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02_EVCA_Javier Echarri

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  • 1. Institutional Investing in Private Equity Investor Forum Overview of the Private Equity Industry November 6, 2007 Bucharest November 7, 2007 Prague Javier Echarri Secretary General, EVCA The European Private Equity and Venture Capital Association
  • 2. Introduction to EVCA
    • Established in 1983 and based in Brussels
    • Represents the European Private Equity and Venture Capital (PE/VC) industry and promotes the asset class both within Europe and throughout the World
    • 1200 members, mainly European
      • 2/3 Full Members: PE/VC fund management companies
      • 1/3 Associate Members:
        • Institutional investors (banks, pension funds, insurance companies, family offices)
        • Professional advisors (lawyers, placement agents, investment banks)
        • National (European) Trade Associations
  • 3. Introduction to EVCA
    • EVCA key focus areas
      • Professional Standards
      • Public & Regulatory Affairs
      • Statistical Research
      • Economic & Industry Analysis
      • Conferences & other Networking events
      • Professional Development and Training
      • Publications
      • Help Desk
      • Team: 33 people
  • 4. What is Private Equity? Seed Start-up Expansion Replacement Capital Buyout Venture Capital Early stage Private Equity
  • 5. What is Private Equity? Acquisition of business or business unit with new/existing management Bring company to the next level 5+ Buyout Finance increased production capacity, new market or product development Expansion and growth of company 3 to 5 Expansion/ Development Later Stage Acquisition of a business from a private equity or other financial owner Finalize product and start initial marketing Finalize research and develop business plan Capital is used to Bring company to the next level Launch business activity and start selling the product commercially Develop and finalize initial business concept Next step of company 5+ 2 to 3 1 to 2 Company Age Replacement capital/ secondary purchase Start-up Seed Stages Early Stage
  • 6. Investment Methods
    • Through a private equity fund
    • Through a Fund of Fund or Advisor
    • Directly in private company
    2 1 3 Investors Fund of Funds PE Fund Company Company Company Company PE Fund PE Fund
  • 7. Investment Methods 12 – 20 investments Institutional investors (bank, insurance, pension funds, …) Fund of funds Individuals & Family Offices Corporates(e.g. Intel, Sony, …) Fund A Fund B PE investment management company Portfolio/investee co 1 Portfolio/investee co 2 Portfolio/investee co 3 … € € € € advises € LP GP
  • 8. Private Equity in numbers
  • 9. Evolution Activity Flows 5 consecutive years of investment growth € billion 2006 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA
  • 10. Fundraising Highs also Mirrored in the Americas Sources: EVCA / Thomson Financial / PricewaterhouseCoopers for Europe Thomson Financial for other regions € billions Global Private Equity Funds Raised
  • 11. Sources of New Funds Raised 2006 2005 2006 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA
  • 12. Fundraising for CEE Private Equity, 2003-2006 Source: EVCA
  • 13. € 71 Billion Invested Record Level 2006 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA
  • 14. 8,583 Private Equity Deals in 2006 2006 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA *Each syndication partner is counted once
  • 15. Annual Investment Value in CEE, 2005-2006 (amounts in €m) Source: EVCA *Croatia, Slovenia, Bosnia and Herzegovina, Serbia and Montenegro
  • 16. Stage Distribution of Investments Amount Invested 2006 2005 2006 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA
  • 17. Type of Investment in CEE vs. Europe, 2006 (Amounts in € th) Source: EVCA   47,107,024   508,320 Total 2005 100.0% 67,807,541 100.0% 1,667,013 Total 2006 69.2% 46,897,279 91.0% 1,517,177 Buyout 5.1% 3,478,698 0.5% 8,220 Replacement Capital 15.4% 10,417,704 5.7% 95,361 Expansion 10.0% 6,777,776 2.7% 45,064 Start-up 0.3% 236,084 0.1% 1,190 Seed % of total 2006 Total Europe % of total Total CEE € ' 000
