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

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

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

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

  2. 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 Investment Activity Methodology

  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 M&A Activity, Europe* IPOActivity, Europe* *Public and private deals Source: Thomson Financial Source: EVCA/Thomson Financial / PricewaterhouseCoopers

  7. 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 Performance Methodology

  8. Investment Benchmarks European Sample

  9. Short term indicators show good performance European Private Equity Funds Formed 1980-2005Net IRRs to Investors, Investment Horizon Return as of 31-Dec-2005 Source: Thomson Financial / EVCA

  10. 3-year venture IRR moves into positive territory European Venture3-,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 Source: Thomson Financial / EVCA

  13. Where is performance coming from? European Private Equity Funds Formed 1980-2005 Source: Thomson Financial / EVCA

  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. How to contribute data? Contact the Thomson Research Specialists: Performance:Cornelia Andersson cornelia.andersson@thomson.com+44 20 7014 1202 Investment activity: Margherita Del Bianco margherita.delbianco@thomson.com +44 20 7566 1934

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