bcg private equity market analysis

8/10/2019 BCG Private Equity Market Analysis

1/47

Private Equity Market Analysis & Sizing 2012


2/47

Private Equity Market Analysis & Sizing 2012 1

Copyright

2012byDealMarket,Inc.

&TheBostonConsultingGroup,

Inc

.Allrightsreserved.

&

The following PE Study is brought to you by

DealMarket The Global PE platform

A one stop shop offering an unfiltered, fast and

cost effective access to the global Private Equity

marketplace

Choose to control your information and data with

state of the art deal flow management tools

A range of new services will be launched in April

2012 - come and visit us

CorporateLiveWire elected DealMarket:

Best global Private Equity platform 2012

The Concept

DealMarket was created to make the complex world of

private equity investment simpler, more efficient and cost

effective. MyOffice, MyOfficePLUS and MyOfficePRO is a suite

of industry leading deal flow management tools, whileDealMarket itself is an online matchmaking platform for

both PE deals and advisors.

MyOffice brings order and standardization to the way

investors source, store, manage and share deal flow.

Powered by cutting edge cloud based technology, it is

considerably more efficient than using e-mail and Excelspreadsheets. MyOffice is a great way for investors to form

private professional networks, making it easier to share

ideas, opinions and deals.

DealMarket brings efficiency and value to the business of

connecting buyers, sellers and advisors. Investors can

browse through hundreds of current and historic deals orcontacts for free. Sellers can advertise deals to a global

audience of potential investors for the price of a cappuccino

a day. Advisors and other service providers also have a

cost effective platform to promote their expertise.

For more information please visit: www.dealmarket.com


3/47


Copyright


&

TheBostonConsultingGroup,

Inc

.Allrightsreserved.

&

High-level overview of the PE industry landscape

Targets

Sec. funds / FoFs

Non-trad. buyers

GPs / PE funds

Buyout

Venture Capital

Mezzanine

Balanced stage

Generalist

Fund of funds

...

PE trans-

actions

Fundraising Second-

aries

1

2

3 5

Fund services

Fund placement agents Fund administrators

7

Associations8Service providers

PE/VC associationsBusiness angels

associations and networksPR advisors ConsultantsAccountants

6

Source: BCG

Lawyers Financial advisors

LPs / Investors

Pension funds

Insurance firms

Banks

SWFs

Family offices

Endowments

...

Insurance firms

...

Pension funds

4 5

LP interests only

Direct only

LP interests / direct


4/47


Copyright


&


Inc

.Allrightsreserved.

&

Targets

GPs / PE funds

Buyout

Venture Capital

Mezzanine

Balanced stage

Generalist

Fund of funds

...

2

Service providers

PR advisors ConsultantsAccountants

6Lawyers Financial advisors

Secondary funds

Non-trad. buyers

Fundraising Second-

aries

3 5

LPs / Investors

Pension funds

Insurance firms

Banks / AMs

SWFs

Family offices

Endowments

...

Insurance firms

...

Pension funds

4 5

LP interests only

Direct only


PE transactions

Fund services


7

Associations8


associations and networks

Source: BCG

1

PE trans-

actions

1


5/47


Copyright


&


Inc

.Allrightsreserved.

&

PE transactions: All time high reached in 2007

PE activity currently rebounding from low in 2009

1,000

800

600

400

200

0

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

+143%

2011

243

2010

257

2009

100

2008

351

2007

835

2006

441

2005

208

2004

129

2003

60

2002

47

2001

57

1. Only transactions with disclosed deal value considered. In general, Thomson Reuters VentureXpert has no official size limit. The database derives the data from several sources: (1) verifiedindustry press and press releases, (2) surveys of the industry routinely conducted by Thomson Reuters, and (3) SEC filings as well as other filings that are regularly monitored by Thomson Reuters.Source: Thomson Reuters VentureXpert, BCG

1

Deal value (in USDbn)1Nr. of deals


6/47


Copyright


&


Inc.

Allrightsreserved.

&

PE transactions: Next to direct investments, the number of

abandoned transactions is considerably large

1. Only transactions with disclosed deal value considered. In general, Thomson Reuters VentureXpert has no official size limit. The database derives the data from several sources: (1) verifiedindustry press and press releases, (2) surveys of the industry routinely conducted by Thomson Reuters, and (3) SEC filings as well as other filings that are regularly monitored by Thomson Reuters.2. Refers to all investments in private targets according to Zephyr minus all PE deals listed in Thomson Reuters VentureXpert.Source: Thomson Reuters VentureXpert, Zephyr, BCG

1

45000

40000

35000

30000

25000

20000

15000

10000

5000

0

20112010200920082007

50000

No of

transactions

10952

22123

10888

11178

24779

10941

10816

21932

892813343

10823

19959

12704

9692

22632

Deals by PE fundsAbandoned deals

(no financing received)

Direct investments

in private firms2

Assumptions onabandoned deals

Number of completed and abandonedinvestments in private targets 2007-2011

49'300

Deal range

% of deals w .

disclosed value

2007-2011

USD 0-0.5m 2%

USD 0.5-2m 4%

USD 2-15m 21%

USD 15-35m 16%

USD >35m 56%

Deal range% of firms which do

not get financed /

acquired

USD 0-0.5m 90%

USD 0.5-2m 75%

USD 2-15m 60%

USD 15-35m 40%

USD >35m 30%

45'028 39'170 43'636 44'016

Assumptions on share of

disclosed deals


7/47


Copyright

2012byDealMarket,Inc.&


Inc.

