Download - Preqin Special Report European Private Equity Copy

8/2/2019 Preqin Special Report European Private Equity Copy

1/14


2/14

Foreword................................................................................... p. 3

European Fundraising in 2011................................................ p. 4

Historical European Fundraising............................................. p. 5

European Fundraising Outlook - 2012................................... p. 6

Distressed Opportunities.......................................................... p. 7

European Investors................................................................... p. 8

Investors to Watch.................................................................... p. 9

Investors Attitudes Following the Eurozone Crisis............... p. 10

Europe-Based Buyout Deal Market....................................... p. 11

Performance of Europe-Focused Funds.............................. p. 12

Contents

Editor:

Alex Jones

Sub-Editor:

Sam Meakin

Preqin:

New York: +1 212 350 0100London: +44 (0)20 7645 8888

Singapore: +65 6408 0122

Email:[email protected]

Web: www.preqin.com

Preqin Special Report: European Private Equity draws exclusively on the following sources of information:

Investor Intelligence - The most comprehensive database of current and potential institutional investors inprivate equity, featuring in-depth proles of more than 3,850 actively investing LPs, and over 1,000 that haveput their investments on hold, including investment preferences, future plans, key contact details and more.

Funds in Market - This constantly updated resource includes details for all funds of all types being raisedworldwide, with key information on target sizes, interim closes, placement agents, lawyers, investors.

Fund Manager Proles - With detailed proles for over 6,250 GPs, including key strategic and investment

preferences, Fund Manager Proles is the foremost source of data on private equity fund managers worldwide.

Deals Analyst - The most extensive, detailed source of information on private equity-backed buyout deals inthe world. This comprehensive product contains in-depth data for over 24,000 buyout deals across the globe,including information on deal value, buyers, sellers, debt nancing providers, nancial and legal advisors, exitdetails and more.

Performance Analyst - The industrys most extensive and transparent source of net-to-LP private equity fundperformance, with full metrics for over 5,700 named vehicles. In terms of capital raised, Performance Analystcontains data for over 70% of all funds raised historically.

Data Source
http://www.preqin.com/private_equity_investors.aspx?itemID=13&scen=S1_II/1.go.aspx?rid=158http://www.preqin.com/item/private-equity-funds-in-market/1/12/go.aspx?rid=158http://www.preqin.com/item/private-equity-fund-manager-profiles/1/4/go.aspx?rid=158http://www.preqin.com/item/private-equity-fund-manager-profiles/1/4/go.aspx?rid=158http://www.preqin.com/item/private-equity-fund-manager-profiles/1/4/go.aspx?rid=158http://www.preqin.com/item/private-equity-buyout-deals/1/2464/go.aspx?rid=158http://www.preqin.com/item/private-equity-performance-analyst/1/11/go.aspx?rid=158http://www.preqin.com/item/private-equity-performance-analyst/1/11/go.aspx?rid=158http://www.preqin.com/item/private-equity-buyout-deals/1/2464/go.aspx?rid=158http://www.preqin.com/item/private-equity-fund-manager-profiles/1/4/go.aspx?rid=158http://www.preqin.com/item/private-equity-funds-in-market/1/12/go.aspx?rid=158http://www.preqin.com/private_equity_investors.aspx?itemID=13&scen=S1_II/1.go.aspx?rid=158


3/143

Preqin Special Report: European Private Equity

2012 Preqin Ltd. / www.preqin.com

Private equity investment in Europe has historically been secure in its position as the second largest market in the industry, next to

the traditional home of the asset class North America. In recent years, however, Europes position as the second most attractive

and other so called emerging markets. Across 2011, however, Europe has featured prominently in private equity professionals and

investors thoughts. To some, the region represents a toxic mix of uncertainty and volatility, while to others it shines as an attractive

opportunity for strategic and well-thought-out investment.

eurozone sovereign debt crisis, which saw the largely positive and encouraging fundraising conditions seen at the start of the year

facing Europe are impossible to predict, the current effects on European private equity are vital to understand. Consequently, this

report aims to analyze Europe-focused private equity from the perspectives of current fundraising conditions, investor attitudes, and

the latest fund performance, framing this important part of the industry in its historical context.

In order to tap into the current landscape of European private equity and produce this special report, we conducted interviews with

over 100 institutional investors from around the world during December 2011 regarding their attitudes towards private equity in light

of recent events in Europe. The sample was selected from Preqins Investor Intelligence database of over 4,800 LPs, the most

comprehensive and accurate source of information on investors in private equity funds available today.

