Roland Berger European Private Equity Outlook 2013 20130421

7/28/2019 Roland Berger European Private Equity Outlook 2013 20130421

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12013-02_European Private Equity Outlook_ PL input.pptx

Frankfurt/Warsaw, March 2013

European Private Equity Outlook

2013


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This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our cli ent and is not complete without the underlying detail analyses and the oral presentation. It may

not be passed on and/or may not be made available to third parties without prior written consent from Roland Berger Strategy Consultants. RBSC does not assume any responsibility for the completenessand accuracy of the statements made in this document.

Roland Berger Strategy Consultants GmbH

Contents Page

A. Focus of study and methodology 4

B. Executive summary 6

C. Results of the private equity survey 2013 10

D. Selected comparison of PE Outlook 2013 vs. PE Outlook 2012 25


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Our fourth European Private Equity Outlook reveals how expertssee the market and its development in 2013

EUROP

EANPRIVATEEQUITY

OUTLOOK2013

Prior to 2012, the Outlook consisted of analyses and assessments by selected Roland Berger andPE industry experts and experience from Roland Berger project work

Since 2012, the Outlook has included a survey of more than 1,200 participants from private equitycompanies across Europe

The results accurately reflect what experts in the market expect for different countries and regions,

and what they consider relevant factors for the private equity business in 2013

We hope that you enjoy reading the Outlook. We would be happy to hear your feedback or discussthe results with you in greater detail

The European Private Equity Outlook 2013 is the fourth in a series launched by Roland Berger in2009

Source: Roland Berger

PRELIMINARY REMARKS


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A. Focus of study and methodology


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As in 2012, the study is based on exclusive surveys withprofessionals from leading private equity firms across Europe

Focus and methodology of study

Overview of European private equity

Key topics 2013 Overview of respondents

Development of PE M&A market

Key challenges for private equity

Private equity business model


1) Germany, Austria, Switzerland

4%

5%

7%

7%

8%

8%Iberia and Italy

Europe in total 15%

Scandinavia 16%

DACH1) 31%

France

CEE excl. Poland

UK

Benelux

Poland

> 10

5 - 10

56%

< 5

23%

21%

Private equity survey 2013

Geographical focus[% of responses]

PE experience[yrs/% of responses]

No. of profes-sionals contacted

1,232


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B. Executive summary



Private equity market on the upturn? Slightly more than half of therespondents expect an increasing number of transactions

Development of private equity M&A market in 2013

> Respondents are slightly upbeat about the development of private equity-driven M&A in 2013 half of the participants(52%) expect to see an increase in the number of transactions

> Scandinavia and Germany are seen as the leading countries for growth of private equity-driven M&A activity in 2013.Poland, the UK and CEE should grow slightly as well, while declines are expected in Iberia, Italy, France and Greece

> Respondents expect most M&A activity to be in Pharma/Healthcare and Consumer Goods/Retail. Energy/Utilities as wellas Technology & Media sectors are ranked second. Automotive and Building/Construction are at the bottom of the list

> No time for large deals mid-cap segment forecast to dominate. 91% of the respondents expect most deals to haveenterprise values of less than EUR 250 million, and 59% expect most deals to be below EUR 100 m

> No changes in the economic outlook are expected, which is considered to be the most relevant factor for Europeanprivate equity M&A in 2013. A substantial improvement is expected in the availability of attractive acquisition targets. Thesituation in the financial markets and the development of the euro crisis are expected to improve slightly

Executive summary (1/3)



Active development of portfolio companies will be the focus of 2013and the mid-term challenge for private equity

Key challenges for private equity investors in 2013

> Private equity investors expect to dedicate most of their time in 2013 to actively developing portfolio companiesextending existing funds and fundraising are not focus activities for 2013

> 57% of the participants anticipate a more competitive environment in fundraising, whereas 37% expect no changes

> Divestments of family-owned businesses, carve-outs from large corporations and secondary buy-outs or distressed/insolventcompanies are ranked equally as attractive sources for new targets. Listed companies (going private) rank far behind

> Improvement in the quality of targets is anticipated by 35% of the participants 45% expect no changes

> The availability of debt financing, particularly for recaps and LBOs, is still expected to become more difficult in 2013

> Strategic investors are expected to play the most important role in PE exits, but other exit channels follow closely

