1
Mike Wright, Imperial College
© Imperial College Business School
Latest Private Equity Trends
Equistone Partners Europe, Birmingham Breakfast Seminar, Feb 6, 2014
© Imperial College Business School 2
• Trends– UK, Europe, Midlands– Values and numbers– Regional Differences– Vendor sources– Industrial sectors– Deal structures and Pricing– Fund raising– Exits
• Prospects
Introduction
Latest Private Equity Trends
© Imperial College Business School 3
UK PE-backed Buyout Market Eases (£m)
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
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2013
0
50
100
150
200
250
300
350
400
450
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
Number Value £m
N
umbe
r
Va
lue
£m
© Imperial College Business School 4
Mid-market(PE-backed £50-250m)
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
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2013
0
10
20
30
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50
60
70
80
0
1000
2000
3000
4000
5000
6000
7000
8000
Number Value £m
N
umbe
r
Va
lue
£m
UK Quarterly Trend Stays Flat20
03 I
2003
III
2004
I
2004
III
2005
I
2005
III
2006
I
2006
III
2007
I
2007
III
2008
I
2008
III
2009
I
2009
III
2010
I
2010
III
2011
I
2011
III
2012
I
2012
III
2013
I
2013
III0
50
100
150
200
250
0
5000
10000
15000
20000
25000
Number Value £m
N
umbe
r
Va
lue
£m
Major European Markets Rise
France
Germany
Italy
UK
0 10000 20000 30000 40000 50000 60000 70000 80000
2013 2012 2011 2010 2009 2008 2007
Midlands Quarterly Trends20
03 I
2003
III
2004
I
2004
III
2005
I
2005
III
2006
I
2006
III
2007
I
2007
III
2008
I
2008
III
2009
I
2009
III
2010
I
2010
III
2011
I
2011
III
2012
I
2012
III
2013
I
2013
III0
5
10
15
20
25
30
35
40
45
0
500
1000
1500
2000
2500
3000
Number Value £m
N
umbe
r
Va
lue
£m
© Imperial College Business School 8
PE-Backed Regional Deal Numbers (Head Office)
Midlands South North Scot, Wales, NI
0
20
40
60
80
100
120
140
200820092010201120122013
© Imperial College Business School 9
PE-Backed Regional Deal Value (Head Office)
Midlands South North Scot, Wales, NI
0
2000
4000
6000
8000
10000
12000
14000
16000
200820092010201120122013
All Midlands DealsValue Flat But Volume Down
1987
1988
1989
1990
1991
1992
1993
1994
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2013
0
20
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80
100
120
140
160
0
1000
2000
3000
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5000
6000
Number Value £m
N
umbe
r
Va
lue
£m
Midlands Share of all UK MBO/MBIs
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
0
5
10
15
20
25
30
35
No. %Value %
UK Top End Volume Recovery(over £100m)
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
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2013
0
10
20
30
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50
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70
80
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5000
10000
15000
20000
25000
30000
35000
40000
45000
Number Value £m
N
umbe
r
Va
lue
£m
Midlands Deals above £100m decline 19
91
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
1
2
3
4
5
6
7
8
9
10
0
1000
2000
3000
4000
5000
6000
Number Value £m
N
umbe
r
Va
lue
£m
Largest Midlands Deals
Buyout Name Vendor Deal Value (£m)
Busy Bees Knowledge Universe Education (USA)
220
Aurum Holdings Landsbanski 175
Whitworths Holdings SBO (European Capital) 90
Kee Safety International SBO (LDC) 90
32.2 WM Wymeswold Solar Power Plant
Private 44
City Link Rentokil 40
Acenta Steel Endless 38
Meter Provida Fusion group 38
In 2012 there were 6 £70m plus Midlands Deals
Midlands – The Last DecadeNumber Value
East Mids West Mids East Mids West Mids
2003 63 70 1629 4007
2004 61 77 1777 1057
2005 64 57 547 982
2006 47 70 1541 3723
2007 66 68 1374 2526
2008 38 50 1563 811
2009 27 37 150 248
2010 33 22 971 853
2011 22 39 231 1345
2012 30 29 477 385
2013 26 25 416 486
© Imperial College Business School 16
All UK Vendor Source (Number %)
Fore
ign
Div
estm
ent
Inso
lven
cy
Loca
l Div
estm
ent
Priv
ate
Publ
ic to
Pri
vate
Seco
ndar
y Bu
y-ou
t
0
5
10
15
20
25
30
35
40
45
2009 2010 2011 2012 2013
N
umbe
r %
© Imperial College Business School 17
PE-backed SBOs(Number & Value £m)
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
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2011
2012
2013
0
20
40
60
80
100
120
0
2000
4000
6000
8000
10000
12000
14000
16000
Number Value £m
N
umbe
r
Va
lue
£m
© Imperial College Business School 18
SBO Value Exceeds Other Buyouts for first time (£m)
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
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0
5000
10000
15000
20000
25000
30000
35000
Other Value £m SBO Value £m
Valu
e £m
© Imperial College Business School 19
SBOs vs Other Buy-outs(Numbers)
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
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2004
2005
2006
2007
2008
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2013
0
100
200
300
400
500
600
700
800
Other SBOs
Num
ber
• Generally arise where primary buyout performance relatively weaker and held longer
• SBOs on average perform worse than primary buyouts, divisional & FF buyouts
• Positive effects of SBOs achieved by expansion not increased efficiency.
