2010 global private

equity watch
New horizons emerge
April 2010
New horizons emerge
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 difcult, 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 renance 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.
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-Pacic
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.
Fund-raising will continue to be a challenge for the next 12 to 18 high-prole secondary sales have been completed. Firms are taking
months. With Preqin reporting that PE rms had US$500 billion advantage of improving markets to make acquisitions, enhance
in uncommitted capital waiting to be deployed at the end of 2009, portfolio company performance, and exit investments in order to
one of the biggest challenges may be nding quality targets. That return funds to limited partners in advance of 2011 fund-raising
said, rms closed US$234.9 billion worth of funds, 60% less than in rounds. All the while they keep a watchful eye on tightening debt
2008.4 As limited partners continue to demand better returns and covenants.
more transparency, competition among general partners will heat
During the rst three months of 2010, global PE rms have
up, even as investors — who sat on the sidelines last year — prepare
announced 358 transactions valued at US$27.0 billion, compared
to commit more capital, according to a recent Preqin study. Mid-sized
with 415 transactions priced at US$17.0 billion for the same period
buyout, distressed debt, secondary, and emerging market funds
in 2009. While the average deal size, where the value was disclosed,
focused on China, India and Brazil may garner increased interest.
for those three months rose to US$157 million from US$70 million
While 2010 should be a better year than 2009 on all fronts, last year, it remains far below the pre-recession high of US$706
regulatory reform is a major uncertainty that could slow the million in the second quarter of 2007. 2010 is looking to be an
industry’s recovery. The European Union’s (EU) proposed directive on intriguing year with global PE activity on the rise.
alternative investment fund managers (AIFM) will dramatically affect
both European and foreign rms operating in the EU. Increased
capital requirements in many markets could adversely affect lending, Kind regards,
as could the “Volcker Rule” in the US, which would force banks to sell
their PE operations and the income streams they provide. Evolving
tax rules in many jurisdictions could affect returns, as decit-ridden
governments seek to increase their tax revenue.
John Harley
In last year’s report, we highlighted the evolution of PE rms from Global Private Equity Leader
their early years as buyers of family businesses to today’s business Ernst & Young
entrepreneurs, renowned for transforming companies and injecting
change capital. As the industry recovers, some PE rms will continue
to diversify into other asset management functions and other
advisory roles, such as capital markets.

In early 2010, valuations are improving, IPOs are encountering

some resistance, leverage is returning in some markets, and some

4. Unless otherwise noted, Preqin is the source of all fund-raising data cited in this report.
About the data
Our report focuses on worldwide acquisition, divestiture and fund-
raising activities of PE rms. Ernst & Young relied on several data
sources in producing this report.
Acquisitions and divestitures: Dealogic is the primary information
source for data on acquisitions, divestitures and IPOs. Deal activity
for various world regions and countries is based on the location
of the target, not that of the buyer or seller. Acquisitions and
divestitures are based on announced deals. Deal value and average
deal size are based on disclosed deals — transactions where a value
was disclosed — while total transactions include all announced deals
including those where the amount paid was not reported. Unless
otherwise indicated, deal value is reported in US dollars. Acquisition
data include minority investments but exclude repurchases, venture
and portfolio company add-ons, which are technically corporate
deals and are discussed separately.

IPOs capture primary offerings only.

Dealogic categorizes regional data as follows:
• Americas includes all nations in North, Central and South
America and the Caribbean

• EMEA comprises all nations in continental Europe, including

Russia and the UK, as well as Africa and the Middle East

• Asia-Pacific includes all Asian nations as well as Australia and

New Zealand

Fund-raising trends: Data on fund-raising comes from Private

Equity Intelligence (Preqin). Except where otherwise noted, these
data reect the total capital raised by funds that were closed in a
given year, and thus include monies actually raised in prior years
in which preliminary closings were held. This report covers all
investment styles except venture funds, including:

• Buyouts • Secondary funds

• Real estate • Balanced
• Infrastructure • Others, such as late stage, mezzanine,
natural resources, special situations and
• Distressed
turnaround funds
• Fund-of-funds

• Expansion/growth equity

Internal rate of return (IRR) data: This information comes from

Preqin and the State Street Private Equity Index, a survey of more
than 1,400 leveraged buyout (LBO), venture and other global PE
funds.

Credit and lending trends: Ernst & Young relied on several sources:
Standard & Poor’s for lending (leverage) multiples; 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.
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 & Young’s Global Private Equity practice ............................................. 33

Key contacts........................................................................................................... 34
2009: private
equity turns a
corner after a Global M&A deal volume: 2000–2009

# of corporate deals 3,195

tough year
2,510
# of PE deals
3,056 1,612

1,723 2,536 39,254 39,023

PE bounced back in the third quarter of 1,464 2,212
1,511 33,575 34,837
2009 after a tough year that saw the value 1,735
29,518 28,750
of global PE deals fall to its lowest level 25,626
24,053
since the doldrums of 2001. According to 23,805
21,436
Dealogic, 1,612 PE deals with a disclosed
value of $95.5 billion were announced in
2009. This represents a 36% decline in
volume and a 56% decline in value from
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
2008 levels, and a fraction of the highs
Source: Dealogic
reached in 2007 when there were 3,195 >
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global PE deals valued at $716 billion.  > > > >
>  >
>> >?

However, PE deal activity bottomed out in

the second quarter and began moving up Quarterly global PE deal volume: 2007–2009
in the second half of the year as the value 1000 # disclosed
of announced transactions rose in both # non-disclosed

emerging and developed world markets, 800

including Brazil, Canada, the US, Germany,
the UK, Australia, China and Japan. These 400 387 370 346
600
results are encouraging, as credit conditions, 392
295
while improving in some areas, continued 293
400 212
to be tight in others, forcing rms to inject 456 173 167 148
437 168
more of their own capital to complete deals. 431
387 366
According to Standard & Poor’s, PE’s equity 200 331 328 274
242 240 253 221
contribution to US deals rose to 46% last
year, the highest level in this decade, up 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
from 39% in 2008 and 33% in 2007. Bank 2007 2008 2009
loans as a percentage of total consideration Source: Dealogic
>
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>
fell to 33% in 2009, down from 39% in 2008  >  >

>>> >
>>  >>
and 53% in 2007, while leverage multiples —
the ratio of total debt to EBITDA — in the US
fell to 4.0, their lowest level since 2004 and Quarterly disclosed global PE activity: 2007–2009
considerably below lending multiples of 4.9 800
in 2008 and 6.2 in 2007. $706
700 #    
Given these factors, it should come as !   " '$*+<
600
no surprise that the average size of PE
deals where the value was disclosed fell in 500
2009 to $100 million from $158 million in $485

2008 and $435 million in 2007. In part, 400

this reects lower purchase prices. Firms $263 $274
300 $237
paid, on average, 7.6 times cash ow for 437
$154 $176
acquisitions made last year, down from 9.1 200 387
456
$161
366 274 253
times cash ow in 2008 and 9.6 times in 242 240
100 331 221
2007. However, deal size increased in the 431 328 $95
$64 $70 $65
fourth quarter, climbing to $176 million, on
0
average, up from $95 million in the third Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 2008 2009
quarter, and nearly three times the 2008
average of $64 million. Source: Dealogic
 
  
 
  
   
  
  
   

    

     
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1 2010 global private equity watch: new horizons emerge

 PE deal value by world region: 2000–2009
($USb)

2009 \447 \176 \332

2008 \827 \288 \1036

Despite limited liquidity, some large

2007 \4271 \479 \2411
deals closed, with 15 PE LBOs topping
the billion-dollar mark, including TPG’s
2006 \4286 \446 \2457
acquisition of IMS Health, the purchase
of Springer Science+Business Media by
2005 \1565 \199 \1560
Singapore’s sovereign wealth fund (SWF),
GIC Special Investments, and EQT Partners,
2004 \1479 \151 \1369
CVC Capital Partners’ acquisition of
Anheuser Busch InBev’s Central European
2003 \717 \120 \930
operations, Blackstone’s purchase of Busch
Entertainment, and Silver Lake and Canada
2002 \622 \45 \713
Pension Plan Investment Board’s acquisition
of Skype Technologies.
2001 \316 \47 \523
Looking at deal value by world region, nearly
half of all PE acquisitions last year involved 2000 \621 \48 \564
targets based in the Americas, up from 38%
in 2008; acquisitions involving Asia-Pacic- 0% 25% 50% 75% 100%
based targets rose from 13% to 18%; while !
  ! ?  [!
those involving European, Middle Eastern or Source: Dealogic
African (EMEA) targets comprised 35% of >
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global deal value, down from 48% in 2008.  >  >

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Transactions involving targets in the US,
Japan and China gained share, while those
PE deal volume by region: 2000–2009
involving targets located in the rest of the
world lost share. 705 278 629
2009

Most PE deal activity involves buyers

and sellers within the same region. 2008 967 518 1X025

However, 2009 witnessed an increase in

the percentage of Americas and EMEA 2007 1X289 614 1X292

transactions involving a foreign PE buyer.

2006 1X319 571 1X166
Although PE exits, like acquisitions, slowed
last year, the one bright spot was the IPO, 2005 1X094 316 1X126
which emerged as a viable exit alternative.
PE rms brought 53 new companies to 2004 1X005 251 956
market in 2009, raising proceeds of $16
billion, slightly up from 52 transactions with 2003 743 174 818
proceeds of $11 billion in 2008. Strong
fourth quarter activity on American and 2002 595 109 807
Asia-Pacic exchanges helped revive the
market. By contrast, the number of new 2001 503 119 842
issues on European and Middle Eastern
exchanges trailed by a considerable margin. 2000 703 137 883

Three IPOs broke the billion-dollar

0% 25% 50% 75% 100%
barrier last year: Myer Holdings listed
on the Australian Stock Exchange, Hyatt !
  ! ?  [!

Hotels listed on the NYSE and Talecris Source: Dealogic

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2010 global private equity watch: new horizons emerge 2

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.

Global PE fund-raising trends: 2005–2009

($USm)
$2,000 $700,000
$588,451 $590,314
$600,000

$480,573
# of funds $500,000
Avg. fund size ($USm)
Fund size ($USm) $400,000
$1,000 $306,290

$234,860 $300,000

803 859 $200,000

767
640 $685 $770 $658
$598
$479 $100,000
357

0 $0
2005 2006 2007 2008 2009
Source: Preqin
Fund-raising data excludes venture funds.

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 condence. That said,
the recently announced €880 million
IPO of Providence Equity Partners’ Kabel
Deutschland, Germany’s biggest cable
company, could signal more IPO activity.
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 In terms of investment style, buyout funds
declined less dramatically to $658 million continue to account for half of all funds
from $770 million. Preqin reports that it raised. Growth capital, fund of funds and
took 18 months, on average, to close a fund secondary funds gained share last year,
in 2009, compared with 12 months in 2007. while infrastructure and distressed debt
funds accounted for a smaller share of total
Funds in the $500 million to $999 million
funds closed.
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%.

