安永-全球2010年私募股权投资观察报告.pdf

2010 global private equity watch New horizons emerge April 2010 New horizons emerge Leveraged loans used to nance new acquisitions bounced back in the fourth quarter While Thomson Reuters reports that new issues in the US totaled US 80 billion in 2009 nearly half of that total US 37 billion was issued in the fourth quarter up from just US 14 billion in the third quarter and US 21 billion in the fourth quarter of 2008 Financing for new acquisitions should increase gradually in 2010 barring major banks being hit with defaults on government and commercial debt in Greece and possibly Spain Liquidity also returned on the sell side The recovery of worldwide stock markets restored the initial public offering IPO as a viable exit strategy in the US and Asia PE sponsors brought 53 new companies to market in 2009 raising proceeds of US 16 billion compared with US 11 billion in 2008 Only three of these IPOs occurred in Europe while 25 took place in both the Americas and in the Asia Paci c region While trade sales fell sharply last year to US 65 billion from US 140 billion they have increased steadily since bottoming out in the rst quarter of 2009 as bid ask spreads between buyers and sellers narrowed PE rms continued to focus on preserving portfolio company value as operating excellence replaced nancial engineering Over the last few years larger rms have concentrated on hiring operating partners and managers to focus on improving their portfolio companies They have also tapped former executives of global Fortune 500 and other multinational companies along with a coterie of ex management consultants to serve as senior advisers These executives who have years of strategic and operating experience have been invaluable in helping struggling companies streamline operations improve their working capital ease their nancial situation and position themselves for growth A year ago there were diverging views on the future of private equity PE Some contended the model had suffered irreparable damage while others saw a nimble industry that would recover and eventually become stronger than ever Although 2009 was a challenging year with leverage in short supply acquisitions and divestitures down sharply and fund raising dif cult the industry showed resilience in adapting to adverse market conditions Globally PE rms made 1 612 acquisitions1 in 2009 a 36 decrease from 2008 2 The average size of an acquisition in 2009 was smaller US 100 million versus US 158 million in 2008 as total deal value fell 56 to US 95 5 billion While there were fewer buyout deals during 2009 minority investments3 as a percentage of total acquisitions rose from 45 to 50 even as the value of such transactions fell from US 57 7 billion to US 21 9 billion However annual data mask the real story of 2009 The long retreat that began in the summer of 2007 ended as a comeback that began in the third quarter and gained strength as larger deals were announced towards year end Globally transactions worth US 39 billion were announced in the fourth quarter up from US 24 billion in the third quarter and more than double the US 18 billion announced in the fourth quarter of 2008 Driving this recovery is the renewed willingness of banks to underwrite debt Bloomberg reported that global high yield debt issuance nearly tripled last year to US 210 billion from US 74 billion in 2008 PE rms particularly those in the United States US used their share of new issues to replace existing portfolio company debt gaining critical debt extensions in the process The use of newly issued high yield bonds to re nance leveraged loans is expected to continue through 2010 as interest rates on government bonds are expected to remain low causing investors to seek higher yields 1 956 acquisitions where the value was disclosed and 656 where the value was not disclosed 2 Unless otherwise noted Dealogic is the source of all acquisition divestiture and IPO data cited in this report 3 Acquisitions of less than a 50 ownership stake In early 2010 valuations are improving IPOs are encountering some resistance leverage is returning in some markets and some high pro le secondary sales have been completed Firms are taking advantage of improving markets to make acquisitions enhance portfolio company performance and exit investments in order to return funds to limited partners in advance of 2011 fund raising rounds All the while they keep a watchful eye on tightening debt covenants During the rst three