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<p>European PE Breakdown 2017 2Q In partnership with FINANCIAL TRANSACTIONS & REPORTING | MARKETING & COMMUNICATIONS FOR REGULATED INDUSTRY | CUSTOMER CONTENT & COLLABORATION SOLUTIONS Kick back this summer, let Merrill secure the deal. MERRILL DATASITE Our award-winning Virtual Data Room is used by thousands of leading organisations, worldwide. These organisations trust our team of highly qualified experts to handle their most confidential transactions. Simple. Safe. Secure. Merrill's technology solutions will take the stress out of your next deal. To learn how we can help you, contact us now: +44 20 3031 6300 info@merrillcorp.com www.merrillcorp.com 1,000,000,000+ PAGES UPLOADED 46,000+ VIRTUAL DATA ROOM PROJECTS SECURED SINCE 2003 40,000+ M&A TRANSACTIONS SINCE 2003 22 TECHNOLOGY AWARDS WON IN THE LAST DECADE Merrill Communications LLC. All rights reserved. All trademarks are property of their respective owners. Credits & Contact PitchBook Data, Inc. JOHN GABBERT Founder, CEO ADLEY BOWDEN Vice President, Market Development & Analysis Content NICO CORDEIRO Analyst DYLAN E. COX Analyst KORY HOANG Data Analyst JENNIFER SAM Senior Graphic Designer Contact PitchBook pitchbook.com RESEARCH reports@pitchbook.com EDITORIAL editorial@pitchbook.com SALES sales@pitchbook.com Introduction 4 Overview 5-6 US-based Investor Activity 7 Deals by Sector & Size 8 Exits 9 Fundraising 10 League Tables 11 Methodology 12 Contents COPYRIGHT 2017 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and retrieval systems without the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment. 3 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY The PitchBook Platform The data in this report comes from the PitchBook Platformour data software for VC, PE and M&A. Contact sales@pitchbook.com to request a free trial. The future of European PE looks promising Introduction NICO CORDEIRO Analyst Key takeaways Deal volume is down, but deal value is off to a strong start with an estimated 201.8 billion of capital invested over 1,209 deals in 1H 2017. As the political uncertainty in Europe subsides, we expect this strong deal flow to continue throughout the rest of the year, as PE firms put 195.1 billion in dry powder to work. Exits via corporate acquisitions continue their downward trend, on pace for a 33% year-over-year decrease in both value and volume. Weaker corporate activity has reduced exit opportunities, but on the flip-side has eased pricing pressures, which resulted in median EV/EBITDA multiples dropping from 9.2x in 2016 to 8.3x through the first half of this year. So far, the fear of negative economic consequences resulting from Brexit has done little to deter PE investors. Through the first half of the year, 36% of all capital invested in Europe by PE shops was placed in UK-based companies with 60.3 billion invested over 410 deals. European PE firms raised 41.6 billion in commitments over 54 funds through the first half of the year. At the current pace, the European PE industry will raise the most amount of capital in our dataset since 2007. In many ways, European PE activity mirrors the PE landscape in the United States. Deal and exit volumes are on a downward trend and looking at 20% or greater year-over-year decreases if the current pace continues. Despite the slowdown in the rate of investing, fundraising continues to boom, with European PE on pace to surpass the amount of capital raised in 2007the highest amount of capital raised in our dataset. It will be interesting to see how the rest of the year plays out now that significant political uncertainty appears to be in the rear-view mirror for the time being. Beginning this quarter, we've included estimates on top of the usual deal flow data that our readers are accustomed to. Due to the nature of private market data, information often does not become available until well after a transaction takes place, so shifts tend to occur over time. With these new estimates, we aim to provide an even more accurate picture of the private markets. Please see the methodology page of this report for more details. We hope this report is useful in your practice. As always, feel free to send any questions or comments to reports@pitchbook.com. 4 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY Sourcing for better value Overview European PE activity Median PE deal size ($M) Source: PitchBook. *As of 6/30/2017 Unknown deal values are estimated based on known figures. Source: PitchBook. *As of 6/30/2017 Deal value remains strong 201.8 billion (estimated) of capital was invested over 1,209 (estimated) deals throughout Europe during the first half of the year. If the current pace continues, we will see a 23% decrease in the number of deals, but the amount of capital invested will be nearly even with 