EVCA Barometer. Issue 52 - June Industry Snapshot

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1 EVCA Barometer Industry Snapshot Like every year in June, EVCA has just released the final private equity and venture capital activity statistics for 20. Similarly to the past two years, this month s Barometer will take a closer look at the key trends in the 20 statistics, providing a summary of the overall market trends. In this edition Industry Snapshot GDP Growth Forecast Libor Inflation & Exchange Rate Stock Market Developments IPO Activity M&A Activity Leverage Loan Market Activity 20 has been another year of high activity, beating the records set in Fundraising, investment and divestment levels hit all-time highs. Over 110bn were raised by European private equity and venture capital players in 20 and a total of 71bn was invested in portfolio companies, which is similar to the amount raised in Although most of the money was invested in buyouts, venture and especially start-up investments attracted significantly more funding than last year. Divestments increased to 33bn, especially driven by trade sales and the repayment of principal loans. The EVCA activity statistics are a crucial part of the association s support to its members and the European private equity and venture capital industry at large. Not only does the annual survey compile industry activity following a standardized methodology already since 1984, it has also increased its coverage in line with the development of Europe and in particular the European Union. Key differences with other statistics providers are the unique coverage of 1,300 European responses (76% of the targeted 1,647), but also the measurement of activity in equity value, net of the bank debt included in deals. 20 headlines: a new year of record activity levels Private equity and venture capital 1 activity in 20 reached record levels on all variables. Most remarkably, a total of 112bn was raised by European private equity funds in 20. This marks a 56% increase on the 72bn raised in Like in 2005, fundraising remained highly concentrated in the hands of a few players: the largest 13 funds represented 47% of the total capital. Investments by European private equity funds increased by 51%, to a record 71bn in 20, compared to 47bn invested in Divestments at cost rose by 11%, reaching 33bn in 20. Although growth was less pronounced in this part of the market, this is once more a record compared to previous years. 1 From this point onwards, private equity is used to cover both venture capital and buyout. 2 The activity figures presented herein are published in the EVCA Yearbook 20. Tel Fax barometer@evca.com - 1

2 Fundraising - Where did the money come from? While the rise in private equity funds raised in 2005 stemmed from a broad uptake in interest by all groups of investors, the 20 increase was mainly driven by a few sources investing significantly more. Fundraising, Investment and Divestment activity in Europe Funds Raised Invest ments Divestments BN Years Source: EVCA/Thomson Financial/PricewaterhouseCoopers After overtaking banks as the number one source of capital in 2005, pension funds further expanded their share, contributing 29.2bn or 27% to the total European funds raised. This marks an increase of 74% compared to the 16.8bn raised by pension funds in Fund of funds replaced banks as the second largest source of fundraising, doubling their share from 8.9bn in 2005 to 19.6bn in 20 (18% of funds raised). Banks were the third largest fundraising source in 20, contributing 15.5bn or 14% to the total, an increase of 30% compared to Insurance companies supplied 11bn (around 10%) of the funds raised, an increase of 45% compared to A slightly smaller amount of 9.6bn came from private individuals, more than doubling their contribution from the 4.1 raised in European versus non-european sources Investors from within Europe once more provided the lion s share of funds raised, supplying 68bn or 61% of the total capital raised. Despite their importance, the share of European investors decreased over the past three years, from as much as 76% in 2004 fundraising. At the same time, funds raised from investors outside Europe rose to close to 40% ( 44bn) in 20, compared to 24% ( 6.6bn) in