  • 18. Type of Investment by CEE Country, 2006 (Amounts in € th) Source: EVCA *Croatia, Slovenia, Bosnia and Herzegovina, Serbia and Montenegro 19,105 35,730 19,467 70,000 107,818 147,247 108,953 - Total 2005 87,574 22,134 19,348 109,956 303,621 734,360 354,208 35,812 Total 2006 76,554 12,185 12,994 34,592 296,621 702,520 352,899 28,812 Buyout - - 2,134 5,875 -   211 - Replacement Capital 11,020 2,517 221 38,150 7,000 28,673 780 7,000 Expansion - 7,132 3,999 31,339 - 2,277 318 - Early Stage - 300 - - - 890 - - Seed Others* Baltic States Slovakia Romania Poland Hungary Czech Republic Bulgaria € ' 000
  • 19. Size of companies financed Exposure to companies of different sizes and sectors 2005 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA 78% 8,496 88% 41,414 Subtotal 22% 2,419 12% 5,587 Unknown 2% 229 6% 2,961 500 - 999 3% 311 30% 14,106 1000 - 4999 6% 699 5% 2,245 100 - 199 28% 3,059 10% 4,617 20 - 99 5% 550 8% 3,568 200 - 499 100% 1% 33% In % of total 10,915 96 3,551 No. of investments 100% 47,000 TOTAL 23% 11,041 5000 + 6% 2,876 0 - 19 In % of total Amount invested 2005 (in mil €) Company size
  • 20. Buyouts totalled €48.9 billion € million 2006 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA 20.7 476.9 197.6 45.1 2.5 Avr. Deal Size 2006 13.6 410.7 203.3 49.6 2.0 Avr. Deal Size 2005 48,851 19,077 7,113 17,947 4,714 Total Invested 2006 2,364 40 36 398 1,890 No. of Deals 2006 2,369 15 39 281 2,034 No. of Deals 2005 32,097 6,161 7,929 13,926 4,081 Total Invested 2005 Total Mega > 300 Large 150<X<300 Mid-market 15<X<150 Small < 15 Buyout Deal Size (no bank leverage included)
  • 21. Buyouts totalled €48.9 billion in 2006 2006 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA Please note no bank leverage included. Legend: Small < €15 m Mid-market €15m<x<€150m Large €150m<x<€300m Mega >€300m
  • 22. Private equity Investments as a Percentage of GDP for Europe, CEE and Selected European Countries, 2006* Source: EVCA
  • 23. € 33bn European Divestment at Cost 2005 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA
  • 24. Exits in CEE vs Total Europe, 2006 (Exit Value at Investment Cost in €th) Source: EVCA   19,562,478   421,693 Total 2005 100.0% 33,327,352 100.0% 441,641 Total 2006 12.1% 4,044,112 5.1% 22,679 Divestment by other means 6.1% 2,048,871 8.2% 36,276 Sale to management (MBO) 5.4% 1,783,683 0.1% 300 Sale to financial institution 16.6% 5,529,199 12.7% 56,098 Sale to another private equity firm 17.0% 5,664,889 8.2% 36,040 Repayment of principal loans 3.8% 1,255,760 0.2% 930 Divestment by write-off 16.0% 5,348,614 18.1% 80,028 Divestment by public offering 23.0% 7,652,225 47.4% 209,291 Divestment by trade sale % of total 2006 Total Europe % of total 2006 Total CEE Exit value at investment cost, € '000
  • 25. Divestments at Cost by CEE Country, 2005-2006 (Amounts in €m) Source: EVCA
  • 26. Economic impact of Private Equity and Professional Stnadards
  • 27. The Virtuous Financing Cycle of Private Equity and Venture Capital Investment repayments + capital gains commitments divestments pensions savings savings and pensions investments Private Equity Funds High-potential companies Institutional investors (Insurance companies, pension funds, banks…) Private Equity Funds Institutional investors (Insurance companies, pension funds, banks…) Saving accounts, Pension plans, Insurance contracts…
  • 28. Economic contribution
    • Over 6 million people employed by PE/VC backed companies in 2005
    • 1+ million new jobs created between 2000 to 2004
        • 420,000 in buyouts
        • 630,000 in venture backed companies
    • Annual average employment growth in buyout financed companies of 2.4%
    • Annual average employment growth in venture backed companies of 30.5%
    • Annual EU25 employment growth 0.7%
    Source: CEFS/EVCA
  • 29. EVCA Professional Standards
    • EVCA believes that transparency is a key factor in the success and growth of PE/VC and has developed the highest Professional Standards.
      • Code of Ethics
      • Governing Principles
      • Corporate Governance Principles
      • International Valuation Guidelines, endorsed by 35 associations worldwide and managed by an independent Board
      • Reporting Guidelines
  • 30.
    • Private Equity has become a mainstream asset class on most investor portfolios
    • Growth market with further strong potential compared to other markets.
    • It requires undertanding and a committed team for the investment program
    • It can be access in different ways: funds, funds of funds, quoted vehicles...
    • It is an superb and exiting industry
    In short
  • 31. Thank you For more information www.evca.com