Annual Private Equity Breakdown 2011

PitchBook

Private Equity: Data | News | Analysis

Better Data. Better Decisions.

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Table Of Contents
Private Equity Deal Flow ....................................................... 3 Deals by Region & Industry ................................................... 4 Transactions by Amount & Deal Count ................................. 5 Equity Percent Used & Add-On Deals.................................... 6 Deal Flow By Industry ............................................................ 7 Deal-Related League Tables ................................................... 9 Portfolio Company Overhang ................................................ 10 Private Equity Exit Flow ......................................................... 11 Private Equity Fundraising .................................................... 12 Selected 2011 Vintage & Open Funds ................................... 14 About PitchBook..................................................................... 15
COPYRIGHT 2011 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means graphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and retrieval systems without the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security or an oer to sell, or a solicitation of an oer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.

www.pitchbook.com

[2]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Private Equity Deal Flow

U.S. Private Equity Deal Flow by Year The U.S. private equity industry, by many measures, turned in one of its best years in 2010, despite the overall poor economic conditions and turbulent nancial markets. There was a steady increase in PE investment during the year culminating with $50 billion invested during 4Q, 6.25x more than the low of $8 billion invested during 2Q 2009. In total, $132 billion was invested by PE rms in U.S. companies during 2010the fth highest one-year total on record. Deal ow was up 11% from 2009 with a total of 1,498 PE deals during 2010. One of the more notable trends that developed during the year was an increase in appetite for larger deals, which was driven by the increased availability of leverage. The 82 U.S. PE deals over $500 million in 2010 was the third highest Source: PitchBook number on record. Fundraising remains very dicult for U.S. private equity rms. Only 95 funds reached a nal close during 2010 on a total of $84 billion in commitmentsthe lowest amount since 2003. The capital overhang of approximately $485 billion continues to make fundraising dicult, as does the PE-backed company overhang. PE rms currently own almost 6,000 companies, a third of which have been held for 5 years or longer and need to be exited in order to generate returns for the rms limited partners. Fortunately, exits are on the rise thanks to recovering nancial markets, strengthening company fundamentals and rising valuations. The past year presented private equity rms with a number of challenges, but still the industry managed to bounce back surprisingly fast from last years lows. Having now turned the corner, look for the positive trends that developed in 2010 around deals and exits to continue in 2011. While a number of challenges do remain such as fundraising and availability of nancing, the outlook for 2011 appears to be bright.

U.S. Private Equity Deal Flow by Quarter

Source: PitchBook

www.pitchbook.com

[3]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

PE Investments by Region
Private equity investment activity continues to be widely spread across the United States. The Midwest was the most active region in 2010 with a total of 313 deals, 49 more than its 2009 total. The Southeast and West Coast were the next most active with 271 and 251 deals, respectively. The Southwest and Northeast were the only regions to see a relative decrease in PE investment activity in 2010 from 2009.

Source: PitchBook

PE Investments by Industry
The Business Products & Services and Consumer Products & Services industries continue to dominate private equity investment with a combined 53% of deal ow. During 2010, the B2B industry experienced the biggest increase in deals from 2009, but it was the Materials & Resources industry that saw the biggest percentage increase with a 57% jump to 77 deals in 2010 from 49 in 2009. Other industries that saw a rise in deal ow during 2010 included Financial Services and Healthcare.

Source: PitchBook

Request a Demo
Sales: 1-877-267-5593
www.pitchbook.com

[4]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

PE Tr ansactions ($ Amount) by Deal Size

One major development in 2010 was the return of signicant amounts of leverage, and with it, an increase in large PE deals. In 2009, deals larger than $500 million represented 55% of the total capital invested. In 2010, that number jumped to almost 70%. The $41 billion invested during 2010 in deals between $500 million and $1 billion represented the second highest total on record for the deal range. In another sign of the returning availability of leverage for private equity transactions there were 24 deals above $1 billion2.5x more than in 2009.

Source: PitchBook

Source: PitchBook

PE Tr ansactions (Count) by Deal Size

The lower end of the market and the middle market continue to make up the majority of private equity deal ow. Deals under $250 million made up over 70% of the deal ow in 2010, but it was actually the lowest portion of deal ow seen by the lower-middle market since before 2005. Evidence of private equitys returning appetite for bigger deals shows up again with the stat that deals over $500 million made up 16% of 2010s deal ow, beating out 2007s 15% for the record in terms of portion of deal ow.

