[ ] press release evca tf

PRESS RELEASE: STRICTLY EMBARGOED FOR RELEASE UNTIL 8AM CET TUESDAY 13th MARCH 2007

FINAL

EUROPEAN PRIVATE EQUITY:

STRONG 2006 PERFORMANCE DRIVES INCREASED ALLOCATION

FIGURES SET NEW EUROPEAN FUNDRAISING AND INVESTMENT RECORDS AND CONFIRM BOOST OF VENTURE CAPITAL

Geneva, 13 March 2007

Preliminary figures for private equity performance and activity for 2006 will be presented at the European

Private Equity and Venture Capital Association (EVCA)’s Investors’ Forum in Geneva on

14 March 2007. 2006 Preliminary Private Equity activity data has been compiled on behalf of EVCA by

Thomson Financial and PricewaterhouseCoopers, and final figures will be published at EVCA’s Symposium

in Rome in June. Thomson Financial compiled the 2006 Private Equity performance benchmark data.

Preliminary figures show:

Strong top quarter internal rate of returns (IRR) are delivered by both venture (23.5%) and buyout

(37.6%) funds, with an overall long-term top quarter IRR of 29.1%;

With one year returns for all private equity at 21.3% and a historical 27 year annualised return net

of fees at 10.3%, private equity is a highly attractive asset class;

Fundraising: European private equity firms raise a new record €90 billion in 2006, up 25% on 2005,

which was already a record year;

Sources of money show consistent commitment in terms of the proportion of money from pension

funds at 26% of the total (compared to 25% in 2005), while fund of funds have contributed a

record amount in 2006, €18 billion, representing 21% of the total, doubling its previous year’s

share;

Of the total €90 billion funds raised, €71 billion (compared with €58 billion in 2005) is allocated to

buyouts, representing the lion’s share in value;

€16 billion of funds raised is allocated to venture capital, a rise of almost 50% on the €11 billion

raised in 2005. This is the second highest amount raised for venture after the €22 billion all-time

record of 2000;

Investments: of the total €50.3 billion equity capital invested in 2006, (up from €47 billion in 2005),

78% relates to buyouts by value. However, based on the number of investments, VC deals take up

a 73% share.

Some 8,500 investments were made in Europe, where the average buyout deal size is €17 million

underlining the core industry focus on small to medium sized companies.

Minervastraat 4, B-1930 Zaventem, Belgium - Tel +32 2 715 00 20 - Fax +32 2 725 07 04 - [email protected] - www.evca.com

http://www.evca.com/

mailto:[email protected]

Following record activity levels in 2005, 2006 was another landmark year for the European private equity

industry, with preliminary figures showing increased fundraising and investment activity. These record

figures are a clear indication that strong performance - with stable returns over the long term - is driving

fundraising and investment in the Private Equity sector. While buyouts represent the main proportion of

the European fundraising by value, there is evidence that the venture capital segment is making a

comeback, with €16 billion raised for VC investments, €5 billion more than in 2005.

Commenting on the figures released today, Javier Loizaga, Chairman of EVCA and CEO and Managing

Partner of Mercapital, said:

“2006 has highlighted the growing importance of the European private equity industry, with private equity

firms in Europe clearly demonstrating their continuing ability to attract record amounts of capital from

institutional investors – both to buyout funds, but more importantly also to venture capital. This increasing

commitment to the industry is, to a large extent, driven by performance, and the European private equity

industry has, yet again, proved its ability to generate excellent returns for investors. At a time when the

global industry is under increased scrutiny, particularly in terms of the way in which private equity firms

operate and in their ability to deliver to investors and other stakeholders, performance is and will remain a

key indicator.

Under the current spotlight from policymakers and the public alike, we - as the European industry body -

are working hard to contribute to the debate to enhance greater understanding of private equity: why its

business model is successful and how we can counter ill-founded criticisms. But we cannot do this alone:

we need vocal support from all segments of the industry, particularly from those who benefit from its

strong performance.”

Gemma Postlethwaite, Vice President, Thomson Financial, added:

“The European private equity industry is continuing to show strong, consistent returns (at 10.3% long-term

average net IRR) which are driving record fundraising as investors continue to increase their allocation by

shifting their assets from public equities and fixed income into both buyout and venture capital. Despite

the jitters in the stock market in the last few weeks, the strong IPO and M&A activity combined with

relatively cheap debt constitute ideal conditions for private equity firms to continue generating strong

returns.”

