EMEA Private Equity All Eyes on UK PE Targets Market ... · Shifting gears to the venture capital...

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EMEA Private Equity

Market Snapshot

JULY 2017 │ Issue 14

All Eyes on UK PE Targets

Sector Selection Critical to Success in Germany and Switzerland

Healthcare Sector Diagnosis: Chronic Arrhythmia

Private Equity Firms: Throwing Gas (and Oil) On A Potential Fire?

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EMEA Private Equity Market Snapshot

Editor’s Note

Welcome to the 14th

issue of the EMEA Private Equity Market Snapshot, a quarterly publication focusing on the private equity [PE] market in Europe, the

Middle East & Africa [EMEA] from S&P Global Market Intelligence.

This issue launches with a look at the UK PE landscape and explores the attractiveness of EMEA targets to foreign PE buyers – the latter of which has

shown a continuation of positive activity.

We then look at how Germany and Switzerland’s strong and stable economies are increasing their appeal as the safest bet for European Private Equity

investors. With the British government at the initiating stages of Brexit negotiations and Macron still to affect meaningful reforms in France, European PE

investors are looking for their returns in low-risk economies with relatively more predictable political leadership.

Our sector focus takes a deep dive into Healthcare, whose attractiveness to the global private equity industry has bounced back. Despite going through a

few ups and downs over the last few years, investments into the sector climbed up to €46.1bn invested capital in 2016, the highest amount since 2008.

2017 YTD (1 January to 31 May) isn’t showing any signs of a slowdown, with €12.7bn of new capital allocated into Healthcare targets, only 25% less

compared to 2016.

Finally, we turn our attention to private equity firms as they shore up many recent defaulters in the oil and gas sector who struggled with falling revenue

due to lower oil prices. However, adding more debt to these firms’ existing loads may prove costly if interest rates rise.

At the heart of our analysis is the S&P Capital IQ platform, an offering of S&P Global Market Intelligence. The platform incorporates a database capturing

more than 3.1 million historical transactions, including deal values and transaction multiples, target company fundamental data, sector-level financials

and comprehensive private equity manager and fund information.

We look forward to receiving feedback and suggestions on regions or sectors of interest for future analysis. To subscribe or comment on the EMEA Private

Equity Market Snapshot, email [email protected]

Authors

Silvina Aldeco-Martinez

MD, Product & Market

Development EMEA & APAC

S&P Global Market Intelligence

Olga Parfiryeva

Associate, Product & Market

Development EMEA


Ian Hazard

Manager,

Investments Data


Ewa Czapnik

Associate,

Investments Data


Nick Kraemer

Senior Director

S&P Global Ratings

Diane Vazza

Managing Director

S&P Global Ratings

mailto:[email protected]

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All Eyes on UK PE Targets

During the study period of this report; 1 April to 31 May 20171, the

attractiveness of EMEA targets to foreign PE buyers showed a

continuation of the positive activity previously discussed in Issue 13 of

Private Equity Market Snapshot.

Total capital deployed by global PE firms into EMEA registered a 6%

growth, from €12.6bn between 1 April and 31 May 2016, to €13.3bn

during the same period in 2017. Average entry deal size also

increased, from €28.4mn in 2016 to €39.5mn for the same timeframe

in 2017. Simultaneously the number of new investments into EMEA

targets fell by 27% (767 new deals down to 563) when comparing 2016

to 2017.

In terms of capital allocation, the UK seized a €7.5bn lion’s share of

the newly invested €13.3bn in the 2017 study period. This represents a

stark 53% jump compared to the same period in 20162. This growth

was mostly attributed to The Blackstone Group L.P. (NYSE:BX)

acquiring the benefits administration and HR business process

outsourcing platform from Aon plc (NYSE:AON) for €4.5bn3. This

transaction also happened to be the largest in EMEA over the 2017

study period. Interestingly, and in spite of growing concerns about

Brexit’s long-term implications, the UK performed better than all

other sub-regions even after removing the mentioned big outlier deal

1 For this report the study period considered throughout is 1 April 2017 – 31 May 2017, unless otherwise stated.

2 Suggested reading: “Lif e Af ter Article 50: Opportunities From Uncertainty For Corporates In The U.K.” by Paul

Watters, https://www.capitaliq.com/CIQDotNet/CreditResearch/SPResearch.aspx?DocumentId=36533829&From=SNP_CR

S

3

https://www.capitaliq.com/ciqdotnet/Transactions/transactionDetail.aspx?transactionId=419696857&company Id=67

1980

bringing the capital allocation to €3bn.

On the other hand, the biggest drawbacks in terms of aggregate

capital deployed by global PE firms were recorded in France and the

‘Rest of Europe’4 sub-region. France experienced the largest decline(-

70%), from €1.5bn in 2016 to €0.4bn in 2017, with number of new

deals closed decreasing by a more moderate 18% (from 130 in to 106

in 2017). At the same time, the ‘Rest of Europe’ saw a reversal of the

positive trend discussed in Issue 13, with new capital deployed

tumbling from €1.5bn between 1 April and 31 May 2016 to €0.5bn for

the same timeframe in 2017.

From a sector perspective, the Information Technology (IT) sector

continued to be the most attractive sector in EMEA. It netted 49% of

the region’s newly invested capital in the 2017 study period, or €6.5bn

of the total €13.3bn (223 new deals). It is worth noting that in the 2017,

capital allocation into the sector grew by an impressive 92%

compared to the same study period in 2016 (€3.4bn in 2016 vs. €6.5bn

in 2017).

Global PE divesture activity also displayed positive features during the

2017, with total capital realised from EMEA-based target exits

reaching €24bn over 193 deals, a 17% increase compared to €20.5bn

over 278 deals in the 2016 equivalent study period. Interestingly, the

average exit deal size grew significantly by 119%, from €183mn (1

April to 31 May 2016) to €400.6mn for the same period in 2017,

suggesting a better environment for mid-large cap exits.

4 The Rest of Europe includes the f ollowing countries: Belarus, Bulgaria, Czech Republic, Hungary , Moldov a,

Poland, Romania, Russia, Slov akia, Ukraine, Channel Islands, Estonia, Ireland, Isle of Man, Latv ia, Lithuania,

Albania, Bosnia-Herzegov ina, Croatia, Cy prus, Gibraltar, Kosov o, Macedonia, Malta, Montenegro, Serbia,

Slov enia, Austria, Liechtenstein, Monaco, and Switzerland.

http://marketintelligence.spglobal.com/our-thinking/ideas/emea-private-equity-market-snapshot-issue-13


https://www.capitaliq.com/CIQDotNet/CreditResearch/SPResearch.aspx?DocumentId=36533829&From=SNP_CRS

https://www.capitaliq.com/CIQDotNet/CreditResearch/SPResearch.aspx?DocumentId=36533829&From=SNP_CRS

https://www.capitaliq.com/ciqdotnet/Transactions/transactionDetail.aspx?transactionId=419696857&companyId=671980

https://www.capitaliq.com/ciqdotnet/Transactions/transactionDetail.aspx?transactionId=419696857&companyId=671980


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EMEA GPs Pursuing Opportunities in the East

EMEA GPs’ activity showed remarkable trends during the 2017 study

period, as total capital deployed globally increased by 72%, rising

from €12.8bn in 2016 to €22bn in 2017. The number of new deals,

however, dropped by 20%, totalling 632 new deals completed by EMEA

PE firms between 1 April and 31 May 2017.