Allrightsreserved.

&

PE transactions: Majority of deals made in VC segment

Buyouts are leading by deal volume

Number of PE transactions by type Deal volume of PE transactions by type

No of deals

14,000

12,000

10,000

0

20112010200920082007

6,000

8,000

Deal volume1 (USDbn)

900

600

300

0

20112010200920082007

Venture Capital

Buyout

Generalist Private Equity

Mezzanine

Other Private Equity

13'343 12'704 8'928 10'888 10'941 835 351 100 257 243


65%

1

60%


8/47


Copyright



Inc.

Allrightsreserved.

&

PE transactions: Deal activity and volume clearly dominated

by developed markets

1

Number of PE transactionsby geography1

Deal volume of PE transactionsby geography1

6,000

9,000

3,000

2011

12,000

0

15,000

201020092007 2008 20082007 20102009 2011

0

200

600

800

400

1,000

Asia AmericasEuropeRoW

13'343 12'704 8'928 10'888 10'941 835 351 100 257 243

No of deals Deal volume2 (USDbn)

1. Geography refers to the location of the target company. 2. Only transactions with disclosed deal value considered. In general, Thomson Reuters VentureXpert has no official size limit. Thedatabase derives the data from several sources: (1) verified industry press and press releases, (2) surveys of the industry routinely conducted by Thomson Reuters, and (3) SEC filings as well asother filings that are regularly monitored by Thomson Reuters.Source: Thomson Reuters VentureXpert, BCG

85%

84%


9/47


Copyright



Inc.

Allrightsreserved.

&

PE transactions: Similar development across regions

Europe most volatile

Americas:Top 5 countries1

9,000

7,500

6,000

4,500

3,000

1,500

0

+20%

-30%

20112010200920082007

No of deals

1. Geography refers to the location of the target firm. 2. Argentina ranked Nr. 6 in 2008 and Nr. 7 in 2010. 3. Spain ranked ranked Nr. 6 in 2007. 4. Hong Kong ranked Nr. 6 in 2008 and 2010. Ingeneral, Thomson Reuters VentureXpert has no official size limit. The database derives the data from several sources: (1) verified industry press and press releases, (2) surveys of the industryroutinely conducted by Thomson Reuters, and (3) SEC filings as well as other filings that are regularly monitored by Thomson Reuters.Source: Thomson Reuters VentureXpert, BCG

United States

Canada

Brazil

Mexico

Argentina2

Other

Europe:Top 5 countries1

3,500

3,000

2,500

2,000

1,500

1,000

500

0

+33%

-40%

20112010200920082007

No of deals

United Kingdom

France

Germany

Sweden

Spain3

Other

Asia:Top 5 countries1

2,000

1,500

1,000

500

0

+19%

-35%

20112010200920082007

No of deals

South Korea

China

India

Japan

Hong Kong4

Other

1


10/47


Copyright



Inc.

Allrightsreserved.

&

PE transactions: 76% of all transactions are small- to mid-cap

PE transactions1 2007-2011 by size


7%

7%

60%

0%

20%

2%

80%

25%

51%

21%

100%

59%

16%

40%

USD 201-1000m USD USD 1000m USD 50-200m

No of deals Deal volume

76%

9%

76% of all PE transactions conducted

from 2007 to 2011 were smaller thanUSD 200m, representing 9% of total

deal volume

1


11/47


Copyright



Inc.

Allrightsreserved.

&

PE transactions (


12/47


Copyr

ight



In

c.

Allrightsreserved.

&

PE transactions (


13/47


Copyr

ight


TheBostonConsultingGroup,In

c.

Allrightsreserved.

&

Sec. funds / FoFs

Non-trad. buyers

Fundraising Second-

aries

3 5

LPs / Investors

Pension funds

Insurance firms

Banks

SWFsFamily offices

Endowments

...

Insurance firms

...

Pension funds

4 5

LP interests only

Direct only

LP interests / directTargets PE trans-

actions

1

Service providers


6


GPs / PE funds

Fund services


7

Associations8



Source: BCG

2

GPs / PE funds

Buyout

Venture Capital

Mezzanine

Balanced stageGeneralist

Fund of funds

...

2


14/47


Copyr

ight



c.

Allrightsreserved.

&

Active GPs: Majority of GPs are small and mid-cap

GPs by type GPs by fund size1 GPs by geography

n = 2807

1. Total amount of capital committed to latest fund. 2. Venture Capital includes seed, early and later stage funds.Source: Thomson Reuters VentureXpert, BCG

2

No of GPs with at least

1 new fund since 2007

100%

80%

60%

40%

20%

0%

USD 0-100m

USD 101-500m

USD 501m-1bn

>USD 1bn

52%

33%

8%

7%

n = 2807 n = 2807



100%

80%

60%

40%

20%

0%

Americas

Europe

Asia

RoW

54%

21%

19%

6%



100%

80%

60%

40%

20%

0%

Venture Capital2

Buyouts

Balanced Stage

Generalist

Fund of Funds

Mezzanine

Other PE

27%

23%

23%

6%5%

4%

12%


15/47


Copyright



c.

