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European Private Equity Outlook 2013

Frankfurt, February 2013


European Private Equity Outlook_ 2013_Final.pptx 1

Contents
A. Focus of study and methodology B. Executive summary C. Results of the private equity survey 2013 D. Selected comparison of PE Outlook 2013 vs. PE Outlook 2012

Page
4 6 10 25

This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation. It may not be passed on and/or may not be made available to third parties without prior written consent from Roland Berger Strategy Consultants. RBSC does not assume any responsibility for the completeness and accuracy of the statements made in this document. Roland Berger Strategy Consultants GmbH

European Private Equity Outlook_ 2013_Final.pptx

PRELIMINARY REMARKS

Our fourth European Private Equity Outlook reveals how experts see the market and its development in 2013
The European Private Equity Outlook 2013 is the fourth in a series launched by Roland Berger in 2009 Prior to 2012, the Outlook consisted of analyses and assessments by selected Roland Berger and PE industry experts and experience from Roland Berger project work Since 2012, the Outlook has included a survey of more than 1,200 participants from private equity companies across Europe The results accurately reflect what experts in the market expect for different countries and regions, and what they consider relevant factors for the private equity business in 2013 We hope that you enjoy reading the Outlook. We would be happy to hear your feedback or discuss the results with you in greater detail

Source: Roland Berger

EUROPEAN PRIVATE EQUITY OUTLOOK 2013

European Private Equity Outlook_ 2013_Final.pptx

A. Focus of study and methodology

European Private Equity Outlook_ 2013_Final.pptx

As in 2012, the study is based on exclusive surveys with professionals from leading private equity firms across Europe
Focus and methodology of study
Overview of European private equity
Key topics 2013 Development of PE M&A market

Private equity survey 2013


Overview of respondents
No. of profesPE experience sionals contacted [yrs/% of responses]
1,232 <5 21%

Geographical focus [% of responses]


DACH1) Scandinavia Europe in total Iberia and Italy Poland Benelux UK CEE excl. Poland 31% 16% 15%

Key challenges for private equity Private equity business model

8% 8% 7% 7% 5% 4%

5 - 10

23%

> 10

56%

France

1) Germany, Austria, Switzerland


Source: Roland Berger European Private Equity Outlook_ 2013_Final.pptx 5

B. Executive summary

European Private Equity Outlook_ 2013_Final.pptx

Private equity market on the upturn? Slightly more than half of the respondents expect an increasing number of transactions
Executive summary (1/3)
Development of private equity M&A market in 2013 > Respondents are slightly upbeat about the development of private equity-driven M&A in 2013 half of the participants (52%) expect to see an increase in the number of transactions > Scandinavia and Germany are seen as the leading countries for growth of private equity-driven M&A activity in 2013. Poland, the UK and CEE should grow slightly as well, while declines are expected in Iberia, Italy, France and Greece > Respondents expect most M&A activity to be in Pharma/Healthcare and Consumer Goods/Retail. Energy/Utilities as well as Technology & Media sectors are ranked second. Automotive and Building/Construction are at the bottom of the list > No time for large deals mid-cap segment forecast to dominate. 91% of the respondents expect most deals to have enterprise values of less than EUR 250 million, and 59% expect most deals to be below EUR 100 m > No changes in the economic outlook are expected, which is considered to be the most relevant factor for European private equity M&A in 2013. A substantial improvement is expected in the availability of attractive acquisition targets. The situation in the financial markets and the development of the euro crisis are expected to improve slightly

European Private Equity Outlook_ 2013_Final.pptx

Active development of portfolio companies will be the focus of 2013 and the mid-term challenge for private equity
Executive summary (2/3)
Key challenges for private equity investors in 2013 > Private equity investors expect to dedicate most of their time in 2013 to actively developing portfolio companies extending existing funds and fundraising are not focus activities for 2013 > 57% of the participants anticipate a more competitive environment in fundraising, whereas 37% expect no changes > Divestments of family-owned businesses, carve-outs from large corporations and secondary buy-outs or distressed/insolvent companies are ranked equally as attractive sources for new targets. Listed companies (going private) rank far behind > Improvement in the quality of targets is anticipated by 35% of the participants 45% expect no changes > The availability of debt financing, particularly for recaps and LBOs, is still expected to become more difficult in 2013 > Strategic investors are expected to play the most important role in PE exits, but other exit channels follow closely Private equity business model > Most respondents feel a need to adapt the private equity business model just one-fourth of respondents see no need for change > 96% of respondents feel that a more active approach to managing companies will be more important in the future > Strategic and operational actions aimed at improving performance are expected to have the best chances of success in the coming years
European Private Equity Outlook_ 2013_Final.pptx 8

