Apax Partners - ESADE 29.01.2013

Private Equity industry climate and outlook
ESADE Private Equity & Venture Capital Forum January 2013

Oriol Pinya
Executive summary
The worst of the downturn in investment activity seems to be over
Debt markets are back (on a selective basis)
Equity dry powder is rapidly being depleted in a very tough fundraising environment
A recovery in divestment activity should help recycle capital and thus propel fundraising and investment
PE is a cyclical industry
Delivering target returns is becoming more difficult
The highest PE returns are achieved in times of distress
SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH
Low valuations create significant opportunities
Spain is becoming a land of opportunity
PE is a very attractive asset class
Right selection of GP is key
Spain is underinvested in PE funds
The worst of the downturn in investment activity

seems to be over
Investment volumes have recovered but still below 2004 levels

Global buyout deal volume ($bn)(1)
696
246
30
32
54
65
95
96
97
98
112
98
99
00
68
297
186
142
111
01
666
184
184
190
10
11
12
72
02
03
04
05
06
07
08
09
Top 5 largest buyouts(2)

2007
Target
#1
#2
#3
#4
#5
Total # of buyouts
with EV >$2.0bn
EV ($bn) Target
TXU
Alltel
First Data
Hilton Hotels
Boots
46
43.8
27.9
27.7
25.8
20.6
2008
EV ($bn) Target
ConvaTec
Expro
NDS Group
Xella
Booz Allen
14
(1) Source: Bain, Dealogic

(2) Source: Dealogic
4.1
3.9
3.3
3.2
2.5
2009
2010
EV ($bn) Target
IMS Health
Springer Science & BM
Anheuser-Busch
Busch Ent.
Skype
5
5.2
3.4
3.0
2.7
2.0
2011
EV ($bn) Target
Del Monte
Burger King
Extended Stay
CommScope
NBTY
13
5.2
3.9
3.9
3.9
3.7
2012
EV ($bn) Target
Kinetic Concepts
PPD
Securitas Direct
Skylark
Emdeon
13
6.3
3.9
3.4
3.4
3.1
EV ($bn)
Cequel
Hamilton Sundstrand
Getty Images
TransUnion
AOT Bedding
12
6.6
3.5
3.3
3.0
3.0
with debt markets back (on a selective basis)
US markets have recovered materially but Europe continues to struggle. Strong high yield issuance
US leveraged loans volumes ($bn)(1)
Europe leveraged loans volumes ($bn)(1)
900
840
800
800
700
706
700
660
642
173
600
548
179
500
430
315
157
400
319
115
300
300
198
200
100
137
480
140
61
273
533
292
164
215
206
53
367
185
386
229
68
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
YTD
Oct
Loans
High yield
(1) Source: BAML
263
253
153
500
275
407
400
305
600
200
100
0
69
43
15
4 54
39
107
25
81
174
25
37
50
117
226
80
67
121
114
60
60
70
46
78
61
56
31
21
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
YTD
Oct
Loans
High yield
149
164
with debt markets back (on a selective basis) (ii)
Dual perception of credit risk in Europe but recent convergence of spreads

Sovereign 5-year Credit Default Swap price evolution (basis points)(1)
650
600
UK
Germany
550
France
500
Italy
450
Spain
400
350
300
250
200
150
100
50
0
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
(1) Source: Bloomberg as of January 24, 2013

5
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Equity dry powder is rapidly being depleted in a very

tough fundraising market
Difficult fundraising environment should be put in perspective: as much capital as in the previous decade was raised in 2006-08
Annual global capital raised for buyout funds ($bn)(1)
+465%
-53%
243
226
233
143
109
99
59
59
71
64
77
79
2010
2011
67
43
1999
2000
2001
2002
(1) Source: Preqin

6
2003
2004
2005
2006
2007
2008
2009
2012 YTD
but a recovery in divestment activity should help recycle

capital and thus propel fundraising and investment
More recent vintage funds have been slower to return capital to investors
Buyout median distribution to paid-in capital (DPI) by vintage year(1)
2007 vintage funds have distributed

less than a half of what similarly aged
funds used to return in the past
(1) Source: Bain, Preqin; Data as of Q2 2011

