2015 Annual U.S. PE Breakdown HLQ

U.S.
2015 ANNUAL
I N PA R TN E R S H I P WITH
2015 DEAL COUNT

DOWN BY OVER 8%,
VALUE BY 4.8%
PAGE 5
MULTIPLES DOWN
TO PRE-2013 LEVELS
PAG E 7
ENERGY SPOTLIGHT
PAG E 10
LEAGUE TABLES
PAG E 19
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Market Development & Analysis
Content
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Contact PitchBook
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RESE ARCH
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Introduction
Overview
5-6
Deal Multiples & Debt Levels
Deals by Deal Size & Sector
Q&A: Merrill DataSite
Spotlight: Energy
10-12
Q&A: Murray Devine
13
Exits Overview
14
Exits by Type
15-16
Fundraising
17-18
4Q 2015 League Tables
19
EDITORIAL
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3
P I TC H B O O K 2015 A N N UA L U. S . P E B R E A K D OW N R E P O R T
The buyout cycle

has begun to slow
Introduction
The private equity landscape of 2015 officially introduced us to the later stage
of the most recent buyout cycle. Moving out of 2009, PE activity moved higher
YOUR JOURNEY
TO STRONGER
RETURNS
STARTS HERE
in linear fashion until pulling back last year, following a noticeable jump between
2013 and 2014. Global economies are facing real fundamental issues. The U.S.
is looking to raise rates and normalize policy, while maintaining steady inflation
growth and keeping unemployment low, among other initiatives. China continues
to shift from a commodity-based economy to one based on consumption,
in effect removing the credit-fueled marginal buyer that helped lead to the
ongoing rout in commodity prices. Exports are falling and the country devalued
its currency, ostensibly to mitigate against its U.S. dollar-pegged yuan from
continuing to increase against its trading partners. Japan continues to ease as
well, and emerging economies that had previously experienced decent growth
are stumbling again.
Across the PE landscape, dealmakers are assessing the best ways to move
forward in this environment. Simply pulling back is not necessarily a viable option
with the amount of dry powder limited partners have funneled into the asset
The PitchBook Platform

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class. General partners continue to move forward, but dealmaking dynamics

are shifting. Fundraising efforts remained robust, with median fund sizes rising
With data on:
for focused strategies such as energy-specific vehicles looking to eventually
Companies
capitalize on the distressed oil market. Multiples remained inflated, but more
realistic expectations around businesses of lower quality emerged. Also, due
Investors
diligence processes became very important in the middle market in order to
Deals
facilitate sales processes further.
M&A
In summary, 2015 was a turning pointthe nature of that turn, as well as its
Limited partners
extent, is viewed differently, but we believe the buyout cycle has begun to slow.
Funds
Activity in 2016 will move along and deals will get done, but concerns around
debt financing and the inventory of attractive assets will continue to be heard.
Financials
We hope the data and insights in this report help inform your decision-making
Advisors
process in 2016 and as always, please reach out with any questions, comments
People
and suggestions at reports@pitchbook.com.
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NIZAR TARH U NI
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4
Last year was a turning point

Overview
2015 U.S. PE activity moved lower

in terms of both deal flow and
aggregate transaction value. Total
deal value came in at just under $606
billion across 3,602 completed deals,
representing a year-over-year (YoY)
decline of 4.8% and 8.2%, respectively.
While activity slackened on a yearly
basis, numbers remained strong
historically. Highlighting 2013 as a
comparison, 2015 deal value was still
up over 18% compared to 2013, with
deal counts remaining inflated by over
10% during the same period.
latest investment cycle is beginning to

experience. Firms are grappling with
how to adequately deploy the dry
powder theyve accumulated, which in
turn has increased competition for the

best assets and also helped underpin
multiples in many transactions.
2014 may well remain a peak for some time

U.S PE activity by year
$1,000
$900
3,923
# of deals closed
3,458
$800
$600
3,265
2,850
2,623
4,000
3,602 3,500
3,332
$700 2,859
The fact that 2015 counts declined

at nearly double the pace as value
speaks to the continued froth weve
seen across the PE asset class. We
firmly believe that since the bulk of
top-tier companies already came
to market in 2013 and 2014, the
trepidation that slightly lower-quality
companies faced in the market in 2H
2015 emphasizes the loss of fuel the
4,500
Deal value ($B)
3,000
2,549
2,500
$500
2,000
$400
1,769
$300
1,500
$606
$636
$512
$470
$408
$358
$0
$166
500
$393
$100
$938
1,000
$487
$200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: PitchBook
The end of 2015 marks a clear inflection point in investment trends

U.S. PE activity by quarter
$250
$200
774
$150
1,200
Deal value ($B)

# of deals closed
624
1,073
743
736
810
879
1,024
708
990 1,015
1,000
961 958
937
894
769
741
690 681
577
919
800
746
698
600
574
$100
400
$122
$198
$144
$142
$171
$160
$151
$153
$176
$126
$109
$102
$189
$96
$96
$89
$115
$92
$100
$101
$129
$77
$80
$0
$72
$50
200
0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010
2011
2012
2013
2014
2015
Source: PitchBook
5
On a quarterly basis, we saw a hesitant

