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


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


    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



    Alex Jones


    Sam Meakin


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

    Singapore: +65 6408 0122

    Email:[email protected]


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


    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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



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


    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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











    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








    Q1 2011 Q2 2011 Q3 2011 Q4 2011

    North America


    Asia and Rest of World

    Source: Preqin Funds in Market Online Service

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


    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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



    Fig. 3: Breakdown of Aggregate Capital Commitments by Fund

    Geographic Focus, 2000 - 2011











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

    North America


    Asia and Rest ofWorld

    Source: Preqin Funds in Market Online Service

    Year of Final Close

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

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

    222 220





















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

    No. of Funds

    Aggregate Capital Raised ($bn)

    Source: Preqin Funds in Market Online Service

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    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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






    15 14





    9.2 7.410.3


















    No. of Funds

    Aggregate Capital Target ($bn)

    Source: Preqin Funds in Market Online Service

    Primary Geographic Focus

    Fig. 5: Breakdown of Funds Currently in Market

    by Main Geographic Focus




    192.3 203.8












    Europe Asia and Rest ofWorld

    North America

    No. of Funds

    Aggregate Capital Target ($bn)

    Source: Preqin Funds in Market Online Service

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    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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
















    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)

    Source: Preqin Funds in Market Online Service

    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



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

    Avenue Europe Special Situations

    Fund II2011

    Avenue Capital



    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


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

    Strategic Value Global

    Opportunities II2011

    Strategic Value



    Debt750 USD 31-Jan-11 First Close




    Source: Preqin Funds in Market Online Service

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    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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


    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


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

    Allocation Size






    3% 3%

















    Source: Preqin Investor Intelligence Online Service

    Source: Preqin Investor Intelligence Online Service

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










    Private Sector Pension Funds

    Public Pension Funds

    Fund of Funds Managers

    Insurance Companies

    Banks & Investment Banks

    Asset Managers

    Family Offices

    Investment Companies


    Corporate Investors


    Source: Preqin Investor Intelligence Online Service

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    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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



    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



    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



    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.


    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.

    Source: Preqin Investor Intelligence Online Service

    Source: Preqin Investor Intelligence Online Service

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    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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



    More Positivetowards PrivateEquity

    More Negative

    towards PrivateEquity

    Opinion of PrivateEquity Has NotChanged

    Source: 2012 Preqin Global Private Equity Report

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    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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




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

    2006 - 2012 (As at 24th February 2012)






























    2006 2007 2008 2009 2010 2011 2012 YTD

    No. of Deals Aggregate Deal Value ($bn)

    Source: Preqin Deals Analyst Online Service


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

    Deals in 2011 by Transaction Type




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


    6% 5%8%


    0.7% 0.5% 0.03%0%


















    No. of Deals

    Aggregate Deal Value ($bn)

    Source: Preqin Deals Analyst Online Service

    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)

    Source: Preqin Deals Analyst Online Service

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    Preqin Special Report: European Private Equity

    2012 Preqin Ltd. /

    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


    Performance of Europe-Focused Funds

    Vintage Year

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

    Vintage Year









    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009



    Asia and Restof World

    Vintage Year

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

    Boundaries by Vintage Year











    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

    Top Quartile IRRBoundary

    Median IRR

    Bottom QuartileIRR Boundary

    Source: Preqin Performance Analyst Online Service

    Source: Preqin Performance Analyst Online Service

    Vintage Year

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

    and Remaining Value Ratios by Vintage Year









    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

    Source: Preqin Performance Analyst Online Service

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


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    2012 Preqin Ltd. /

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