European Private Equity Outlook 2012 (PDF, 1293 ... - Roland Berger

European_Private_Equity_Outlook_2012_final.pptx 

European Private Equity Outlook 

2012 

Munich, February 2012

Contents 

Page 

A. Focus of study and methodology 4 

B. Executive summary 6 

C. Results of the Private Equity survey 2012 9 

© Roland Berger Strategy Consultants 


2

EUROPEAN PRIVATE EQUITY 

OUTLOOK 2012 

PRELIMINARY REMARKS 

Our third European Private Equity Outlook offers an interesting 

experts assessment of the market and its development in 2012 

The European Private Equity Outlook 2012 is the third Outlook that Roland Berger publishes since 

2009 

In the past the Outlook comprised analysis and assessments of selected Roland Berger and PE 

industry experts and experiences from Roland Berger project work 

With the Outlook 2012 we switched the approach to a study including a survey with more than 800 

participants from Private Equity companies all across Europe 

Therefore the results reflect a very live and sound picture of what the experts in the market expect 

for different countries, regions and relevant factors for the Private Equity business in 2012 

We hope that you enjoy studying the Outlook and are happy to take your comments or discuss the 

one or the other result with you 

Source: Roland Berger 


3

A. Focus of study and methodology 

European_Private_Equity_Outlook_2012_final.pptx 4

The study is based on exclusive interviews with professionals of 

leading Private Equity firms across Europe 

Focus on methodology of study 

Overview of European Private Equity 

Key topics 2012 

Private Equity survey 2012 

Overview of interview participants 

Development of PE M&A market 

Number of 

participants [#] 

PE experience 

[yrs / % of responses] 

Geographic focus 

[% of responses] 

DACH 1) 35% 

Key challenges for Private Equity 

Private Equity business model 

862 

< 5 16% 

5 - 10 25% 

> 10 59% 

Europe in total 24% 

Poland 

Iberia and Italy 

Other CEE 

countries 

Benelux 

Scandinavia 

France 

UK 

Greece 

7% 

6% 

6% 

6% 

6% 

5% 

4% 

1% 

1) Germany, Austria, Switzerland 



5

B. Executive summary 



7 

PE professionals are rather cautious on market development – 

Slowdown in most European countries expected 

Executive summary (1/2) 

Development of Private Equity M&A market in 2012 

> Respondents are generally cautious about the development of PE-driven M&A in 2012 – 73% expect a decline or 

stagnation in the number of transactions 

> From an industry perspective, respondents expect most M&A activity in the Pharma/Healthcare, Consumer Goods/Retail 

as well as the Logistics & Business services sectors 

> Apart from Central/Eastern Europe and Scandinavia, a sharp decline in PE M&A activity is expected – Greece (-10%), 

Iberia, Italy, France and Benelux (-7%) will see the sharpest declines. Moderate declines are expected in 

Germany (-3%) and UK (-2%) as well 

> Buoyancy in the capital markets and the constrained availability of debt financing render large transactions the exception; 

94% of all respondents expect most deals below enterprise values of EUR 250 m, 60% expect most deals below 

EUR 100 m 

> The economic outlook is considered the most relevant factor for European PE M&A in 2012 – A majority expects a 

negative development in the overall economic climate 

> Despite a constrained financing environment, overall market valuation levels are not expected to change – high 

likelihood of mismatch between buyers' and sellers' price expectations


8 

Active development of portfolio companies will be in the focus in 

2012 – Corporate carve-outs will be a key source for targets 

Executive summary (2/2) 

Key challenges for Private Equity investors 2012 

> Private Equity investors expect to dedicate most of their time in 2012 to the active development of portfolio companies – New 

investments or exits are not in focus 

> The competition in fundraising is expected to become more intense in 2012 – Solid track record likely to be required 

> Corporate carve-outs are expected to be a key source for premier PE targets in 2012 – Due to a lack of debt financing and 

expected limitations in the IPO market, carve-out disposals may also prove an attractive alternative means of financing 

> In general, respondents do not expect distressed assets to yield attractive investment cases 

> Availability of debt financing, particularly for recaps and LBOs, expected to be an issue in 2012 