Europe-focused private equity is truly a global industry, with managers targeting the region for investment located in 68 countries

Our worldwide coverage is provided by teams of multi-lingual analysts, allowing us to remain in daily contact with private equity fund

managers, funds of funds, institutional investors, consultants and other service providers. We believe that by speaking to industry

players directly, we are able to assess the latest trends and provide our clients with valuable, pertinent and comprehensive analysis

and data.

any feedback and suggestions you may have for future editions. Should you wish to have any further information on the products and

A JonesAlex Jones

Editor

Foreword


4/144



Global private equity fundraising experienced a strong start to

2011 only to falter in Q3 once the effects of the eurozone crisis

took hold; however for Europe-focused private equity funds, the

level of capital garnered by funds closed increased throughout

the year. Despite economic volatility and the sovereign debt

crisis, Europe proved to be a popular choice for investors in the

asset class.

The Impact of the Eurozone Crisis

Moving into 2011 poor fundraising conditions prevailed, with lowlevels of capital being raised across the private equity industry.

Despite this, at the beginning of the year there was a sense that

stabilizing to a degree. With respect to deals, H1 2011 saw a 49%

increase in the value of private equity exits completed compared

of 2011, compared to $140bn generated by 377 exits throughout

the latter half of 2010. This encouraged a more positive investor

outlook and freed up capital to make new investments.

fundraising market recovering. While there were still large

numbers of vehicles on the road seeking capital, funds were

closing in increasing numbers and the logjam of vehicles in

market looked to be easing. Globally, 180 vehicles closed in

Q1 2011 and this increased to 198 funds in the second quarter,

industry was attracting also began to increase in the early part

of 2011, with an aggregate $87.4bn raised by funds that closed

worldwide in Q2, the highest total since Q2 2009.

Mounting fears regarding eurozone debt levels and the associated

year, however, did much to erase the positive fundraising start.

In Q3 136 funds closed on a total of $53.1bn. While the marketrecovered partially in the last quarter of 2011, with 168 vehicles

closing on an aggregate $68.8bn, both the number of funds

gained remained below the strong start seen in H1.

European-Focused Fundraising in 2011

European-focused fundraising bucked the global trend of a poor

overall amount of capital raised remains depressed. As shown in

Fig. 2, the aggregate capital raised by Europe-focused vehicles

World funds. At the beginning of 2011 a total of 41 vehiclesclosed for an aggregate $11bn (8bn), but in Q4 the amount of

capital increased to nearly double total capital commitments,

with 39 funds closing on an aggregate $21.5bn (15.9).

Of Europe-focused funds closed in 2011, 21% were venture

funds, buyout and private real estate vehicles each accounted

for 16%, while 14% were private equity funds of funds. Six

percent of Europe-focused private equity vehicles that reached

Europe was the only region for which capital commitments to

quarter. While some investors shied away from committing to

private equity funds that intended to invest in Europe due to the

economic conditions, take advantage of the current landscape

and generate attractive returns.

European Fundraising in 2011

Fig. 1: Breakdown of Global Private Equity Fundraising,

Q1 2011 - Q4 2011

180

198

136

168

0

50

100

150

200

250

Q1 2011 Q2 2011 Q3 2011 Q4 2011

No. of Funds

Aggregate Capital Raised ($bn)

Source: Preqin Funds in Market Online Service

Fig. 2: Breakdown of Aggregate Capital Commitments by Fund

Geographic Focus, Q1 2011 - Q4 2011

0

10

20

30

40

50

60

Q1 2011 Q2 2011 Q3 2011 Q4 2011

North America

Europe

Asia and Rest of World



5/145



Historically, Europe-focused fundraising has lagged behind that

of North America-focused funds. As the traditional base of private

equity, North America and particularly the US has attracted

the lion share of capital over the years, with the vast majority of

fund managers based there and the bulk of investment focused

in the region.

As highlighted in Fig. 3, until recently Europe-focused funds have

been the second most popular destination for investor capital,

World-focused vehicles trailing behind in terms of aggregate

we have seen a marked shift in fundraising markets, with the

investment in Europe in 2010. This trend has continued in 2011,

with Europe-focused vehicles garnering $62.4bn in contrast to

as a whole, with fundraising across all major markets down

closed each year and levels of capital raised, and Europe-focused

fundraising has been no exception to this trend. As shown in

Fig. 4, while there have been small periods of improvement

for European fundraising, 2008-2010 saw aggregate capital

contributions fall from $167.8bn to just $58.9bn. The amount of

capital raised increased slightly in 2011; however the number of

funds that closed declined from 182 in 2010 to 161 last year a

close in 2007.