Source: PitchBook

Source: PitchBook

Request a Demo
Sales: 1-877-267-5593
[5]
1-877-267-5593 demo@pitchbook.com

www.pitchbook.com

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Equity Percent Used In PE Buyouts

Source: PitchBook

Source: PitchBook

The percentage of equity used in private equity buyouts held relatively steady in 2010, sticking close to 2008 and 2009 levels. As would be expected, the smaller and middle-market deals, which have less access to leverage, use almost 10% more equity than larger deals. The amount of equity used in large transactions seems to have settled around an average of 42% during the past four years. Conversely, the amount of equity used for deals under $1 billion has steadily risen over the last ve years from a 10-year low in 2006 of 41%. Equity percentages in buyout deals both big and small will be one of the many interesting data points to monitor in order to gauge the direction and health of the PE industry in the year to come.

Private Equity Add-on Activity

Source: PitchBook

Add-ons as a percentage of private equity buyouts climbed for the sixth straight year in 2010 to account for 41% of all U.S. buyouts. The 442 completed add-on deals in 2010 constitute the fth-highest total on record and had a total value in excess of $9.5 billion. The median value of add-on deals also increased from $25 million in 2009 to $51.5 million in 2010. The trend shows that private equity rms are continuing to nd consolidation investment opportunities and have made the best of the economic recession by acquisitively growing their portfolio companies through add-ons of struggling competitors and complimentary new businesses. The top industry sectors for add-ons in 2010 were Commercial Services with 96, Commercial Products with 44 and Healthcare Services with 40.
1-877-267-5593 demo@pitchbook.com

www.pitchbook.com

[6]

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Business Products & Services (B2B)

The Business Products & Services (B2B) industry, which includes the Commercial Products, Commercial Services and Transportation sectors, had 133 completed PE investments during 4Q 2010 and a total of 475 in all of 2010. The 133 4Q deals mark a 41% increase in deals from 2009s 3Q low of 94. The most active sector in the B2B industry during 2010 was Commercial Services with 236 deals, which was led by the Business Media & Information Services sub-sector with 53 deals.

Source: PitchBook

Consumer Products & Services (B2C)

The Consumer Products & Services (B2C) industry, which includes the Apparel, Consumer Durables and Non-Durables, Media, Restaurants, Hotels & Leisure, Retail, Transportation and Consumer Non-Financial Services sectors, saw a nal count of 89 completed U.S. deals for 4Q 2010, a 39% increase from 3Q 2010. In total there were 323 completed 2010 deals, only a slight increase over 2009s total of 316. The most active sector in the B2C industry in 2010 was Consumer Non-Durables with 67 PE investments, which was driven by its sub-sector Food Products with 41 deals.
Source: PitchBook

Healthcare
The Healthcare industry, which includes the Medical Devices & Supplies, Medical Technology Systems, Pharmaceuticals & Biotechnology and Medical Services sectors, nished 2010 with a total of 192 completed deals. The year-end total represented about a 10% increase from 2009. The most active sector was Medical Services with its 106 deals in Clinics, Hospitals and Elder & Disabled Care service providers. The median deal value for Healthcare deals in 2010 was $50 million, 3.5x more than 2009s of $14.4 million.

Source: PitchBook

www.pitchbook.com

[7]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Information Technology
The Information Technology (IT) industry, which includes the Communications and Networking, IT Hardware, Semiconductors, IT Services and Software sectors, saw 182 completed U.S. deals in 2010. Investment has remained relatively steady in the IT industry over the last two years. The most popular sector by far was Software, which accounted for almost 50% of the total IT deal ow for 2010. It was the Communications and Networking sector though with $4.2 billion in investments that saw the most capital invested during the year.
Source: PitchBook

Financial Services
The Financial Services industry, which includes the Capital Markets Institutions, Commercial Banks and Insurance sectors, ended 2010 with a total of 135 completed U.S. deals, representing a 27% increase in deal ow from last year. The most active sector in 2010 for the industry was Commercial Banks with 51 completed deals, the most popular type being Regional Banks, which saw 35 investments during the year. Commercial banks also accounted for over half of the invested capital in the Financial Services industry with $7 billion of investments during 2010.
Source: PitchBook

Energy
The Energy industry, which includes the Equipment; Exploration, Production & Rening; Energy Services and Utilities sectors, ended 2010 with a total of 114 deals, eight more than were completed in 2009. The 28 completed deals in 4Q 2010 represent a 33% increase from the previous quarter and a 64.7% increase from the low of 17 deals in 2Q 2009. Investment in the Energy industry was led by the 47 investments in Exploration, Production & Rening companies. The median deal amount in the Energy industry during 2010 was $130 million, up from $95 million last year.

