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Content Includes

European Fundraising
We assess the experience
of Europe-focused funds in
market in the past year and
historically.
Current Fundraising
Conditions
How has sustained economic
volatility impacted the
present fundraising market?
Distressed Opportunities
Analysis of funds targeting
the distressed opportunities
available in Europe.
European Performance
A rundown of the key
performance metrics for
Europe-focused private
equity funds.
Investors
We identify the key investors
in European private equity
to watch, and assess LP
attitudes following the
eurozone crisis.
Preqin Special Report: European Private Equity
March 2012
Foreword................................................................................... p. 3
European Fundraising in 2011................................................ p. 4
Historical European Fundraising............................................. p. 5
European Fundraising Outlook - 2012................................... p. 6
Distressed Opportunities.......................................................... p. 7
European Investors................................................................... p. 8
Investors to Watch.................................................................... p. 9
Investors Attitudes Following the Eurozone Crisis............... p. 10
Europe-Based Buyout Deal Market....................................... p. 11
Performance of Europe-Focused Funds.............................. p. 12
Contents
Editor:
Alex Jones
Sub-Editor:
Sam Meakin
Preqin:
New York: +1 212 350 0100
London: +44 (0)20 7645 8888
Singapore: +65 6408 0122
Email: info@preqin.com
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Preqin Special Report: European Private Equity draws exclusively on the following sources of information:
t Investor Intelligence - The most comprehensive database of current and potential institutional investors in
private equity, featuring in-depth proles of more than 3,850 actively investing LPs, and over 1,000 that have
put their investments on hold, including investment preferences, future plans, key contact details and more.
t Funds in Market - This constantly updated resource includes details for all funds of all types being raised
worldwide, with key information on target sizes, interim closes, placement agents, lawyers, investors.
t Fund Manager Proles - With detailed proles for over 6,250 GPs, including key strategic and investment
preferences, Fund Manager Proles is the foremost source of data on private equity fund managers worldwide.
t Deals Analyst - The most extensive, detailed source of information on private equity-backed buyout deals in
the world. This comprehensive product contains in-depth data for over 24,000 buyout deals across the globe,
including information on deal value, buyers, sellers, debt nancing providers, nancial and legal advisors, exit
details and more.
t Performance Analyst - The industrys most extensive and transparent source of net-to-LP private equity fund
performance, with full metrics for over 5,700 named vehicles. In terms of capital raised, Performance Analyst
contains data for over 70% of all funds raised historically.
Data Source
3
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
Private equity investment in Europe has historically been secure in its position as the second largest market in the industry, next to
the traditional home of the asset class North America. In recent years, however, Europes position as the second most attractive
destination of choice for private equity investor capital has been under threat due to the rapid growth of the industry in Asia-Pacifc
and other so called emerging markets. Across 2011, however, Europe has featured prominently in private equity professionals and
investors thoughts. To some, the region represents a toxic mix of uncertainty and volatility, while to others it shines as an attractive
opportunity for strategic and well-thought-out investment.
The last year has proven to be particularly signifcant for private equity as a whole for numerous reasons, not least due to the ongoing
eurozone sovereign debt crisis, which saw the largely positive and encouraging fundraising conditions seen at the start of the year
fall away as renewed fears of fnancial crisis and recession took grip. While the long-term results of the current economic diffculties
facing Europe are impossible to predict, the current effects on European private equity are vital to understand. Consequently, this
report aims to analyze Europe-focused private equity from the perspectives of current fundraising conditions, investor attitudes, and
the latest fund performance, framing this important part of the industry in its historical context.
In order to tap into the current landscape of European private equity and produce this special report, we conducted interviews with
over 100 institutional investors from around the world during December 2011 regarding their attitudes towards private equity in light
of recent events in Europe. The sample was selected from Preqins Investor Intelligence database of over 4,800 LPs, the most
comprehensive and accurate source of information on investors in private equity funds available today.
Europe-focused private equity is truly a global industry, with managers targeting the region for investment located in 68 countries
around the world. Preqin, as a global frm with offces in New York, London and Singapore, is ideally placed to track wider trends.
Our worldwide coverage is provided by teams of multi-lingual analysts, allowing us to remain in daily contact with private equity fund
managers, funds of funds, institutional investors, consultants and other service providers. We believe that by speaking to industry
players directly, we are able to assess the latest trends and provide our clients with valuable, pertinent and comprehensive analysis
and data.
We hope you fnd the Preqin Special Report: European Private Equity a useful and interesting guide and, as always, we welcome
any feedback and suggestions you may have for future editions. Should you wish to have any further information on the products and
services offered by Preqin, please do not hesitate to contact any of our offces.
A Jones
Alex Jones
Editor
Foreword
4
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
Global private equity fundraising experienced a strong start to
2011 only to falter in Q3 once the effects of the eurozone crisis
took hold; however for Europe-focused private equity funds, the
level of capital garnered by funds closed increased throughout
the year. Despite economic volatility and the sovereign debt
crisis, Europe proved to be a popular choice for investors in the
asset class.
The Impact of the Eurozone Crisis
Moving into 2011 poor fundraising conditions prevailed, with low
levels of capital being raised across the private equity industry.
Despite this, at the beginning of the year there was a sense that
the prevailing winds were changing, with wider fnancial markets
stabilizing to a degree. With respect to deals, H1 2011 saw a 49%
