October 2017 Private Equity Capital Briefing...Private Equity Capital Briefing Monthly insights and...

Private Equity Capital Briefing

Monthly insights and intelligence on PE trends

Opportunity knocks for first-time fundsNew entrants raise record amounts in 2017

October 2017

The Private Equity Capital Briefing has been designed to help you remain current on capital market trends. It captures key insights from subject-matter professionals across EY firms and distills this intelligence into a succinct and user-friendly publication.

Private Equity Capital Briefingcan provide perspectives on both recent developments and the longer-term outlook for private equity (PE) fundraising, acquisitions and exits, as well as trends in global M&A, cross-border deal flows, IPOs and the debt and bond markets.

Please feel free to reach out to any of the subject-matter contacts listed on the back page of this document if you wish to discuss any of the topics covered.

Contents

Section 1 Private equity: fundraising 4

Private equity: acquisitions 5

Private equity: exits 6

Infrastructure 7

Credit 8

Section 2 M&A 9

Section 3 IPOs 11

Section 4 Loans 12

Section 5 Bonds 13

AppendicesAppendix A Global PE activity 15

Appendix B M&A activity monthly flash 24

Appendix C M&A multiples and bid premium 25

Appendix D Capital Confidence Barometer 26

1.i. Private equity: fundraising

Executive summary

• PE fundraising remains strong, though Q3 saw a slight reduction in the pace of fundraising seen earlier this year.

• Nonetheless, PE firms could set a new record in 2017 for aggregate fundraising. Year to date, firms have closed funds valued at US$465.1b, up 12% from last year, and within striking distance of 2008’s US$634b in closed funds.

• Large buyout funds are making up a greater percentage of the total than ever — 37% of buyout fundraising has gone to the top five largest funds.

Current state

Fundraising

• PE fundraising remained strong in the third quarter, albeit at a reduced pace relative to earlier this year. Firms closed funds valued at US$128.3b, in line with 3Q16, but down 28% from the second quarter of this year.

• YTD, PE firms have closed funds valued at US$465.1b, up 12% from last year. Given that Q4 fundraising typically represents 30% or more of the year’s total, the industry’s aggregate commitment could well exceed the US$634b in funds that closed in 2008 (much of which was raised in 2007).

• Large buyout funds continue to drive activity in 2017. Overall, fundraising for buyout strategies has represented 48% of total PE fundraising, a record proportion. And within buyout strategies, 37% of total commitments have flowed to just five funds, which each raised more than US$10b in commitments.

Dry powder

• Dry powder remains at record highs. PE firms currently have more than US$602b in capital available for deals, up 4% from last quarter, and up 7% from the end of last year.

Environment and horizon

• PE, along with other alternative investments, remain a key component of investors’ portfolios despite some growing concerns, according to an Intralinks survey. The survey found 35% of investors allocated more than 30% to alternatives and 67% planned to increase their allocations during 2017. However, the survey also revealed some concerns among investors, including competing opportunities for higher returns in public markets and higher expenses. Investors also noted preferred investments were in technology (50%), health care (49%) and infrastructure (44%).

• First-time buyout funds raised a record US$658m on average in 2017, according to Preqin. Investors are attracted to first-time funds because they have outperformed incumbents in each year from 2000 to 2014 (except for 2013) based on median returns. First-time funds typically invest in small to midsize companies, which tend to grow more quickly than larger companies and can often be acquired at lower multiples.

• The growth of Asian pension funds could be a boon for private equity, according to a new Willis Towers Watson study, which found that 31 Asia-Pacific sovereign and public sector funds managed an aggregate US$3.7t in 2016, representing a growth rate of 7% compared with the previous year, outpacing the average 6.1% growth in the world’s largest pension funds overall. While many of these funds are already active in commingled investments and direct deals, several have indicated that they are seeking to increase their exposure to PE and other alternatives asset classes.

4


Global PE fundraising by year (in US$b)

Source: Preqin

Fund Type Target size

(US$b)

Finalsize

(US$b)

Industry focus

Location focus

Apollo Investment Fund IX Buyout 23.5 24.7 Diversified Developed

Bain Capital Fund XII Buyout 7.0 9.4 Diversified Global

New Mountain Partners V Buyout 5.0 6.2 DiversifiedNorth

America

Carlyle Realty Partners VIII Real Estate 5.0 4.0 Property US

Partners Group Direct Equity 2016 Buyout 2.2 3.5 Diversified Global

Oak Hill Capital Partners IV Buyout 2.0 2.7 Diversified

North America

AMP Capital Infrastructure Debt Fund III Infrastructure 2.0 2.5 Energy OECD

Castlelake V Distressed Debt 2.0 2.5 Aerospace Global

Waterland Private Equity Fund VII Buyout 2.3 2.4 Diversified Europe

CITIC PE Multi-Strategy Fund Mezzanine 2.0 Diversified China

Top funds raised in 3Q17Source: Pregin

PE dry powder (US$b)Source: Pregin

$0

$100

$200

$300

$400

$500

$600

$700

2008 2009 2010 2011 2012 2013 2014 2015 2016 3Q17

North America Europe Asia Rest of world

0

200

400

600

800

1,000

1,200

$0

$100

$200

$300

$400

$500

$600

$700

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

1Q17 value 2Q17 value 3Q17 value4Q17 value Number of funds

Return of the megafund – proportion of total buyout fundraising by funds of US$10b and up

Source: Preqin

0%

5%

10%

15%

20%

25%

30%

35%

40%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

1.ii. Private equity: acquisitions

Executive summary

• Investment activity jumped 40% during Q3 2017 from the prior quarter to US$121.8b, the largest quarterly total since 2007.

• Asia-Pacific quarterly activity surged past the Americas for the first time.

• Technology, consumer goods and health care are active sectors.

Current state

• Investment activity jumped 40% during 3Q17 from the prior quarter, to US$121.8b, the largest quarterly total since 3Q07. PE firms announced 1,078 deals valued at US$270b YTD through Sept 30 2017, up 16% by value versus last year.

• Asia-Pacific quarterly activity surged past the Americas for the first time, mostly due to Toshiba Corp.’s US$17.9b agreement to divest Toshiba Memory Corp. to a consortium led by Bain Capital. During 3Q17, deal value was down 7% to US$39.8b in the Americas; up 115% to US$42.4b in Asia-Pacific and up 63% to US$39.7b in EMEA. YTD through 3Q17, PE activity is down 20% in the Americas, up 178% in Asia-Pacific, and up 28% in EMEA versus last year.

• PE activity moved from core middle market mostly to lower market but also upper middle market and mega cap companies during the quarter.

Number of PE deals by size – 2Q17 vs 3Q17

Source: Dealogic


• Loans issued to fund buyouts by PE firms are up 74% by value in the US this year while volume is up 53%. This puts 2017 on pace to surpass pre-financial crisis records, according to S&P Global Market Intelligence's Leveraged Commentary & Data (LCD) unit. Consequently, leverage is increasing for PE-backed companies in the US, where nearly a third of the loans this year are leveraged at least six times EBITDA, according to LCD, with five of the six largest new loans exceeding that level, according to Dealogic and Moody's Investors Service. Increasing leverage beyond that point is notable since the US Federal Reserve stated leverage of more than six times "raises concerns for most industries“ in 2013 guidelines on loan underwriting. In Europe, loan terms are becoming more aggressive as well — 70% of new leveraged loans are covenant-lite, more than triple the number four years ago.

• PE firms are acquiring opioid treatment facilities, attracted by the chance to consolidate a highly fragmented market, soaring demand and increasing insurance coverage. According to PitchBook Data Inc., PE firms invested US$2.9b across 45 deals into treatment facilities last year, up from US$11.4m across 25 deals in 2011.

• The Hong Kong Government wants to attract more PE firms. The Financial Services Development Council, a Government-appointed think tank, published a report that calls for a tax exemption for PE firms investing in Hong Kong. Paul Chan, the Financial Secretary, and Norman Chan Tak-lam, CEO of the Hong Kong Monetary Authority, both said they plan to review the tax code in Hong Kong to make it more competitive with Singapore.

5


PE deal value by sector — YTD 2016 vs. YTD 2017 (as a percentage of total)

Source: Dealogic

PE acquisitions by quarter (US$b)Source: Dealogic

3%

6%8%

11%10%

6%

2%

8% 7%

30%

2%

7%

3%

6%4%

13%

11%

5% 4%

10%

7%

23%

2%

13%

YTD 2016 value YTD 2017 value

Date TargetValue

(US$b)Sector Acquirer

20-Sep-17

Toshiba Memory Corp.

