presented by: $2.1 invested middle -...

THE 2012 MIDDLE MARKET REPORT | PitchBook Data

FINANCIAL

INVESTED

OVER5,000deals

OVER5,000deals

$2.1THE CORE

of the PRIVATE EQUITY

INDUSTRY

TRILLION

MID

DLE

REPORT

MAR

KET

PRESENTED BY:

PitchBookTHE 2012

Bet ter Data. Bet ter Decisions.PitchBook

CO-SPONSORED BY:

FINANCIAL

®


FINANCIAL

COPYRIGHT © 2012 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 offer to sell, or a solicitation of an offer 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.

PitchBookBetter Data. Better Platform. Better Decisions.

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FINANCIAL

An OvERvIEw Of THE MIDDLE MARKETAn Overview ............................................................. 5

The Lower Middle Market ($25M - $100M) ...................... 6

The Core Middle Market ($100M - $500M) ........................ 7

The Upper Middle Market ($500M - $1B) ........................ 8

InvESTMEnT ACTIvITYDeals by Region and Industry .................................... 10

Middle Market Deal Flow & Investment by Segment ..... 11

Add-on Activity ........................................................ 12

EBITDA Multiples and Leverage Used ............................ 13

EXIT ACTIvITYMiddle Market Exit Activity by Type ..................... 14

The Middle Market’s Share of Exits ....................... 14

fUnDRAISInG ACTIvITYFundraising by Year ............................................... 16

Fund Counts by Size and Capital Committed ......... 16

Top Middle Market Funds ...................................... 17

CROSS-BORDER ACTIVITY

Non-U.S. Investments by U.S. Middle Market PE Firms .... 18

U.S.Middle Market Investments by Non-U.S. PE Firms ....18

LEAGUE TABLESTop Players of 2011 ............................................... 20

Top Players by Middle Market Segment ................. 21

ABOUT PITCHBOOKMethodology ......................................................... 22

About PitchBook ................................................... 23

TABLE Of COnTEnTS

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FINANCIAL

We are proud to sponsor this inaugural edition of the Middle Market Report. This joint report of PitchBook and Latham & Watkins LLP analyzes trends in private equity investments, fundraising and exits in the greater middle market involving transactions ranging from $25 million to $1 billion, which continues to account for the majority of private equity deal flow.

Across the private equity landscape, 2011 was an active year that, despite some softening during the latter half, saw investment, fundraising and exit activity at substantially higher levels than the depths of 2009. The middle market experienced a similar rebound, with the following highlights representing just a few of the trends and data points presented in this report.

• While private equity investment in the middle market did not approach its 2007 peak, it rebounded significantly from its 2009 lows, with both the number and value of middle market investments in 2011 increasing nearly 50% relative to 2009.

• Fundraising in the middle market once again trended upwards. In particular, in 2011, funds that closed with less than $500 million of commitments accounted for more than half of the private equity funds raised, the highest proportion since 2005.

• With 370 transactions, 2011 saw the fourth-highest number of middle-market exits in the past decade, with the middle market representing 85% of all private equity exits.

As always, the presentation of data regarding past results raises as many questions about the future as it answers about the past. Will the downward trends developing in the latter part of 2011, and continuing in large part in the first quarter of 2012, ultimately define the 2012 private equity market? Or, will robust debt markets and generally improving economic conditions encourage private equity investors to put their substantial dry powder to work, while tax concerns (as to potential increases in capital gains rates and pending legislation regarding taxation of carried interest) drive additional deal volume by inspiring sponsors (and, in the case of capital gains rates, other business owners) to seek exits prior to the end of this year?

While the data in this report won’t answer these questions, we believe it provides meaningful context for an informed conversation about the past and an educated assessment of potential developments to come. David Allinson David Brown Co-Chair, Private Equity Practice Group Co-Chair, Private Equity Practice Group Latham & Watkins LLP Latham & Watkins LLP

Latham & Watkins’ Private Equity Practice is at the center of worldwide merger, acquisition and investment activity and is one of the most active, diverse and highly respected legal practices.

Some of the world’s most sophisticated private equity firms, middle market private equity investors, energy funds, infrastructure funds and sovereign wealth funds regularly turn to Latham for legal advice. In the last three years, the firm’s lawyers completed more than 300 private equity acquisitions and divestitures with a value of more than US$200 billion.