3 2010 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.
purchase of Japan’s Bellsystem24; and This reects the global nature of PE, its
Pacic Equity’s $709 million acquisition of ability to pursue attractive opportunities
Australia-based Energy Developments Ltd. anywhere in the world, and a post-recession
risk management mindset that considers
The dispersion of large transaction targets
emerging markets investments — which
around the world represents a sharp
once carried a very high risk premium — as
contrast from 2007 when North American
a necessary counterbalance to those in
(primarily US) targets represented 21 of
developed markets.
the top 25 PE transactions worldwide.
PE deal volume by transaction size: 2007–2009
1 3
2009 42 93 786
14 17
7
2008 39 61 99 165 993

To put this in perspective, just four

transactions — including three LBOs — 22 17
topped the $3 billion mark last year, while
2007 109 115 137 244 1,002
seven did so in 2008 and 39 in 2007.
The average size of the 25 largest PE
0% 25% 50% 75% 100%
acquisitions was $1.6 billion in 2009, $2.2
billion in 2008 and nearly $13 billion in $5b+ $3]$49b $1]$29b $500]$999

2007. $250]$499 $100]$249 ^$100

In 2009, 13 of the 25 largest acquisitions Source: Dealogic

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involved US targets, including TPG’s
purchase of IMS Health, Blackstone’s $2.7
billion acquisition of Busch Entertainment,
Transaction by deal size: 2007–2009
Apollo’s $2.3 billion purchase of Cedar ($USb)
Fair, and Advent’s $1.8 billion investment
in Fifth Third Processing Solutions. Eight 2009 \|2 \9_ \2{` \`20 \`{` \`{2 \`_{
of the largest transactions involved EMEA
targets, including the $3.4 billion purchase
of Springer Science+Business Media by GIC
2008 \2|2 \_{| \{07 \}}9 \2|9 \2|0
Special Investments and EQT Partners; CVC
Capital Partners’ $3 billion acquisition of
Anheuser-Busch’s InBev; and Silver Lake and \}7_ \28`
Canada Pension Plan Investment Board’s 2007 \28|_ \_`{ \`72| \8`` \{9_
$2 billion purchase of Skype Technologies.
There were four large deals involving Asian
0% 25% 50% 75% 100%
and Australian targets: KKR’s $1.8 billion
$5b+ $}]${9b $`]$29b $500]$999
acquisition of South Korea’s Oriental Brewery;
$250]${99 $`00]$2{9 ^$`00
GS Capital and MBK Partners’ $1.4 billion
purchase of USJ Co., a Japanese leisure Source: Dealogic
>
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service provider; Bain Capital’s $1.1 billion

2010 global private equity watch: new horizons emerge 4

PE rms made 705 acquisitions in the 
   


Americas, 629 in EMEA and 278 in Asia \} !"#'
and the Pacic. While the number and value
of acquisitions was down in all regions last 2009 \{`€ \€ \|` \€} \`|‚ \`}~

year, Asia has increased its share of PE deal

activity since 2007, while North America’s \_}
share of deal activity has decreased. \€~ \}_ \`} \} \|{ \|}{
2008
Acquisitions involving targets in ve
countries — the US, the UK, Japan, Germany \{~ \}€ \`}|
and China — have consistently accounted
2007 \}~‚€ \‚€{ \| \`€
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 US UK China ƒ

  Japan

trend is up. …
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>>


Half of last year’s deal volume was in four Source: Dealogic

>
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industries: computers and electronics,  >  >

>>>> >
>>  >>> > > > >
professional services, health care and
nancial services, while industries with the
largest transactions included computers
2009 PE acquisitions by industry ranked by volume
and electronics, nancial services, leisure (% of volume/deal volume)
and recreation, food and beverages, and
professional services. Financial services,
professional services, health care and
electronics were leading targets for PE Computers and electronics

investments in 2008 as well. 21.0% (342) Professional services

26.6% (434)
Health care
Minority investments in portfolio companies
Financial services*
accounted for 50% of global PE purchases
Retail
in 2009, up from 45% in 2008 and 33%
12.7% (208) Construction and building
in 2007. They are most common in Asia, 3.1%
(51) Telecommunications
where it is more difcult for foreigners 3.2%
(52) Food and beverage
to purchase controlling stakes in local 3.4% Consumer products
companies. Minority investments are less (55)
11.2% (182)
3.6% Transportation
common in Europe, where they account (58)
4.7% Other**
for 39% of acquisitions, and rose sharply in (77) 4.9% 5.7%
(80) (93)
the Americas last year to constitute 55% of
all acquisitions, up from 24% in 2007. The
Source: Dealogic
average size of a minority investment was *Financial Services includes Insurance.
$35 million last year, down from $70 million **Other include utilities and energy, automotive, machinery, publishing, oil and gas,
leisure, real estate, metals and mining, agribusiness, aerospace, chemicals and others.
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.
while dropping signicantly in Asia and the
In 2009, club deals accounted for 10% of US. These deals allow rms to complete
global deal value, or $9.5 billion, and 5% larger transactions; as such, they are more
of deal volume. Club deals’ contribution common in booming M&A markets.
to total deal value rose sharply in Europe,

5 2010 global private equity watch: new horizons emerge

2009 top 25 announced global PE acquisitions
Target PE buyer Deal value ($USm) Target location Target industry
IMS Health Inc. TPG Capital LP (Texas Pacic) 5,203 United States Computers and electronics
Springer Science+Business Media GIC Special Investments Pte, 3,387 Germany Publishing
EQT Partners AB
Anheuser-Busch InBev SA/NV (Central European CVC Capital Partners Ltd. 3,031 Bosnia and Food and beverages
operations – Bulgaria, Romania, Hungary, Herzegovina
Croatia, Czech Republic, Serbia and Montenegro)
Busch Entertainment Corp. Blackstone Group LP 2,700 United States Leisure and recreation
Cedar Fair LP Apollo Advisors LP 2,314 United States Leisure and recreation
Skype Technologies SA (70%) Silver Lake Partners LP, Canada 2,025 Luxembourg Computers and electronics
Pension Plan Investment Board
Fifth Third Processing Solutions (51%) Advent International Corp. 1,811 United States Financial services
Oriental Brewery Co. Ltd. Kohlberg Kravis Roberts & Co. - KKR 1,810 South Korea Food and beverages
Enel Rete Gas SpA (80%) AXA Private Equity 1,715 Italy Utilities and energy
TASC Inc. KKR, General Atlantic LLC 1,650 United States Computers and electronics
Marken Ltd. Apax Partners LP 1,602 United Kingdom Transportation
IndyMac Bank FSB JC Flowers & Co. LLC, 1,550 United States Financial services
Stone Point Capital LLC
USJ Co. Ltd. Goldman Sachs Capital Partners, 1,376 Japan Leisure and recreation
MBK Partners LLC
Constantia Packaging AG (65.8%) One Equity Partners LLC 1,206 Austria Forestry and paper
Bellsystem24 Inc. Bain Capital Partners LLC 1,116 Japan Professional services
BankUnited FSB (Majority) Carlyle Group Inc, Blackstone 900 United States Financial services
Group LP, WL Ross & Co. LLC,
Centerbridge Partners LP
Wood Mackenzie & Co. Ltd. Charterhouse Development Capital 899 United Kingdom Professional services
Ltd.
Energy Developments Ltd. (79.6%) Pacic Equity Partners Pty Ltd. 709 Australia Utilities and energy
GenTek Inc. American Securities Capital 673 United States Telecommunications
Partners LLC
Psagot Ofek Investment House Ltd. (76%) Apax Partners LP 626 Israel Financial services
Bankrate Inc. Apax Partners LP 612 United States Professional services
ATI Enterprises Inc. BC Partners Ltd 581 United States Professional services
Corus Bankshares Inc (Real estate assets ) TPG Capital 554 United States Financial services
Airvana Inc. Blackstone Group LP, SAC Private 536 United States Computers and electronics
Capital Group LLC
Valerus Compression Services TPG Capital LP 500 United States Machinery
Total: top 25 39,087
Total private equity 95,520
% top 25 41%

Source: Dealogic

2010 global private equity watch: new horizons emerge 6

 Portfolio company bolt-ons
Globally, PE portfolio companies made 517
bolt-on or add-on acquisitions in 2009,
with a disclosed value of $25.5 billion.
This represents a moderate decline in
value, but a sharp decline in number from
2008 when there were 994 bolt-ons with a
disclosed value of $28.9 billion.
Some well-known names were among
the largest bolt-ons of 2009, including
the $3.1 billion acquisition of Procter &
7 2010 global private equity watch: new horizons emerge
Gamble’s prescription drug business by
Warner Chilcott, a company jointly owned
by Thomas H. Lee, DLJ Merchant Banking,
Bain Capital and CCMP Capital; the $1.3
billion purchase of Birds Eye Foods by
Blackstone portfolio company Pinnacle
Foods; and the acquisition of Barnes & Noble
College Bookstores by Barnes & Noble, a
minority investment of Ron Burkle’s Yucaipa
Companies.
2009 top 15 announced global portfolio company bolt-on acquisitions
Target Acquiror Deal value ($USm) Target industry Acquiror's industry Financial sponsor
Kyivstar GSM ZAT Vimpel-Communications 5,417 Telecommunications Telecommunications Alfa Capital Partners
OAO - VimpelCom
Procter & Gamble Co. Warner Chilcott plc 3,100 Health care Health care Thomas H Lee Partners, DLJ
(Prescription-drug Merchant Banking Partners, Bain
business) Capital Partners LLC, CCMP
Capital LLC
IPC Holdings Ltd. Validus Holdings Ltd. 1,888 Insurance Insurance New Mountain Capital LLC, Goldman
(Bid No. 1) Sachs Capital Partners, Vestar Capital
Partners Inc.
Magellan Midstream Magellan Midstream 1,490 Oil and gas Oil and gas Madison Dearborn Partners LLC
Holdings LP Partners LP
Birds Eye Foods Inc. Pinnacle Foods Group 1,300 Food and beverage Food and beverage Blackstone Group LP, Vestar Capital
LLC Partners Inc.
Wireless TT Infoservices Quippo Telecom 1,296 Construction and Construction and GIC Special Investments Pte Ltd., IDFC
Ltd. (49%) Infrastructure Ltd. building products building products Private Equity Co. Ltd.
Invitel Holdings A/S Mid Europa Partners LLP 745 Telecommunications Financial services Blackstone Group LP,
(64.6%) Providence Equity Partners Inc.,
Permira Ltd., Kohlberg Kravis Roberts
& Co. - KKR, Apax Partners LP, Mid
Europa Partners LLP
China Online Housing E-House (China) Holdings 714 Computers and Professional services China Renaissance Capital
Technology Corp. (66%) Ltd. electronics Investment Inc.
Aplus Co. Ltd. (Class H Shinsei Bank Ltd. 651 Financial services Financial services JC Flowers & Co. LLC
Preferred Shares)
Swedish Orphan Biovitrum AB 579 Health care Health care HBM BioVentures AG, Investor Growth
International AB Capital AB, Priveq Investment
Barnes & Noble College Barnes & Noble Inc. 514 Retail Retail Yucaipa Companies LLC
Bookstores Inc.
BPP Holdings plc Apollo Group Inc. 483 Publishing Professional services Carlyle Group Inc., Apollo Advisors LP
i2 Technologies Inc. JDA Software Group Inc. 446 Computers and Computers and Thoma Cressey Bravo
electronics electronics
North Baja Pipeline LLC TC PipeLines LP 395 Oil and gas Utility and energy Kayne Anderson Capital Advisors
Zict Inc. (48.3%) Atom Corp, Colowide 346 Dining and lodging Dining and lodging Olympus Capital Holdings Asia
Co. Ltd.