increase in the value of private equity exits completed compared
to H2 2010, with $209bn realized from 328 deals in the frst half
of 2011, compared to $140bn generated by 377 exits throughout
the latter half of 2010. This encouraged a more positive investor
outlook and freed up capital to make new investments.
As a result, the frst half of the year showed signs of the global
fundraising market recovering. While there were still large
numbers of vehicles on the road seeking capital, funds were
closing in increasing numbers and the logjam of vehicles in
market looked to be easing. Globally, 180 vehicles closed in
Q1 2011 and this increased to 198 funds in the second quarter,
as shown in Fig. 1. Signifcantly, the levels of capital that the
industry was attracting also began to increase in the early part
of 2011, with an aggregate $87.4bn raised by funds that closed
worldwide in Q2, the highest total since Q2 2009.
Mounting fears regarding eurozone debt levels and the associated
fnancial market volatility that followed in the second half of the
year, however, did much to erase the positive fundraising start.
In Q3 136 funds closed on a total of $53.1bn. While the market
recovered partially in the last quarter of 2011, with 168 vehicles
closing on an aggregate $68.8bn, both the number of funds
fnalizing their fundraising and the total capital commitments
gained remained below the strong start seen in H1.
European-Focused Fundraising in 2011
European-focused fundraising bucked the global trend of a poor
fnish to 2011 by raising more capital in Q4 than in Q1; however
overall amount of capital raised remains depressed. As shown in
Fig. 2, the aggregate capital raised by Europe-focused vehicles
closed in Q1 was actually lower than that by Asia and Rest of
World funds. At the beginning of 2011 a total of 41 vehicles
closed for an aggregate $11bn (8bn), but in Q4 the amount of
capital increased to nearly double total capital commitments,
with 39 funds closing on an aggregate $21.5bn (15.9).
Of Europe-focused funds closed in 2011, 21% were venture
funds, buyout and private real estate vehicles each accounted
for 16%, while 14% were private equity funds of funds. Six
percent of Europe-focused private equity vehicles that reached
fnal close in the year were distressed private equity funds.
Europe was the only region for which capital commitments to
funds closed in the last quarter of 2011 were higher than the frst
quarter. While some investors shied away from committing to
private equity funds that intended to invest in Europe due to the
perceived risk, many LPs clearly felt that they had identifed fund
managers that have the requisite talent to negotiate the diffcult
economic conditions, take advantage of the current landscape
and generate attractive returns.
European Fundraising in 2011
Fig. 1: Breakdown of Global Private Equity Fundraising,
Q1 2011 - Q4 2011
180
198
136
168
0
50
100
150
200
250
Q1 2011 Q2 2011 Q3 2011 Q4 2011
No. of Funds
Aggregate Capital Raised ($bn)
Source: Preqin Funds in Market Online Service
Fig. 2: Breakdown of Aggregate Capital Commitments by Fund
Geographic Focus, Q1 2011 - Q4 2011
0
10
20
30
40
50
60
Q1 2011 Q2 2011 Q3 2011 Q4 2011
North America
Europe
Asia and Rest of World
Source: Preqin Funds in Market Online Service
5
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
Historically, Europe-focused fundraising has lagged behind that
of North America-focused funds. As the traditional base of private
equity, North America and particularly the US has attracted
the lion share of capital over the years, with the vast majority of
fund managers based there and the bulk of investment focused
in the region.
As highlighted in Fig. 3, until recently Europe-focused funds have
been the second most popular destination for investor capital,
with North America substantially in front and Asia and Rest of
World-focused vehicles trailing behind in terms of aggregate
contributions. Despite this, however, since the fnancial crisis
we have seen a marked shift in fundraising markets, with the
level of capital fowing into Asia and Rest of World-focused
funds surpassing for the frst time that contributed to vehicles for
investment in Europe in 2010. This trend has continued in 2011,
with Europe-focused vehicles garnering $62.4bn in contrast to
Asia and Rest of World's $63.5bn.
The fnancial crisis negatively affected the private equity industry
as a whole, with fundraising across all major markets down
signifcantly both in terms of the number of funds successfully
closed each year and levels of capital raised, and Europe-focused
fundraising has been no exception to this trend. As shown in
Fig. 4, while there have been small periods of improvement
for European fundraising, 2008-2010 saw aggregate capital
contributions fall from $167.8bn to just $58.9bn. The amount of
capital raised increased slightly in 2011; however the number of
funds that closed declined from 182 in 2010 to 161 last year a
far cry from the all-time peak of 414 funds that reached a fnal
close in 2007.
In contrast, fundraising for funds focused on investment in Asia
and Rest of World has proven to be much more resilient to
the effects of the crisis. While the number of funds closed and
aggregate capital raised are still below the fgures seen during
the boom period, the amount of capital raised by Asia and
Rest of World-focused funds has now surpassed the amounts
seen in 2005. The private equity industry in the likes of Asia,
South America and India has expanded rapidly over the past
decade alongside wider fnancial growth and we have seen
a corresponding expansion of the number of sophisticated
institutional investors based in these regions. This, coupled with
the fact that many Western LPs have become more open to
investment in emerging markets at the expense of allocations
to funds targeting the traditional markets, has narrowed the gap
between fundraising levels in Europe and Asia and Rest of World.
Since the fnancial crisis hit the private equity industry, the
fundraising market across all regions has been very crowded.
Poor wider economic conditions led to sustained periods
of unattractive deal and exit opportunities, which in turn
resulted in a dearth of distributions back to investors and a
decline in commitments to funds. As a consequence, over recent
years it has taken progressively longer for many funds to reach
fnal close. The average time spent in market for Europe-focused
vehicles attempting to attract capital has increased year on year,
from 12.4 months for funds closed in 2006 to 19.5 months for
funds closed in 2011.
To compound the crowded conditions seen from 2009 onwards,
any brief window of economic stability - such as at the end of
2010 and beginning of 2011 - has led to a furry of exit and deals
made. In such periods, many GPs that were sat on the sidelines
have come to market with new offerings, adding to the many
already struggling funds. This has created a logjam effect, with
record numbers of funds on the road culminating in the over
1,800 vehicles in market seen during February 2012.
Historical European Fundraising
Year of Final Close
A
g
g
r
e
g
a
t
e