Private equity business model

> Most respondents feel a need to adapt the private equity business model just one-fourth of respondents see no need forchange

> 96% of respondents feel that a more active approach to managing companies will be more important in the future

> Strategic and operational actions aimed at improving performance are expected to have the best chances of success in thecoming years




Compared to 2012, the market's mood is improving No changes inthe origin of targets or target sizes anticipated

Selected comparison of PE Outlook 2013 vs. PE Outlook 2012

> Participants feel more positive about market developments in 2013 compared to 2012

> In terms of countries, improvement of the PE market especially in Germany and UK is expected compared to last year onthe lower end of the spectrum, Greece is still expected to decline, but to a lesser extent than in the prior year

> Practically no changes in the ranking of industries with PE investor involvement in 2013 compared to 2012;Pharma/Healthcare and Consumer Goods/Retail remain the top industries

> No changes in the expected range of enterprise value between 2012 and 2013 deal size remains small, with up tojust EUR 250 million in transaction value




C. Results of the private equity survey 2013



Private equity professionals are slightly upbeat about the developmentof PE-driven M&A in 2013 Half (52%) expect transactions to increase

M&A transactions with PE involvement in 2013 compared to 2012 [%]


Increase of

more than 10%

11%

0% to +10%

41%

0%

26%

0% to -10%

15%

Decline of

more than 10%

7%

Expected change in the number of M&A transactionswith PE involvement in 2013

> More than half of all professionalsinterviewed expect the number ofM&A transactions with PE

involvement to increase in 2013

> However, there is also a significantnumber (22% of all surveyparticipants) that anticipate acontinuous decrease in M&Atransactions with PE involvement

COMMENTS

52%

% of responses [only one answer permitted]

1 DEVELOPMENT OF PE M&A MARKET

17% 25% 42% 0%17%

x% % of responses in Poland [only one answer permitted]



Scandinavia and Germany have the highest growth compared to2012, whereas PE M&A activity esp. in Greece could decline

Change of PE M&A activity in major countries 2013 vs. 2012 [%]


Expected change in PE M&A activity in 2013 compared to 2012

> Major PE markets such as the UKand Germany are expected to seea small increase in PE M&A

activities 1.5% to 2.5% increasein 2013 over the previous year

> Scandinavia and CEE areexpected to gain momentum in2013

> The opposite is expected in Iberia,Italy, France and Greece

COMMENTS

Greece -1.0%

France -0.7%

Iberia and Italy -0.6%

Benelux 0.1%

Austria and Switzerland 0.9%

CEE excl. Poland2) 1.5%

UK 1.7%

Poland 1.9%

Germany 2.4%

Scandinavia1) 2.7%

1) Includes Denmark, Norway, Sweden2) Central and Eastern Europe includes Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Slovak Republic and Slovenia

1

10

2

3

4

5

6

7

8

9

Expected change of PE M&A activity in 2013 compared to previous year in % [multiple answers permitted]




Pharma/Healthcare and Consumer Goods/Retail are expected tohave the most M&A transactions with PE involvement in 2013

Ranking of industries by number of M&A transactions [%]


Technology & Media 41%

Energy/Utilities 41%

Financial Services 18%

Capital Goods & Engineering 24%

Logistics & Business Services 35%

10%Chemicals 17%

Pharma/Healthcare

Building and Construction

51%

5%

Consumer Goods/Retail

Automotive

54%

European industries with a high number of M&A transactionswith PE investor involvement in 2013

> More than half of all respondentsexpect that Pharma/Healthcareand Consumer Goods/Retail will

have a very high number of M&Atransactions with private equityinvolvement

> Low number of PE transactionsexpected for Building/Constructionand Automotive

COMMENTS

1

10

2

3

4

5

6

7

89

100% =Max. value

% of participants that expect a high number of transactions [multiple answers permitted]


0%

9%9%

0%

9%

25%

42%

73%

42%

27%

Europe Poland



Mid-cap segment expected to dominate 91% of PE transactions in2013 are expected in the enterprise value range of up to EUR 250 m

Expected range of PE transactions in enterprise value in 2013 [%, EUR m]