From the perspective of geographical allocation of capital, EMEA GPs

turned away from investing primarily into local targets for the first

time since Q4 20165 and 80% of newly invested money was deployed

into cross-border companies in 2017 (€17.6bn of the total €22bn). This

represents a significant shift in cross-border activity compared to the

same period in 2016 when capital allocated into non-EMEA targets

was only €5.8bn.

Asia Pacific6 emerged as the leading region, receiving €13.1bn of

capital from the EMEA GPs across just 12 new deals. This region was

also home to the largest deal of the 2017 study period: Qatar

Investment Authority, Macquarie Infrastructure and Real Assets Pty

Limited and others acquired Endeavour Energy for €8bn7. It is worth

noting that even after removing the outlier deal Asia Pacific still lead

the pack at €5.1bn capital invested, with Australia and China topping

the charts.

5 Issue 12 of Priv ate Equity Market Snapshot, http://marketintelligence.spglobal.com/dotAsset/773a6bf8-bded-

4231-a246-8c6f 25793e7a.pdf

6 Asia includes the f ollowing countries: Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea,

Af ghanistan, Armenia, Azerbaijan, Georgia, Kazakhstan, Ky rgy zstan, Tajikistan, Uzbekistan, China, North Korea,

Mongolia, Taiwan, Cambodia, Indonesia, Malay sia, Philippines, Thailand, Vietnam.

7

https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=430658207&company Id=

5491576

On a sector basis, the IT sector continued to be favoured by EMEA-

based GPs, receiving the most amount of capital during 2017, standing

at €8.9bn across 256 new deals. This is a remarkable 223% spike in

capital received compared to the same period in 2016. Regionally,

North America lead the pack for IT investments, sitting at €2.8bn

across 42 deals.

Shifting gears to the venture capital (VC) world, the EMEA region

recorded a 59% increase in capital inflows from global VCs during the

2017 study period across 258 new deals and €1.8bn total capital

(compared to €1.1bn across 349 deals for the same period in 2016).

EMEA-based VC firms in particular recorded a similarly positive trend,

deploying 14% more capital in 2017, increasing from €1.7bn in 2016 to

€1.9bn 2017 for the given study period.

Sector Selection Critical to Success in Germany and

Switzerland

Although Germany and Switzerland are rarely described as hyper-

active investment markets, they seem to be increasing their appeal as

the safest bet for European Private Equity investors. With the British

government only at the outset of the Brexit negotiations and Macron

still to affect meaningful reforms in France (Issue 13 of Private Equity

Market Snapshot). Germany and Switzerland’s strong and stable

economies are likely to be increasingly attractive to European PE

investors looking for returns in low risk economies with relatively more

predictable political leadership8.

S&P Global Market Intelligence’s data shows that Germany’s leading

8 https://www.f t.com/content/47969426-529a-11e7-bf b8-997009366969

http://marketintelligence.spglobal.com/dotAsset/773a6bf8-bded-4231-a246-8c6f25793e7a.pdf

http://marketintelligence.spglobal.com/dotAsset/773a6bf8-bded-4231-a246-8c6f25793e7a.pdf

https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=430658207&companyId=5491576

https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=430658207&companyId=5491576



https://www.ft.com/content/47969426-529a-11e7-bfb8-997009366969

5


economic position on the continent and Switzerland’s long standing

reputation as a stable-haven currency have allowed Private Equity

investments in the region to weather the recent jitters in the market

relatively well; keeping pace or outperforming their European

counterparts and at times, even registering increased capital inflows

in some sub-sectors. In this section we review the recent investment

activity in these two as well as the challenges ahead.

Venture Capital Trumps Private Equity

With real GDP growth at 1.8% Germany has the most favorable outlook

amongst Europe’s major economies, with the same GDP growth as the

UK and significantly above the 1.1% of France. Additionally the

flexible German labor laws and strong collaborative corporate

governance appear to have proven to be well suited at absorbing

economic shocks and building long term growth since the global

financial crisis. Notably, Germany has seen no lasting unemployment

growth over the last 5 years and also experienced a rapid economic

recovery compared to France9.

When it comes to private equity and venture capital investment

activity, S&P Global Market Intelligence’s data shows that Germany’s

performance over the last 5 years has remained steady – with

aggregate investment value into Germany moving from €10.5bn in

2012 to €16.8bn in 2015, before falling back to €7.2bn in 2016

following the Brexit shock. Although the decline in 2016 is sizable it

does not reflect in actual deals closed with 2016 standing at 533

transactions up from 527 in 2012. Additionally the drop in invested

9 S&P Global Market Intelligence Issue 13 of Priv ate Equity Market Snapshot

capital seems to be contained in the Private Equity sector moving from

€14.2bn in 2015 to €5.6bn in 2016 on roughly equal transactions

numbers (175 and 152 respectively).

At the same time, the venture capital and growth capital sector has

been significantly more resilient with aggregate number of deals in

2016 3.5% higher than in 2012 (381 deals) and only 29 deal behind its

2015 peak.

For illustrative purposes only. S&P Global Market Intelligence as at 31/05/2017

Similarly, aggregate deal values for VC and Growth investments stood

at €1.6bn in 2016, 2.44x more than in 2012. Figures for 2017 to the end

of May continued along the same trend with VC and Growth registering

€1.3bn aggregate deal value and 155 deals, likely indicating a bumper

year for German VC investments in 2017. Conversely the buyout sector

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Fig. 1: German PE/VC Backed Transactions

Buyout # Venture Capital #


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seems to be heading for another subdued year in 2017, having closed

only 50 deals for a total value of €2.4bn so far this year.

Although France has fared better than its neighbor in capital deployed

for Private Equity investments (99 deals for €2.9bn) the deal values

remained significantly lower than in Germany. This is further

confirmed in the venture capital stakes, where French targets raised

only €810mn from 208 deals, 40% less capital than Germany but with

53 additional deals. This supports the continued attractiveness of

German high-value targets but shows that the middle-of-the-road

targets in Germany appear harder to shift. Despite its economic

strength, Germany cannot escape the effects of Euro zone

membership altogether.

Additional hindrance appears to originate in the ECB monetary policy,

that whilst it aims to prop up struggling European nations it seems to

conversely dis-incentivize domestic and international investors to

move with stronger conviction into the low risk/low return German

market.