3 Within the non-european fundraising, especially investors from the US increased their allocation to the European market. In 20, the US was the single most important country in terms of capital raised, having provided a total of 32.4bn or 29% of the total funds raised. This is almost double the 17bn raised from US investors in Asian investors have kept their share relatively stable, supplying 3.4bn or 3% of the total funds raised, compared to 4bn or 6% in Investors from other regions in the world also more than doubled their contribution to 7.6bn, representing 7% of the total funds raised in 20. To sum up, there was a strong uptake in fundraising in 20, which was to a large extent driven by pension funds and fund of funds. Although most capital raised came from within Europe, the US was the largest single country source of fundraising overall, thus further increasing the share of capital coming from non-european investors. Country of origin When looking more closely at the sources of fundraising within Europe, limited partners from the UK remained at the top of the list, only second to their US peers. Limited partners from the UK provided 23.9bn or 21% of the total funds raised in 20. This is close to the level of 2005, when UK limited partners provided 20.8bn, at that time, however, representing 29% of total funds raised. France maintained its status as the second largest European country for fundraising, adding 8.8bn to the total funds raised in 20, representing 8%. Swedish limited partners supplied 5.7bn (i.e. 5% of the total), which makes it the third largest European supplier of capital, ahead of the Netherlands ( 5.5bn) and Germany ( 4.3bn). Country of management When looking at the 20 funds raised by country of management, the UK remains the most prominent location for European private equity funds. A total of 75bn was raised by private equity houses located in the UK, representing 67% of the total funds raised. As such, the UK expanded its overall position and relative share, compared to the 45.6bn (or 64% of the total) raised in Like in 2005, the second most important country in terms of fund management is France, attracting 10.6bn (10%) of the funds raised in 20. This marks a small decrease compared to the 11.5bn (or 16%) raised in Sweden completes the list of top three countries by fund management. Funds raised by Swedish players quadrupled from 1.9bn in 2005 to 9.4bn (8% of the total funds raised) in 20. Spain ( 2.9bn) took over Germany ( 2.8bn) as the fourth largest country managing private equity funds. 3

4 In- and outflow of capital raised Comparing the two fundraising flows (i.e. by country of origin and by country of management), private equity players in the UK, France, Sweden and Spain raised more money in 20 than limited partners in their respective country provided to the overall market. This resulted in a net inflow of capital managed in the country, especially in the UK. On the contrary, private equity houses located in the Netherlands, Germany and to a slight extent Italy, raised less money than limited partners in their country supplied, hence experiencing a net outflow. This picture is very similar to the findings of Funds raised by country of management and by country of origin Country of Origin (LPs location) Country of M anagement (GPs location) BN USA UK France Sweden Netherlands Germany Asia Italy Spain Source: EVCA/Thomson Financial/PricewaterhouseCoopers Note: US amount of 32.4bn comprises fundraising by European funds from US limited partners. Where to be allocated? Most capital raised in 20 was once more earmarked for buyout investments, attracting 84.3bn of the funds raised. This marks an increase of 46% compared to 2005, despite an overall smaller share (75% in 20 and 80% in 2005). Funds to be invested in European venture increased by 60% to 17.5bn, representing around 16% of the total funds raised in 20. The majority of this capital or 9.5bn will be invested in the non high-tech expansion stage. Allocations to high-tech expansion grew only slightly, from 1.5bn in 2005 to 2.1bn in 20. Also funding for the non high-tech early-stage increased, from under 1bn in 2005 to 3bn in 20. Funds earmarked for high-tech earlystage decreased slightly from 3.5bn in 2005 to 2.9bn in 20. In all, close to 6bn of the 20 funds raised is dedicated for the early-stage ( 4.4bn in 2005) and 11.5bn for the expansion stage ( 6.5bn in 2005). 4

5 Expected allocation of funds raised in 20 (amounts) BN Buyout High-Tech Expansion Non High-Tech Expansion High- Tech Early- Stage Non High- Tech Ear ly- S t age Ot her Source: EVCA/Thomson Financial/PricewaterhouseCoopers To sum up, the interest for later stage continued in 20, while the interest for non high-tech venture investments seems to be on the rise. Investments - How was the money invested? Overall, European private equity funds invested a total of 71.2bn in 20, which marks a 51% increase compared to the 47.1bn invested in 2005 and close to double the 2004 investments of 36.9bn. Nevertheless, the number of investments slightly decreased from 10,912 in 2005 to 10,760 in 20. Consequently, the average deal size grew from 4.3m in 2005 to 6.6m in 20. Stage distribution Buyouts received the lion s share of European private equity investments, attracting 71% of the capital invested. Overall, this amounts to 50.3bn compared to 32.1 in 2005 and 25.7bn in Given the increasing deal size, this represents only 2,482 investments or close to one fourth of the total investments made. Average deal size grew from 13.6m in 2005 to 20.3m. Investments in replacement capital remained at a high level of 3.6bn in 20, compared to 2.3bn in 2005 and 905m in Despite the prominence of buyouts, investments in venture capital were also on the rise. In 20, a total of 17.3bn was invested in European venture, an increase of 36% compared to the 12.7bn invested in Within this segment, especially investments in start-up companies increased, doubling from 2.3bn in 2005 to 5.7bn in 20. Similarly, investments in seed more than doubled from a previously very low level of 97m in 2005 to 198m in 20. 5