17.9 TechnologyBain Capital LLC; SK Hynix Inc.; Hoya Corp.

18-Aug-17

Calpine Corp. 17.4 Utility & Energy

Energy Capital Partners LLC; Access Industries Inc.;Canada Pension Plan Investment Board (CPPIB)

14-Jul-17

Global Logistic Properties Ltd.

16.1 Real estate

China Vanke Co. Ltd.; Hopu Investment Management Co.; Bank of China Ltd.; Hillhouse Capital Management Ltd.; SMG Eastern Ltd.

25-Sep-17

Nets A/S 6.4 Technology

Hellman & Friedman LLC; Bain Capital LLC; Sampo Oyj; StepStone Group LP; Advent International Corp.; Fisher Lynch Capital LLC; GIC Special Investments Pte Ltd.

8-Aug-17

Banco Popular Español SA (Real estate business)

6.1 Real estate Blackstone Group LP

0

100

200

300

400

500

600

700

$0

$20

$40

$60

$80

$100

$120

$140

Americas value Asia-Pac value EMEA value Global number of deals

Top PE deals in 3Q17Source: Dealogic

0%

10%

20%

30%

40%

50%

>US$1b US$500m to$1b

US$100m to$500m

US$25m to$100m

<US$25m

Q2 Q3

1.iii. Private equity: exits

Executive summary

• Exits declined in the third quarter with PE firms announcing 267 exits valued at US$84.4b, down 21% by value. However, activity remains up 15% YTD versus 2016 on the strength of the first half.

• Trade sales and secondary buyouts represent 90% of PE exits this year. Such deals are up 14% versus YTD 2016.

• Q3 was a muted quarter for PE-backed IPOs, with just 15 deals pricing.

Current state

• Exits declined 21% by value during 3Q17 from the prior quarter but remain up 15% YTD versus last year. PE firms announced 267 exits valued at US$84.4b in Q3. YTD, PE firms have announced 783 exits valued at US$272b.

• Exits via M&A have accounted for 90% of aggregate exit activity by value so far this year. PE firms announced 252 M&A exits valued at US$79.9b, up 5% from the same period a year ago. Exit activity overall via M&A has increased 14% versus YTD 2016. Strength is evident in both sales to strategics (up 14% by value versus YTD last year) and sales to PE firms (up 16% by value versus last year).

• Despite an uptick in IPOs in September, Q3 was a muted quarter for PE-backed IPO activity. Just 15 issues priced, raising US$4.5b in proceeds, down 66% by value and 61% by volume from Q2. However, YTD activity remains elevated versus last year. To date, PE firms have taken 79 companies public, raising US$26.5b in proceeds, up 23% by value and up 13% by volume versus YTD 2016.

• On a regional basis, EMEA has seen the greatest strength relative to last year, with exits up 21% by value; in the Americas, total exit activity is up 16% by value; and Asia-Pacific has seen a decline of 8.1% by value, with US$23.4b in announced exit activity.

PE exits by region YTD 2017

Source: Dealogic


• The exit environment ranks among the top three concerns of investors, according to a Preqin survey. The survey found that 45% of investors believe valuations will lead to lower returns over the longer term compared with 25% that believe returns will increase. The key issues facing PE in the next year: valuations, deal flow, exit environment, fees and performance.

• Media outlets reported that Warburg Pincus plans to sell assets in Asia in the secondary market, a move that would rank among the largest such deals. It is a notable example of PE firms using secondary markets to return cash to investors. According to reports, the assets consist of health care, logistics, financial services, retail and technology companies in China, India and Southeast Asia.

6


IPOs as a percentage of total exit activity, by valueSource: Dealogic

PE exits by quarter and type (in US$b)Source: Dealogic

0

50

100

150

200

250

300

350

400

$0

$20

$40

$60

$80

$100

$120

$140

$160

M&A exit value IPO exit value Number of deals

US:

YTD 2016 – US$130b

YTD 2017– US$150b

Change – 16%

Europe:

YTD 2016 – US$81b

YTD 2017 – US$98b

Change – 21%

Asia-Pacific:

YTD 2016 – US$26b

YTD 2017 – US$23b

Change – (8%)

0%

5%

10%

15%

20%

25%

30%

Exit activity by route, YTD 2016 vs YTD 2017Source: Dealogic

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

$200.0

Trade sales Secondaries IPOs

2. Infrastructure

Executive summary

• Fundraising for infrastructure funds remains strong. YTD, funds have closed with US$59.1b in aggregate commitments, up 15% from last year.

• There are an additional 77 infrastructure funds currently raising capital. Together, they are seeking US$56.2b in commitments.

• Co-investment remains an area of significant interest for LPs — a recent State Street survey found that nearly 70% are interested in such opportunities.

Current state

• Fundraising for infrastructure funds was strong in the third quarter, with 19 separate funds raising an aggregate US$18.8b in total commitments. Year to date, fundraising for the asset class is on track for a record year. Firms have raised US$59.1b through the end of September, up 15% from last year.

• Funds focused primarily on the US have accounted for 49% of total commitments, roughly in line with YTD last year, but up markedly from 2015, when US-focused fundraising was less than one-third of the total. Funds focused on Europe have accounted for 39% of fundraising this YTD, up from 34% last year YTD.

• While fundraising is up, the pace of deployment has slowed. So far this year, PE firms have announced deals valued at US$218b, down 35% from last YTD. Activity in the Americas has remained fairly steady (off 9% by value versus last year); however, deals in Asia (down 58% by value versus YTD 2016), Europe (down 19% versus YTD 2016) and the rest of the world (down 56% by value versus YTD 2016) have all seen steeper declines.


• The outlook for continued robust fundraising remains strong. Currently, there are more than 77 funds on the road seeking an additional US$56.2b in total commitments.

• Co-investment remains an area of intense interest or large investors, particularly in the infrastructure space. A recent survey released by State Street Corp. found that 68% of investors surveyed had a “significant” or “very significant” interest in partnering with another institutional investor on an infrastructure deal. A slightly smaller number, 60%, indicated interest in partnering with an asset management firm on an infrastructure deal. Infrastructure was the highest report response, edging out real estate.

• Infrastructure firms are increasingly looking to invest in opportunities tied to the rapid growth and reliance on digital technologies. A new fund currently being raised by infrastructure firm Digital Bridge Holdings and Colony NorthStar Inc. is seeking to raise US$3b for investments in digital backbone projects such as data centers and data transmission networks. In June, Digital Bridge announced that it had acquired DataBank Ltd, a private Dallas-based data center company, for an undisclosed amount.

7


Source: Preqin

Top infrastructure funds raised 2017 YTD

53

54

55

56

57

58

59

60

61

62

$0

$10

$20

$30

$40

$50

$60

$70

YTD 2014 YTD 2015 YTD 2016 YTD 2017

Value No. of funds

Infrastructure fundraising (US$b)

Source: PreqinFund Target (in US$b)

Raised (in US$b)

Stage

Global Infrastructure Partners III 12.5 15.8 Brownfield

EQT Infrastructure III 3.3 4.2 Brownfield, Greenfield, Secondary Stage

Actis Energy Infrastructure Fund IV 2.0 2.8 Brownfield, Secondary Stage

AMP Capital Infrastructure Debt Fund III

2.0 2.5 Brownfield

Pan-European Infrastructure Fund II

2.2 2.0 Brownfield, Greenfield, Secondary Stage

QIC Global Infrastructure Fund 1.3 1.8 Brownfield, Greenfield

BlackRock Global Renewable Power Fund II

1.0 1.7 Brownfield, Greenfield, Secondary Stage

BlackRock Renewable Income UK Fund

1.4 Brownfield, Greenfield, Secondary Stage

iCON Infrastructure Partners IV 1.1 1.4 Brownfield, Secondary Stage

GIB Offshore Wind Fund 1.6 1.3 Secondary Stage

0

100

200

300

400

500

600

700

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

$0

$20

$40

$60

$80

$100

$120

$140

$160

Infrastructure deal activity by quarter (US$b)

Source: Preqin

Infrastructure deal activity by region – YTD 2016 vs YTD 2017 (US$b)

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

North America Europe Asia Rest of the world

YTD 2016 YTD 2017

Source: Preqin

3. Private credit

Executive summary

• PE firms closed funds valued at US$18.8b in the third quarter or 2017, up 43% from the same period last year. Activity was driven by continued strength in direct lending funds and special situations.