2016. Given fewer deals but greater capital flows, it is unsurprising that the median deal size trended upward to 29.3 million, the highest median in our dataset since 2007. B2B companies continue to be the sector of choice for PE firms, accounting for 36% of all deals completed this year. However, IT continues to see increased activity, accounting for 21% of deals completed. That proportion is well above the 10-year average of 13% of deals annually. We are witnessing a similar trend globally as PE firms, faced with high valuations and stiff competition, search for companies with higher margins and greater growth potential. Multiples fall Despite greater deal sizes, median valuation/EBITDA multiples fell to 8.3x on deals completed through the first half of the year, which is the lowest median valuation/ EBITDA multiple since 2013. This is nearly a full 1x cheaper than in 2016. We believe a steep decline in strategic acquisitions helped ease pricing pressures for PE acquisitions through the first two quarters. PE deal flow is expected to strengthen through the rest of the year for four reasons. 227100201234225247358476370183201.8 est. 2,400 1,617 2,275 2,611 2,451 2,552 3,005 3,344 3,132 1,209 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Deal Value (B) Es mated Deal Value ($B) # of Deals Closed Es mated # of Deals Closed $25 $29.3 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 5 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY Sourcing for better value Overview, continued Median European PE buyout multiples UK PE activity Source: PitchBook. *As of 6/30/2017. Note: The sample size for debt percentages was insufficiently robust on a normative basis, hence the asterisk. 5.0x2.7x3.9x4.3x4.1x4.4x5.4x5.1x5.2x4.7x*4.3x2.6x4.2x4.3x4.1x3.5x4.0x4.0x4.1x3.6x9.3x 5.3x 8.1x 8.6x 8.3x 7.9x 9.4x 9.0x 9.2x 8.3x 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Debt/EBITDA Equity/EBITDA Valua on/EBITDA 512350505058851088952617 405 623 674 674 794 916 1,024 930 410 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Deal Value (B) Deal Count Source: PitchBook. *As of 6/30/2017 One, the political uncertainty surrounding the European Union during 2016 continues to fade. Second, valuation multiples have decreased. Third, European PE firms hold 195.1 billion in dry powder as of the end of 2016. Lastly, loose credit policies have provided steady leverage opportunities, evidenced by the fact median debt levels remain unchanged with a roughly 56% debt-to-equity ratio since 2010. What Brexit? The UK region saw 51.8 billion in total value over 410 deals, signifying positive change in terms of PE activity since the vote to exit the EU. This equates to 36% of all deals completed in Europe so far this year and is well above the long-term average of 28%. Without a change in that current trend, UK companies are on pace to receive the greatest percentage of PE deal flow in our dataset. PE investors remain optimistic about the UK economy despite the continuing narrative suggesting negative economic consequences as withdrawal from the EU moves forward. 6 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY US-based investor activity w/o European investor participation European PE activity with US-based investor participation Source: PitchBook. *As of 6/30/2017 Unknown deal values are estimated based on known figures. Source: PitchBook. *As of 6/30/2017 Unknown deal values are estimated based on known figures. US PEGs ramping up US-based Investor Activity 7027556171691131528855424 268 358 459 446 451 610 657 584 224 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Deal Value (B) # of Deals Closed 22112934323465685137187 116 185 237 220 238 322 341 294 128 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Deal Value (B) # of Deals Closed US firms look abroad 20% of deals completed in Europe during the first half of the year included some form of capital from US investors, totaling 224 deals and 55 billion in deal value. This is up about 2% from the historical average of 18%, but the most interesting aspect of this data point is that a full 11% of deals completed in Europe were completed without a European counterpart. Deals without any European PE firm's participation accounted for 37.2 billion in deal value over 128 deals. This is partly driven by US investors looking for cheaper markets and partly driven by a tightening of the dollar-euro exchange rate since 2014. Activity along this front will require the currency pair to stay closer to parity for US firms to fully capitalize on cheaper markets in the EU. However, as US PE firms complete an increasing number of acquisitions in Europe and become more familiar with the legal and regulatory complexity of operating within the EU, those barriers to entry are eroded. Due to this, and barring any major changes in the exchange rate, we expect US investor-only activity to increase in volume moving forward. What does this mean for European investors? Historically, European PE investors have benefited from club deals involving US investors by providing regulatory and regional expertise for inexperienced US investors in exchange for the ability to spread equity contributions among multiple investors. As US investors continue venturing off on their own in increasing numbers, valuation multiples could increase in Europe as ever- intensifying foreign competition drives prices higher. This is another reason why we expect European deal flow to finish out the second half of the year strong. 