> Strategic investors anticipated to play an increasingly important role in PE exits – The IPO channel, however, seems to be 

closed for PE assets 

Private Equity business model 

> Respondents feel a need to adapt the PE business model – A third sees no need for changes 

> 94 % of respondents feel that a more active approach to managing companies will become more important in the future 

> Strategic measures for performance improvement are expected to offer the highest chances for success over the next years

C. Results of the Private Equity survey 2012 




10 

1 DEVELOPMENT OF PE M&A MARKET 

PE professionals are cautious about the development of PE-driven M&A 

in 2012 – 73% of the respondents expect a decline or stagnation 

M&A transaction with PE involvement in 2012 compared to 2011 [%] 

Expected change in the number of M&A transactions with PE involvement 

in 2012 

28% 

73% 

28% 

17% 

23% 

4% 

COMMENTS 

> More than half of all professionals 

interviewed expect the number of 

M&A transactions with PE 

involvement to decrease or 

stagnate in 2012 

> However, there is also a significant 

group (one fourth of all survey 

participants) that anticipate a 

continuous increase of M&A 

transactions with PE involvement 

Less than -10% 

0% to -10% 

0% 

0% to +10% 

More than 10% 

% of responses [only one answer possible]



11 


Pharma/Healthcare and Consumer Goods/Retail sectors expected 

to show most M&A transactions with PE involvement in 2012 

Ranking of industries by number of M&A transactions [%] 

European industries with a high number of M&A transactions with PE 

investor involvement in 2012 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

Pharma/Healthcare 56% 

Consumer Goods and Retail 51% 

Logistics & Business Services 37% 

Energy/Utilities 37% 

Technology & Media 34% 

Financial Services 27% 

Capital Goods & Engineering 21% 

Chemicals 14% 

Automotive 13% 

Building & Construction 9% 

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

100% = 

Max. value 

COMMENTS 

> There is a clear opinion among 

Private Equity professionals about 

the industries where M&A will be a 

driver 

> More than half of all Private Equity 

Professionals expect that 

Pharma/Healthcare and Consumer 

Goods/Retail will have a very high 

number of M&A transactions with 

Private Equity involvement



12 


Mid-cap segment expected to dominate – 94% of PE transactions in 

2012 are expected in the enterprise value range of up to EUR 250 m 

Expected range of PE transactions in enterprise value in 2012, [%, EUR m] 

"Most PE transactions in 2012 will be in the enterprise value range of…" 

19% 

94% 

41% 

34% 

4% 

2% 

0% 

COMMENTS 

> Large cap deals with enterprise 

values above EUR 500 m are likely 

to remain seldom 

> 94% of all PE transactions in 2012 

are expected to be smaller than 

EUR 250 m 

> Still 60% expect that most 

enterprise values of PE 

transactions would be even below 

EUR 100 m in 2012 

EUR 

1,000m 




13 


Despite from Central/Eastern Europe and Scandinavia, a sharp 

decline in PE M&A activity is expected 

Change of PE M&A activity in major countries – 2012 vs. 2011 [%] 

Expected change in PE M&A activities in the following countries in 2012 

compared to 2011 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

Poland 4% 

Scandinavia 1) 1% 

CEE (excl. Poland) 2) 1% 

UK -2% 

Germany -3% 

Austria & Switzerland -3% 

Benelux -7% 

France -7% 

Iberia & Italy -7% 

Greece -10% 

COMMENTS 

> Major PE markets like the UK and 

Germany are expected to see a 

minor slowdown of PE M&A 

activities – reduction of 2% to 3% 

in 2012 compared to previous year 

> However, in Nordic countries and 

Central Eastern Europe PE M&A 

activity is expected to gain 

momentum in 2012 

> Esp. Greece is expected to suffer 

from the uncertain economic 

outlook 

Expected change of PE M&A activity in 2012 compared to previous year in % [multiple answers possible] 

1) Includes Denmark, Norway, Sweden 

2) Central and Eastern Europe includes e.g. Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, the Slovak Republic, Slovenia



14 


Overall economic situation considered the most relevant factor for 

European PE driven M&A – Decline in economic climate expected 

Overview on factors with relevance for M&A business in Europe [%] 

"What will be the most influential factors affecting European M&A transactions 

with Private Equity involvement in 2012? How do they develop?" 

