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Insights in Private Equity. Kristof Vande Capelle – CFO AFC Finance conference, 7 November 2013. Contents. What is Private Equity and Venture Capital ? How does the PE model work ? The current PE landscape in Europe and Belgium Gimv’s new strategy A few stories ….

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    1. Insights in Private Equity Kristof Vande Capelle – CFO AFC Finance conference, 7 November 2013

    2. Contents • What is Private Equity and Venture Capital ? • How does the PE model work ? • The current PE landscape in Europe and Belgium • Gimv’s new strategy • A few stories … AFC Finance Conference - 07/11/2013

    3. 1. WhatisPrivateEquity, Venture Capital AFC Finance Conference - 07/11/2013

    4. Introduction by EVCA (European Association) AFC Finance Conference - 07/11/2013

    5. Where do we start ? The private equityand venture capitalindustry … Invests professionally in equity and equity-related instruments of private companies Creates liquidity for the investments (portfolio rotation) Raises funds from several sources Grows the value of the companies AFC Finance Conference - 07/11/2013

    6. What do PE players and venture capitalists do? • Replaces existing shareholders • Completely • Buy-outs • Buy-ins • Partially • Replacement capital • Brings additional resources • Growth capital • Mature, cash generating companies Private Equity • Invests in equity and equity-linked instruments of private companies Takes the risks on the successful execution of a business plan and on the growthof the firm Venture capital • Joins with other venture capitalists to provide risk capital to innovative technology companies, in successive financing rounds • Invests in equity and equity-linked instruments of private companies AFC Finance Conference - 07/11/2013

    7. There are many different types of PE players • CVC • Lion Cap • Alpha Funds Captive • ING PE • Fortis PE • KBC PE Institutional investor LP FUND GP Investment manager FUND Investee companies Investee companies Listed investment co • Gimv • 3i • Eurazeo • Capman • Blackstone • KKR funds • Family offices Privateinvestmentco Stock market Co Co Investee companies Investee companies AFC Finance Conference - 07/11/2013

    8. PE companies operate in different markets Size of investments small ------------ midcap------------ large ------------ mega Regional preference mono-country ----------- pan-regional --------------- global Sector preference mono-sector ------------ multi-sector ------------ generalist Target maturity start-up ---------- growth ---------- pre-IPO ----------- PIPE Level of control minority ------------------ co-control ------------------ control Ownership model no involvement - monitoring - mentoring - exec. chairman AFC Finance Conference - 07/11/2013

    9. There is a range of portfolio activism styles… Collaborative Directive Hands-off “Let’s figure out what to do together” “Do what we tell you to do” “Do what you said you would do when we bought the company” • Traditional approach • Turnarounds • Certain MDs • Leading-edge PE firms Source: Bain analysis AFC Finance Conference - 07/11/2013

    10. 2. How does the PE model work ?

    11. The privateequity ‘model’… (buyouts) (… if all goes to plan) 40% asset value Assets 140 Debt 40 Equity 100 Debt 60 Assets 100 Assets 100 Debt 30 250% equityvalue Equity 70 Equity 40 Market value beforebuyout Exit value Buyout value Time frame 2-7 years 11 AFC Finance Conference - 07/11/2013

    12. 180 100 Money multiple 4x Equity Debt Debt redemption 3 drivers of return: growth, multiple and deleverage • Value at entry 20 EBITDA x multiple 5 = 100 enterprise value • Value at exit 30 EBITDA x multiple 6 = 180 enterprise value • Equity value = enterprise value – net financial debt AFC Finance Conference - 07/11/2013

    13. Shareholder value from 40 to 160 (money multiple 4) 3 drivers of return: growth, multiple and deleverage 13 AFC Finance Conference - 07/11/2013

    14. Private equity players create value in severalways AFC Finance Conference - 07/11/2013

    15. Over time, the way PE creates value has shifted Source: BCG-IESE/Goldman Sachs, February 2008 15 AFC Finance Conference - 07/11/2013

    16. Earning differentiated returns becomes more difficult • More competitor funds, with large capital overhang • Efficient and competitive sales processes, even on middle-market transactions => price pressure (multiple play ) • Less leverage and more expensive debt on new investments • Multiple contraction on 2006-08 investments • Only “controllable” way to earn differentiated returns is to add value • to portfolio companies • Leverageand multiple arbitrage do notaddanythingto the competitiveposition of the company and are thereforenotsustainable Source: Bain analysis AFC Finance Conference - 07/11/2013

    17. We growbusinesses at Gimv 10 years of valuecreation at Gimv (by source)... ... compares favourably to European PE exits (06-08) Source: Vlerick analysis Source: E&Y AFC Finance Conference - 07/11/2013

    18. 3. Current PE landscape in Europe and Belgium AFC Finance Conference - 07/11/2013

    19. Market remains difficult for European PE investments in 1H13 • Total invested amount in H1 2013 is EUR 13,1 billion, which is a 19%decline compared to H1 2012 • H2 typically is a more active period • Some first encouraging signs that more active deal market is achievable • Increasing confidence • Appetite for deals • Improving debt market • Yet, still challenging market and deals take longer to complete PE investments in Europe (in value) AFC Finance Conference - 07/11/2013

    20. Exits equal investments for first time since start of the crisis • Total divestments (at cost) for H1 2013 are EUR 12.9 billion, which is a 16% increase compared to 1H12, and level with investments for the first time since start of the crisis. • Private equity houses are divesting their portfolio ahead of raising new funds. • Trade sale is the preferred divestment route (47% of all exits so far this year) • European IPO proceeds in H1 2013 amount to EUR 11.7 bn, already exceeding the total amount of 2012, but still way below pre-crisis levels • Higher valuation, lower volatility and improving European market indices provide a somewhat better IPO climate AFC Finance Conference - 07/11/2013