6 Investments in the expansion stage still made up the largest share (around two thirds) of venture investments, but remained relatively stable compared to In 20, 11.4bn were invested in companies at the expansion stage, which marks only a slight increase on the 10.3bn invested in Amount invested by stage Buyout Venture Capital BN Years Source: EVCA/Thomson Financial/PricewaterhouseCoopers Note: Buyout figures in this graph include investments in replacement capital. Within the buyout segment, especially the mega deals and the mid-market stood out 3. Investments in mega deals (over 300 million in equity value) more than tripled from 6.2bn in 2005 to 19.5bn in 20. At the same time, the number of investments grew from 15 to 41, raising the average deal size from 425m in 2005 to 475m in 20. However, mega deals only represented under 1% of the total number of buyout investments. Buyout investments by segment 25,000 2, Total Invested Amount invested in million 20,000 15,000 10,000 5, ,785 2,034 1,993 4,081 18,585 13, Total Invested 20 No. of Deals 2005 No. of Deals 7,501 7, ,466 Small M id-m arket Large M ega 6, ,000 1,500 1, No. of Deals Source: EVCA/Thomson Financial/PricewaterhouseCoopers 3 Buyout deals in the EVCA methodology are categorised according to the equity proportion of the transaction in small (< 15m), midmarket ( 15m<X< 150m), large ( 150m<x< 300m) and mega deals (> 300m). 6

7 The mid-market was the second largest investment field in the buyout segment, attracting 18.6bn in 20 compared to 13.9bn in 2005 (increase by one third). This money was invested in 410 deals (compared to 281 in 2005), decreasing the average amount invested from 50m in 2005 to 45m in 20. Investments in large buyout deals (between 150m and 300m of equity) remained relatively unchanged, summing to 7.5bn ( 7.9bn in 2005) invested in 38 deals (39 in 2005). Despite the rising amounts invested at the larger end of the market, most deals took place in the small buyout segment. In 20, a total of 4.8bn was invested in close to 2,000 companies (average deal value of 2.4m). This compares to a total of 4.1bn invested in 2,034 deals (average deal value of 2.0m) in Overall, small buyout deals represented 80% of the total number of buyout investments. Cross-border Investments In 20, 95% of the investments were made within Europe ( 67.7bn), compared to 96% in 2005 ( 45.4bn). Looking at the investment flows in 20, private equity houses located in the UK invested more than half (58%) of the total capital, amounting to 40.9bn. This marks an increase of 72% compared to last year s 23.8bn. From those funds invested by UK players, close to 60% ( 23.5bn) was actually invested in UK businesses. The remainder was channelled to other European countries. 20 Investments by country of management and country of destination Country of dest ination Country of management 30 BN UK France Germany Netherlands Italy Sweden Spain US Belgium Source: EVCA/Thomson Financial/PricewaterhouseCoopers 7

8 The second strongest country in terms of investment activity by funds was France, with players located there putting 10.1bn to work in 20. Sweden followed in third position, with funds investing 4.3bn in 20. Some of the European countries noted a strong inflow of capital, with more money being invested in the country compared to the investment activity by domestic private equity players. Germany and the Netherlands in particular, had 3.7bn and 3.1bn more capital coming to their country than domestic funds invested in 20. In addition, European private equity players invested around 3.4bn outside Europe, of which 78% or 2.7bn was invested in US based portfolio companies. Private equity as percentage of GDP The economic impact of private equity in a given country can further be compared when looking at the share of private equity investments (by country of destination) as percentage of total GDP. This comparison shows that in 20, Sweden followed by the United Kingdom and the Netherlands had the largest share of private equity investments relative to the respective size of its economy. The European average overall increased from 0.40% in 2005 to 0.57% in 20. However, there are only five countries above this average, with a private equity investment to GDP ratio of over 0.57%. Divestments What were the main exit routes? 20 Private Equity Investments as % of GDP by country of destination BN Sweden United Kingdom Netherlands France Hungary Europe Czech Republic Belgium Ireland Spain De nmark Italy Ge rmany Source: EVCA/Thomson Financial/PricewaterhouseCoopers From the 33bn divested by European private equity players in 20, trade sales were the most prominent exit route, representing 7.5bn or 23% of the total divestments. Second came repayment of shares/loans, contributing 5.7bn or 17%. While the amount and proportion of trade sales is relatively similar to 2005, the repayment of shares/loans decreased by over one billion from 23% of the total divestments in