• YTD, PE firms have closed credit funds valued at US$64.3b, up 48% from YTD 2016.

• Funds are taking less time to close in 2017, averaging 18 months on the road, versus 20 months on the road for funds that closed in 2016.

• A new report from Dechert LLP and the Alternative Credit Council suggests that the industry could reach US$1t by 2020.

Current state

• Fundraising for private credit strategies moderated slightly in the third quarter, but activity remains strong. Firms closed 23 funds valued at US$18.8b in Q3, down 7% from 2Q17, but up 43% from the same period a year ago.

• Through the end of the third quarter, PE firms have closed credit funds valued at US$64.3b, up 48% from the same period a year ago. Results were driven by strength in two areas: continued funding of direct lending strategies, which have seen US$22.7b raised so far this year, up 70% from the same period a year ago; and closings by a number of special situations funds, which in aggregate have raised US$10.0b this year, up from US$3.3b last YTD, and US$4.7b in YTD 2015. Some investors are looking at the lateness of the credit cycle and positioning themselves for a potential turn, increasing the attractiveness of the asset class.

• Overall, funds are taking less time to close in 2017. The average credit fund closed after 18 months on the road, down from and average of 20 for funds which closed last year. Funds in the direct lending, distressed and special situations space have all seen declines in time to final close, while mezzanine strategies have seen a marked uptick.


• With new players entering the market and a significant increase in interest from LPs, a new report published by the Alternative Credit Council in collaboration with Dechert LLP concludes that the private credit industry could reach more than US$1t by 2020, after growing at a rate of roughly 20% per year since 2000, a rate of growth that is comparable to the early days of the hedge fund industry. While the US still accounts for the bulk of the industry’s presence, respondents to the ACC’s survey report seeing opportunities for growth in a range of jurisdictions, including Germany, the UK, France and Canada.

• The report also states that funds are expanding their purview beyond their core middle market — smaller businesses are now the largest category of borrower by direct lending funds, representing 43% of aggregate lending, while large corporates represent 18% of total lending. Middle market companies’ overall share of the space has fallen, from 54% YTD 2016, to 39% in YTD 2017.

• Concerns are increasing around credit quality amid the rising proliferation of covenant-lite loans, which now account for roughly three-quarters of the lending market in the US and Europe. Once limited to larger, safer borrowers, loosening covenants are permeating deeper into the middle market, where recovery prospects are lower.

• Confidence in the asset class remains high. A Preqin survey released in September shows that 91% of investors expect to maintain or increase their allocation to private debt vehicles in the coming years.

Growth of credit dry powder over the last five years

8


Source: Preqin

Source: Preqin

Investor attitudes around allocations to private credit

0

10

20

30

40

50

60

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17$0

$10

$20

$30

$40

$50

$60

Commitments Number of funds closed

Private credit fundraising by quarter (US$b)

Source: Preqin

Number of months to final close, by strategy

Source: Preqin

18

12

18

2120 21

18

21

1517

30

17

Direct lending Distressed Mezzanine Special situations

2015 2016 YTD 2017

US:

2012 – US92b

2017– US$143b

Change – 56%

Europe:

2012 – US$26b

2017 – US$57b

Change – 118%

Asia-Pacific:

2012 – US$10b

2017 – US$13b

Change – 37%

0

50

100

150

200

250

86% 84%91%

14% 16%9%

Mid-2015 Mid-2016 Mid-2017

Maintain or increase allocation Decrease allocation

Source: Preqin

Growth of credit dry powder over the last five years (US$b)

Current state• Global M&A performed well in 3Q17, with deals worth US$770b – the

highest quarterly value seen so far in 2017. While this was down 2% against 3Q16, it was up 4% against 2Q17. In terms of volume, 3Q17 registered 9,313 deals compared with 8,029 recorded at the same time in 2016.

• September saw 3,051 deals valued at US$261b, the second–highest monthly value seen this year after January. The key value range driving M&A in the current month was the US$5b to US$10b band, recording deals worth US$45b, the highest value seen in this deal range in the year so far.

• In terms of value, P&U was an active target sector in 3Q17 with US$77b of deals announced. This followed the technology sector, which registered deals worth US$124b. During 2017, P&U has remained in the limelight, with deals such as Sempra Energy’s agreement to buy Oncor Electric Delivery Company; Fortum Corporation’s offer for Uniper SE; and Energy Capital-led consortium’s investment in Calpine Corporation. 2017 has, so far, witnessed deals totaling US$157b – the highest YTD value recorded in the past nine years in P&U.

• The largest deal of the month was by aerospace supplier United Technologies Corporation (UTC) which offered to buy avionics and interiors maker Rockwell Collins Inc. for US$30b in the hope that the deal would increase UTC’s negotiating power with plane makers by creating one of the world’s largest producers of civilian and defense aircraft components. The transaction is the latest in a series of deals in the fast-consolidating sector. It is pending approval from regulatory authorities and may offer an insight into the regulatory regime under President Trump and Makan Delrahim, newly appointed to lead the US Department of Justice Antitrust Division.

• Another key deal was the merger of the rail operations of Siemens AG and Alstom SA, creating a European transportation giant aimed at countering competition from China. The framework deal, which still has to be approved by Alstom shareholders as well as regulators, is a Franco-German industrial breakthrough for French President Emmanuel Macron, but is a move that has riled opposition from unions in France. Additionally, it could act as a bellwether for European Union (EU) attempts to create global champions, as it will be closely scrutinized by European Commission regulators.

Environment and horizon• Global deal activity to remain healthy for the remainder of 2017, despite

ongoing geopolitical tensions. The search for strategic growth continues to drive boards to take action and engage in dealmaking. Supportive market factors, including low interest rates, surplus cash reserves, a congested deal pipeline and record PE buyouts, are likely to propel M&A.

• Technology and digital takeovers continue to drive deal-making, as digital transformation and disruption make it imperative for companies to spend on technologies and innovation to compete and future-proof their businesses. Companies are turning to M&A to acquire new digital capabilities and close innovation gaps as disruption across industries and sector convergence continues. The growth in FinTech acquisitions in 2017 is indicative of this trend, as financial institutions face the increasing need to digitize the customer experience. Other growth sectors include automotive, consumer products and retail, and health care.

• European M&A should stay firm in the coming months as markets begin to stabilize and optimism about the region’s economic prospects increases. Renewed dealmaking confidence, the desire to achieve strategic growth, favorable financing conditions and continued interest by overseas buyers can be expected to translate into M&A activity.

• The Asia-Pacific M&A market outlook remains positive, despite uncertainty regarding China’s investment flows overseas. Regardless of concerns around geopolitical issues and protectionism, Asia-Pacificremains strong and resilient to uncertainty and volatility. Although China’s outbound M&A dropped significantly recently, driven by capital control regulations, the overall outlook remains robust, and the pipeline continues to strengthen as clarity emerges regarding regulations. “Capital control regulations in China might lead to short-term volatility; it is unlikely to be a permanent measure, as Chinese corporates continue to invest strategically overseas, in line with major government initiatives,” commented Harsha Basnayake, APAC Managing Partner, TAS.

Deal environment: by area (US$b)

Last 12 months (LTM) to September 2017 versus LTM to September 2016Source: Dealogic and EY analysis.

Deal environment: by target sector and target area (% share of global value)

LTM to September 2017Source: Dealogic and EY analysis; excludes real estate asset sales.

Note: because of rounding, percentages may not add up to total.

M&A analysis as at 1 October 2017.

Note: data is continually updated and therefore subject to change.

Figures have been rounded off to nearest decimal place.

9

Executive summary• Global M&A activity remained firm in 3Q17, recording 9,313 deals worth US$770b.

• Power and utilities (P&U) was an active target sector in terms of value in 3Q17 – with deals totaling US$77b.

• Technology and digital takeovers continue to drive dealmaking, as digital transformation makes it imperative for companies to spend on technologies and innovation.

• European M&A should stay firm in the coming months as markets begin to stabilize and optimism around the region’s economic prospects increases.

• The outlook for Asia-Pacific M&A remains positive for the coming months.

