2010 EVCA Buyout Review An in-depth outlook of the buyout segment in Europe October 2010 Sponsored by

2 Impact of the Economic Environment on Deal Making

3 Improvement in economic environment helps boost buyout investments Source: EVCA calculation based on Eurostat and PEREP_Analytics EU GDP growth and index of buyout investment activity (index by amount)

4 Debt market shows signs of revival Senior loan volume - LBO transactions Source: Standard & Poor's LCD The data includes all private equity-related transactions, including refinancings and recapitalisations.

5 Institutional funding is still insignificant Source: Standard & Poor’s LCD Pro rata loans are loans made up of revolving credit facility and an amortising term loan. Pro rata loans are syndicated to banks as opposed to institutional loans, which are term-loan facilities with a portion carved out for non-bank (institutional) investors. European pro-rata vs. institutional LBO activity

6 Leveraged loan prices have not fallen Rolling 3-month weighted average spreads of all European new-issue LBOs Source: Standard & Poor’s LCD Wtd. avg. pro rata spread (WAPR) is the average RC/TLA spread weighted by sizes of the RC and TLA tranches. Wtd. avg. institutional spread (WAIS) is the average TLB/TLC spread weighted by the sizes of the TLB and TLC tranches.

7 80% of outstanding European leveraged loans mature Source: Standard & Poor’s LCD Based on all facilities in the European leveraged loan index (ELLI) universe, priced and unpriced. Maturity schedule by par outstanding as of 30 June 2010

8 Leverage multiples converge across deal size ranges Source: CMBOR/Barclays Private Equity/Ernst & Young This sample includes all buyouts, not only private equity-backed buyouts. However, as non-private equity-backed buyouts are typically smaller in size (mainly sub-€10m deals), the data is still representative for private equity-backed buyouts. Debt-to-EBIT ratios for buyout transactions

9 Large deals get higher equity share than smaller deals in H EquityMezzanineDebtLoan noteOther finance Source: CMBOR/Barclays Private Equity/Ernst & Young Average deal structures for European private-equity-backed buyouts

10 Purchase multiples increase at the upper end of the market Deal size range H €0m-€10m €10m-€25m €25m-€50m €50m-€100m €100m-€250m Over €250m Average P/E* ratios for European private-equity-backed buyouts Source: CMBOR/Barclays Private Equity/Ernst & Young * P/E ratios are defined as deal price divided by EBIT.

11 Evolution of Buyout Activity 2007 – H1 2010

12 Fundraising improves but remains challenging Amounts in €m H Growth capital 1,7162, ,485 Buyout 62,54366,6619,1075,890 Mezzanine 4, Total fundraising* 69,15470,55210,5948,375 Source: EVCA/PEREP_Analytics * Throughout the presentation, “total fundraising” refers to funds raised by buyout, growth and mezzanine funds Fundraising by fund stage focus (intermediate closings in the year)

13 The majority of fundraising activity is concentrated in UK & Ireland Source: EVCA/PEREP_Analytics Regional fundraising (% of European total)

14 Banks continue to be the leading source of capital Source: EVCA/PEREP_Analytics Percentages are calculated on the funds raised for which the source is known. Funds raised by type of investor (% of amount)

15 US LPs decrease in importance, with UK LPs maintaining their lead Ranking H The US The UK 2 The USFrance 3GreeceAustralasiaFranceAustralasia 4 CanadaItalyThe US 5GermanyFranceGermanyBelgium Source: EVCA/PEREP_Analytics Ranking of top limited partners by location (per European fundraising year)

16 Average fund sizes are on the rise Amounts in €m H Fund stageAmoun t Nr of funds Avg fund size Amoun t Nr of funds Avg fund size Amoun t Nr of funds Avg fund size Amoun t Nr of funds Avg fund size Growth1, , , Buyout57, , , , Mezzanine4, , Independent funds raised63, , , , Final closings by fund stage focus (cumulative amount raised at final closing) Source: EVCA/PEREP_Analytics

17 UK & Ireland and Benelux see more final closings than in full-year 2009 Source: EVCA/PEREP_Analytics Final closings by fund region (by number of funds closed)