9 European divestments at cost Divestment by Trade Sale Divest ment by Public Off ering Divest ment by Writ e-of f Repayment of Preference Shares/Loans Divestment by Other M eans BN Years Source: EVCA/Thomson Financial/PricewaterhouseCoopers Note: The category Divestment by other means includes the categories sale to financial institution and sale to management. Sales to another private equity player remained relatively stable at 5.5bn of divestments (17%), while divestments by public offering more than doubled to 5.4bn. Write-offs decreased slightly from 1.4bn in 2005 to 1.3bn in GDP growth forecast increased for the Euro Zone, but reviewed downwards for the US and Japan While the Euro Zone GDP growth forecasts increased for both 20 and 2008, growth estimates for the US and Japan were revised downwards for 20. The economic outlook for 2008, however, remained stable for the US and improved for Japan. According to The Economist s monthly GDP growth projections, the economic outlook for 2008 for the Euro Zone has improved to 2.2% (up 0.1 percentage point). Growth forecasts for the UK and Sweden have remained unchanged compared to last month, still anticipating 2.5% and 3.1% of GDP growth in 2008 respectively. The estimate for Denmark has been reviewed downwards by 0.1 percentage point to a GDP growth of 2.2% in While for the US economy, a growth rate of 2.7% is anticipated for 2008, the same as last month, the Japanese GDP growth forecast was reviewed upwards by 0.1 percentage point to 2.3%. Except for the Euro Zone and the UK, all GDP growth projections for 20 have decreased since last month. The GDP growth forecast for the Euro Zone has improved to 2.6%, up 0.2 percentage points on the May forecast, and has remained stable for the UK at 2.7%. For Denmark, Sweden, the US and Japan, GDP growth estimates have all been revised downwards by 0.1 percentage point to 2.2%, 3.7%, 2.0% and 2.3% respectively. 9

10 Annual GDP Growth Forecasts in % June 20 forecast May 20 forecast Difference between the two forecast Euro zone UK Denmark Sweden USA Japan Source: The Economist Compared to the previous release, the European Commission s quarterly GDP growth projections for all three quarters remained broadly unchanged. GDP growth is still expected to remain strong in the second and third quarter of 20, before cooling off slightly in the last quarter of the year. For both the second and third quarters of 20, GDP is projected to grow within the range of 0.4% to 0.8%. For the fourth quarter of 20, GDP growth in the Euro Zone is expected to range between 0.2% and 0.8%. The actual GDP growth for the first quarter of 20 has remained constant compared to last month, indicating a quarterly growth rate of 0.6%. Quarterly GDP Growth Forecasts for the Euro zone in % June 20 forecast May 20 forecast Difference between the two forecast 1 st Quarter % 0.6% nd Quarter % % rd Quarter % % th Quarter % % 0.0 * Refers to the actual quarterly growth rates, which are revised monthly to take account of new information. Source: ECFIN EU Commission Directorate General for Economic and Financial Affairs LIBOR continues to rise throughout Q2 20, closing May at 4.456% LIBOR continues its upward trend throughout the second quarter of 20. With the exception of a slight dip in the second week of May, LIBOR increased during the entire month, closing at 4.456%, which is 11% above the year entry value. The average LIBOR rate for May 20 was 4.37%, which is 1 basis points above the May 20 average of 3.31%. 10

11 Annual LIBOR % Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Source: British Bankers Association (BBA) Inflation and Exchange rates After the Euro Zone inflation rate remained constant at 1.8% in January and February, the March rate increased to 1.9%. Since then, the annual inflation forecast for the Euro Zone has remained unchanged at 1.9%. Annual Inflation for the Euro Zone % Jan- Feb- M ar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- M ar- Apr- May- Source: Eurostat - Inflation rate for consumer price Following a short dip and stagnation period in the first month and a half of 20, the US$/ exchange rate increased steadily in March and April, reaching a new record high by the end of April at US$1.365/. In May, however, the exchange rate started to fall, closing the month at US$1.345 per Euro. 11