4. M&A

Americas Asia-Pacific EMEA Total

Technology 5% 4% 5% 13%

Oil and gas 9% 1% 3% 13%

Consumer products and retail 6% 2% 4% 12%

Financial services 3% 2% 3% 8%

Power and utilities 3% 2% 2% 8%

Diversified industrial products 2% 2% 3% 8%

Life sciences 4% 1% 2% 7%

Media and entertainment 5% 1% 1% 7%

Automotive and transportation 2% 2% 2% 6%

Others 9% 5% 4% 18%

All sectors 48% 22% 29% 100%

Capital Briefing

0

500

1,000

1,500

2,000

2,500

Americas Asia-Pacific EMEA

LTM value PTM value

Global deal value and volume (year to date (YTD) last five years)Source: Dealogic and EY analysis.

0

500

1,000

1,500

2,000

2,500

3,000

0

500

1,000

1,500

2,000

2,500

3,000

2013 2014 2015 2016 2017

Value (US$b) (RHS) Volume* (LHS)

*Volume based on deals greater than US$100m.

4.i. M&A: cross-border deal flow

Key cross-border M&A deal flow(LTM to September 2017)(Total = US$1.2t)

N America to:W Europe – $169b

UK&I – $61bMiddle East – $22b

Japan to:N America – $43b

Russia, CIS and CSE – $9bW Europe – $7b

UK&I to:N America – $105bW Europe – $12b

Africa – $4bSE Asia – $4b

L America to:N America – $7bMiddle East - $2b

Greater China andMongolia to:

N America – $44bW Europe – $25b

Oceania – $23bW Europe to:N America – $76b

UK&I - $14bL America - $12b

Cross-border M&A deal flow (LTM to September 2017)

(US$m)

Key

>$100b

>$50b

>$10b

Note: all figures are in US$.

# Acquiror refers to acquiror’s ultimate holding company.

$ Greater China and Mongolia includes mainland China, Hong Kong, Macau, Mongolia and Taiwan.

M&A analysis as at 1 October 2017.

Source: Dealogic. All Rights Reserved.

Note: data is continually updated and therefore subject to change.

Key >US$100b >US$50 >US$10b

Intra-area cross-border deals

Target Acquiror# Africa SE Asia (including Korea)

Greater China and Mongolia$

Russia, CIS and CSE

W Europe (excluding UK&I)

India Japan Latin America

Middle East

North America

Oceania UK&I Inboundtotal

% versus PTM

Africa 2,108 16 3,663 1,575 3,117 33 756 - 31 7,333 90 3,919 22,641 73%

SE Asia (including Korea)

16 5,768 14,458 126 2,785 372 5,489 - 1,314 1,108 346 3,802 35,584 -2%

Greater China andMongolia $

- 3,047 34,072 468 891 - 6,316 37 - 7,815 871 195 53,712 14%

Russia, CIS and CSE 138 123 13,474 2,366 9,403 156 8,907 427 11,157 1,724 19 1,559 49,454 93%

W Europe (excluding UK&I)

1,378 5,341 24,954 288 142,871 1,338 7,180 413 3,013 169,265 1,291 11,684 369,017 49%

India 373 1,970 1,779 12,912 878 - 5,109 - 68 5,151 58 21 28,318 22%

Japan - 268 2,243 100 226 - - - 6 2,691 14 - 5,548 -79%

Latin America 116 586 14,612 - 12,252 9 257 6,568 624 19,716 573 675 55,989 -4%

Middle East 83 1,138 5,357 20 1,159 25 1,288 1,500 1,136 21,689 500 3,149 37,045 21%

North America 2,911 15,439 43,929 94 76,217 1,256 43,442 6,904 9,967 60,908 5,579 105,415 372,060 -12%

Oceania 842 878 22,900 0 2,656 50 2,691 110 484 5,373 672 1,509 38,166 -4%

UK&I 1,990 2,280 9,386 628 13,875 801 4,066 1,131 3,045 60,779 4,967 1,362 104,309 -60%

Outbound total 9,954 36,856 190,828 18,576 266,330 4,038 85,501 17,091 30,844 363,553 14,980 133,290 1,171,843 -5%

% versus previous 12 months (PTM)

-28% 3% -13% 38% -35% -39% 7% 6% 30% 7% 20% 113% -5%

10 Capital Briefing

5. IPOs

Executive summary

• While global volume of IPOs in September was up year on year (YOY), we saw a slight drop in proceeds compared with IPO activity in September 2016.

• Asia-Pacific was the most active region for listings during the month, accounting for 77% and 54% of the global number of deals and proceeds respectively.

• While Italy and India witnessed their biggest US$1b+ deals since 2015 and 2010 respectively, South Africa saw its biggest ever IPO this month.

• 2017 is on track to be the busiest year for IPOs since 2007 as low volatility, strengthening investor sentiment, rallying markets and a healthy pipeline continue to drive activity across regions.

11

Current state• Global IPO activity saw mixed results in September 2017 (141 deals

raising US$17.4b). While the number of deals increased by 42% YOY, IPO proceeds marginally declined by 8%. However, the number of deals and proceeds compared positively with the average for September over the past five years (101% and 2% higher respectively). The month witnessed the highest number of IPOs for September since 2000, driven by high levels of activity in China and India.

• Asia-Pacific continued to dominate global IPO activity, with 109 deals raising US$9.4b, accounting for 77% and 54% of the global number of IPOs and proceeds respectively. While the number of IPOs in this region saw an increase of 47%, proceeds saw a decline of 27% compared with September 2016 due to fewer large deals. In September 2017, India contributed 25% and 27% to the region’s IPO activity in terms of number of deals and proceeds respectively, and recorded the highest monthly deals and third-highest proceeds since 2000 on the back of a rally in the stock market and the re-emergence of larger listings.

• EMEA IPO activity (17 deals raising US$5.8b) saw an increase in September YOY, where the number of IPOs increased by 70% and proceeds surged by 76%. The region accounted for two of the top four deals by proceeds this month.

• US IPO activity (17 deals raising US$2.6b) was steady in September 2017. YOY, while the number of deals remained the same, proceeds declined marginally by 10%.

• There were four US$1b+ deals this month:

• Pirelli & C SpA raised US$2.7b in Italy’s third-largest IPO ever and its largest since 2015.

• ZhongAn Online P & C Insurance Co. Ltd. raised US$1.5b in the second-largest listing on the Stock Exchange of Hong Kong this year. It intends to use IPO proceeds to strengthen the capital base to support business growth.

• SBI Life Insurance Co. Ltd. raised US$1.3b in India’s largest IPO since 2010. This is the first US$1b+ deal from the insurance sector in the country.

• Steinhoff Africa Retail Ltd. raised US$1.2b in the biggest South African IPO on record. It intends to use proceeds for general corporate purposes and repaying existing financial indebtedness.

Environment and horizon• 2017 is on track to be the busiest year for IPOs since 2007, as strong

momentum has continued to build in the market due to strengthening IPO sentiment, relatively low volatility levels and high valuations.

• European IPO activity should finish the year on a high, with positive momentum fueled by solid economic fundamentals going into Q4. However, investors remain selective, and appetite for new stocks may be impacted if the European Central Bank (ECB) decides to reduce its asset purchases at the beginning of 2018. Meanwhile, the fluctuating value of the euro presents another source of uncertainty.

• We expect an active fourth quarter in the UK, with the pipeline looking strong for the Alternative Investment Market (AIM) and small main market listings. However, full recovery of the UK IPO market is not expected until the pound stabilizes and there is greater certainty and clarity regarding the process and terms of the UK’s withdrawal from the EU.

• A healthy pipeline has continued to build in the US, led by healthcare and technology companies, as equity indices are near all-time highs with relatively low levels of volatility. This should result in robust IPO activity toward the end of 2017 and early 2018.

• IPO activity in Asia-Pacific is expected to rise in 4Q17, which is historically the strongest quarter of the year. Activity should be supported by the continuing recovery of the global economy. Mainland China and Hong Kong exchanges should continue to lead the way, supported by a strong pipeline of IPO-ready companies and rising stock markets.

• Japan’s IPO volume and proceeds should end the year slightly higher than 2016 levels. The outlook for IPOs is positive, especially in the technology sector, where the Japanese Government has prioritized support for investment in innovation to help drive economic growth. However, current political and economic uncertainty may impact the IPO market in the medium term.