C
a
p
i
t
a
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R
a
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(
$
b
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)
Fig. 3: Breakdown of Aggregate Capital Commitments by Fund
Geographic Focus, 2000 - 2011
0
50
100
150
200
250
300
350
400
450
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
North America
Europe
Asia and Rest of
World
Source: Preqin Funds in Market Online Service
Year of Final Close
Fig. 4: Breakdown of Europe-Focused Private Equity Fundraising,
2000 - 2012 YTD (As at 23rd February 2012)
222 220
196
165
196
270
383
414
378
231
182
161
16
0
50
100
150
200
250
300
350
400
450
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
YTD
No. of Funds
Aggregate Capital Raised ($bn)
Source: Preqin Funds in Market Online Service
6
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
At present there are a record 1,885 private equity funds of all
types on the road globally, seeking an aggregate $777.5bn in
investor capital. Due to the poor fundraising conditions seen in the
aftermath of the fnancial crisis, in 2012 there is effectively three
years stock of vehicles in market, resulting in an unprecedentedly
crowded landscape. Some European GPs, such as Duke Street,
have shelved fundraising plans and now operate on a deal-by-
deal basis; however, investor sentiment remains strong and it is
possible for well-positioned funds to be successful on the road.
For example, UK-based BC Partners recently closed its latest
Europe-focused buyout vehicle, BC European Cap IX, above its
6bn target by reaching its 6.5bn hard-cap in February 2012.
Breakdown of Funds Currently in Market
As shown in Fig. 5, of the record number of vehicles currently
seeking capital, 23% (436) are focused on investment in Europe,
while 44% (832) are North America-focused and the remaining
32% (617) are geared towards investment in Asia and Rest of
World. Of the three main geographic regions, Europe-focused
vehicles are currently seeking $192.3bn (141.2bn), representing
the smallest proportion of the aggregate capital being sought by
the industry at approximately one-quarter of the total.
Of the European-focused vehicles currently in market, over 90%
are managed by GPs based in the region, representing 83% of
the total capital being sought by such funds. Seven percent are
managed by frms headquartered in North America, representing
12.5% of the aggregate capital target of Europe-focused funds,
while the remaining 3% are managed by Asia and Rest of World-
based managers, representing 4.5% of the aggregate capital
being sought by such vehicles.
Mirroring trends seen across the industry, the most numerous type
of Europe-focused fund currently in market is real estate. Such
vehicles have had a particularly diffcult time in attracting capital
from investors, with just 61 Europe-focused private real estate
funds reaching fnal close in the last two years, accounting for an
aggregate $16.1bn in capital. As shown in Fig. 6, the next most
common fund type in market is venture; however these vehicles
typically have much smaller target sizes than funds pursuing
other strategies, meaning that 81 funds are targeting just $8.5bn
(6.4bn). There are currently 61 Europe-focused infrastructure
funds in market targeting an aggregate $40.8bn, while there
are 57 buyout vehicles seeking a total of $54.2bn. Due to the
impact of the eurozone crisis, there are now a great deal more
distressed opportunities for private equity fund managers to take
advantage of. Unsurprisingly this has led to 15 Europe-focused
distressed private equity funds (constituting those pursuing
distressed debt, turnaround and special situations strategies) in
market, targeting an aggregate $10.3bn (7.6bn), representing
over 5% of the total capital being sought by all European funds.
Outlook for 2012
While conditions remain diffcult, some investors clearly feel that
there are opportunities to be had in investing in private equity in
Europe. At present, 191 of the funds in market that are targeting
the region have held an interim close, raising an aggregate
$38.6bn (28.3bn) towards their goals. This is a promising sign
that fundraising levels may improve throughout the coming year,
as investors look to tap into the potential returns to be had from
successfully navigating the economic circumstances resulting
from the eurozone crisis. As we will see later in this report, there
remains substantial investor interest in investment in Europe;
however there will not be enough capital to satisfy the demands
of every manager presently on the road. As a result, it is vital for
GPs looking to market their fund to ensure that they have strong
marketing/branding skills, a clear, well-thought-out mandate and
deep knowledge regarding their prospective investor base.
European Fundraising Outlook - 2012
Fig. 6: Breakdown of Europe-Focused Funds Currently in Market
by Fund Type
104
81
61
57
41
31
15 14
39.9
8.5
40.8
54.2
9.2
7.4
10.3
6.7
0
20
40
60
80
100
120
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E
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No. of Funds
Aggregate Capital Target ($bn)
Source: Preqin Funds in Market Online Service
Primary Geographic Focus
Fig. 5: Breakdown of Funds Currently in Market
by Main Geographic Focus
436
617
832
192.3
203.8
381.4
0
100
200
300
400
500
600
700
800
900
Europe Asia and Rest of
World
North America
No. of Funds
Aggregate Capital Target ($bn)
Source: Preqin Funds in Market Online Service
7
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
Since the pioneering distressed private equity funds launched in
the 1980s, vehicles investing in securities of companies facing
