2009 European Private Equity Market EVCA, The Voice of European Private Equity Industry since 1983...

2009 European Private Equity MarketEVCA, The Voice of European Private Equity Industry since 1983

Philippe Defreyn

COO and Mid-market Buyout Platform Director

EVCA

The severe global crisis takes its toll on European private equity

25

48

40

28 27 27

72

112

83 82

13

25

35

2428 29

37

47

71 73

54

21

0

20

40

60

80

100

120

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 prel.

Funds Raised

Investments

in € billion

Source: EVCA/PEREP_Analytics for 2007-2009 EVCA/Thomson Reuters/PwC for previous years

Europe, by location of private equity firm

And not only on private equityEuropean M&As

1.1

0.6 0.5 0.6

0.7

1.1

1.5

1.9

1.3

0.7

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

M&As

in $ trillion

Source: Dealogic

Fundraising went to a major drop in Q1 2009(Q1 2007 = 100)

0

20

40

60

80

100

120

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Funds Raised

Venturefundraising

Buyout, growth& mezzaninefundraising

Source: EVCA/PEREP_Analytics

2007 2008 2009

Less concentration of capital Total amount at final closings

€27bn€21bn

€7bn

€42bn€47bn

€4bn

2007 2008 2009

Funds €1bn+

Funds <€1bn

€69bn €68bn

€11bn


Fundraising picture not so bleak after all

Evergreen17%

200910%

200817%

200719%

200614%

20057%

Before 200516%


European private equity firms by vintage year of latest fundraising

0

0.2

0.4

0.6

0.8

1

Early-

stage

Later

Sta

ge V

entu

re

Balanc

ed

All Ven

ture

Growth

Buyout

s

Mez

zanine

Gener

alist

All Priv

ate E

quity

€ billion

0

30

60

90

120

150

180

# of funds

2007 Average fund size


2009 Average fund size2007 Number of funds

2008 Number of funds



Average amount at final closing

Venture funds dominate final closings

Average fund size stays constant for most of the market players


Average amount at final closing

Excluding €1 bn+Including €1 bn+

0.0

0.2

0.4

0.6

0.8

1.0

Growth Buyouts Mezzanine

€ billion

0

20

40

60

80

100# of funds

0.0

0.2

0.4

0.6

0.8

1.0

Growth Buyouts Mezzanine

€ billion

0

20

40

60

80

100# of funds







Shift in LP base – a trend or a fad?

2008

Government agencies5.4%Pension funds

27.8%

Private individuals4.6%

Other & unknown18.3%

Fund of funds14.2%

Insurance companies6.4%

Banks6.6%

Academic institutions0.2%

Other asset managers4.9%

Corporate investors2.9%

Family offices4.1%

Endowments and foundations

4.3%

Capital markets0.4%


Incremental closings during the year

2009 preliminary

Private individuals4.0%

Other & unknown20.8%

Insurance companies8.8%

Pension funds10.9%

Fund of funds10.5%

Government agencies11.1%

Capital markets1.8%

Endowments and foundations

0.5%Family offices

2.7%

Corporate investors6.2%

Other asset managers3.8%

Academic institutions0.2%

Banks18.6%

Fundraising: More level playing field across regions

€ 5.1bn

(€50.2bn)

€1.6bn

(€6.1bn)

€ 2.2bn

(€ 3.4bn)

€ 2.7bn

(€ 11.3bn)

€ 151m

(€ 1.3bn)

€ 842m

(€ 9.3bn)

Fundraising by GP location

Europe believes in Europe

22.4%(13.6%)

10.3%(10.4%)

18.0%(3.3%)

21.2%(9.7%)

0.4%(0.3%)

7.5%(6.2%)

North America12.0%(38.9%)

AustraliaAsia

2.5%(7.8%)

Rest of World

0.0%(0.3%)

Other Western Europe

5.6%(10.2%)

Location of LPs behind 2009 Fundraising

Private equity supported more than 4,000 companies in 2009(Investments - PE funds’ contributions only)

35.0

24.327.6 29.1

36.9

47.1

72.9

53.9

21.3

71.2

0

20

40

60

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009prel.

in € billion

0

3,000

6,000

9,000

12,000

Number of companies invested

Amount Number of companies

Source: EVCA/PEREP_Analytics for 2007-2009 EVCA/Thomson Reuters/PwC for previous years

Europe, by location of the private equity firm

An uptick in investment as EU GDP growth turns positive

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

%

0

20

40

60

80

100

120

140

GDP growth EU 27 (% q/q) PE Investments by amount (Index Q1 2007=100)

Source: EVCA calculation based on Eurostat and PEREP_Analytics

EU GDP growth and index of buyout investment activity by amount

2007 2008 2009

Growth capital – the new paradigm?

% of amount

68.2 70.780.4

69.6

52.4

8.0

14.0

20.4

21.8 16.0

5.47.6

8.2

5.0 8.0 4.78.9

2.9

2.6

7.8

5.04.8

0.6

1.6

3.1

0.2 0.3 0.2 0.6 0.7

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 prel.

