latest private equity trends presentation - mike wright

1

Mike Wright, Imperial College

© Imperial College Business School

Latest Private Equity Trends

Equistone Partners Europe, Birmingham Breakfast Seminar, Feb 6, 2014

© Imperial College Business School 2

• Trends– UK, Europe, Midlands– Values and numbers– Regional Differences– Vendor sources– Industrial sectors– Deal structures and Pricing– Fund raising– Exits

• Prospects

Introduction

Latest Private Equity Trends


UK PE-backed Buyout Market Eases (£m)

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£m


Mid-market(PE-backed £50-250m)

1987

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UK Quarterly Trend Stays Flat20

03 I

2003

III

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I

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I

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I

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I

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III0

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Major European Markets Rise

France

Germany

Italy

UK

0 10000 20000 30000 40000 50000 60000 70000 80000

2013 2012 2011 2010 2009 2008 2007

Midlands Quarterly Trends20

03 I

2003

III

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I

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I

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I

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I

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PE-Backed Regional Deal Numbers (Head Office)

Midlands South North Scot, Wales, NI

0

20

40

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120

140

200820092010201120122013


PE-Backed Regional Deal Value (Head Office)

Midlands South North Scot, Wales, NI

0

2000

4000

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12000

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16000

200820092010201120122013

All Midlands DealsValue Flat But Volume Down

1987

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Midlands Share of all UK MBO/MBIs

1987

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2011

2013

0

5

10

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25

30

35

No. %Value %

UK Top End Volume Recovery(over £100m)

1987

1988

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Midlands Deals above £100m decline 19

91

1995

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Largest Midlands Deals

Buyout Name Vendor Deal Value (£m)

Busy Bees Knowledge Universe Education (USA)

220

Aurum Holdings Landsbanski 175

Whitworths Holdings SBO (European Capital) 90

Kee Safety International SBO (LDC) 90

32.2 WM Wymeswold Solar Power Plant

Private 44

City Link Rentokil 40

Acenta Steel Endless 38

Meter Provida Fusion group 38

In 2012 there were 6 £70m plus Midlands Deals

Midlands – The Last DecadeNumber Value

East Mids West Mids East Mids West Mids

2003 63 70 1629 4007

2004 61 77 1777 1057

2005 64 57 547 982

2006 47 70 1541 3723

2007 66 68 1374 2526

2008 38 50 1563 811

2009 27 37 150 248

2010 33 22 971 853

2011 22 39 231 1345

2012 30 29 477 385

2013 26 25 416 486


All UK Vendor Source (Number %)

Fore

ign

Div

estm

ent

Inso

lven

cy

Loca

l Div

estm

ent

Priv

ate

Publ

ic to

Pri

vate

Seco

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y Bu

y-ou

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0

5

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35

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45

2009 2010 2011 2012 2013

N

umbe

r %


PE-backed SBOs(Number & Value £m)

1987

1988

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SBO Value Exceeds Other Buyouts for first time (£m)

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Other Value £m SBO Value £m

Valu

e £m


SBOs vs Other Buy-outs(Numbers)

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Other SBOs

Num

ber

• Generally arise where primary buyout performance relatively weaker and held longer

• SBOs on average perform worse than primary buyouts, divisional & FF buyouts

• Positive effects of SBOs achieved by expansion not increased efficiency.

• BUT……SBOs between specialized PE firms do perform better

Care with Secondary Buyouts? sustain performance?

Family Foreign Local P2P Creditor SBO0

5

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45

50

UKMidlands

UK & Midlands 2013 Vendor Sources – % by Numbers

Family Foreign Local P2P Creditor SBO0

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60

UKMidlands

UK & Midlands 2013 Vendor Sources – % by Value

© Imperial College Business School 23Bus

. & S

uppo

rt Ser

vices

Financ

ial S

ervic

es

Food

and

Drink

Health

care

Leisu

re

Man

ufac

turin

g

Oth

er

Paper

,Prin

t,Pub

lish

Prope

rty &

Con

stru

ction

Retail

TMT

Trans

port

& Com

ms

0

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2007200920122013

UK Industry Sectors (Numbers)


Midlands SectorsDeal Numbers

Sector 2011 2012 2013Bus. & Support Services

13 12 5

Financial Services 3 1 0Food and Drink 2 2 1Healthcare 2 4 2Leisure 5 6 5Manufacturing 17 19 14Other 9 3 6Paper,Print,Publish 0 2 0Property & Construction

1 2 3

Retail 5 6 5TMT 3 0 9Transport & Comms 1 2 1Total 61 59 51


Midlands SectorsDeal Values

Sector 2011 2012 2013Bus. & Support Services

148 198 240

Financial Services 6 2 0Food and Drink 3 17 90Healthcare 127 222 4Leisure 10 95 40Manufacturing 399 115 128Other 112 42 125Paper,Print,Publish 0 152 0Property & Construction

38 4 6

Retail 685 12 184TMT 46 0 46Transport & Comms 2 5 40Total 1575 862 902


Debt Available(Deal Structures Above £10m)

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Debt Equity LoanNote Mezzanine OtherFinance

%

Collateralised Loan Obligations issuance

COV-LITEThe Return of Cov-Lite Loans

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

2

4

6

8

10

12

14

16

18

20

10-100m

above 100m

Entry EBIT Multiples for UK Buy-outs Increasing


UK Fund Raising back to peak levels

1999

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PE Backed Exit Recovery Continues

1987

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Mid-market exits accelerate(PE backed, £50-250m entry value)

1987

1988

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Flotations resurrected

Cred

itor

Exi

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tatio

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y-ou

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Trad

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Exits of Midlands Deals

Cred

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Main Midlands Exits

Company Name Deal Year Exit Value (£m)

Name of Buyer

Whitworths Holdings 2006 90 Equistone Partners

Kee Safety International 2011 90 Dunedin CP

Napier Turbochargers 2008 75 Wabtec Corp (USA)

Bionostics (Nav Bidco) 2008 68 Techne Corp (USA)

Optimum Care 2007 38 Four Seasons

Acenta Steel 2011 38 MBO

Practice Plan 2005 38 Wesleyan Assurance Society

Lil-lets UK 2006 37 Premier Foods (South Africa)

Eve Trakway 2006 28 Ashtead Group

Private Equity Prospects

• Large deal volume up though total value down

– Absence of mega deals

• Significant pending deals in 2014

– Domestic & General at £750 million

– Skrill £511 million

• More large deals expected


• Public to privates extremely quiet in 2013

• No large pending PTP deals

• Buoyant stock market

• Very quiet year for PTP in 2014


• IPO value of £9.8 billion highest on record.

• If stock and capital markets remain positive this trend should continue through 2014.

• Trade sales increasing but still seems some caution by corporates in converting increasing confidence into action


• 2013 ended on a more positive note than it began.

• Debt levels rose last year and more relaxed debt markets

• Buoyant exit and refinancing markets

• Increased UK based fund raising

• Large amounts of capital availability likely to fuel return to growth in buyout market in 2014.