Private Equity Panel Detail: Monday, May 2, 211 9:3 AM - 1:45 AM Speakers: Leon Black, Founding Partner, Apollo Management, LP David Bonderman, Founding Partner, TPG Capital Jonathan Nelson, CEO and Founder, Providence Equity Partners Jonathan Sokoloff, Managing Partner, Leonard Green & Partners Scott Sperling, Co-President, Thomas H. Lee Partners, L.P. Moderator: Maria Bartiromo, Anchor, CNBC
Carlyle IPO a Game-Changer? (US$) Blackstone share price 4 35 3 25 2 15 1 5 Jun-7 Jun-8 Jun-9 Jun-1 Jun-11 (US$) Apollo share price 2 18 16 14 12 1 8 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Source: Bloomberg.
PE is one of the better-performing asset classes Median Returns of Pension Plans by Asset Class as of 3 June 211 35% 3% 25% 2% 15% 1% 5% % -5% -1% -15% Source: Preqin and Bain. Fixed Income Hedge Funds Listed Equity Private Equity Real Estate Total Investment Portfolio 1 Year 3 Years 5 Years
Global private equity fundraising still stalling Quarterly: 25Q1 212Q1 US$ billions Global private equity fundraising by quarter $25 27 Q2 market peak: $213 billion $2 $15 $1 212 Q1: $62 billion $5 $ Source: Preqin.
Global private equity fundraising by region US$ billions 8 7 668.1 679.7 6 17.8 12.4 Asia and Rest of World 543.9 Europe 5 86.3 173.7 167.9 North America 4 358.9 138.6 35.6 54.4 274.8 3 265.6 211.7 4.8 19.6 6.9 19.8 88.4 59.6 2 17.7 386.7 391.4 49.4 58.8 319. 59.5 9.2 61.8 1 34.8 194.8 142.5 176.4 155.2 146.5 13.2 63.6 15.1 33.6 23 24 25 26 27 28 29 21 211 1Q 212 Source: Preqin.
Which types of funds are raising the most cash? Global private equity fundraising by fund type Q1 212 (US$ billions) Infrastructure Fund of funds Growth Other Secondaries $2.6 $1.9 $1.7 $3.2 Mezzanine $3. $5.6 $6.8 $8.8 $9.7 $18.5 Buyout Source: Preqin. Distressed PE Real estate Venture
Average time required to close funds Average number of months 22 2 2.9 18 18.5 16 14 16.1 12 13.3 1 8 1.2 1.4 1.8 6 4 2 26 27 28 29 21 211 212 Q1 Source: Preqin. Year of fund close
Investors are still exhibiting an interest in PE Timeframe for investors' next intended commitments to private equity funds Proportion of investors that feel their private equity fund investment has lived up to expectations Not Before 214 6.7% 213 2.9% H2 212 1.6% Opportunistic 17.3% H1 212 62.5% Percent 1 9 8 22 23 13 19 7 6 5 4 71 7 78 75 3 2 1 7 7 1 6 End of 28 29 21 211 Source: Preqin.
Global private equity buyout deals Number of deals 12 272.8 1 Number of deals (left axis) Aggregate value of deals (right axis) US$ billions 3 25 8 912 2 6 728 169.7 725 779 627 724 637 632 636 712 683 761 721 669 669 15 4 2 126.5 71.8 49.5 8.1 4.6 432 357 16. 11.9 15.9 22. 429 447 51 491 44.3 29.8 55.2 64.7 69.1 58.8 81.3 61.8 57.7 46.3 1 5 Q1 27 Q1 28 Q1 29 Q1 21 Q1 211 Q1 212 Source: Preqin.
Global number of PE-backed exits by type Smaller exits elevated during 1Q 212 Global number of private equity-backed exits 5 45 4 35 3 25 2 15 1 5 33.2 34. 24.6 64.5 57.6 76. 7.9 52.6 24.2 59. Trade sale Sale to GP restructuring IPO Aggregate Exit Value ($bn) 2. 12.5 13.3 11.6 5.4 52.4 32.1 54.9 57. Exit value (US$ billions) 82.3 8.4 125.7 56.7 41.8 46.4 Q1 26 Q1 27 Q1 28 Q1 29 Q1 21 Q1 211 Q1 212 14 12 1 8 6 4 2 Source: Preqin.