market before experiencing what
appeared to be an inflection point
as we transitioned from 3Q to 4Q.
1Q 2015 witnessed a decline of more
than 17% in value, along with a 7.7%
drop in volume compared to the last
quarter of 2014. A couple mega-deals
were able to prop capital invested
figures higher, with 3Q seeing a near38% quarter-over-quarter (QoQ)
jump in that segment. But that same
quarter, a Chinese stock market that
had appreciated over 60% through
the year experienced a colossal selloff, only exacerbated by a surprise
devaluation of its currency during
August. High-yield debt, which saw
spreads tighten to within 500 basis
points of risk-free assets following the
2007-2008 crisis, began to widen,
accelerated by a continued rout in
energy prices that led investors to
flee the bonds of many oil and gas
companies. The uncertainty brought
forward from these events manifested
in 4Q, which experienced a decline in
deal volume of over 22%, and an even
steeper 38% drop in aggregate capital
invested.
While all transaction types were

down during 2015, add-ons and PIPE
investments experienced the lowest
YoY decline, falling just 1.7% and 3.5%,
respectively. With the U.S. middle
market able to better shield itself
from global macro events that can
directly impact larger, multinational
enterprises, it comes as no surprise
to see portfolio companies continue
to find accretive add-ons. Despite
the troubled market environment we
saw begin to unfold in 2H 2015, addons actually accounted for 62% of all
PE activity, the highest percentage
weve ever tracked at PitchBook.
Examining PIPE rounds, GPs needing
to put money to work appear to have
been able to prove valuable sources
of capital to public entities that
otherwise would have faced significant
fundraising challenges in the public
equity markets. Further, unless
companies were able to show ample
cash flows to handle an increased
debt load, pricing would have been an
issue if they came to the bond market
to fill those funding gaps, especially
in the back half of 2015. With many
companies looking for M&A to gain
access to the aforementioned cash

flows, the bond markets werent their
best choice, however we did see a
healthier lending environment across
the core middle market.
As we enter 2016, we believe the
uncertain environment will continue to
unfold. The public markets will remain
volatile, which will make comparable
valuations for those looking to price
private deals increasingly difficult.
With capital overhang remaining high,
dealmakers will continue to narrow
their focus on certain niches and will
need to become more creative to put
money to work, avoiding the need
to potentially increase fund lifetimes
and suppress IRRs. Multiples have
certainly moved lower in general, yet
strategics also nursing inflated cash
reserves will continue to compete
with PE for the best assets on the
market, and so multiples will remain
stretched for many deals. Quality is still
a primary concern, yet LPs continue to
funnel money back to the historically
outperforming asset class, so we think
GPs will continue to move forward, but
more cautiously.
Add-ons and PIPEs illustrate how GPs are diversifying

investment theses
U.S. PE activity by type and year
Add-ons hit a record percentage of total buyout

activity last year
U.S. add-on % of buyout activity
100%
3,000
0%
1,025
1,112
902
1,127
961
1,647
1,293
956
604
40%
Recap
PE Growth
PIPE
0%
Platform Creation
Add-on
Non add-on
Source: PitchBook
6
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2015
2014
2013
2012
2011
2010
2009
2008
2006
2007
Add-on
20%
10%
Buyout
50%
30%
1,109
500
10%
865
20%
1,202
30%
952
1,000
852
40%
564
1,500
1,067
50%
1,475
60%
1,246
2,000
1,333
70%
70%
60%
2,500
80%
1,676
90%
62%
Add-on % of buyout
Source: PitchBook
Multiples return to 2012 levels

Deal multiples & debt levels
The deal environment remains

expensive on a historical basis,
yet we began to see multiples slide
slightly in 2015. The median valuationto-EBITDA multiple recorded last year
was just over 9x, yet a few hurting
sectors, including the depressed
energy space, suppressed these
multiples. The multiple compression
also speaks to the decline in the
inventory of top-tier companies
coming to market. Any sellers with
less-than-robust financials or concerns
around their underlying businesses
could potentially reach the higher ends
of valuations in 2013 or 2014, but GPs
are now examining these transactions
skeptically to assess if they could
weather the next cycle. While the
market is in no way inaccessible
to these firms, they must settle for
slightly lower prices to get their deals
done. Conversely, top-tier companies
were able to demand higher multiples
and sail through diligence processes
without much difficulty at all. Another

factor that began influencing the
market in 2015 came on the debt
side. Weve touched on the havoc in
the junk-bond markets, and lending
for upper-middle-market and megasize brackets also became more of
a challenge. Banks are dealing with
regulatory pressures to manage
the risk-weighted-assets they hold
and thus have had to shy away from
lending to various deals. At the high
end of transaction sizes, buyers
and sellers have had to negotiate
prices lower and, in certain cases,
restructure signed deals in order get
the economics of a deal to work. Some
sectors feel these pressures more
than others, but it is something we
view will potentially become much
more widely felt as we move through
2016. That said, middle-market
lenders have definitely fared better as
theyve been able to better manage
their relationships with sponsors and
sectors to provide better flexibility

in that realm. Quality, however, is
still an issue in the MM, which has led
to heightened competition among
lenders, in turn introducing concerns
for them around pricing. What
weve seen play out in 2015 is more
conservatism regarding debt use in
PE. Debt-to-EBITDA multiples have
come down to around 5.1x compared
to 6.6x in 2014 and 6.4x in 2013, while
the median debt percentage in deals
has moved lower to 56% compared
to 60% in 2014 and 64% in 2013. We
think the trends we saw this year will
likely remain the same. And, as MM
lenders have to strongly analyze the
debt packages they underwrite or
purchase from originators to assess
the additional risk they can adequately
shoulder, we may even see debt
use move slightly lower, despite the
demand from sponsors.
Multiples slid last year, but competition for quality could slow the decline
Median EBITDA multiples for U.S. buyouts
Debt usage remains on the lower end