Source: PitchBook

www.pitchbook.com

[8]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Private Equity: Data | News | Analysis

Better Data. Better decisions.

Most Active Private Equity Investors in 2010 By Number of Closed Investments Investor Name
The Blackstone Group H.I.G. Capital The Carlyle Group TPG Capital Sun Capital Partners Warburg Pincus Stone Point Capital Thoma Bravo Apollo Global Management GS Capital Partners Metalmark Capital The Riverside Company Golden Gate Capital Platinum Equity Marlin Equity Partners Oaktree Capital Management Wind Point Partners Kayne Anderson Capital Advisors Leonard Green & Partners The Gores Group Audax Group Bain Capital Catterton Partners GTCR Golder Rauner Kohlberg Kravis Roberts Riverstone Holdings Silverhawk Capital Partners Welsh Carson Anderson & Stowe ABRY Partners Bush O'Donnell Centerbridge Partners Court Square Capital Partners Francisco Partners Hellman & Friedman Huntsman Gay Global Capital Kohlberg & Company Lightyear Capital Oak Hill Capital Partners Providence Equity Partners Summit Partners American Securities Capital Partners Ares Management Arsenal Capital Partners CCMP Capital Advisors Crestview Partners General Atlantic

Most Active Private Equity Service Providers in 2010 By Number of Deals Serviced
30 19 18 18 16 15 14 14 13 13 13 13 12 12 11 11 11 10 10 10 9 9 9 9 9 9 9 9 8 8 8 8 8 8 8 8 8 8 8 8 7 7 7 7 7 7

Deal Count

Top Law Firms in Private Equity1

Kirkland & Ellis Jones Day Weil Gotshal & Manges Skadden Arps Slate Meagher & Flom Simpson Thacher & Bartlett Latham & Watkins Dechert Sullivan & Cromwell Shearman & Sterling Paul Weiss Rifkind Wharton & Garrison
1 by counsel provided on closed transactions

Top Investment Banks & Advisors2

Bank of America Goldman Sachs Harris Williams & Co. Jeeries & Company Houlihan Lokey Howard & Zukin Morgan Stanley JP Morgan Lincoln International Robert W Baird Moelis & Company Lazard William Blair & Company Imperial Capital

2 by number of advisory roles in closed transactions

Top Lenders in Private Equity3

GE Capital Bank of America Wells Fargo Madison Capital Funding Fifth Third Bank U.S. Bancorp Fifth Street Finance PNC Financial Services Group Ares Capital Golub Capital Triangle Capital Prospect Capital

3 by number of nancings provided

Source: PitchBook

Source: PitchBook

www.pitchbook.com

[9]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Current Private Equity Portfolio Overhang

Source: PitchBook

Private equity rms owned an all-time high 5,994 U.S. companies at the end of 2010, according to the PitchBook Platform. The number of private equity-owned companies has been steadily building over the last ve years with an annual average growth rate of 19%. The growth has slowed over the last few years due to a decrease in deal ow but still managed to increase by almost 5% in 2010. The number of PE-owned companies really began its ascent as the investment boom kicked into high gear, tripling from 1,620 in 2003 to 4,808 by the end of 2007. These totals represent companies majority-owned by PE rms and exclude add-on companies. This portfolio company overhang is the result of buyouts consistently outpacing exits over the last decade as new money continued to ow in and prots were reinvested. The hold time of investments by PE rms has also been steadily rising over the last few years. In 2010, the median hold time for all companies exited was over 5 years, up considerably from the 3 year hold time seen in 2007. The mismatch of new investments to Median Holding Period of Exits exits, as well as increasing company hold times, means that this overhang of portfolio companies is likely to persist for a number of years, which could potentially pose a structural challenge to the recovering PE industry. The fact that over 66% of these 5,994 companies are investments older than 3 years and 30% are older than 5 years is a potentially troubling sign. This overhang is going to command a lot attention from both PE rms and their limited partners as they look for liquidity. Given an average of about 450 exits per year, there is currently a 4-year backlog consisting of just those PE investments older than 5 years. Clearly PE rms are going to have to increase their exits signicantly over the next few years Source: PitchBook but luckily a number of positive trends are currently developing around exits.