Compared to 2012, the market's mood is improving No changes in the origin of targets or target sizes anticipated
Executive summary (3/3)
Selected comparison of PE Outlook 2013 vs. PE Outlook 2012 > Participants feel more positive about market developments in 2013 compared to 2012 > In terms of countries, improvement of the PE market especially in Germany and UK is expected compared to last year on the lower end of the spectrum, Greece is still expected to decline, but to a lesser extent than in the prior year > Practically no changes in the ranking of industries with PE investor involvement in 2013 compared to 2012; Pharma/Healthcare and Consumer Goods/Retail remain the top industries > No changes in the expected range of enterprise value between 2012 and 2013 deal size remains small, with up to just EUR 250 million in transaction value

European Private Equity Outlook_ 2013_Final.pptx

C. Results of the private equity survey 2013

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DEVELOPMENT OF PE M&A MARKET

Private equity professionals are slightly upbeat about the development of PE-driven M&A in 2013 Half (52%) expect transactions to increase
M&A transactions with PE involvement in 2013 compared to 2012 [%]
Expected change in the number of M&A transactions with PE involvement in 2013
52% 41%

COMMENTS > More than half of all professionals interviewed expect the number of M&A transactions with PE involvement to increase in 2013 > However, there is also a significant number (22% of all survey participants) that anticipate a continuous decrease in M&A transactions with PE involvement
11%

26% 15% 7%

Decline of more than 10%

0% to -10%

0%

0% to +10%

Increase of more than 10%

% of responses [only one answer permitted]

Source: Roland Berger

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DEVELOPMENT OF PE M&A MARKET

Scandinavia and Germany have the highest growth compared to 2012, whereas PE M&A activity esp. in Greece could decline
Change of PE M&A activity in major countries 2013 vs. 2012 [%]
Expected change in PE M&A activity in 2013 compared to 2012
1 2 3 4 5 6 7 8 9 10 Scandinavia1) Germany Poland UK CEE excl. Poland2) Austria and Switzerland Benelux Iberia and Italy France Greece -0.6% -0.7% -1.0% 0.1% 0.9% 1.5% 1.9% 1.7% 2.7% 2.4%

COMMENTS > Major PE markets such as the UK and Germany are expected to see a small increase in PE M&A activities 1.5% to 2.5% increase in 2013 over the previous year > Scandinavia and CEE are expected to gain momentum in 2013 > The opposite is expected in Iberia, Italy, France and Greece

Expected change of PE M&A activity in 2013 compared to previous year in % [multiple answers permitted] 1) Includes Denmark, Norway, Sweden 2) Central and Eastern Europe includes Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Slovak Republic and Slovenia
Source: Roland Berger European Private Equity Outlook_ 2013_Final.pptx 12

DEVELOPMENT OF PE M&A MARKET

Pharma/Healthcare and Consumer Goods/Retail are expected to have the most M&A transactions with PE involvement in 2013
Ranking of industries by number of M&A transactions [%]
European industries with a high number of M&A transactions with PE investor involvement in 2013
1 2 3 4 5 6 7 8 9 Pharma/Healthcare Consumer Goods/Retail Energy/Utilities Technology & Media Logistics & Business Services Capital Goods & Engineering Financial Services Chemicals Automotive 5% 100% = Max. value
% of participants that expect a high number of transactions [multiple answers permitted]

COMMENTS > More than half of all respondents expect that Pharma/Healthcare and Consumer Goods/Retail will have a very high number of M&A transactions with private equity involvement > Low number of PE transactions expected for Building/Construction and Automotive

54% 51% 41% 41% 35% 24% 18% 17% 10%

10 Building and Construction

Source: Roland Berger

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DEVELOPMENT OF PE M&A MARKET