EUR

>1,000m

0%

EUR

500-1000m

19%

EUR

250-500m

1%

EUR

100-250m

EUR

50-100m

EUR

Large-cap deals with enterprise

values above EUR 500 m are likelyto remain rare

> 91% of all PE transactions in 2013are expected to be smaller thanEUR 250 m in 2012, 94% of allPE transactions were expected tobe less than EUR 250 m

> 59% of respondents expect thatthe enterprise value of most PE

transactions will be belowEUR 100 m in 2013

COMMENTS

91%



8% 42% 33% 17% 0% 0%




No change in the economic situation anticipated, which is the mostrelevant factor for PE-driven M&A Availability of targets improving

Overview of relevant factors for M&A business in Europe [%]


Availability of attractive

acquisition targets26%

Development of

valuation levels13%

Situation of the

financial markets16%

Development of

the euro crisis19%

Overall economic

situation26%

"What will be the most influential factors affecting European M&A trans-actions with private equity involvement in 2013? How will they develop?"

> Private equity investments aredriven mainly by the uncertaineconomic outlook for 2013 no

change in economic situation isexpected

> Surveyed participants anticipate animprovement in the financialmarkets and the pipeline ofattractive targets for 2013

> Slight improvement regarding

situation of financial markets anddevelopment of euro crisisexpected

> Valuation levels are not expectedto change significantly

COMMENTS

Importanceof factors

Development of factors in 2013

1

2

3

4

5

Substantialdeterioration

Substantialimprovement

Nochange

% of participants that expect this factor to have a major influence [multiple answers permitted]


--


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PE investors will dedicate most of their time to developing portfoliocompanies Fundraising and extension of funds not in focus

Focus of PE investors on lifecycle stages in 2013 [%]

Developing portfoliocompanies

Making newinvestments

Divestingexistinginvestments

Fundraising Extendingexistingfunds

29% 17%

16%

12% 12%

2 KEY ISSUES FOR PRIVATE EQUITY 2013


"On which phase of the PE value chain will you put most of your focus onin 2013?"

> Value creation within the holdingperiod is a top priority for PE fundsin 2013 29% of all private equity

professionals will focus ondeveloping existing portfolios

> Only between 1 and 2 out of 10private equity investors willcontinue to raise funds or startnew fundraising activities

> Making new investments, divesting

existing ones and extendingexisting funds is a priority task forless than 20%

COMMENTS

% of participants that will place most of their focus on this phase of the PE value chain [multiple answers permitted]


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57% of private equity professionals expect a more competitivesituation in fundraising in 2013

Expected degree of competitiveness in fundraising in 2013 [%]


"What degree of competitiveness do you expect in fundraising in 2013?"> Two-thirds of all private equity

professionals expect fiercercompetition for fundraising in 2013

> Only 5% expect a significantimprovement in the fundraisingsituation

> 37% expect no change in thefundraising situation in 2013

> In Poland 75% of respondentsexpect that competitive situationwill become more intense whereas25% expect no changes

COMMENTS

5%

Easing of the

competitive situation

No change in

competitive situation 37%

Competitive situation will

become more intense57%




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Except for listed companies (going private), the PE market ranks theattractiveness of all sources for targets as nearly equal

Sources of most attractive targets in 2013 [%]


Secondary buy-outs

42%

Parts of groups/carve-outs

28%Listed companies (going private)

43%

Majority shareholdings

in family-owned companies46%

Insolvent companies/distressed deals

43%

> Nearly all sources for targetsranked equal: majorityshareholdings in family-owned

companies, carve-outs fromcorporations, secondary buy-outsand distressed deals

> Taking listed companies private isby far the least attractive source oftargets for private equity funds

COMMENTS

1

2

3

4

5

% of participants that expect this source of targets to be very important [multiple answers permitted]

Sources of attractive targets in 2013, ranked by importance

100% =Max. value


2


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The study participants are likely to expect more attractive targets in2013 than in 2012


"Will the targets available on the market in 2013 will be more attractivethan in 2012?"

> 35% of all private equityprofessionals expect that moreattractive targets for investment

will be available in 2013

> However, the overall situation isuncertain 45% do not know if theattractiveness of targets willincrease or decrease

> One-fifth of respondents think thatfewer attractive targets will be

available on the market

COMMENTS


Completely agreeSomewhat

agree

28%

Neither agree

nor disagree

Somewhat

disagree

7%

Completely

disagree

45%

18%

2%

35%

Expected development of investment opportunities in 2013 [%]

25% 42% 33% 0%0%




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Debt financing is generally expected to become more difficult in2013 Fewer difficulties for working capital and CAPEX lines

Availability of external financing in 2013 [%]


"Compared to 2012, what external financing will be more difficult to raisein 2013?"