Brendan McMahon, Private Equity Leader within the Investment Management group at

PricewaterhouseCoopers LLP, said:

"The record funds raised by European based private equity houses demonstrates investors' confidence in

the ability of the industry to deliver long-term and consistent value. Private equity specialists' unique

experience of operating across a wide range of industries and jurisdictions brings valuable insights to

management teams seeking to achieve sustainable and long-term growth.”


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DETAILED COMMENTARY ON PERFORMANCE AND ACTIVITY

PERFORMANCE OF PRIVATE EQUITY

Preliminary performance figures for 2006 from Thomson Financial reveal another strong year for

European private equity. Top quarter funds continue to provide extremely strong returns to their

investors with an impressive 29.1% delivered by all private equity. Top quarter venture funds

return a robust 23.5% with the top quarter buyout funds returning an impressive 37.6%. These

returns of the best performing funds are consistently higher than those of 2005.

Investment Horizon Net Returns as of 31-Dec-2006 All Private Equity Horizon IRRs

Stage3

Year5

Year10

Year10.3%

4.3%

11.0%

21.3%

97 98 99 00 01 02 03 04 05 2006

Early Stage 2.1 -4.8 -1.2Development 7.2 1.2 7.2Balanced 15.9 5.1 11.1All Venture 8.7 0.5 5.5Buyouts 13.2 7.2 13.6Generalist 4.5 -0.8 7.2All Private Equity 11.0 4.3 10.3

Source: Thomson Financial on behalf of EVCA

The short term performance shows total private equity returns over one year of 21.3%, net of

management fees and carried interest.

Returns are also increasing steadily over the medium and long term horizons. The 3-year

investment horizon return has almost doubled in the last 12 months, increasing to 11% from 6.9%

in 2005, with buyouts and venture showing returns of 13.2% and 8.7% respectively. Both buyouts

and venture capital funds have shown positive ten-year returns of 13.6% for buyouts and 5.5% for

venture.

Since Inception Net Returns as of 31-Dec-2006

Sample Pooled

Stage Size Average Upper Median Lower DPI RVPI TVPIEarly Stage 306 -0.1 1.8 -1.8 -10.3 0.40 0.60 1.00Development 188 8.5 8.9 0.1 -3.8 0.80 0.70 1.50Balanced 175 9.6 7.4 -0.2 -6.8 0.78 0.63 1.41All Venture 670 6.4 5.5 -0.6 -7.6 0.65 0.63 1.28Buyouts 367 13.7 15.9 7.4 0.0 0.86 0.59 1.45Generalist 92 8.2 8.1 1.2 -3.2 0.97 0.40 1.38

All Private Equity 1,129 10.3 10.0 0.3 -5.2 0.83 0.56 1.39

Source: Thomson Financial on behalf of EVCA

Looking at longer term private equity performance over the last 27 years, figures show that, since

inception, private equity has returned 10.3% net of management fees and carried interest, with


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buyouts and venture capital returning 13.7% and 6.4% respectively, in line with the final 2005

returns.

PRIVATE EQUITY ACTIVITY

Against the backdrop of the strong performance highlighted above, the private equity industry in Europe

has remained buoyant in 2006, showing strong activity across fundraising and investment, and continuing

the upward trend it has shown over the past two years.

European Activity Statistics

(€ billion)

Year Funds Raised Investments Divestments at cost

1996 8.0 6.8 3.6

1997 20.0 9.7 5.81998 20.3 14.5 7.01999 25.4 25.1 8.62000 48.0 35.0 9.12001 40.0 24.3 12.5

2002 27.5 27.6 10.72003 27.0 29.1 13.62004 27.5 36.9 19.62005 71.8 47.0 29.82006* 89.8 50.3 21.8* Preliminary figures

Source: EVCA/Thomson Financial/PricewaterhouseCoopers

Evolution of Private Equity in Europe

0

10

20

30

40

50

60

70

80

90

100

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*

in €

bn

Funds Raised InvestmentsDivestments at cost

Private Equity Investments in Europe

0

5

10

15

20

25

30

35

40

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

am

ou

nts

in

€ b

n

VC Investments

Buyout Investments

FUNDS RAISED: 90 BILLION EUROS

Expected Allocation of Funds Raised 2002 – 2006


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€ billion 2002 2003 2004 2005 2006*