From advising on multibillion dollar “going private” transactions to structuring complex global tax-efficient investment vehicles, Latham’s lawyers understand the nuances of the most challenging private equity deals and are able to guide clients through the most complex global regulatory environments.

Clients also value Latham’s ability to fully integrate its Private Equity Practice with a leading global Capital Markets and Leveraged Finance Practice that can access capital from any of the world’s financing centers. Latham’s Private Equity Practice includes a dedicated team of banking, mezzanine finance and capital markets lawyers who handle financing and securities matters exclusively for fund sponsors and their portfolio companies.

Latham assists clients throughout every stage of the investment cycle, and the firm’s lawyers have comprehensive experience in every aspect of global private equity, including: acquisitions from bankruptcy and rescue investments, carve-out transactions, consortia arrangements, cross border transactions, IPO exits, leveraged buyouts and private investments in public companies.

For more information about Latham & Watkins or its Private Equity practice, visit lw.com.

A wORD ABOUT THE MIDDLE MARKET

iv

http://www.lw.com/


FINANCIAL

Although private equity mega-deals make the national headlines on a regular basis, the middle market, which consists of companies valued between $25 million and $1 billion, is the true heart of private equity activity. This slice of the industry has represented three out of every five private equity deals since 2000, totaling $2.1 trillion in invested capital.

By providing a great majority of the investment opportunities the last few years, the middle market has played a very important and prominent role in U.S. private equity investment in the aftermath of the financial crisis. In 2009, the middle market represented just over half of all private equity activity (54%); in 2010, the middle market portion of deal making climbed to 64% of all private equity deals. By 2011, the middle market was responsible for 74% of all private equity capital invested.

Since the private equity frenzy between 2003 and 2007, lenders and general partners alike have largely shied away from mega-deals in the billions of dollars, refocusing their attention instead on the middle market and lower markets for investments. Private equity investors’ renewed focus on using not only their capital resources and financial talents, but their skills as professional managers providing strategic, managerial and operational guidance matches the needs of many middle market companies today. It is this synergy that continues to drive private equity investment in the middle market, generates positive returns for PE funds and their investors and builds a stronger U.S. middle market.

MIDDLE MARKET DEAL FLOw BY QUARTER

MIDDLE MARKET DEAL fLOw BY YEAR

THE MIDDLE MARKET

Source: PitchBook

Source: PitchBook

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FINANCIAL6

The lower middle market, which represents companies valued between $25 million and $100 million, has accounted for just over half of all middle-market deal flow since 2000. It was one of the areas least affected by by the financial crisis as the smaller size of company and deal sizes has helped to insulate the lower middle market. However, increased investment in the core and upper middle markets has led to a steady ebb in lower middle-market deals as a percentage of overall middle-market activity, from 55% in 2009 to 37% in 2011. During the same period, lower middle-market invested capital dropped from 18% to 9% of total middle-market deal value. The average deal size for this segment of the market has encouragingly grown from $49 million in 2009 to $54 million in 2011. Activity was sporadic throughout 2011 and highly concentrated in 2Q and 4Q, when 60% of the year’s investments were made. However, activity on an annual basis has largely stabilized the last couple of years, with lower middle-market deals accounting for 46% of all middle-market activity in 4Q 2011.

LOwER MIDDLE MARKET DEAL FLOw BY YEAR

THE LOwER MIDDLE MARKETSHARE Of THE

MIDDLE MARKET In 2011

Source: PitchBook

Source: PitchBook


FINANCIAL7

The core middle market, defined as companies valued from $100 million to $500 million, plays an integral role in private equity middle market investment, accounting for 43% of deal activity and 52% of capital investment since 2000 in the middle market. Recently, it has played a particularly central role for private equity as a whole as well, representing over a third of all private equity deal and investment activity in 2011. The core middle market was the only portion of the middle market to realize year-over-year increases in deal flow last year, with a 2% uptick in both deals and capital invested. Average deal size has been on the rise since 2008, growing by 10% to $220 million in 2011. As with other segments of private equity, the core middle market’s activity has mostly stabilized following the peak in 2007 and the subsequent drop in 2009. In the past three years, the percentage of middle-market deals accounted for by the core middle market has jumped from 38% to 51%. This is a trend that shows no sign of slowing down as the availability of financing for deals of this size continues to increase and the number of private equity firms focusing their attention on this middle-market space also keeps rising.