Allrightsreserved.

&

Active GPs (


16/47


Copyright



c.

Allrightsreserved.

&

Sec. funds / FoFs

Non-trad. buyers

Second-

aries

5

LPs / Investors

Pension funds

Insurance firms

Banks

SWFsFamily offices

Endowments

...

Insurance firms

...

Pension funds

4 5

LP interests only

Direct only

LP interests / directTargets

GPs / PE funds

Buyout

Venture Capital

Mezzanine


Fund of funds

...

PE trans-

actions

1

2

Service providers


6


PE fundraising

Fund services


7

Associations8



Source: BCG

3

Fundraising

3


17/47


Copyright



c.

Allrightsreserved.

&

PE fundraising: Still significantly below all time high in 20073

Source: Thomson Reuters VentureXpert, BCG

600

500

400

300

200

100

0

No of funds raised

1,400

1,200

1,000

800

600

400

200

0

-52%

2011

255

2010

185

2009

177

2008

514

2007

529

2006

415

2005

Funds raised (in USDbn)

322

2004

148

2003

102

2002

99

2001

184

Funds raised (in USDbn)Nr. of funds raised


18/47


Copyright



c.

Allrightsreserved.

&

PE fundraising: Increased activity in small/mid-cap segment

No of funds raised1,200

1,000

800

600

400

200

0

Balanced stage

Venture Capital2

Buyouts

Fund of Funds

Mezzanine

82

5054

196

2010

234

223

187

70

5547

136

231

242

2011

Other PE

Generalist

213

Funds raised by type Funds raised by fund size1 Funds raised by geography


1,000

800

600

400

200

0

USD 0-100m

USD 101-500m

USD 501m -1bn

>USD1bn

2011

554

361

79

74

2010

496

301

79

76


1,000

800

600

400

200

0

Americas

Europe

Asia

RoW

2011

646

118

283

21

2010

548

147

228

29

952 1068952 1068952 1068

1. Total amount of capital committed to a fund by its LPs and GPs. 2. Venture Capital includes seed, early and later stage funds.Source: Thomson Reuters VentureXpert, BCG

3


19/47


Copyright



c.

Allrightsreserved.

&

PE fundraising: USD 255bn funds raised in 20113


300

250

200

150

100

50

Buyouts

Balanced stage

Venture Capital2

Fund of Funds

Mezzanine

Generalist

Other PE

2011

103

33

25

1010

16

57

2010

5626

15

1310

7

58

Funds raised by type Funds raised by size1 Funds raised by geography


300

250

200

150

100

50

0USD 0-100m

USD 101-500m

USD 501m -1bn

>USD1bn

2011

18

69

45

123

2010

15

47

37

86


300

250

200

150

100

50

0

Americas

Europe

Asia

RoW

2011

152

44

56

3

2010

121

24

36

4

185 255185 255185 255

1. Total amount of capital committed to a fund by its LPs and GPs. 2. Venture Capital includes seed, early and later stage funds.Source: Thomson Reuters VentureXpert, BCG


20/47


Copyright



c.

Allrightsreserved.

&

33

FundraisingFundraising

Sec. funds / FoFs

Non-trad. buyers

Second-

aries

5

Insurance firms

...

Pension funds

5

LP interests only

Direct only


GPs / PE funds

Buyout

Venture Capital

Mezzanine

Balanced stage

Generalist

Fund of funds

...

PE trans-

actions

1

2

Service providers


6


LPs / PE Investors

Fund services


7

Associations8



Source: BCG

4

LPs / Investors

Pension funds

Insurance firms

Banks

SWFs

Family offices

Endowments

...

4


21/47


Copy

right


TheBostonConsultingGroup,Inc.

Allrightsreserved.

&

LPs / Investors: Family offices and Endowments withsignificant "outstanding dry powder"

1. Data based on a proprietary database of more than 3'000 commitments by LPs to PE built by BCG and IESE in 2009. The database draws from publicly available data on LPs and PE funds, aswell las from commercial databases including Preqin, Thomson Reuters VentureXpert, Dow Jones Directory of Alternative Investment Programs and Dealogic. In addition, in-depth interviews withmore than 30 LPs and GPs in the US and Europe were conducted. 2. Dry powder is the capital committed by investors into PE funds minus both the capital invested by the firm managing the fundand the capital investors will not be able to provide.

Note: Fund of funds are not included as LPs because they are intermediaries and not original sources of capital. However they play an important role as distributors of about 10-15% of all LPcommitments to PE fundsSource: BCG-IESE database

4

Main types of investors in PE by outstanding dry powder1

Public

pension

funds

~17%

Insurance

companies

Family offices

and

foundations

~6%

SWFs and

government

agencies

~10%

~16%

Private

pension

funds

~15%

Financial

institutions

100%

Outstanding

dry powder2

0%

100%

20%

60%

Endowments

40%

80%

~6%

~30%

~ USD 500bnShare of outstanding

dry powder by

PE investors2


22/47


Copy

right

2012byDealMarket,Inc.&TheBostonConsultingGroup,Inc.