In contrast, fundraising for funds focused on investment in Asia

the effects of the crisis. While the number of funds closed and

the boom period, the amount of capital raised by Asia and

seen in 2005. The private equity industry in the likes of Asia,

South America and India has expanded rapidly over the past

a corresponding expansion of the number of sophisticated

institutional investors based in these regions. This, coupled with

the fact that many Western LPs have become more open to

investment in emerging markets at the expense of allocations

to funds targeting the traditional markets, has narrowed the gap

fundraising market across all regions has been very crowded.

Poor wider economic conditions led to sustained periods

of unattractive deal and exit opportunities, which in turn

resulted in a dearth of distributions back to investors and a

decline in commitments to funds. As a consequence, over recent

years it has taken progressively longer for many funds to reach

vehicles attempting to attract capital has increased year on year,

from 12.4 months for funds closed in 2006 to 19.5 months for

funds closed in 2011.

To compound the crowded conditions seen from 2009 onwards,

any brief window of economic stability - such as at the end of

made. In such periods, many GPs that were sat on the sidelines

have come to market with new offerings, adding to the many

already struggling funds. This has created a logjam effect, with

record numbers of funds on the road culminating in the over

1,800 vehicles in market seen during February 2012.

Historical European Fundraising

Year of Final Close

AggregateCapitalRaised

($bn)

Fig. 3: Breakdown of Aggregate Capital Commitments by Fund

Geographic Focus, 2000 - 2011

0

50

100

150

200

250

300

350

400

450

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

North America

Europe

Asia and Rest ofWorld


Year of Final Close

Fig. 4: Breakdown of Europe-Focused Private Equity Fundraising,

2000 - 2012 YTD (As at 23rd February 2012)

222 220

196

165

196

270

383

414

378

231

182161

16

0

50

100

150

200

250

300

350

400

450

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012YTD

No. of Funds

Aggregate Capital Raised ($bn)



6/146



At present there are a record 1,885 private equity funds of all

types on the road globally, seeking an aggregate $777.5bn in

investor capital. Due to the poor fundraising conditions seen in the

years stock of vehicles in market, resulting in an unprecedentedly

crowded landscape. Some European GPs, such as Duke Street,

have shelved fundraising plans and now operate on a deal-by-

deal basis; however, investor sentiment remains strong and it is

possible for well-positioned funds to be successful on the road.

For example, UK-based BC Partners recently closed its latestEurope-focused buyout vehicle, BC European Cap IX, above its

6bn target by reaching its 6.5bn hard-cap in February 2012.

Breakdown of Funds Currently in Market

As shown in Fig. 5, of the record number of vehicles currently

seeking capital, 23% (436) are focused on investment in Europe,

while 44% (832) are North America-focused and the remaining

World. Of the three main geographic regions, Europe-focused

vehicles are currently seeking $192.3bn (141.2bn), representing

the smallest proportion of the aggregate capital being sought by

the industry at approximately one-quarter of the total.

Of the European-focused vehicles currently in market, over 90%

are managed by GPs based in the region, representing 83% of

the total capital being sought by such funds. Seven percent are

12.5% of the aggregate capital target of Europe-focused funds,

based managers, representing 4.5% of the aggregate capital

being sought by such vehicles.

Mirroring trends seen across the industry, the most numerous type

of Europe-focused fund currently in market is real estate. Such

from investors, with just 61 Europe-focused private real estate

aggregate $16.1bn in capital. As shown in Fig. 6, the next most

common fund type in market is venture; however these vehicles

typically have much smaller target sizes than funds pursuing

other strategies, meaning that 81 funds are targeting just $8.5bn

(6.4bn). There are currently 61 Europe-focused infrastructure

funds in market targeting an aggregate $40.8bn, while there

are 57 buyout vehicles seeking a total of $54.2bn. Due to the

impact of the eurozone crisis, there are now a great deal more

distressed opportunities for private equity fund managers to take

advantage of. Unsurprisingly this has led to 15 Europe-focuseddistressed private equity funds (constituting those pursuing

distressed debt, turnaround and special situations strategies) in

market, targeting an aggregate $10.3bn (7.6bn), representing

over 5% of the total capital being sought by all European funds.