12 Exchange rate $ / Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Source: European Central Bank (ECB) Stock markets resume rising trend after dip in March Despite a serious drop in early March, all stock markets presented here have increased in 20 so far (cut-off date: 31 May 20), closing May well above their year entry values. The Technology All Share recorded the highest growth since the beginning of the year. After dropping by 9.9% between the end of February and early March, the Technology All Share increased again, to close May at 19.2% above its year opening value. 1,120 1,100 1,080 1,0 1,040 1,020 1, Jan- Feb- M ar- Apr- M ay- Technology All Share Year 20 Highest value: 1, (31 May) Lowest value: (2 January) Year 20 Closing: 29 December at Highest value: (10 May) Lowest value: (18 July) % change on year opening % % change on same month previous year % Technology All Share Source: Deutsche Börse 12

13 The AIM stock exchange saw the second highest increase since the year opening. After a small drop at the end of February, AIM has resumed its upward trend throughout the second quarter of 20, closing May at 14.3% above its year entry value. 1,220 1,200 1,180 1,160 1,140 1,120 1,100 1,080 1,0 1,040 Jan- Feb- M ar- Apr- M ay- AIM Year 20 Highest value: 1, (31 May) Lowest value: 1, (10 January) Year 20 Closing: 29 December at 1,054.6 Highest value: 1,274.4 (11 May) Lowest value: (4 October) % change on year opening % % change on same month previous year +8.13% AIM Source: London Stock Exchange Also NASDAQ and the FTSE Eurotop 300 recovered well from the drop in early March. After falling to below their year entry values, both stock markets started to increase again to 7.5% and 7.3% above their year entry values respectively. 2,600 2,570 2,540 2,510 2,480 2,450 2,420 2,390 2,360 NASDAQ Year 20 Highest value: 2, (31 May) Lowest value: 2, (5 March) Year 20 Closing: 29 December at 2, Highest value: 2, (22 November) Lowest value: 2, (21 July) % change on year opening +7.48% % change on same month previous year % 2,330 Jan- Feb- M ar- Apr- M ay- NASDAQ Source: NASDAQ 13

14 1,620 1,600 1,580 1,560 1,540 1,520 1,500 1,480 1,460 1,440 FTSE Eurotop 300 Year 20 Highest value: 1, (31 May) Lowest value: 1, (14 March) Year 20 Closing: 29 December at 1, Highest value: 1, (15 December) Lowest value: 1, (13 June) % change on year opening +7.30% % change on same month previous year % 1,420 Jan- Feb- M ar- Apr- M ay- FTSE Eurotop 300 Source: London Stock Exchange IPO Activity IPO activity by European and Asian companies remained strong in the second quarter of 20, but started to cool down for US companies. According to data by Thomson Financial, 52 European companies went public on international stock markets in May 20, with proceeds summing to 14.7bn. May is thus the strongest month so far in terms of both revenues generated by European company IPOs and deals. USA Europe Asia * 20 20* 20 20* Proceeds m No. Issues Proceeds m No. Issues Proceeds m No. Issues Proceeds m No. Issues Proceeds m No. Issues Proceeds m No. Issues Quarter 1 5, , , , , , Quarter 2 13, , , , , , April 2, , , , , , May 8, , , , , , Quarter 3 4, , , Quarter 4 11, , , Total 35, , , , , , * Cut-off date: 31 May 20 IPO activity is classified by the domicile nation of the issuer s headquarters Data is continuously updated and is therefore subject to change 14