1 

2 

3 

4 

5 

Overall economic 

situation 

Situation of the 

financial markets 

Availability of attractive 

acquisition targets 

Development of 

the Euro crisis 

Development of 

valuation levels 

Importance 

of factors 

18% 

12% 

29% 

25% 

33% 

Development of factors in 2012 

Substantial 

deterioration 

No 

change 

Substantial 

improvement 

COMMENTS 

> PE investments are mainly driven 

by the uncertain economic outlook 

of 2012 

> Survey participants anticipate a 

further decline of the financial 

markets and the overall economic 

situation 

> No change in the pipeline of 

attractive targets expected for 

2012 

> The valuation levels are not 

considered to change considerably 

% of participants that expect high influence of this factor [multiple answers possible]



15 


38% of respondents expect the financing environment to be the 

most relevant factor for pricing of M&A deals 

Relevance of factors for pricing of M&A deals in 2012 [%] 

Ranking of factors: high relevance for pricing of M&A deals in 2012 

1 

2 

3 

4 

5 

Financing environment 

Target's market positioning 

Competition among European PE 

Competition from European strategic 

investors with European PE 

Historical purchase price upon entry 

38% 

25% 

10% 

8% 

7% 

COMMENTS 

> The current financing environment 

as well as the target's market 

position are the primary factors for 

determining pricing of M&A deals 

in 212 

> Competition among European PE, 

strategic investors – also from 

Asia – is not considered to be that 

important 

6 

Competition from Asian strategic 

investors with European PE 

7% 

% of participants that rank factor with high relevance [multiple answers ]



16 

2 KEY ISSUES FOR PRIVATE EQUITY 2012 

Private Equity investors will dedicate most of their time to the 

development of portfolio companies – Investing or exits not in focus 

Focus of PE investors in 2012 on life cycle stages [%] 

"On which phase of the PE value chain will you put most of your focus in 

2012?" 

40% 

Development of portfolio 

companies 

15% 

Making new 

investments 

11% 

Fundraising 

8% 

Divesting 

existing 

investments 

7% 

Prolongation 

of existing 

funds 

COMMENTS 

> Value creation within the holding 

period is a top priority for PE funds 

in 2012; 40% of all Private Equity 

professions will focus on the 

development of the existing 

portfolio 

> Only one to two out of 10 Private 

Equity investors will continue to 

make new investments or will 

continue to raise funds or start new 

fundraising activities 

> Divesting of existing investments 

and prolongation of existing funds 

is a priority task for less than 10% 

% of participants that will put most of their focus on phase of PE value chain [multiple answers possible]



17 


64% of PE professionals expect competition in fundraising to 

become more intense in 2012 

Expected degree of competitiveness in fundraising in 2012 [%] 

"What degree of competitiveness do you expect in fundraising in 2012?" 

No change of 

competitive situation 

Easing up 

competitive situation 

31% 

5% 

64% 

Competitive situation 

becomes more intense 

COMMENTS 

> Two thirds of all PE professionals 

expect to face a more intense 

competitive situation for 

fundraising in 2012 

> Only 5%, however, see a 

significant improvement of the 

fundraising situation 

> One third does not see any change 

of fundraising in 2012 




18 


Carve-outs likely to be a key source for premier PE targets in 2012 – 

Distressed deals not expected to yield attractive investment cases 

Overview on sources of most attractive targets in 2012 [%] 

Ranking of the most important source of attractive targets in 2012 

1 

2 

3 

4 

5 

Parts of groups/carve-outs 76% 

Majority shareholdings in 

family-owned companies 

Secondary buy-outs 50% 

Insolvent companies/distressed deals 48% 

Listed companies (taking private) 21% 

69% 

COMMENTS 

> Carve-outs as well as majority 

shareholdings of family-owned 

companies will be the primary 

sources of targets in 2012 

> Secondary buy-outs and 

distressed deals also remain an 

important source for targets 

> Taking listed companies private is 

by far the least attractive source of 

targets for Private Equity funds 

% of participants that expect high importance for the source of targets [multiple answers possible] 

100% = 

Max. value



19 


Debt financing generally expected to become more difficult in 

2012 – Less difficulties for working capital and CAPEX lines 

Availability of external financing in 2012 [%] 

"Compared to 2011, what external financing will be more difficult to raise 

in 2012?" 