Outlook for 2012

there are opportunities to be had in investing in private equity in

Europe. At present, 191 of the funds in market that are targeting

the region have held an interim close, raising an aggregate

$38.6bn (28.3bn) towards their goals. This is a promising sign

that fundraising levels may improve throughout the coming year,

as investors look to tap into the potential returns to be had from

successfully navigating the economic circumstances resulting

from the eurozone crisis. As we will see later in this report, there

remains substantial investor interest in investment in Europe;however there will not be enough capital to satisfy the demands

of every manager presently on the road. As a result, it is vital for

GPs looking to market their fund to ensure that they have strong

marketing/branding skills, a clear, well-thought-out mandate and

deep knowledge regarding their prospective investor base.

European Fundraising Outlook - 2012

Fig. 6: Breakdown of Europe-Focused Funds Currently in Market

by Fund Type

104

81

6157

41

31

15 14

39.9

8.5

40.8

54.2

9.2 7.410.3

6.7

0

20

40

60

80

100

120

RealEstate

Venture

Infrastructure

Buyout

PrivateEquity

FundofFunds

Growth

DistressedPE

Mezzanine

No. of Funds

Aggregate Capital Target ($bn)


Primary Geographic Focus

Fig. 5: Breakdown of Funds Currently in Market

by Main Geographic Focus

436

617

832

192.3 203.8

381.4

0

100

200

300

400

500

600

700

800

900

Europe Asia and Rest ofWorld

North America

No. of Funds

Aggregate Capital Target ($bn)



7/147



Since the pioneering distressed private equity funds launched in

the 1980s, vehicles investing in securities of companies facing

but vital, contribution to the private equity marketplace. After the

constriction of capital markets and economic crisis that occurred

following the collapse of Lehman Brothers in 2008, we have

witnessed increasing demand for such vehicles from investors

looking to tap into the resulting opportunities.

Historical Distressed Private Equity FundraisingFrom 2003 to March 2012, a total of 288 distressed private equity

funds have closed worldwide, raising over $219bn in capital

from investors. Over this same period, Europe-focused funds

accounted for 52 of these vehicles, representing $25.4bn of the

total capital raised. For funds globally, the peak of fundraising

hit during the boom period of 2007 and 2008, when 44 and

40 distressed funds raised $51.3bn and $54.2bn respectively.

While representing just a small proportion of global fundraising,

Europe-focused distressed private equity funds have grown in

importance and for such vehicles the peak in fundraising was

reached in 2011, when 10 vehicles closed on an aggregate

$7.7bn (5.7bn). This is unsurprising given the fact that the

sovereign debt crisis in the region has created a plethora of

opportunities for investment in distressed private companies. As

shown in Fig. 7, the number of funds closing and the level of

capital contributions into such funds has increased year-on-year

since 2009.

Current Distressed Private Equity Fundraising Conditions

As of March 2012, there are 66 distressed private equity funds

in market, seeking $7.6bn, and of these there are 15 Europe-

focused vehicles targeting an aggregate $3.5bn (2.6bn) from

investors. While number of European funds on the road is lower

focused funds, their aggregate target is the higher of all threeregions. This highlights the fact that many fund managers

intending to invest in distressed assets in Europe believe that

there are abundant opportunities to take advantage of in the

eurozone crisis.

LP Sentiment towards Distressed Private Equity

In a September 2011 study of LP attitudes towards distressed

private equity investment, undertaken at a time of particular

concern over the sovereign debt crisis, a prominent 65% of

investors in distressed funds named Europe as a preferential

focus. It is interesting to note that several LPs we interviewed at

this time were looking to move away from US-focused distressed

private equity investments towards opportunities in Europe. One

large US public pension fund noted: [There are] more distressed

companies in Europe because of gloom hanging over the EU...

[there are] better opportunities to invest there. Fig. 8 shows the

largest Europe-focused distressed private equity funds still in

market, looking to take advantage of this increased demand.