CORE MIDDLE MARKET DEAL FLOw BY YEAR

THE CORE MIDDLE MARKET

Source: PitchBook

SHARE Of THE MIDDLE MARKET In 2011

Source: PitchBook


FINANCIAL8

The upper middle market, which includes companies valued from $500 million to $1 billion in size, is an interesting sector of the middle market. Due to the larger size of deals, this sector has accounted for 33% of capital investment, though it has represented only 9% of mid-market deal activity since 2000. It is also an area that saw much inactivity until 2006 and 2007. During the financial crisis, deal-making in this sector was the hardest hit of any segment of the middle market, dropping a precipitous 73% in 2009 from its peak in 2007. Investment nearly tripled though from the 2009 lows in 2010 as company health and the availability of debt financing both improved. Despite the year-over-year decline, the total value of upper middle market deals completed in 2011 still eclipsed the totals from 2008 and 2009 combined, indicating that private equity deal flow in the upper middle market have largely stabilized from its post-bubble lows. The average size of upper middle-market deals has been steadily increasing over the past four years as well, from $570 million in 2008 to $703 million in 2011. With $425 billion of private equity dry powder needing to be invested over the next few years and deals above $1 billion still difficult to complete, the upper middle market is an area that could attract a significant level of private equity investment over the next couple of years.

UPPER MIDDLE MARKET DEAL FLOw BY YEAR

THE UPPER MIDDLE MARKET

Source: PitchBook

SHARE Of THE MIDDLE MARKET In 2011

Source: PitchBook

www.pwc.com/us/deals


FINANCIAL10

Private equity investment can be seen across all areas of the U.S. mid-market. Traditionally the most active industry for middle-market investment, Business Products and Services’ share of all middle-market activity expanded to 32% in 2011, with 371 deals. Deal flow in this industry has grown an impressive 67% since the nadir of 2009 when just 222 deals closed. The only other industry to see growth in deal flow was Information Technology, which grew by 3% in 2011. Consumer Products and Services (B2C), consistently the second-strongest sector, saw a 4% decline in deal-making last year. Every other industry saw double-digit percentage decreases. Energy was the hardest hit, with 24 fewer deals for a decline of 24%. Prior to their 2011 drawback, however, the aforementioned industries had been steadily growing within the middle market since 2008.

MIDDLE MARKET TRAnSACTIOnS BY REGIOn

MIDDLE MARKET TRAnSACTIOnS BY InDUSTRY

Private equity investment in the middle market is geographically dispersed across the United States, with the Midwest remaining the most active region for the middle market in 2011. 2011 did see some drop-offs in a few regions such as the Southeast, which saw 37 fewer deals for a reduction of 16%, and the Mountain region, where 18 fewer deals equated to a decrease of 28%. Middle-market activity was robust in the Mid-Atlantic region, which accounted for 11% of all middle-market deals after a 12% spike in transactions from 2010 to 2011. While comprising the smallest portion of regional activity, the Southwest saw the most drastic year-over-year increase, closing 71% more deals in 2011 than in 2010.

InvESTMEnT ACTIvITY

Source: PitchBook

Source: PitchBook


FINANCIAL11

Already the bedrock of private equity investment, the core middle market ($100 million to $500 million) saw its share of middle-market deals rise from 47% in 2010 to 51% in 2011. The core middle market now represents nearly one-third (32%) of all private equity deals, with 586 closing during 2011, second only to the lower market (deals under $25 million), which had 626 closed deals last year. Deal flow in the lower middle market, which dropped 11% from 2010 to 2011, accounted for 37% of middle-market activity and 24% of all private equity deals, both new lows since 2000 in the continuation of a multi year trend. A pullback in activity was also seen in the upper middle market, which saw 137 closed deals in 2011, a decline of 17% from the previous year. In 2011, this sector of the middle market accounted for 12% of the total middle-market activity.

MIDDLE-MARKET InVESTMEnT BY SEGMEnTThe amount of total private equity capital invested in 2011 was up 15% from the lows of 2009; however, the core and upper middle market increased by 121% and 174% respectively. The only segment of the middle market to attract more capital in 2011 than in 2010 was the core middle market, which, with $128 billion of invested capital, accounted for 38% of the year’s total capital invested. With less money flowing to lower and upper middle-market deals, the core middle market grew to 52% in 2011. The lower middle market did not see the same growth as the core and upper middle markets last year, which more than doubled. It will be interesting to see if the lower middle market can eventually match the recovery pace of the core and upper middle markets, or if it will maintain the same pace seen over the past three years.