www.pitchbook.com

[ 10 ]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Private Equity Exit Activity

One of the most important developments during 2010 for the private equity industry was an increase in exits, which were up 3.8x from the low of 39 during 1Q 2009 to 148 during 4Q 2010. In fact, the second half of 2010 alone had more exits than 2009 as a whole. These exits are crucial, because as was previously discussed, there are nearly 1,800 investments that have reached the point where they need to be sold to generate liquidity for fund investors. Fortunately, strategic acquirers (corporations) continue to be big buyers of PE-backed companies, IPOs again appear to be a viable option for a lot of companies and the $485 billion PE capital overhang is driving more and more secondary sales (PE rm to PE rm deals) and at record sale amounts.

Source: PitchBook

Source: PitchBook

Percent of Exits (Count) by Deal Type

Median Exit ($)

Source: PitchBook

Source: PitchBook

This chart shows the changes in exit preferences that occurred during 2010 with a shift back to secondary sales and IPOs. Secondary sales returned in a big way with 3x more deals in 2010 than in 2009, though the chart shows that the 28% of exits they currently make up is relatively close to the long-term average. IPOs continued to be an option, although most of the 57 completed were mainly for the purpose of company capital-raising rather than investor liquidity.

The patience of private equity rms paid o as median PE sale amounts were at record levels in 2010. Companies sold to strategic acquirers (corporate acquisitions) sold for a median of $211 million, 2.6x 2009s median sale. The most dramatic statistic, though, is the $382 million median sale amount for PE-to-PE deals (secondary transactions), representing an all-time high by $132 million. The increase was driven by a number of factors, including changes in exit preferences, company sizes and multiples.
1-877-267-5593 demo@pitchbook.com

www.pitchbook.com

[ 11 ]

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Private Equity Fundr aising

U.S Private Equity Fundr aising by Year U.S. private equity fundraising struggled in 2010 with only 95 funds reaching nal closes, raising a total of $84 billion. The second half of the year was the worst 6-month stretch for PE fundraising since 2003 with only $30 billion raised by 33 funds. As a result of the dicult market, the average fund size was down signicantly in 2010 to $911 million from $1.5 billion just two years ago. Fundraising has lagged behind deal ow by about a year in showing the eects of the nancial crises, meaning 2H 2010 will likely represent a bottom for fundraising. A number of factors are currently causing a drag on private equity fundraising, including the current $485 billion private equity overhang, limited partners (LPs) at the top of their allocations and a Source: PitchBook preference by many LPs to wait for more liquidity from current funds before committing to new ones. However, there were bright spots in private equity fundraising during 2010, such as the strong showing by middlemarket funds, which raised almost 90% of the total capital. Firms with strong historical track records were also able to raise capital quickly and in some cases even exceed their targets. It was also a good year for mezzanine funds, which had their fth-best year with a total of $6.5 billion raised by 14 funds. Fundraising in 2011 has strong potential to be much better than 2010. Firstly, there are over 660 funds currently on the fundraising trail, and a number of top performing funds are expected to bring new funds to market in 2011 as well. Secondly, as the market continues to recover, portfolio valuations and distributions will increase again, making the asset class more attractive. Finally, after making limited commitments during the past few years, LPs will need to invest to maintain allocation targets and recommit to existing top managers raising new funds.

U.S Private Equity Fundr aising by Quarter

Source: PitchBook

www.pitchbook.com

[ 12 ]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Capital R aised by Fund Size

Fund Count by Fund Size

Source: PitchBook

Source: PitchBook

Aver age Fund Size ($M)

Aver age Time to Close

Source: PitchBook

Source: PitchBook

The average size of 2010-vintage private equity funds was the fth-highest on record at $911 million but well below the high of $1.5 billion set by the 2008 vintage. The drop in fund size came as PE fund managers opted to close funds short or at the low end of their target range rather than face another year on the fundraising trail. Distressed/Restructuring funds had the highest average fund size in 2010 at $1.7 billion, followed by Buyout funds with $748 million.