Distressed Opportunities

* Comprises: distressed debt, turnaround and special situations funds

Fig. 7: Annual Global and Europe-Focused Distressed Private

Equity* Fundraising by Year of Final Close, 2003 - 2011

2 2 27 7 5 6

9 10

1924

31

33

44

40

28

37

28

0

10

20

30

40

50

60

2003 2004 2005 2006 2007 2008 2009 2010 2011

No. of Non-Europe-FocusedFunds ($bn)

No. of Europe-Focused Funds

Aggregate Capital Raised byNon-Europe-Focused Funds($bn)

Aggregate Capital Raised byEurope-Focused Funds ($bn)


Fig. 8: Top Five Europe-Focused Distressed Private Equity Funds Currently in Market (As at 23rd February 2012)

Fund Vintage Manager Type Target Size (mn) Latest Interim Close Fund Status Location Focus Manager Country

Apollo European Principal Finance

Fund II2012

Apollo Global

Management

Distressed

Debt2,500 EUR 10-Feb-12 First Close Europe US

Avenue Europe Special Situations

Fund II2011

Avenue Capital

Group

Distressed

Debt1,500 EUR 22-Dec-11 Fourth Close West Europe US

Merchant Asset Partners 2010Merchant Asset

PartnersTurnaround 500 GBP - Raising UK UK

OHA European Strategic Credit

Fund2011 Oak Hil l Advisors

Distressed

Debt750 USD 10-Feb-12 Fifth Close West Europe US

Strategic Value Global

Opportunities II2011

Strategic Value

Partners

Distressed

Debt750 USD 31-Jan-11 First Close

North

America,Europe

US



8/148



At present, Preqins Investor Intelligence product tracks 1,165

investors based in Europe, representing 31% of the global

private equity investor universe. As shown in Fig. 9, private

sector pension funds represent 18% of the total number, with

public pension funds accounting for 13%, and funds of funds

12%.

In terms of allocations to private equity, 34% of European

investors allocate 50-249mn, while a notable 21% allocate

under 25mn, as shown in Fig. 10. Of the Europe-based investoruniverse just 6% invest 2.5bn or more in the asset class. The

majority of these larger allocators tend to be fund of funds

managers; however there are other notable investors based in

be seen in Fig. 11.

Investment Preferences

In December 2011 Preqins study of investor sentiment revealed

intend to seek allocations to small to mid-market buyout funds in

2012, with some 45% believing that this is the area of the market

that is currently presenting attractive opportunities. Nineteen

percent of European LPs advised that they intend to target the

distressed private equity space and 27% believe that this area

is attractive, which is unsurprising given the growing number of

opportunities available for distressed investment.

While Europe-based LPs have been historically characterized

managers and emerging market investment, they are also

highly experienced and sophisticated investors. In recent years,

we have seen a growing number become more open to the

perceived higher risk / higher return opportunities presented by

emerging managers. At present, 46% of Europe-based LPs are

equity funds, while 15% are open to investment with spin-off

teams. The remaining 29% will not consider emerging managers.

European LPs

Fig. 11: Five Notable Europe-Based Investors in Private Equity

Investor Type Location AUM (bn) Current Allocation to PE (%) First-Time Funds Typical Investment Size (mn)

AlpInvest PartnersPrivate Equity Fund of Funds

ManagerNetherlands EUR 40.2 100 Yes EUR 10-250

Pantheon VenturesPrivate Equity Fund of Funds

ManagerUK USD 25 100 Yes USD 10-20

APG - All Pensions Group Asset Manager Netherlands EUR 274 5.5 Yes -

Pictet & Cie Bank Switzerland USD 350 4 No USD 5-150

UniversitiesSuperannuation Scheme

Public Pension Fund UK GBP 32.6 9 Yes GBP 50-250

Private Equity Allocation

ProportionofInvestors

Fig. 10: Make-up of Europe-Based LPs by Private Equity

Allocation Size

21%

10%

34%

18%

11%

3% 3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0-24mn

25-49mn

50-249mn

250-999mn

1,000-2,499mn

2,500-4,999mn

5,000+mn

Source: Preqin Investor Intelligence Online Service


Fig. 9: Make-up of Europe-Based LPs by Investor Type

18%

13%

12%

9%9%

7%

7%

6%

6%

4%9%

Private Sector Pension Funds

Public Pension Funds

Fund of Funds Managers

Insurance Companies

Banks & Investment Banks

Asset Managers

Family Offices

Investment Companies

Foundations

Corporate Investors

Other



9/149



Investors to Watch

Domestic Europe-Focused Investors to Watch

Investor Name Type Location AUMCurrent Allocation

(% of AUM)Target Allocation

(% of AUM)2012 Investment Plans

SEB PensionPrivate SectorPension Fund

Sweden SEK 15.5bn 10% 10%

SEB Pension anticipates that it will make new fund commitments in H1

2012, and is planning to increase the number of GP relationships it has

within its private equity portfolio over the coming year. The pension fund

invests in a variety of fund types including buyout, venture and distressed

debt vehicles that are predominantly focused on European markets.