Top 10 IPOs by proceeds, September 2017Source: Dealogic.

Issuer name Issuerlocation

Sector Exchange Proceeds(US$m)

Pirelli & C SpA ItalyAutomotive and transportation

Borsa Italiana 2,677

ZhongAn Online P & C Insurance Co. Ltd.

China Insurance Hong Kong 1,525

SBI Life Insurance Co. Ltd. India Insurance Bombay 1,286

Steinhoff Africa Retail Ltd.South Africa

Consumer products and retail

Johannesburg 1,247

ICICI Lombard General Insurance Co. Ltd.

India Insurance Bombay 885

PQ Group Holdings Inc. USDiversified industrial products

New York 508

Rovio Entertainment Oyj Finland TechnologyNASDAQ OMX Helsinki

499

Mitsubishi Estate Logistics REIT Investment Corp.

Japan Real estate Tokyo 472

GIMA TT SpA ItalyDiversified industrial products

Borsa Italiana 453

BEST Inc. ChinaAutomotive and transportation

New York 450

IPO activity by sector and area (% share of global proceeds)

LTM to September 2017Source: Dealogic; regional classification on the basis of issuer nationality.

Note: because of rounding, percentages may not add up to total.

Americas Asia-Pacific EMEA Total

Technology 4% 6% 3% 12%

Banking and capital markets 1% 7% 4% 12%

Life sciences 2% 6% 3% 11%

Consumer products and retail 2% 6% 2% 10%

Automotive and transportation 1% 6% 3% 10%

Diversified industrial products 1% 6% 3% 10%

Real estate 2% 4% 3% 9%

Power and utilities 0% 2% 3% 6%

Oil and gas 3% 1% 1% 5%

Others 4% 8% 3% 15%

Total 21% 51% 28% 100%

IPO activity by area (YOY % change)

(LTM to September 2017 versus LTM to September 2016)Source: Dealogic; regional classification on the basis of issuer nationality.

0%

20%

40%

60%

80%

0% 30% 60% 90% 120%Value

Vo

lum

e

Americas(including US)

EMEA

Global

Asia-Pacific

Capital Briefing

US

6. Loans

Executive summary

Global investment-grade loans (US$b)Source: Thomson ONE.

Global high-yield loans (US$b)Source: Thomson ONE.

Top arrangers ranking, YTD 2017 (US$b)Source: Thomson ONE.

Global loan issuance by industry, YTD Sep 2017Source: Thomson ONE.

Proceeds Issues

Bank of America Merrill Lynch 246.8 1,173

JP Morgan Chase & Company 200.5 1,009

Citigroup Inc. 177.8 674

Wells Fargo & Company 138.7 869

Mitsubishi UFJ Financial Group 119.7 1,117

All loans by region, YTD 2017 (US$b)Source: Thomson ONE.

Market share(%) Proceeds Issues

Americas 63.0 1,989.9 3,443

EMEA 20.8 655.8 1,007

Asia-Pacific 16.2 510.4 2,626

12

• YTD 2017 issuance has already surpassed 2016 levels in both the US and Europe.

• September was the third most busy month of 2017, after a slowdown in July and August.

• M&A-backed activity has picked up and is expected to increase in the coming months.

• M&A-related cross-border loans are expected to increase in the near term.

Capital Briefing

Current state• In September, US$63.1b of loans were issued in the US and €13.8b in

Europe, taking the YTD global issuance to US$607.5b.

• Global new-issuance loan volume doubled in September compared with August, but was down 7% YOY.

• US YTD issuance is US$513b, 6% higher than full-year 2016 volume. Issuance in Europe was €85.1b, 22% higher than full-year 2016 volume.

• There was a surge in activity in both the US and the European markets in September after a slowdown in the previous two months. September was the third most busy month of 2017.

• Acquisition- and dividend-related deals provided a boost to the market in September as borrowers and arrangers continued to take advantage of favorable market conditions.

• The fresh supply of M&A paper, combined with outflows from loan funds during September, led to a narrowing of the demand and supply gap.

• The third quarter saw a slowdown in the US leveraged loan market during July and August, with activity picking up in September.

• During the third quarter, PE firms remained active in refinancing portfolio company debt and extracting dividends, albeit at a lower pace compared with previous months.

• YTD average senior leverage on European loan transactions reached at 4.5x,the highest level since 2007 when leverage stood at 4.6x. Leverage levels have been rising in Europe during 2017, reflecting an increasingly competitive market.

• UK ring-fencing regulation is increasing the cost and reducing the profitability of syndicated lending for UK banks. According to the regulation, UK banks with deposits of £25b or more must separate essential banking services from more risky investment banking services from 1 January 2019.

• Ring-fencing regulation is giving international banks an ideal opportunity to gain a major foothold in the UK syndicated loan market at the expense of incumbent UK clearing banks.

Environment and horizon• The European leveraged finance market has seen strong activity in

2017. The loan market has seen the most supply this year since 2007.

• The flow of very large buyout transactions in the European leveraged loan market is set to continue into the fourth quarter, with the emergence of the largest European buyout of the year in the shape of a take-private of payments group Nets by Hellman & Friedman.

Opportunities• The LBO pipeline in Europe is refilling ahead of the fourth quarter,

boosting hopes for more buyout financing going into 2018.

• M&A-related cross-border loans are expected to increase in the coming months. While the US market continues to provide depth to large European borrowers, the cheaper pricing available in Europe will continue to entice issuers that need euros to issue directly in that markets.

0

200

400

600

0

200

400

600

800

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Proceeds (LHS) Number of issues (RHS)

0

1,000

2,000

3,000

0

300

600

900

1,200

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17


0 100 200 300 400 500

Energy and power

Financials

Industrials

Materials

High technology

Health care

Consumer staples

Consumer products and services

Media and entertainment

Retail

Real estate

Telecommunications

Government and agenciesProceeds (US$b)

Current state• Global high-yield activity more than doubled month on month (MOM) in

September as issuance reached US$38.3b in the US and €10.8b in Europe, taking the YTD total global issuance to US$284.1b.

• European high-yield volume in September reached a record high of €10.8b, after a slow August recorded just €275m of issuance. The US high-yield volume also increased by 91% compared with the previous month.

• Overall, the third quarter saw strong volume in line with the second quarter. Issuers were able to raise financing at a low cost while investors had the opportunity to choose from a good variety of credits.

• Refinancing still accounted for the primary use of proceeds in both Europe and US high-yield market, though M&A issuers (excluding LBOs) found a home in the high-yield market in September.

• YTD, FY17 high-yield issuance for refinancing activity accounted for 65% of volume globally. Meanwhile, YTD FY17 high-yield issuance for M&A activity accounted for 22% of volume globally.

• Oil and gas continues to be a major industry segment in the high-yield market, accounting for 15% of market activity in September and 12% YTD.

• New-issue yields for BB- and B-rated bonds averaged 4.79% and 6.06% respectively on a rolling three-month basis in the US. New-issue yields were comparatively lower in Europe, with BB- yields averaging 3.42% on a rolling three-month basis, 22 bps tighter compared with last month, and B-yields averaging 5.34% on a rolling three-month basis, 35 bps tighter MOM.

• High-grade companies are still tapping the market and have sold around US$2t of bonds YTD 2017, as companies have rushed to add more debt at prevailing low interest rates.

• The high-yield market also bounced back in Norway. Companies raised NOK45b ($5.63b) from January to September, more than double the full-year 2016 level:

• Oslo’s corporate bond market, a vital source of cash to many mid-size shipping and oil services firms both in Norway and overseas, has rebounded after nearly drying up last year when a series of debt restructurings drove high-yield investors away.

Environment and horizon• Demand for bonds is expected to be high from investors anticipating a

decline in supply next year resulting from tax reform proposals in the US.

• ECB tapering is expected to begin in the fourth quarter of 2017 and will be one of the key factors impacting the European market. This also resulted in strong issuance activity from companies looking to beat any market impact from such an announcement.

Opportunities• Issuers continue to be on the lookout for refinancing opportunities in the

high-yield European market due to low cost of financing.

• More borrowers are expected to come into the market to lock in fixed-rate paper given the perception that interest rates may rise in future.

Executive summary

Euro bond issuances (US$b)Source: Thomson ONE.

US bond issuances (US$b)Source: Thomson ONE.

Top 10 corporate bond issuers, YTD September 2017 (US$b)Source: Thomson ONE.