Allrightsreserved.

&

LPs / Investors: Trend towards direct investments

Direct investments of LPs in private firms1

1. Based on Coller Capital Global Private Equity Barometer 2006, 2007/2008 and 2010. 2. 2010 Survey of 62 families advised by McNally Capital with average AuM of USD 250m.Source: Coller Capital Global Private Equity Barometer 2006, 2007/2008 and 2010, McNally Capital/New York Times, BCG

Direct investments of LPs in private firms

13%

26%

51%

Survey

2007/2008

10%9%

23%

59%

Survey

2006

9%10%

65%

16%

% of surveyed LPs

100%

80%

60%

40%

20%

0%

Yes -

proprietary investing only

Yes -

co-investm. and propr. investing

Yes -

co-investment only

No direct investments

Survey

2010

10%

LP plans for direct investments over next three years

% of surveyed LPs

100%

80%

60%

40%

20%

0%

Increase

direct investments

No change

Decrease

direct investments

Survey

2010

41%

54%

5%

Survey

2007/2008

31%

67%

3%

Survey

2006

25%

72%

3%

Survey of Family Offices2

4

are planning to increase or maintain their direct

investments in private firms over the next two years

of respondents said they were seeking outsized

returns from direct investing

source direct investments primarily from

friends and family

of family offices that responded said they were not

satisfied with the fee structure at private equity finds

prefer to invest in direct deals as opposed to

more traditional private equity funds

83%

67%

63%

> 60%

59%


23/47


Copy

right


Allrightsreserved.

&

LPs / Investors - Family Offices: SFOs tend to have higherPE allocation

Source: Wharton Global Family Alliance, IMD/EVCA, BCG

Types of family offices Allocation to Private Equity

Single family office

(SFO)

Exclusive FO for one family

Highest form of confidentiality

Multi family office

(MFO)

Broad service offering

Cost efficiency through economies of

scale

Virtual family office

(VFO)

Network of service providers without

physical infrastructure

Less administration, therefore lower costs

Main areas of services

Investment-related

services

Administration-relatedservices

Family-related

services

Asset allocation

Manager selection

& monitoring

Education of family

members

Estate planning

Risk management/

insurance

Philanthropy Security & concierge

services

Reporting

Tax services

Financial admin

Legal services Banking

Relation mgmt

12%13%

EU SFOsUS SFOs

% of assets allocated

to private equity

15%

10%

5%

0%Worldwide

SFOs

9%

according to

Wharton Global Family

Alliance Survey (2008)

according to

IMD/EVCA

Survey

4


24/47


Copy

right


Allrightsreserved.

&

LPs / Investors - Family Offices: Broad range of estimatesabout existing number of family offices

Family office estimates cited in the press

Source: Barron's, Family Wealth Alliance, Financial Times, Wall Street Journal, Family Office Association / Wharton Global Family Alliance, EVCA/IMD, BCG Global Wealth Market-Sizing Database

"Right now, there are about 3'000 family offices in America."

Barrons (Sep 28, 2009)

"Currently, there are approximately 1'000 single

family offices in the world."

Family Office Association / Wharton GlobalFamily Alliance (2008)

"There are somewhere between 3'000and 5'000 family offices in the US."

FT (Jul 31, 2011)

"The universe of US-based Single

Family Offices is estimated at 2'500"

Family Wealth Alliance (2010)

"A more realistic estimate is likely to be

closer to 1,000 [SFOs] just in Europe."

Wall Street Journal (Jun 14, 2010)

"EVCA estimates thatthere are around 500

smaller family offices

active in Europe, of

which between 80

and100 can be

considered as large"

European VentureCapital Association,IMD (2007)

4

Term "family office" often used forsingle or multi-family offices only or

including all types of family offices

Research reports are generally

focused on specific geographic

regions

Inconsistent use of term "family

office" and geographical focus leads

to a wide range of estimates about

number of existing family offices

worldwide

Need for estimation of worldwide number of firmsdedicated to family offices services


25/47


Copy

right


Allrightsreserved.

&

LPs / Investors - Family Offices: BCG estimates ~7'070 firmsdedicated to family offices service

Potential client universe1 Number of firms dedicated to FO services

~ AuM USD 100m needed to makedirect investments of USD 1m+

No of UHNW households

(> USD 100m AuM)

15000

10000

5000

0

Total

~ 12300

RoW

~ 1700

Asia-Pacific

~ 2000

Americas

~ 3700

Europe

~ 4900

Europe: ~3000 existing firms dedicated to FO services resulting

in a ratio of ~0.6 firms/UHNW household2

Americas: Family offices originated in the US, i.e. generallylarger penetration assumed (Assumption: 0.7 firms/UHNW

household)

Asia / RoW3 : Currently underrepresented in terms of firms withFO services, but strong growth prospects (Assumption: 0.4

firms/UHNW household)

No of firms dedicated

to family office services

2000

4000

6000

8000

0

Total

~ 7'070

RoW

~ 680'

Asia-Pacific

~ 800

Americas

~ 2'590

Europe

~ 3'000

1. Includes single family offices, multi family offices and other family office service providers (e.g. EAMs). 2. Based on a comprehensive BCG study about European family office services.3. Citigroup expects the number of family offices in Asia to triple over the next decade.Source: BCG Global Wealth Market-Sizing Database, Citigroup, BCG

4


26/47


Copy

right


Allrightsreserved.