> Banks are still reluctant to agreeon recapitalizations and financeleveraged buyouts

> Asset-based growth financing(CAPEX, working capital) is notexpected to be under as muchpressure as other deal financing

COMMENTS

1

2

3

4

Easierto raise

More difficultto raise

Nochange

Recapitalization (i.e. debt substitutingequity, dividend to sponsor)

Refinancing (i.e. improvement ofterms)

Leveraged buyouts (i.e. newtransactions)

Growth financing (i.e. working capital,lines for add-on acquisitions or CAPEX)




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Strategic investors are expected to play the most important role in PEexits, but other exit channels are close behind

Change of exit channels in 2013 compared to 2012 [%]


Triple track (i.e. IPO, M&A

process and refinancing)19%

18%IPOs

Dual track (i.e. IPO and M&A process) 19%

M&A to PE investors 21%

M&A to strategic investors 23%

Ranking of exit channel activity: expected significant increase in 2013compared to previous year

> Strategic investors representstrong competition in PE auctionprocesses based on additional

synergy levers an increase inexits with strategic investors isexpected in 2013 (23%)

> Other exit channels, nevertheless,with M&A to PE, dual/triple tracksand IPOs follow close behind

COMMENTS

1

2

3

4

5

% of participants that expect a significant increase in this exit channel [multiple answers permitted]

100% =Max. value


3 PRIVATE EQUITY BUSINESS MODEL


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Majority of respondents feel a need to adapt the private equitybusiness model Just 25% see no need for change

Necessity of adjusting private equity business model [%]


"The private equity business model is just as robust now as it was beforethe crisis. No adjustment is necessary. Agree or disagree?"

> Two-thirds of PE professionalsthink that the private equitybusiness model needs to change

> However, one in four see no needto change current investmentstrategies

> Polish respondents see this issuesimilarly as their Europeancounterparts: 67% of them fell thatPE business model needs to

change while 17% think opposite

COMMENTS

Disagree to some extent

71%

29%

Completely

disagree

82%

Agree to some extent

18%

Completely

agree

Neither agree

nor disagree

Disagree Neutral Agree

65% of all participants 10% of all participants 25% of all participants




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96% of respondents feel that a more active approach to managingcompanies will become more important in the future

Importance of active portfolio management [%]


"Managing portfolio companies actively will become more important in thefuture passive management is no longer suitable. Agree or disagree?"

> 96% of respondents feel that anactive management approach willbe more important.

> Passive portfolio management withpurely financial engineering islimited

COMMENTS

82%

14%

2%1%1%

Agree to

some extent

Disagree to

some extent

Completely

disagree

Neither agree

nor disagree

Completely agree

2% 96%



0% 8% 8% 83%0%




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Strategic and operational actions aimed at improving performance areexpected to have the best chances of success in the coming years

Chances of success of value-enhancement actions [%]


Financial actions (e.g. recapitalization,refinancing, working capital)

36%Operational actions (e.g. cost

cutting, outsourcing)

26%

39%Strategic actions (e.g. buy and build,penetration of new markets)

Value-enhancement actions for PE portfolio companies rankedaccording to their chances of success in coming years

> Implementing strategic actions isbelieved to have the best chanceof success in the coming years

> Continuous operational actionssuch as cost cutting andoutsourcing can tap additionalpotential to improve profitability

> The effect of financial actions onvalue enhancement is stillexpected to be very limited

COMMENTS

1

2

3

% of participants that expect the value-enhancement action in question to have a very goodchance of success [multiple answers permitted]

100% =Max. value


25%

0%

42%

Europe Poland


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D. Selected comparison of PE Outlook 2013 vs.PE Outlook 2012


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Participants feel more positive about market developments in 2013compared to 2012

M&A transactions with PE involvement in 2012/2013[%]


Expected change in the number of M&A transactionswith PE involvement in 2012 compared to previous year

% of responses in 2013 [only one answer permitted]