15 In addition, with still one month to go, the second quarter has already largely surpassed the previous quarter s activity in terms of proceeds and looks set to do the same in terms of number of deals. In total, quarter two has so far seen 89 IPOs by European companies, generating proceeds of 22bn, compared to 85 IPOs and 10.7bn in quarter one. In all, a total of 174 European companies have been launched on international stock markets in 20 so far (cut-off date: 31 May 20), with returns adding to 32.6bn. This is around 43% of last year s total IPO activity level in value terms and 37% in terms of deal number. The average monthly deal volume for 20 so far is 35 transactions, with on average 6.5bn in returns. In addition, another 40 European company IPOs are in the pipeline for the second quarter of 20. Of those deals, 4 are private equity-backed but none is venture-backed. The IPO of the Russian OAO Vneshtorgbank in May is the largest IPO by a European company this year to date, raising total proceeds of 5.9bn. Second and third are the listings of the Irish Smurfit Kappa Group in March, with total revenues of 1.5bn, and of the UK sportinggoods retailer Sports Direct International, which raised 1.4bn. IPO activity by US companies fell back slightly in comparison with Europe. Although there has been a sound number of US company IPOs in the second quarter, it is only half of the number of transactions and one third of the proceeds generated in Europe. May is so far the most active months, with 27 US companies being launched on international stock markets, collecting 3.4bn in proceeds. Quarter two thus counts so far 36 US company IPOs and revenues of 6.8bn, slightly surpassing quarter one activity levels in terms of proceeds. Quarter one attracted 6.3bn over 42 IPO deals. In total, 78 US companies have completed an IPO in 20 so far (cut-off date: 31 May 20), with revenues summing to 13.1bn. 20 has reached 37% of the total 20 IPO figures in terms of number of issues and 40% in terms of returns. On average, 16 US company IPOs have taken place per month in 20 so far, summing to average monthly proceeds of 2.6bn, which is significantly lower than IPO activity by European and Asian companies. The April IPO of Boart Longyear Limited is so far the largest initial public offering by a US company in 20, raising revenues of 1.4bn. The IPO of MetroPCS Communications Inc, also in April, ranks second with 972m in proceeds, followed by the February listing of National CineMedia Inc, worth 678m. Similarly to Europe, IPO activity by Asian companies remained strong in the second quarter of 20. After a very active month of April, which generated 8.6bn in revenues, IPO activity returned to its previous level seen over the first three months of the year. In May, 30 Asian companies completed an IPO, generating proceeds of 2.3bn, which is significantly lower than the May 20 figure of 11.3bn. 15

16 Overall, quarter two has so far seen 59 Asian company IPOs, with total proceeds of 10.9bn. With the June activity still outstanding, this is already more than quarter one activity levels in revenue terms. In the first quarter of 20, 97 Asian company IPOs raised 7.7bn. In total, 156 Asian companies went public in the first five months of 20, with returns totalling 18.6bn. This translates to around 31 Asian IPOs, worth 3.7bn, on average per month in 20. Total 20 activity figures have reached 40% of last year s activity levels in terms of number of IPOs and 30% in revenue terms. The largest transaction by an Asian company this year to date is the IPO of the China Citic Bank in April, which raised 4.4bn. The January listing of the Chinese Industrial Bank Co Ltd, worth 1.6bn, ranks second, followed by the IPO of Chinese Country Garden Holdings Co Ltd in April, which generated 1.4bn. Top IPO stock exchanges While London AIM has so far attracted the highest number of European company IPOs in 20, it is the London Stock Exchange that tops the table of most important stock exchange in terms of proceeds. Overall the LSE attracted revenues of 18.2bn across 23 IPO transactions. Staying behind in second and third position are the Russian Trading System and the London AIM, raising 8bn and 3.4bn across 7 and 53 deals respectively. The Frankfurt and Istanbul Stock Exchanges complete the top five, with revenues totalling 2.1bn and 1.7bn respectively. USA Europe Asia 1 Ranking Name Proceeds m No. issues Name Proceeds m No. issues Name Proceeds m No. issues 1 New York 5, London 18, Hong Kong 9, Nasdaq 5, Russian Trading System 7,991 7 Shanghai 3, Australia 1,432 1 London AIM 3, Mumbai {The Bombay Stock Exchange} 1, American Frankfurt 2,2 19 National Stock Exchange 1, London AIM 74 3 Istanbul 1,668 4 Singapore 1, * Cut-off date: 31 May 20 1 Asia here excludes Japan Source: Thomson Financial 16