fnancial distress or bankruptcy have made a relatively small,
but vital, contribution to the private equity marketplace. After the
constriction of capital markets and economic crisis that occurred
following the collapse of Lehman Brothers in 2008, we have
witnessed increasing demand for such vehicles from investors
looking to tap into the resulting opportunities.
Historical Distressed Private Equity Fundraising
From 2003 to March 2012, a total of 288 distressed private equity
funds have closed worldwide, raising over $219bn in capital
from investors. Over this same period, Europe-focused funds
accounted for 52 of these vehicles, representing $25.4bn of the
total capital raised. For funds globally, the peak of fundraising
hit during the boom period of 2007 and 2008, when 44 and
40 distressed funds raised $51.3bn and $54.2bn respectively.
While representing just a small proportion of global fundraising,
Europe-focused distressed private equity funds have grown in
importance and for such vehicles the peak in fundraising was
reached in 2011, when 10 vehicles closed on an aggregate
$7.7bn (5.7bn). This is unsurprising given the fact that the
sovereign debt crisis in the region has created a plethora of
opportunities for investment in distressed private companies. As
shown in Fig. 7, the number of funds closing and the level of
capital contributions into such funds has increased year-on-year
since 2009.
Current Distressed Private Equity Fundraising Conditions
As of March 2012, there are 66 distressed private equity funds
in market, seeking $7.6bn, and of these there are 15 Europe-
focused vehicles targeting an aggregate $3.5bn (2.6bn) from
investors. While number of European funds on the road is lower
in comparison to North America- and Asia and Rest of World-
focused funds, their aggregate target is the higher of all three
regions. This highlights the fact that many fund managers
intending to invest in distressed assets in Europe believe that
there are abundant opportunities to take advantage of in the
region, in part due to the fnancial conditions created by the
eurozone crisis.
LP Sentiment towards Distressed Private Equity
In a September 2011 study of LP attitudes towards distressed
private equity investment, undertaken at a time of particular
concern over the sovereign debt crisis, a prominent 65% of
investors in distressed funds named Europe as a preferential
focus. It is interesting to note that several LPs we interviewed at
this time were looking to move away from US-focused distressed
private equity investments towards opportunities in Europe. One
large US public pension fund noted: [There are] more distressed
companies in Europe because of gloom hanging over the EU...
[there are] better opportunities to invest there. Fig. 8 shows the
largest Europe-focused distressed private equity funds still in
market, looking to take advantage of this increased demand.
Distressed Opportunities
* Comprises: distressed debt, turnaround and special situations funds
Fig. 7: Annual Global and Europe-Focused Distressed Private
Equity* Fundraising by Year of Final Close, 2003 - 2011
2 2 2
7 7
5
6
9
10
19
24
31
33
44
40
28
37
28
0
10
20
30
40
50
60
2003 2004 2005 2006 2007 2008 2009 2010 2011
No. of Non-Europe-Focused
Funds ($bn)
No. of Europe-Focused Funds
Aggregate Capital Raised by
Non-Europe-Focused Funds
($bn)
Aggregate Capital Raised by
Europe-Focused Funds ($bn)
Source: Preqin Funds in Market Online Service
Fig. 8: Top Five Europe-Focused Distressed Private Equity Funds Currently in Market (As at 23rd February 2012)
Fund Vintage Manager Type Target Size (mn) Latest Interim Close Fund Status Location Focus Manager Country
Apollo European Principal Finance
Fund II
2012
Apollo Global
Management
Distressed
Debt
2,500 EUR 10-Feb-12 First Close Europe US
Avenue Europe Special Situations
Fund II
2011
Avenue Capital
Group
Distressed
Debt
1,500 EUR 22-Dec-11 Fourth Close West Europe US
Merchant Asset Partners 2010
Merchant Asset
Partners
Turnaround 500 GBP - Raising UK UK
OHA European Strategic Credit
Fund
2011 Oak Hill Advisors
Distressed
Debt
750 USD 10-Feb-12 Fifth Close West Europe US
Strategic Value Global
Opportunities II
2011
Strategic Value
Partners
Distressed
Debt
750 USD 31-Jan-11 First Close
North
America,
Europe
US
Source: Preqin Funds in Market Online Service
8
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
At present, Preqins Investor Intelligence product tracks 1,165
investors based in Europe, representing 31% of the global
private equity investor universe. As shown in Fig. 9, private
sector pension funds represent 18% of the total number, with
public pension funds accounting for 13%, and funds of funds
12%.
In terms of allocations to private equity, 34% of European
investors allocate 50-249mn, while a notable 21% allocate
under 25mn, as shown in Fig. 10. Of the Europe-based investor
universe just 6% invest 2.5bn or more in the asset class. The
majority of these larger allocators tend to be fund of funds
managers; however there are other notable investors based in
the region. The details of fve prominent Europe-based LPs can
be seen in Fig. 11.
Investment Preferences
In December 2011 Preqins study of investor sentiment revealed
that a signifcant 49% of all Europe-based institutional investors
intend to seek allocations to small to mid-market buyout funds in
2012, with some 45% believing that this is the area of the market
that is currently presenting attractive opportunities. Nineteen
percent of European LPs advised that they intend to target the
distressed private equity space and 27% believe that this area
is attractive, which is unsurprising given the growing number of
opportunities available for distressed investment.

