Where is European Private Equity Heading? - 2005 European Private Equity Statistics

1
Where is European Private Equity Heading? -
2005 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 at time of divestment
  by PE firm

3
A fund raising all-time record at 60bn
European Private Equity Funds Raised

• 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

Source EVCA/Thomson Financial/
PricewaterhouseCoopers
4
Investments divestments growing too
billion

• Not too much capital overhang
• 66 of investments in 2005 related to buyout
  deals, vs. 70 in 2004

Source EVCA/Thomson Financial/
PricewaterhouseCoopers
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
Divestments Breakdown by Type
MA Activity, Europe
IPO Activity, Europe
Public and private deals
Source EVCA/Thomson Financial /
PricewaterhouseCoopers
Source Thomson Financial
7
Performance Methodology

• Data collected from GPs and LPs historically for
  1000 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

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Investment Benchmarks European Sample
9
European Private Equity Funds Formed
1980-2005Net IRRs to Investors, Investment
Horizon Return as of 31-Dec-2005
Short term indicators show good performance
Stage 1 YR 3 YR 5 YR 10 YR 20 YR

All Venture 25.4 0.6 -4.0 5.3 5.7
Buyouts 20.9 7.9 5.0 12.6 12.4
Generalist 51.2 1.2 -4.8 9.7 8.6
All Private Equity 24.1 5.2 1.2 10.2 9.6
Source Thomson Financial / EVCA
10
3-year venture IRR moves into positive territory
European Venture 3-,5-,10-Year Rolling IRRs
5.3
0.6
-4.0
Source Thomson Financial / EVCA
11
All horizon IRRs in positive territory for
buyouts and climbing
European Buyouts3-,5-,10-Year Rolling IRRs
12.6
7.9
5.0
Source Thomson Financial / EVCA
12
Top quarter funds return 23
European Private Equity Funds Formed 1980-2005
Stage Pooled IRR Minimum value Top Quarter Pooled IRR Top Quarter

All Venture 5.6 6.1 23.9
Buyouts 12.4 17.1 35.3
Generalist 8.6 8.1 12.4
All Private Equity 9.6 10.4 23.0
Source Thomson Financial / EVCA
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Where is performance coming from?
European Private Equity Funds Formed 1980-2005
Stage DPI RVPI TVPI
All Venture 0.60 0.61 1.21
Buyouts 0.80 0.60 1.40
Generalist 0.97 0.40 1.37
All Private Equity 0.78 0.57 1.35

Source Thomson Financial / EVCA
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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

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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

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How to contribute data?

• Contact the Thomson Research Specialists
• Performance Cornelia Andersson
  cornelia.andersson_at_thomson.com 44 20 7014 1202
• Investment activity Margherita Del Bianco
• margherita.delbianco_at_thomson.com
• 44 20 7566 1934