17 The top three stock exchanges for US company IPOs in terms of proceeds is headed by the New York Stock Exchange, while NASDAQ ranks first in terms of deal number. Over the first five months of 20, the New York Stock Exchange attracted 21 IPO transactions, generating 5.8bn in revenues; NASDAQ recorded 50 IPOs, summing to total revenues of 5.5bn. The Australia Stock Exchange ranks third with only 1 IPO, raising a total of 1.4bn. The top five Asian IPO stock exchanges all raised more than 1bn in proceeds between January and May 20. The Hong Kong Stock Exchange turns out to be the most prominent in terms of revenues, with a total of 9bn across 23 Asian company IPOs. The Shanghai Stock Exchange follows in second position with only 5 IPOs generating 3.1bn. Although the Bombay Stock Exchange has attracted the highest number of deals, it only ranks third in revenue terms. Bombay has so far seen 40 Asian company IPOs, worth 1.5bn. The National Stock Exchange (India) and the Singapore Stock Exchange complete the table with returns of 1.5bn and 1.4bn respectively. Europe counts 4,149 M&A deals, totalling 465bn, in 20 so far European M&A activity has continued its positive trend in the second quarter of 20. According to data from Dealogic, a total of 4,149 M&A transactions, valued at 465bn, have taken place in Europe in 20 so far (cut-off date: 31 May 20). Compared to the previous Barometer publication in May, this marks an increase in deal value of 21%, adding 825 M&A transactions to the 20 total (up 25% on last month s data). The average monthly deal volume for 20 so far (cut-off date: 31 May 20) is 830 European M&A deals per month, with an average value of 93bn. In 20 the average number of deals was slightly higher at 972, but with a lower average value of 88bn. Overall, European M&A activity levels for 20 have reached 44% of last year s figures in terms of proceeds and 36% in terms of deal number. The most active sector in 20 so far in terms of deal number is Professional Services, the only sector that has surpassed the threshold of 500 deals with 514 M&A transactions. Real Estate/Property and Computers & Electronics were also very popular sectors with 460 and 433 M&A deals respectively. Like last month, the leading sector in value terms so far is Finance, attracting 95bn in proceeds, followed by Real Estate/Property with 64bn. 17

18 * Amt. bn No. of deals Amt. bn No. of deals Amt. bn No. of deals Amt. bn No. of deals Aerospace Agribusiness Auto/Truck Chemicals Computers & Electronics 22 1, , , Construction/Bldg Prods Consumer Products Dining & Lodging Finance Food & Beverage Forestry & Paper Government Healthcare Holding Companies Insurance Leisure & Recreation Machinery Metal & Steel Mining Oil & Gas Professional Services 18 1, , , Publishing Real Estate/Property Retail Telecommunications Textile Transportation Utility & Energy Total 545 9, ,116 1,0 11, ,149 * Cut-off date: 31 May 20 Data is continuously updated and is therefore subject to change Note: the industry classification has changed as of April 20, following the implementation of a new analytics system. Please also note that the data methodology has changed as of January 2005 and is presented excluding company carveouts. Source: Dealogic 18

19 3,603 M&A deals, worth 416bn, in Western Europe in 20 so far, compared to 546 M&A deals, valued at 50bn, in Eastern Europe According to data from Dealogic, 3,603 M&A transactions took place in Western Europe between January and May 20, generating returns of 416bn. Western Europe thus represents 89% of the total European M&A activity in terms of revenues and 87% in terms of deal number. Eastern Europe saw 546 M&A deals during the same period, adding up to 50bn in proceeds. Amt. bn * No. of deals Amt. bn No. of deals Amt. bn No. of deals Eastern Europe 39 1, , , Russian Federation , Poland Romania Czech Republic Turkey Amt. bn No. of deals Western Europe 5 7, , , ,603 United Kingdom 155 2, , , ,311 Germany 63 1,2 96 1, , Spain Sweden France , Italy Total 545 9, ,116 1,0 11, ,149 * Cut-off date: 31 May 20 Data is continuously updated and is therefore subject to change Note: the data methodology has changed as of January 2005 and is presented excluding company carveouts. Source: Dealogic The United Kingdom retains its status as favourite Western European country for M&A transactions. This year to date (cut-off date: 31 May 20), the United Kingdom has witnessed 1,311 M&A transactions, raising 130bn. While Germany ranks second in terms of deal number with 385 M&A transactions, worth 52bn, Italy has attracted the second largest amount of proceeds with 66bn (across 203 deals). Spain follows in third position in terms of deal number with 357 M&A deals and France in terms of deal value with 41bn. In Eastern Europe, the Russian Federation remains the most active country in terms of M&A activity. Since the beginning of 20, the Russian Federation has attracted 153 M&A deals, raising proceeds of 27bn. Poland comes second in terms of deal number with 59 M&A transactions, worth 3bn, and Turkey in value terms with 7bn (across 32 deals). 19