Global bond issuance by industry, YTD 2017Source: Thomson ONE.

Issuer Nation Industry Proceeds

AT&T Inc. US Telecommunications 44.7

Apple Inc. US High technology 28.8

China Railway Corporation China Industrials 23.4

Verizon Communications Inc. US Telecommunications 19.2

Microsoft Corporation US High technology 17.0

Amazon.com Inc. US Retail 16.0

SoftBank Group Corporation Japan Telecommunications 14.5

Broadcom Corporation US High technology 13.6

State Power Investment Corporation

China Energy and power 12.4

Qualcomm Incorporated US Telecommunications 11.013

7. Bonds

• Global high-yield activity more than doubled in September, driven by both the US and European markets.

• Refinancing still accounted for the primary use of proceeds in both the European and the US high-yield markets.

• Oil and gas continues to be the biggest industry segment in the global high-yield market.

• High-grade companies are tapping the bond market to add more debt to take advantage of low interest rates.

• Issuers continue to look for opportunistic deals for refinancings.

Capital Briefing

0 100 200 300

Energy and power

Industrials

Real estate

High technology

Telecommunications

Consumer staples

Health care

Materials

Consumer products and services

Retail

Media and entertainment

Proceeds(US$bn)

0

40

80

120

160

200

0

50

100

150

200

250

Proceeds (LHS) Number of Issues (RHS)

0

100

200

300

400

500

600

0

50

100

150

200

250

300

350

400


Appendices

Dry powder — buyout funds — by region (in US$b)

Global PE fundraising (in US$b)

Appendix AGlobal PE fundraising activity

Source: Preqin

Private Equity Capital Briefing15

Source: Preqin

0

200

400

600

800

1,000

1,200

$0

$100

$200

$300

$400

$500

$600

$700

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

Commitments Number of funds

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

$0

$100

$200

$300

$400

$500

$600

$700

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

North America Europe Asia-Pacific and rest of world Asia-Pacific and rest of world as percentage of total

Source: Dealogic

Global PE value and volume — quarterly trend (in US$b)

PE acquisitions by year (in US$b)

Appendix AGlobal PE acquisition activity

Source: Dealogic

Private Equity Capital Briefing16

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

$0

$100

$200

$300

$400

$500

$600

$700

$800

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

Value Number of deals

0

100

200

300

400

500

600

700

$0

$20

$40

$60

$80

$100

$120

$140

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Value Volume

17

Americas PE acquisitions — the top deals with disclosed financial terms in 3Q 2017

Appendix AGlobal PE acquisition activity by region — Americas

Americas PE acquisitions (in US$b)


Source: Dealogic

Source: Dealogic

Announcement date

Completion date

Company SectorValue

(US$b)Acquirer

18-Aug-17 Calpine Corp. Utilities 17.4

Energy Capital Partners LLC;Access Industries Inc.;Canada Pension Plan Investment Board

24-Jul-17 28-Sep-17 Nature's Bounty Co. Health care 3 KKR & Co. LP

9-Jul-17 18-Sep-17 ClubCorp Holdings Inc. Leisure and recreation 2.2Apollo Global Management LLC

31-Jul-17 ET Rover Pipeline LLC Oil and gas 1.6 Blackstone Group LP

29-Aug-17 Education Advisory Board Professional services 1.6 Vista Equity Partners LLC

16-Aug-17 16-Aug-17 DuPage Medical Group Ltd. Health care 1.5 Ares Management LP

2-Aug-17 PharMerica Corp. Health care 1.4KKR & Co. LP;Walgreens Boots Alliance Inc.

6-Jul-17 17-Aug-17Syncsort Inc.;Vision Solutions Inc. Technology 1.3 Centerbridge Partners LP

2-Aug-17 4-Oct-17 Ten-X LLC Technology 1 Thomas H Lee Partners LP

2-Aug-17 2-Aug-17 WME IMG Holdings, LLC Leisure and recreation 1

GIC Pte Ltd.; Canada Pension Plan Investment Board (CPPIB)

0

50

100

150

200

250

300

350

$0

$10

$20

$30

$40

$50

$60

$70

$80



Appendix AGlobal PE acquisition activity by region — EMEA

EMEA PE acquisitions (in US$b)

Source: Dealogic


Announcement date

Completion date

Company Sector Value (US$b) Acquirer

25-Sep-17 Nets A/S Technology 6.4

Hellman & Friedman LLC;Bain Capital LLC;Sampo Oyj;StepStone Group LP;Advent International Corp.;Fisher Lynch Capital LLC;GIC Special Investments Pte Ltd.

8-Aug-17Banco Popular Espanol SA (Real estate business) Real estate 6 Blackstone Group LP

10-Jul-17 8-Sep-17 Stada Arzneimittel AG Health care 4.3Bain Capital LLC;Cinven Ltd.

21-Jul-17 Paysafe Group plc Technology 4Blackstone Group LP;CVC Capital Partners Ltd.

29-Aug-17 29-Aug-17 CPA Global Ltd. Technology 3.1 Leonard Green & Partners LP

3-Aug-17Gas Natural SDG SA (Natural gas distribution business) Utilities 1.8

Allianz Capital Partners GmbH;Canada Pension Plan Investment Board (CPPIB)

24-Jul-17 Civica Services Ltd. Technologies 1.4 Partners Group Holding AG

12-Jul-17 Shell E&P Ireland Ltd. Oil & gas 1.2 Canada Pension Plan Investment Board (CPPIB)

17-Jul-17 ADB Safegate BVBA Consumer products 1Carlyle Group LP;Existing Management

1-Sep-17 Sompo Canopius AG Insurance 0.95 Centerbridge Partners LP

Source: Dealogic

EMEA PE acquisitions — the top deals with disclosed financial terms in 3Q 2017

0

50

100

150

200

250

300

$0

$10

$20

$30

$40

$50

$60



16

Appendix AGlobal PE acquisition activity by region — Asia-Pacific

Asia-Pacific PE acquisitions (in US$b)

Source: Dealogic


Announcement date

Completion date

Company SectorValue

(US$b)Acquirer

20-Sep-17 Toshiba Memory Corp. Technology 17.9

Bain Capital LLC;SK Hynix Inc.;Hoya Corp.

14-Jul-17 Global Logistic Properties Ltd. Real estate 16.1

China Vanke Co. Ltd. (21.4% / 21.2% / 21.2% / 21.2% / 15%);Hopu Investment Management Co.;Bank of China Ltd.;Hillhouse Capital Management Ltd;SMG Eastern Ltd.

30-Jul-17 3-Oct-17

Hutchison Global Communications Investment Holding Ltd. Telecommunications 1.9 I Squared Capital Advisors (US) LLC

3-Aug-17 22-Sep-17 Energy Development Corp. Utilities 1.3

Macquarie Infrastructure and Real Assets Pty Ltd.;GIC Pte Ltd.

10-Aug-17

State of South Australia 40-year concession period for South Australia's transactional land services Professional services 1.3

Public Sector Pension Investment Board - PSP INVESTMENTS;Macquarie Infrastructure and Real Assets Pty Ltd.

26-Jul-17

LS Mtron Ltd. copper foil and flexible copper clad laminate business;LS Automotive Corp. Metal and steel 0.94 KKR & Co. LP

5-Jul-17 Pepper Group Ltd. Finance 0.52 KKR & Co. LP

1-Sep-17 Laser Clinics Australia Pty Ltd. Professional services 0.52 KKR & Co. LP

1-Aug-17 4-Oct-17

Astro Japan Property Group (properties in Tokyo and other areas) Real estate 0.34 Blackstone Group LP

18-Jul-17 Home Credit Asia Ltd. Finance 0.3 PAG Asia Capital Ltd.