7 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY IT deal value grows significantly European PE deals (B) by sector B2B drives transaction count European PE deals (#) by sector Deals of 500M+ account for over 50% of 2017 value European PE deals (B) by size Smaller deals still make up most transaction volume European PE deals (#) by size IT remains in focus Deals by Sector & Size Source: PitchBook. *As of 6/30/2017 Unknown deal values are estimated based on known figures. Source: PitchBook. *As of 6/30/2017 Unknown deal values are estimated based on known figures. Source: PitchBook. *As of 6/30/2017 Source: PitchBook. *As of 6/30/2017 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2008200920102011201220132014201520162017*2.5B+ 1B-2.5B 500M-1B 100M-500M 25M-100M Under 25M 0 100 200 300 400 500 600 2008200920102011201220132014201520162017*2.5B+ 1B-2.5B 500M-1B 100M-500M 25M-100M Under 25M 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2008200920102011201220132014201520162017*B2B B2C Energy Financial Services Healthcare IT Materials & Resources 0 100 200 300 400 500 600 2008200920102011201220132014201520162017*B2B B2C Energy Financial Services Healthcare IT Materials & Resources 8 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY Exits continue to slide Exits Tending to be off pace European PE-backed exits SBOs on the rise European PE-backed exits (B) by type Source: PitchBook. *As of 6/30/2017 Source: PitchBook. *As of 6/30/2017 Difficulties in selling ahead? In the first half of the year, exits continued a downward trend that began in 2015 with 76.7 billion in exit value over 471 deals. This is on pace to see a 22% decrease in volume and 17% decrease in value. Despite cooling, exits are still strong on a historical basis. We don't expect exit volume to fall much further as 32% of all European companies sponsored by PE firms were acquired over five years ago. For years, distributions from general partners to limited partners far outpaced contributions. However, that trend is reversing as exits slow and LPs continue to commit record amount of capital to PE firms. If exits continue trending downward and older inventory continues building, it will be more difficult to unload inventory should a large percentage of PE firms seek liquidity within a short timeframe. Corporate buyers retreat The biggest driver causing exits to fall is the retreat by corporate acquirers, which is surprising given the continued strength of corporate earnings throughout major European markets. Corporate acquisitions accounted for 41.6 billion in exit value across 206 exits, which represents 54% of all deal value but only 44% of deals by count. This is on pace for a 33% decrease in both exit value and number. Secondary buyouts are on pace to decline 7% in volume, now making up 52% of all exits with 31 billion in exit value over 245 deals. As the percent of company 9426611188019217920418677701 509 716 933 835 1,053 1,127 1,341 1,200 471 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Exit Value (B) # of Exits 0 50 100 150 200 250 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Corporate Acquisi on IPO Secondary Buyout inventory held greater than five years increases, sponsor-to- sponsor sales are becoming a more prominent exit option as PE firms begin looking for liquidity in current investments. 9 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY On pace for decade high Fundraising Decade high in funds hitting their targets European PE funds (#) hitting target Median European PE fund size (M) 2017 pacing to surpass last year's fund count, just barely European PE fundraising Source: PitchBook. *As of 6/30/2017 Source: PitchBook. *As of 6/30/2017 Source: PitchBook. *As of 6/30/2017 Commitments still pour in PE fundraising worldwide continues to boomEurope is no different with 41.6 billion raised this year across 54 funds. This is not only on pace to surpass 2016 fundraising numbers by 16%, but also looking to exceed the total raised in 2007. On top of those strong numbers, 88% of funds hit their target, up from last year and the highest percentage in our dataset. Median fund sizes are down After reaching the highest mark in our