Source: Dealogic

2010 global private equity watch: new horizons emerge 8

Sovereign wealth funds
According to a recent Preqin study, SWFs had $3.5 trillion in assets
at the start of 2010, up from $3.2 trillion in 2009 and $2 trillion
in 2007. SWFs, government-owned investment authorities, are
primarily passive investors in public equity. However, 55% direct
some of their investments to PE, with 12% making direct investments
in portfolio companies and 43% investing in PE funds, in most
cases as limited partners (LPs) and in some instances as direct
investors in the sponsor rm. SWFs with more than $10 billion under
management are more likely to invest in PE than smaller funds.
Investments in PE constituted 12% of total SWF transactions last
year, compared with nearly 20% in 2008. However, the China
Investment Corporation (CIC) invested $500 million in Blackstone’s
hedge fund unit and €685 million in Apax Europe VII. This year, CIC
announced a $956 million direct investment in Apax and a decision
to invest $1.5 billion in the secondary market. In 2008, CIC joined
forces with US PE rm JC Flowers to launch a $4 billion PE fund to
purchase US nancial assets, with CIC investing $3.2 billion.
SWFs announced 85 transactions in 2009, about the same number
as in 2008. However, the value of those deals increased 45% to
$63.4 billion. As in prior years, funds based in the Middle East,
Global SWF investments: 2007–2009
(#)
100
80
60 $44,058
52
40
20
$9,210
14
0 $0
2005 2006
# investing with PE # SWF direct investing
Source: Dealogic
This chart captures transactions where the buyer is a SWF acquiring global targets.
9 2010 global private equity watch: new horizons emerge
Singapore and China were the most active. Among the largest
investments were a 4.3% stake in Citicorp by the Kuwait Investment
Authority valued at $3 billion; 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
$5.6 billion acquisition of Eircom, an Australian telecommunications
holding company, by STT, a subsidiary of Singapore’s Temasek.
Although signs are positive, it is too soon to speculate on how SWFs
will invest in 2010. While total investments may be down, investment
styles among SWFs are likely to diverge. Those suffering major
losses late last year, including investors in Dubai World, will invest
less and stay closer to home. However, others may increase their
allocations, or make their rst investments. The Korean Investment
Corp. announced that it will double its exposure to PE, focusing
on distressed and secondary funds, while the Emirates Investment
Authority plans to make its rst PE investment later this year.
($USm)
$80,000
$62,672
$60,000
67
75 $40,000
$35,840
$20,000
$7,930
10
16
$728
2007 2008 2009
$ investing with PE $ SWF direct investing
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.

2010 global private equity watch: new horizons emerge 10

Sell-side action
bounces back
as IPOs gain
ground
In 2009, global PE rms exited 461 Global PE exits: 2000–2009
investments valued at $80.9 billion. This ($USm)

reects a signicant decline in activity from 2009 $51,634 $13,058 $16,239

2008, when rms exited 668 entities valued
2008 $108,574 $31,323 $10,758
at $150.7 billion. Sales to corporations
(strategic sales) or other PE rms 2007 $127,325 $174,636 $51,077
(secondary sales) remain the preferred exit
2006 $75,320 $104,960 $49,969
routes, because they enable rms to quickly
return cash to investors. 2005 $130,224 $84,069 $38,647

However, IPOs gained momentum last year, 2004 $69,590 $65,897 $32,675
as a recovering stock market once again
made them viable exit alternatives. In terms 2003 $27,717 $34,055 $10,276

of proceeds, PE rms raised 64% from sales 2002 $17,116 $16,790 $11,237
to strategic buyers, 16% from sales to PE,
and 20% from IPOs. While PE rms took 2001 $39,548 $4,989 $8,305
roughly the same number of companies
2000 $57,544 $11,857 $13,695
public in 2009 as in 2008, proceeds from
those transactions rose sharply from $10.8 0% 25% 50% 75% 100%
billion to $16.2 billion. By contrast, both Source: Dealogic Strategic sales Secondary sales IPOs
strategic sales and secondary sales fell to
$51.6 billion and $13.1 billion, respectively,
less than half their 2008 levels.
Global PE exits: 2000–2009
The value of PE exits usually outstrips that (deal volume)
of acquisitions, which is not surprising, given 2009 332 76 53
the industry’s model of buying undervalued
entities, turning them around and selling 2008 400 216 52

them at an attractive prot. In 2009, the 554 447 218

2007
average exit totaled $321 million, while the
average acquisition was only $100 million. 2006 484 388 197

The last time a gap that large existed was

2005 522 367 179
in the doldrums of 2001, when the average
acquisition was $98 million and the average 2004 297 261 150
divestiture $303 million. By contrast, as
2003 235 154 48
the market peaked in 2006, the average
acquisition was slightly larger than the 2002 168 85 61
average divestiture ($424 million versus
2001 196 45 43
$396 million), as high leverage multiples
and “covenant lite” loans made it easy for PE 2000 163 58 73
rms to raise their bids.
0% 25% 50% 75% 100%
While most exits involved portfolio Source: Dealogic Strategic sales Secondary sales IPOs
companies in America and Europe, PE rms
have also sold or taken public an increasing
number of Asian investments in recent
years. Asian exits rose to $16.7 billion in
2009 from $12.9 billion in 2008, while
exits of portfolio companies in the US and

11 2010 global private equity watch: new horizons emerge

2009 top 25 largest announced global PE divestitures, excluding IPOs
Target PE seller Deal value ($USm) Target location Target industry
Metavante Technologies Inc.* Warburg Pincus LLC 5,484 United States Computers and
electronics
Orangina Schweppes Blackstone Group LP, Lion Capital LLP 3,815 France Food and beverage
Stiefel Laboratories Inc. Blackstone Group LP 3,600 United States Health care
Springer Science+Business Media Candover Investments plc, Cinven Ltd. 3,387 Germany Publishing
Starent Networks Corp. Matrix Partners 2,900 United States Computers and
electronics
Shenzhen Development Bank Ltd. (16.8%) TPG Capital LP (Texas Pacic) 2,282 China Financial services
Paris Re Holdings Ltd. AAC Capital Partners, Hellman & Friedman LLC, 1,957 Switzerland Insurance
Vestar Capital Partners Inc., Crestview Partners
LLC, Stone Point Capital LLC
Venture Production plc (71%) ArcLight Capital Partners LLC 1,871 United Kingdom Oil and gas
BEZEQ Israel Telecommunications Corp. Saban Capital Group Inc., Apax Partners LP 1,766 Israel Telecommunications
Ltd. (30.7%)
KBRO Co. Ltd. (77%) Carlyle Group Inc. 1,743 Taiwan Telecommunications
MONIER Group GmbH (Majority)** PAI Partners 1,398 Germany Construction and building
products
Pearl Group Ltd.** TDR Capital LLP 1,322 United Kingdom Insurance
Nikko Asset Management Co. Ltd. GIC Special Investments Pte Ltd., Warburg 1,187 Japan Financial services
(98.6%) Pincus LLC, Nikko Private Equity
Bellsystem24 Inc. Nikko Private Equity 1,116 Japan Professional Services
Crest Nicholson plc (90%)** West Coast Capital Ltd., Bank of Scotland 931 United Kingdom Real estate
Private Equity
Ovation Pharmaceuticals Inc. GTCR Golder Rauner LLC 900 United States Health care
Wood Mackenzie & Co. Ltd. Candover Investments plc 899 United Kingdom Professional services
Meihua Biotechnology Group Co. Ltd.*** CDH China Holdings Management Co. Ltd. 848 China Chemicals
Ferretti SpA (53%)** Candover Investments plc, Permira Ltd. 822 Italy Transportation
CoreValve Inc. HealthCap, Apax Partners LP 775 United States Health care
Simmons Co.** Thomas H Lee Partners 758 United States Consumer products
Russian Alcohol Group ZAO (37.8%) Lion Capital LLP, UFG Private Equity 666 Russian Federation Food and beverage
Sturm Foods Inc. HM Capital Partners LLC 660 United States Food and beverage
United Malt Holdings Castle Harlan Inc. 655 United States Food and beverage
British Car Auctions Ltd. Montagu Private Equity Ltd. 638 United Kingdom Retail
Total: top 25 42,378
Total divestitures (excluding IPOs) 64,137
% top 25 66%

Source: Dealogic. Divestitures as captured and categorized by Dealogic.

* Involved the disposal of shares Warburg Pincus acquired for $4 billion in a 2007 PIPE transaction when Marshall & Isley spun off the business. Warburg's 25% stake was converted
to an 11% stake in the new company.
** Exit through restructuring.
*** Equity rolled over to a new company.

2010 global private equity watch: new horizons emerge 12

 Global PE exit trends by quarter: 2007–2009
($USb)

PE rms went on an 140

Strategic sales

unprecedented shopping 120 $23.0 Secondary sales

IPOs
spree between 2005 100

and 2007, making 80

$8.2
$76.8 $10.3 $9.7

8,787 acquisitions with 60

$40.0 $29.7
$28.2
$6.4
$9.3
$2.1

a disclosed value of 40 $12.3

$1.4 $4.2
$0.6
$1.8
$1.8 trillion. Although 20 $28.6 $27.4
$35.1 $36.2
$30.4
$50.2
$8.2 $0.9
$1.5
$0.0
$1.9
$11.5

$9.0
$19.2 $0.4 $17.6 $17.9

investments made at the 0

$8.9 $4.6
$11.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
height of the market 2007 2008 2009
Source: Dealogic
are unlikely to yield as
much as those made
in weak markets, PE Average PE deal size: acquisitions vs. divestitures: 2000–2009
rms are eager to Based on disclosed deals
($USm)

exit some of these 600

Acquisitions $535

investments and 500

$442
Divestitures $481
$435
return capital 400 $367
$405 $396

$424
to LPs. $303
$321

300
$235
$209
200 $227
$244 $158

$170 $100
$146
100
$108 $98

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Dealogic
This chart excludes IPOs.

Average PE deal size: strategic sales, secondary sales and IPOs: 2000–2009
($USm)
1000
Strategic sales
Secondary sales $801
800 IPOs

$567
600 $530
$496
$422
$388
$395 $368 $364 $384
400 $344 $350
$318 $308 $306
$289 $280 $279
$254 $234
$214 $218 $216 $207
$188 $193 $184
200 $156 $168
$178

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Dealogic

13 2010 global private equity watch: new horizons emerge

Americas PE exit trends: 2000–2009
($USb)

2009 $19.8 $4.2 $8.5

2008 $58.2 $5.5 $3.5

Europe fell to $32.6 billion and $31.1 billion,

2007 $52.8 $77.8 $18.0 respectively, less than half their 2008 levels.

Fourteen PE divestitures, excluding IPOs,

2006 $34.2 $33.7 $23.5
exceeded the $1 billion mark, including
Blackstone and Lion Capital’s sale of
2005 $69.6 $37.0 $21.4
Orangina Schweppes for $3.8 billion and
Blackstone’s sale of Stiefel Laboratories for
2004 $31.4 $32.9 $16.4
$3.6 billion. Notable sales to PE secondaries
included Candover and Cinven’s sale of
2003 $18.5 $16.3 $7.0
Springer Science+Business Media to GIC
Special Investments.
2002 $9.8 $5.0 $6.7
Exit methods vary considerably by world
2001 $31.8 $2.4 $6.2 region. Strategic sales are more common
in America and Europe, secondary sales in
2000 $43.4 $2.9 $10.2 Europe, and IPOs in Asia and the US.

0% 25% 50% 75% 100% The top exchanges for IPOs last year were
the NYSE, the NASDAQ, Hong Kong and
Strategic sales Secondary sales IPOs
Australia (mainly due to of Myers Holdings’
Source: Dealogic
Strategic and secondary deal values refer to deals where the value is known. $1.9 billion IPO), which, as a group,
accounted for 79% of proceeds. In terms of
IPO volume, the NYSE and the NASDAQ and
+
;<
 <=>   Hong Kong exchanges drew more than half
($USm)
of the activity.
 $8,203 $1,535 $6,947
Health care, retail, professional services
? $6,546 $2,735 $3,654 and computers and electronics companies
headed the list of nancial sponsor-backed
 $13,019 $6,646 $14,105 IPOs, accounting for more than 50% of
IPO volume and proceeds. The ve largest
@ $5,195 $1,056 $6,530 IPOs of 2009 were Myers Holdings ($1.9
$660 billion), Hyatt Hotels ($1.1 billion), Telecris
 $15,111 $2,787 Biotherapeutics ($1.1 billion), Cobalt
$408 International Energy ($958 million) and
D $7,685 $8,074 Dollar General ($824 million).