20 Leverage Loan Market 4 Activity European leverage ratios from 1999-Q According to data provided by Standard & Poor s Leveraged Commentary & Data (S&P LCD), debt to EBITDA multiples continued to rise, increasing by 0.25 percentage points from 5.49x in 20 to 5.74x in the first quarter of 20. The senior debt to EBITDA multiple increased even more, rising by 0.7 percentage points from 4.28x in 20 to 4.98x in Q1 20. Average European equity contributions from 1997-Q1 20 (as of total equity) After gradually decreasing between 2002 and 2005 and stabilising at 33.7% in 20, the average equity contribution for European LBO transactions increased slightly in the first quarter of 20 to 33.8%. 29.6% 35.6% 35.9% 37.4% 37.6% 38.6% 37.3% 35.9% % 33.7% 33.8% Q1 20 Debt/ EBITDA Senior Debt/ EBITDA Source: S&P LCD Q1 20 Source: S&P LCD 4 The leverage loan market refers to the market in which loans are syndicated by a lead bank and hence sold on to other borrowers. The data here refers to loans sold to borrowers in Europe. 20

21 Methodology GDP i) EU Commission, Directorate General for Economic and Financial Affairs (ECFIN): Source: The growth rates presented refer to the quarterly percentage change in real GDP. The numbers given in ranges are the GDP growth forecasts estimated for two quarters in advance of the actual figures. The ranges indicate the lowest expected growth rate compared to the highest. The single numbers are the actual growth figures, for the respective quarters, which are again recalculated as new data becomes available. The area referred to is the Euro Zone (EU 12). ii) The Economist: The Economist poll forecast Source: The Economist poll forecast is a monthly estimate for the GDP growth rate in the Euro Zone for the coming year. To obtain this forecast, 17 banks and financial institutions are questioned on their current growth projections. For the final figure, the arithmetic average of individual projections is calculated. LIBOR Source: British Bankers Association (BBA), Home Page: The data presented is the 12 month Euro LIBOR, measured at spot value. Inflation rate Source: Eurostat The numbers displayed are the annual consumer price inflation rates published by Eurostat on a monthly basis. The most recent value is an estimate, which is published at the end of the month and incorporates all information available at the time. This figure is restated in the middle of the following month. The data presented measures price changes in the Euro Zone between the current month and the same month in the previous year. Exchange rate Source: European Central Bank (ECB) Bilateral Euro/ US Dollar exchange rate. Stock Markets FTSE Eurotop 300: Source: AIM: Source: Technology All Share: Source: NASDAQ: Source: 21

22 IPO activity and Top 5 IPO stock exchanges Source: Thomson Financial at IPO data includes the first public offering of a company s common stock. Secondary listings or re-listings on other markets are not considered IPOs. The data is attributed geographically by the domicile nation of the issuer s headquarters, regardless of the target market. European data comprises IPOs of companies domiciled in Europe, including Central and Eastern Europe. Asian data refers to companies domiciled in Asia, excluding Japan. All amounts are given in Euros and represent total proceeds raised to the issuing company, including overallotments sold. M&A activity in Europe Source: Dealogic at The M&A data accounts for completed deals between January 1999 and the time of publication. Deals that are pending, withdrawn or in which shares have been bought back are excluded. Europe refers to both Western and Eastern Europe. Volume data refers to M&As of quoted and unquoted companies. The geographical M&A flows are classified by target nationality. Please also note that the data methodology has changed as of January 2005 and that M&A data is presented excluding company carveouts. European leverage ratios and average equity contributions Source: S&P LCD at The data is referring to the leverage loan market, covering loans for LBO transactions that are syndicated to borrowers (banks) in Europe. Transactions include all sponsored activity, such as refinancing and recapitalizations. Europe refers to both, Western and Eastern Europe. Disclaimer The data provided in this Barometer has been collected from different sources. EVCA has taken steps to ensure the reliability of the information presented. However, EVCA cannot guarantee the ultimate accuracy of the data and therefore EVCA does not accept responsibility for any decision made or action taken based on the information provided. Copyright EVCA 20 22