    21. Gimv investments & exits versus the European PE market • Investment level of Gimv follows the market cycle, but was less hit than the market in 2008-2009 (launch of Gimv-XL fund with important investment activity) • Healthy deal flow size resulted in recent pick-up in investment activity for Gimv, despite hesitating markets • Exits on average above market levels over the last years (especially in 2012) AFC Finance Conference - 07/11/2013

    22. 1H 2013 was weak in Belgium but no reason for concern, 2H 2013 looks promising AFC Finance Conference - 07/11/2013

    23. Competitive landscape has been changing Captives International PE Holdings ‘Local’ PE groups Family PE vehicles De Eik AFC Finance Conference - 07/11/2013

    24. 4. Gimv’s new strategyand the changing PE model? AFC Finance Conference - 07/11/2013

    25. Gimv, a pioneer in continental Europe since 1980 UNIQUE STRENGTHS & DIFFERENTIATION • Funding from strong balance sheet, complemented with specialized co-investment funds • Long-term active support to portfolio companies • Internationalreach with a local touch, strong brand & network • Focus on value creation via 4 platforms • Flexibility in investment instruments and exit timing, given evergreen fund structure FACTS & FIGURES • Listed on NYSE-Euronext Brussels • EUR 1.8 billion AUM • 32 years of expertise in PE & VC • 97 employees in 4 offices • Average return of 11.7% (32 years) DIVERSIFIED PORTFOLIO AFC Finance Conference - 07/11/2013

    26. Growth AuM to about EUR 1.8 billion IPO (in EUR mio) AFC Finance Conference - 07/11/2013

    27. Cross country platform strategy to partner with the next generation entrepreneurs • Consumer 2020Companies with a clear vision on the needs and preferences of the future consumer • Health & CareHealth and care solutions for the ageing, health- and cost-conscious society • Smart IndustriesSmart, technology enabled solutions and added value services • Sustainable CitiesServices, utilities & infrastructure with a sustainable community impact 4 platforms withdedicatedandskilled team acrossGimv’s home markets: Belgium, the Netherlands, France and Germany AFC Finance Conference - 07/11/2013

    28. Gimv key investment criteria STRATEGIC NEEDS 1. Clear company vision 2. Clear investment thesis for growth and value creation 3. Sustainable and defendable competitive advantage 4. Strong management AFC Finance Conference - 07/11/2013

    29. Investment process DEAL FLOW SourcingInitial analysis of the Business Plan “Building value through active participation” EXPERT DUE DILIGENCE Due diligence Letter of Interest to analyze all aspects in depth FAST DECISION MAKING CLOSING Deal making Final negotiations result in Term sheet BOARD SEAT / OBSERVER Business building Solid collaboration / ‘180 days plan’ / add Value MAXIMIZE SHAREHOLDER VALUE Prepare for exit Exit horizon of 5 to 7 years on average IPO Trade Sale M&A Business building AFC Finance Conference - 07/11/2013

    30. 5. A few stories … AFC Finance Conference - 07/11/2013

    31. VCST Niche manufacturer of mission critical and high value added precision components (engine gears, transmission shafts & brake components) for the automotive sector. VCST is active in the European as well as in the North American market with factories in St-Truiden (Belgium - head office), Reichenbach (Germany), Leon (Mexico), Changzou (China). Increase exposure towards Asia, set up a China operation and a European low cost manufacturing plant, look for international add-ons Growth ambition to reach > EUR 200 million revenues in 2015 Excellent management team Strong historic track record Strong customer lock-in Niche player with global footprint active in high value added automotive components Attractive deal structure Gimv provided growth capital in a restructuring transaction in August 2009, bought out LRM in December 2011 and today owns 79.8% AFC Finance Conference - 07/11/2013

    32. Greenyard Foods (formerPinguinLutosa) Greenyard Foods, headquartered in Westrozebeke (Belgium), specializes in the development, production and sale of deep-frozen and canned food products: vegetablesand ready-made meals. After the takeover of the frozen vegetable activities of the French CECAB group and the acquisition of ScanaNoliko, the group is one of the largest vegetable processors in Europe. The proceeds were used for the refinancing of the acquisition of ScanaNoliko. This transaction allowed the company to work on further diversification of products and end-markets Fits perfectly Gimv-XL’s strategy of supporting successful growth companies in Flanders Combination of PinguinLutosa and ScanaNolikohas lead to a merged platform at the forefront of the food sector in Europe Management with vision and entrepreneurship Gimv invested EUR 60 million via the Gimv-XL fund. AFC Finance Conference - 07/11/2013

    33. Oldelft Ultrasound Gimv acquired a majority interest in Oldelft Ultrasound from AlpInvest and invested alongside the existing management team of the company. With this investment Gimv will strongly support the company’s plans for further innovation in new products and applications and international growth with new and existing customers Gimv identified various market and strategic opportunities Company provides critical component for medical imaging systems with high value added Strong and maintainable global market position, incl. strong and embedded relationship with key OEMs Positive market growth drivers in ultrasound imaging Additional growth potential in new products and new applications of existing products Oldelft Ultrasound, headquartered in Delft (the Netherlands), is a high-tech medical diagnostic company, specialised in the development, manufacture and service of innovative miniature ultrasound transducers applied in cardiac imaging for children and small adults. The company currently employs around 50 people and has a leading global position in the supply of high end ultrasound transducers to global OEMs AFC Finance Conference - 07/11/2013