Source: Dealogic

Asia-Pacific PE acquisitions — the top deals with disclosed financial terms in 3Q 2017

0

20

40

60

80

100

120

140

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45



17

Source: Dealogic

Global PE-backed IPOs — value and volume — quarterly trend (in US$b)

Appendix AGlobal PE exit activity

Global PE-backed exits by M&A — value and volume — quarterly trend (in US$b)


Source: Dealogic

0

50

100

150

200

250

300

350

$0

$20

$40

$60

$80

$100

$120

$140



0

10

20

30

40

50

60

70

80

90

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45



18

Source: Dealogic

Appendix AGlobal PE exit activity — Americas

Americas PE exits — top exits 3Q 2017

Americas PE exits (in US$b)

Announcementor filing date

Completion orpriced date

Company Sector Value (US$b) Sponsor Type

18-Jul-17 LTS Group Holdings LLC Telecommunications 7.1

Berkshire Partners LLC;ABRY Partners LLC;Pamlico Capital Management LP M&A

2-Aug-17 CH2M Hill Cos Ltd. Construction 3.3 Apollo Global Management LLC M&A

24-Jul-17 28-Sep-17 Nature's Bounty Co. Health care 3 Carlyle Group LP M&A

28-Sep-17 29-Sep-17 PQ Group Holdings Inc. Materials 2.2 CCMP Capital Advisors LLC IPO

19-Sep-17 20-Sep-17 Despegar.com Corp. Technology 1.7 General Atlantic LLC IPO

4-Sep-17Royal Adhesives & Sealants LLC Chemicals 1.6 American Securities LLC M&A

3-Jul-17 Bankrate Inc. Technology 1.5 M&A

16-Aug-17 16-Aug-17DuPage Medical Group Ltd. Health care 1.5 Summit Partners LP M&A

14-Aug-17 2-Oct-17 Neff Corp. Construction 1.3 Wayzata Investment Partners LLC M&A

6-Jul-17 17-Aug-17Syncsort Inc.;Vision Solutions Inc. Technology 1.3 Clearlake Capital Group LP M&A

21

Source: Dealogic


0

20

40

60

80

100

120

140

160

180

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90


M&A value IPO value M&A volume IPO volume

19

Source: Dealogic

Appendix AGlobal PE exit activity — EMEA

EMEA PE exits — top exits 3Q 2017

EMEA PE exits (in US$b)




27-Jul-17 ista International GmbH Professional services 6.5

CVC Capital Partners Ltd.;Canada Pension Plan Investment Board (CPPIB) M&A

13-Sep-17 Copenhagen Airports A/S Transportation 6.Macquarie Infrastructure and Real Assets Pty Ltd. M&A

29-Aug-17 29-Aug-17 CPA Global Ltd. Technology 3.1 Cinven Ltd. M&A

25-Sep-17Alliance Automotive Group SAS Automotive 2 Blackstone Group LP M&A

20-Jul-17 Bambora Group AB Technology 1.7 Nordic Capital Svenska AB M&A

7-Aug-17 Netafim Ltd. Machinery 1.5

Permira Ltd.;Kibbutz Magal;Kibbutz Hatzerim M&A

24-Jul-17 Civica Services Ltd. Technology 1.4Ontario Municipal Employees Retirement System M&A

24-Jul-17 ANF Immobilier SA Real estate 1.1 Eurazeo SA M&A

17-Jul-17 ADB Safegate BVBA Consumer products 1 PAI Partners SAS M&A

11-Sep-17

Property Portfolio (Portfolio of UK business parks) Real estate 0.90 Oaktree Capital Group LLC M&A

22

Source: Dealogic


0

20

40

60

80

100

120

140

160

$0

$10

$20

$30

$40

$50

$60

$70



20

Capital Briefing23

Source: Dealogic

Appendix AGlobal PE exit activity — Asia-Pacific

Asia-Pacific PE exits — top exits 3Q 2017

Asia-Pacific PE exits (in US$b)

Source: Dealogic





17-Jul-17 28-Jul-17Celltrion Healthcare Co. Ltd. Consumer products 5 One Equity Partners LLC IPO

25-Sep-17 Carver Korea Co. Ltd. Consumer products 2.7Goldman Sachs Capital Partners;Bain Capital LLC M&A

20-Sep-17 Coates Hire Ltd. Professional Services 1.3 Carlyle Group LP M&A

3-Jul-17 31-Aug-17Zip Industries (Aust) Pty Ltd. Consumer products 0.42 Quadrant Private Equity Pty Ltd. M&A

24-Jul-17 7-Aug-17Shenzhen SunXing Light Alloys Materials Co. Ltd. Materials 0.35

Haitong-Fortis Private Equity Fund Management Co. Ltd. IPO

29-Sep-17Sushiro Global Holdings Ltd. Dining and lodging 0.34 Permira Ltd. M&A

6-Jul-17Shanghai Bright HolstanCo. Ltd. Agribusiness 0.32 RRJ Capital M&A

13-Sep-17 27-Sep-17Jiangsu Tianmu Lake Tourism Co. Ltd.

Media and entertainment 0.24

Haitong-Fortis Private Equity Fund Management Co. Ltd. IPO

31-Aug-17 31-Aug-17 SK Siltron Inc. Technology 0.23 VIG Partners Co. Ltd. M&A

31-Aug-17 Sembcorp Green Infra Ltd. Utilities 0.22 IDFC Private Equity Co. Ltd. M&A

0

5

10

15

20

25

30

35

40

45

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45



21

Appendix BM&A activity monthly flash

Volume Value Volume Value

Calendar YTD

YTD % ∆ Calendar YTD

YTD % ∆ LTM LTM % ∆ LTM LTM % ∆

2017(to September

17)

vs. 2016(to September

16)

2017(to September

17)

vs. 2016(to September

16)

LTM(to September

17)

vs. PTM(to September

16)

LTM (to September

17)

vs. PTM(to September

16)

M&A activity by areas and regions

Global 28,473 4% 2,197,230 -2% 37,466 4% 3,407,431 -3%

Americas 10,276 1% 1,156,137 -10% 13,613 0% 1,930,931 -1%

Canada 1,514 -27% 135,120 -35% 2,094 -23% 161,722 -35%

MeCAR 175 4% 13,571 -15% 224 -7% 17,367 -39%

SA region 591 -6% 66,760 10% 785 -12% 86,175 5%

US 8,714 8% 1,008,689 -11% 11,452 6% 1,755,414 1%

EMEA 10,644 6% 781,492 8% 13,845 6% 1,239,918 7%

Africa 476 1% 19,688 -40% 600 -7% 34,250 -19%

CIS 819 16% 23,662 4% 1,024 10% 65,419 60%

CSE 714 -11% 21,721 -1% 894 -17% 50,667 43%

GSA 2,219 30% 180,340 -18% 2,730 20% 268,355 -1%

Israel 272 48% 27,128 35% 321 24% 29,984 22%

Mediterranean 1,244 19% 132,152 43% 1,558 12% 161,244 21%

MENA 199 -19% 29,991 -22% 255 -23% 55,678 14%

Nordics 1,229 19% 95,597 82% 1,591 20% 118,069 69%

UK&I 2,484 -9% 179,763 15% 3,460 -4% 336,159 -11%

WEM 2,420 1% 191,168 38% 3,237 7% 286,037 -20%

Asia-Pacific 10,735 4% 658,714 -15% 14,309 6% 983,903 -13%

ASEAN 1,399 0% 51,281 -27% 1,837 2% 67,529 -29%

Greater China 4,435 11% 407,878 -15% 6,056 18% 589,959 -17%

India 921 2% 42,449 1% 1,154 -2% 67,510 25%

Japan 2,527 7% 104,970 -20% 3,333 6% 157,948 -15%

Korea 853 -17% 51,734 18% 1,082 -23% 71,726 27%

Oceania 1,226 0% 53,631 4% 1,669 0% 99,179 18%

M&A activity by sectors

Aerospace and defense 270 5% 68,832 321% 377 8% 83,837 275%

Automotive and transportation 1,979 8% 176,376 -10% 2,612 7% 236,357 -18%

Banking and capital markets 1,682 -3% 169,318 -18% 2,216 -6% 247,904 -37%

Consumer products and retail 4,042 1% 321,317 39% 5,371 2% 480,739 -2%

Diversified industrial products 3,782 5% 223,146 -44% 5,064 7% 384,768 -32%

Government and public sector 483 4% 22,164 66% 631 2% 36,841 48%

Health care 931 10% 42,677 2% 1,214 8% 59,129 12%

Insurance 824 7% 97,559 29% 1,085 3% 154,856 33%

Life sciences 1,854 0% 215,099 -31% 2,434 -1% 257,392 -34%

Media and entertainment 1,823 -2% 90,184 -5% 2,336 -6% 238,358 71%

Mining and metals 1,497 -9% 67,866 -18% 1,986 -8% 101,296 -2%

Oil and gas 1,018 -1% 256,973 9% 1,438 2% 454,709 44%

Other sectors 3,271 8% 86,997 -3% 4,248 4% 135,650 10%

Power and utilities 1,145 9% 164,758 12% 1,526 9% 274,976 27%

Real estate 2,731 6% 137,248 -9% 3,602 7% 224,839 3%

Technology 8,315 12% 361,164 -26% 10,601 11% 513,577 -31%

Telecommunications 555 10% 112,603 15% 740 5% 279,431 71%

Wealth and asset management 696 -6% 36,749 17% 974 -2% 55,910 33%

24

Regions’ M&A numbers represent a summation of domestic, inbound and outbound M&A activity involving the region. Sectors’ numbers represent involvement from either side, i.e., target or acquiror, except in the case of wealth and asset management, where only target-side involvement has been mapped.M&A analysis as at 1 October 2017. Source: Dealogic. All Rights Reserved. Note: data is continually updated and therefore subject to change.