MIDDLE-MARKET DEAL FLOw BY SEGMEnT

Source: PitchBook

Source: PitchBook


FINANCIAL12

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MIDDLE MARKET ADD-On ACTIVITY

Growing portfolio companies through acquisitions known as add-ons has been a key strategy for many private equity investors in the middle market. Investors completed 445 middle-market add-ons during 2011 alone, the highest amount since the investment boom in 2007. Add-on transactions represented 45% of all middle-market PE activity in 2011, up from 37% in 2010 and the highest level in the last decade. With large stockpiles of dry powder, middle market investors have turned to add-on opportunities as an efficient way to add value to their existing portfolio companies while sopping up some of their reserve capital.

Source: PitchBook

http://www.acg.org/boston/growthconferenceinfo.aspx


FINANCIAL13

EBITDA MULTIPLES

EBITDA valuation multiples climbed for in the middle market the second straight year, an indicator of the heightened competition in the market place. When deal-making stalled following the financial meltdown, deal size to EBITDA multiples in the middle market dropped by over 1.5x from the peak in 2007 but have since grown in conjunction with multiples across the full spectrum of private equity transactions to reach their current levels. There was less debt financing available for middle market deals in 2011, resulting in PE investors using almost 1x EBITDA less of debt and 1x EBITDA more equity in their buyouts. In the coming year middle market valuations could likely continue to climb as a result of an improving general economic outlook and especially if the availability of debt increases.

LEVERAGE USED In BUYOUTS

Tighter lending standards and more prudent investing resulted in sharp declines in the amount of leverage used in middle market deals in 2011. The debt percentage for transactions fell from 58% in 2010 to 46% in 2011, the lowest levels in the last decade. This decline was most pronounced in the lower middle market, where average debt levels dropped from 59% to 39%. The same drop holds true for all private equity deals, where the average level of debt used in buyouts last year declined from 58% to 51%. As can be expected, larger deals necessitate higher levels of debt. Accordingly, the upper middle market averaged 51% debt per deal, compared to 39% for the lower middle market.

Source: PitchBook

Source: PitchBook


FINANCIAL14

Although the middle market dropped slightly as a percentage of overall private equity exits in 2011, it still accounted for 85% of all exit activity as a total of 370 middle-market exits were completed last year. As with investments, middle-market exits have stabilized following the crisis and remained fairly consistent from 2010 to 2011, experiencing a modest 5% decline. The core middle market has traditionally contributed the majority of middle-market exit activity, and 2011 was no exception, with 51% of exits coming from the sector. Furthermore, the 188 exits from the core middle market were an overwhelming 43% of all private equity exits.

MIDDLE MARKET ExIT ACTIVITY BY TYPE

As has been the case for the past decade, sales to strategic acquirers (corporate acquisitions) dominated middle-market exits, representing 57% of the 2011 activity. However, secondary buyouts are becoming an increasingly important avenue for exits, growing from 16% of all middle-market exits in 2009 to 36% in 2011. This exit strategy was particularly prevalent in the lower and upper middle markets, where secondary buyouts accounted for 40% and 49% of exit activity, respectively. When it comes to initial public offerings, the core middle market seems to be the preferred size, as it has comprised more than half of all private equity IPOs since 2001.

THE MIDDLE MARKET’S SHARE Of EXITS

MIDDLE MARKET EXIT ACTIvITY

Source: PitchBook

Source: PitchBook

http://www.venue.rrd.com/


FINANCIAL16

Fundraising for PE funds investing in the middle market has struggled since peaking in 2007, but has done much better than other segments of private equity. While 2011 saw marginal improvements, the $93 billion raised by 122 funds still represents a stark 70% decrease from peak levels. The financial crisis has resulted in the near extinction of new funds with more than $5 billion and a steady decline of $1 billion to $5 billion funds. Just 25 funds in excess of $1 billion were closed in 2011, compared to 79 in 2007. The demise of massive funds has coincided with a steady upsurge of funds with less than $500 million of capital, which in 2011 accounted for more than half of all funds and 16% of the capital raised by private equity firms, the largest proportions since 2005.