Shifting countries of focus, Private Equity investments into

Switzerland have performed in line with Germany over the same

period. Aggregate deal count increased by 43% (37% for VC and 64%

for PE) but showed significantly more volatility throughout the period.

By the same token, aggregate deal values confirm that Swiss Private

Equity is also driven by a small number of outsize deals, reaching a

peak of €6.3bn in 2015 (19 deals) and a trough of €142mn in 2014 (21

deals). Venture capital and growth investments, however, have shown

a more consistent upward trend from €475mn in 2012 to €639mn in

2016. Although the Swiss VC and Growth market represents less than

one-sixth of the equivalent German market in terms of deal count, it

accounts for one-fourth of the German deal value, which potentially

indicates higher value targets in Switzerland.

Healthcare and IT Start-Ups Reign Supreme

Focusing further on venture capital and growth investments our data

suggests that Switzerland has a strong concentration of investments

into the Healthcare and Information Technology sectors. Investments

into both accounted for 80% of completed investments, and 85% of

invested growth capital between 2012 and 2016. Although Information

Technology recorded the largest amounts of closed deals at 35 in 2016

(€231mn), investments in Healthcare were more significant in capital

at €386mn for 28 deals.

Biotechnology was the most targeted industry within the Healthcare

sector, having attracted over half the aggregate growth capital from

January 2012 to date (€832mn of €1.6bn).


Over the same period Germany saw almost 2.9x more investment into

Information Technology start-ups (€5.3bn – 1123 deals) than in its

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Fig. 2: Switzerland PE/VC Backed Transactions

Buyout # Venture Capital #

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second largest sector - Consumer Discretionary (€1.8bn – 385),

followed closely by Healthcare at €1.6bn (262). Overall Information

Technology attracted just over half the private placements

investments in both deal count and value in Germany.

Furthermore it is likely that venture capital investments in IT and

Healthcare will outperform their 5-year average in 2017 for both

Germany and Switzerland. Looking at YoY data from January to May

31st

we find that the German Healthcare sector has attracted €462mn

venture capital in 2017, 8.6x the average for 2012 to 2016. Similarly,

after a decline in 2016 (€266.3mn) German Information Technology

targets have attracted €647mn so far this year, 2.4x the 5-year

average.

The Swiss IT sector has also attracted €115mn over 18 deals so far

this year, the highest value for the period from 2012 to date.

IP Driven Investments Pave the Road Ahead

Viewed in isolation both Germany and Switzerland would be

considered a sure bet for investment success relative to their

European counterparts. However, their exposure to the economic

woes of the Euro zone, the impending Brexit fall-out and possible

slowing growth further afield mean that both countries are not

immune to a continued downturn in investments, especially in the

large buyout space.

For Germany, the impact of a struggling Euro zone and the risk of a

slowdown in China could severely affect export potential for mature

Private Equity targets. Should this scenario play out, the effects are

unlikely to be absorbed by increased internal consumption or an

increase in the competitiveness of the labor market following years of

slow wage growth.10

Additionally, with PE valuations at record highs and reports that

German institutional investors are increasingly concerned about the

returns available at the current price levels, the market could slow

down further as a result.11

Similarly for Swiss PE the strength of the Swiss Franc is both a

challenge for new entrants into the market and for the export potential

of Swiss goods.

On the bright side, from a Venture Capital perspective, Germany and

Switzerland both continue to show strong potential for IP

investments. S&P Global Market Intelligence’s data shows there is a

healthy and growing inflow of capital for venture investments in the

IP-centric sectors. These investments are supported by good growth

opportunities in healthy domestic consumer markets and a large

potential for global expansion of home-grown technology in the

Healthcare and IT sector. Both Germany and Switzerland seem to be

playing to their strengths in these sectors to navigate the choppy

waters ahead.

Healthcare Sector Diagnosis: Chronic Arrhythmia

The Healthcare sector attractiveness to the global private equity

industry has gone through a few ups and downs over the last few

years, with investors losing interest in the sector only to gain it back in

recent years.

The sector reached its historical peak in 2006 when it attracted €59bn

10

OECD Economic Outlook – Volume 2017 Issue 1 11

Handelsblatt – June 11 2017 – Unternehmnenswetten droht der Absturz

8


of capital from global GPs across 1,456 new deals (Fig.3). While new

capital allocation into Healthcare dropped slightly in 2007 to €57.3bn,

the number of new deals grew by 11%, suggesting a shift to smaller

targets. Since then the interest in global Healthcare targets seems to

have faded even more, as the total capital allocation into the sector

from 2007 to 2013 had a negative 2% CAGR, with 2009 registering the

lowest amount of money deployed into Healthcare targets since 2001,

€11.5bn.


On the other end of the spectrum, investments into the sector climbed

to €46.1bn in 2016, a record level since 2008. 2017YTD12

isn’t showing

signs of a slowdown yet, with €12.7bn of new capital allocated into

Healthcare targets, only 25% less compared to 2016YTD.

Turning our attention to sub-sectors, Biotechnology, is one that saw a

steady inflow of capital since 2014. It attracted a constant amount of

12

2017YTD ref ers to the period f rom 01/01/2017 – 31/05/2017.

investments during this period, growing by 35% in 2014 vs. 2013, and

more than doubling in 2015 to €8.3bn from €4.8bn.

Whilst global GPs’ activity in Biotechnology slowed down in 2017YTD in

terms of capital allocation (20% less capital vs. 2016YTD), the number

of deals grew by 9% compared to 2016YTD. Furthermore, deals

announced from the beginning of 2017, if completed, would add €3bn

of new capital into global Biotechnology targets across 168 potential

deals, possibly improving 2017 totals.

Venture Capital Most Prominent in EMEA Healthcare

The charm of EMEA-based Healthcare targets seems to be a bit more

volatile than the global picture (Fig.4). 2015 recorded the highest

amount of capital allocated to EMEA Healthcare portfolio companies

since 2008, €9.7bn across 525 deals. 2016, however, experienced a

sharp drop of 50% in total aggregate deal values across only 1% less

deals. This appears to suggest that GPs were not ready to commit the

same level of capital in 2016, with average deal value parked at only

€14.3mn. The trend seems to have extended into 2017 as well with

only €1.5bn invested into EMEA Healthcare targets thus far.

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Fig.3: Global GPs' Investments into Global Healthcare

Total Capital Invested, EURmn Total Deal Count

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Such a small average deal value might be explained by the fact that

the number of VC transactions into the Healthcare space is growing

against traditional PE buyout activity. Over the last five years (2012 –

2016) the total number of VC deals equalled 1,313 compared to only

463 buyouts. At the same time, total capital allocated to VC deals in

2017YTD also surpassed buyouts with €627mn across 96 deals vs.

€63mn across 22 traditional PE deals in EMEA.