Talanx AssetManagement Asset Manager Germany EUR 85bn 1.5% n/a

Talanx Asset Management plans to commit to between eight and ten new

funds over the course of 2012, allocating 10-30mn to each opportunity.

The asset manager continues to invest on a global scale, with a particularfocus on vehicles targeting Europe and North America, while also looking

to increase its long-term allocation to emerging markets.

Blue SkyGroup

Asset Manager Netherlands EUR 13bn n/a n/a

Blue Sky Group is looking to re-enter the asset class in the immediate

future, having ceased investing in the mid-2000s. It will be looking to form

new manager relationships in 2012 as it looks to build its exposure to the

asset class. It is looking to invest in funds of funds based in Europe and the

US, and will also consider opportunities in emerging markets.

Nordea Bank Bank Denmark EUR 125.2bn 0.2% n/a

Nordea Bank is looking to increase its level of exposure to the private

equity asset class over the next 12 months, and could commit to up to ve

new vehicles. The bank is primarily targeting Northern Europe-focused

buyout funds. It will predominantly be committing to re-ups with its

existing fund managers, but will also consider investment opportunities

with managers outside of its existing portfolio.

PPMManagers Asset Manager UK GBP 1.1bn 100% n/a

PPM Managers expects to commit to between four and ve new private

equity funds in the next 12 months. It believes that small to mid-market

buyout funds are presenting the best opportunities and will be focusing

predominantly on these fund types that target Europe over the next 12

months. In the longer term, it plans to increase its level of exposure to the

asset class. It typically commits 20-30mn per fund.

Foreign Europe-Focused Investors to Watch

Investor Name Type Location AUMCurrent Allocation

(% of AUM)Target Allocation

(% of AUM)2012 Investment Plans

DevelopmentBank of Japan

Bank Japan JPY 14,830tn 0.6% n/a

Development Bank of Japan is looking to gain greater exposure tooverseas funds in 2012, seeking to invest in funds focused on Europe,North America, and regions in Asia such as India and China, as well ascontinuing to invest in Japan-focused funds. Over the next year, DBJ plansto commit $200mn (approximately JPY 15.2bn) to ve to six private equity

funds. The bank has an interest in a wide variety of fund types.

NTUC IncomeInsurance

Co-operative

InsuranceCompany

Singapore SGD 26.4bn n/a n/a

NTUC Income Insurance Co-operative has set aside SGD 150-250mn toinvest in ve to ten new private equity funds over the next 12 months.

The insurance company targets a range of fund types including buyout,mezzanine and growth funds. It invests primarily in Europe, NorthAmerica and Asia (in particular Greater China).

Ohio Public

Employees'Retirement

System

Public PensionFund

US USD 76bn 8.8% 10%

Ohio Public Employees' Retirement System (OPERS) has set aside $2bnto commit across 12 to 15 new private equity funds over the next 12months. It has a preference for buyout, growth, venture, mezzanine andsecondaries funds. It invests globally, including Europe, North Americaand emerging markets.

San FranciscoCity & County

Employees'

RetirementSystem

Public Pension

FundUS USD 16bn 12.5% 16%

San Francisco City & County Employees' Retirement System has increased

its target allocation to private equity from 14% to 16% of its total assets.Following in line with this increase, it has set aside $300-400mn to investacross 12 to 16 new private equity funds during 2012. Amongst theseinvestments, it will look to commit to Europe-based distressed debtvehicles.

SunSuperSuperannuation

SchemeAustralia AUD 18bn 6.5% 7%

In 2012, SunSuper plans to commit AUD 300-400mn to between six andeight new funds. SunSuper continues to focus on investing on a globalscale, with a particular interest in vehicles targeting Europe, NorthAmerica and emerging markets, including Asia. It primarily invests indistressed private equity funds, but also has some exposure to mid-market US buyout funds.




10/1410



During the latter half of 2011 growing fears regarding the

sustainability of the eurozone and the growing burden placed

upon some of its member states due to sovereign debt levels

world. This affected the private equity industry in many ways,

the corresponding lowering of capital commitments to funds;

however what do LPs feel about investment in the asset class

following this crisis?

During our December 2011 study of global investor sentiment,

markets, and in particular the sovereign debt crisis in Europe,

has impacted on their views of private equity. As Fig. 12 shows,

almost two-thirds (61%) of investors we spoke to for this study

have not changed their attitude toward private equity investment,

private equity has to offer in light of volatility in wider markets.