&

Corporate M&A: key group within PE, often underestimated

1. Based on Deloitte survey. 2. Based on Orbis - Bureau van Dijk database.Source: Deloitte Corporate Development 2010, Orbis - Bureau van Dijk, BCG

4

BCG estimation of number ofcorporates with M&A department

Assumptions: Number of firms with sales of more than USD 500m

Firms who conducted at least one M&A deal since 2000

No of corporates2

10000

8000

6000

4000

2000

0

TotalAsia-Pacific

~2'500

EMEA

~3'000

Americas

~3'500

Main tasks of corporate M&A dep.

73%

76%

79%

83%

84%

% of surveyed executives who see the primary responsibility

of corporate development teams in the following areas1 :

1. M&A strategy and target

identification

2. Valuation and analytics

3. Leading negotiations

4. Deal pipeline management

5. Financial due dilligence

~ 9'000


27/47


Copy

right

2012byDealMarket,Inc.&TheBostonConsultingGroup,I

nc.

Allrightsreserved.

&

8

Fundraising

3

LPs / Investors

Pension funds

Insurance firms

Banks

SWFs

Family offices

Endowments

...

4

Targets

GPs / PE funds

Buyout

Venture Capital

Mezzanine

Balanced stage

Generalist

Fund of funds

...

PE trans-

actions

1

2

Service providers


6Lawyers Financial advisors

Secondaries

Fund services


7

Associations



Source: BCG

5

Sec. funds / FoFs

Non-trad. buyers

Second-

aries

5

Insurance firms

...

Pension funds

5

LP interests only

Direct only



28/47


Copyright


&TheBostonConsultingGroup,I

nc.

Allrightsreserved.

&

Secondaries: Most secondary deals are LP interest sales

Basic transaction types Secondary deal volume by type

Buyer and seller motivation

LP sells its interest in a PE

fund or a portfolio of interests

to another investor

Seller get paid for previously

funded investments and is

released from future capital

calls

Sale of LP interests

Secondary direct: Refers tothe sale of an entire portfolio of

firms or firm participations by a

GP

Secondary buyout: GP sellsa single portfolio company to

another private equity fund

Secondary direct/buyout

Need for liquidity (e.g. unableto meet capital calls)

Unsatisfactory performance

of PE funds

Change in asset allocation

Regulatory changes

...

Seller of LP interests

Exploit market inefficiencies/discounted investment opp.

Invest in an identifiable

portfolio of assets

Gain access to future funds of

top-performing GPs

...

Buyer of LP interests

Source: UBS Private Funds Group estimates, BCG

Est. deal

volume (in USDbn)

20

10

0

5

LPinterests

Directs

2010

15

18

(83%)

4

(17%)

2009

25

8

(85%)

1 (15%)

2008

13

(67%)

7

(33%)

2007

11

(73%)

4

(27%)

15 20 9 22

5

Secondary deal volume dominated by LP interest sales


29/47


Copyright


&TheBostonConsultingGroup,Inc.

Allrightsreserved.

&

Secondaries: Fundraising stable USD 26bn dry powder

promises ongoing secondary deal flow

Number of secondary funds raised Dry powder at leading secondary funds

2011

18

0

5

10

20

15

2009

17

20102008

22

14

25

2007

11

2006

14

2005

16

Source: Preqin, BCG

25

7

2005 2006

7

14

2007

14

2011

20

15

10

5

0

10

2010

11

2009

23

2008

Secondary fundraising volume


No of funds raised

stable

stable

Firm CountryEst. dry powder

(in USDbn)

Lexington Partners US 5.1

Goldman Sachs Private Equity US 3.9

Pantheon Ventures UK 3.2

Landmark Partners US 2.5

CS Strategic Partners US 2.2

AlpInvest Partners NL 2.0

Partners Group CH 1.9

Axa Private Equity F 1.9

HarbourVest Partners US 1.9

Coller Capital UK 1.7

Total ~ USD 26bn

Ratio of dry powder at leading secondary fundsto secondary deal volume in 2010 currently ~1.2x

5


30/47


Copyright



Allrightsreserved.

