Truly global footprint High share of recurring revenues Diversified end-customer base Based on 2013 revenues Based on 2013 revenues Based on 2013 revenues US Asia 35% 14% 51% Europe New systems and products 49% 27% 14% Service 10% Modernisation Recurring revenues Infrastructure Commercial 4% 20% 23% Energy 53% Industry Repair

20 Minimax Viking Group Case study Vision at entry to build a global market leader with 1bn + in sales Confidential 20 Revenue growth Goal for Exit m / bn Truly global player c.1bn Leader in special hazards 400 Add-on acquisitions EUR 1 Billion + in sales Organic growth Best practices in terms of service and solutions provider Stable growing business 466 Base 2006 (Entry) Vision for Exit

21 Minimax Viking Group Case study Strong organic growth complemented by transformational addon acquisitions Confidential 21 Acquisition of CFP Group (2007) Acquisition of Viking (2009) Leading US based installation and service company Strong presence western and southern US states Network to service national accounts, e.g., Wallmart Leading fire protection components manufacturer Based in the US and #2 market position in home market Distribution of products worldwide Revenue development (in EUR) ~240% ~960m ~1bn ~1.1bn ~1.1bn+ ~790m ~750m ~490m ~560m

22 Minimax Viking Group Case study Increased share of service revenues adds stability and enhances MVG s attractiveness Confidential 22 German service revenues m 160+ ~90 ~100 ~110 ~107 ~120 ~130 ~ % Stable revenue stream with attractive margin 27% MVG as system installer best positioned to provide inspection (legal requirement), maintenance and repair services Total service revenues as % of total revenues Adds stability and resilience to the overall business profile -> value driver Total service revenues as % of total revenues

23 Narrow Product portfolio Broad Minimax Viking Group Case study Confidential 23 During the past 8 years, MVG developed from a regional specialist into a truly global player Positioning Tyco 2014 UTC Expansion of offering into components segment through Viking acquisition Regional Generalists 2006 MVG now fully integrated along the value chain components, installation and service Regional specialists Global Generalists Significantly expanded geographic coverage especially in the US (acquisitions) and Asia (organic) Local players Local Geography Global

2017 European Private Equity Activity

2017 European Private Equity Activity Disclaimer The information contained in this report has been produced by Invest Europe, based on data collected as part of the European Data Cooperative (EDC) and other third party information. While Invest