months of 2010 global PE rms have announced 358 transactions valued at US 27 0 billion compared with 415 transactions priced at US 17 0 billion for the same period in 2009 While the average deal size where the value was disclosed for those three months rose to US 157 million from US 70 million last year it remains far below the pre recession high of US 706 million in the second quarter of 2007 2010 is looking to be an intriguing year with global PE activity on the rise Kind regards John Harley Global Private Equity Leader Ernst Bloomberg Thomson Reuters Moody s Investors Service and Credit Suisse for information on the global syndicated loan markets and the US high yield and leveraged loan markets Secondary funds Balanced Others such as late stage mezzanine natural resources special situations and turnaround funds Table of contents 2009 private equity turns a corner after a tough year pg 1 Acquisitions the smaller is beautiful trend continues 4 Sell side action bounces back as IPOs gain ground 11 Portfolio companies on the mend 16 A strong high yield market fuels global restructuring efforts 17 Fund raising challenges remain despite capital surplus 18 Emerging markets come into their own 22 Regulatory and tax reform slow process wide ranging impact 26 2010 outlook for private equity 30 About Ernst acquisitions involving Asia Paci c based targets rose from 13 to 18 while those involving European Middle Eastern or African EMEA targets comprised 35 of global deal value down from 48 in 2008 Transactions involving targets in the US Japan and China gained share while those involving targets located in the rest of the world lost share Most PE deal activity involves buyers and sellers within the same region However 2009 witnessed an increase in the percentage of Americas and EMEA transactions involving a foreign PE buyer Although PE exits like acquisitions slowed last year the one bright spot was the IPO which emerged as a viable exit alternative PE rms brought 53 new companies to market in 2009 raising proceeds of 16 billion slightly up from 52 transactions with proceeds of 11 billion in 2008 Strong fourth quarter activity on American and Asia Paci c exchanges helped revive the market By contrast the number of new issues on European and Middle Eastern exchanges trailed by a considerable margin Three IPOs broke the billion dollar barrier last year Myer Holdings listed on the Australian Stock Exchange Hyatt PE deal value by world region 2000 2009 0 25 50 75 100 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Source Dealogic X 44 7 17 6 33 2 82 7 28 8 103 6 427 1 47 9 241 1 428 6 44 6 245 7 156 5 19 9 156 0 147 9 15 1 136 9 71 7 12 0 93 0 62 2 4 5 71 3 31 6 4 7 52 3 62 1 4 8 56 4 USb PE deal volume by region 2000 2009 0 25 50 75 100 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Source Dealogic X 705278 629 9675181X025 1X2896141X292 1X3195711X166 1X0943161X126 1X005251956 743174818 595109807 503119842 703137883 32010 global private equity watch new horizons emerge Hotels listed on the NYSE and Talecris Biotherapeutics listed on NASDAQ As of 29 March 2010 there were 39 PE backed companies waiting to go public and more lings are expected Activity on European exchanges is expected to pick up later this year but the deferral of the New Look and Travelport IPOs and the sale of Pets at Home and Ambea to PE secondaries have dented early con dence That said the recently announced 880 million IPO of Providence Equity Partners Kabel Deutschland Germany s biggest cable company could signal more IPO activity Global PE fund raising trends 2005 2009 0 1 000 2 000 2005 2006 2007 2008 2009 Source Preqin Fund raising data excludes venture funds 640 479 803 598 859 685 767 770 357 658 480 573 306 290 588 451 590 314 234 860 Avg fund size USm of funds Fund size USm USm 0 100 000 200 000 300 000 400 000 500 000 600 000 700 000 Fund raising declined in 2009 Globally PE rms closed 357 funds valued at 234 9 billion down from 767 funds totaling 590 3 billion in 2008 Average fund size declined less dramatically to 658 million from 770 million Preqin reports that it took 18 months on average to close a fund in 2009 compared with 12 months in 2007 Funds in the 500 million to 999 million range appear to be attracting a greater share of investor commitments while larger funds especially mega funds over 5 billion lost share last year In response some large funds lowered their fees According to an October survey by Preqin on average PE funds funds with 1 