Increase

of more

than 10%

4%

0% to +10%

23%

0%

17%

0% to -10%

28%

Decline

of more

than 10%

28%

73%

Increase

of more

than 10%

11%

0% to +10%

41%

0%

26%

0% to -10%

15%

Decline

of more

than 10%

7%

52%

Expected change in the number of M&A transactionswith PE involvement in 2013 compared to previous year

35% 25% 20% 10% 10% 17% 17% 25% 42% 0%



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The market outlook for PE M&A activity has improved, especially forGermany and the UK

Change of PE M&A activity in major countries in 2012/2013 [%]


-10.0%

-7.0%

-7.0%

-7.0%

-3.0%

-3.0%

CEE (excl. Poland)

-2.0%

Benelux

1.0%

Poland

1.0%Scandinavia1)

4.0%

UK

Germany

Austria & Switzerland

France

Iberia & Italy

Greece

1) Includes Denmark, Norway, Sweden2) Central and Eastern Europe includes Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Slovak Republic and Slovenia

1

10

2

3

4

5

6

7

8

9

Expected change of PE M&A activity in 2013 compared to previous year in % [multiple answers permitted]

0.1%

Austria/Switzerland 0.9%

CEE excl. Poland2) 1.5%

UK 1.7%

Poland 1.9%

Germany 2.4%

Scandinavia1) 2.7%

Greece -1.0%

France -0.7%

Iberia and Italy -0.6%

Benelux

1

10

2

3

4

5

6

7

8

9

Expected change in PE M&A activity in 2011 comparedto 2012

Expected change in PE M&A activity in 2012 comparedto 2013


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Virtually no changes in the ranking of industries with PE investorinvolvement in 2013 compared to 2012

Ranking of industries by number of M&A transactions in 2012/2013 [%]


13%

37%

AutomotiveChemicals 14%

Capital Goods & Engineering

9%

21%

Financial Services 27%


Energy/Utilities

37%

Consumer Goods and Retail 51%

Pharma/Healthcare 56%

Logistics & Business Services

Building & Construction

European industries with a high number of M&Atransactions with PE investor involvement in 2012

1

10

2

3

4

5

6

7

89

100% =Max. value

% of participants that expect a high number of transactions [multiple answers permitted]

Building and Construction 5%

Automotive 10%Chemicals 17%

Financial Services

Capital Goods & Engineering 24%

Logistics & Business Services 35%

Pharma/Healthcare

Consumer Goods/Retail

18%

51%

41%Energy/Utilities

54%


1

10

2

3

4

5

6

7

89

European industries with a high number of M&Atransactions with PE investor involvement in 2013

0%10%

10%

40%

50%

35%

20%

60%

80%

5%

9%

9%

0%

27%

42%

0%

73%

9%

25%

42%

Europe EuropePoland Poland


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No changes expected in the range of enterprise values between the2012 and 2013 studies Deal size remains small

Expected range of PE transactions in enterprise value in 2012/2013 [%, EUR m]


"Most PE transactions in 2012 will be in the enterprisevalue range of"



"Most PE transactions in 2013 will be in the enterprisevalue range of"

EUR

>1,000m

0%

EUR

500-

1000m

19%

EUR

250-500m

1%

EUR

100-250m

EUR

50-100m

EUR

1,000m

2%

EUR

500-

1000m

19%

EUR

250-500m

0%

EUR

100-250m

EUR

50-100m

EUR


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Your contact

Dr. Gerd SieversPrivate Equity Support Team - Author of the studyPartnerRoland Berger Strategy Consultants GmbHMies-van-der-Rohe-Str. 680807 Munich

[email protected]+49 89 9230 - 8543

Dr. Sascha HaghaniHead of Competence Center Corporate FinanceSenior PartnerRoland Berger Strategy Consultants GmbHOpernTurm, Bockenheimer Landstrae 2-8,

60306 [email protected]+49 69 29924 - 6444

Christof HuthPrivate Equity Support TeamPartnerRoland Berger Strategy Consultants GmbHMies-van-der-Rohe-Str. 680807 Munich

[email protected]+49 89 9230 - 8291

Sven KleindienstPrivate Equity Support TeamPrincipalRoland Berger Strategy Consultants GmbHMies-van-der-Rohe-Str. 680807 [email protected]

+49 89 9230 - 8539

Roland Berger European Private Equity Outlook 2013 20130421

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