• BUT……SBOs between specialized PE firms do perform better
Care with Secondary Buyouts? sustain performance?
Family Foreign Local P2P Creditor SBO0
5
10
15
20
25
30
35
40
45
50
UKMidlands
UK & Midlands 2013 Vendor Sources – % by Numbers
Family Foreign Local P2P Creditor SBO0
10
20
30
40
50
60
UKMidlands
UK & Midlands 2013 Vendor Sources – % by Value
© Imperial College Business School 23Bus
. & S
uppo
rt Ser
vices
Financ
ial S
ervic
es
Food
and
Drink
Health
care
Leisu
re
Man
ufac
turin
g
Oth
er
Paper
,Prin
t,Pub
lish
Prope
rty &
Con
stru
ction
Retail
TMT
Trans
port
& Com
ms
0
20
40
60
80
100
120
140
160
180
200
2007200920122013
UK Industry Sectors (Numbers)
© Imperial College Business School 24
Midlands SectorsDeal Numbers
Sector 2011 2012 2013Bus. & Support Services
13 12 5
Financial Services 3 1 0Food and Drink 2 2 1Healthcare 2 4 2Leisure 5 6 5Manufacturing 17 19 14Other 9 3 6Paper,Print,Publish 0 2 0Property & Construction
1 2 3
Retail 5 6 5TMT 3 0 9Transport & Comms 1 2 1Total 61 59 51
© Imperial College Business School 25
Midlands SectorsDeal Values
Sector 2011 2012 2013Bus. & Support Services
148 198 240
Financial Services 6 2 0Food and Drink 3 17 90Healthcare 127 222 4Leisure 10 95 40Manufacturing 399 115 128Other 112 42 125Paper,Print,Publish 0 152 0Property & Construction
38 4 6
Retail 685 12 184TMT 46 0 46Transport & Comms 2 5 40Total 1575 862 902
© Imperial College Business School 26
Debt Available(Deal Structures Above £10m)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
20
40
60
80
100
120
Debt Equity LoanNote Mezzanine OtherFinance
%
Collateralised Loan Obligations issuance
COV-LITEThe Return of Cov-Lite Loans
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
2
4
6
8
10
12
14
16
18
20
10-100m
above 100m
Entry EBIT Multiples for UK Buy-outs Increasing
© Imperial College Business School 30
UK Fund Raising back to peak levels
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
5
10
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30
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40
45
0
5000
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Number Value £m
N
umbe
r
Va
lue
£m
© Imperial College Business School 31
PE Backed Exit Recovery Continues
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
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0
50
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0
5000
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15000
20000
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Number Value £m
N
umbe
r
Va
lue
£m
© Imperial College Business School 32
Mid-market exits accelerate(PE backed, £50-250m entry value)
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
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2012
2013
0
10
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50
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0
1000
2000
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7000
Number Value £m
N
umbe
r
Va
lue
£m
© Imperial College Business School 33
Flotations resurrected
Cred
itor
Exi
t
Floa
tatio
n
Seco
ndar
y Bu
y-ou
t
Trad
e Sa
le
0
20
40
60
80
100
120
140
160
180
200
2005 2006 2007 2008 2009 2010 2011 2012 2013
N
umbe
r
Exits of Midlands Deals
Cred
itor
Exi
t
Floa
tatio
n
Seco
ndar
y Bu
y-ou
t
Trad
e Sa
le
0
5
10
15
20
25
30
35
40
45
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
N
umbe
r
© Imperial College Business School 35
Main Midlands Exits
Company Name Deal Year Exit Value (£m)
Name of Buyer
Whitworths Holdings 2006 90 Equistone Partners
Kee Safety International 2011 90 Dunedin CP
Napier Turbochargers 2008 75 Wabtec Corp (USA)
Bionostics (Nav Bidco) 2008 68 Techne Corp (USA)
Optimum Care 2007 38 Four Seasons
Acenta Steel 2011 38 MBO
Practice Plan 2005 38 Wesleyan Assurance Society
Lil-lets UK 2006 37 Premier Foods (South Africa)
Eve Trakway 2006 28 Ashtead Group
Private Equity Prospects
• Large deal volume up though total value down
– Absence of mega deals
• Significant pending deals in 2014
– Domestic & General at £750 million
– Skrill £511 million
• More large deals expected
Private Equity Prospects
• Public to privates extremely quiet in 2013
• No large pending PTP deals
• Buoyant stock market
• Very quiet year for PTP in 2014
Private Equity Prospects
• IPO value of £9.8 billion highest on record.
• If stock and capital markets remain positive this trend should continue through 2014.
• Trade sales increasing but still seems some caution by corporates in converting increasing confidence into action
Private Equity Prospects
• 2013 ended on a more positive note than it began.
• Debt levels rose last year and more relaxed debt markets
• Buoyant exit and refinancing markets
• Increased UK based fund raising
• Large amounts of capital availability likely to fuel return to growth in buyout market in 2014.
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