Venture high - tech 4.2 2.3 2.5 5.1 4.7

Venture non high - tech 4.3 3.4 6.3 5.8 11.2

Total venture 8.5 5.7 8.8 10.9 15.9

Buyout 18.3 21.0 17.8 57.7 70.9

Not Available 0.7 0.3 0.9 3.2 3.1

Funds Raised 27.5 27.0 27.5 71.8 89.8

* preliminary 2006 dataSource: EVCA / Thomson Financial / PricewaterhouseCoopers

Of the €90 billion record breaking level of funds raised in 2006 (25% up on 2005), the majority is

allocated to buyouts at €71 billion, an increase of nearly 25% compared to the €58 billion raised

for buyouts in 2005. As with any maturing market there is concentration taking place in the

private equity industry with more capital managed by a handful of players – there are 10 buyout

funds of over €1 billion raising an aggregate €42 billion in 2006 (or 47% of total 2006 fundraising).

Fundraising for venture is at €16 billion up by nearly half from €11 billion in 2005. This is clear

evidence of resurgent interest in this important segment of the market, continuing from the 2005

increase in fundraising for venture.

Sources of funds raised 2002 - 2006

Funds raised by type of investor 2002 2003 2004 2005 2006* 5-Year Total

(in € billion)Amoun

t %Amoun

t %Amoun

t %Amoun

t %Amoun

t %Amoun

t %

Corporate Investors 1.9 7 1.2 5 1.6 7 3.4 5 1.6 2 9.8 4

Private Individuals 1.6 6 0.8 3 1.8 8 4.1 6 5.7 7 13.9 6

Government Agencies 2.9 11 1.7 7 1.4 6 6.7 10 5.5 6 18.3 8

Banks 6.8 26 5.4 21 5.1 22 11.9 18 16.0 19 45.2 20

Pension Funds 4.3 16 4.9 19 4.5 19 16.8 25 22.0 26 52.5 23

Insurance Companies 3.6 14 2.2 9 2.8 12 7.5 11 7.7 9 23.8 10

Fund of Funds 3.4 13 4.2 16 3.2 13 8.9 13 18.1 21 37.6 17

Academic Institutions 0.4 2 0.4 2 0.3 1 1.7 3 1.2 1 4.0 2

Capital Markets 0.0 0 0.1 0 0.5 2 0.8 1 1.5 2 2.9 1

Not Available 1.1 4 4.4 17 2.2 9 5.9 9 6.3 7 19.8 9Subtotal New Funds Raised 26.0 100 25.3 100 23.5 100 67.7 100 85.4 100 228.0 100

Realised Capital Gains 1.5 1.7 4.0 4.1 4.4 15.6

Total Funds Raised 27.5 27.0 27.5 71.8 89.8 243.6

* Preliminary figures

Source: EVCA/Thomson Financial/PricewaterhouseCoopers

Sources of funds show continued commitment from pension funds with 25% of capital coming from

this source. While historically pension funds and banks have provided around half of the capital

raised, in 2006 the combination of capital from pension funds, fund of funds and banks represents

66% or €56 billion of the €90 billion raised. This year for the first time fund of funds become the

second largest source of capital.


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INVESTMENTS

Preliminary 2006 figures show a significant increase in investment activity by European private equity

firms, across both the buyout and venture capital segments. 2006 has seen investment activity rise by

7%, to €50.3 billion compared to the final investment figure of €47 billion in 2005.

Evolution of Investments 2002-2006

€ billion 2002 2003 2004 2005 2006*

Total Venture 9.8 8.4 10.3 17.7 11.3

Total Buyout (bank debt excluded) 17.9 20.7 26.6 34.3 39.0

Investments 27.6 29.1 36.9 47.0 50.3


Number of deals and

average deal size (in €m)

2002 2003 2004 2005 2006*

Number of deals

Average deal size

Number of deals

Average deal size

Number of deals

Average deal size

Number of deals

Average deal size

Number of deals

Average deal size

Total Venture 8,684 1.1 8,398 1.0 8,044 1.3 8,152 1.6 6,252 1.8Total Buyout (excl. bank debt) 1,545 11.6 1,977 10.5 2,192 12.2 2,763 12.4 2,331 16.7Investments 10,229 2.7 10,375 2.8 10,236 3.6 10,915 4.3 8,583 5.9


● Some 8,500 investments are made in total in 2006 in Europe. The average buyout deal size is

€17 million underlining the core industry focus on small to medium sized companies.