billion or more reduced their management fees to 1 65 In terms of investment style buyout funds continue to account for half of all funds raised Growth capital fund of funds and secondary funds gained share last year while infrastructure and distressed debt funds accounted for a smaller share of total funds closed Many portfolio companies particularly those acquired at the peak of the market struggled in 2009 However of the more than 61 000 companies ling for bankruptcy in US courts only about 100 were PE portfolio companies according to Buyouts and peHUB 42010 global private equity watch new horizons emerge Acquisitions the smaller is beautiful trend continues Global PE rms announced investments in 1 612 companies last year down 36 from 2 510 in 2008 The average size of transactions where a value was disclosed fell more than 37 to 100 million from 158 million in 2008 which in turn represented a dramatic decline from 435 million in 2007 The dearth of mega deals continued with only one transaction topping the 5 billion mark TPG s acquisition of US based IMS Health a leading provider of data and intelligence to the health care industry Transactions valued between 3 billion and 5 billion totaled 9 6 billion down from 62 in 2008 and 84 in 2007 Deals in the 1 billion to 3 billion range are becoming more numerous as are smaller transactions under 250 million To put this in perspective just four transactions including three LBOs topped the 3 billion mark last year while seven did so in 2008 and 39 in 2007 The average size of the 25 largest PE acquisitions was 1 6 billion in 2009 2 2 billion in 2008 and nearly 13 billion in 2007 In 2009 13 of the 25 largest acquisitions involved US targets including TPG s purchase of IMS Health Blackstone s 2 7 billion acquisition of Busch Entertainment Apollo s 2 3 billion purchase of Cedar Fair and Advent s 1 8 billion investment in Fifth Third Processing Solutions Eight of the largest transactions involved EMEA targets including the 3 4 billion purchase of Springer Science Business Media by GIC Special Investments and EQT Partners CVC Capital Partners 3 billion acquisition of Anheuser Busch s InBev and Silver Lake and Canada Pension Plan Investment Board s 2 billion purchase of Skype Technologies There were four large deals involving Asian and Australian targets KKR s 1 8 billion acquisition of South Korea s Oriental Brewery GS Capital and MBK Partners 1 4 billion purchase of USJ Co a Japanese leisure service provider Bain Capital s 1 1 billion purchase of Japan s Bellsystem24 and Paci c Equity s 709 million acquisition of Australia based Energy Developments Ltd The dispersion of large transaction targets around the world represents a sharp contrast from 2007 when North American primarily US targets represented 21 of the top 25 PE transactions worldwide This re ects the global nature of PE its ability to pursue attractive opportunities anywhere in the world and a post recession risk management mindset that considers emerging markets investments which once carried a very high risk premium as a necessary counterbalance to those in developed markets PE deal volume by transaction size 2007 2009 0 25 50 75 100 2009 2008 2007 Source Dealogic 13 1417 1 002 2217 109115137244 78693 42 39 6199165993 7 5b 3 4 9b 500 999 1 2 9b 250 499 100 249 100 Transaction by deal size 2007 2009 0 25 50 75 100 2009 2008 2007 Source Dealogic 2 8 9 7 28 72 28 2 2 0 2 9 0 7 9 2 0 2 9 2 2 5b 9b 500 999 2 9b 250 99 00 2 9 00 USb 52010 global private equity watch new horizons emerge 2009 2008 2007 Source Dealogic USUK ChinaJapan PE rms made 705 acquisitions in the Americas 629 in EMEA and 278 in Asia and the Paci c While the number and value of acquisitions was down in all regions last year Asia has increased its share of PE deal activity since 2007 while North America s share of deal activity has decreased Acquisitions involving targets in ve countries the US the UK Japan Germany and China have consistently accounted for over 60 of global PE activity While acquisitions in emerging markets of Southeast Asia Eastern Europe and Latin America dipped last year the long term trend is up Half of last year s deal volume was in four industries computers and electronics professional services health care and nancial services while industries with the largest transactions included computers and electronics nancial services leisure and recreation food and beverages and professional services Financial services professional services health care