&

Secondaries: Pricing improved considerably

Based on the average high bids received for UBS-advised transactions.Source: UBS Private Funds Group estimates, BCG

5

% discount to

net asset value

50

40

30

20

10

0

Q1 2011

13.1

26.5

3.0

Q4 2010

15.5

21.1

11.7

Q3 2010

17.2

33.9

13.4

Q2 2010

18.0

36.9

18.1

Q1 2010

12.5

30.9

12.1

Q4 2009

36.8

34.031.6

All PEVentureBuyout

Pricing of private equity assets1

Pricing of private equity

assets improved

considerably from

Q4 2009 to Q1 2011

In Q1 2011, the average

discount to NAV forprivate equity assets is at

13.1%

Discounts for buyout

assets are the lowest

(3% discount to NAV)


31/47


Copyright



Allrightsreserved.

&

Relative importanceof the secondary market

Secondaries: Secondary segment still marginal compared torest of the PE market and not on top of LP agendas

1. According to Probitas Research LP survey.Source: Probitas Research - Private Equity Deskbook 2011, BCG

100%

6%

4%

2%

0%

Deal volume2010

(in USDbn)

~ USD 22bn(8%)

USD 243bn

(92%)

Funds raised2011

(in USDbn)

USD 10bn(4%)

USD 255bn

(96%)

No of funds raised2011

18(2%)

1068

(98%)

Share of the secondary market

in % of total PE market

SecondaryRest of PE market

5

Outlook: LP areas of interest

13%

30%

33%

37%

39%

46%

% of LPs who plan to focus most of their attention on

investing in the following areas (up to 5 choices possible)1 :

1. US mid-cap buyouts

2. Growth capital funds

3. US small-cap buyouts

4. EU small-cap buyouts

5. Asia country-focused funds

...

14. Secondary funds


32/47


Copyright



Allrightsreserved.

&

Sec. funds / FoFs

Non-trad. buyers

Fundraising Second-

aries

3 5

LPs / Investors

Pension funds

Insurance firms

Banks

SWFsFamily offices

Endowments

...

Insurance firms

...

Pension funds

4 5

LP interests only

Direct only


GPs / PE funds

Buyout

Venture Capital

Mezzanine


Fund of funds

...

PE trans-

actions

1

2

Service providers

Fund services


7

Associations8



Source: BCG

6

Service providers


6



33/47


Copyright



Allrightsreserved.

&

Summary: ~ 25000 PE specialists identified across ~4'200

M&A service providers

1000

2000

3000

4000

5000

No of firms

0

Total

4212

Acc-

ountants

256

Cons-

ultants

315

PR

advisors

523

Financial

Advisors

1289

Law

firms

1829

Type of service provider

4212 service providers identified1

Service providers involved in

at least one M&A deal since 2009

1. The analysis is based on league table credit of advisors in all M&A transactions recorded in mergermarket since January 2009. mergermarket includes transactions worldwide with at least USD5mdeal value. If the deal value is not disclosed and cannot be confirmed to be greater than or equal to USD 5m, deals are included if the targets revenue is greater than USD 10m. League table credit is

given to firms advising any of the principals (bidder, target or seller) or the parent companies of the principals on a transaction. Where there is more than one advisor, each is credited with the full dealvalue of the transaction.Source: mergermarket, BCG

11'043

8'803

2'422

1'514

898

Financial advisors

Law firms

Accountants

Consultants

PR advisors

24'680Total of PE specialists acrossservice providers

6

PE specialists across service providers


34/47


Cop

yright



Inc.

Allrightsreserved.

&

Law firmDeal value

(in EURm)

Nr. of

deals

Countries

w. office

Freshfields Bruckhaus Deringer 460'381 601 15

Linklaters 368'361 587 19

Allen & Overy LLP 241'571 546 26

DLA Piper 57'255 519 30

CMS 57'135 516 29

Clifford Chance LLP 222'898 495 26

Baker & McKenzie 64'322 404 41

Latham & Watkins LLP 185'166 338 13

Jones Day 56'706 331 19

White & Case LLP 85'248 316 25

Average 24

Law firms: ~8'800 PE specialists

Nooflaw

firms

2000

1500

1000

500

0

1829

>100

deals

46

11-100

deals

243

2-10

deals

617

1

deal

923

No of deals advised since 2009

6

Number of deals advised by law firms1 Most active law firms since 2009

Assuming one PE specialist per

country a multiple of~25 for the most active firms

seems reasonable

Identifiedfirms

Multiplier

Potentialnumber of

PEspecialists

x

=

8'803

x

923

1

=

3'085

5

x

=

3'645

15

x

=

=1'150

25

x

=

=+ + +




35/47


36/47


37/47


Cop

yright



Inc.

Allrightsreserved.

&

Consultants

Countries

w. office

McKinsey & Co 55

Boston Consulting Group 42

A.T. Kearney 38

Booz & Company 34

Roland Berger SC 33

Bain & Company 30

Oliver Wyman 25

Arthur D. Little 20

Monitor Group 17

L.E.K. Consulting 14

Average 31

Consultants: ~1'500 PE specialists

400

Noofconsultancyfirms

300

200

100

0

315

>100

deals

0

11-100

deals

19

2-10

deals

72

1

deal

224


6

Number of deals advised by consultants1 Leading consultancy firms2

1. The analysis is based on league table credit of advisers in all M&A transactions recorded in mergermarket since January 2009. mergermarket includes transactions worldwide with at least USD5mdeal value. If the deal value is not disclosed and cannot be confirmed to be greater than or equal to USD 5m, deals are included if the targets revenue is greater than USD 10m.Source: mergermarket, BCG


country a multiple of

~30 for the most active firmsseems reasonable

1'514

x

224

1

=

720

10

x

=

570

30

x

=

=0

30

x

=

=+ + +

Identifiedfirms

Multiplier

Potentialnumber of

PEspecialists

x

=


38/47


Cop

yright



Inc.