dataset, median fund sizes are down 27% through 1H. This is mostly due to a smaller number of 1 billion+ funds closed when compared to 1H 2016. The only mega-fund to close in Europe in 2Q was the massive $16 billion buyout fund raised by CVC Capital Partners. This is vastly different than the fundraising scene in the US, where median fund sizes are up to record levels this year and mega-funds continue to dominate the landscape. LP contributions to PE will continue to increase throughout the rest of the year. However, distributions have been on a downward trend. If exits continue to slow, contributions will surpass distributions for the first time since 2010. Should this occur, the fundraising craze of the last few years will finally begin slowing. 797850412338316147537242191 188 156 113 105 112 99 109 97 88 94 54 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Capital Raised (B) # of Funds Closed 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Hit Target Missed Target 225.0 249.0 0 50 100 150 200 250 300 350 400 450 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Buyout Funds All PE Funds 400.0 342.6 10 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY Firm name Date Size (M) Investor(s) HQ Sector Alight Solutions 1/5/2017 $4,800 The Blackstone Group London BPO/Outsource Services OT Morpho 31/5/2017 2,420 Advent International Paris Systems & Information Management Xella International 11/4/2017 2,200 Lone Star Funds Duisburg Building Products Mauser Group 3/4/2017 $2,300 Stone Canyon Industries Brhl Packaging Cerba HealthCare 20/4/2017 2,000 Partners Group, Public Sector Pension Investment Board Cergy-Pontoise Laboratory Services Firm name Date Size (M) Type Former Investor(s) HQ Sector Host Europe 3/4/2017 $1,820 M&A Cinven, Oakley Capital Private Equity Cologne Internet Service Providers Zabka Polska 21/4/2017 $1,580 Secondary Buyout CVC Capital Partners Poznn Department Stores Vanderlande Industries 18/5/2017 1,200 M&A NPM Capital Veghel Logistics Beacon Rail Leasing 9/4/2017 855 Secondary Buyout Pamplona Capital Management London Rail Antarius 1/4/2017 425 M&A Aviva Paris Life & Health Insurance Fund name Firm Close date Size (M) HQ CVC European Equity Partners VII CVC Capital Partnesr 1/6/2017 16,000 London Vitruvian Investment Partnership III Vitruvian Partners 29/6/2017 2,400 London Chequers Capital XVII Chequers Capital 17/5/2017 1,100 Paris Adelis Equity Partners Fund II Adelis Equity Partners 9/6/2017 600 Stockholm MCH Iberian Capital IV MCH Private Equity 5/4/2017 300 Madrid Select largest PE-backed exits in 2Q 2017 Select largest PE buyouts in 2Q 2017 Select largest closed PE funds in 2Q 2017 Source: PitchBook Source: PitchBook Source: PitchBook League tables 2Q 2017 11 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY Methodology Deals PitchBook only tracks closed transactions, not rumored or announced deals. All unknown deal values are extrapolated from known transaction values. The eligible PitchBook transaction types are all buyout types, PE growth investments and investor buyouts by management. Deal Flow Estimation Due to the nature of private market data, information often does not become available until well after a transaction takes place. To provide the most accurate data possible, we estimate how much of this new information will become available in the next quarter by calculating the average percentage change in deal flow from the first to the second reporting cycle over the trailing 24 months. We then add this estimate to the reported figure for the most recent quarter. Both the original reported figure and the estimated figure are provided for your reference. Exits PitchBook only tracks completed exits, not rumored or announced. Exit value is not extrapolated. Initial public offering (IPO) size is based on the initial price that the company sets multiplied by the number of total shares outstanding. Fundraising Unless otherwise noted, PE fund data includes buyout, co-investment, diversified PE, energy alternative/ renewables, energy oil & gas, mezzanine, mezzanine captive, growth and restructuring/turnaround funds. Fund location is determined by specific location tagged to the fund entity, not the investor headquarters. Only closed funds are tracked. Geographical Scope Only transactions involving companies headquartered in Europe are included. Look up a company. And its cap table. And its investors. And its EBITDA multiples. And its board members. In seconds. The PitchBook Platform has the data you need to close your next deal. Learn more at pitchbook.com 12 PITCHBOOK 2Q 2017 EUROPEAN PE BREAKDOWN SPONSORED BY See how the PitchBook Platform can help your private equity firm close your next deal. demo@pitchbook.com We do EBITDA multiples, private comps, valuations, market trends, growth metrics. You build a better portfolio. </p>