82% of deals in Q1 212 were small-cap (<$25mn ) Percent 1 9 8 7 6 5 4 3 2 1 4 1 2 52 12 62 14 13 9 No. deals Deal value less than $1m $1-249m $25-499m $5-999m $1bn or more Source: Preqin.
Add-on acquisitions will remain elevated Maintaining the levels of activity of Q4 211 Percent 1 9 8 7 6 5 4 3 2 1 6% 17% 15% 13% 8% 35% 62% 44% No. deals Deal value Buyout Add-on Growth capital Public to private Source: Preqin.
Sector breakdown of U.S. PE-backed deals 26% of deal value was completed in energy in Q1 212 Breakdown of aggregate value of US PE-backed deals in Q1 212 by industry (US$ billions) IT, $1.8 Food, $.5 Other, $1.3 Industrials, $3.4 Energy, $6.7 Business services, $5.2 Healthcare, $1.8 Telecome, $2.6 Consumer, $2.9 Source: Preqin 13
23% of all deals were completed in the industrials sector Breakdown of US 365 PE-backed deals in 1Q 212 Food, 18 Other, 18 Telecome, 22 Energy, 25 Industrials, 84 Source: Preqin Healthcare, 36 IT, 44 Consumer, 55 Business services, 62 14
4 Dry powder in global buyout funds US$ billions 6 5 $45 $51 $58 $462 4 $38 $365 3 $259 2 $187 $178 1 Source: Preqin 23 24 25 26 27 28 29 21 211
Breakdown of funds of funds in market By target fund size Percent 4% Number of funds raising money 35% 3% 25% 2% 15% 1% 5% % Up to $1mn $11-25mn $251-5mn $51-75mn $751-1,mn $1,1mn+ Source: Preqin.
Emerging markets continue to attract LPs Asia is attractive to 6% investors, North America to 42% Proportion of respondents (Percent) 5 45 4 35 3 25 2 15 1 5 Countries and regions within emerging markets that investors view as presenting attractive opportunities Source: Preqin
Global bond and equity market issuance still below pre-crisis levels Corporate bond issuance Fund raised through IPOs US$ trillions 3.6 3. $2.7 $2.8 $2.4 2.4 1.8 1.2 $3.3 $2.5 $2.4 US$ billions 35 3 $267 25 2 15 1 $295 $96 $113 $285 $17 Emerging economies Advanced economies.6 5. 26 27 28 29 21 211 26 27 28 29 21 211 Sources: Ernst & Young, S&P Fixed Income Research.
US
Non-bank institutions are playing an ever-larger role in U.S. financial sector Share of financial sector assets, 197 to 211 Percent 75 6 Banks (left axis) Percent 25 2 45 15 3 1 15 Non-bank financial institutions (right axis) 197 1975 198 1985 199 1995 2 25 21 5 Source: Federal Reserve.
Private equity deal flow by year 211 PE investment in US well above 29 lows US$ billions 6 5 4 3 2 1 843 4 83 Capital invested (left axis) 1225 126 1686 174 232 35 2517 34 571 196 2228 Number of deals closed (right axis) 62 1393 1828 Number of deals 3,5 1738 161 147 22 23 24 25 26 27 28 29 21 211 3, 2,5 2, 1,5 1, 5 Source: PitchBook.