Allrightsreserved.

&

Accountants

Deal value

(in EURm)

Nr. of

deals

Countries

w. office

Ernst & Young 157'737 774 140

PwC 86'376 498 149

KPMG 113'870 476 152

Deloitte 60'132 413 150

Grant Thornton UK 5'296 158 100

BDO 8'326 152 135

Baker Tilly International 591 35 100PKF (UK) LLP 298 21 125

Mazars LLP 408 17 67

Accuracy 2'748 14 9

Average 113

Accountants: ~2'400 specialists

300

Noofaccountants

200

100

0

256

>100

deals

6

11-100

deals

9

2-10

deals

59

1

deal

182


6

Number of deals advised by accountants1 Most active accountants since 2009


country a multiple of~110 for the most active firms

seems reasonable

2'422

x

182

1

=

590

10

x

=

990

110

x

=

=660

110

x

=

=+ + +



Identifiedfirms

Multiplier

Potentialnumber of

PEspecialists

x

=


39/47

PE Placement agents: Usage of placement agents

7


40/47


Cop

yright



Inc.

Allrightsreserved.

&

Firm Nr. of fundsplaced

(in USDbn)

Agg. capitalplaced

(in USDbn)

Park Hill Group 9 22.4

Credit Suisse Private Fund Group 17 11.9

MVision Private Equity Advisers 13 11.1

UBS Investment Bank Private Funds Group 4 7.6

Greenhill Fund Placement Advisory Group 9 6.5

Atlantic-Pacific Capital 6 5.9

Probitas Partners 4 5.1

Campbell Lutyens 3 4.9

Capital and Marketing Group 3 4.9

Lazard Private Fund Advisory Group 7 4.8

PE Placement agents: Usage of placement agents

varies significantly by PE fund type

Main service

Leading placement agents by capital placed

Source: Private Equity International A guide to fund placement specialists, Preqin, BCG

Usage of placement agents

North America

Asia and RoW Yes (47%)

Yes (42%)

No (53%)

Europe

No (58%)

Yes (48%) No (52%)Bygeo-gra-phy

Venture

Fund of Funds

Mezzanine

Buyout

Yes (29%) No (71%)

Yes (32%) No (68%)

Yes (50%) No (50%)

Yes (65%) No (35%)

Byfundtype

Fund placement agents specialize in raising capital onbehalf of private equity funds by finding institutional

investor which are willing to invest

PE placement agent universe

~130 placement agents identified

7

PE Fund administrators: Fund administrators provide a wide7


41/47


Cop

yright



Inc.

Allrightsreserved.

&

PE Fund administrators: Fund administrators provide a wide

range of services to PEs

Services offered by PE fund admin.

Exemplary PE fund administrators

Source: Fund administrator websites, Preqin, BCG

Usage of PE fund administrators

PE fund administrator universe

~40 fund administrators identified

North America Yes (30%) No (70%)

Asia and RoW Yes (64%) No (36%)

Europe Yes (66%) No (34%)By

geo-gra-phy

Register and

Transfer Agency41%

Cash Mgmt and Provi-

sion of Bank Accounts42%

Tax Services 47%

Corporate Services 58%

Fund Launches/

Fund Establishment60%

Compliance and

Portfolio Monitoring61%

NAV Calculation 61% 39%

39%

40%

42%

53%

58%

59%

% of fund administrators offering service

7

Firm Headquarter

Apex Fund Services Bermuda

Augentius Fund Administration UK

Aztec Group Jersey

Banque Prive Edmond de Rothschild Switzerland

BNP Paribas Securities Services France

BNY Mellon US

Caceis Fastnet France

Citco Fund Services CaymanCiti Fund Services US

Deutsche Bank Alternative Fund Services UK

International Financial Services Mauritius

Ipes UK

JP Morgan Real Estate and PE Services US

Northern Trust US

State Street Global Services US


42/47


Cop

yright



Inc.

Allrightsreserved.

&

Sec. funds / FoFs

Non-trad. buyers

Fundraising Second-

aries

3 5

LPs / Investors

Pension funds

Insurance firms

Banks

SWFs

Family offices

Endowments

...

Insurance firms

...

Pension funds

4 5

LP interests only

Direct only


GPs / PE funds

Buyout

Venture Capital

Mezzanine

Balanced stage

Generalist

Fund of funds

...

PE trans-

actions

1

2

Service providers


6


Fund services


7

Associations

Source: BCG

Associations8



8


43/47


Copyright

2012byDealMarket,Inc

.&TheBostonConsultingGroup,

Inc.

Allrightsreserved.