Mid-cap segment expected to dominate 91% of PE transactions in 2013 are expected in the enterprise value range of up to EUR 250 m
Expected range of PE transactions in enterprise value in 2013 [%, EUR m]
"Most PE transactions in 2013 will be in the enterprise value range of"
91% 40% 32%

COMMENTS > Large-cap deals with enterprise values above EUR 500 m are likely to remain rare > 91% of all PE transactions in 2013 are expected to be smaller than EUR 250 m in 2012, 94% of all PE transactions were expected to be less than EUR 250 m

19% 8% 0% EUR <50m EUR 50-100m EUR 100-250m EUR 250-500m EUR 500-1000m 1% EUR >1,000m

> 59% of respondents expect that the enterprise value of most PE transactions will be below EUR 100 m in 2013

% of responses [only one answer permitted]

Source: Roland Berger

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DEVELOPMENT OF PE M&A MARKET

No change in the economic situation anticipated, which is the most relevant factor for PE-driven M&A Availability of targets improving
Overview of relevant factors for M&A business in Europe [%]
"What will be the most influential factors affecting European M&A transactions with private equity involvement in 2013? How will they develop?" Importance of factors
1 Overall economic situation 2 Availability of attractive acquisition targets 3 Development of the euro crisis 4 Situation of the financial markets 5 Development of valuation levels 26% 26% 19% 16% 13%

COMMENTS > Private equity investments are driven mainly by the uncertain economic outlook for 2013 no change in economic situation is expected > Surveyed participants anticipate an improvement in the financial markets and the pipeline of attractive targets for 2013 > Slight improvement regarding situation of financial markets and development of euro crisis expected > Valuation levels are not expected to change significantly
European Private Equity Outlook_ 2013_Final.pptx 15

Development of factors in 2013


Substantial deterioration No change Substantial improvement

% of participants that expect this factor to have a major influence [multiple answers permitted]

Source: Roland Berger

KEY ISSUES FOR PRIVATE EQUITY 2013

PE investors will dedicate most of their time to developing portfolio companies Fundraising and extension of funds not in focus
Focus of PE investors on lifecycle stages in 2013 [%]
"On which phase of the PE value chain will you put most of your focus on in 2013?" COMMENTS > Value creation within the holding period is a top priority for PE funds in 2013 29% of all private equity professionals will focus on developing existing portfolios > Only between 1 and 2 out of 10 private equity investors will continue to raise funds or start new fundraising activities > Making new investments, divesting existing ones and extending existing funds is a priority task for less than 20%

29%

17% 16% 12% 12%

Developing portfolio companies

Making new investments

Fundraising Divesting existing investments

Extending existing funds

% of participants that will place most of their focus on this phase of the PE value chain [multiple answers permitted]

Source: Roland Berger

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KEY ISSUES FOR PRIVATE EQUITY 2013

57% of private equity professionals expect a more competitive situation in fundraising in 2013
Expected degree of competitiveness in fundraising in 2013 [%]
"What degree of competitiveness do you expect in fundraising in 2013?" Easing of the competitive situation
5%

COMMENTS > Two-thirds of all private equity professionals expect fiercer competition for fundraising in 2013 > Only 5% expect a significant improvement in the fundraising situation > 37% expect no change in the fundraising situation in 2013

No change in competitive situation 37% 57% Competitive situation will become more intense

% of responses [only one answer permitted]

Source: Roland Berger

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KEY ISSUES FOR PRIVATE EQUITY 2013

Except for listed companies (going private), the PE market ranks the attractiveness of all sources for targets as nearly equal
Sources of most attractive targets in 2013 [%]
Sources of attractive targets in 2013, ranked by importance
1 Majority shareholdings in family-owned companies 2 Parts of groups/carve-outs 3 Secondary buy-outs 4 Insolvent companies/distressed deals 5 Listed companies (going private) 28% 100% = Max. value
% of participants that expect this source of targets to be very important [multiple answers permitted]

COMMENTS > Nearly all sources for targets ranked equal: majority shareholdings in family-owned companies, carve-outs from corporations, secondary buy-outs and distressed deals > Taking listed companies private is by far the least attractive source of targets for private equity funds