While Europe-based LPs have been historically characterized
as conservative and typically more adverse to frst-time fund
managers and emerging market investment, they are also
highly experienced and sophisticated investors. In recent years,
we have seen a growing number become more open to the
perceived higher risk / higher return opportunities presented by
emerging managers. At present, 46% of Europe-based LPs are
interested in, or are considering, investment in frst-time private
equity funds, while 15% are open to investment with spin-off
teams. The remaining 29% will not consider emerging managers.
European LPs
Fig. 11: Five Notable Europe-Based Investors in Private Equity
Investor Type Location AUM (bn) Current Allocation to PE (%) First-Time Funds Typical Investment Size (mn)
AlpInvest Partners
Private Equity Fund of Funds
Manager
Netherlands EUR 40.2 100 Yes EUR 10-250
Pantheon Ventures
Private Equity Fund of Funds
Manager
UK USD 25 100 Yes USD 10-20
APG - All Pensions Group Asset Manager Netherlands EUR 274 5.5 Yes -
Pictet & Cie Bank Switzerland USD 350 4 No USD 5-150
Universities
Superannuation Scheme
Public Pension Fund UK GBP 32.6 9 Yes GBP 50-250
Private Equity Allocation
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I
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v
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t
o
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s
Fig. 10: Make-up of Europe-Based LPs by Private Equity
Allocation Size
21%
10%
34%
18%
11%
3% 3%
0%
5%
10%
15%
20%
25%
30%
35%
40%