7
After all, PE is a cyclical industry
PE is a cyclical business
US buyout deal value ($bn)(1)
500
450
400
350
300
250
200
150
100
50
0
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
(1) Source: Bain US LBO deal database; Represents control buyout transactions by US-based firms; includes closed deals only; represents
year deals were closed
Higher operational focus going forward more demanding than plain financial engineering from the past
Sources of value creation in PE deals across time (%)(1)
1980s
Leverage Era
1990s
Multiple
Expansion Era
2000s
Earnings
Growth Era
2010s
Operational
Value Creation
100%
80%
32%
25%
51%
60%
15%
Deleverage
30%
Multiple expansion
55%
EBITDA growth
39%
46%
40%
31%
20%
36%
18%
22%
1980s
1990s
0%
(1) Source: BCG The Future of Private Equity (June 2010)

9
2000s
2010s
volumes
margins
The highest PE returns are achieved in times of

distress
The best private equity investments originate at the bottom of the cycle(1)
Mean net IRR by vintage(1)
YoY US GDP growth(1)
35
6
32%
31%
30%
30
4
26%
25
23%
21%
21%
20
19%
18%
16%
16%
15
15%
15%
0
11%
10
11%
10%
9%
7% 7%
10%
(1)
7%
(2)
5%
(3)
Top of Cycle
10
Bottom of Cycle
US GDP Growth
(1) Source: Global Insight, Cambridge Associates LLC; US private equity Pooled Mean Net IRR to limited partners by vintage year as of
30 June 2011; GDP projections as per the International Monetary Fund, September 2011
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
(4)
1986
as low valuations create significant opportunities
Multiples attractive compared to long term trend

DAX 30, EuroStoxx, S&P Shiller P/E(1) (Indexed: 1983=100), 1983-2011
Nov-11
LT(2) Avg
S&P500
22.9x
26.7x
DAX
13.3x
23.8x
EuroStoxx
13.1x
21.3x
60
50
40
30
20
Troughs in
2003 and 2009
10
0
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
US
11
EuroStoxx
DAX
(1) Alternative to standard P/E ratio, developed by Robert Shiller; Ratio is based on 10-year moving average of inflation-adjusted earnings,
rather than LTM figures
(2) Long-term: 1983-2011
Spain: Shortage of funding
Spain: Growing competitiveness
New loans (bn)(1)
Weight of international sales for top 55 listed Spanish stocks(2)
1,000
% total
-50%
800
600
400
200
-79%
0
2006
2007
2008
2009
2010
New loans to non-financial corporations
2011
2012E
93
96
98 96 96 94 91
93
78
90 90
85 80 76 74
73
78
74 74 71 70
67 62 60
51
60 53 52 51
49
52
49 47 44
40 40
33 33 24
25 23 20
18
52
00000000000
New loans to families
Local Spanish PE dry powder (m)(1)
P/E vs. EPS growth for key European stock indices(2)
3,928
2,116
1,812
Funds raised 2006-2012
12
Investments
Avg: 49% weight of

international sales
Estimate of current
dry powder
(1) Source: PwC, Ascri, Eurostat, DBK Informa, INE, OECD, IMF, broker reports; Funds raised by local private equity funds: 2012 estimate
assumes 50% of Investindutrials new fund is in Spain; Estimates based on # of deals executed by each fund and assuming the average
investment size as stated in funds strategy on website
(2) Source: Banco Santander (2013 Strategy Report, Nov-12)
All in all, PE is a very attractive asset class
Long term evidence: PE shows superior returns

Median returns as of 30 June 2010(1)
20
15
10
(5)
(10)
(15)
1 Year
Fixed Income
(1) Source: Preqin

13
3 Years
Hedge Fund
5 Years
Listed Equity
Private Equity
10 Years
Real Estate
particularly if you choose the right GP
Selecting the right fund manager is vital for generating alpha

PE alpha generated by GP group(1)
Alpha creation example
40%
Top 5%
Total alpha excluding leverage