Median debt percentages for U.S. buyouts
12x
70%
9.9x
9.1x
4.4x
62.3%
64.0%
63.8%
0x
60.0%
60.0%
60.0%
56.6%
55%
55.9%
55.4%
50%
5.1x
6.6x
6.4x
5.4x
5.3x
5.0x
3.6x
6.3x
6.5x
6.0x
4x
65%
60%
4.0x
3.6x
9.0x
3.6x
4.3x
7.3x
9.6x
3.7x
6x
2x
8.8x
3.8x
4.2x
3.7x
8x
9.6x
3.6x
10x
11.1x
10.2x 10.5x
50.0%
45%
Source: PitchBook
40%
2006 2007 2008

Debt / EBITDA
2009 2010 2011

Equity / EBITDA
2012
2013 2014 2015

Valuation / EBITDA
2006
2007
2008
2009
Source: PitchBook
7
2010
2011
2012
2013
2014
2015
2015 sees spate of mega-deals, on

the consumer side in particular
Deals by size & sector
Continued interest in the U.S. middle market kept
proportions at a relative plateau
U.S. PE deals (#) by deal size
100%
$2.5B+
90%
80%
$2.5B+ transactions resurged in total

value in 2015, nearing $135 billion,
the largest sum in years.
$1B-$2.5B
70%
60%
$500M-$1B
50%
$100M$500M
40%
30%
$25M-$100M
20%
Some things dont change: B2B and B2C remained

dominant in shares of deal flow
U.S. PE deals (#) by sector
100%
B2B
90%
B2C
80%
10%
Under $25M
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0%
70%
Energy
60%
Source: PitchBook
50%
Financial
services
40%
2015
2014
2013
2012
2011
2010
2009
0%
90%
80%
IT
10%
2008
$2.5B+
20%
2007
100%
Healthcare
30%
2006
Mega-deals came back in a big way in 2015, resurging

to proportions unseen for years
U.S. PE deals ($) by deal size
Materials &
resources
Source: PitchBook
$1B-$2.5B
70%
60%
$500M-$1B
50%
$100M$500M
40%
30%
$25M-$100M
20%
B2C in particular was skewed by a handful of huge

transactions
U.S. PE deals ($) by sector
100%
B2B
90%
B2C
80%
10%
Under $25M
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0%
70%
Energy
60%
Source: PitchBook
50%
Financial
services
40%
Healthcare
30%
20%
IT
10%
2015
2014
2013
2012
2011
2010
2009
2008
2007
0%
2006
IT saw another banner year, with the

combined total of deals since the
start of 2014 topping 1,000.
Materials &
resources
Source: PitchBook
8
What is your general take on private

equity dealmaking for the first half of
the year?
While the equity markets opened to
a rocky start, the PE sector remains
poised for a solid 2016. Private capital
fundsincluding PEare seeking to
raise $946 billion in 2016. In 2015,
more than $500 billion was raised,
marking the sixth consecutive year of
growth in fundraising. Given all this
dry powder, we expect many firms to
put capital to work in 2016; however,
we may see fewer cross-border
transactions, particularly given the
uncertainty in China, the Middle East
and Latin America.
Richard A.
Martin, Jr.
Senior Director
Merrill DataSite
Richard A. Martin, Jr. is a Senior
Director at Merrill Corporation,
responsible for Merrill DataSites
global marketing group. His 18 years
of marketing experience working and
residing in the U.S., U.K. and Europe
has developed Martins understanding
of disparate business cultures and the
global financial industry, evidenced
by a successful record of growing
businesses. Martin currently works
closely with financial professionals to
provide first class virtual data room
(VDR) solutions for their transaction
and due diligence needs. Prior to joining
Merrill, Martin led the hedge fund
marketing strategy group at Morgan
Stanley Capital International and the
global equity product strategy group
at Reuters International, London. He
received his B.A. from Dartmouth
College, a marketing certificate from the
University of Michigan Business School
and currently resides in New York City
with his wife and children.
With regard to trends in due diligence

seen in 2015, how do you expect them
to fare in the first half of 2016?
As the world continues to shrink,
so does the due diligence timeline.
However, long before a buyer is even
in the picture, its imperative for sellside companies to conduct their own
due-diligencewith many companies
starting the process as early as 18
months prior to a potential M&A
transaction. As part of this process, we
are seeing more and more companies
purchase contract management
software that enables them to
easily identify and organize major
contracts in advance of buyer interest.
Beyond just contracts, companies
are organizing other key documents
in virtual data rooms (VDRs) to
ensure that they are made available
to potential buyers and position the
company in the best possible light.
As we keep hearing about increased

focus on sell-side diligence, do you
anticipate transaction closing times to
fall even further, or what do you think
will happen?
With more and more at stake, selling
companies are increasingly conducting
their own internal due diligence to
improve transparency and identify any
information which could be construed
as problematic during the sale of a
company. In addition, companies that
pursue dual track (IPO/private sale)
will undergo a similar process that,
while not labeled as due diligence,
will ensure they are prepared to
successfully entertain both options.
In short, yes: Sell-side companies will
continue to expand their own due
diligence efforts and yes, this should
result in shorter transaction closing
times.
Whats your take on what measures
PE firms should take with regard to
cybersecurity threats to portfolio
companies?
Cybersecurity is now an every
company issue, even more so with
respect to PE firms as they are
increasingly utilizing connected
devices, effectively augmenting their
risk. According to Gartner, worldwide
spending on information security will
reach $170 billion in 2020. However,
its been widely reported that many
middle-market private equity firms
are ill-equipped to protect their own
data. We believe 2016 will be a year
where the PE industry will continue
to invest in cybersecurity measures,
which in turn will trickle down to
their portfolio companies. From a
completely different perspective, we
think cybersecurity is ripe for M&A.
9
Spotlight: Energy
2015 totals indicate a pausing for positioning
U.S. PE energy deals by year
When volatility hit the market in

