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Do Mid-Cap Private Equity Funds

Have an Advantage

in Today’s Markets?

Richard Cashin, Managing Partner, One Equity Partners

Ellis Jones, CEO, Wasserstein & Co.

John Mapes, Managing Partner, Aurora Capital Group

Ted Virtue, CEO, MidOcean Partners

Moderator: Mischa Zabotin,

Managing Director, Head of Financial Sponsors Group, Calyon Securities (USA) Inc.

Monday, April 28, 2008

9:35 AM – 10:50 AM


Have an Advantage


General Background Slides

Growing mid-cap private equity fund

By number of deals

Source: Portfolio Company Disbursements (VCD).

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2003 2004 2005 2006 2007

Large-cap (>US$500M) Mid-cap (US$50-500M) Small-cap (<US$50M)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2003 2004 2005 2006 2007

US$ billions

Large-cap (>US$500M) Mid-cap (US$50-500M) Small-cap (<US$50M)

Source: Portfolio Company Disbursements (VCD).

Growing mid-cap private equity fund

By deal values

23.3% oftotal

20.6% oftotal

24.0% oftotal

19.6% oftotal

25.7% oftotal

72.6% oftotal

79.1% oftotal

78.4% oftotal

75.7% oftotal

75.1% oftotal

Private equity: An alternative to classicprivate and public governance models

Publicly listedcompany

Private equity

Family-owned orprivately held

Ownership structure

Many dispersed shareholders,both institutional and retail

Private equity fund bundlesequity from private investors to

speak with one voice

Single owner or family group

Source: McKinsey Global Institute analysis.


Private equity


Corporate governance

Shareholders have weak financialincentives and usually

weak voice in management

Direct LBO representative on boardwith significant financial incentives

for shareholder value

Controlled and led by founder/owner.May have outside voice on board or

management by invitation only





Private equity


Capital structure

Low debt-equity ratio

High debt-equity ratio

Debt tolerance dependson owner; usually low




Private equity


Fundraising

Fundraising through public debtand equity markets, bank loans

Fundraising throughprivate investors

Fundraising through debtand bank loans


Direct and indirect effectson companies and financial markets

DirectImprovement of

portfoliocompanies

Pressure oncorporate performance

Create more liquidbuyout market

Impact on publiccapital markets

•Takeover threat•Public investments

•Buyout market for spin-offs•Key driver in M&A volume

•Rise in company performance•More activist governance

•Changing debt-equity

Indirect impact


Announced U.S. share buybacks

131

198

349

432

510

0

100

200

300

400

500

600

2003 2004 2005 2006 2007

US$ billions

Source: McKinsey Global Institute analysis, October 2007.

13.30%18.20%LBO yield before fees

4.796.55Net profit after tax (30% tax rate)

7.565.04

9%6%Debt service

14.4EBIT (margin 12%)

84Debt share 70%

36Equity contribution 30%

120Market capitalization

Simplified example of LBO deal (US$ millions)

LBO denotes leveraged buyout fund.

Interest rates have fallen,boosting private equity returns


Average private equity returnsin the U.S. As of December 12, 2006


Ten-year annualized returns

12.9

8.5

14.5

8.6

8.3

4.7

6.2

Hedge funds

U.S. private equity

Real estate

US equities

International equities

Internationalfixed income

U.S. fixed income

Five-year annualized returns

9.2

10.6

23.2

7.2

15.7

9.5

5.1

Estimate of future AUM in LBO funds

Correction

Base case

Continuedgrowth

McKinsey Global Institute analysis

• Funds raised in the U.S. lose -15% per year• Funds raised in Europe shrink by -15% per year• AUM in Asia and elsewhere remain at 2006

levels

• Funds raised in the U.S. and in Europe remain at2006 levels

• AUM in Asia and elsewhere grow by 10%

• Funds raised in the U.S. grow by 14% per year• Funds raised in Europe grow by 20% per year• AUM in Asia and elsewhere grow by 20%

AUM = assets under management.


Global private assets reachUS$1.4 trillion in 2012 in base case

• = estimates•Source: McKinsey Global Institute analysis, October 2007.

1,429

709 864 992 1069 1027 889 771

48128

237 370 523 658

914

1,141

1,3751,557 1,722

1,959

2006 2007 2008* 2009* 2010* 2011* 2012*

US$ billions

Continued growth

Base case

Correction

U.S. LBOs by target industry

Source: Thomson Financial.2004 2005 2006 2007

Financials

Healthcare

Energy and power

Telecommunications

Media and

entertainment

High technology

Other

US$ billions

US$65.8

US$120.0

US$380.2US$361.4

Of which26% were

retail

Of which32% wereconsumer

Of which 34%were

materials

Non-U.S. LBOs by target industry

Source: Thomson Financial.2004 2005 2006 2007

Energy and power

Materials

Consumer

Industrials

Telecommunications

Retail

Other

US$97.7

US$168.0

US$324.5US$336.7

US$ billions

Of which 50%were media

andentertainment

Of which25% werereal estate

Of which 44%were media

andentertainment


Have an Advantage


Mischa Zabotin’s Slides

Private Equity Funds

in the United States

Commitments to U.S. privateequity partnerships by sector

Does not include funds-of-funds.