46% 43% 43% 42%

Source: Roland Berger

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KEY ISSUES FOR PRIVATE EQUITY 2013

The study participants are likely to expect more attractive targets in 2013 than in 2012
Expected development of investment opportunities in 2013 [%]
"Will the targets available on the market in 2013 will be more attractive than in 2012?"
45% 35%

COMMENTS > 35% of all private equity professionals expect that more attractive targets for investment will be available in 2013 > However, the overall situation is uncertain 45% do not know if the attractiveness of targets will increase or decrease

28% 18% 7% 2% Completely disagree Somewhat disagree Neither agree nor disagree Somewhat agree Completely agree

> One-fifth of respondents think that fewer attractive targets will be available on the market

% of responses [only one answer permitted]

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KEY ISSUES FOR PRIVATE EQUITY 2013

Debt financing is generally expected to become more difficult in 2013 Fewer difficulties for working capital and CAPEX lines
Availability of external financing in 2013 [%]
"Compared to 2012, what external financing will be more difficult to raise in 2013?"
Easier to raise 1 No More difficult change to raise

COMMENTS > Banks are still reluctant to agree on recapitalizations and finance leveraged buyouts > Asset-based growth financing (CAPEX, working capital) is not expected to be under as much pressure as other deal financing

Recapitalization (i.e. debt substituting equity, dividend to sponsor) Refinancing (i.e. improvement of terms) Leveraged buyouts (i.e. new transactions) Growth financing (i.e. working capital, lines for add-on acquisitions or CAPEX)

2 3

Source: Roland Berger

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KEY ISSUES FOR PRIVATE EQUITY 2013

Strategic investors are expected to play the most important role in PE exits, but other exit channels are close behind
Change of exit channels in 2013 compared to 2012 [%]
Ranking of exit channel activity: expected significant increase in 2013 compared to previous year
1 2 3 4 M&A to strategic investors M&A to PE investors Dual track (i.e. IPO and M&A process) Triple track (i.e. IPO, M&A process and refinancing) IPOs 23% 21% 19% 19% 18% 100% = Max. value
% of participants that expect a significant increase in this exit channel [multiple answers permitted]

COMMENTS > Strategic investors represent strong competition in PE auction processes based on additional synergy levers an increase in exits with strategic investors is expected in 2013 (23%) > Other exit channels, nevertheless, with M&A to PE, dual/triple tracks and IPOs follow close behind

Source: Roland Berger

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PRIVATE EQUITY BUSINESS MODEL

Majority of respondents feel a need to adapt the private equity business model Just 25% see no need for change
Necessity of adjusting private equity business model [%]
"The private equity business model is just as robust now as it was before the crisis. No adjustment is necessary. Agree or disagree?" Disagree
Completely disagree 29%

COMMENTS > Two-thirds of PE professionals think that the private equity business model needs to change > However, one in four see no need to change current investment strategies

Neutral

Agree

Completely agree 18% 71% 82%

Disagree to some extent

Neither agree nor disagree

Agree to some extent

65% of all participants


Source: Roland Berger

10% of all participants 25% of all participants


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PRIVATE EQUITY BUSINESS MODEL

96% of respondents feel that a more active approach to managing companies will become more important in the future
Importance of active portfolio management [%]
"Managing portfolio companies actively will become more important in the future passive management is no longer suitable. Agree or disagree?"
2% 96%
82%

COMMENTS > 96% of respondents feel that an active management approach will be more important > Passive portfolio management with purely financial engineering is limited

14% 1% 1% 2%

Completely disagree

Disagree to some extent

Neither agree nor disagree

Agree to some extent

Completely agree

% of responses [only one answer permitted]

Source: Roland Berger

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PRIVATE EQUITY BUSINESS MODEL

Strategic and operational actions aimed at improving performance are expected to have the best chances of success in the coming years
Chances of success of value-enhancement actions [%]
Value-enhancement actions for PE portfolio companies ranked according to their chances of success in coming years COMMENTS > Implementing strategic actions is believed to have the best chance of success in the coming years > Continuous operational actions such as cost cutting and outsourcing can tap additional potential to improve profitability > The effect of financial actions on value enhancement is still expected to be very limited
26%