2014, the common sentiment was
certainly not that we would end up at
the beginning of 2016 with oil prices
teetering around the $29 to $30 per
barrel range. Over the past 12 to 24
months, the energy space has been
dealing with a massive supply glut that
began to induce negative price-action
in the commodity. While historically
Saudi Arabia has served as the swing
producer mitigating an oversupplied
market, its producers opted not to
be that player anymore in order to
preserve its own market position.
$140
350
Deal value ($B)
Deal count
$120
243
$100
246
260
252
232
301
300
266
250
201
$80
190
$60
200
150
141
$35
$73
$55
$58
$68
$37
$0
$24
50
$41
$20
$117
100
$46
$40
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: PitchBook
4Q saw the lowest numbers in years

U.S. PE energy deals by quarter
$25
Deal value ($B)
$20
87
83
76
52
66
52
51
78
75
64
$15
100
Deal count
58
65
54
66
58
65
69
90
80
67
60
70
47
58
60
48
$10
50
37
34
$5
30
$7
$7
$13
$8
$20
$21
$16
$15
$15
$16
$11
$13
$23
$9
$17
$9
$22
$12
$17
$17
$12
$6
$11
20
$8
$0
40
10
0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010
2011
2012
2013
2014
2015
Source: PitchBook
10
A summary of what weve seen

unfold since then has included a
massive supply glut, fears of that glut
persisting if not worsening as Iran
threatens to come back to the market,
and geopolitical factors contributing
to uncertainty around when and
how often Libyan supply may come
online, along with other players across
the globe continuing to produce. In
addition, the strength in the U.S. dollar
only hurts other dollar-denominated
commodities, such as oil, due to
divergent global monetary policies
supporting current and expected
capital flows into the U.S. with rates
stateside beginning to rise, and a
declining rate environment abroad.
Energy firms have been able to employ
operational and financial levers to
begin cutting capital expenditures.
Theyve become more selective with
the projects they pursue, and have also
resorted to job cuts to weather the
low-price environment, yet many of
the factors forcing the commodity to
move lower do not appear to be fading
at any time in the immediate short run.
So what happens? We need a washout,
primarily consolidation in the markets
and bankruptcies to begin reducing
the abundance of supply in the space.
These are the events that happen at
the end of a cycle, and the savviest
investors have already begun readying
themselves for such occurrences.
Taking into account the above
snapshot, we saw GPs raise a
record amount of capital for energy
investments last year as more than
$35 billion was raised in 2015 for the
space across 18 vehicles. Interestingly,
the sheer amount of capital raised
is the largest amount weve ever
experienced, yet each of the three
years preceding 2015 raised more
vehicles by count, speaking to the
niche and distressed opportunities that

smart money is preparing to target.
While a record amount of energyspecific capital was closed on in 2015,
energy deal flow fell on a yearly basis
and came in at the lowest level weve
seen since 2009. 2015 saw just $34.7
billion invested into the sector across
190 completed transactions, a YoY
decline of nearly 53% in terms of deal
value and 37% in terms of deal counts.
players are down some 70% as of this

writing. At $50 or $60 a barrel, we
began to see energy firms make the
right moves in capital expenditures
to shift break-even prices lower, but
at $30 per barrel, the lower bound
is simply too far down. Even Saudi
Aramco is having discussions about
floating assets, although many of
those are part of joint ventures, so
other parties have to be considered
before that can happen. At the
current price level, consolidation and
failure is inevitable as many smaller
companies cant sustain operations or
keep up with interest payments on the
massive amounts of debt borrowed
to fund their projects. Adding pain to
their wounds are the technological
developments around fracking the U.S.
has seen unfold in recent years, which
provides efficiencies that actually
help keep break-even prices lower.
This phenomenon only further hurts
The uncertainty in the market is no

surprise, yet producers are fighting
tooth and nail to continue staying
alive. GPs have come to market at
an opportune time to raise sufficient
capital to enter the space, but at this
point, there may not be any need for
them to deploy that capital when
they are likely able to pick up those
same assets in a bankruptcy process
at much lower prices. Weve already
seen Chapter 11s begin to increase in
volume, and the bonds of many energy
Players in the space are readying for action

U.S. financial vs. strategic energy deals (#) by year
500
Financial
Strategic
45%
% Financial
450
40%
400
35%
350
30%
300
25%
250
20%
200
15%
150
100
10%
50
5%
0%
2010
2011
2012
2013
11
2014
2015
Source: PitchBook
incentives for higher prices as stronger

players understand the implications
and the benefits to their businesses if
weaker companies leave the market.
The last few years illustrate how PE firms are preparing to make plays
U.S. PE energy fundraising by year
As the bankruptcies continue, PE will

be able to play a pivotal role from
a couple of different angles. Funds
will be able to acquire high-quality
assets at a fraction of the price out
of Chapter 7s. In addition, GPs will
be able to evaluate capital structures
and look to buy the debt of certain
companies restructuring in Chapter
11s. These are all distressed assets, and
with the money already raised for firms
to deploy, PE players are certainly
aware of the opportunity to invest at
the bottom of the cycle. The space in
general is experiencing compressed
multiples, which will allow GPs to
acquire entire companies in various
cases as they gain firmer conviction
in their investment strategies around
the sector and multiples remain
subdued in the medium run. It should
be noted as well that oil price cycles
have historically taken the form of
prolonged super cycles, something
that will keep the space dynamic and
difficult to analyze for a considerable
period of time.
$35
$40
30
Capital raised ($B)
# of funds closed
24
$30
14
18
13
$15
15
11
11
10
10
$10
$35
$23
$28
$16
$8
$23
$10
$13
5
$20
$0
20
17
$20
$5
25
20
$13
$25
25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: PitchBook
Only a handful of firms are already specifically targeting distressed assets