From a geographical perspective, there are well-established

Healthcare hubs within EMEA that appear to continue to attract

capital, the UK, France and Germany. The total aggregate capital

invested into these countries accounted for more than 50% in 2016, a

trend that followed into 2017 as well (Fig.5). In 2017YTD these three

countries attracted 64% of the period’s total, standing at €967mn

across 98 deals.


In 2014 World Health Organisation13

reported that the UK, France and

Germany spent $253mn, $326.4mn and $437mn, respectively, on

healthcare—which seems to be indicative of business favourable

environment for these countries. In line with that, the total spent as a

% of countries’ GDP also remained stable, with the latest data

available in 2014 showing the expenditure at 9% for the UK, 11% for

France and 12% for Germany14

. Having a stable platform for

healthcare development would make PE firms more interested in

investing into such countries.

Healthcare Facilities, which includes Assisted Living Facilities and

Services, is one of the most invested into sub-sectors in these

geographies. 2012 to 2017YTD it accounted for almost a quarter (€6bn)

13

http://www.who.int/health-accounts/ghed/en/ 14

The World Bank, http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS

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Fig.4: Global GPs' Investments into EMEA

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Fig.5: Global GPs Investments into EMEA vs. Aggregate UK France Germany

Total EMEA Deal Value, EURmn Total UK Ger Fra Deal Value, EURmn

http://www.who.int/health-accounts/ghed/en/

http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS

10


of all capital allocated into Healthcare targets in the UK, Germany and

France. This comes as no surprise as the life expectancy in those

countries continues to grows15

, so will the demand for assisted living

facilities16

. S&P Global Market Intelligence’s data shows that over the

last 5 years (2012 – 2016) there were 156 new assisted living facilities

established in EMEA, a number which kept growing through the study

period (Fig. 6).


15

Lif e expectancy in the UK is 81.4 y ears; France – 82.8 y ears; Germany – 81.2 y ears, https://data.oecd.org/healthstat/life-expectancy-at-birth.htm 16

Suggested Reading: “Global Aging 2016: 58 Shades of Gray ”, S&P Global Ratings,

https://www.spglobal.com/our-insights/Global-Aging-2016-58-Shades-Of -Gray -.html

EMEA Healthcare Buyers Only Eyeing Out The Fittest?

European healthcare private companies displayed growth in their

fundamental financials over the last five years, especially when

compared with their North American counterparts. In 2016 European

healthcare companies’ average Net Income Margin grew by 20%

compared to the value five years ago. At the same time, average EBIT

Margin also displayed positive signs, growing by 17% in 2016

compared to 2012.

North American healthcare private companies, on the other hand,

displayed negative trends in their fundamentals’ growth. Their average

Net Income Margin declined by 15% in 2016 vs. 2012, while average

EBIT Margin dropped by 21%.

When looking at what types of buyers the Healthcare sector in EMEA

attracts, it is evident that investments into this sector are completed

by GPs who allocate the majority of their capital into the Healthcare

sector. In addition to this, their investments seem to favour domestic

countries (GP-target colocation). Findings of the top five most active

single buyers17

investing in EMEA (measured by deal counts in the

period between 2007 and 2017YTD) suggest that:

Out of 91 total deals these top five buyers did, only two deals

were completed outside of their own country.

Touchstone Innovations Plc, the most active single buyer in

EMEA with 23 deals in the study period, has 51% of its portfolio

in Healthcare companies while the second most active

investor, Swedish PE firm Karolinska Development AB (publ),

17

Touchstone Innov ations Plc, Karolinska Dev elopment AB (publ), High-Tech Gründerf onds Management GmbH,

Enterprise Ireland, Inv estment Arm, Clal Biotechnology Industries Ltd.

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Fig.6: Number of Assisted Living Companies Founded

https://data.oecd.org/healthstat/life-expectancy-at-birth.htm

https://www.spglobal.com/our-insights/Global-Aging-2016-58-Shades-Of-Gray-.html

11


invests only primarily in Swedish Healthcare (79% of their total

investments).

Private Equity Firms: Throwing Gas (and Oil) On A

Potential Fire?

In recent years the speculative-grade default rate across sponsored

and non-sponsored issuers has risen mainly due to disproportionate

stress in the energy and natural resources sector – and within that,

primarily via stress for oil and gas companies struggling with falling

revenue due to lower oil prices. The oil price declines that began in the

second half of 2014 were particularly hard-felt among U.S.-based

shale oil producers, as this relatively expensive extraction method

proved unsustainable in the presence of an approximate 80% drop in

oil prices. However, over time, many of these new entrants to the

sector improved their production methods and organisational

operations.

As we will see, many recent defaulters in this sector (across multiple

geographies) have enjoyed extra funding sources via private equity

companies taking out ownership stakes. Given what appears to be a

bottoming out of the decline in oil prices, combined with improving

credit conditions in the oil and gas sector as well as experiencing

some of the most favorable financing conditions currently seen across

markets, many distressed oil and gas companies (and those within the

larger energy and natural resources segment,) appear to be a high-

return bet. However, risks do exist, and adding more debt to these

firms’ existing loads may prove costly if interest rates rise, the larger

U.S. or European economies dip into recession, or if oil prices once

again decline.

Overview

In both the U.S. and Europe, firms within the energy and

natural resources sector that defaulted in recent years show a

higher proportion of private ownership to total ownership.

Bond prices for these defaulters in the U.S., along with long-

term recovery prospects for the oil and gas segment provide

some support to the notion that distressed companies within

this segment have higher than average upside potential.

Financing conditions in the U.S. and Europe are currently

supportive of increased borrowing by corporations, but it is

more likely that conditions will deteriorate a year from now,

rather than continue to loosen.

S&P Global Fixed Income Research expectations for default activity

over the next 12 months is modest in both the U.S. and Europe, but

stressors may continue in the energy and natural resources sector,

while fundamental changes lie ahead for many retailers.

Private Ownership Of Recent Defaulters More Focused On Energy

Companies

Within the U.S. region (including Bermuda and the Cayman Islands)

there were 105 defaults in 2016, of which 61 (58%) were from the

energy and natural resources sector. Within this sector, the majority of

these defaults were oil and gas companies (50 of the 61). Of the 105

defaults, we have ownership details for 102, which reveal that an even

higher percentage of the total have some private ownership stake

within the energy and natural resources sector (Fig. 7). This sector

accounted for 58.1% of all U.S. defaults in 2016, but looking at the

year’s defaults with private ownership stakes, over 64% of these are

12


energy and natural resources companies18

. Interestingly, this is the

only sector accounting for a higher proportion of the default total

among firms with some private owners relative to its contribution to

the total default count.

Looking at the last five years within Europe, we note the energy and

natural resource sector’s contribution to total defaults also leads the

way and as detailed in Figure 8, we identify that the sector, also has a

higher percentage of current private ownership as well.