Capital flow into IT, healthcare, and energy rose Percentage of deal volume (capital) by industry 1% 9% 8% 7% 6% $27 $13 $25 5% $86 $17 4% $15 $23 $11 $7 3% $28 $5 $2 $11 $15 $5 2% $2 $8 $16 $9 $42 $5 $6 $29 $49 $2 $1 $14 $26 1% $55 $7 % 22 23 24 25 26 27 28 29 21 211 Source: PitchBook. US$ billions Business Products and Services (B2B) Consumer Products and Services (B2C) Energy Financial Services Healthcare Information Technology Materials & Resources
Sector breakdown of US PE deals US$ billions US PE sector breakout US$ millions Sector breakdown of 211 PE-backed IPOs Source: Dealogic
Large deals* began to remerge Percentage of deal volume (capital) by deal size 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % $14.31 $34.6 $17.35 $22.69 Source: PitchBook. * Denotes deals more than USD 1 billion $47.7 $39.33 $21.75 $28.1 $131.34 $6.11 $41.23 $355.95 $82.63 $86.54 $38.45 $2.45 $29.78 $28.46 $47.73 $18.51 $3.45 $38.83 $36.5 $25.8 $6.85 $37.69 $7.26 $7.75 $7.94 $5.98 $1.67 $11.24 $11.88 $1.77 $12.81 $4.55 $35.55 $33.1 $39.92 $24.29 $39.4 $41.62 $26.6 $17.33 $23.57 $19.44 $4.42 $3.38 24 25 26 27 28 29 21 211 Under $5M $5M-$25M $25M-$5M $5M-$1B $1B-$2.5B $2.5B+ US$ billions
EBITDA multiples of U.S. buyout transactions 1x 8x 6x 4x 2x 6.9 5.9 2.9 2.1 3.8 4. 7.6 8.2 2.3 3.2 5.3 5. 9. 8.8 1.2 3.1 7.6 5.9 9.5 5. 4.4 6.5 3.2 3.3 7.3 2.7 4.6 9.1 2.8 6.2 x 22 23 24 25 26 27 28 29 21 211 Debt / EBITDA Equity / EBITDA Total deal size / EBITDA Source: PitchBook.
Median buyout size hits new record Median capital invested in U.S. private equity transactions US$ millions 14 13 12 1 8 6 4 4 5 52 6 76 1 66 4 1 2 22 23 24 25 26 27 28 29 21 211 Source: PitchBook.
Percentage of debt used in buyouts 75% 7% 65% 6% 63% 71% 67% 67% 57% 61% 62% 59% 61% 55% 5% 45% 4% 52% 49% 56% 55% 56% 57% 56% 52% 51% 57% 46% 35% 22 23 24 25 26 27 28 29 21 211 Source: PitchBook.
Private equity investors exited $18bn in 211 Percentage of P.E. exit volume (count) by exit type 1% 8% 6% 31 24 56 12 123 164 193 27 57 67 66 51 17 14 33 24 142 15 4 3 4% 2% 96 11 158 187 219 266 229 15 252 24 % 22 23 24 25 26 27 28 29 21 211 Corporate acquisition IPO Secondary buyout Source: PitchBook.
Corporate acquisitions hit a record high Median deal size of $24 million in 211 $4 $35 Median exit value (USD millions) $339 $3 $27 $291 $25 $2 Corporate Acquisition $191 Secondary Buyout $221 $24 $191 $15 $151 $1 $92 $15 $5 $43 $- 22 23 24 25 26 27 28 29 21 211 Source: PitchBook.
Increase in holding length in the U.S. PE Market (# of years held) 6 Median time from buyout to exit 5 4 4.37 3.82 4.38 4.16 3.67 3.57 3.84 3.93 4.68 4.81 3 2 1 22 23 24 25 26 27 28 29 21 211 Source: PitchBook.
PE investors sitting on $425B of dry powder $14 $12 $1 $8 $6 $4 $2 $ US$ Billions $114.98 $77.64 $24.22 $425 Billion $76.11 $67.8 $63.46 26 27 28 29 21 211 Cumulative Overhang Under $1M $1M-$25M $25M-$5M $5M-$1B $1B-$5B $5B+ $6 $5 $4 $3 $2 $1 $ Source: PitchBook.
Private equity returns have climbed back to pre-crisis levels 25% 15% 5% -5% -15% -25% -35% -8% -29% -31% -31% U.S. PE 1-Year Median Rolling Horizon IRR 2% 21% 22% 16% 17% 15% 13% 6% 12% 5% 8% -5% -5% 21 22 23 24 25 26 27 28 29 21 211* -18% -1% One year IRR as of year ending December 31st *Through 2Q 211 Buyout Fund of Funds Mezzanine Source: PitchBook.