1 

2 

Recapitalization (i.e. debt substituting 

equity, dividend to sponsor) 

Leveraged buyouts (i.e. new 

transactions) 

Easier 

to raise 

No 

change 

More difficult 

to raise 

COMMENTS 

> Banks are still reluctant to agree 

on recapitalizations and to finance 

leveraged buyouts 

> Asset-based growth financing 

(CAPEX, working capital) is not 

seen as much under pressure 

3 

Refinancing (i.e. improvement of terms) 

4 

Growth financing (i.e. working capital, 

lines for add-on acquisitions or CAPEX)



20 


Strategic investors are anticipated to play an increasingly important 

role in PE exits – IPO channel expected to be closed for PE assets 

Change of exit channels in 2012 compared to 2011 [%] 

Ranking of exit channel activity: expected significant increase in 2012 

compared to previous year 

1 

2 

3 

4 

5 

M&A with strategic investors 61% 

M&A with PE investors 27% 

Triple track 

(i.e. IPO, M&A process and refinancing) 

Dual track 

(i.e. IPO and M&A process) 

IPO 2% 

11% 

10% 

COMMENTS 

> Strategic investors represent 

strong competition in PE auction 

processes based on additional 

synergy levers – A significant 

increase of exits with strategic 

investors is expected in 2012 

> Secondary buy-outs remain an 

option while 

> Dual and triple track are 

considered while the IPO channel 

is expected to be closed for PE 

assets 

% of participants that expect a significant increase of exit channel [multiple answers possible] 

100% = 

Max. value



21 

3 PRIVATE EQUITY BUSINESS MODEL 

The majority of respondents feel a need to adapt the PE business 

model – 36% see no need for changes 

Adjustment of Private Equity business model necessary [%] 

"The Private Equity business model is just as robust now as it was before 

the crisis. No adjustment is necessary. Agree or disagree?" 

Disagree Neutral Agree 

Completely 

disagree 

21% 

Completely 

agree 

19% 

COMMENTS 

> More than half of the PE 

professionals think that the Private 

Equity business model needs to be 

changed 

> Still one third – however – expects 

no need to change the investment 

strategies in place 

79% 

Somewhat disagree 

Neither agree 

or disagree 

81% 

Somewhat agree 

57% of all participants 7% of all participants 36% of all participants



22 


94 % 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?" 

4% 94% 

74% 

COMMENTS 

> Stronger focus on proactive 

operational improvement within the 

portfolio companies becomes more 

important 

> Passive portfolio management with 

pure financial engineering is 

limited 

20% 

2% 

2% 

2% 

Completely 

disagree 

Somewhat 

disagree 

Neither agree 

nor disagree 

Somewhat agree 

Completely agree 




23 


Strategic measures for performance improvement are expected to 

offer the highest chances for success in the next years 

Chances of success of value-enhancement measures [%] 

Ranking of value enhancement measures for PE portfolio companies 

according to chances for success in the next years 

1 

2 

3 

Strategic measures 

(e.g. buy-and-build) 

Operational measures 

(e.g. cost cutting, 

outsourcing) 

Financial measures 

(e.g. recapitalisation, 

refinancing) 

2% 

34% 

54% 

COMMENTS 

> The implementation of strategic 

measures offers the best chances 

for success in the next year 

> Continuous operational measures 

like cost cutting and outsourcing 

can tap additional potential to 

improve profitability 

> The effect of financial measures in 

terms of value enhancement is 

very limited 

% of responses that expect very promising chance of success for value enhancement measures 

[multiple answers possible] 

100% = 

Max. value


24 

It's It's character 

that character creates 

impact! that creates 

impact!

European Private Equity Outlook 2012 (PDF, 1293 ... - Roland Berger

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