18 € m is the most popular fund size range in H Source: EVCA/PEREP_Analytics Final closings by fund size range By number of funds By cumulative amount raised €bn

19 Most buyout funds are not sector specific Amounts in €m H Fund sector focusAmountNr of funds AmountNr of funds AmountNr of funds AmountNr of funds Agriculture, chemicals and materials Business and industrial products and services 1, Consumer products, services and retail 2, Energy and environment Financial services ICT Life sciences001, Generalist57, ,570719, ,23918 Independent funds raised63, , , ,71121 Final closings by fund sector focus Source: EVCA/PEREP_Analytics

20 Investment levels start to recover, expected to reach 2005 levels by year-end Source: EVCA/PEREP_Analytics for 2007-H data. For prior years’ data: EVCA/Thomson Reuters/PriceWaterhouseCoopers Investments by European private equity firms- evolution

21 H investment into European companies has already reached 80% of the full-year 2009 amount Source: EVCA/PEREP_Analytics Investments into European portfolio companies - evolution

22 GP proximity to investee companies increases in importance during the crisis Amounts in €m H Geographic origin of investments AmountNumber of cos AmountNumber of cos AmountNumber of cos AmountNumbe r of cos Domestic 42,8851,50933,8401,59813,1481,38011, Intra-European 19, , , ,94085 Outside Europe 3,403421, Total investment 65,4001,76946,1911,88918,8691,60315, Investments by geographic origin Source: EVCA/PEREP_Analytics

23 Average investment size in UK & Ireland more than doubles on 2009 Source: EVCA/PEREP_Analytics Average deal size by region

24 The UK & Ireland’s domination as investment markets further increases in H % of amount% of number of companies Geographic destination of investments H H Benelux12%7%10%4%10%8%12%7% CEE region3%5%13%3%5% 6%4% DACH region18%20%13%15%16%18%22%23% France17% 12%11%20%30%19%17% Nordic region10%9%13%11%12% 14%15% Southern Europe11%17%15%8%13%12%11%9% UK & Ireland29%26%23%49%24%15%16%25% Europe100% Source: EVCA/PEREP_Analytics Investments by region

25 Most capital is sourced domestically. The Nordic region has the most active intra-regional cross-border flows Regional cross-border flows for H % of amount% of number of companies Source: EVCA/PEREP_Analytics

26 Most companies attract growth capital in 2009-H versus buyout in Amounts in €m H Stage distribution of investments AmountNumber of cos AmountNumbe r of cos AmountNumber of cos Amoun t Number of cos Growth5, , , , Rescue/ turnaround Replacement capital1, , , ,40662 Buyout58,1281,26036,9441,11811, , Total investment65,4001,76946,1911,88918,8691,60315, Investments by financing stage Source: EVCA/PEREP_Analytics

27 Growth deals dominate across most regions. France and Nordic regions are the exception with buyouts as the single largest subset Investments by region and stage in H (% of number of companies) Source: EVCA/PEREP_Analytics

28 Buyouts recover most of the lost value since 2007 in average investment size Source: EVCA/PEREP_Analytics Investments by stage of financing (average amount of equity invested per company)

29 In H1 2010, mid-market deals account for 45% of the transaction value (vs. large and mega deals being 70% of TV in 2007), nearly 90% of the companies are small buyouts (vs. 60% in 2007) Equity vs. transaction value* by deal size 2007 H Source: EVCA/PEREP_Analytics * Transaction value includes the contributions of all co-investors in a deal and the leverage. Therefore, the difference between private equity funds’ contribution (“equity value”) and transaction value consists of two parts: the contributions of syndication partners other than private equity firms (such as LP co-investors, corporate co-investors, financial institutions) and leverage.