U.S. distressed debt fundraising by year
$60
23
$50
Capital raised ($B)

20
20
20
15
15
$30
15
15
10
10
10
10
5
$11
$18
$20
$13
$19
$15
$3
$48
$27
$7
$10
$0
25
17
$40
$20
# of funds closed
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: PitchBook
12
To what extent will high valuations

be cushioned by strong demand for
quality targets into the next year?
Some have anticipated an increasing
spread in the range of multiples, with
top-tier assets still commanding hefty
purchase prices given continued
strong demand on the part of private
equity firms, as well as continued
access to ample stores of dry powder
and debt financing for worthwhile
targets.
Jordan J. Barnett
Director, CFA
Murray Devine
Jordan Barnett joined Murray
Devine in 2007 and is responsible for
financial analysis and advisory services
relating to financial opinions, portfolio
valuations and the valuation of business
enterprises.
Since arriving at Murray Devine,
Jordan has worked on numerous
engagements across many different
industries. He has participated in
the financial analysis, research, and
due diligence relating to enterprise
valuations of closely held businesses
for fairness and solvency opinions,
portfolio valuations, accounting and
other purposes.
Prior to joining Murray Devine,
Jordan worked as a Portfolio Manager
with Sovereign Bank, focusing on the
healthcare sector and managing an
asset portfolio in excess of $500.0
million. He was responsible for several
aspects of the underwriting process and
monitoring portfolio performance.
Jordan received a Bachelor of
Arts degree in Economics from the
University of Vermont in 2001 and a
Masters in Business Administration
with a concentration in Finance from
Villanova University in 2007. Jordan
is also a Chartered Financial Analyst
(CFA) charterholder.
It appears likely that high-quality

targets will continue to command
high valuations over the next year
considering the large amount of
capital in the marketplace. Were
still in a low-growth environment,
general partners are seeking solid
returns, and weve witnessed a trend,
particularly in the middle market, to
drive earnings growth and multiple
expansion through add-on strategies
incorporating synergistic acquisitions.
These strategies are designed to
improve purchasing power and open
up new cross-selling opportunities. It
is difficult to say whether or not there
will be an increasing spread in the
range of multiples, but if there is any
downturn in the economy, generally,
that tends to be the case.
Weve heard from other firms that
valuators are entering pre-acquisition
valuation processes soonerhave
you seen this as well and to what
do you ascribe this acceleration?
Furthermore, do you expect this to
persist into next year?
In certain cases, we have witnessed
this, particularly prior to the closing
of agreed-upon acquisitions. Some
of these instances have included
bond offerings in which preliminary
determinations of intangible asset
values have been required. In general,
the trend toward increased scrutiny
around valuations is being driven by
auditors and investors. As a result,
the valuation timeline is accelerating,
requiring the services of valuation
firms that can move quickly to process

large amounts of information and
produce well-documented valuation
reports.
In recent months, have you seen a
material uptick in requests for fairness
opinions connected to wariness
around potential transactions? If so,
what factors are primarily behind the
change?
We have not seen a significant uptick
in requests for fairness opinions
except in the case of related-party
transactions. In these circumstances,
a market price is often not available
and the independent directors and
trustees will request that the parties
involved obtain a fairness opinion.
Increasingly, were seeing these
requests come from lenders and
other third-party stakeholders. The
requests are driven by the need for
some assurance that the terms of the
transaction approximate fair value.
Have you seen acceleration in the
demand for third-party valuations
of PE portfolio holdings? If so, what
are the primary factors behind the
increase and do you anticipate this to
ramp up even further in 2016?
Absolutely. The increased oversight
from regulators is driving a strong
demand for third-party valuations of
portfolio holdings. As part of that,
theres been an increased emphasis on
fair value and valuation procedures.
Weve also seen the incorporation
of objective, independent valuations
into the best practices of investment
manager valuation policies. This
trend extends beyond just private
equity, as other investors, including
hedge funds, business development
companies and pension funds are
bringing third parties in to provide
independent oversight to their periodic
portfolio valuation process. The goal,
in addition to greater transparency in
the valuation process, is to drive more
consistency in reported values.
13
A year for the record books

