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Latest Private Equity Trends Presentation - Mike Wright

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  • 1. Mike Wright, Imperial College © Imperial College Business School Latest Private Equity Trends 1 Equistone Partners Europe, Birmingham Breakfast Seminar, Feb 6, 2014
  • 2. • Trends – UK, Europe, Midlands – Values and numbers – Regional Differences – Vendor sources – Industrial sectors – Deal structures and Pricing – Fund raising – Exits • Prospects Introduction © Imperial College Business School Latest Private Equity Trends 2
  • 3. © Imperial College Business School 3 UK PE-backed Buyout Market Eases (£m) 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 0 50 100 150 200 250 300 350 400 450 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013    Value£m       Number    Number Value £m
  • 4. © Imperial College Business School 4 Mid-market (PE-backed £50-250m) 0 1000 2000 3000 4000 5000 6000 7000 8000 0 10 20 30 40 50 60 70 80 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013    Value£m       Number    Number Value £m
  • 5. UK Quarterly Trend Stays Flat 0 5000 10000 15000 20000 25000 0 50 100 150 200 250 2003I 2003IV 2004III 2005II 2006I 2006IV 2007III 2008II 2009I 2009IV 2010III 2011II 2012I 2012IV 2013III    Value£m       Number    Number Value £m
  • 6. Major European Markets Rise 0 10000 20000 30000 40000 50000 60000 70000 80000 France Germany Italy UK 2007 2008 2009 2010 2011 2012 2013
  • 7. Midlands Quarterly Trends 0 500 1000 1500 2000 2500 3000 0 5 10 15 20 25 30 35 40 45 2003I 2003IV 2004III 2005II 2006I 2006IV 2007III 2008II 2009I 2009IV 2010III 2011II 2012I 2012IV 2013III    Value£m       Number    Number Value £m
  • 8. © Imperial College Business School 8 PE-Backed Regional Deal Numbers (Head Office) 0 20 40 60 80 100 120 140 Midlands South North Scot, Wales, NI 2008 2009 2010 2011 2012 2013
  • 9. © Imperial College Business School 9 PE-Backed Regional Deal Value (Head Office) 0 2000 4000 6000 8000 10000 12000 14000 16000 Midlands South North Scot, Wales, NI 2008 2009 2010 2011 2012 2013
  • 10. All Midlands Deals Value Flat But Volume Down 0 1000 2000 3000 4000 5000 6000 0 20 40 60 80 100 120 140 160 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013    Value£m       Number    Number Value £m
  • 11. Midlands Share of all UK MBO/MBIs 0 5 10 15 20 25 30 35 No. % Value %
  • 12. UK Top End Volume Recovery (over £100m) 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 0 10 20 30 40 50 60 70 80 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013    Value£m       Number    Number Value £m
  • 13. Midlands Deals above £100m decline 0 1000 2000 3000 4000 5000 6000 0 1 2 3 4 5 6 7 8 9 10 1991 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013    Value£m       Number    Number Value £m
  • 14. 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
  • 15. Midlands – The Last Decade Number 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
  • 16. © Imperial College Business School 16 All UK Vendor Source (Number %) 0 5 10 15 20 25 30 35 40 45 ForeignDivestment Insolvency LocalDivestment Private PublictoPrivate SecondaryBuy-out    Number%    2009 2010 2011 2012 2013
  • 17. © Imperial College Business School 17 PE-backed SBOs (Number & Value £m) 0 2000 4000 6000 8000 10000 12000 14000 16000 0 20 40 60 80 100 120 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013    Value£m       Number    Number Value £m
  • 18. © Imperial College Business School 18 SBO Value Exceeds Other Buyouts for first time (£m) 0 5000 10000 15000 20000 25000 30000 35000 1989 1992 1995 1998 2001 2004 2007 2010 2013 Value£m Other Value £m SBO Value £m
  • 19. © Imperial College Business School 19 SBOs vs Other Buy-outs (Numbers) 0 100 200 300 400 500 600 700 800 1989 1992 1995 1998 2001 2004 2007 2010 2013 Number Other SBOs
  • 20. • 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?
  • 21. 0 5 10 15 20 25 30 35 40 45 50 Family Foreign Local P2P Creditor SBO UK Midlands UK & Midlands 2013 Vendor Sources – % by Numbers
  • 22. 0 10 20 30 40 50 60 Family Foreign Local P2P Creditor SBO UK Midlands UK & Midlands 2013 Vendor Sources – % by Value
  • 23. 0 20 40 60 80 100 120 140 160 180 200 2007 2009 2012 2013 © Imperial College Business School 23 UK Industry Sectors (Numbers)
  • 24. © Imperial College Business School 24 Midlands Sectors Deal Numbers Sector 2011 2012 2013 Bus. & Support Services 13 12 5 Financial Services 3 1 0 Food and Drink 2 2 1 Healthcare 2 4 2 Leisure 5 6 5 Manufacturing 17 19 14 Other 9 3 6 Paper,Print,Publish 0 2 0 Property & Construction 1 2 3 Retail 5 6 5 TMT 3 0 9 Transport & Comms 1 2 1
  • 25. © Imperial College Business School 25 Midlands Sectors Deal Values Sector 2011 2012 2013 Bus. & Support Services 148 198 240 Financial Services 6 2 0 Food and Drink 3 17 90 Healthcare 127 222 4 Leisure 10 95 40 Manufacturing 399 115 128 Other 112 42 125 Paper,Print,Publish 0 152 0 Property & Construction 38 4 6 Retail 685 12 184 TMT 46 0 46 Transport & Comms 2 5 40
  • 26. © Imperial College Business School 26 Debt Available (Deal Structures Above £10m) 0 20 40 60 80 100 120 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013    %    Debt Equity LoanNote Mezzanine OtherFinance
  • 27. Collateralised Loan Obligations issuance
  • 28. COV-LITEThe Return of Cov-Lite Loans
  • 29. 0 2 4 6 8 10 12 14 16 18 20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 10-100m above 100m Entry EBIT Multiples for UK Buy-outs Increasing
  • 30. © Imperial College Business School 30 UK Fund Raising back to peak levels 0 5000 10000 15000 20000 25000 0 5 10 15 20 25 30 35 40 45 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013    Value£m       Number    Number Value £m
  • 31. © Imperial College Business School 31 PE Backed Exit Recovery Continues 0 5000 10000 15000 20000 25000 30000 0 50 100 150 200 250 300 350 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013    Value£m       Number    Number Value £m
  • 32. © Imperial College Business School 32 Mid-market exits accelerate (PE backed, £50-250m entry value) 0 1000 2000 3000 4000 5000 6000 7000 0 10 20 30 40 50 60 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013    Value£m       Number    Number Value £m
  • 33. © Imperial College Business School 33 Flotations resurrected 0 20 40 60 80 100 120 140 160 180 200 CreditorExit Floatation SecondaryBuy- out TradeSale    Number    2005 2006 2007 2008 2009 2010 2011 2012 2013
  • 34. Exits of Midlands Deals 0 5 10 15 20 25 30 35 40 45 50 CreditorExit Floatation SecondaryBuy-out TradeSale    Number    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  • 35. © Imperial College Business School 35 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
  • 36. 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
  • 37. Private Equity Prospects • Public to privates extremely quiet in 2013 • No large pending PTP deals • Buoyant stock market • Very quiet year for PTP in 2014
  • 38. Private Equity Prospects • 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
  • 39. Private Equity Prospects • 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.