● Buyouts continue to lead the market, accounting for 78% of investment activity by value, with

overall amount invested by buyouts rising to €39 billion in 2006 from €34 billion in 2005.

● While venture investments fall slightly to €11.3 billion from €12.7 billion in 2005, these account for

nearly 73% of the total number of deals, making 6,252 investments in 2006, emphasising where

the majority of industry activity lies in terms of deals.


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DIVESTMENTS

Evolution of Divestments at cost 2002-2006

€ billion 2002 2003 2004 2005 2006*Divestment by Trade Sale 3.3 2.8 4.6 6.7 5.6Divestment by Flotation (IPO) 0.7 0.8 1.4 1.3 0.9Sale of quoted equity post flotation 0.6 0.8 0.9 1.3 1.7Divestment by Write-Off 3.2 1.6 1.9 1.4 0.8Repayment of Preference Shares/Loans 0.9 2.2 4.2 7.0 4.1Sale to Another Private Equity House 0.4 2.7 2.6 5.5 4.1Sale to Financial Institution 0.4 0.8 0.6 1.2 1.2Sale to Management (Buy-back) - 0.7 0.9 1.6 2.2Divestment by Other Means 1.2 1.2 2.5 3.8 1.2Total Divestments 10.7 13.6 19.6 29.8 21.8


● Preliminary figures for private equity divestments at cost have seen a decline in 2006 compared to

record figures 2005. Preliminary figures show that divestments at cost (not at exit value) have

fallen to €21.8 billion in 2006, down from €29.8 billion in 2005. Against this backcloth, sale to

management has increased by an impressive 37.5%, showing that management within private

equity owned companies perceives private equity ownership as adding value to the underlying

company. Divestment by trade sales accounts for the majority, 25.7%, or €5.6 billion of all

divestment activity, a drop of 20% compared to 2005. This is followed by repayment of loans and

secondary sales, each representing €4.1 billion in 2006 (or 19% of the total divested at cost). The

level of IPOs remains low in 2006.

Ends


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For further information, please contact:

Penny Cross, Director of Corporate Communications, EVCA

+32 2 715 00 29, +32 473 88 57 87, [email protected]

Sandrell Sultana, PR Officer, EVCA

+32 2 715 00 29, [email protected]

David Bernard, European Head of Private Equity, Thomson Financial

+44 20 7336 1930, +44 7767 438 157, [email protected]

Brendan McMahon, European Private Equity Assurance Leader, PricewaterhouseCoopers

+44 1534 838234, [email protected]


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Notes to editors:

* The figures announced for 2006 are preliminary figures, based on a response rate of 61% for all European private equity firms. The comparative historical figures shown are final figures for those years.

1. Annex 1 – Terminology

2. EVCA (The European Private Equity and Venture Capital Association), established in 1983 and based in Brussels, promotes, facilitates and represents the needs and interests of the private equity and venture capital industry in Europe. EVCA has over 925 members in 50 countries, including the leading fund managers in the European private equity and venture capital industry. www.evca.com

3. The Annual EVCA Survey of Pan-European Private Equity and Venture Capital Activity is undertaken by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA and covers 27 countries. The Annual Survey covers the European universe of private equity and venture capital management companies (not only EVCA members) and presents detailed, comprehensive fundraising, investment and divestment data for the whole year. It should be noted that secured debt amounts are removed from the investment figures, unless the secured debt derives from a private equity fund vehicle. Final activity figures will be published on 13 June 2007 at the EVCA Annual Symposium in Rome.

4. Pan-European Survey of Performance is undertaken by Thomson Financial on behalf of EVCA and returns (net IRRs) and multiples are derived from calculations on underlying cash flows and NAVs for 1,129 funds with € 234 billion committed capital. In addition, it offers a benchmark against public market indexes.