Exits overview
With selling activity oscillating

throughout the year, 2015 closed
at new highs. More than $321 billion
was exited across 1,132 completed
sales, representing a YoY jump of 10%
in terms of exit value and a modest
drop of 2.4% in exit volume. Similar to
what we saw from buyers, companies
at the higher ends of the quality
spectrum were still able to fetch values
that were very generous, boosting
capital exited. In addition, it should be
noted that while exit volume declined
a bit, that figure is still the secondhighest count weve ever tracked, only
below the record 1,160 deals exited in
2014.
With volatility coming to the markets
the way it did in 2015, evaluations of
potential sale processes by portfolio
companies and their sponsors was
heightened. Across the middle market,
U.S. companies may be able to fend
better when evaluating their respective

businesses, but with owners at the
lower ends of the middle market
potentially looking for liquidity, any
increased volatility that could suppress
M&A activity by larger strategics could
dampen exit routes or significantly
depress the future multiples corporate
buyers would be willing to pay for
these smaller companies.
On a quarterly basis, exit counts and
sums exited dropped a bit during 3Q
before staging a comeback during the
last quarter of 2015. 4Q 2015 saw $91
billion of exit value across 286 sales,
QoQ jumps of near 13% and 3.3%,
respectively.
We think the U.S. economy will
certainly remain stronger than global
counterparts, and core-middle-market
businesses across many sectors
should fare well in the near future.
2015 closed at a new high for total value of PE-backed

exits, an immense $321 billion
U.S. PE exits by year
$120
1,160 1,132 1,200
$100
1,000
$80
100
$20
$0
$91
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
150
$80
200
169
$92
$321
$292
$202
$216
$148
$138
$50
$99
$189
$0
$146
328
$50
200
$58
400
$100
$40
209
$102
600
521
626
$60
300
250
249
230
$58
669
282 277 286
$58
800
287
$73
$150
919
753
760
350
334
$99
$200
272
305
$54
999
$250
311
$31
$300
400
# of exits
Exit value ($B)
# of exits
$18
Exit value ($B)
Stable exit activity and additional indicators suggest

appetite for PE-backed holdings could persist
U.S. PE exits by quarter
1,400
$350
However, heightened macro concerns

can introduce a contagion of sorts
across multinationals, which in turn
will undoubtedly affect their smaller
business partners. With that, our view
is that the window to achieve multiples
similar to what has been the norm is
narrowing. Further, the slight drop
in total exit volume in 2015 may be
attributable to owners holding out
for even frothier valuations than had
previously been seen in 2013 and 2014.
With the environment in that sense
remaining choppy and ultimately
flat, we wouldnt be surprised to see
owners opening up to exits at a slightly
elevated clip in 2016, hoping to achieve
liquidity and get to market before the
window closes. 2015s uncertainty
likely helped manage expectations
surrounding unrealistic exit multiples
sellers previously anticipated.
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
2013
Source: PitchBook
14
2014
50
0
2015
Source: PitchBook
M&A remains crucial

Exits by type
PE-backed holdings have only grown more popular among strategics

Corporate acquisitions of U.S. PE-backed companies by year
$300
700
630
# of exits
Exit value ($B)

$250
613
564
$200
407
500
507
435
600
384
400
$150
319
318
$100
300
200
$246
$189
$118
$120
$98
$37
$67
$88
$0
$89
$50
$106
211
100
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: PitchBook
PE firms exchanged a record number of companies last year

Secondary buyouts of U.S. PE-backed companies by year
$100
600
Exit value ($B)
$90
# of exits
$80
455
$70
391
$60
241
90
$64
$78
$58
100
$86
$28
$86
$0
$35
$20
200
$27
187
$32
$30
$10
300
239
$5
$40
500
400
345
282
294
$50
480
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: PitchBook
Strategic acquisitions remained

the primary exit route for PE
last year, representing over 54% of
all PE-backed sales. As total exit
volume dropped slightly in 2015,
yearly corporate acquisition counts
declined by around 3%, yet total value
exited via the ramp was up 31% during
the same period, highlighting the
continued willingness of strategics
to pay expensive prices in search of
synergies to provide top-line revenue
growth and bolster earnings in a global
environment that has seen depressed
earnings growth. What should be
noted, however, is that strategic
purchases value grew more than 60%
between 2013 and 2014, rendering
the growth figure from 2014 to 2015
minute by comparison and prompting
questions about the potential future
growth rates of PE-to-strategic M&A.
Looking at PE-to-PE activity,
secondary buyouts by value were
down over 18% in 2015 compared to
2014 numbers. While representing 42%
of all exits, total value exited via other
GPs came in at $64 billion, relative
to more than $78 billion exchanged
between PE firms in 2014. Looking
back to the growth rate in the exit
ramp from 2013 to 2014, SBOs grew
close to 35% YoY in value during that
period. A couple of factors could
have contributed to this, including
the unabating expensive multiple
environment, along with various
GPs looking to develop in particular
niches to focus on greater operational
capabilities. In the case of the latter,
firms were likely willing to acquire
various assets that had become noncore to the focus or strategy of certain
GPs holding them.
15
IPOs accounted for just 3% of all exits

in 2015, the lowest amount weve
seen since 2008this was expected
given the relative unattractiveness of
exiting via the public markets as other
ramps provided greater value and
simultaneously less risk. With public
markets trading at record valuations
amid continuous uncertainty, investors
are scrutinizing new listings with a
more critical eye, making it tricky
for sponsors to accurately gauge
public investors interest along with
increasing the difficulty of pricing
offerings. Its no secret that preparing
for an IPO is hardly a cheap endeavor,
so incentives to go public with the
risk of having to either push back
an offering or pull it all together are
weak. 2015 numbers further reinforced
this notion with just $11 billion of
PE-backed exits coming through
public listings, a near 56% YoY decline
from the $25 billion reaped by PEsponsored companies listing in 2014. In
terms of counts, 2015 saw 48% fewer
IPOs come to market than what we
saw in 2014.
PE-backed listings took a veritable nosedive between 2014 and 2015