&

PE/VC associations: ~ 100 PE/VC associations existing

VC and PE associations fulfill several purposes

Member groups

Maintain dialogue with key stakeholders to effect

changes to the tax and regulatory environment

Representation /

lobbying

Provide opportunities to exchange ideas and increasecooperation / deal flow between membersNetworking

Conduct and publish research on issues important to the

venture and private equity industryResearch

Offer trainings to enhance the professional skills and

expertise of practitionersTrainings

Establish and maintain best practice ethical and

professional standards

Professional

standards

PE / VC Funds

Typically core members

Investors

Service providers

Typically associate members

8

Number of PE/VC associations

100

80

60

40

20

0

North America39

Europe26

Asia-Pacific18

Africa / ME.7

Latin A. 4 Intern. 2

Regional

40

National47

International9

n = 96 n = 96

No of

associations

by type by region

100

80

60

40

20

0

North America39

Europe26

Asia-Pacific18

Africa / ME.7

Latin A. 4 Intern. 2

Regional

40

National47

International9

n = 96 n = 96

No of

associations

by type by region

Note: Analysis based on information provided by VC/PE associationsSource: Associations, BCG

National and International PE/VC associations: Largest8


44/47


Copyright



Inc.

Allrightsreserved.

&

National and International PE/VC associations: Largest

associations focus on developed markets

The European Venture

Capital Association(EVCA) represents the

biggest Private Equity

Association with 1200

members

Five national

associations focusing

on the emerging PEmarketsAsia-Pacific,

Latin America and

Africa / Middle East

made it to the Top 20

while the Emerging

Markets Private Equity

Association ranks on

No 8

20 largest national and international PE/VC associations1

Nr. Association Type of Ass. Region Members

1 European Private Equity and Venture Capital Association International Europe 1200

2 National Association of Seed and Venture Funds National North America 850

3 Association Franaise des Investisseurs en Capital National Europe 470

4 British Private Equity and Venture Capital Association National Europe 450

5 National Venture Capital Association National North America 407

6 Swiss Private Equity & Corporate Finance Association National Europe 349

7 Bundesverband Deutscher Kapitalbeteiligungsgesellschaften National Europe 320

8 Emerging Markets Private Equity Association International International 300

9 Swedish Private Equity & Venture Capital Association National Europe 270

10 Canada's Venture Capital & Private Equity Association National North America 26811 Institutional Limited Partners Association International International 250

12 Associazione Italiana del Private Equity e Venture Capital National Europe 250

13 Australian Private Equity & Venture Capital Association National Asia-Pacific 231

14 Taiwan Venture Capital Association National Asia-Pacific 228

15 Danish Venture Capital and Private Equity Association National Europe 190

16 Associao Brasileira de Private Equity e Venture Capital National Latin America 170

17 China Venture Capital Association National Asia-Pacific 150

18 Nederlandse Vereniging van Participatiemaatschappijen National Europe 14919 Asociacin Espaola De Entidades De Capital National Europe 143

20 South African Venture Capital Association National Africa / Middle East 129

1. International and national PE/VC associations considered which provide information on number of members. Members include full and associate membersSource: Associations, BCG

8


45/47

Business angels associations and networks/groups: Europe8


46/47


Copyright



Inc.

Allrightsreserved.

&

Business angels associations and networks/groups: Europe

most fragmented

National22

North America2

International

4

Europe

16

Latin America2

Asia-Pacific4

Africa / ME. 1Intern. 1

8

16

24

4

28

20

12

0

by type

n = 26 n = 26

No of associations

by region

Business angels associations Business angels networks/groups

500

900

0

200

300

400

RoW~ 60

100

North America

~ 370600

800

Europe~ 400

700

by region

n = ~ 830

No of networks/groups

Source: OECD "Financing high-growth Firms The role of angel investors", Associations, BCG

Role of business

angels associations:

Act as umbrella

organisations of

business angel groups

Raise awareness about

the industry

Liaise with policy

makers

Collect data from

member organisations

and conduct research

Provide a platform forinformation sharing

Role of business angels

networks/groups:

Connect angel investors

willing to invest with

entrepreneurs looking for

capital

Business Angel Network

do not make anyinvestments or

investment decisions

The networks can have a

general or specific

industry focus and are

typically established on a

international, national orregional level


47/47


Copyright



Inc.

Allrightsreserved.

&

Summary: Rough sizing of the PE market

1. Based on a currency rate of CHF/USD 0.91. Based on 2011 Montana Capital Partners estimate.Source: BCG

No of PE deals: 10'941

No of direct deals: 10'952

No of abandoned d.: 22'123

1

No of GPs / PE funds: 2'8072

No of funds raised: 1'0683

No of family offices: 7'070

No of M&A depart.: 9'0004

Sec. deal volume: ~CHF 21.8b

No of secondaries: 908

PE specialists fin. adv.: 11'043

PE specialists law firms: 8'803

PE specialists account.: 2'422

PE specialists consult.: 1'514

PE specialists PR advis.: 898

No of fund administrators: 40

No of fund placement ag.: 130

No of VC/PE associations: 96

No of Angel associations: 26

No of Angel groups/netw.: 830

5

6

7

8

bcg private equity market analysis

Documents