FUnD COUnT BY FUnD SIzE

fUnDRAISInG ACTIvITY

CAPITAL RAISED BY FUnD SIzE

MIDDLE MARKET fUnDRAISInG

Source: PitchBook

Source: PitchBook Source: PitchBook

2006 2007 2008 2009 2010 2011$100M-$250M 46 64 49 24 19 33$250M-$500M 46 59 51 24 30 26$500M-$1B 44 41 42 21 26 30$1B-$5B 50 66 52 30 26 25$5B+ 8 13 15 7 - -

2006 2007 2008 2009 2010 2011$100M-$250M $7.32 $10.09 $7.61 $3.93 $3.34 $5.54 $250M-$500M $15.49 $21.54 $17.82 $8.06 $10.51 $9.71 $500M-$1B $30.01 $26.35 $27.56 $13.71 $17.74 $20.53 $1B-$5B $98.77 $125.70 $113.35 $62.69 $57.08 $56.84 $5B+ $70.49 $128.19 $143.45 $63.18 $- $-


FINANCIAL17

SELECT MIDDLE MARKET fUnDSFUnDS $100M - $250M

FUnDS $250M - $500M

FUnDS $500M - $1B

Fund Investor Amount ($M) Close YearStonehenge Opportunity Fund III Stonehenge Partners $250 2011Behrman Capital IV Behram Capital $250 2008Grey Mountain Partners Fund II Grey Mountain Partners $224 2010Altus Capital Partners II Altus Capital Partners $200 2011Bunker Hill Capital II Bunker Hill Capital $200 2011

Fund Investor Amount ($M) Close YearH.I.G Growth Equity Fund II H.I.G. Capital $500 2011Bertram Growth Capital II Bertram Capital $500 2010Waud Capital Partners III Waud Capital Partners $463 2011Insight Equity Fund II Insight Equity $435 2010Thompson Street Capital Partners Fund III Thompson Street Capital Partners $350 2012

Fund Investor Amount ($M) Close YearHUSRG Power and Biofuel Fund III U.S. Renewables Group $1,000 2009Wind Point Partners VII Wind Point Partners $915 2010Snow Phipps II Snow Phipps $844 2011Parthenon Investors IV Parthenon Capital Partners $700 2012Marlin Equity Partners III Marlin Equity Partners $650 2009

FUnDS OVER $1B

Fund Investor Amount ($M) Close YearWarburg Pincus Private Equity X Warbug Pincus $15,000 2008Hellman & Friedman Capital Partners VII Hellman & Friedman $8,800 2009Madison Dearborn Capital Partners VI Madison Dearborn Partners $4,100 2010WCAS XI Welsh Carson Anderson & Stowe $3,850 2009TPG Growth Fund II TPG Capital $2,000 2012


FINANCIAL

CROSS BORDER ACTIvITY

U.S.-based private equity firms have been slowly returning to Northern and Western Europe seeking undervalued middle market companies and attractive investment opportunities. The region currently accounts for 45% of all U.S. cross-border mid-market private equity investment, up from 40% in 2010. Another area of strength is North America (excluding the U.S.), which now is the third largest region for cross-border investment with 14% of the market. Following a strong 2010, private equity investment in China and East Asia fell by more than a third (35%) while middle market activity in the rest of Asia remained consistent with 2010 levels. Central and South America saw the most drastic year-over-year decline, with activity dropping by half to its lowest levels since 2007.

Foreign private equity investments into U.S. middle market follows the same trajectory of most other investment over recent years—peaking in 2008, bottoming in 2009, and slowly rebuilding since. To that end, the number of mid-market PE deals in 2011 was the highest since 2008, representing an 82% increase from 2009. PE Investments into U.S. middle market companies from Northern and Western Europe-based firms, which deteriorated between 2007 and 2010, grew by 60%. Firms from China and East Asia, which failed to close a single transaction in the U.S. 2009, now account for a considerable 22% of foreign investment. The biggest drop-off in activity came from the Americas (excluding the U.S.), which closed half the number of U.S.-based mid-market deals in 2011 as in 2010.