U.S. PE-backed IPOs by year
The median exit size of strategic

acquisitions came in at $240 million
last year, a 13% increase over the $213
million recorded in 2014. While the
growth rate during the period was
far less than the 64% growth we saw
moving from 2013 to 2014, looking
back to 2009 highlights just how
coveted PE assets have become, with
that figure growing 3.2x from the $75
million median size recorded in 2009.
SBOs have experienced a roughly
14% decline in YoY median deal size
to $300 million. Interestingly, the
median PE-backed IPO that came to
market was close to 11% higher than
2014 numbers. With public listings
becoming a difficult endeavor, the
jump in that metric can be attributed
to top-tier PE assets opting for that
route with the proper fundamentals to
attract investors, or better-prepared
companies of scale finally making their
way to the public stage.
$150
$30
IPO value ($B)
67
67
$25
80
75
# of IPOs
70
59
60
$20
46
$15
50
44
36
27
$10
40
39
30
20
$5
10
$11
$25
$26
$10
$15
$8
$8
$4
$0
$16
$22
15
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: PitchBook
At $240M, corporate buyers were happy to pay up in 2015

Median U.S. exit size ($M) by type and year
$400
IPO
$350
Corporate Acquisition
SBO
$300
$300
$240
$250
$200
$212
$100
Source: PitchBook
$50
$0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
The 1.7x ratio demonstrates just how much of a sellers market 2015 was
U.S. PE investment-to-exit ratio by year
2,500
4.0x
3.5x
2,000
3.0x
2.5x
1,500
2.0x
1,000
1.5x
1.0x
3.0x
3.0x
3.4x
3.7x
2.5x
2.3x
2.0x
2.1x
1.9x
1.7x
2007
2008
2009
2010
2011
2012
2013
2014
2015
2006
500
Investments/exits
# of investments (excl. add-ons)
0.5x
0.0x
# of exits
Source: PitchBook
16
Shifting strategies
Fundraising
from firms such as Sixpoint Partners
who work with GPs in their fundraising
efforts, its clear GPs also have found
success in raising capital for spinouts
and secondaries. In addition, the
distressed subsector of PE focus is
beginning to become a prominent
talking point, as we appear to be in the
late stages of the buyout cycle that
followed the 2007-2008 crisis. The
buzzword around strategies today is
niche.
At the beginning of the cycle, buyout
funds were able to raise significant
capital to take advantage of a
depressed-multiple environment. As
competition began to increase and
the economy strengthened, multiples
naturally climbed and we saw
growth funds come to market to take
advantage of minority investment
opportunities. To employ a baseball
metaphor, we are likely in the 7th
inning of this cycle, without a clear
Fundraising efforts remained fairly

healthy
U.S. PE fundraising by year
$350
$250
Capital raised ($B)
348
$300
# of funds closed
305
300
284
$200
214
$150
176
300
278
230
200
178
150
$181
$204
$229
$131
$111
$128
$86
$0
250
100
$245
$50
400
350
325
$100
$310
We view the sheer amount of

capital raised in 2015 as a sign of the
continued ability of GPs to come to the
market with new vehicles and garner
much interest from LPs. As weve
surveyed certain industry professionals
case for how long it will take to play

out remaining innings. At this stage,
weve seen vehicles the past couple
of years come to market to raise
restructuring and distressed debt
funds, as well as a record-setting
environment around energy-specific
fundraising. While generalist buyout
funds still account for the majority
of funds raised, 2015 set a record in
terms of capital earmarked for energy
investments.
$190
While producing results slightly

weaker than those of 2014, U.S.
PE fundraising efforts in 2015 were
still relatively healthy and robust. More
than $181 billion was raised during the
year across 278 vehicles, representing
a YoY decline of around 11% in terms
of capital raised and a 14% YoY drop
in the amount of funds closed. While
the declines in capital raised and
funds could potentially hint to some
that LP appetites might be declining,
the reality is that less capital is simply
needed with the amount of dry powder
accumulated over the past five years.
In the half decade preceding 2015, an
aggregate amount of $760 billion was
raised across 1,252 funds.
50
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: PitchBook
4Q results led to the year ending on a high note

U.S. PE fundraising by quarter
$90
120
Capital raised ($B)
$80
99
# of funds closed
$70
86
$60
$50
$40
85
68
55
72
49
$30
68 72
60 62
59 60
100
86
71 70
80
75
62
51
40
42
$20
$34
$24
$19
$33
$36
$26
$36
$37
$80
$32
$80
$47
$54
$39
$64
$45
$36
$43
$56
$0
20
$33
$10
60
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
2011
2012
2013
2014
2015
Source: PitchBook
17
Fund sizes hint at more targeted strategies and plentiful dry powder
Median U.S. fund size ($M)
$400
$300
$200
$177
$150
$100
U.S. buyout funds
$0
2006
2007
2008
2009
2010
All U.S. PE funds
2011
2012
2013
2014
2015
Source: PitchBook
LP interest in PE vehicles remains quite high

Time to close U.S. PE funds (months)
20
17
14.7
14
13.9
11
U.S. buyout funds
All U.S. PE funds
8
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: PitchBook
Fundraisers are picking their targets more carefully

U.S. PE funds (#) hitting their target
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2006
2007
2008
2009 2010 2011 2012