H $840 $325 $802

$17
 $278 $687
$0
 $175 $903

 $109 $872 $275

0% 25% 50% 75% 100%

Strategic sales Secondary sales IPOs

Source: Dealogic
Strategic and secondary deal values refer to deals where the value is known.

2010 global private equity watch: new horizons emerge 14

 EMEA PE exit trends: 2000–2009
($USm)

2009 $23,040 $7,292 $779

2008 $43,875 $23,129 $3,458

2007 $61,503 $90,154 $18,932

2006 $35,920 $70,253 $19,962

2005 $45,465 $46,434 $14,485

2004 $30,506 $32,628 $8,239

2003 $8,398 $17,382 $2,462

2002 $7,065 $11,763 $3,892

2001 $7,607 $2,596 $1,208

2000 $13,997 $8,047 $3,192

0% 25% 50% 75% 100%

Strategic sales Secondary sales IPOs

Source: Dealogic
Strategic and secondary deal values refer to deals where the value is known.

2009 PE sponsored IPOs ranked by volume

Health care
22.6%
(12 deals/$2.4b) Computer and electronics

37.7% Retail
(20 deals/$6.9b)
Professional services

Other

17.0%
(9 deals/$1.9b)

9.4% 13.2%
(5 deals/$1.0b) (7 deals/$4.1b)

Source: Dealogic

15 2010 global private equity watch: new horizons emerge

Portfolio
companies on
the mend
PE business models and strategies were
tested and adapted in 2009 amid increasing
scrutiny and regulation. PE rms realize that
four factors, historically, drive returns: multiple
expansion arbitrage, leverage, improved core
operational efciencies and revenue growth.
The rst two factors are beyond the control of
individual rms, while the last two characterize
the industry’s most successful rms.
At the top of the last M&A cycle when the
urge to merge was at its peak, many rms
could begin exiting within 24 months, after
completing a few structural repairs. Those
days are over. In an environment of reduced
leverage, improving performance at portfolio
companies of existing and future funds is
critical to delivering superior returns. After
spending much of the last year negotiating
with lenders to amend covenants and extend
maturities, or — in the worst cases —
arranging out-of-court restructurings or
prepackaged bankruptcies, sponsors have
realized that there are no quick ways to x
companies bought at the top of the market
and struggling under a pile of debt.
The 2008 Ernst & Young study on creating
value at portfolio companies showed that cost
reductions, growth initiatives, and working
capital improvements characterized the
most successful European PE exits between
2005 and 2008. Top-performing companies
averaged a CAGR of 29%, with nearly half of
that attributable to cost reduction programs,
30% to organic growth initiatives, 17%
to acquisitions and divestitures, and the
remainder to other actions.
Improvements in operating efciency
had by far the greatest impact on
growth. Simplifying the operating model
through initiatives such as product-based
specialization at production facilities,
product and channel rationalization and
outsourcing were the most effective ways
5. Credit Suisse
6. Moody’s Investors Service
to reduce costs. Firms achieving superior B. Hawkes, the former CEO of Eaton Vance,
results were more likely to follow a “100 and Paul Pressler, a veteran retail, leisure
day” post-acquisition plan, change CEOs as and consumer products executive, to guide
needed during any restructuring process, portfolio companies and investments in
link performance measures and incentives to these sectors. Expect to see more of this as
the overall strategy, and derive savings from PE funds become more sector-focused.
working capital improvements.
The revival of the high-yield bond market
Growing revenue will become increasingly beginning in the second quarter of 2009
important as 2010 progresses. Many enabled some companies, such as Clear
companies acquired at top-of-the-market Channel’s outdoor unit, to use the proceeds
prices were nanced with large amounts from bond sales to renance debt, thereby
of leveraged loans on the assumption avoiding a year-end covenant violation.
that continued economic growth would
Other companies purchased at the height
allow the companies to “grow into” their
of the buyout boom defaulted last year.
balance sheets. Some portfolio companies
According to research by Buyouts and
will likely face restructuring if revenue
peHUB, there were 74 LBO defaults in the
increases slowly in a sluggish economy and
US in 2009, 40 of which were companies
cost containment and other operational
purchased between 2005 and 2007.
efciencies fail to generate sufcient cash to
The purchase price of defaulted portfolio
allow these companies to de-lever.
companies totaled $48.2 billion.
Delivering consistently superior results also
Companies that could not renance — many
requires having the right PE team working
of which were small to mid-sized portfolio
with portfolio company management.
companies — sought creative restructuring
Some funds deploy “operating partners”
solutions, including discounted debt
or an entire team that works with portfolio
buybacks and pre-packaged bankruptcies.
company management to execute strategic
With over $1.5 trillion5 of leveraged loans
initiatives, increase revenue, and implement
set to mature globally between 2010 and
cost, supply chain, procurement and working
2014, including nearly $800 billion in the
capital improvements.
US,6 restructuring and renancing will
Other funds have recruited former be signicant for some time. Companies
executives and management consultants as that can renance at the favorable rates
senior advisers. With their wealth of industry currently available should do so, as
and operating knowledge, these advisers Moody’s Investors Service expects yields
have helped their rms (particularly their on speculative bonds in the US to begin
deal teams) evaluate potential investments increasing in 2011, raising the cost of
and guide portfolio companies. Warburg debt capital.
Pincus hired Fred Hassan, the former CEO
of Schering-Plough Corp., as a senior
health care adviser. Harry Sachinis, the
former president of McGraw-Hill’s business
information group, is plying his media know-
how as an Advent International operating
partner. Clayton Dubilier & Rice hired James
2010 global private equity watch: new horizons emerge 16
A strong high-
yield market
fuels global US leveraged loan issuance: 2006–2009
($USb)
800

restructuring 700
New issues
Total issues

efforts 600

500
While nancing for new acquisitions was
400
difcult to obtain during the rst three $689
quarters of 2009, it picked up in the last 300
$612

quarter. In the US, new leveraged loan issues $472

$412
totaled $80 billion in 2009, with nearly half 200
$294
of that total — or $37 billion — issued in the $239
100 $194
fourth quarter, representing a 76% rise from $80
the fourth quarter of 2008’s $21 billion. 0
2006 2007 2008 2009
Although US leveraged loans were down
Source: Thomson Reuters
from $194 billion in 2008 to $80 billion
in 2009, the positive fourth quarter has
renewed optimism for deal nancing. During
this quarter, new issues included General Global high-yield debt issuance: 2006–2009
($USb)
Atlantic Partners’ purchase of TASC, Inc.,
250
TPG’s majority stake in Valerus Compression
US
and Carlyle’s acquisition of OpenLink
Global
Financial Inc., to name a few. Financing for 200
new acquisitions should continue to increase
gradually in 2010.
150
It became easier to renance ailing portfolio
companies in 2009 as investor appetite $210
100 $200 $196
for better returns than could be garnered
from government issues created a high- $137 $136
$147

yield bond market three times the size of 50

what existed a year earlier. According to
Bloomberg, new high-yield issues worldwide,
including corporation and PE portfolios,
totaled $210 billion, the highest levels in a
decade, enabling portfolio companies in all
parts of the world to replace leveraged loans
with new bonds, in many cases extending
the maturity in the process. PE portfolios
that renanced their debt included HCA,
Clearwire Communications, Clear Channel
and Expro Finance Luxembourg. Investor
appetite for high-yield debt should continue
through 2010, so long as interest rates on
government bonds remain low.
Nonetheless, portfolio companies were
among the 266 speculative-grade issuers
Moody’s identied as having defaulted in
2009. The global default rate closed the
year at 12.5%, with US defaults at 13.2% and
0
2006 2007
Source: Bloomberg
European defaults at 10.2%. The global and
US rates exceeded cyclical highs reached
in 1991 and 2002. Global defaults began
declining in the fourth quarter and are
expected to drop sharply in 2010, ending
the year at 3.3% under Moody’s most
optimistic scenario and at 7.1% under its
most pessimistic one. Europe’s default rate is
expected to fall to 2.7% by year-end, while the
US rate is projected to end the year at 3.6%.
The media industry was the worst-
performing sector in 2009, with 45 issuers
defaulting. The automotive and hotel/
$74
$40
2008 2009
gaming/leisure sectors were the next, with
19 defaults in each. Across regions, 205 (or
77%) of the 2009 defaulters were based in
North America, while only 30 (11%) were
from Europe, and 31 (12%) in Asia and
Latin America.
That said, PE rms’ ability to bring in
operating and industry experts and inject
additional capital works to enhance the
sustainability and growth of their portfolio
companies.

17 2010 global private equity watch: new horizons emerge

Fund-raising
challenges
remain, despite Capital rasied by PE funds with a global investment focus: 2003–2009
($USb)

capital surplus 150

# Funds
Amount raised
$141
$133

$110

Fund-raising slowed in 2009 as the full 94

100
impact of the worldwide nancial collapse 86

took its toll. Global PE rms closed 357 67

funds last year, down from 767 in 2008 and $51
48 48
the smallest number of funds closed in ve 50 42 $44

years. Funds took 18 months, on average, $31

to close, well above the 2007 average of 12 12

months, and some large funds failed to meet $4
0
their targets. While the average value of 2003 2004 2005 2006 2007 2008 2009
2009 vintage funds was a respectable $658 Source: Preqin
million, the total value of 2009 vintage
funds was $234.9 billion, less than half the
$590.3 billion in 2008 funds. That said, Funds closed by size: 2005–2009 ($USm)
Preqin reported that 1,589 funds were on $3,835
the road as of February 2010 seeking to 2009 $61,478 $86,077 $42,472 $40,998
raise $668 billion in total. $7,587

PE funds with a global investment focus 2008 $181,664 $229,834 $85,833 $85,396

grew from $4 billion in 2003 to $141 billion $7,682

in 2007, dipped slightly in 2008, before 2007 $158,347 $221,363 $95,989 $105,070
plunging to $44 billion in 2009. Despite $7,663
this decline, it shows the increasingly global 2006 $118,854 $170,303 $81,847 $101,906
nature of PE rms and their dexterity to
$8,149
chase global opportunities.
2005 $55,277 $103,507 $62,081 $77,276
Overlooked in the fund-raising discussion
0% 25% 50% 75% 100%
is the fact that PE rms closed 2009 with
$500 billion in “dry powder,” according $5b+ $1b – $4.9b $500m – $999m

to Preqin, with funds closing in 2007 and $100m – $499m Under $100m
2008 accounting for three-fths of that Source: Preqin
amount. Deploying these funds will be a Fund-raising excludes venture funds.