36%
Top 10%
25%
Top 25%
18%
Top 50%
-5%
Bottom 50%
-13%
Bottom 25%
Bottom 10%
Bottom 5%
-27%
-32%
Stock market
return
Sector pick alpha
Unlevered
operational alpha
IRR at sector
leverage
Incremental
leverage
(1) Source: Bain, Private Equity Study: Finding Alpha 2.0 (Oliver Gottschalg, HEC-Paris, Golding Capital Paris, November 2011)
14
Local currency
gross IRR
which leaves us wondering why Spain is

underinvested in PE funds
Spanish institutional investors underinvest in

PE when compared to other countries
The largest institutional investors in the world invest heavily and successfully in
PE
Pension funds portfolio allocation to PE funds

(%)(1)
Asset allocation of pension funds (%)

Public equities
Fixed income
Real estate
PE
Other
6.5%
6%
14% 3%
14%
10%
6%
12%
36%
51%
18%
34%
11%
37%
CalSTRS(2)
(total AuM: $158bn)
16%
Caisse de Dpts et
Placements du Qubec(2)
(total AuM: $159bn)
33%
Canada Pension Plan

Investment Board(2)
(total AuM: $162bn)
CalSTRS 10-year IRR(2)

0.8%
12.9%
Spain
6.5%
Europe
PE portfolio
15
Total fund
(1) Source: Ascri

(2) Source: CalSTRS, Caisse de Dpts et Placements du Qubec (CDPQ), Canada Pension Plan Investment Board (CPPIB); CalSTRS
asset allocation as of December 31, 2012; CalSTRS 10-year IRR as of June 30, 2012; CDPQ asset allocation as of December 31, 2011; CPPIB
asset allocation as of March 31, 2012; CPPIB PE investments include direct investments and investments through externally managed funds
Summary
The worst of the downturn in investment activity seems to be over
Equity dry powder is rapidly being depleted in a very tough fundraising environment
PE is a cyclical industry
The highest PE returns are achieved in times of distress
PE is a very attractive asset class
16

Apax Partners - ESADE 29.01.2013

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Private Equity industry climate and outlook

ESADE Private Equity & Venture Capital Forum January 2013

The worst of the downturn in investment activity seems to be over

Debt markets are back (on a selective basis)

Delivering target returns is becoming more difficult

The highest PE returns are achieved in times of distress

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

Low valuations create significant opportunities

Spain is becoming a land of opportunity

PE is a very attractive asset class

Right selection of GP is key

Spain is underinvested in PE funds

The worst of the downturn in investment activity

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

Investment volumes have recovered but still below 2004 levels

Top 5 largest buyouts(2)

(1) Source: Bain, Dealogic

with debt markets back (on a selective basis)

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

Europe leveraged loans volumes ($bn)(1)

(1) Source: BAML

with debt markets back (on a selective basis) (ii)

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

Dual perception of credit risk in Europe but recent convergence of spreads

(1) Source: Bloomberg as of January 24, 2013

Equity dry powder is rapidly being depleted in a very

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

(1) Source: Preqin

but a recovery in divestment activity should help recycle

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

2007 vintage funds have distributed

(1) Source: Bain, Preqin; Data as of Q2 2011

After all, PE is a cyclical industry

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

Delivering target returns is becoming more difficult

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

(1) Source: BCG The Future of Private Equity (June 2010)

The highest PE returns are achieved in times of

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

YoY US GDP growth(1)

as low valuations create significant opportunities

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

Multiples attractive compared to long term trend

Spain is becoming a land of opportunity

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

Spain: Shortage of funding

Spain: Growing competitiveness

New loans (bn)(1)

Weight of international sales for top 55 listed Spanish stocks(2)

New loans to non-financial corporations

New loans to families

Local Spanish PE dry powder (m)(1)

P/E vs. EPS growth for key European stock indices(2)

Funds raised 2006-2012

Avg: 49% weight of

All in all, PE is a very attractive asset class

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

Long term evidence: PE shows superior returns

(1) Source: Preqin

particularly if you choose the right GP

SECTOR FOCUSED | LOCAL PRESENCE | GLOBAL REACH

Selecting the right fund manager is vital for generating alpha

Alpha creation example

Total alpha excluding leverage