0
-
2
4
m
n

2
5
-
4
9
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5
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1
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9
9
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5
,
0
0
0
+
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Source: Preqin Investor Intelligence Online Service
Source: Preqin Investor Intelligence Online Service
Fig. 9: Make-up of Europe-Based LPs by Investor Type
18%
13%
12%
9%
9%
7%
7%
6%
6%
4%
9%
Private Sector Pension Funds
Public Pension Funds
Fund of Funds Managers
Insurance Companies
Banks & Investment Banks
Asset Managers
Family Offices
Investment Companies
Foundations
Corporate Investors
Other
Source: Preqin Investor Intelligence Online Service
9
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
Investors to Watch
Domestic Europe-Focused Investors to Watch
Investor Name Type Location AUM
Current Allocation
(% of AUM)
Target Allocation
(% of AUM)
2012 Investment Plans
SEB Pension
Private Sector
Pension Fund
Sweden SEK 15.5bn 10% 10%
SEB Pension anticipates that it will make new fund commitments in H1
2012, and is planning to increase the number of GP relationships it has
within its private equity portfolio over the coming year. The pension fund
invests in a variety of fund types including buyout, venture and distressed
debt vehicles that are predominantly focused on European markets.
Talanx Asset
Management
Asset Manager Germany EUR 85bn 1.5% n/a
Talanx Asset Management plans to commit to between eight and ten new
funds over the course of 2012, allocating 10-30mn to each opportunity.
The asset manager continues to invest on a global scale, with a particular
focus on vehicles targeting Europe and North America, while also looking
to increase its long-term allocation to emerging markets.
Blue Sky
Group
Asset Manager Netherlands EUR 13bn n/a n/a
Blue Sky Group is looking to re-enter the asset class in the immediate
future, having ceased investing in the mid-2000s. It will be looking to form
new manager relationships in 2012 as it looks to build its exposure to the
asset class. It is looking to invest in funds of funds based in Europe and the
US, and will also consider opportunities in emerging markets.
Nordea Bank Bank Denmark EUR 125.2bn 0.2% n/a
Nordea Bank is looking to increase its level of exposure to the private
equity asset class over the next 12 months, and could commit to up to ve
new vehicles. The bank is primarily targeting Northern Europe-focused
buyout funds. It will predominantly be committing to re-ups with its
existing fund managers, but will also consider investment opportunities
with managers outside of its existing portfolio.
PPM
Managers
Asset Manager UK GBP 1.1bn 100% n/a
PPM Managers expects to commit to between four and ve new private
equity funds in the next 12 months. It believes that small to mid-market
buyout funds are presenting the best opportunities and will be focusing
predominantly on these fund types that target Europe over the next 12
months. In the longer term, it plans to increase its level of exposure to the
asset class. It typically commits 20-30mn per fund.
Foreign Europe-Focused Investors to Watch
Investor Name Type Location AUM
Current Allocation
(% of AUM)
Target Allocation
(% of AUM)
2012 Investment Plans
Development
Bank of Japan
Bank Japan JPY 14,830tn 0.6% n/a
Development Bank of Japan is looking to gain greater exposure to
overseas funds in 2012, seeking to invest in funds focused on Europe,
North America, and regions in Asia such as India and China, as well as
continuing to invest in Japan-focused funds. Over the next year, DBJ plans
to commit $200mn (approximately JPY 15.2bn) to ve to six private equity
funds. The bank has an interest in a wide variety of fund types.
NTUC Income
Insurance
Co-operative
Insurance
Company
Singapore SGD 26.4bn n/a n/a
NTUC Income Insurance Co-operative has set aside SGD 150-250mn to
invest in ve to ten new private equity funds over the next 12 months.
The insurance company targets a range of fund types including buyout,
mezzanine and growth funds. It invests primarily in Europe, North
America and Asia (in particular Greater China).
Ohio Public
Employees'
Retirement
System
Public Pension
Fund
US USD 76bn 8.8% 10%
Ohio Public Employees' Retirement System (OPERS) has set aside $2bn
to commit across 12 to 15 new private equity funds over the next 12
months. It has a preference for buyout, growth, venture, mezzanine and
secondaries funds. It invests globally, including Europe, North America
and emerging markets.
San Francisco
City & County
Employees'
Retirement
System
Public Pension
Fund
US USD 16bn 12.5% 16%
San Francisco City & County Employees' Retirement System has increased
its target allocation to private equity from 14% to 16% of its total assets.
Following in line with this increase, it has set aside $300-400mn to invest
across 12 to 16 new private equity funds during 2012. Amongst these
investments, it will look to commit to Europe-based distressed debt
vehicles.
SunSuper
Superannuation
Scheme
Australia AUD 18bn 6.5% 7%
In 2012, SunSuper plans to commit AUD 300-400mn to between six and
eight new funds. SunSuper continues to focus on investing on a global
scale, with a particular interest in vehicles targeting Europe, North
America and emerging markets, including Asia. It primarily invests in
distressed private equity funds, but also has some exposure to mid-
market US buyout funds.
Source: Preqin Investor Intelligence Online Service
Source: Preqin Investor Intelligence Online Service
10
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
During the latter half of 2011 growing fears regarding the
sustainability of the eurozone and the growing burden placed
upon some of its member states due to sovereign debt levels