challenge in 2010, as excess capital chases

fewer deals. General partners (GPs) may
nd themselves negotiating with LPs to
extend the life of funds, or exploring other
solutions to address uncalled capital. In
this environment, raising the next fund will
remain a challenge.
Fewer mega-funds closed last year. CVC
European Equity Partners V, a multi-industry
buyout fund focused on Western Europe,
was the only 2009 fund to raise more
than $10 billion, while 10 funds over $10
billion closed in 2008. Funds in the $1
billion to $10 billion-dollar range suffered
as well, with 49 funds raising $1 billion
to $10 billion, down from 135 and 136,
respectively, in each of the prior two years.
Although a handful of funds closed without
meeting their targets, it is encouraging that
50 funds closed north of $1 billion in 2009’s
challenging environment.
In terms of investment style, only one
category registered both absolute and
relative growth in the number of funds
closed last year. Secondary funds dedicated
to buying positions in existing funds raised
$18.5 billion through 15 funds, up sharply
from $8.7 billion raised through 21 funds in
2008. A recent analysis by Cogent Partners
shows that pricing levels rose dramatically
in the second half of 2009, reaching 72%
of net asset value (NAV), up from 40% in
the rst half of the year. Preqin estimates
that 45% of potential buyers are in North
America, 39% in Europe, and 45% in Asia
and emerging markets.
While vintage 2009 funds in all other
categories raised less money than their
2008 counterparts, growth capital and fund-
of-funds gained share.
The preponderance of funds closing in
2009 focused on the US and Europe. This is
somewhat ironic, given that returns on Asia-
Pacic funds declined by less than those
with a US or European focus. However, LPs
based in Asia were the least satised with
the performance of their funds, according

2010 global private equity watch: new horizons emerge 18

to a study by Coller Capital. Only 24% of Funds closed by investment style: 2005–2009
($USb)
Asia-Pacic investors were satised with $6.5 $2.6 $11.3 $0.4

the recent performance of their funds, while 2009 $102.6 $42.8 $23.5 $18.5 $26.7
only 42% of those in Europe and 60% of
those in North America were satised. Given $34.6 $17.0 $8.7 $20.9

these conicting signals, some funds that 2008 $233.5 $135.0 $42.1 $45.0 $53.6

closed this year may move away from their

$13.5 $14.4 $6.6
original regional or industry focus to take
advantage of opportunities in other areas. 2007 $250.2 $123.1 $41.1 $39.0 $61.4 $39.2

That said, the second-largest fund to close in $11.2 $7.4 $15.1 $3.3
2009, the $8.8 billion First Reserve Fund XII, 2006 $221.1 $99.2 $24.8 $42.5 $56.1
is focused on energy and natural resources
in Brazil, China and India, while the 18th- $8.3 $7.7 $8.8 $7.9 $11.2
ranked Mount Kellett Fund I is focused on 2005 $138.9 $72.0 $29.9 $21.6
Asia. Both Blackstone and Carlyle opened
renminbi-denominated funds this year, the 0% 25% 50% 75% 100%
former in a partnership with the Shanghai
Buyouts Real estate Infrastructure Distressed
Pudong New Area, and the latter through a
Fund-of-funds Growth equity Secondaries Balanced
partnership with Fosun International, China’s
largest non-state-owned conglomerate. Other

These funds will allow their sponsors to tap Source: Preqin

Fund-raising excludes venture funds.
the resources of inuential local investors
whose investments are otherwise limited
by currency control rules and who can
Funds closed by geographical area of focus: 2005–2009
potentially expedite the transaction
($USm)
approval process because they are subject
to fewer requirements, thereby reducing 2009 $135,485 $73,891 $25,484

completion risk.
2008 $341,678 $145,479 $103,157
In the wake of the market’s 2008 collapse,
there was much talk about investors
reducing their allocations to PE, ironically 2007 $349,316 $151,901 $87,234

because these investments generally held

up better than other parts of institutional 2006 $280,689 $129,804 $70,080
portfolios and thus exceeded their
allocation levels. A recent Preqin survey of 2005 $161,372 $103,761 $41,157
106 large institutional investors suggests
that both investments and allocations to PE 0% 25% 50% 75% 100%

should increase. US Europe ROW

Perhaps because 40% of those interviewed Source: Preqin

Fund-raising excludes venture funds.
sat on the sidelines in 2009, two-thirds
expect to make commitments in 2010, and
51% expect to do so during the rst half of
the year. Both the size of commitments and
investor allocations to PE could increase
next year. 51% of survey respondents expect
to commit more capital to PE, while only 8%
expect to commit less. Similarly, 22% plan to

19 2010 global private equity watch: new horizons emerge

increase their PE allocations in 2010, while
13% plan to reduce them.
GPs may nd themselves negotiating
This optimism may reect positive PE
performance during the second half of with LPs to extend the life of funds,
2009. The State Street Private Equity Index or exploring other solutions to
shows that global PE funds had IRRs of
5.5% and 5.8% during the second and address uncalled capital.
third quarters of 2009, following ve
negative quarters.

Although LPs are willing to invest again,

they also seem more than willing to move
money around. More than half of those
Global PE internal rate of return: quarter-over-quarter
interviewed said they would consider
investing in funds managed by rms they 15%
10.89%
have no prior relationship with. Two-thirds
8.55%
were open to emerging market funds, with 10%
5.48% 5.83%
China, India, Brazil and other Asian markets 3.18%
5% 5.76% 2.26%
garnering the greatest interest. Mid-sized 4.17%
Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09
buyout funds, distressed debt funds and 0%
-0.87%
secondary funds were also seen as offering -1.51%

-5%
attractive returns, while some expressed -6.46%
-8.35%
reservations about committing more money -10%
Quarterly IRRs

to mega-funds, in part due to lower returns

in recent years, and in part because many
institutional investors had large unfunded
commitments to these funds. A ight to
quality can be expected, as investors seek to
limit “surprises” and make choices
based on performance and the quality
of a rm’s nancial information and risk
management practices.
In the US, the fund-raising process itself came
under re in 2009 following an investigation
by New York State Attorney General
Andrew Cuomo of pay-to-play scandals,
which involved rms hiring third-party
placement agents to steer public pension
fund investments their way. So far, Cuomo
has collected $120 million in settlements,
with several prominent rms adopting the
Attorney General’s code of conduct which
bans the use of placement agents or other
third parties to solicit business from pension
funds and prohibits rms from making
campaign contributions to government
ofcials who can inuence investment
decisions of public pension funds.
-15%
-16.32%
-20%
Source: State Street Private Equity Index
Given these developments, some large
institutional investors could take matters into
their own hands. Direct investing, currently
a small percentage of total institutional
investing, could gain popularity as large
deals are completed, such as last year’s $6.3
billion acquisition of Transurban Group, an
Australian logistics provider, by the Canada
Pension Plan Investment Board and Ontario
Teachers’ Pension Plan. Should the Canadian
model, with a 20-year cycle and virtually no
capital outows, deliver attractive returns, it
could lead other large institutional investors
to form their own funds.

2010 global private equity watch: new horizons emerge 20

25 largest funds closed in 2009
Target Style Size ($USm) Industry Focus Regional Focus Mgr. Country
CVC European Equity Partners V Buyout 14,203 Multi-industry West Europe UK
First Reserve Fund XII Natural resources 8,821 Natural resources/energy Brazil, China, India, US US
Hellman & Friedman VII Buyout 8,800 Media/technology/nancial North America, Europe, Asia US
KKR European Fund III Buyout 7,984 Multi-Industry Europe US
Riverstone/Carlyle Global Energy Natural resources 6,000 Natural resources/energy Global US
and Power Fund IV
GS Vintage Fund V Secondaries 5,500 Multi-industry North America US
Charterhouse Capital Partners IX Buyout 5,170 Consumer and manufacturing West Europe UK
Clayton Dubilier & Rice VIII Buyout 5,000 Business services/other North America, Europe US
Lindsay Goldberg - Fund III Buyout 4,700 Multi-industry Germany, North America, US
West Europe, Scandinavia
Blackstone Real Estate Real estate 4,366 Real estate UK, Europe US
Partners Europe III
Onex Partners III Buyout 4,300 Multi-industry North America Canada
TA XI Buyout 4,000 Any US US
Oak Hill Capital Partners III Buyout 3,800 Multi-industry US, Global US
Partners Group Secondary 2008 Secondaries 3,746 Any Global Switzerland
Welsh Carson Anderson & Buyout 3,700 Health care, information US, North America US
Stowe XI services, business services
Dover Street VII Secondaries 2,900 Any North America, Global US
Goldman Sachs Real Estate Real estate 2,630 Real estate US US
Mezzanine Partners
Quantum Energy Partners V Buyout 2,500 Energy Canada, US US
Mount Kellett Fund I Buyout 2,500 Any China, Asia US
Finvest Private Equity Fund Buyout 2,500 Any North America, Europe Switzerland
Fondi Italiani Per Le Infrastrutture Infrastructure 2,443 Infrastructure Italy Italy
Siguler Guff Distressed Fund-of-funds 2,400 Any North America US
Opportunities Fund III
JC Flowers III Buyout 2,320 Financial services North America, West Europe, US
Global
Clessidra Capital Partners II Buyout 2,040 Industrial, utilities Italy Italy
Adams Street 2009 Global Fund-of-funds 1,950 Any North America, Europe, US
Opportunities Portfolio Global
Total top 25 114,273
Total 2009 234,860
% top 25 49%

Source: Preqin

21 2010 global private equity watch: new horizons emerge

Emerging
markets come PE acquisitions by target country: 2000–2009
($USm)

into their own

9,000 $8,296

8,000
$6,739
7,000 $6,256
Less affected by the global nancial crisis $5,691
6,000
and rebounding faster than the developed
$5,525
world, emerging markets are viewed by 5,000
$4,811 $3,780
many as increasingly attractive investment 4,000 $1,651 $3,961
$1,404 $1,689
targets. We’ve proled three of the largest, 3,000
$1,133 $427
$1,223
$1,007
$541 $889 $3,242
$578 $363
fastest-growing markets — China, Brazil and $183
$404
$135 $230
$828 $952
$1,572
$1,778
2,000 $193
India — ranked the rst, second and third $80
$165 $78
$1,766 $1,028
$123 $10
1,000 $864
most attractive emerging markets among PE $12
$669
$722

investors in a recent survey by Coller Capital. 0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

With M&A activity in these markets up Œ ‹ Š

" + !

dramatically in the last decade, PE is Source: Dealogic

 
  
 
  
  

  
 

