PitchBook PE Breakdown 2011

8/3/2019 PitchBook PE Breakdown 2011

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Private Equity: Data | News | Analysis

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Private Equity: Data | News | Analy

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Table Of Contents

Private Equity Deal Flow ....................................................... 3

Deals by Region & Industry ................................................... 4

Transacons by Amount & Deal Count ................................. 5

Equity Percent Used & Add-On Deals.................................... 6

Deal Flow By Industry ............................................................ 7

Deal-Related League Tables ................................................... 9

Porolio Company Overhang ................................................ 10

Private Equity Exit Flow ......................................................... 11

Private Equity Fundraising .................................................... 12

Selected 2011 Vintage & Open Funds ................................... 14

About PitchBook..................................................................... 15

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relied upon as such or used in substuon for the exercise of independent judgment.


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Private Equity Deal Flow

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The U.S. private equity industry, by many measures, turned

in one of its best years in 2010, despite the overall pooreconomic condions and turbulent financial markets. There

was a steady increase in PE investment during the year culmi-

nang 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 firms in U.S. companies during

2010the fih highest one-year total on record. Deal flow

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 appete 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 highestnumber on record.

Fundraising remains very difficult for U.S. private equity firms. Only 95 funds reached a final close during 2010 on a total of

$84 billion in commitmentsthe lowest amount since 2003. The capital overhang of approximately $485 billion connues to

make fundraising difficult, as does the PE-backed company overhang. PE firms 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 firms limited partners.

Fortunately, exits are on the rise thanks to recovering financial markets, strengthening company fundamentals and rising valua-

ons.

The past year presented private equity firms with a number of challenges, but sll the industry managed to bounce back

surprisingly fast from last years lows. Having now turned the corner, look for the posive trends that developed in 2010 around

deals and exits to connue in 2011. While a number of challenges do remain such as fundraising and availability of financing,

the outlook for 2011 appears to be bright.

U.S. Private Equity Deal Flow by Quarter

U.S. Private Equity Deal Flow by Year

Source: PitchBook

Source: PitchBook


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PE Investments by Region

Private equity investment acvity connues to be

widely spread across the United States. The Midwest

was the most acve region in 2010 with a total of 313deals, 49 more than its 2009 total. The Southeast and

West Coast were the next most acve with 271 and 251

deals, respecvely. The Southwest and Northeast were

the only regions to see a relave decrease in PE invest-

ment acvity in 2010 from 2009.

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Source: PitchBook

Source: PitchBook

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The Business Products & Services and Consumer

Products & Services industries connue to dominate

private equity investment with a combined 53% of deal

flow. During 2010, the B2B industry experienced the

biggest increase in deals from 2009, but it was the Mate-

rials & Resources industry that saw the biggest percent-

age increase with a 57% jump to 77 deals in 2010 from

49 in 2009. Other industries that saw a rise in deal flowduring 2010 included Financial Services and Healthcare.

PE Investments by Industry
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PE Transactions (Count) by Deal Size

PE Transactions ($ Amount) by Deal Size

One major development in 2010 was the return of significant

amounts of leverage, and with it, an increase in large PE deals.In 2009, deals larger than $500 million represented 55% of thetotal capital invested. In 2010, that number jumped to almost70%. The $41 billion invested during 2010 in deals between$500 million and $1 billion represented the second highesttotal on record for the deal range. In another sign of the return-ing availability of leverage for private equity transacons therewere 24 deals above $1 billion2.5x more than in 2009.

The lower end of the market and the middle market connueto make up the majority of private equity deal flow. Dealsunder $250 million made up over 70% of the deal flow in 2010,but it was actually the lowest poron of deal flow seen by the

lower-middle market since before 2005. Evidence of privateequitys returning appete for bigger deals shows up againwith the stat that deals over $500 million made up 16% of2010s deal flow, beang out 2007s 15% for the record in termsof poron of deal flow.

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Source: PitchBook

Source: PitchBook Source: PitchBook

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Source: PitchBook


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The percentage of equity used in private equity buyouts held relavely steady in 2010, scking 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 transacons seems to have seled 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 five 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 interesng data points to monitor in order to gauge the direcon and health of the PE industry in the year

to come.

Private Equity Add-on Activity

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 constute the fih-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 firms are connuing to find consolidaon investment opportunies and

have made the best of the economic recession by acquisively growing their porolio companies through add-ons of

struggling competors and complimentary new businesses. The top industry sectors for add-ons in 2010 were Commer-

cial Services with 96, Commercial Products with 44 and Healthcare Services with 40.

Equity Percent Used In PE Buyouts

Source: PitchBook

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Source: PitchBook

Source: PitchBook


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The Business Products & Services (B2B) industry,

which includes the Commercial Products, Commercial

Services and Transportaon sectors, had 133completed 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

acve sector in the B2B industry during 2010 was Com-

mercial Services with 236 deals, which was led by the

Business Media & Informaon Services sub-sector with

53 deals.