18

Natural resource companies include: Oil & Gas, Utilities (inclusiv e of Inf rastructure), Metals & Mining, and Steel

Issuers.

Oil and Gas Sector Exhibiting Decent Recovery Prospects

Despite some relatively limited sample sizes among many sectors,

bond prices for these U.S.-based firms currently containing private

equity ownership do show some interesting distinctions across

sectors. For those firms within the energy and natural resources

sector, the average bond price leading up to default were generally

lower when compared to other industries. But when looking at post-

default pricing, these same firms’ average bond prices are generally

higher a month after the default event (Fig. 9). Interestingly, despite

having the historically weakest rating profile, the media and

entertainment sector’s recent defaulters with private sponsors have

some of the highest bond prices both before and after default.

13


Figure 9: Industry Level Bond Price History Of 2016 U.S. Defaulters

With Private Equity Owners

Generally, favorable recent bond prices for the oil and gas segment

are in-line with historical recovery observations (Fig. 10). Though not

markedly higher than the industry-level averages, the oil and gas

segment does generally display higher recovery rates in the U.S.

relative to other sectors.

Figure 10: Historical Recovery Rates: U.S. Corporates

Low Rates and Favourable Financing Conditions: But For How Much

Longer?

Despite recent and expected rate hikes by the Fed, financing

conditions in the U.S. are broadly supportive through May (Figure 11).

The 10-year Treasury yield temporarily surpassed the important 2.5%

mark as recently as mid-March, but it has fallen to 2.23% as of May

29. Meanwhile, corporate bond yields in both primary and secondary

markets have generally remained muted amid the Treasury yield

movements. In fact, speculative-grade spreads came in at 385 bps at

the end of May, compared with 405 bps at the end of December.

Average Bond Prices

Industry 365 180 90 60 30 30 60 90 180 365

Aerospace / Automotive / Capital Goods / Metal 82.5 82.4 70.0 73.0

Consumer / Service Sector 65.0 75.8 71.0 37.7 48.3 27.5 41.4 43.0 36.2

Energy / Natural Resources 78.4 42.2 30.5 26.3 36.0 32.0 51.5 61.0 71.8 90.4

Financial Institutions 72.3 62.5 49.5 44.0 40.2 45.8 38.4 49.1 68.9 102.6

Forest and Building Products / Homebuilders 86.8 7.4 7.8 7.0 5.7

High Technology / Computers / Office Equipment 90.8 83.0 75.3

Leisure Time / Media 71.3 98.0 71.3 55.5 73.0 70.3 71.6 72.0 91.0

Telecommunications 78.5 42.8 49.5 49.3 48.6 32.5

Transportation 72.6 60.8 54.8 58.4 45.5 29.3 46.9 36.0

Utilities 39.1 38.7 41.3 37.1

Total 77.1 46.3 40.0 28.6 42.5 33.9 49.9 57.3 68.6 91.2

Issue Counts

Aerospace / Automotive / Capital Goods / Metal 1 1 1 1

Consumer / Service Sector 6 1 1 7 6 1 7 6 6

Energy / Natural Resources 84 60 75 71 61 61 37 54 43 13

Financial Institutions 4 1 1 4 3 1 3 3 2 1

Forest and Building Products / Homebuilders 6 6 6 6 6

High Technology / Computers / Office Equipment 2 2 2

Leisure Time / Media 16 3 17 1 16 3 14 17 4

Telecommunications 1 1 1 1 1 1

Transportation 4 2 2 2 4 2 2 1

Utilities 3 3 3 3

Total 124 71 103 95 99 71 70 88 56 14

*Where available. Source: S&P Global Fixed Income Research.

Days Prior To Default* Days After Default* Sector

All instruments

(recovery, %)

Loans

(recovery, %)

Bonds

(recovery, %)

Loans (dollar-

weighted recovery, %)

Bonds (dollar-

weighted recovery, %) Loans (count) Bonds (count)

Aerospace and defense 44.8 75.7 29.3 57.0 21.5 15 30

Automotive 50.8 81.8 32.5 87.1 31.1 81 137

Capital goods 48.8 64.7 36.3 61.2 35.1 99 125

Chemicals, packaging, and environmental services 51.7 64.3 39.6 47.7 36.0 89 92

Consumer products 58.3 77.9 40.3 72.0 38.4 172 187

Forest products and building materials 58.9 76.8 44.6 69.7 44.9 85 106

Health care 51.4 69.2 36.1 63.7 47.3 86 101

High technology 50.7 72.9 34.4 61.6 27.1 83 113

Homebuilders/real estate companies 41.4 81.0 30.8 68.8 27.3 19 71

Media and entertainment 51.5 74.3 37.9 66.5 37.3 162 270

Metals, mining, and steel 55.5 88.1 36.2 90.6 33.3 51 86

Oil and gas 50.6 81.8 39.2 61.9 40.8 61 168

Retail/restaurants 48.4 72.1 31.8 68.4 29.7 223 319

Telecommunications 40.1 69.5 29.7 64.5 32.5 147 413

Transportation 54.2 80.4 45.4 83.5 47.1 51 151

Utility 74.5 72.1 75.2 72.9 78.6 43 155

Average 52.0 75.2 38.7 68.6 38.0

For bonds and loans which defaulted. Sources: S&P LossStats and S&P Global Fixed Income Research.

14


Despite the Fed’s recent announcement to reduce its asset holdings in

a slow process beginning late this year, Treasury yields have thus far

remained low. Given the administration’s tax plan’s reliance on

stronger than normal economic growth to keep the plan revenue-

neutral, the Fed’s reduced principal reinvestment could pose a major

headwind for the economy and financial markets in 2018.

Ultimately, while the lending environment appears to be currently

favorable to increased borrowing, the question remains of how long

will a low-interest rate environment last? Fears of rising rates are still

relatively low, and as Japan has shown, a low-rate environment can

persist for a very long time. Nonetheless, it is unlikely that interest

rates and lending standards will ease much more, if at all, in the

coming year.

Figure 11: Indicators Of Financing Conditions: U.S.

*Data through May 31. **Through the f irst-quarter. ¶Federal Reserv e Senior Loan Of f icer Opinion Surv ey on Bank

Lending Practices For Large And Medium-Sized Firms. Source: IHS Global Insight; Federal Reserv e Bank of New York; S&P LCD; S&P Global Fixed Income Research.