 
  Š
", ‹ , Œ 
+ ! 
increasing its investments. Initially, the bulk
of the activity involved overseas PE rms
making minority investments in local targets
with the goal of injecting growth capital
and increasing their equity stakes down the
road. While minority investments continue
to be the norm, domestic acquisitions in all
three nations took off in 2006. Although
PE investments appeared to be down in
2009, published deal statistics do not reect
add-on investments, investments by venture
rms and unannounced acquisitions.
Brazil
Brazilians have long said that their country
is on the verge of greatness. That day may
nally be here. Brazil posted the strongest
recovery in Latin America, with a growing
middle class, brisk manufacturing, the
biggest oil discovery in the Americas in 30
years, and an infrastructure boom expected
in advance of the World Cup in 2014 and the
Olympics in 2016. Brazil’s economy could
expand by 5% to 7% in 2010, with household
spending expected to rise to nearly 4%
and industrial output to 8%, while ination
should remain below 5%.
Brazil’s highly regulated banking industry,
with its relatively low leverage, was largely
shielded from the nancial meltdown. Public
debt is expected to fall from 44% of gross
domestic product (GDP) in 2009 to 43%
in 2010 and 41% in 2011. Currently all
three US rating agencies granted Brazil an
investment grade rating on its debt.
Foreign direct investment in Brazil fell
more than 40% last year, to $26 billion,
while the estimated value of announced PE
transactions declined more precipitously,
from $1.8 billion in 2008 to $722 million
last year. However, Brazil’s government
expects 2010 inows to equal the 2008
record of $45 billion, and PE investments
are expected to mirror this trend.
The top three PE investments in 2009 were
Carlyle’s $250 million acquisition of CVC
Brasil Operadora e Agencia de Viagens,
a leading travel agency, and Advent
International’s purchase of CETIP, Latin
America’s largest asset clearing house, and
Pitagoras, a professional services rm, for
$171 million and $142 million, respectively.
There were three notable exits last year:
Great Hill Partners’ sale of online publisher
BuscaPe.com for $342 million, Linzor
Capital Partners’ sale of Cinemark Brasil
for an undisclosed amount and the IPO of
nancial services rm CETIP, which raised
$450 million just ve months after Advent
International purchased a 30% stake for
$171 million.
Transactions should increase this year, as
several large rms have announced their
intent to make more investments in Brazil.
Grupo Santander Brazil and San Francisco-
based Paul Capital Partners have announced
they are looking to make investments in
2010 global private equity watch: new horizons emerge
companies that will benet from the World
Cup and Olympics. Axxon Group of Rio de
Janiero is considering oil services, health
care and media investments, while the
Carlyle Group has announced plans to invest
$1.2 billion in Brazil over the next ve years.
With so much capital expected to pour in,
the biggest challenge Brazil faces is ination
risk. While the government claimed scal
and monetary stimuli introduced in the
wake of the nancial crisis were temporary,
it has not yet indicated when it will begin
tightening scal policy. This may be
politically driven, as Brazil will elect a new
president in October, and President Lula
may not be willing to put the brakes on the
economy until after his successor is elected.
Nevertheless, delaying a much-needed
scal adjustment until the fourth quarter
may make higher interest and ination rates
more likely, especially if foreign investment
continues to pour in, despite efforts to slow
it with a tax on portfolio investments.
PE rms looking to invest in Brazil need
to carefully screen targets and devote
sufcient time to due diligence, which
tends to take longer than in more mature
economies. In screening targets, would-be
buyers should start by asking themselves
where their expertise would ll an unmet
need, and then partner with local rms
22
to acquire and value target companies. PE exits by type: 2007–2009
($USm)
As they invest in Brazilian companies, like
12000
many in emerging markets, buyers must
Trade sales
recognize they may be exposed to tax, IPOs
grey market sales, governance and other
9000
issues which need to be carefully addressed.
Many companies are family-owned, with $9,749
inadequate or non-existent nancial 6000 $2,933
information and accounting structure. This
makes valuing assets particularly difcult, as $228
comparables are hard to nd. Adding to the 3000 $1,075 $1,576 $4,046
$748
difculty is Brazil’s history of large currency $2,437 $450 $709
$0
uctuations. Last year, the value of the real $797 $621 $1,639 $403 $342 $25
$160
rose 35% against the US dollar. 0
Brazil China India Brazil China India Brazil China India
2007 2008 2009
Integration planning also presents Source: Dealogic
Ts ar a
res rasas ere e seller s a P r ad e 
er s a rrae r aer P r
challenges. Brazil’s high-cost social benets
r a s ased  ares la
and unwieldy tax and labor laws can create
“surprises” for unprepared investors. For
example, the distinction between full-time
and contract workers is opaque, which could
add a signicant post-acquisition expense if
employment taxes must be paid or lay-offs
are necessary. In spite of these investment
challenges, prepared buyers can nd vast
opportunities as the market evolves
and grows.
China
Asia’s response to the 2008 nancial crisis
was very different from its response to
the Asian nancial crisis a decade earlier.
Instead of tightening monetary and scal
policy, which forced companies to rely on
exports for growth, Asia undertook the
largest collective easing of economic policies
in history. China led the way with a RMB4
trillion stimulus program ($586 billion)
announced in late 2008, dedicated primarily
to multi-year infrastructure projects. That
program created demand that lifted other
Asia-Pacic markets, boosting Australia’s
commodity exports and Japan’s sales of
luxury goods.
7. 2010 Global Economic Outlook, Nomura Global Economics.
23
‹
Most experts are projecting double-digit Nevertheless, there are three factors that
growth for China in 2010. Some even could limit China’s performance this year:
contend it might be the nation’s best year in
• The expected exit from more relaxed
a decade, with China displacing Japan as the
monetary policies could happen too
world’s second largest economy. However,
quickly. While most experts expect this
this time, internal demand will play a bigger
to be done in stages, there is a small risk
role in China’s growth than exports. While
that policy-makers — perceiving that they
Nomura Securities expects exports to grow
have delayed tightening for too long — will
by up to 11% in 2010 as global inventories
are rebuilt, it predicts that internal demand
overreact.
could grow by as much as 20%. • Although it is not likely to do so until the
global recovery is in full swing, China
Private consumption remains low relative to
is expected to eventually decouple the
China’s GDP (37% in 2008) but is growing
yuan from the US dollar to gain more
more than 7% a year, the fastest rate in
control over its monetary policy. Allowing
the world. Despite this increase, ination
the yuan to trade within a 0.5% band of
is expected to remain at a low 2.5%,7
the 6.83 yuan-to-dollar peg set in 2008
due largely to abundant manufacturing
may have shielded Chinese exports from
capacity which fuels price competition.
sharper declines such as those occurring
China’s focus on using stimulus money for
in developed countries like Japan. But it
infrastructure projects — particularly in
could also have deleterious effects should
underserved regions of the country — was
growth rates and monetary policy in the
also responsible for limiting inationary
US and China diverge.
pressures and ensuring real growth. China’s
emphasis on infrastructure also gives it a • As China recovers faster than the rest
major competitive advantage over India as a of the world and moves to become a
target for new investment. consumer-driven economy, inflation is
2010 global private equity watch: new horizons emerge
 PE minority investments as a percentage of country total deal value: 2000–2009 The IPO total does not include China Pacic
100.0%
100.0% 100.0%
Insurance’s $3.1 billion secondary offering
100% 100.0% 93.2%

86.9% 87.6% on the Hong Kong stock exchange.

92.8% 82.8% 84.9%
84.6%
80%
76.8%
72.9%
83.8% The value of China-focused funds that closed
80.2%
63.7%
76.3%
65.4%
in 2009 fell precipitously to $541 million
64.4% from $12.4 billion in 2008. We believe this
60%
54.6%
54.8% 47.6% 56.5% represents a breather, as investors make
45.4% good on unfunded commitments, and GPs
40%
28.5%
based outside China line up to introduce
local currency funds.
26.2%
20% 22.4%
17.7% The Chinese tax system continued to evolve
3.7%
0.5% in 2009, with taxes becoming a greater area
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 of focus for PE rms investing in China.
Œ ‹ Š
"

Source: Dealogic
>
> 
>
>>>>
>>
> >>Œ X>‹ >
>Š
">>> India
a risk. Consumer prices rose 1.5% in
January and are expected to accelerate
further as the year progresses. The
central bank has already raised reserve
requirements twice in 2010 to curtail a
credit and housing price boom. Should
China grow at a double-digit rate and
impose stricter monetary policy while
the US keeps interest rates near zero in
response to a tepid recovery, China could
experience huge capital inflows, inflation
and possibly an asset bubble.
What might this mean for PE rms? Last
year, PE investments in China fell, but by less
than in other emerging markets. In 2009,
there were 73 PE acquisitions in China
valued at $3.8 billion, compared with 120
transactions worth $6.3 billion in 2008.
In a major shift, Chinese PE rms made
more than half of last year’s acquisitions,
accounting for $3.2 billion of the total.
However, acquisitions were decidedly
smaller than in prior years, with the largest
one being Hopu Investment Management’s
$790 million purchase of a 20% stake in
China Mengniu Dairy — markedly smaller
than 2008’s largest transaction: Arcapita
Bank’s $2 billion acquisition of Honiton
Energy Holdings. Other large transactions
included WL Ross & Co.’s stake in China
Longyuan Power valued at $730 million,
Morgan Stanley Private Equity’s purchase of
Sihuan Pharmaceutical Holdings Group for
$319 million, and the acquisition of a 20%
stake in Chery Automobile by CDH China
Holdings and Bohai Industrial Investment
Fund for $293 million.
Going forward, infrastructure opportunities
abound. With 13 million cars sold in China
last year, and just 30,000 kilometers of toll
roads, China will need 85,000 kilometers of
new highways by 2020, according to Andrew
Yee, global head of infrastructure nance at
Standard Chartered Bank. Similarly, China
treats just 50% of its wastewater, in contrast
with Europe’s 90% and Singapore’s 99%.
China’s exit market recovered last year,
with $4 billion in divestitures and $9.7
billion in IPOs, well above 2008’s $160
million and $1.6 billion. Large divestitures
included TPG Capital’s sale of its 17% stake
in Shenzhen Development Bank for $2.3
billion, CDH China Holding’s sale of Meihua
Biotechnology Group for $848 million and
the $285 million sale of a majority position
in Hejian Technology by NIF SMBC Ventures.
China’s largest IPOs of 2009 were Yingde
Gases Group, Kaisa Group Holdings and
PCD Stores, with proceeds of $470 million,
$445 million and $434 million, respectively.
2010 global private equity watch: new horizons emerge
After a year that witnessed both the global
nancial crisis and an internal food crisis
brought on by weak monsoons, India’s
economy is recovering and is expected
to grow by 8% in 2010, buoyed by lower
interest rates, rising consumer demand and
a strengthening jobs market.
Last year, India undertook stimulus
programs worth 3.5% of GDP. But with GDP
growing for the rst time since 2007, and
with ination reaching a 13-month high of
8.6% in January, the government is under
pressure to begin winding down economic
stimuli. India’s recently released 2010
budget is designed to do this in a calibrated
way, reducing the decit from 6.9% to
5.5% of GDP, and restoring duties on crude
oil, gasoline and other rened petroleum
products. While some worry that these
taxes will be inationary in the short term,
others believe they are necessary to wean
consumers off unsustainable government
subsidies. The Reserve Bank of India’s (RBI)
recent decision to increase the cash reserve
from 3% to 3.75% will reduce liquidity in the
banking system as well as increase the cost
of borrowing from banks. Should this not
be sufcient, the RBI may consider further
measures, including hikes in benchmark
interest rates, which would increase the cost
24
 Foreign private equity acquisitions as a percentage of country deal value total Co., UTI Venture and Citigroup Private
100% Equity’s $100 million investment in Ind-
100% 100% 98%
Barath Power Ifra and Blackstone’s $64
90% 92%
79% million investment in Gateway Rail Freight.
80% 82%

70%
67% 69% PE interest in infrastructure sectors should
56%
59% continue, while strong growth should
60%
56% 48% 50% spark interest in consumer products and
50% 45% 45%
48% services, nance, health care, education
40% 31%
and green technologies, the last driven by
35% 32%
28%
30% the government’s focus on cutting carbon
20% 20%
25%
17% emissions.
16%
10% 6%
0% 0%
0%
3% 0% PE rms exited relatively few Indian
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 companies last year, with just four trade
Œnia China Brazil sales and two IPOs. Adani Power raised
Source: Dealogic
$626 billion in its initial offering, and DB
>
> 
>
 >
>>