The average time spent fundraising by funds closed in 2010 was 19 months, a 19% increase from 2009s average and almost double the time spent by 2007 and 2008 vintage funds. Distressed/Restructuring funds had the shortest fundraising period this year at 10 months on average. 2010-vintage mezzanine funds had the longest average fundraising period at 24 months. 2010 buyout funds took an average of 18 months to reach their nal close.

www.pitchbook.com

[ 13 ]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Private Equity: Data | News | Analysis

Better Data. Better decisions.

Largest Closed Funds

Fund
OCM Opportunities Fund VIII Energy Capital Partners II Madison Dearborn Capital Partners VI Alinda Infrastructure Fund II OCM Principal Opportunities Fund V Carlyle Asia Partners III Centerbridge Special Credit Partners Apollo European Principal Finance Fund Avista Capital Partners II Latin America Private Equity Fund V Littlejohn Fund IV Veritas Capital Fund IV AG Capital Recovery Partners VII Wellspring Capital Partners V Carlyle Global Financial Services Partners

Investor
Oaktree Capital Management Energy Capital Partners Madison Dearborn Partners Alinda Capital Partners Oaktree Capital Management The Carlyle Group Centerbridge Partners Apollo Global Management Avista Capital Partners Advent International Littlejohn & Company Veritas Capital Angelo Gordon & Company Wellspring Capital Management The Carlyle Group

Amount ($M)
4,400 4,335 4,100 4,000 3,300 2,550 2,000 1,400* 1,800 1,650 1,340 1,225 1,200 1,200 1,100 * Euros

Selected Open Funds

Fund
Centerbridge Capital Partners II TCW Energy Fund XV KSL Capital Partners III Behrman Capital IV Jeeries Capital Partners V Capital Z Partners Balderton Capital Fund IV DAG Ventures IV ComVest Investment Partners IV Prairie Capital V

Investor
Centerbridge Partners TCW Group KSL Capital Partners Behrman Capital Jeeries Capital Partners Capital Z Partners Balderton Capital DAG Ventures The ComVest Group Prairie Capital

Target Amount ($M)

3,750 2,500 1,500 1,000 800 750 500 500 500 300

www.pitchbook.com

[ 14 ]

1-877-267-5593 demo@pitchbook.com

The PitchBook Difference

Better Data. Better decisions.

Private Equity: Data | News | Analysis

Your Single Source for Quality Private Equity Data

Only PitchBook tracks the entire private equity lifecycle and every party involved: limited partners, inancial sponsors & investors, target companies, service providers and key professionals. By dynamically linking these parties, PitchBook makes it easy to identify relationships and networks. Additionally, it actively researches target companies the entire time they are in an investors portfolio so youll always be up-to-date on the crucial details of a transaction and the companys progress. The PitchBook Platform contains information on over 25,000 private equitybacked companies, investors, and service providers, across every industry segment, every deal size and every private equity deal type from announcement to exit.

Broad Private Equity Coverage

PitchBooks mission is to provide hard-to-ind information on private equity: the details you can only ind through direct contact with key players and painstaking background research.

Deep Level of Detail

Deal monitoring and research through the entire lifecycle. Without exception, PitchBook actively researches and reports on companies from announcement to inal exit. PitchBook captures the full inancing story, much more than just a snapshot of the deals announcement. No cutting corners. It takes meticulous research to produce complete, consistent, timely, and accurate information, and we devote the manpower and resources necessary to make this happen. Full spectrum coverage. PitchBook covers the full spectrum of private equity deals: all sizes, all industries, and all types.

What Makes PitchBook Different

PitchBook researches deal amounts and valuations, target company inancials and price multiples, capitalization structures, deal terms, investor information and service provider contact information. It also tracks deal stakeholders and participants not just inancial sponsors and investors, but also the many other inancial, legal, and advisory irms associated with taking a deal through to completion.

The PitchBook Platform Places Powerful Intelligence at Your Fingertips:

Request a Demo
Detailed Reports Sortable Results

Customizable Dashboard Excel Downloads

Advanced Searches*

Visit us at www.pitchbook.com
www.pitchbook.com

*Advanced Searches allow selecting criteria from more than 130 search options

[ 15 ]

1-877-267-5593 demo@pitchbook.com