and electronics were leading targets for PE investments in 2008 as well Minority investments in portfolio companies accounted for 50 of global PE purchases in 2009 up from 45 in 2008 and 33 in 2007 They are most common in Asia where it is more dif cult for foreigners to purchase controlling stakes in local companies Minority investments are less common in Europe where they account for 39 of acquisitions and rose sharply in the Americas last year to constitute 55 of all acquisitions up from 24 in 2007 The average size of a minority investment was 35 million last year down from 70 million in 2008 and 90 million in 2007 The last time it was this low was during the downturn in 2002 when the average deal size of minority investments was 28 million In 2009 club deals accounted for 10 of global deal value or 9 5 billion and 5 of deal volume Club deals contribution 21 0 342 12 7 208 11 2 182 4 7 77 3 6 58 3 4 55 3 2 52 3 1 51 26 6 434 5 7 93 4 9 80 2009 PE acquisitions by industry ranked by volume Professional services Computers and electronics Financial services Health care Construction and building Retail Food and beverage Telecommunications Transportation Consumer products Other Source Dealogic Financial Services includes Insurance Other include utilities and energy automotive machinery publishing oil and gas leisure real estate metals and mining agribusiness aerospace chemicals and others of volume deal volume to total deal value rose sharply in Europe while dropping signi cantly in Asia and the US These deals allow rms to complete larger transactions as such they are more common in booming M the 1 3 billion purchase of Birds Eye Foods by Blackstone portfolio company Pinnacle Foods and the acquisition of Barnes Qatar Investment Authority s purchase of 12 6 in Volkswagen for 7 1 billion and 5 of Porsche for 2 9 billion and the UAE s International Petroleum Investment Co s 37 5 stake in CEPSA a Spanish energy company for 4 4 billion and 10 4 stake in Barclays for 3 3 billion while its Advanced Technology Investment Co acquired Singapore s Chartered Semiconductor for 3 3 billion Rounding out the top 10 was the 5 6 billion acquisition of Eircom an Australian telecommunications holding company by STT a subsidiary of Singapore s Temasek Although signs are positive it is too soon to speculate on how SWFs will invest in 2010 While total investments may be down investment styles among SWFs are likely to diverge Those suffering major losses late last year including investors in Dubai World will invest less and stay closer to home However others may increase their allocations or make their rst investments The Korean Investment Corp announced that it will double its exposure to PE focusing on distressed and secondary funds while the Emirates Investment Authority plans to make its rst PE investment later this year Asset allocation practices differ from country to country with larger funds such as those of Singapore Kuwait Norway and China employing more sophisticated asset allocation models and often hiring outside advisors to review them However information on actual allocations is limited Despite their vast resources some SWFs are developing and ne tuning their investment strategies developing their people and attracting talent In addition SWFs are adopting more rigorous risk management practices to improve their overall governance 102010 global private equity watch new horizons emerge 112010 global private equity watch new horizons emerge Sell side action bounces back as IPOs gain ground In 2009 global PE rms exited 461 investments valued at 80 9 billion This re ects a signi cant decline in activity from 2008 when rms exited 668 entities valued at 150 7 billion Sales to corporations strategic sales or other PE rms secondary sales remain the preferred exit routes because they enable rms to quickly return cash to investors However IPOs gained momentum last year as a recovering stock market once again made them viable exit alternatives In terms of proceeds PE rms raised 64 from sales to strategic buyers 16 from sales to PE and 20 from IPOs While PE rms took roughly the same number of companies public in 2009 as in 2008 proceeds from those transactions rose sharply from 10 8 billion to 16 2 billion By contrast both strategic sales and secondary sales fell to 51 6 billion and 13 1 billion respectively less than half their 2008 levels The value of PE exits usually outstrips that of acquisitions which is not surprising given the industry s mod