As in the U.S., the lending environment in Europe is also especially

favorable to corporations (Fig. 12). Given the region’s slowly improving

economic performance, there is some anticipation of higher interest

rates coming out of the ECB in the near-future. This is not

unreasonable considering the ECB’s monetary stimulus may be losing

its efficacy (as our economists believe19

) as economic conditions

improve, and interest rates faced by corporations are generally even

19 Source:

https://www.globalcreditportal.com/ratingsdirect/showArticlePage.do?rand=hixn23Wl15&sid=1866158&sind=A&object_id=10126266&rev_id=1&from=SR

Indicators Of Financing Conditions: U.S. Restrictive Neutral Supportive 2017* 2016* 2015*

Tri-party Repo Market - Size of Collateral Base ($, millions) x 1,847.97 1,582.67 1,618.95

Three-Month Financial Commercial Paper Yields, (%) x 1.06 0.59 0.17

Three-Month Non-financial Commercial Paper Yields, (%) x 0.97 0.46 0.10

10-Year Treasury Yields, (%) x 2.21 1.84 2.12

Yield Curve (10-year minus 3-month) x 1.2 1.5 2.1

Yield-to-Maturity of New Corporate Issues Rated 'BBB', (%) x 3.49 3.78 3.66

Yield-to-Maturity of New Corporate Issues Rated 'B', (%) x 6.96 7.15 6.52

10-Year 'BBB'-Rated Secondary Market Industrial Yields, (%) x 3.85 4.29 4.09

Five-Year 'B' -Rated Secondary Market Industrial Yields, (%) x 6.06 8.25 7.15

10-Year Investment-Grade Corporate Spreads, (bps) x 140.7 179.1 158.8

Five-Year Speculative-Grade Corporate Spreads, (bps) x 388.1 583.7 509.6

Fed Lending Survey¶ x -2.8 11.6 -5.3

S&P Corporate Bond Distress Ratio, (%) x 6.8 18.1 10.3

S&P LSTA Index Distress Ratio, (%) x 3.7 8.0 1.8

New-Issue First-Lien Covenant-Lite Loan Volume, (% of total, rolling 3-month average) x 69.7 77.0 63.3

New-Issue First-Lien Spreads (Pro Rata) x n/a 389.1 294.0

New-Issue First-Lien Spreads (Institutional) x 342.5 399.6 394.0

Amendments, (#, rolling 12-months) x 211.0 190.0 251.0

Amend-to-Extend Fee, (bps)** x 20.8 41.9 23.1

15


lower than in the U.S. We also expect continued stress on financial

markets from a continually uncertain path for Brexit negotiations. At

this time though, our economists expect the ECB to continue its QE

program through most of 2018, which should keep financing

conditions generally favorable for a longer period than is likely in the

U.S.

Figure 12: Indicators Of Financing Conditions: Europe

*Data through May 31. European Central Bank Euro Area Bank Lending Surv ey f or Large Firms. Source: IHS

Global Insight; ECB; S&P LCD; S&P Global Fixed Income Research.

However, despite a very favorable backdrop and some strong early

months in 2017, U.S. corporate bond issuance is trending downward in

the second-quarter (Fig. 13). Through May, the second-quarter of 2017

has shown declines in both the investment-grade and speculative-

grade segments after a weak April showing. The combined April and

May totals of $204.4bn and $31.4bn for investment-grade and

speculative-grade bond issuance, respectively, fall short of the

$228.9bn and $40.3bn seen last year. It is also our expectation that

the second-half of 2017 will see volatile – and possibly – declining

issuance levels. Interest rate increases by the Fed alongside a winding

down of their massive monthly asset purchases will likely result in

higher borrowing costs for issuers. And though having lost some

momentum recently, tax reform proposals by the U.S. House of

Representatives include the removal of the net interest deduction,

which could disincentivise future debt issuance, though we don’t

anticipate any bill passage until late this year, with the effects coming

into play in 2018.

These issuance trends are also present and to a greater extent in

Europe, (Fig. 14). We also generally hold the same set of expectations

for aggregate European issuance for the remainder of this year as

Restrictive Neutral Supportive 2017* 2016* 2015*

Three-Month Euro-dollar Deposit Rates, (%) x 1.15 0.65 0.3

ECB Lending Survey of Large Companies x -1.24 -8.16 -6.61

Yield-to-Maturity of New Corporate Issues Rated 'A', (%) x 2.16 2.10 2.72

Yield-to-Maturity of New Corporate Issues Rated 'B', (%) x 5.64 8.08 5.91

Major Govt Interest Rates on 10-Year Debt x

S&P LCD European Leveraged Loan Index Distress Ratio, % x 2.55 3.04 2.97

Amendments, (#, rolling 12-months) x 16 9 27

Rolling Three-Month Average of All New-Issue Spreads: RC/TLA, (Euribor +, bps) x 350.0 409.4 360.5

Rolling Three-Month Average of All New-Issue Spreads: TLB/TLC, (Euribor +, bps) x 361.5 488.5 394.8

Cov-Lite Institutional Volume: Share of Institutional Debt, (%, rolling three-month average) x 67.7 54.3 28.7

16


well. Some stabilisation of the Pound occurred during the prior two

quarters, however after the somewhat unexpected outcome of this

month’s snap election in the U.K., it is more likely that a further

devaluation will occur, pushing down our dollar-based issuance

figures further. And though more modest in their execution relative to

the current U.S. House proposal, the recent OECD recommendations

for reduced net interest deductions have recently been implemented

in the U.K. this April, potentially acting as a potential deterrent to debt

issuance. Though the OECD recommendations are more generally

targeted at discouraging corporate inversions, and suggest an

allowance for a net interest deduction of about 30% of EBITDA.

Nonetheless, this may hold back some large or highly levered

transactions.

Default Rates Expected to Remain Low, But Risks Remain for Specific

Sectors

S&P Global Fixed Income Research expects the U.S. corporate

trailing-12-month speculative-grade default rate to decrease to 3.3%

by March 2018 from 4.1% in March 2017 and 3.8% in March 2016 (Fig.

15). The energy and natural resources sector has contributed the most

to the default rate in the past 24 months, but the pace of defaults

from this sector has been subsiding. Oil prices have stabilized in

recent months, but another decline would pose major headwinds to

many issuers in the sector, and recently the price of a barrel of West

Texas Intermediate (WTI) has fallen below $45/barrel. Meanwhile

retailers and some consumer products firms are facing structural

changes which could lead to near term and potentially permanent

stress within those sectors. More recently, the consumer/service

sector has experienced increased defaults, and it remains one of the

larger contributors to the speculative-grade population in the U.S. 20

The energy and natural resources and consumer/service sectors

together comprise over a quarter of the current speculative-grade-

rated entities in the U.S. and more importantly, over 55% of all firms

rated ‘CCC+’ or lower. While these two sectors appear to be the

greatest potential sources of future defaults, they are both undergoing

sector-specific structural changes or events that we believe will limit

contagion of credit stress to other sectors.