Strategic actions (e.g. buy and build, penetration of new markets)

39%

Operational actions (e.g. cost cutting, outsourcing)

36%

Financial actions (e.g. recapitalization, refinancing, working capital)

% of participants that expect the value-enhancement action in question to have a very good chance of success [multiple answers permitted]

100% = Max. value

Source: Roland Berger

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D. Selected comparison of PE Outlook 2013 vs. PE Outlook 2012

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Participants feel more positive about market developments in 2013 compared to 2012
M&A transactions with PE involvement in 2012/2013[%]
Expected change in the number of M&A transactions with PE involvement in 2012 compared to previous year
73% 28% 28% 23% 17% 15% 4% 7% 11% 26% 41%

Expected change in the number of M&A transactions with PE involvement in 2013 compared to previous year
52%

Decline 0% to -10% of more than 10%

0%

0% to +10% Increase of more than 10%

Decline 0% to -10% of more than 10%

0%

0% to +10% Increase of more than 10%

% of responses in 2013 [only one answer permitted] % of responses in 2012 [only one answer permitted]
Source: Roland Berger European Private Equity Outlook_ 2013_Final.pptx 26

The market outlook for PE M&A activity has improved, especially for Germany and the UK
Change of PE M&A activity in major countries in 2012/2013 [%]
Expected change in PE M&A activity in 2011 compared to 2012
1 2 3 4 5 6 7 8 9 10 Poland Scandinavia1) CEE (excl. Poland) UK Germany Austria & Switzerland Benelux France Iberia & Italy Greece -7.0% -7.0% -7.0% -10.0% -2.0% -3.0% -3.0% 1.0% 1.0% 4.0%

Expected change in PE M&A activity in 2012 compared to 2013


1 2 3 4 5 6 7 8 9 Scandinavia1) Germany Poland UK CEE excl. Poland2) Austria/Switzerland Benelux Iberia and Italy France -0.6% -0.7% -1.0% 0.1% 0.9% 1.9% 1.7% 1.5% 2.7% 2.4%

10 Greece

Expected change of PE M&A activity in 2013 compared to previous year in % [multiple answers permitted] 1) Includes Denmark, Norway, Sweden 2) Central and Eastern Europe includes Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Slovak Republic and Slovenia
Source: Roland Berger European Private Equity Outlook_ 2013_Final.pptx 27

Virtually no changes in the ranking of industries with PE investor involvement in 2013 compared to 2012
Ranking of industries by number of M&A transactions in 2012/2013 [%]
European industries with a high number of M&A transactions with PE investor involvement in 2012 European industries with a high number of M&A transactions with PE investor involvement in 2013

1 2 3 4 5 6 7 8 9

Pharma/Healthcare Consumer Goods and Retail Logistics & Business Services Energy/Utilities Technology & Media Financial Services Capital Goods & Engineering Chemicals Automotive 37% 37% 34% 27% 21% 14% 13% 9%

56% 51%

1 2 3 4 5 6 7 8 9

Pharma/Healthcare Consumer Goods/Retail Energy/Utilities Technology & Media Logistics & Business Services Capital Goods & Engineering Financial Services Chemicals Automotive 5% 18% 17% 10% 24%

54% 51% 41% 41% 35%

10 Building & Construction

10 Building and Construction

100% = Max. value

% of participants that expect a high number of transactions [multiple answers permitted]

Source: Roland Berger

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No changes expected in the range of enterprise values between the 2012 and 2013 studies Deal size remains small
Expected range of PE transactions in enterprise value in 2012/2013 [%, EUR m]
"Most PE transactions in 2012 will be in the enterprise value range of"
94% 41% 34%

"Most PE transactions in 2013 will be in the enterprise value range of"


91% 40% 32%

19%

19% 8% 4% 2% EUR 5001000m 0% EUR >1,000m EUR <50m EUR EUR EUR 50-100m 100-250m 250-500m 0% EUR 5001000m 1% EUR >1,000m

EUR <50m

EUR EUR EUR 50-100m 100-250m 250-500m

% of responses in 2013 [only one answer permitted] % of responses in 2012 [only one answer permitted]
Source: Roland Berger

% of responses [only one answer permitted]

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