Source: Private Equity Analyst.

$300

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1Q07 1Q08

US$ billions

Buyouts / corporate finance

Secondaries / other

Venture capital

Mezzanine

13.319.5

29.8 31.5

50.1

84.390.8

155.2

98.2

58.2

42.9

85.4

144.6

209.3

278.7

110.2

56.1

The ten largest funds in 2007

Source: Buyouts magazine, January 7, 2008.

Sponsor Name of fund Amount raised

in 2007 (US$M)

Amount raised

to date (US$M)

Target (US$M)

Blackstone Group Blackstone Capital Partners V 6,100 21,700 20,000

Goldman Sachs Goldman Sachs Capital Partners VI 20,000 20,000 19,000

Apax Partners Apax Europe VII 16,172 16,172 16,172

Apollo Management Apollo Investment Fund VII 6,400 6,400 15,800

Kohlberg, Kravis, Roberts & Co. KKR 2006 Fund 2,430 18,500 15,500

Carlyle Group Carlyle Partners V 11,000 11,000 15,000

Warburg Pincus Warburg Pincus Private Equity X 9,000 9,000 15,000

Providence Equity Partners Providence Equity Partners VI 11,950 12,100 12,000

Blackstone Group Blackstone Real Estate Partners VI 11,000 11,000 10,200

Madison Dearborn Partners*** Madison Dearborn Partners VI 10,000

*** premarketing

Largest LBO acquisitions Announced between July 2006 and April 11, 2008

Source: Merger Market.

Date

announced

Date

completed

Target company Acquirer Deal value (US$M)

Jun 30, 2007 Pending BCE Inc BCE Consortium 48,059

Feb 26, 2007 Oct 10, 2007 Energy Future Holdings Corp. TXU Acquisition Consortium 44,161

Nov 20, 2006 Feb 9, 2007 Equity Office Properties Trust Blackstone Real Estate Partners 37,837

Jul 24, 2006 Nov 17, 2006 HCA Inc. HCA Acquisition 31,771

Dec 19, 2006 Jan 28, 2008 Harrah's Entertainment Inc. Hamlet Holdings LLC 27,188

Nov 16, 2006 Pending Clear Channel Communications Inc Clear Channel Acquisition Corp. 26,999

Apr 2, 2007 Sep 24, 2007 First Data Corp. Kohlberg Kravis Roberts & Corp. (KKR) 26,964

May 20, 2007 Nov 16, 2007 Alltel Corporation Inc. Alltel Acquisition Corp. 26,862

Jul 3, 2007 Oct 24, 2007 Hilton Hotels Corp. Blackstone Group Holdings LLC 25,081

Apr 16, 2007 Pending SLM Corporation SLM Acquisition Corp. 24,662

May 2, 2007 Pending Cablevision Systems Corp. Charles Dolan family 22,465

Aug 28, 2006 May 30, 2007 Kinder Morgan Inc. (KMI) Kinder Morgan (management group) 22,386

May 29, 2007 Oct 5, 2007 Archstone-Smith Trust Archstone-Smith Acquisition Corp. 19,820

Sep 15, 2006 Dec 1, 2006 Freescale Semiconductor Inc. Freescale Acquisition Corp. 16,285

Jun 19, 2007 Feb 4, 2008 Intelsat Holdings Ltd. BC Partners Ltd. 15,823

Dec 18, 2006 Jul 12, 2007 Biomet Inc. LVB Acquisition LLC 11,342

3%

20%

26%

40%

13%

9%11%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

1Q07

2Q07

3Q07

4Q07

1Q08

Source: Thomson Financial.

Percentage of global M&Aattributed to buyouts

Buyout Financing

Source: Standard & Poor’s LBO 1Q08.

Average purchaseprice / non-adjusted EBITDA multiples

6.8

6.4

5.8

6.46.7

7

8.1 8.0

8.8

0.3

0.3

0.2

0.3

0.3 0.3

0.3

0.39.3

0.2

0.4

5x

6x

7x

8x

9x

10x

1999 2000 2001 2002 2003 2004 2005 2006 2007 1Q08

EBITDA multiples

Purchase price

Fees/expense

Source: Standard & Poor’s LCD Quarterly 2008Q1.

Average debt multiples of LBO loans

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1Q08

Debt/multiple

5.75.4

4.7

4.2 4.1 4.0

4.64.8

5.3 5.4

6.2

5.14.8 4.7

4.1 4.03.4

3.9 3.8

4.2

4.7 4.7

5.6

4.5

0x

1x

2x

3x

4x

5x

6xLarge corporate LBO loans

Middle market LBO loans

U.S. leveraged pricing

Source: Standard & Poor’s LCD Quarterly, 2008Q1.

0

100

200

300

400

500

600

1Q-98 1Q-00 1Q-02 1Q-04 1Q-06 1Q-08

BB

B

Basis points

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