Hit Target
Missed Target
2013
2014
2015
$35 billion was raised in 2015 for

energy vehicles, a 55% jump over 2014
numbers and by far the largest amount
weve ever witnessed. Weve seen
the highly debt-dependent energy
space falter due to reasons touched
on earlier, and with companies in need
of serious funding, PE has positioned
itself to be able to acquire assets as
businesses enter distressed states. In
addition, with around $11 billion raised
for distressed debt funds, we view this
as PE firms preparing for a range of
Chapter 11s typically seen at the end of
a cycle in order to step in and purchase
some of the subordinated debt of
businesses they think will successfully
re-emerge and provide an attractive
return. The $11 billion raised for
distressed debt is far less than what we
saw in 2013 and 2014, potentially due
to GPs simply coming to market early
with these funds, wary of a fundraising
window closing prematurely in an
escalated environment.
With overhang remaining high and
plenty of vehicles gearing toward the
middle market, the median buyout
fund size declined 23% YoY to $150
million in 2015. However, looking at all
other strategies combined, the median
fund size closed slightly higher at $177
million relative to 2014, supplementing
shifting fundraising efforts in more
targeted strategies. Speaking to how
much investor interest in the asset
class persists, buyout vehicles closing
last year were able to hold final closes
in less than 14 months, the shortest
span weve tracked since 2006.
Overall, 2015 funds were able to close
in less than 15 months, the shortest
length since 2008. Furthermore, we
saw 88% of fundraisers hit their target,
the highest level in at least a decade.
The year ended on a high note: We
saw the most oversubscription in 4Q,
with over $56 billion raised during that
period across just 62 vehicles.
Source: PitchBook
18
League tables
4Q 2015
Most active investors by deal count
Most active lenders by deal count
Most active law firms by deal count
ABRY Partners
19
Madison Capital Funding
23
Kirkland & Ellis
54
Apollo Global Management
12
Antares Holdings
21
Latham & Watkins
25
Audax Group
12
Fifth Street
Paul Hastings
25
HarbourVest Partners
12
BMO Harris Bank
DLA Piper
23
Kelso & Co.
10
NXT Capital LLC
Jones Day
17
Berkshire Partners
The Goldman Sachs Group
Ropes & Gray
16
Genstar Capital
NewStar Financial
Morgan, Lewis & Bockius
15
Warburg Pincus
Golub Capital
Goodwin Procter
14
The Blackstone Group
Credit Suisse
Sidley Austin
12
AEA Investors
Sumitomo Mitsui Banking
Skadden, Arps, Slate,

Meagher & Flom
11
Cornerstone Holdings
Twin Brook Capital Partners
11
Housatonic Partners
Monroe Capital
Honigman Miller Schwartz

and Cohn
Summit Partners
SunTrust Robinson Humphrey
The Carlyle Group
Bank of Ireland
Vista Equity Partners
Bank of America
Apax Partners
Ally Corporate Finance
Hellman & Friedman
Alcentra Capital
KRG Capital Partners
Babson Capital Management
Onex
Cadence Bank
Ontario Teachers' Pension

Plan
Deutsche Bank
FirstMerit
Ironwood Capital
Maranon Capital
BNP Paribas
MidCap Financial
RBC Capital Markets
TD Bank Group
Triangle Capital Corporation
Thoma Bravo
AlpInvest Partners
Bain Capital
Graycliff Partners
Partners Group
The Riverside Company
Triangle Capital Corporation
Most active advisors by deal count

Houlihan Lokey
17
Lincoln International
16
Raymond James Financial
15
William Blair & Company
14
Harris Williams & Co.
10
Evercore Group
Robert W. Baird & Co.
Jefferies & Co
The Goldman Sachs Group
Deutsche Bank
Greene Holcomb & Fisher
Morgan Stanley
Piper Jaffray
19
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RESEARCH
reports@pitchbook.com
EDITORIAL
editorial@pitchbook.com
SALES
sales@pitchbook.com
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2015 DEAL COUNT

Credits & Contact

J ENNIFER SAM Senior Graphic Designer

Deal Multiples & Debt Levels

Deals by Deal Size & Sector

Q&A: Merrill DataSite

Q&A: Murray Devine

4Q 2015 League Tables

COPYRIGHT 2015 by PitchBook Data,

The buyout cycle

The PitchBook Platform

class. General partners continue to move forward, but dealmaking dynamics

With data on:

for focused strategies such as energy-specific vehicles looking to eventually

diligence processes became very important in the middle market in order to

facilitate sales processes further.

and suggestions at reports@pitchbook.com.

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Last year was a turning point

2015 U.S. PE activity moved lower

latest investment cycle is beginning to

turn has increased competition for the

2014 may well remain a peak for some time

The fact that 2015 counts declined

Deal value ($B)

The end of 2015 marks a clear inflection point in investment trends

Deal value ($B)

On a quarterly basis, we saw a hesitant

While all transaction types were

access to the aforementioned cash

Add-ons and PIPEs illustrate how GPs are diversifying

Add-ons hit a record percentage of total buyout

Multiples return to 2012 levels

The deal environment remains

without much difficulty at all. Another

sectors to provide better flexibility

Debt usage remains on the lower end

2006 2007 2008

2009 2010 2011

2013 2014 2015

2015 sees spate of mega-deals, on

$2.5B+ transactions resurged in total

Some things dont change: B2B and B2C remained

Mega-deals came back in a big way in 2015, resurging

B2C in particular was skewed by a handful of huge

IT saw another banner year, with the

What is your general take on private

With regard to trends in due diligence

As we keep hearing about increased

When volatility hit the market in

4Q saw the lowest numbers in years

Deal value ($B)

A summary of what weve seen

niche and distressed opportunities that

players are down some 70% as of this

The uncertainty in the market is no

Players in the space are readying for action

incentives for higher prices as stronger

As the bankruptcies continue, PE will

Only a handful of firms are already specifically targeting distressed assets

Capital raised ($B)

To what extent will high valuations