>> >
>>
> 

>
> >>Œ X> Corp. — a professional services rm — raised
China or Brazil.
of credit and thus curtail the increase in
demand and ination.
Moody’s believes the new budget bodes well
for India’s sovereign rating. When combined
with a rebounding economy, a stronger
rupee and a well-timed exit from scal
stimuli, the proposed measures could reduce
India’s debt to 70% of GDP in the next two to
three years, down from the current 78%.
Unlike China, which faces structural change
as it shifts from an export-driven to a
consumer-driven economy, India’s growth
has long been dependent on domestic
demand, even as exports have risen.
However, its major weakness has been
infrastructure, with basic transportation,
power grid and irrigation systems lagging
behind those of China. In a welcome
move, the government plans to increase
infrastructure spending by INR1.74 trillion
($38 billion) this year.
25
Unlike China and Brazil, which have
witnessed an increase in acquisitions by local
PE rms, India attracts a greater proportion
of foreign PE rms. 3i, Baring Private Equity,
HSBC Private Equity, Standard Chartered
Private Equity and Citigroup Private
Equity were active last year. Its legal and
governance systems have long attracted PE
investors from around the world.
According to Dealogic, last year, PE rms
invested $1 billion in India, a decline from
2008 levels when PE rms spent $5.5
billion. While the technology and business
process outsourcing sectors have historically
been PE’s main investment targets, only
one of the 10 largest acquisitions last
year — Future Capital Holdings’ $46 million
acquisition of Tikona Digital Networks —
was in information technology, while six
of the top 10 involved infrastructure-
related industries like transportation and
construction. These include the following
minority investments: 3i Group’s $161
million investment in Krishnapatnam Port
2010 global private equity watch: new horizons emerge
$82 million. Only one trade sale, the
disposition of an 8% stake in Shriram City
Union Finance by an investor group led by
ChrysCapital of Mauritius, disclosed the
value, $25 million.
Looking ahead, India should continue to be
a growth market, with minority investments
the norm. However, buyouts, currently
approximately 5% of all transactions
involving Indian targets, may gain
acceptance longer term. Exits should pick up
over the next few years, as rms look to take
prots on investments made between 2004
and 2006. Regulation is likely to increase to
meet global investor demand for increased
transparency, better risk management and
more sophisticated internal controls.
Since India’s banks largely avoided the credit
freeze that plagued developed countries,
access to capital has not been a signicant
issue. In turning to PE, Indian companies are
seeking partners who can bring them sector
knowledge, operating expertise and access
to new markets and technologies.
Regulatory and
tax reform: slow
process, wide-
ranging impact
Regulatory reform initiatives, aimed at
reducing systemic risk in the global nancial
system, have major implications for PE rms
operating in all of the world’s key regions.
Pressures to bolster banks’ capital reserves,
increase transparency, and develop tax
structures that are tighter, substantive
and sustainable are being felt in all major
markets.
Global regulatory developments. Perhaps
the most controversial and far-ranging
regulatory proposal is the EU’s proposed
AIFM directive, which would increase
nancial reporting and compliance costs
for all rms operating in the EU, and could
drastically change how PE rms operate
there. Among other things, the directive
would require foreign-based rms to use
an independent, Europe-based rm to
value their European funds, and to keep
all European PE assets in an independent,
Europe-based depository. It would also
increase disclosure requirements for
portfolio companies, impose stiffer capital
requirements on EU-based rms, and cap
the amount of leverage.
The directive could limit choice for EU
investors, by denying managers based
outside the EU a common fund-raising
“passport” for marketing their funds in the
EU, unless they can prove they are subject
to sufciently rigorous regulation in their
home countries. This would be especially
harsh on US- and Cayman Islands-based
fund managers, as these jurisdictions are
not perceived to regulate the industry
sufciently. Ultimately, the directive could
affect where funds are domiciled, as it
effectively requires non-EU rms to operate
their EU funds separately from the rest of
their funds.
The directive, which is scheduled to take
effect in July 2012, will affect the operating
models of traditional buyout funds and those
employing other investment styles. If passed
in its current form, the European Parliament
estimates the directive could
cost PE and hedge funds
up to €22 billion in initial The directive could limit choice
charges and €4 billion in
annual compliance costs.
for EU investors, by denying
Since the draft directive
managers based outside the EU a
was issued in April 2009, common fund-raising “passport” for
both the former Swedish
and the current Spanish
marketing their funds in the EU.
Presidents of the
European Council have submitted hundreds
of amendments. The directive must thus
be viewed as a work in progress, and it is
not known which of the more contentious
provisions will be in the nal text when it is
issued later this year.
Financial industry reform bills before the US
Congress also include new regulations on PE
rms. The US House and Senate bills would
eliminate the “private advisor” exemption
and require most rms to register with the
Securities Exchange and Commission (SEC).
SEC registration and reporting requirements
are not expected to have much of an
impact on large funds — some of which have
voluntarily registered with the SEC — but
could be onerous and costly for newer,
smaller funds.
On the accounting front, Financial
Accounting Standard No. 167 (FAS 167)
has not been fully implemented in the US,
with its application deferred for certain
investment entities, including many PE
rms. This deferral will give the Financial
Accounting Standard Board and the
International Accounting Standard Board
more time to dene the relationship
between principal and agent, and resolve
concerns that the implementation of FAS
167 in its current state might reduce,
rather than increase, the transparency of a
rm’s nancial statements by requiring it to
consolidate certain funds it advises.
Global banking reforms. To reduce the
likelihood of another nancial collapse,
governments around the world are
2010 global private equity watch: new horizons emerge
increasing capital requirements for
banks, and placing limits on some of
their riskier activities. In July 2009, the
Basel Committee on Banking Supervision
approved new trading book capital rules as
part of its program to strengthen the Basel
II regulatory capital framework. Among
other things, the new rules introduce
higher risk weights for collateralized loan
and debt obligations (CLOs and CDOs) to
better reect their inherent risk, and raises
standards for capturing the risks inherent in
securitization activities. Additional standards
that enhance capital buffers, strengthen
the quality of bank capital and introduce
new leverage ratios are expected. The new
trading book rules, which take effect at the
end of 2010, could make it more difcult to
sell collateralized loan obligations and thus
limit bank lending to PE.
New capital and securitization requirements
of bills before the US Congress are likely
to have a farther ranging impact on the
industry. These bills require nancial
institutions that originate and securitize
asset-backed securities to maintain reserves
equal to between 5% and 10% of the credit
risk. Requiring banks to hold more reserves
for asset-backed securities, including CLOs,
could limit the amount of leverage available
to fund PE acquisitions, as banks have
depended on a strong market for structured
nance products to move leveraged loans
off their balance sheets. Last year, equity
contributions to LBOs averaged 46%,
the highest level in the last decade, and
26
signicantly above 39% in 2008 and the pre-
recession 10-year average of 32.1%.8
The Volcker Rule, full details of which have
yet to be spelled out, is intended to prohibit
bank holding companies from engaging in
proprietary trading and running hedge funds
or PE rms. Limits on proprietary trading
are designed to keep banks out of riskier,
more highly leveraged activities, while
keeping banks from engaging in PE seems
aimed at limiting bank size and ensuring that
they focus on core activities. If adopted, the
Volcker Rule could accelerate the sale or
spin-off of bank PE holdings and operations,
with a possible impact on industry
consolidation. In February 2010, Citigroup
announced plans to sell or split off its $10
billion Citi Private Equity unit.
Global tax initiatives. Governments
around the world are looking for new tax
sources as they shift from scal stimulus
to belt tightening. More than in some other
jurisdictions, tax authorities in the Asia-
Pacic region have become increasingly
focused on PE prots as a potential source
of revenue. Australian and South Korean
authorities recently challenged taxes due
on prots from some high-prole portfolio
company exits. While this marked the
continuation of a trend in South Korea,
the challenge by Australia’s Revenue
Department was less expected and was
followed by amended guidance on the
distinction between revenue and capital
gains for tax purposes. Australia also
challenged the practice of channeling prots
to offshore entities in tax-friendly havens,
proposing that this be treated as a form
of tax avoidance in some instances. These
challenges point to an underlying risk for
rms making acquisitions in the world’s
growth markets. In both cases, tax laws were
initially relaxed to attract foreign investment.
But when prots grew, governments moved
in to capture a portion of the gain.
8. Standard & Poor’s LCD, February 2010.
27
The Chinese tax system, the subject of
extensive reform in 2008, continued to
evolve in 2009, with more sophisticated
restructuring rules and clarications in a
number of areas that created tax planning
opportunities. While it is still possible to
defer taxes on the equity portion of a
transaction and thus obtain a tax-effective
restructuring, rms must meet strict
requirements and are subject to a three-year
transfer restriction on certain cross-border
restructuring transactions.
Like authorities in other Asian jurisdictions,
the actions of Chinese tax authorities in
2009 focused more on substance than on
form, especially with respect to the need
for business purpose when assessing the
taxation of gains and applying for tax treaty
benets on withholding taxes. Consistent
with this approach, late last year China
imposed an effective tax of up to 12.5% on
indirect sales of Chinese shares.
This represents the rst time China asserted
its right to tax such gains under certain
circumstances, but it has provided limited
guidance on how these new rules would
work in practice.
All of this will affect valuation models and,
ultimately, investment decisions, as PE
buyers weigh higher or uncertain tax bills on
future exits.
In the US, proposals to tax carried interest
as ordinary income continue, with long-term
implications. Such a move would not only
present PE partners with increased tax bills,
but could also start a brain drain, as some
PE rms would not be able to compete for
talent without being able to offer recruits
the prospect of having their PE earnings
taxed at more favorable rates.
Valuation under a microscope in all
regions. Throughout the world, LPs have
demanded increased transparency to
shed light on the underlying values of
2010 global private equity watch: new horizons emerge
their holdings. But opinions differ on what
constitutes an independent valuation, how
fair value should be dened and how often
it should be measured. The International
Private Equity and Venture Capital Valuation
Board (IPEV) has recently updated its
guidelines on how LPs should estimate the
fair value of their holdings and essentially
eliminated the marketability discount by
stating that when all features of a portfolio
company are appropriately considered
in determining fair value — including its
marketability or lack thereof — no further
discount is necessary.
Striking the right balance between GP
and LP interests. In the heyday of the mid-
decade LBO boom, the constructive tension
that had existed between the interests of
GPs and LPs clearly began to tip in favor
of GPs. Even those with less-than-stellar
records were able to negotiate attractive
terms with respect to carried interest,
management and transaction fees. The
“Great Recession” gave investors a chance
to rethink the relationship, and last fall, the
Institutional Limited Partners Association
(ILPA) unveiled a set of principles designed
to restore and strengthen the alignment
of LP and GP interests. The ILPA’s best
practices include:
• Using management fees exclusively for
the benefit of the fund and keeping them
reasonable
• Requiring claw-backs, when necessary, to
be gross of taxes and repaid in a timely
manner
• Recommending a waterfall distribution
formula in which GPs do not receive
carried interest until LPs have received all
contributed capital plus a preferred return
• Giving a supermajority of LPs the
authority to dissolve a fund or remove
its GP
• Disclosing detailed valuation and financial
information on portfolio companies on a
quarterly basis
While some of these proposals are
controversial, and have been described as a
“big leap” for PE, most accept that at a time
of increased LP power, some rebalancing of
interests is inevitable.
Although many pieces of the global
regulatory, tax and governance puzzle
are moving at the same time, injecting
complexity and uncertainty into the PE
market, it is unlikely that governments
want to seriously damage this golden
goose. The basic PE model of acquiring
control positions in undervalued businesses,
bringing in strong management, focusing on
operating efciency and exiting at a prot
will remain intact. As President Obama has
acknowledged, PE has an important role to
play in the economy.
However, PE rms realize that
some changes have to be
made and have accepted PE rms realize that some changes
that there will be more
have to be made and have accepted
regulatory oversight. Firms
are focusing on improving that there will be more regulatory
their back-ofce
oversight. Firms are focusing on
operations to meet new
regulatory requirements improving their back-ofce operations
in Europe and the US
to meet new regulatory requirements
and to meet investor
demands for clearer, and investors’ demands.
more consistent, more
complete nancial
reporting and
enhanced risk management. These steps
will put PE rms on sounder footing as they
engage in succession planning, improve
relations with LPs and decide whether their
next step involves obtaining a permanent
source of capital through a public offering of
their own.
2010 global private equity watch: new horizons emerge 28
29 2010 global private equity watch: new horizons emerge
2010: outlook
for private
equity
The PE industry’s agility and resilience in
adapting to the adverse market conditions
of the last two years will serve it well as
the market continues to recover. So far,
the outlook for 2010 is positive, with
leverage returning to some markets, the
value of acquisitions increasing and exit
opportunities on the rise.
We expect the following trends to emerge
in 2010:
• A more robust market with larger
acquisitions and more exits. Through
March 2010, the disclosed value of global
PE acquisitions rose 59% from $17 billion
in 2009 to $27 billion, with the average
deal size increasing from $70 million to
$157 million. The pace of acquisitions
should continue to climb through the
remainder of the year as industry
dynamics improve. With larger equity
contributions, limited financing options
and lower lending multiples expected to
continue through 2010, acquisitions will
be markedly smaller, compared to the pre-
recession peak of $706 million reached
in the second quarter of 2007. The pace
of acquisitions should continue to climb
through the remainder of the year as
industry dynamics improve.
• Improved financing and liquidity.
That said, acquisition size should
steadily increase as the global recovery
gains strength. Dealogic data suggest
the disparity between acquisition
and divestiture size is greatest in
weaker markets, when PE rms have
opportunities to make smart acquisitions
at bargain prices. Similar to 2001,
in 2009, the price of the average
acquisition was $100 million, while the
average divestiture fetched $321 million.
Comparable gures for 2006 were $424
million and $396 million, respectively. This
suggests the gap between the average
price PE rms pay for new acquisitions
and the price they receive on divestitures
will narrow as the economy improves.
2010 global private equity watch: new horizons emerge
Portfolio company bolt-on acquisitions
exhibited some activity last year and
appear to have picked up this year, as
PE rms seize opportunities to purchase
weaker competitors as well as non-core
businesses that corporations look to sell.
More corporate trade sales are expected
in 2010 as the market fundamentals for
buyouts continue to improve.
A key question lingers as to what banks —
particularly government-owned banks —
will do, now that they own a substantial
number of non-core businesses. Following
prior recessions, PE rms were often the
preferred buyers of such companies, but
so far there is little evidence that history
will repeat itself.
PE-backed exits are on the rise. Globally
there were 104 trade sales through 29
March 2010, including some high-prole
secondary sales in Europe, compared with
78 for the full rst quarter of 2009. While
there was one IPO in the rst quarter
of 2009, 22 IPOs were listed in the
rst three months of 2010. Should this
momentum continue, PE exit activity in
2010 will end the year signicantly higher
than in 2009.
• Stronger portfolio companies. For the
Lending multiples are slowly increasing
as banks return to financing buyouts and
relax restrictions on leveraged loans.
Standard & Poor’s reports that lending
multiples for PE acquisitions averaged
4.1 through February 2010, up from
3.9 in the last quarter of 2009, with
some banks recently lending up to five
times EBITDA, a level last seen in 2006.
While the lending pool is constrained in
many parts of the world, in other areas,
including the Nordic countries and the US,
lending practices are returning to normal,
with stapled financing and dividend recaps
in the US, reminiscent of 2006. However,
equity contributions are likely to remain
closer to the historic high of over 50%
than the historic average of 33%. Equity-
only transactions continue to occur, but
with the understanding that the acquired
company will be refinanced within a
year, creating a more typical buyout
capital structure.
With the US Fed committed to keeping
interest rates near zero for the rest of the
year, investor demand for high-yield bonds
should continue to be strong, making it
likely that the wave of portfolio company
renancing started last year will extend
through 2010.
Two factors could limit leverage for new
acquisitions in 2010. Should the market
for CLOs remain weak, it could effectively
cap the amount of money available for
acquisition nancing, as banks would be
required to keep the loans on their balance
sheets rather than securitize them. Later
this year, the Fed is expected to slow the
amount of new money funneled to banks,
further limiting the lending pool. Since
leverage drives acquisition activity, its
availability will determine the degree of
deal momentum in 2010.
most part, PE portfolio companies have
weathered the economic downturn
through a combination of revenue
protection, production efficiencies,
cost cutting and careful working capital
management. Lower commodity prices,
sympathetic lenders and opportunities
to refinance thanks to a strong high-
yield bond market have helped ease
financial pressures. PE firms have also
taken a hands-on approach to protecting
invested capital. Many have expanded
their in-house operations teams and hired
seasoned executives and consultants with
deep industry expertise to assist portfolio
30
 companies strategically and operationally,
in growing revenues, improving operating
efficiencies and boosting profits.
Firms will continue to work on improving
portfolio company performance this year
as they look to right-size capital structures
and increase revenue prior to exiting some
of the businesses purchased at the height
of the last cycle. To retain management
talent at these companies, PE rms will
focus on repairing incentives, especially
in cases where existing compensation
arrangements are under water.
• Smaller funds as firms deploy capital.
With $500 billion of dry powder at the
end of 2009, some PE firms will not need
to raise new funds for several years.
However, firms marketing funds in 2010
may find it easier, as the State Street
Private Equity Index has posted positive
quarter-to-quarter performance since
June 2009, and most studies suggest
LPs will be maintaining or increasing
their PE commitments in 2010. However,
there will be a price. LPs are seeking
better reporting, more rigorous risk
management and more favorable fee
arrangements from their GPs. Innovative
GPs will see these developments as an
opportunity to improve their fund-raising
processes. The time it takes to raise a fund
will be significantly longer than it did prior
to the recession.
Given these trends, funds closing this year
are likely to be smaller than those closing
at the top of the market. Although buyout
funds will continue to constitute 40% to
50% of all funds raised, growth capital,
industry-focused and regionally focused
funds could gain share as institutional
investors sharpen their investment
outlook.
• Emerging markets become more
important. Emerging markets led the
worldwide economic recovery and have
seen their share of PE transactions
increase in the last decade. They could
gain a larger share of deal activity if
more firms conclude that the prospect
of earning better returns outweighs risks
arising from political, legal and structural
market uncertainties. Some analysts have
even contended that emerging market
investments may carry less risk than those
• Industry adapts as regulatory proposals
in developed markets because many of
the destabilizing factors that caused the
“Great Recession” either did not exist
or were not as prevalent in emerging
economies.
Emerging markets primarily present
minority investment opportunities for
growth capital, with minority stakes
comprising two-thirds of last year’s
investments in Brazil, China and India.
Deals are typically small by Western
standards and, oftentimes, more difcult
to negotiate. However, opportunities for
control acquisitions can vary sharply from
year to year, country to country. Control
investments are picking up in India, and
they may become more common in China
as foreign-based rms form local currency
funds to attract local investors with the
capital and inuence needed to complete
transactions typically not available to
foreign PE rms. Competition for funds
to invest in China should remain erce as
the number of funds domiciled in China
increases and China’s SWFs become more
active abroad.
• Infrastructure opportunities abound.
Infrastructure funds should see better
opportunities and increased deal
activity in 2010 as the global economic
recovery continues and the effects of
infrastructure-focused stimuli in China and
the US begin to take hold. PE’s core skills
in managing portfolio investments should
make infrastructure funds more attractive
than direct investments in infrastructure
assets. As LPs seek investments with
stable cash flows and lower risk, PE-
sponsored infrastructure funds could
become the “utilities” of alternative
investment portfolios, generating
dependable, longer-term cash flows, while
growth capital and buyout funds produce
larger, shorter- to medium-term payoffs.
From 2005 to 2009, infrastructure funds
raised $115.3 billion globally.
proliferate. PE firms are coming to terms
with more regulatory oversight. Certain
proposals, such as registration and some
increased reporting requirements, are not
likely to have a major impact on larger
funds. However, other proposals could
fundamentally affect how the PE industry
operates in various parts of the world.
The EU’s AIFM directive is of particular
concern. If its more controversial
provisions pass, the directive could
isolate Europe and reduce the size of its
PE industry. By raising compliance costs,
imposing stiffer capital requirements,
increasing governance and transparency
requirements, and making it more difcult
for managers based outside the EU to
market their funds in the EU, the directive
could effectively limit fund-raising in EU
countries.
The pace of reform in other parts of the
world is slower as governments focus on
curtailing risks that were responsible for
the collapse of the global nancial system.
While some reforms are likely to pass
in the US, whether perennial proposals
such as taxing carried interest as ordinary
income make it into nal legislation
remain to be seen. Tax pressures on the
industry are likely to rise around the world
as governments seek to increase tax
revenue in order to reduce large decits
brought on by stimulus spending.