Total U.S. sponsored loan volume $14B $12B $1B $8B $6B $4B $2B $B 178 158 $19.2 $87.1 loan values (left axis) 58 66 $52.6 $44.8 43 41 $24.1 23 6 7 $21.9 $11.2 $1.3 $1.4 Number of loans(right axis) 32 16 $28.8 $27.2 $2.3 13 $13.5 $7.1 $3.3 118 $85.9 13 17 89 8 66 62 $48.6 $43.3 5 $18.5 $21.2 $52. 51 1Q7 1Q8 1Q9 1Q1 1Q11 1Q12 18 16 14 12 1 8 6 4 2 Source: S&P Leveraged Commentary & Data. Includes all sponsored loan volume (leveraged buyouts, acquisitions, refinancing, recaps, etc). Reflects only transactions financed in the syndicated debt markets.
Visible demand for debt capital $14 $9 $4 Debt Maturities: Leveraged Loans (US$ billions) $1, $8 $6 $4 $2 $4 Leveraged Finance Demand (US$ billions) $446 $846 -$1 213 214 215 216 217 $ Refi(1) Private Equity(2) Visible Demand Source: S&P Leveraged Commentary and Data
Collapse of the shadow banking market US$ billions 12 1 8 6 Global CLO issuance 98 9 52 Supply of capital drastically reduced; CLOs provided $24B of capital between 25 27 (55% of all lending ) before market died in 28 4 2 13 14 1 11 17 26 12 1 3 1999 2 21 22 23 24 25 26 27 28 29 21 211 Q1 212 Source: S&P Leveraged Commentary and Data 12 6
Industry participants exit Source: Chatham capital
Average LBO purchase price multiples Purchase price multiples 12 1 8 6 6.x 6.6x 7.1x 7.3x 8.4x 8.4x 9.7x 9.1x 7.7x 8.5x 4 2 Source: Standard & Poor s. 21 22 23 24 25 26 27 28 29 21
Purchase price and equity contribution of large corporate LBO loans Purchase price breakdown* 12.x Equity Contribution* Purchase Price Breakdown* Equity contribution* 5% 1.x 8.x 6.x 7.9x 8.1x 7.7x 6.3x 6.1x 6.5x 7.1x 7.4x 8.2x 8.6x 9.8x 9.5x 7.9x 8.5x 9.1x 8.6x 45% 4% 35% 3% 25% 4.x 2% 15% 2.x 1% 5%.x 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 1Q12 Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others Equity Contribution % *Equity component of Purchase Price Breakdown represents total equity (new + rollover). Equity Contribution includes only new equity. Source: PitchBook. 1
Purchase price and equity contribution of middle market LBO loans Purchase Price Breakdown* Equity contribution 12.x 1.x 8.x 6.x 4.x 2.x.x Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others Equity Contribution 7.6x 7.5x 9.3x 8.5x 8.1x 8.3x 8.4x 8.2x 7.1x 6.9x 7.x 7.2x 6.7x 6.6x 7.3x 5.9x 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 1Q12 5% 45% 4% 35% 3% 25% 2% 15% 1% 5% % *Equity component of Purchase Price Breakdown represents total equity (new + rollover). Equity Contribution includes only new equity. Source: PitchBook. 1
Private equity fundraising in the U.S. 26 funds ($2bn) closed during 1Q 12 US$ billions 35 Capital raised (left) # of funds closed (right) 314 Number of funds 35 3 25 252 261 273 3 25 2 15 142 117 161 136 138 141 2 15 1 1 5 79 44 9 142 224 313 312 152 89 93 22 23 24 25 26 27 28 29 21 211 5 Source: PitchBook.
New general partners (GPs) are entering the private equity Industry 35 3 25 2 15 1 5 31% 32% 32% 44 37 98 8 51 11 Number of funds closed by year 29% 26% 72 68 18 193 85 62 229 211 19% 36 26 42 1 112 99 22 23 24 25 26 27 28 29 21 211 Experienced GP First Time GP % of First Time GPs 3% 35% 3% 25% 2% 15% 1% 5% % Source: PitchBook.