Many investors have shown concerns over the impact of

volatility in wider markets on their private equity portfolios, but

the vast majority are sticking with the program. One Thailand-

doesnt make us positive or negative, just more cautious when

investing, and a pension fund based in Malaysia stated: While

schedules, it has not dampened our enthusiasm for private

equity. Overall we remain very positive about the asset class.

A number of investors feel that private equity is faring well in

comparison to other asset classes. One investor, based in

Australia, stated: Public markets are more volatile and risky

in times like this, so private equity becomes more attractive.

Many investors shared this view, including a Netherlands-based

pension fund, which commented: The volatility is affecting privateequity less than other asset classes, and a US endowment,

which noted: [There is] more value in private equity after the

fall in public markets. Several LPs also noted that wider market

volatility is creating new opportunities within private equity, in

particular in the distressed and secondaries sectors.

Some investors (19%) feel more negative towards the private

equity asset class as a result of recent market volatility,

particularly within the eurozone. Some are concerned that public

market losses are increasing the risk of the denominator effect,

while others have concerns about maturing funds within their

portfolios being able to realize their investments.

LPs Attitudes Following the Eurozone Crisis

Fig. 12: Impact of Recent Volatility in Wider Financial Markets on

LP Attitudes towards Private Equity

20%

19%61%

More Positivetowards PrivateEquity

More Negative

towards PrivateEquity

Opinion of PrivateEquity Has NotChanged

Source: 2012 Preqin Global Private Equity Report


11/1411



Private equity-backed buyout transactions based in Europe

comprise over a third (36%) of all such deals worldwide,

accounting for 34% of aggregate deal value. As shown in Fig.

13, the number and aggregate value of European deals declined

has since rebounded in subsequent years. From 2009 to 2011

the number and aggregate value of such transactions has

increased year-on-year, hitting a post-crisis peak in 2011 of 928

deals for an aggregate $96.3bn. This mirrors global trends that

saw 2011 deal activity reach the highest levels since the privateequity boom period.

Many fund managers worldwide delayed deploying their capital

reserves in the immediate aftermath of the collapse of Lehman

Brothers, as conditions were unfavourable due to depressed

however, there have been several windows of opportunities for

deal-making, which has led to a rush of GPs deploying some

of the substantial levels of dry powder that have been available

to them. Since 2008, capital held in reserve for Europe-focused

funds has declined from $269.7bn to $232.7bn as managers

have put their funds to work.

Buyout Deal Trends

Fig. 14 shows the breakdown of Europe-based private equity-

backed buyout deals in 2011 by transaction type, with leveraged

buyouts (LBOs) accounting for the largest proportion of the

number of deals completed during the year. Unsurprisingly,

these heavily leveraged transactions represented by far the

largest share of the aggregate deal value, accounting for 76%

of the total.

Add-on deals, where a portfolio company acquires bolt-on

purchases in the same industry, have become an increasinglyimportant tool for fund managers looking to consolidate their

portfolio in times of sustained volatility. Add-ons currently

represent over one-third of all private equity-backed deals, up

there were 467 add-ons worth an aggregate $3.4bn, rising to 963

completed in 2011 for a total of $28.4bn. In Europe during 2011,

such transactions accounted for 27% of all deals completed

during the year, representing 6% of the aggregate value. Given

current wider market conditions, many fund managers have used

add-ons to help protect their portfolio against the negative impact

Geographic Focus of European Deals

In terms of geographic location, the three largest economies in

Europe Germany, France and the UK have dominated the

number of private equity-backed buyout deals, as shown in Fig.

15. The UK is one of most sophisticated private equity markets

and is home to numerous private equity fund managers, and as a

result is by far the most popular deal destination with over 1,600

transactions completed in the country since 2006. This is over

twice the number of second placed country - France.

Europe-Based Buyout Deal Market

No.

ofD

eals

Fig. 13: Europe-Based Private Equity-Backed Buyout Deals,

2006 - 2012 (As at 24th February 2012)

Aggregate

D

ealValue

($bn)

958

1,079

889

509

855

928

123

0

20

40

60

80

100

120

140

160

180

200

0

200

400

600

800

1000

1200

2006 2007 2008 2009 2010 2011 2012 YTD

No. of Deals Aggregate Deal Value ($bn)