The Healthcare industry, which includes the Medical

Devices & Supplies, Medical Technology Systems,

Pharmaceucals & Biotechnology and Medical Services

sectors, finished 2010 with a total of 192 completed deals.The year-end total represented about a 10% increase

from 2009. The most acve sector was Medical Services

with its 106 deals in Clinics, Hospitals and Elder & Disabled

Care service providers. The median deal value for Health-

care deals in 2010 was $50 million, 3.5x more than 2009s

of $14.4 million.

The Consumer Products & Services (B2C) industry,

which includes the Apparel, Consumer Durables and

Non-Durables, Media, Restaurants, Hotels & Leisure,

Retail, Transportaon and Consumer Non-Financial

Services sectors, saw a final 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 acve sector

in the B2C industry in 2010 was Consumer Non-Durableswith 67 PE investments, which was driven by its

sub-sector Food Products with 41 deals.

Healthcare

Consumer Products & Services (B2C)

Business Products & Services (B2B)

Source: PitchBook

Source: PitchBook

Source: PitchBook

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The Informaon Technology (IT) industry, which

includes the Communicaons and Networking, IT Hard-ware, Semiconductors, IT Services and Soware

sectors, saw 182 completed U.S. deals in 2010. Invest-

ment has remained relavely steady in the IT industry

over the last two years. The most popular sector by far

was Soware, which accounted for almost 50% of the

total IT deal flow for 2010. It was the Communicaons

and Networking sector though with $4.2 billion in

investments that saw the most capital invested during

the year.

The Energy industry, which includes the Equipment;

Exploraon, Producon & Refining; Energy Services

and Ulies sectors, ended 2010 with a total of 114deals, 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 Explo-

raon, Producon & Refining companies. The median

deal amount in the Energy industry during 2010 was

$130 million, up from $95 million last year.

The Financial Services industry, which includes the

Capital Markets Instuons, Commercial Banks and

Insurance sectors, ended 2010 with a total of 135

completed U.S. deals, represenng a 27% increase in

deal flow from last year. The most acve 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 overhalf of the invested capital in the Financial Services

industry with $7 billion of investments during 2010.

Information Technology

Energy

Financial Services

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Source: PitchBook

Source: PitchBook

Source: PitchBook


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By Number of Closed Investments

Most Active Private EquityInvestors in 2010



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 CompanyGolden Gate Capital

Planum Equity

Marlin Equity Partners

Oaktree Capital Management

Wind Point Partners

Kayne Anderson Capital Advisors

Leonard Green & Partners

The Gores Group

Audax Group

Bain Capital

Caerton Partners

GTCR Golder Rauner

Kohlberg Kravis RobertsRiverstone 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 PartnersProvidence Equity Partners

Summit Partners

American Securies Capital Partners

Ares Management

Arsenal Capital Partners

CCMP Capital Advisors

Crestview Partners

General Atlanc

Deal Count30

19

18

18

16

15

14

14

13

13

13

1312

12

11

11

11

10

10

10

9

9

9

9

99

9

9

8

8

8

8

8

8

8

8

8

88

8

7

7

7

7

7

7

2 by number of advisory roles in closed transacons

Top Investment Banks & Advisors2

Bank of America

Goldman Sachs

Harris Williams & Co.

Jefferies & Company

Houlihan Lokey Howard & Zukin

Morgan Stanley

JP Morgan

Lincoln Internaonal

Robert W Baird

Moelis & Company

Lazard

William Blair & Company

Imperial Capital

3 by number of financings provided

Top Lenders in Private Equity3

GE Capital

Bank of America

Wells Fargo

Madison Capital Funding

Fih Third Bank

U.S. BancorpFih Street Finance

PNC Financial Services Group

Ares Capital

Golub Capital

Triangle Capital

Prospect Capital

1 by counsel provided on closed transacons

Top Law Firms in Private Equity1

Kirkland & Ellis

Jones Day

Weil Gotshal & Manges

Skadden Arps Slate Meagher & Flom

Simpson Thacher & Bartle

Latham & Watkins

Dechert

Sullivan & Cromwell

Shearman & Sterling

Paul Weiss Riind Wharton & Garrison

Most Active Private EquityService Providers in 2010

By Number of Deals Serviced

Investor Name

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Source: PitchBook

Source: PitchBook


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Current Private Equity Portfolio Overhang

Private equity firms owned an all-me high 5,994 U.S. companies at the end of 2010, according to the PitchBook Plaorm.

The number of private equity-owned companies has been steadily building over the last five years with an annual average

growth rate of 19%. The growth has slowed over the last few years due to a decrease in deal flow but sll 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 firms and

exclude add-on companies.

This porolio company overhang is the result of buyouts consistently outpacing exits over the last decade as new money

connued to flow in and profits were reinvested. The hold me of investments by PE firms has also been steadily rising over the

last few years. In 2010, the median hold me for all companies exited was over 5 years, up considerably from the 3 year hold

me seen in 2007. The mismatch of new investments to

exits, as well as increasing company hold mes, means

that this overhang of porolio companies is likely to

persist for a number of years, which could potenally

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 potenally troubling sign. This overhang is

going to command a lot aenon from both PE firms 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 consisng of just those PE investments

older than 5 years. Clearly PE firms are going to have to

increase their exits significantly over the next few years

but luckily a number of posive trends are currently

developing around exits.