30 The largest source of buyout deals in H is private equity firms (secondary buyouts) by amount, and family & private owners by number of companies financed Source: EVCA/PEREP_Analytics Percentages are presented for the buyout deals where the source is known. Sources of buyouts % of amount invested% of number of companies

31 Most sectors register an uplift in average investment size on 2009 Source: EVCA/PEREP_Analytics Average size of investment per company - sector overview

32 Consumer goods & retail is the most appealing sector in H Source: EVCA/PEREP_Analytics Amount invested by sector €million

33 More new investments for PE firms in H prove the recovery of the investment market Source: EVCA/PEREP_Analytics Initial versus follow-on investments (% of number of companies)

34 Follow-on deals are bigger than initial investments in France and the DACH region Source: EVCA/PEREP_Analytics Initial versus follow-on investments by region – H (average amount invested per company)

35 Syndication in buyouts further decreases in H Source: EVCA/PEREP_Analytics Syndication by stage (% of amount)

36 The average amount invested in clubbed deals is lower than in non-syndicated deals in France and Benelux Source: EVCA/PEREP_Analytics Syndicated versus non-syndicated deals by region – H (average amount invested per company)

37 In H1 2010, 57% of European companies financed by buyout firms are SMEs Over 1, ,000 Up to 250 (SMEs) Number of employees: Source: EVCA/PEREP_Analytics Investments by number of employees

38 The divestment market shows signs of revival with €7bn divested at cost in H Source: EVCA/PEREP_Analytics Divestments at cost from European portfolio companies - evolution

39 40% of the European companies divested by private equity firms are located in the DACH region Source: EVCA/PEREP_Analytics Divestments by location of the portfolio company – H1 2010

40 Trade sales have not picked up as expected in H Source: EVCA/PEREP_Analytics Divestments by exit method (% of number of companies)

41 Life sciences is the most divested sector in H Source: EVCA/PEREP_Analytics Divestments by sector (excluding write-offs) (% of amount at cost divested)

42 Close to half of the H write-offs are in consumer services Source: EVCA/PEREP_Analytics Write-offs by sector (% of amount at cost divested)

43 Buyout Performance as of December 2009

44 The long-term performance of the buyout industry remains robust Funds formed MultiplesMultiples (as % of TVPI) Fund sizeSample sizeNet pooled IRR DPIRVPITVPIDPIRVPI Small %26% Mid-market %31% Large %25% Mega %43% All buyout %37% Source: EVCA/Thomson Reuters Annualised net pooled IRR from inception to

45 Top-quarter and top-half returns remain strong at 30.6% and 19.7% respectively Funds formed Top-quarter net pooled IRR (Top-quarter funds formed ) Top-half net pooled IRR (Top-half funds formed ) Fund sizeSample sizeTop-quarter pooled IRR Overall upper quartile IRR* Sample sizeTop-half pooled IRR Overall median IRR** Small Mid-market Large Mega All buyout Source: EVCA/Thomson Reuters * Entry point that funds have to meet or exceed as return in order to become part of top-quarter funds. ** Entry point that funds have to meet or exceed as return in order to become part of upper-half funds. Top-quarter and upper-half net pooled IRR as of

46 The spread of returns across the four performance quarters has narrowed in 2009 Funds formed Fund sizeNet pooled IRR Upper quartile Net pooled top quarter IRR Small Mid-market Large Mega All buyout % -18.9% 17.0% Net IRR Percentile 11.3% 30.6% 6.2% -2.7% Net pooled for the quarter Source: EVCA/Thomson Reuters Buyout performance per quarter as of

47 Buyout investments during downturns generate superior performance Funds formed : Fund sizeIRRDPIIRRDPIIRRDPIIRRDPIIRRDPIIRRDPI Small Mid-market Large Mega All buyout Source: EVCA/Thomson Reuters Annualised net pooled IRR by vintage years as

48 Three-year IRRs reflect the impact of the crisis Funds formed Fund size1-year IRR3-year IRR5-year IRR10-year IRR Small Mid-market Large Mega All buyout Source: EVCA/Thomson Reuters Short-, medium-, and long-term returns reflected by net horizon IRRs to

49 Buyout performance stands at 8.3% on the 5-year horizon and 8.0% on the 10-year horizon Source: EVCA/Thomson Reuters

50 Industrial/energy funds once more achieve the highest returns. Life sciences is the only sector that registers a modest improvement in performance on 2008 Funds formed Fund sizeSample sizeNet IRR to Dec 2009 Net IRR to Dec 2008 Net IRR to Dec 2007 Net IRR to Dec 2006 Net IRR to Dec 2005 Consumer related ICT Industrial/energy Life sciences Other Source: EVCA/Thomson Reuters Performance by sector focus