20

Source: www.spcreditpro.com

http://www.spcreditpro.com/

17


S&P Global Ratings expects the 12-month default rate for

speculative-grade European financial and nonfinancial corporate

issuers that we rate to remain at about 2% by the end of March 2018,

close to recent lows (Fig. 16). Based on credit-related and

macroeconomic factors, we believe the default rate should remain low

over the coming months, although there are some potential risks on

the horizon. However, the proportion of speculative-grade issuers that

we rate in the 'CCC/C' category remains high by recent standards,

reading 6.3% at the end of March 2017, up from 5.9% a year earlier

and 4.8% two years ago. Segmentation by sector reveals significant

polarization, though, with the oil and gas sector in particular still

exhibiting a high negative ratings bias, well above its long-term

average, in contrast with most other sectors.

1For illustrative purposes only. Source: S&P Global Market Intelligence. As of May 31, 2017.

EMEA – Based Targets

0

50

100

150

200

250

April - 31 May 2016 April - 31 May 2017

Number of Private Equity Entry Transactions by RegionApril - 31 May 2016 vs. April - 31 May 2017

Africa

BeNeLux

France

Germany

Middle East

Nordics

RoE

Southern Europe

United Kingdom 0

10

20

30

40

50

60

70


Number of Private Equity Exit Transactions by Region April - 31 May 2016 vs. April - 31 May 2017

Africa

BeNeLux

France

Germany

Middle East

Nordics

RoE

Southern Europe

United Kingdom

0

1

2

3

4

5

6

7

8


Aggregate Private Equity Entry Transaction Values by Region (€bn)

April - 31 May 2016 vs. April - 31 May 2017

Africa

BeNeLux

France

Germany

Middle East

Nordics

RoE

Southern Europe

United Kingdom 0

2

4

6

8

10

12


Aggregate Private Equity Exit Transaction Values by Region (€bn)


Africa

BeNeLux

France

Germany

Middle East

Nordics

RoE

Southern Europe

United Kingdom

Data Pack

0

50

100

150

200

250

300

350

400


Average Entry Transaction Size by Region (€mn)April - 31 May 2016 vs. April - 31 May 2017

Africa

BeNeLux

France

Germany

Middle East

Nordics

RoE

Southern Europe

United Kingdom 0

200

400

600

800

1000

1200

1400


Average Exit Transaction Size by Region (€mn) April - 31 May 2016 vs. April - 31 May 2017

Africa

BeNeLux

France

Germany

Middle East

Nordics

RoE

Southern Europe

United Kingdom

0

50

100

150

200

250

300

350


Number of Private Equity Entry Transactions by Industry April - 31 May 2016 vs. April - 31 May 2017

Consumer Discretionary

Consumer Staples

Energy

Financials

Healthcare

Industrials

Information Technology

Materials

Real Estate

Telecommunication Services

Utilities 0

10

20

30

40

50

60

70

80


Number of Private Equity Exit Transactions by Industry April - 31 May 2016 vs. April - 31 May 2017


Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials


Utilities

Real Estate

Data Pack

EMEA – Based Targets (continued)



0

1

2

3

4

5

6

7


Aggregate Private Equity Entry Transaction Values by Industry (€bn)



Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials


Utilities

Real Estate0

1

2

3

4

5

6

7

8


Aggregate Private Equity Exit Transaction Values by Industry (€bn)



Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities

0

100

200

300

400

500


Average Entry Transaction Size by Industry (€mn)



Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities0

200

400

600

800

1000

1200


Average Exit Transaction Size by Industry (€mn)



Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities

Data Pack

EMEA – Based Targets (continued)


EMEA – Based GPs1

1. The entry transaction averages have been calculated after removing the following regions to avoid over-estimating the trend on the back of a single deal: Asia - Macquarie Infrastructure and Real Assets Pty Limited, The Retail Employees Superannuation

Trust, British Columbia Investment Management Corporation and Qatar Investment Authority acquired Endeavour Energy for €8bn.

0

20

40

60

80

100

120

140

160

180


Number of Private Equity Entry Transactions by Region April - 31 May 2016 vs. April - 31 May 2017

Africa

Asia

BeNeLux

France

Germany

Indian Sub-Continent

Latin America

Middle East

Nordics

North America

RoE

Southern Europe

United Kingdom0

10

20

30

40

50

60


Number of Private Equity Exit Transactions by Region April - 31 May 2016 vs. April - 31 May 2017

Africa

Asia

BeNeLux

France

Germany


Latin America

Middle East

Nordics

North America

RoE

Southern Europe

United Kingdom

0

2

4

6

8

10

12

14


Aggregate Private Equity Entry Transaction Values by Region (€bn)


Africa

Asia

BeNeLux

France

Germany


Latin America

Middle East

Nordics

North America

RoE

Southern Europe

United Kingdom0

1

2

3

4

5

6

7


Aggregate Private Equity Exit Transaction Values by Region (€bn)


Africa

Asia

BeNeLux

France

Germany


Latin America

Middle East

Nordics

North America

RoE

Southern Europe

United Kingdom

Data Pack


0

100

200

300

400

500

600


Average Entry Transaction Size by Region (€mn)

April - 31 May 2016 vs. April - 31 May 2017 3

Africa

Asia

BeNeLux

France

Germany


Latin America

Middle East

Nordics

North America

RoE

Southern Europe

United Kingdom

0

200

400

600

800

1000

1200

1400


Average Exit Transaction Size by Region (€mn)


Africa

Asia

BeNeLux

France

Germany


Latin America

Middle East

Nordics

North America

RoE

Southern Europe

United Kingdom

0

50

100

150

200

250

300

350


Number of Private Equity Entry Transactions by IndustryApril - 31 May 2016 vs. April - 31 May 2017


Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities 0

10

20

30

40

50

60

70

80


Number of Private Equity Exit Transactions by Industry April - 31 May 2016 vs. April - 31 May 2017


Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities

Data Pack

EMEA – Based GPs1 (continued)


Trust, British Columbia Investment Management Corporation and Qatar Investment Authority acquired Endeavour Energy for €8bn.


0

2

4

6

8

10


Aggregate Private Equity Entry Transaction Values by Industry (€bn)



Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities0

1

2

3

4

5

6

7

8


Aggregate Private Equity Exit Transaction Values by Industry (€bn)



Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities

0

20

40

60

80

100

120

140

160

180





Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities0

500

1000

1500

2000


Average Exit Transaction Size by Industry (€mn)



Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities

Data Pack

EMEA – Based GPs1 (continued)


Trust, British Columbia Investment Management Corporation and Qatar Investment Authority acquired Endeavour Energy for 8bn EUR.