nOn-U.S. InVESTMEnTS BY U.S. MIDDLE-MARKET PE FIRMS

U.S. MIDDLE-MARKET InVESTMEnTS BY nOn-U.S. PE FIRMS

Source: PitchBook

Source: PitchBook

18

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FINANCIAL

2011 MIDDLE MARKET LEAGUE TABLES

GS Capital Partners 24The Blackstone Group 23Parthenon Capital Partners 22TPG Capital 19The Riverside Company 19The Carlyle Group 19Kohlberg Kravis Roberts 18Genstar Capital 15GTCR Golder Ra uner 14Vista Equity Partners 14Audax Group 13H.I.G. Capital 13Sun Capital Partners 12Investcorp 12Kayne Anderson Capital Advisors 12Apax Partners 11Hellman & Friedman 11Oak Hill Capital Partners 11Ridgemont Equity Partners 11Warburg Pincus 11Thomas H. Lee Partners 10Clayton Dubilier & Rice 10JMI Equity 10Welsh Carson Anderson & Stowe 9Stone Point Capital 9Golden Gate Capital 9MidOcean Partners 9Silverhawk Capital Partners 9TA Associates 9ABRY Partners 9General Atlantic 9Bain Capital 9Oaktree Capital Management 8Waud Capital Partners 8Wind Point Partners 8Crestview Partners 8Silver Lake Partners 8Cerberus Capital Management 8Pfingsten Partners 8Metalmark Capital 8Avista Capital Partners 8KRG Capital Partners 8Platinum Equity 8Moelis Capital Partners 7The Stephens Group 7RFE Investment Partners 7Water Street Healthcare Partners 7Symphony Technology Group 7Teachers’ Private Capital 7Huron Capital Partners 7Babson Capital Management 7

Investor Deal Count

MOST ACTIVE PE InVESTORS MOST ACTIvE ADvISORS

MOST ACTIvE LEnDERS

MOST ACTIvE LAw fIRMS

Advisor

Lender

Law Firm

Houlihan LokeyWilliam Blair & CompanyBarclays CapitalMorgan StanleyJefferies & CompanyUBSMoelis & CompanyJP MorganGoldman SachsCredit SuisseBank of America Merrill LynchHarris Williams & Co.Robert W Baird

Madison Capital FundingGE CapitalBank of America Merrill LynchFifth Street FinanceWells FargoMaranon CapitalMorgan StanleyAres CapitalBNP ParibasBabson Capital ManagementBMO Capital MarketsNXT Capital

Kirkland & EllisJones DayLatham & WatkinsWeil Gotshal & MangesSimpson Thacher & BartlettPaul Weiss Rifkind Wharton & GarrisonSkadden Arps Slate Meagher & FlomRopes & GrayPaul HastingsWachtell Lipton Rosen & KatzMorgan Lewis & Bockius

20


FINANCIAL21

MIDDLE MARKET LEAGUE TABLES 2007 - 2011LOwER MIDDLE MARKET

CORE MIDDLE MARKET

UPPER MIDDLE MARKET

InvestorsSun Capital PartnersH.I.G. CapitalPfingsten PartnersAudax GroupAllied CapitalGryphon InvestorsTPG CapitalParthenon Capital PartnersWarburg PincusBlue Point Capital PartnersVeronis Suhler Stevenson

Law FirmsKirkland & EllisJones DayLatham & WatkinsWeil Gotshal & MangesProskauer RoseSkadden Arps Slate Meagher & FlomDorsey & WhitneyGoodwin ProcterAlston & BirdRopes & GrayMorgan Lewis & Bockius

InvestorsThe Riverside CompanyThe Carlyle GroupGS Capital PartnersWarburg PincusThe Blackstone GroupGTCR Golder RaunerWelsh Carson Anderson & StoweTPG CapitalKohlberg Kravis RobertsOaktree Capital ManagementAudax Group

Law FirmsKirkland & EllisJones DayLatham & WatkinsSkadden Arps Slate Meagher & FlomWeil Gotshal & MangesGoodwin ProcterPaul Weiss Rifkind Wharton & GarrisonDechertSimpson Thacher & Bartlett

InvestorsSilverhawk Capital PartnersThe Blackstone GroupApax PartnersThe Carlyle GroupTPG CapitalGS Capital PartnersWelsh Carson Anderson & StoweApollo Global ManagementHellman & FriedmanKohlberg Kravis RobertsProvidence Equity PartnersOaktree Capital Management