led to a period of sustained fnancial market volatility across the
world. This affected the private equity industry in many ways,
chiefy through the constriction of exit and deal markets and
the corresponding lowering of capital commitments to funds;
however what do LPs feel about investment in the asset class
following this crisis?
During our December 2011 study of global investor sentiment,
we asked investors how recent volatility in wider fnancial
markets, and in particular the sovereign debt crisis in Europe,
has impacted on their views of private equity. As Fig. 12 shows,
almost two-thirds (61%) of investors we spoke to for this study
have not changed their attitude toward private equity investment,
and a ffth of investors feel more positive about the opportunities
private equity has to offer in light of volatility in wider markets.
Many investors have shown concerns over the impact of
volatility in wider markets on their private equity portfolios, but
the vast majority are sticking with the program. One Thailand-
based investor we spoke to commented: "The fnancial climate
doesnt make us positive or negative, just more cautious when
investing, and a pension fund based in Malaysia stated: While
the increased fnancial volatility has slightly impacted our exit
schedules, it has not dampened our enthusiasm for private
equity. Overall we remain very positive about the asset class.
A number of investors feel that private equity is faring well in
comparison to other asset classes. One investor, based in
Australia, stated: Public markets are more volatile and risky
in times like this, so private equity becomes more attractive.
Many investors shared this view, including a Netherlands-based
pension fund, which commented: The volatility is affecting private
equity less than other asset classes, and a US endowment,
which noted: [There is] more value in private equity after the
fall in public markets. Several LPs also noted that wider market
volatility is creating new opportunities within private equity, in
particular in the distressed and secondaries sectors.
Some investors (19%) feel more negative towards the private
equity asset class as a result of recent market volatility,
particularly within the eurozone. Some are concerned that public
market losses are increasing the risk of the denominator effect,
while others have concerns about maturing funds within their
portfolios being able to realize their investments.
LPs Attitudes Following the Eurozone Crisis
Fig. 12: Impact of Recent Volatility in Wider Financial Markets on
LP Attitudes towards Private Equity
20%
19%
61%
More Positive
towards Private
Equity
More Negative
towards Private
Equity
Opinion of Private
Equity Has Not
Changed
Source: 2012 Preqin Global Private Equity Report
11
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
Private equity-backed buyout transactions based in Europe
comprise over a third (36%) of all such deals worldwide,
accounting for 34% of aggregate deal value. As shown in Fig.
13, the number and aggregate value of European deals declined
signifcantly as the fnancial crisis took hold; however deal fow
has since rebounded in subsequent years. From 2009 to 2011
the number and aggregate value of such transactions has
increased year-on-year, hitting a post-crisis peak in 2011 of 928
deals for an aggregate $96.3bn. This mirrors global trends that
saw 2011 deal activity reach the highest levels since the private
equity boom period.
Many fund managers worldwide delayed deploying their capital
reserves in the immediate aftermath of the collapse of Lehman
Brothers, as conditions were unfavourable due to depressed
fnancial markets, anti-leveraging sentiment and the lack of easily
obtainable debt fnancing. As conditions subsequently improved,
however, there have been several windows of opportunities for
deal-making, which has led to a rush of GPs deploying some
of the substantial levels of dry powder that have been available
to them. Since 2008, capital held in reserve for Europe-focused
funds has declined from $269.7bn to $232.7bn as managers
have put their funds to work.
Buyout Deal Trends
Fig. 14 shows the breakdown of Europe-based private equity-
backed buyout deals in 2011 by transaction type, with leveraged
buyouts (LBOs) accounting for the largest proportion of the
number of deals completed during the year. Unsurprisingly,
these heavily leveraged transactions represented by far the
largest share of the aggregate deal value, accounting for 76%
of the total.
Add-on deals, where a portfolio company acquires bolt-on
purchases in the same industry, have become an increasingly
important tool for fund managers looking to consolidate their
portfolio in times of sustained volatility. Add-ons currently
represent over one-third of all private equity-backed deals, up
from around one-ffth of all deals pre-fnancial crisis. n 2008
there were 467 add-ons worth an aggregate $3.4bn, rising to 963
completed in 2011 for a total of $28.4bn. In Europe during 2011,
such transactions accounted for 27% of all deals completed
during the year, representing 6% of the aggregate value. Given
current wider market conditions, many fund managers have used
add-ons to help protect their portfolio against the negative impact
of increased volatility and fnancial stress.
Geographic Focus of European Deals
In terms of geographic location, the three largest economies in
Europe Germany, France and the UK have dominated the
number of private equity-backed buyout deals, as shown in Fig.
15. The UK is one of most sophisticated private equity markets
and is home to numerous private equity fund managers, and as a
result is by far the most popular deal destination with over 1,600
transactions completed in the country since 2006. This is over
twice the number of second placed country - France.
Europe-Based Buyout Deal Market
N
o
.