5. Thomson Financial: with 2006 revenues of US$2 billion, is a provider of information and technology solutions to the worldwide financial community. The company is the single source for unparalleled information for the Private Equity and Venture Capital industry worldwide, building on the legacy of Thomson Venture Economics and Thomson MacDonald. Our products and services are helping industry professionals to efficiently raise capital, invest capital wisely and exit investments profitably. Through the widest range of products and services in the industry, Thomson Financial helps clients in more than 70 countries make better decisions, be more productive and achieve superior results. Thomson Financial is part of The Thomson Corporation (www.thomson.com), a global leader in providing essential electronic workflow solutions to business and professional customers. With operational headquarters in Stamford, Conn., Thomson provides value-added information, software tools and applications to professionals in the fields of law, tax, accounting, financial services, scientific research and healthcare. The Corporation’s common shares are listed on the New York and Toronto stock exchanges (NYSE: TOC; TSX: TOC). www.thomsonfinancial.com

6. PricewaterhouseCoopers: The member firms of the PricewaterhouseCoopers network provide industry focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 140,000 people in 149 countries across our network work collaboratively using connected thinking to develop fresh perspectives and practical advice. Unless otherwise indicated, PricewaterhouseCoopers refers to PricewaterhouseCoopers LLP (www.pwc.com/uk) a limited liability partnership incorporated in England. PricewaterhouseCoopers LLP is a member firm of PricewaterhouseCoopers International Limited. www.pwc.com


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http://www.pwc.com/

http://www.thomsonfinancial.com/


Annex 1 – Terminology

Venture Capital Refers to Early-Stage (seed and start-up) and Expansion finance

Private Equity Provides equity capital to enterprises not quoted on a stock market and refers to all stages of industry, i.e. Venture Capital and Buyouts.

IRR

Internal Rate of Return

The IRR is the interim net return earned by investors (Limited Partners), from the fund from inception to a stated date. The IRR is calculated as an annualised effective compounded rate of return using monthly cash flows to and from investors, together with the Residual Value as a terminal cash flow to investors. The IRR is therefore net, i.e. after deduction of all fees and carried interest. In cases of captive or semi-captive investment vehicles without fees or carried interest, the IRR is adjusted to create a synthetic net return using assumed fees and carried interest.

Pooled IRR The IRR obtained by taking cash flows from inception together with the Residual Value for each fund and aggregating them into a pool as if they were a single fund. This is superior to either the average, which can be skewed by large returns on relatively small investments, or the capital weighted IRR which weights each IRR by capital committed. This latter measure would be accurate only if all investments were made at once at the beginning of the funds life.

Horizon IRR The Horizon IRR allows for an indication of performance trends in the industry. It uses the fund’s net asset value at the beginning of the period as an initial cash outflow and the Residual Value at the end of the period as the terminal cash flow. The IRR is calculated using those values plus any cash actually received into or paid by the fund from or to investors in the defined time period (i.e. horizon).

10-year Rolling IRR The 10 year Rolling IRR shows the development of the ten year Horizon IRR, measured at the end of each year.

Same logic for the 3-year Rolling IRR and 1-year Rolling IRR.

DPI - Distribution to Paid-In

The DPI measures the cumulative distributions returned to investors (Limited Partners) as a proportion of the cumulative paid-in capital. DPI is net of fees and carried interest. This is also often called the “cash-on-cash return”. This is a relative measure of the fund’s “realized” return on investment.

RVPI - Residual Value to Paid-In

The RVPI measures the value of the investors’ (Limited Partner’s) interest held within the fund, relative to the cumulative paid-in capital. RVPI is net of fees and carried interest. This is a measure of the fund’s “unrealized” return on investment.

Residual Value The estimated value of the assets of the fund, net of fees and carried interest.

TVPI - Total Value to Paid-In

TVPI is the sum of the DPI and the RVPI.

TVPI is net of fees and carried interest and is also known as the ‘multiple’.

Early Stage Fund Venture capital funds focused on investing in companies in the early part of their lives.

Development Fund Venture capital funds focused on investing in later stage companies in need of expansion capital.

Balanced Fund Venture capital funds focused on both early stage and development with no particular concentration on either.

Buyout Fund Funds whose strategy is to acquire other businesses; this may also include mezzanine debt funds which provide (generally subordinated) debt to facilitate financing buyouts, frequently alongside a right to some of the equity upside.

Generalist Fund Funds with either a stated focus of investing in all stages of private equity investment, or funds with a broad area of investment activity.


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[ ] press release evca tf

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