AdvisorsHoulihan LokeyHarris Williams & Co.Lincoln InternationalBrookwood AssociatesGulfStar GroupJefferies & CompanyBB&T Capital MarketsMcColl PartnersAllegiance CapitalLazard Middle MarketMesirow FinancialPiper JaffrayMorgan Keegan

AdvisorsGoldman SachsHoulihan LokeyHarris Williams & Co.Morgan StanleyCredit SuisseJP MorganJefferies & CompanyBank of America Merrill LynchBarclays CapitalPiper JaffrayLazardDeutsche Bank

AdvisorsGoldman SachsCredit SuisseJefferies & CompanyJP MorganLehman BrothersCitigroupMorgan StanleyBank of America Merrill LynchBarclays CapitalBofA Merrill LynchLazardDeutsche BankHarris Williams & Co.

Law FirmsKirkland & EllisSimpson Thacher & BartlettSkadden Arps Slate Meagher & FlomWeil Gotshal & MangesJones DayLatham & WatkinsPaul Weiss Rifkind Wharton & GarrisonDechertSullivan & CromwellO’Melveny & MyersDavis Polk & Wardwell


FINANCIAL

PITCHBOOK METHODOLOGYMIDDLE MARKET DEfInITIOn

The middle market is defined for this report as companies valued between $25 million and $1 billion. This is further broken down into the lower middle market ($25 million to $100 million), the core middle market ($100 million to $500 million) and the upper middle market ($500 million to $1 billion). Where company enterprise values are not known, the actual or estimated transaction size has been used to determine the companies market. This report covers only U.S.- based middle-market companies that have received some type of private equity investment. Middle Market funds are funds that actively invest in middle market companies and are defined as those with over $100 million of committed capital.

PRIVATE EQUITY DEALS The report includes all private equity investments (buyout, growth, PIPE, recapitalization and add-on), excluding real estate investments, made into target companies headquartered in the United States. Only investments made directly by private equity firms or their portfolio companies are counted.

Buyout deals are defined as transactions in which the private equity investor receives a controlling ownership stake in the target company. Growth deals are defined as minority investments in target companies. Add-on deals are defined as acquisitions by companies with private equity backing.

TOTAL CAPITAL InVESTMEnT Total amount of equity and debt used in the private equity investment

Ex. $10 million of equity and $20 million of debt = $30 million of total capital investment

PitchBook’s total capital invested figures include deal amounts that were not collected by PitchBook but have been estimated using a multi-dimensional substitution and estimation matrix, which takes into account year of investment, deal type, platform v. add-on, industry and sector. Some data sets will include these extrapolated numbers while others will be compiled using only data collected directly by PitchBook; this explains any potential discrepancies that may be noticed.

fUnDRAISInG The report only includes private equity funds that have held their final close. Fund of funds and LP secondary funds are also not included.

EXITS The report includes both full and partial exits via corporate acquisition, secondary private equity buyout and initial public offering (IPO). Dividend recapitalizations are not taken into account in the report.

22

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Competitive AdvantagePLATFORM HIGHLIGHTSPitchBook

1 Data sourced from 4Q 2011 nearest competitor publication. All other competitor data sourced from nearest competitor site on 4/4/12.2 All PitchBook data sourced from the PitchBook Platform as of 4/4/12.

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70,8162

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2,7482

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* In association with the Law Office of Mohammed A. Al-Sheikh

The Private Equity practice at Latham & Watkins delivers value — no matter the size, region, industry or complexity of your deal. Latham’s private equity lawyers bring comprehensive experience to every aspect of private equity dealmaking, from acquisitions from bankruptcy and rescue investments, carve-out transactions, consortia arrangements, cross border transactions and IPO exits, to leveraged buyouts and private investments in public companies.

For more information about Latham & Watkins or its Private Equity practice, visit lw.com.

Delivering Value to the Middle Market

Abu Dhabi

Barcelona

Beijing

Boston

Brussels

Chicago

Doha

Dubai

Frankfurt

Hamburg

Hong Kong

Houston

London

Los Angeles

Madrid

Milan

Moscow

Munich

New Jersey

New York

Orange County

Paris

Riyadh*

Rome

San Diego

San Francisco

Shanghai

Silicon Valley

Singapore

Tokyo

Washington, D.C.

http://www.lw.com/

presented by: $2.1 invested middle -...

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