Capital Briefing

2016 2017

J F M A M J J A S O N D J F M A M J J A S O N D

2015 2016 2017

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S

Appendix CM&A multiples and bid premium

Deal multiples greater than 30x and bid premium greater than 100% have been excluded from calculation of median.M&A analysis as at 1 October 2017. Source: Dealogic. All Rights Reserved. Note: data is continually updated and therefore subject to change.

25

Median deal multiple — EV / EBITDA

Global Americas Asia-Pacific EMEA

LTM(to Sep 17)

PTM(to Sep 16)

LTM(to Sep 17)

PTM(to Sep 16)

LTM(to Sep 17)

PTM(to Sep 16)

LTM(to Sep 17)

PTM(to Sep 16)

Aerospace and defense 12.0x 12.1x 16.2x 9.7x 4.5x 14.1x 12.0x 15.5x

Automotive and transportation 9.6x 10.0x 9.0x 12.1x 10.9x 11.7x 10.4x 8.4x

Consumer products and retail 9.8x 10.4x 10.6x 10.7x 9.6x 10.8x 9.1x 9.7x

Diversified industrial products 11.0x 9.1x 11.0x 10.3x 12.2x 9.4x 9.8x 8.2x

Financial services 10.6x 10.0x 14.1x 12.4x 7.1x 8.8x 7.8x 7.6x

Government and public sector 8.6x 8.8x 9.3x 8.2x 10.5x 10.5x 7.7x 9.5x

Health care 13.4x 10.8x 13.1x 10.5x 17.5x 12.2x 13.2x 10.8x

Life sciences 9.1x 11.0x 10.3x 8.8x 9.5x 12.9x 8.5x 10.3x

Media and entertainment 6.9x 9.0x 9.8x 6.2x 5.0x 11.6x 6.3x 9.7x

Mining and metals 10.4x 8.2x 12.1x 8.5x 13.4x 7.7x 5.8x 7.0x

Oil and gas 10.7x 10.4x 11.6x 13.8x 11.5x 10.2x 9.8x 8.7x

Other sectors 10.0x 10.7x 12.4x 10.5x 12.2x 15.3x 7.9x 9.6x

Power and utilities 10.5x 12.1x 5.5x 8.7x 8.5x 12.6x 12.8x 12.6x

Real estate 10.6x 9.5x 11.8x 9.5x 13.9x 8.5x 8.4x 10.1x

Technology 11.3x 11.3x 12.4x 12.8x 12.1x 11.7x 10.2x 10.3x

Telecommunications 7.2x 7.6x 6.9x 12.1x 4.9x 7.9x 7.9x 6.6x

Total 10.3x 10.1x 11.6x 10.6x 10.7x 10.7x 9.1x 9.5x

Median bid premium to four-week stock price

Global Americas Asia-Pacific EMEA

LTM(to Sep 17)

PTM(to Sep 16)

LTM(to Sep 17)

PTM(to Sep 16)

LTM(to Sep 17)

PTM(to Sep 16)

LTM(to Sep17)

PTM(to Sep 16)

Aerospace and defense 28% 31% 28% 60% 11% 31% 31% 15%

Automotive and transportation

20% 18% 22% 36% 22% 17% 11% 8%

Consumer products and retail 14% 20% 19% 32% 13% 15% 11% 23%

Diversified industrial products 22% 22% 33% 25% 22% 19% 12% 24%

Financial services 19% 22% 29% 28% 16% 10% 14% 14%

Government and public sector 23% 31% - 38% 19% 10% 23% 16%

Health care 25% 33% 35% 50% 15% 20% 14% 12%

Life sciences 21% 21% 24% 51% 17% 16% 22% 19%

Media and entertainment 21% 30% 23% 35% 17% 22% 21% 28%

Mining and metals 19% 25% 18% 29% 19% 23% 21% 9%

Oil and gas 20% 22% 25% 31% 12% 22% 32% 19%

Other sectors 11% 22% 15% 26% 12% 14% 10% 22%

Power and utilities 28% 12% 35% 8% 29% 14% 6% 52%

Real estate 23% 23% 18% 28% 25% 18% 12% 18%

Technology 20% 24% 31% 35% 16% 19% 13% 17%

Telecommunications 12% 23% 36% 23% 9% 25% 10% 15%

Total 19% 23% 26% 32% 17% 18% 14% 18%

Capital Briefing

Appendix DCapital Confidence Barometer (April 2017): by area

Respondents who expect their company to pursue acquisitions in the next 12 months

40%

56%59%

50%

57% 56%

0%

25%

50%

75%

100%

Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17

34%

57%

67%

54%

62%

81%

0%

25%

50%

75%

100%


30%

50% 48%44%

47% 46%

0%

25%

50%

75%

100%


Global Americas EMEA

57%

45% 44%

38%

47% 46%

0%

25%

50%

75%

100%


Asia-Pacific China Germany

28%

51%56%

50%

61%

28%

0%

25%

50%

75%

100%


Japan UK US

16%

58%

52%

59%

48%

42%

0%

25%

50%

75%

100%


33%

61%

74%

57%

75%

63%

0%

25%

50%

75%

100%


26 Capital Briefing

56%

43%40%

43%

49%

38%

0%

25%

50%

75%

100%


68%

51%

43%

35%

61%

31%

0%

25%

50%

75%

100%


Notes

27 Private Equity Capital Briefing

Notes

28 Private Equity Capital Briefing

If you would like to discuss any of the topics covered in this publication, please contact your EY advisor or any of the contacts below:

EY | Assurance | Tax | Transactions | Advisory

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst and Young Global Limited, each of which is a separate legal entity. Ernst and Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

How EY’s Global Private Equity Sector can help your business

Private equity firms, portfolio companies and investment funds face complex challenges. They are under pressure to deploy capital amid geopolitical uncertainty, increased competition, higher valuations and rising stakeholder expectations. Successful deals depend on the ability to move faster, drive rapid and strategic growth and create greater value throughout the transaction life cycle. EY taps its global network to help source deal opportunities, and combines deep sector insights with the proven, innovative strategies that have guided the world’s fastest-growing companies. Our clients discover powerful new ways to create unexpected paths to value — generating positive economic benefits for both investors and society. That’s the power of positive equity.

© 2017 EYGM Limited.All Rights Reserved.

EYG no. 05939-174GblED None

In line with EY’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

ey.com

Transaction Advisory Services

Steve Krouskos

EY Global Vice Chair


+1 404 817 5090

[email protected]

Bill Casey

EY Americas Leader


+1 305 415 1645

[email protected]

Andrea Guerzoni

EY EMEIA Leader


+39 02 8066 9707

[email protected]

Harsha Basnayake

EY Asia-Pacific Leader


+65 6309 6741

[email protected]

Peter Wesp

EY Japan Leader


+81 3 4582 6465

[email protected]

Private Equity

Herb Engert

EY Global Private Equity Leader

+1 212 773 6202

[email protected]

Bill Stoffel

EY Americas Private Equity Leader

+1 212 773 3141

[email protected]

Jeff Hecht

EY Global PE Tax Leader

+1 212 773 2339

[email protected]

Research and Insights

Mark Temple

EY Knowledge


+44 20 7951 6985

[email protected]

Pete Witte

EY Knowledge

Private Equity

+1 312 879 4404

[email protected]

October 2017 Private Equity Capital Briefing...Private Equity Capital Briefing Monthly insights and...

Documents

Transcript of October 2017 Private Equity Capital Briefing...Private Equity Capital Briefing Monthly insights and...