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Median Holding Period of Exits

Source: PitchBook

Source: PitchBook


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Private Equity Exit Activity

Median Exit ($)Percent of Exits (Count) by Deal Type

Source: PitchBook

The paence of private equity firms paid off as median PEsale amounts were at record levels in 2010. Companies sold tostrategic acquirers (corporate acquisions) sold for a median of$211 million, 2.6x 2009s median sale. The most dramacstasc, though, is the $382 million median sale amount forPE-to-PE deals (secondary transacons), represenng anall-me high by $132 million. The increase was driven by anumber of factors, including changes in exit preferences,company sizes and mulples.

This chart shows the changes in exit preferences thatoccurred during 2010 with a shi back to secondary sales andIPOs. Secondary sales returned in a big way with 3x more dealsin 2010 than in 2009, though the chart shows that the 28% ofexits they currently make up is relavely close to the long-termaverage. IPOs connued to be an opon, although most of the57 completed were mainly for the purpose of companycapital-raising rather than investor liquidity.

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One of the most important developments during 2010 for the private equity industry was an increase in exits, which were up 3.8xfrom 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 awhole. 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 (corporaons) connue to bebig buyers of PE-backed companies, IPOs again appear to be a viable opon for a lot of companies and the $485 billion PE capitaloverhang is driving more and more secondary sales (PE firm to PE firm deals) and at record sale amounts.

Source: PitchBook Source: PitchBook

Source: PitchBook


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Private Equity Fundraising

U.S Private Equity Fundraising by Year

U.S Private Equity Fundraising by Quarter

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U.S. private equity fundraising struggled in 2010 withonly 95 funds reaching final 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 difficult market, the

average fund size was down significantly in 2010 to $911

million from $1.5 billion just two years ago. Fundraising has

lagged behind deal flow by about a year in showing the

effects of the financial crises, meaning 2H 2010 will likely

represent a boom 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 allocaons and a

preference by many LPs to wait for more liquidity fromcurrent funds before comming to new ones.

However, there were bright spots in private equity fundraising during 2010, such as the strong showing by middle-

market 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 fih-best year with a total of $6.5 billion raised by 14 funds.

Fundraising in 2011 has strong potenal to be much beer 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 connues to recover, porolio valuaons and distribuons will increase again, making

the asset class more aracve. Finally, aer making limited commitments during the past few years, LPs will need to

invest to maintain allocaon targets and recommit to exisng top managers raising new funds.

Source: PitchBook

Source: PitchBook


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Average Fund Size ($M) Average Time to Close

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Fund Count by Fund SizeCapital R aised by Fund Size

The average size of 2010-vintage private equity fundswas the fih-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 me spent fundraising by funds closed in2010 was 19 months, a 19% increase from 2009s average

and almost double the me 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 final

close.

Source: PitchBook

Source: PitchBookSource: PitchBook

Source: PitchBook


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Largest Closed Funds

Selected Open Funds

Fund

OCM Opportunies Fund VIII

Energy Capital Partners II

Madison Dearborn Capital Partners VI

Alinda Infrastructure Fund II

OCM Principal Opportunies Fund V

Carlyle Asia Partners III

Centerbridge Special Credit Partners

Apollo European Principal Finance Fund

Avista Capital Partners II

Lan America Private Equity Fund V

Lilejohn Fund IV

Veritas Capital Fund IV

AG Capital Recovery Partners VII

Wellspring Capital Partners V

Carlyle Global Financial Services Partners

Investor


Energy Capital Partners

Madison Dearborn Partners

Alinda Capital Partners


The Carlyle Group


Apollo Global Management

Avista Capital Partners

Advent Internaonal

Lilejohn & 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

Fund

Centerbridge Capital Partners II

TCW Energy Fund XV

KSL Capital Partners III

Behrman Capital IV

Jefferies Capital Partners V

Capital Z Partners

Balderton Capital Fund IV

DAG Ventures IV

ComVest Investment Partners IV

Prairie Capital V

Investor


TCW Group

KSL Capital Partners

Behrman Capital

Jefferies 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

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* Euros


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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, itactively 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.

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The PitchBook Platform contains information on over 25,000 private equity-

backed companies, investors, and service providers, across every industry segment,

every deal size and every private equity deal type from announcement to exit.

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details you can only ind through direct contact with key players and painstaking

background research.

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.

Deal monitoring and research through the entire lifecycle. Without exception, PitchBook actively researches and reportson companies from announcement to inal exit . PitchBook captures the full inancing story, much more than just a snapshot of the deals

announcement.

Full spectrum coverage.PitchBook covers the full spectrum of private equity deals: all sizes, all industries, and all types.

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PitchBook PE Breakdown 2011