Source: Preqin Deals Analyst Online Service

ProportionofTotal

Fig. 14: Breakdown of European Private Equity-Backed Buyout

Deals in 2011 by Transaction Type

55%

27%

12%

2% 1% 1%1% 0.8% 0.2%

76%

6% 5%8%

0.5%3%

0.7% 0.5% 0.03%0%

10%

20%

30%

40%

50%

60%

70%

80%

LBO

Add-on

GrowthCapital

PublictoPrivate

Merger

PIPE

Restructuring

Recapitalization

Turnaround

No. of Deals

Aggregate Deal Value ($bn)


Country No. of Deals

UK 1,686

France 785

Germany 583

Sweden 284

Italy 276

Fig. 15: Top Five European Countries by Number of Private Equity-

Backed Buyout Deals, 2006 - 2012 YTD (As at 24th February 2012)



12/1412



Performance Analyst, Preqins extensive and transparent source

of net-to-LP private equity fund performance, currently holds

fund-level performance data for over 1,180 European private

equity funds, ranging in vintage from 1984 to 2011.

Fig. 16 shows the median called-up, distributed and remaining

value ratios by vintage year for Europe-focused funds. Vehicles

of vintage years between 2000 and 2001 have a median

have distributed back between 1.1x and 1.3x investors capitalcontributions. Funds of 2000 to 2006 and 2009 to 2010 vintages

are showing a total value to paid-in capital (TVPI) of over 100%,

while 2006, 2007 and 2008 have TVPIs of 96.6%, 95.6% and

97% respectively. For later vintage funds, however, this could yet

change, as these funds are still early in their investment cycles.

have remained in positive territory for the entire sample, with the

highest median return of 16.5% being achieved by 2002 vintage

vehicles. The bottom quartile boundary remains in the black for

all vintage years prior to 2005, before dropping into single-digit

negatives for vintages 2006 to 2009. The difference between

all vintage years, demonstrating the importance of investors

fund selection. The largest difference is seen for funds of 2009

vintage, with a gap of 28.7 percentage points.

From vintage years 2000 to 2004, Europe-focused funds show

overtaken from 2005 to 2009, as shown in Fig. 18. Until vintage

2009, the median Europe-focused fund has performed below the

conducted using performance data for 3,600 private equity funds

with vintages between 2000 and 2009, including 2,307 US-

focused funds.

Top Performing Europe-Focused Funds

By examining all funds with a focus on investment in Europe that

have a vintage year of 2009 or older and have invested at least

50% of their committed capital, it is possible to ascertain the top

the 1997 vintage Swedestart II, managed by CapMan Capital

84%. Next on the list is the more recent, vintage 2004 HerkulesPrivate Equity Fund I, a 2004 vintage buyout fund managed by

80.4%.

Performance of Europe-Focused Funds

Vintage Year

Fig. 18: Median Net IRRs by Primary Geographic Focus and

Vintage Year

0%

5%

10%

15%

20%

25%

30%

35%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

US

Europe

Asia and Restof World

Vintage Year

Fig. 17: Europe-Focused Funds - Median Net IRRs and Quartile

Boundaries by Vintage Year

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Top Quartile IRRBoundary

Median IRR

Bottom QuartileIRR Boundary

Source: Preqin Performance Analyst Online Service


Vintage Year

Fig. 16: Europe-Focused Funds - Median Called-Up, Distributed

and Remaining Value Ratios by Vintage Year

0%

20%

40%

60%

80%

100%

120%

140%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Distributed to Paid-InCapital

Remaining Value to

Paid-In Capital

Called-Up toCommitted Capital



13/14

If you want any furtherinformation, or would like

to apply for a demo of ourproducts please contact

us:

New York:

One Grand Central Place60 E 42nd Street

Suite 2544New YorkNY 10165

Tel: +1 212 350 0100Fax: +1 440 445 9595

London:

Equitable House47 King William Street

London

Tel:+44 (0)20 7645 8888Fax:+44 (0)87 0330 5892

Singapore:

Asia Square Tower 1#07-04

8 Marina ViewSingapore 018960

Tel: +65 6407 1011Fax:+65 6407 1001

Email:[email protected]:www.preqin.com

About Preqin

Preqin private equity provides information products and services to private

Buyout Deals

Fund Performance

Fundraising

Fund Terms

Employment and Compensation

Our customers can access this market intelligence in three different ways:

Hard copy publications

Online database services

Tailored data downloads

Preqin regularly releases research and information on fundraising and all other

aspects of the private equity industry as both research reports, and as part

of our monthly Spotlight newsletter. To register to receive more research andanalysis, please visit www.preqin.com/research

If you have any comments on this report, please contact:

[email protected]



14/14

Download - Preqin Special Report European Private Equity Copy

Top Related