Title: Where is European Private Equity Heading? - 2005 European Private Equity Statistics
1Where is European Private Equity Heading? -
2005 European Private Equity Statistics
- Gemma Postlethwaite, Thomson Financial
- 16 March 2006
2Investment 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
3A 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
4Investments 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
5Is there a leverage bubble?
Source Thomson Financial NB Based on calculated
or reported ratios, for transactions were the
data was available
6Exit 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
7Performance 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
8Investment Benchmarks European Sample
9European 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
103-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
11All 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
12Top 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
13Where 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
14Conclusion 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
15Conclusion 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 -
16How 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
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