Seed

Start-up

Later Stage Venture

Growth Capital

Rescue/ Turnaround

Replacement Capital

Buyout

Source: EVCA/PEREP_Analytics for 2007-2009EVCA/Thomson Reuters/PwC for previous years

Europe, by location of the private equity firm Prior to 2007, growth capital was part of venture capital

0

5

10

15

20

25

Small Mid-market Large Mega Total buyout

€ billion

0

100

200

300

400

500

Equity value(PE funds participation)

Transaction value Number of companies

Number of companies

Mid-market deals drive buyout activity

Source: EVCA/PEREP_AnalyticsEurope, by location of the portfolio company

2009 Investments by GP location

40.4%(41.7%)

13.2%(15.9%)

8.1%(10.2%)

22.9%(20.9%)

4.0%(2.1%)

11.5%(9.2%)

2009 Investments by investee company location

24.6%(25.9%)

16.0%(19.7%)

11.4%(15.9%)

24.0%(23.9%)

11.0%(4.7%)

13.1%(9.8%)

UK drives cross-border activity

€4.7 domestic investments

Foreign PE firms investment

Foreign PE firms investment €3.9bn€0.4bn

Top 3 destinations by amount:

1. CEE

2. USA

3. Germany

inflow outflow

Investments by UK & Irish PE firms at €8.6bn

CEE – a net beneficiary

Foreign PE firms investment

Foreign PE firms investment €1.4bn

Top 3 sources:

1. UK

2. Austria

3. France

inflow€839mn domestic

investments in CEE

€10m

outflow

Investments into CEE companies at €2.2bn

CEE – a diverger ?

12

76

15

12

8

5

24

7

21

10

0

5

10

15

20

25

UK & Ireland France &Benelux

DACH Nordics SouthernEurope

CEE

€m

2008

2009

Average investment size

Source: EVCA/PEREP_AnalyticsBy location of the portfolio company

More follow-on investments to support current portfolio

55% 52%44%

45% 48%56%

41%38%

45%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Follow-on investment for the company

Initial for the company

Follow-on investment for the privateequity firm

* Percentages are calculated on the number of companies for which the breakdown was knownSource: EVCA/PEREP_AnalyticsEurope, by location of the portfolio company

Initial versus follow-on investments% of number of companies*

Life sciences/healthcare leads the ranking Overall private equity investment by sector

0 2 4 6 8 10€billion

2009 preliminary2008


0 2 4 6 8 10

Real estate

Agriculture

Construction

Chemicals and materials

Transportation

Financial services

Energy and environment

Computer and consumer electronics

Consumer services: Other

Business and industrial services

Business and industrial products

Consumer goods and retail

Communications

Life sciences

€billion

Top sectors per segment remain the same in 2009



Venture Buyout/Growth Capital

€ 2.1 bn

605

600

403

192

274

136

# co# co

2009 Top Sectors:

CommunicationsBusiness and industrial products

Communications

Computer and consumer electronicsLife sciences

€ 2.1bn€ 2.1bn

€ 2.4bn€ 2.4bn

€2.2bn€2.2bn

€ 576m€ 576m

€ 672m€ 672m

€ 950m€ 950m

Divestment window closed in 2009

13% 12%6% 7%

5% 6%

3%5%

4% 5%

5%5%

23% 17%

14% 6%

18%

17%

33%

28%

5%

4%3%

6%

5%

7%5%

5%

5%9%

4%

23% 23%27%

38%

28%

10%

5%

6%

2%

9%

33%

7%

1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009

Trade sale

IPO

Sale of quoted equity

Write-off

Secondary

Repayment ofshares/loans

Sale to financialinstitution

Sale to management(MBO)

Other

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Divestment at cost

Source: EVCA/PEREP_Analytics for 2007-2009 figuresEurope, by location of the private equity firm

Quarterly index (Q1 2007=100)

0

20

40

60

80

100

120

Q12007

Q22007

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

2009-Q1

2009-Q2

2009-Q3

2009-Q4

Divestments at cost

Annual index (2000=100)

Consumer goods & retail takes the lead in exits from business & industrial products

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6€billion

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Agriculture

Real estate

Unknown

Chemicals and materials

Construction

Transportation

Financial services

Business and industrial services

Energy and environment

Consumer services

Life sciences

Computer and consumer electronics

Business and industrial products

Communications


€billion

Divestments (excluding write-offs) Write-offs


Europe, by location of the portfolio company

Conclusions

Activity flows fall dramatically and bottom out in Q2 2009

However, 4,000 European companies receive private equity backing in 2009

Shift in LP base but mainly driven by sparse fundraising

Deal making moves towards the lower end of the market and growth capital gains

momentum

Life sciences/healthcare becomes the most popular sector

Private equity firms focus on management and cleaning of current portfolio

Private equity in 2010: fitter and more efficient?

Methodology

Data collected through questionnaires and reliable public sources (coverage rate by number of players 70%. For EVCA Members only: 94%)

Europe: for deals, it is defined either by the location of the PE firm(industry statistics) or by location of the portfolio company (market statistics) as referenced in the source; for

fundraising it covers funds primarily focused on investments in Europe. Fundraising: only formal closings included with committed amount;

covers only direct PE funds (excludes distressed debt, infrastructure, real estate, funds of funds)

Investments: equity value captured, debt only if provided by the PE funds (bank leverage excluded) unless specified it is transaction

value Divestments: measured at amount at cost divested, not proceeds

Segment definitions

Venture Capital: Seed, Start-up, Later-stage Buyout: Buyout (MBI, MBO, LBO, PIPE, PTP), Replacement

capital, Rescue/turnaround, GrowthPrior to 2007, growth capital was part of venture capitalPrior to 2007, rescue/turnaround was part of venture

capital

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2009 European Private Equity Market EVCA, The Voice of European Private Equity Industry since 1983...

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