VC EMEA – Based GPs2

0

10

20

30

40

50

60

70

80


Number of Venture Capital Entry Transactions by Region April - 31 May 2016 vs. April - 31 May 2017

Africa

Asia

BeNeLux

France

Germany


Latin America

Middle East

Nordics

North America

RoE

Southern Europe

United Kingdom0

50

100

150

200

250


Number of Venture Capital Entry Transactions by Industry April - 31 May 2016 vs. April - 31 May 2017


Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities

0

100

200

300

400

500

600

700

800


Aggregate Venture Capital Entry Transaction Values by Region (€mn)


Africa

Asia

BeNeLux

France

Germany


Latin America

Middle East

Nordics

North America

RoE

Southern Europe

United Kingdom0

100

200

300

400

500

600

700

800

900


Aggregate Venture Capital Entry Transaction Values by Industry (€mn)



Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities

Data Pack

1. The entry transaction averages have been calculated after removing the following transaction to avoid over-estimating the trend on the back of a single deal: Mime Petroleum AS announced that it has received €267mn in funding led by new investor Blue

Water Energy LLP. Energy Deal in 2017


0

5

10

15

20

25

30



April - 31 May 2016 vs. April - 31 May 2017Africa

Asia

BeNeLux

France

Germany


Latin America

Middle East

Nordics

North America

RoE

Southern Europe

United Kingdom0

5

10

15

20

25

30



April - 31 May 2016 vs. April - 31 May 2017Consumer Discretionary

Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities

Data Pack

VC EMEA – Based GPs2 (continued)



Data Pack


VC EMEA – Based Targets2

0

10

20

30

40

50

60

70

80

90

April- 31 May 2016 April - 31 May 2017

Number of Venture Capital Entry Transactions by Region April - 31 May 2016 vs. April - 31 May 2017

Africa

BeNeLux

France

Germany

Middle East

Nordics

RoE

Southern Europe

United Kingdom 0

50

100

150

200

250


Number of Venture Capital Entry Transactions by Industry April - 31 May 2016 vs. April - 31 May 2017


Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate

TelecommunicationServicesUtilities

0

100

200

300

400

500

600

700


Aggregate Venture Capital Entry Transaction Values by Region (€mn)


Africa

BeNeLux

France

Germany

Middle East

Nordics

RoE

Southern Europe

United Kingdom 0

200

400

600

800

1000


Aggregate Venture Capital Entry Transaction Values by Industry (€mn)



Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities




0

5

10

15

20

25

30




Africa

BeNeLux

France

Germany

Middle East

Nordics

RoE

Southern Europe

United Kingdom 0

2

4

6

8

10

12

14

16

18





Consumer Staples

Energy

Financials

Healthcare

Industrials


Materials

Real Estate


Utilities

Data Pack

VC EMEA – Based Targets2 (continued)





Multiples Table

Implied Enterprise Value/EBITDA

EMEA Private Equity Exits 01/04/2016–31/05/2017

M&A01/04/2016–31/05/2017

Consumer Discretionary 12.2 11.2

Consumer Staples 11.3 10.1

Energy 11.6 8.1

Financials 20.2 12.2

Healthcare 13.2 12.4

Industrials 10.4 9.7

Information Technology 15.2 13.1

Materials 7.7 8.3

Telecommunication Services 9.3 7.7

Utilities 9.4 9.6

Real Estate 26.6 19.9

Implied Equity Value/LTM Net Income

EMEA Private Equity Exits 01/04/2016–31/05/2017

M&A01/04/2016–31/05/2017

Consumer Discretionary 17.1 16.5

Consumer Staples 18.8 17.1

Energy 21.3 9.5

Financials 17.1 15.4

Healthcare 30.3 18.9

Industrials 20.1 17.9

Information Technology 21.5 20.3

Materials 14.8 14.7

Telecommunication Services 26.7 18.7

Utilities 15.5 16.1

Real Estate 11.1 15.1

*Multiples highlighted in bold & italics represent the sector average over a 2 year time horizon in order to provide a more comprehensive sector average.



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Previous Issues

Issue 1, March 2014

• EMEA-Based Private Equity Market Settles into a New Normal Post-Financial Crisis

• Information Technology Remains Attractive for PE and VC Firms

Issue s2, June 2014

• Healthy Start to 2014 for EMEA GPs, Despite April Hiccup

• Healthcare: Resilient or Overheating? We examine PE activity pre and post-financial crisis

Issue 3, September 2014

• Pressure from Strategic Buyers Slowing EMEA GPs’ Pace of Investment in Q2

• Asia Capital Sun Rising over Europe: Asian PE investors show growing interest in EMEA-

based targets

Issue 4, January 2015

• 2014: EMEA Still Attractive to Global Private Equity

• IT & Finance heat up - The IT sector attracted the most deals over the course of 2014, with

1701 investments worth €12bn of capital. €33.2bn was invested into the Financial sector in

2014, a 29% increase in deal volume compared to 2013

• Germany: Has the Mittelstand lost its quintessentially strong profile?

Issue 5, April 2015

• UK North-South Divide: Who is Benefitting from UK Private Equity Investments?

• Fall of Oil & Gas Prices: Potential PE Dealmaking Territory

• Private Equity: What’s the Deal with Tax Havens?

Issue 6, July 2015

• European Leveraged Lending: How are PE Firms Taking Advantage of Conditions in the

European Leveraged Finance Market?

• Consumer Confidence Conundrum – EMEA PE Skeptical about Consumer Confidence

Outlook?

• Middle East Sovereign Wealth Funds – Perfect Partners for Mega-Deals

Issue 7, September 2015

• Investment into EMEA Wanes as Regional Issues Accumulate

• Private Equity Shifts Focus Towards Internet Retailers

• Private Equity Exits: Secondaries and IPOs – Buffers and Bull Markets

Issue 8, February 2016

• EMEA Becomes Increasingly Attractive to Global GPs

• EMEA Healthcare Checkup

• The Rise of Cyber Power in Germany

• Have Buyout Holding Periods Reached their Peak?

Issue 9, April 2016

• 2016: Slow Start for EMEA Entries but Exits Skyrocketing

• France: La Belle Vie for Private Equity

• Spanner in the Works for Industrials

• Will Private Equity Push through High-Yield Bond Market Volatility?

Issue 10, July 2016

• Is Investment into EMEA Running Out of Steam?

• Sweden: Still ahead in the Nordic Private Equity Market?

• IT in EMEA Losing Ground to the U.S. and Asia

• Private Equity Sponsors Tap Powerful Direct-Lenders in Bid to Raise Larger Unitranches

Issue 11, October 2016

• EMEA Emerging Markets Flourish Despite Brexit Jitters

• Specialist Mid-Market GPs Face Stiff Competition

• EMEA Consumer Products Losing Ground to US Targets

• UK Large Caps, UK Mid-Caps: Spot Any Difference?

Issue 12, February 2017

• EMEA Fails to Attract Global Private Equity Capital in 2016

• Russia, Czech Republic and Poland lead the way for CEE

• Real Estate and Private Equity: An Affair to Remember

• Asia-Pacific Investors favour North America over Europe

Issue 13, April 2017

• 2017: EMEA Blossoms in the Spring

• France Affected by Counterfactual Thinking?

• Global GPs Cautiously Optimistic Towards the Energy Sector

• Borrowers Hold the Upper Hand in Flooded Leveraged Loan Market


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