31 2010 global private equity watch: new horizons emerge

Faced with the prospect of increased
regulation and LP demands for more
transparency, PE rms are making efforts
to offer investors more comprehensive
nancial information on a regular basis,
along with improved risk management,
and discussions on their valuation
methods. Enhancing back-ofce
operations and linking them to front-ofce
and portfolio company operations
is essential to managing enterprise
risk and meeting regulatory and
investor reporting requirements. These
improvements are particularly important
for rms seeking permanent capital
through a public offering.
As regulatory reform proposals move
forward, pressures to exempt PE from
some of the rules proposed for hedge
funds are likely to increase, as most
authorities believe the PE industry — unlike
the hedge fund industry — played no role
in precipitating the global nancial crisis.

Ernst & Young’s perspective

As we look backward to 2009 and forward to the future, the PE industry has
weathered one of its toughest economic periods. The industry’s core value proposition
— using engaged ownership and aligned incentives to maximize returns for the long-
term investor — remains intact, as rms scour the globe for attractive opportunities.
Firms that will thrive in the complex 21st-century world will be those nimble and
creative enough to seize the opportunities a difcult and uncertain economy presents.
Because the PE industry has many such rms, we believe it will remain an important
asset class that draws signicant investor interest in 2010 and beyond.

2010 global private equity watch: new horizons emerge 32

 About Ernst & Young’s Global
Private Equity practice
An enterprise approach to meeting the
evolving needs of private equity
Ernst & Young’s Global Private Equity experience, along with the support
practice offers an enterprise tailored of 144,000 dedicated professional
approach that addresses the unique services providers across audit, tax,
needs of private equity funds, their transactions and advisory service lines,
transactions processes and investment we can meet the evolving requirements
stewardship. With a global network of private equity rms and their portfolio
of rms including more than 8,000 companies from acquisition to exit.
dedicated transactions professionals and
more than 20 years of private equity

Ernst & Young services for private equity

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33 2010 global private equity watch: new horizons emerge

Key contacts

Global Area Emerging markets

John Harley Americas Brazil
Global Private Equity Leader Jeffrey Bunder Carlos Asciutti
jharley@uk.ey.com Americas Private Equity Leader Partner, Transaction Advisory Services
+44 20 9751 5115 jeffrey.bunder@ey.com carlos.asciutti@br.ey.com
+1 212 773 2889 +5511 9652 7697
Philip Bass
Global Private Equity Markets Leader Europe China
philip.bass@ey.com John Harley Robert Partridge
+1 212 773 5186 Global Private Equity Leader Far East Private Equity Leader
jharley@uk.ey.com robert.partridge@hk.ey.com
+44 20 9751 5115 +852 2846 9973

Far East India

Robert Partridge Rajiv Memani
Far East Private Equity Leader India Private Equity Leader
robert.partridge@hk.ey.com rajiv.memani@in.ey.com
+852 2846 9973 +91 124 464 4112

Japan
Michael Buxton
Japan Private Equity Leader
michael.buxton@jp.ey.com
+81 3 5401 6406

Oceania
Bryan Zekulich
Oceania Private Equity Leader
bryan.zekulich@au.ey.com
+61 2 9248 5833

2010 global private equity watch: new horizons emerge 34

Ernst & Young

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About Ernst & Young

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our 144,000 people are united by our shared
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© 2010 EYGM Limited. All rights reserved.

EYG No. FR0002

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