Where is European Private Equity Heading? - 2005 European Private Equity Statistics Gemma Postlethwaite, Thomson Financial 16 March 2006.

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Presentation transcript:

Where is European Private Equity Heading? European Private Equity Statistics Gemma Postlethwaite, Thomson Financial 16 March 2006

2 Investment Activity Methodology  Data collected from GPs via survey questionnaires, response rate 62.3% for 1,450 PE firms  Europe is defined as location of the PE fund  Fundraising – only formal closings included  Investments – based on completion date, only equity value (debt only if provided by PE fund)  Divestments – at cost, and a t time of divestment by PE firm

3 A fund raising all-time record at €60bn Source: EVCA/Thomson Financial/ PricewaterhouseCoopers  Sustainable level?  77% of funds raised in 2005 allocated to buyout, vs. 65% in 2004  Banks are back – why?  Pension funds invest massively –baby boomers with a pension shortfall  US fund raising also a record with $173bn, but second to 2000 European Private Equity Funds Raised

4 Investments & divestments growing too € billion Source: EVCA/Thomson Financial/ PricewaterhouseCoopers  Not too much capital overhang  66% of investments in 2005 related to buyout deals, vs. 70% in 2004

5 Is there a leverage bubble? Source: Thomson Financial NB: Based on calculated or reported ratios, for transactions were the data was available

6 Exit prospects look healthy Source: EVCA/Thomson Financial / PricewaterhouseCoopers Divestments – Breakdown by Type M&A Activity, Europe* IPO Activity, Europe* Source: Thomson Financial *Public and private deals

7 Performance Methodology  Data collected from GPs and LPs historically for European funds  Returns calculated at fund level, and net of management fees and carried interest  All calculations done by Thomson based on actual cash flows  Pooled IRR: IRR of a group of funds where cash flows have been aggregated together before IRR calculation  Investment horizon return: IRR calculated with Net Asset Value as capital outflow at beginning of period, Net Asset Value at end of period, and actual cash flow in between  DPI: Distribution (in cash or stock) divided by Paid-In capital (‘realised’ ratio)  RVPI: Residual Value divided by Paid-In capital (‘unrealised’ ratio)  TVPI: Total Value divided by Paid-In, sum of DPI and RVPI

8 Investment Benchmarks European Sample

9 European Private Equity Funds Formed Net IRRs to Investors, Investment Horizon Return as of 31-Dec-2005 Stage1 YR3 YR5 YR10 YR20 YR All Venture Buyouts Generalist All Private Equity Source: Thomson Financial / EVCA Short term indicators show good performance

10 3-year venture IRR moves into positive territory +0.6% +5.3% Source: Thomson Financial / EVCA European Venture 3-,5-,10-Year Rolling IRRs -4.0%

11 All horizon IRRs in positive territory for buyouts and climbing +7.9% +12.6% Source: Thomson Financial / EVCA European Buyouts 3-,5-,10-Year Rolling IRRs +5.0%

12 Top quarter funds return 23% StagePooled IRR Minimum value Top Quarter Pooled IRR Top Quarter All Venture Buyouts Generalist All Private Equity Source: Thomson Financial / EVCA European Private Equity Funds Formed

13 Where is performance coming from? StageDPIRVPITVPI All Venture Buyouts Generalist All Private Equity Source: Thomson Financial / EVCA European Private Equity Funds Formed

14 Conclusion: Record Activity  Fundraising record at €59.5bn  Pension funds and banks - main investors with 57.5%  2005 investments steady at €38.5bn, expected to go above €43bn on final data set  Buyouts represent 65.8% by amount invested  Venture represent 72.6% by number of investments  Divestments up 23% at €24.0 billion  Trade sale continues to be the most popular exit route with 24.6% of the total amount divested  Write-offs reduced to 5.5% of total amount divested

15 Conclusion: Improved Performance  Long-term performance  Stays constant at around 10% net IRR  Robust returns for top quarter funds: 35.3% for buyout and 23.9% for venture funds.  Shorter-term performance  Overall 3-year rolling IRR moves up to 5.2% IRR with both buyout and venture returns in positive territory  1-year rolling IRR is an impressive 20.9% for buyout and 25.4% for venture funds

16 Contact the Thomson Research Specialists: Performance: Cornelia Andersson Investment activity: Margherita Del Bianco How to contribute data?