o
f

D
e
a
l
s
Fig. 13: Europe-Based Private Equity-Backed Buyout Deals,
2006 - 2012 (As at 24th February 2012)
A
g
g
r
e
g
a
t
e

D
e
a
l

V
a
l
u
e

(
$
b
n
)
958
1,079
889
509
855
928
123
0
20
40
60
80
100
120
140
160
180
200
0
200
400
600
800
1000
1200
2006 2007 2008 2009 2010 2011 2012 YTD
No. of Deals Aggregate Deal Value ($bn)
Source: Preqin Deals Analyst Online Service
P
r
o
p
o
r
t
i
o
n

o
f

T
o
t
a
l
Fig. 14: Breakdown of European Private Equity-Backed Buyout
Deals in 2011 by Transaction Type
55%
27%
12%
2%
1%
1%
1% 0.8%
0.2%
76%
6%
5%
8%
0.5%
3%
0.7% 0.5% 0.03%
0%
10%
20%
30%
40%
50%
60%
70%
80%
L
B
O
A
d
d
-
o
n
G
r
o
w
t
h

C
a
p
it
a
l
P
u
b
lic

t
o

P
r
iv
a
t
e
M
e
r
g
e
r
P
I
P
E
R
e
s
t
r
u
c
t
u
r
in
g
R
e
c
a
p
it
a
liz
a
t
io
n
T
u
r
n
a
r
o
u
n
d
No. of Deals
Aggregate Deal Value ($bn)
Source: Preqin Deals Analyst Online Service
Country No. of Deals
UK 1,686
France 785
Germany 583
Sweden 284
Italy 276
Fig. 15: Top Five European Countries by Number of Private Equity-
Backed Buyout Deals, 2006 - 2012 YTD (As at 24th February 2012)
Source: Preqin Deals Analyst Online Service
12
Preqin Special Report: European Private Equity
2012 Preqin Ltd. / www.preqin.com
Performance Analyst, Preqins extensive and transparent source
of net-to-LP private equity fund performance, currently holds
fund-level performance data for over 1,180 European private
equity funds, ranging in vintage from 1984 to 2011.
Fig. 16 shows the median called-up, distributed and remaining
value ratios by vintage year for Europe-focused funds. Vehicles
of vintage years between 2000 and 2001 have a median
called-up fgure of over 90% of their committed capital and
have distributed back between 1.1x and 1.3x investors capital
contributions. Funds of 2000 to 2006 and 2009 to 2010 vintages
are showing a total value to paid-in capital (TVPI) of over 100%,
while 2006, 2007 and 2008 have TVPIs of 96.6%, 95.6% and
97% respectively. For later vintage funds, however, this could yet
change, as these funds are still early in their investment cycles.
The median net RR and quartile boundaries by vintage year of
Europe-focused funds are demonstrated in Fig. 17. Median RRs
have remained in positive territory for the entire sample, with the
highest median return of 16.5% being achieved by 2002 vintage
vehicles. The bottom quartile boundary remains in the black for
all vintage years prior to 2005, before dropping into single-digit
negatives for vintages 2006 to 2009. The difference between
the top and bottom quartile boundaries is signifcant across
all vintage years, demonstrating the importance of investors
fund selection. The largest difference is seen for funds of 2009
vintage, with a gap of 28.7 percentage points.
From vintage years 2000 to 2004, Europe-focused funds show
higher median net RRs than their US counterparts, before being
overtaken from 2005 to 2009, as shown in Fig. 18. Until vintage
2009, the median Europe-focused fund has performed below the
median Asia and Rest of World-focused fund. This analysis is
conducted using performance data for 3,600 private equity funds
with vintages between 2000 and 2009, including 2,307 US-
focused, 829 Europe-focused, and 464 Asia and Rest of World-
focused funds.
Top Performing Europe-Focused Funds
By examining all funds with a focus on investment in Europe that
have a vintage year of 2009 or older and have invested at least
50% of their committed capital, it is possible to ascertain the top
performing European funds. Using RR as the key measure,
the 1997 vintage Swedestart II, managed by CapMan Capital
Management, is top, with an RR of 168.5%. Permira's vintage
1997 Permira Europe buyout fund is second, with an RR of
84%. Next on the list is the more recent, vintage 2004 Herkules
Private Equity Fund I, a 2004 vintage buyout fund managed by
Norway-based Herkules Capital, which has an RR standing at
80.4%.
Performance of Europe-Focused Funds
Vintage Year
Fig. 18: Median Net IRRs by Primary Geographic Focus and
Vintage Year
0%
5%
10%
15%
20%
25%
30%
35%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
US
Europe
Asia and Rest
of World
Vintage Year
Fig. 17: Europe-Focused Funds - Median Net IRRs and Quartile
Boundaries by Vintage Year
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Top Quartile IRR
Boundary
Median IRR
Bottom Quartile
IRR Boundary
Source: Preqin Performance Analyst Online Service
Source: Preqin Performance Analyst Online Service
Vintage Year
Fig. 16: Europe-Focused Funds - Median Called-Up, Distributed
and Remaining Value Ratios by Vintage Year
0%
20%
40%
60%
80%
100%
120%
140%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Distributed to Paid-In
Capital
Remaining Value to
Paid-In Capital
Called-Up to
Committed Capital
Source: Preqin Performance Analyst Online Service
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About Preqin
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