Private Equity in Germany:

Roundtable Discussion

Response to the Crisis

Munich
Q3 2009
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 02 PRIVATE EQUITY IN
Roundtable Discussion

GERMANY: RESPONSE
TO THE CRISIS

Contents

Speakers around the table 03

Transcription of the discussion 04
Duff & Phelps: Where the debt breaks 08
Latham & Watkins: National legal safeguards against
10
risks associated with private equity investments
Historical data 13
 03

Roundtable Discussion
Speakers around the table

Robert A. Bartell CFA Michael H. Bork

Managing Director Managing Director

Duff & Phelps Barclays Private Equity

Germany

Dr. Jörg Kirchner Sotiris T.F. Lyritzis

Office Managing Partner Managing Director

Latham & Watkins LLP Summit Partners

Artur Meinzolt Catherine Raisig

Senior Manager Managing Editor

Management Remark, The

Consulting - Strategy, Mergermarket Group
M&A, Accenture

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Roundtable Discussion

With current M&A and corporate finance related activity in Germany low, this roundtable event
held in Q3 2009 in Munich examined how the German market has reacted to the financial crisis.
The following is an edited transcript of the discussion.

What has been the impact of the

financial crisis on private equity?
Michael Bork (MB):
MB: There is no doubt that the private equity industry and our day-to-day business has changed a lot in the last 18 months. Deal
flow in the mid-cap and large segments is low, although the lower end of the market is doing well. The financing environment has
improved, but the banks are still not financing many deals and we have seen very few transactions taking place. At the beginning
of the crisis, we concentrated on our portfolio and used tools that would help recover, or improve, existing portfolio businesses.
We feel quite comfortable now – it is a different kind of play, but it is quite interesting as well.

Sotiris Lyritzis (SL): Artur Meinzolt (AM):

SL: We have spent a lot of time with our portfolio companies,
helping them to understand the impact of the changes and how
they need to change their own plans, from budgeting to recruiting,
and operational standpoints. I think portfolio work is always very
important, but in times of crisis it is even more so and funds that
spend a lot of time with their portfolios will reap the rewards
over the longer term. It is correct that deal flow is limited and
difficult, but sometimes you have to be a little bit more creative
when looking at transactions and structure them differently so
that you can make them work. Other times, you just have to be
patient, identify the good companies and stay in touch with them
until they’re ready to take an investment. In difficult periods like
these, we notice that the owners of many of the more attractive
businesses prefer to wait instead of taking an investor in.
Dr. Jörg Kirchner (JK):
JK: As an adviser, we see that deal flow has gone down and that
the industry has focussed on portfolio companies. However,
private equity firms focussed on restructurings and investments
in stressed and distressed debt are very busy.
As far as the general market is concerned, I would say two
things: firstly, times have changed and overall there are fewer
bidders out there. We are faced with scenarios where the seller
knows that he has to work with the buyer in order to get to a
closing and that can mean sharing the risk. It is a totally different
atmosphere to negotiating a deal two years ago. Secondly, the
financing environment is very tough and leverage continues to
be difficult to obtain, it is possible, but you sometimes need to be
creative.
AM: We see three value creation levers for private equity funds going
forward: financial engineering; operational levers; and strategic
levers, such as opening up new revenue opportunities by taking an
established technology to a new market.
Robert Bartell (RB):
RB: We are now in a new time where things that would never
have been considered a couple of years ago are being thought
about carefully. Many companies are confronted with a decline in
revenues and, as a result, there is more attention paid to things
like costs. Sponsors and their advisers are looking carefully at
what drives a business and what can be cut. However, this needs
to be carefully thought out because there’s a risk you’re going to
do damage to the future business.
How have deal structures
changed in the aftermath
of the financial crisis?
JK: Deal structures need to tackle the two main problems the
private equity industry currently faces: firstly, it should be noted
that the business outlook of most target companies is relatively
unpredictable and, consequently, it is hard to find the right
purchase price. It is difficult to find business plans that are totally
plausible and convincing. Secondly, the issue of financing needs
to be addressed, but there are all kinds of creative solutions.
It is still available for mid-cap transactions, but there needs to
be negotiation with quite a large number of banks with each
underwriting a piece of the debt. Deals can still be done.

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Roundtable Discussion
SL: I agree that you have to try a little harder to find ways to get
to the same spot as before. In addition to the things mentioned,
I should add that structures are now more focussed on earn-
outs or earn-out type constellations. The only way to get around
a situation in which a management team insists that they will
grow a business 50% over the next five years, despite there
having been no growth in the last three years, is to say: let’s put
something in place that rewards you if you manage that, but
that doesn’t punish us if you don’t. You have to now think about
aligning interests and incentivising management over the longer
term rather than a clean deal where everything is wrapped up
from day one.

MB: I think deals are structured in a better way than they were
before. Twelve or 18 months ago, we were more or less asked
to buy very complex businesses with our eyes virtually closed.
Buying a business is different from buying a car, and therefore
the risk should be shared in a more effective way.

In the absence of credit,

can private equity funds
still offer above-market
average returns on
investment?
RB: Duff & Phelps recently tested out hypothetical scenarios
of private equity. Even with 33% leverage, the net returns to
LPs were on average, with no operational improvements, still
13-17% higher than the market. This is low compared to what
we know private equity can do, but higher than returns offered
by indices, be they European indices; the S&P 500; or the Asia-
Pacific markets. The point is that even with none or very modest
leverage, the returns that private equity generates is superior
to historical returns in the public markets. Furthermore,
managers are starting to realise that if they can remove the
serious financial risk, which tends to be binary, then they can
really focus on operations and growth.

AM: By taking more time to get to know the business, to get to

know the market, I’m sure that you can find the right targets
and make the right investments to realise the superior returns
that we have seen in the past.

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Roundtable Discussion

SL: The stage at which private equity invests is typically earlier

than the public markets and so there is perhaps more scope “If you do your
for rapid growth. If you do your work well and identify the right
opportunities, manage to invest at decent valuations, and manage work well and
the investments well, then you can generate very attractive returns
for your investors. identify the right
JK: A fund at the end of its lifetime which invested heavily during opportunities,
the boom phase will probably show a smaller return than other
funds. However, funds that are beginning to be invested today face manage to invest at
a very interesting time – if a private equity house makes profitable
investments right now, and is creative, they will be able to show a decent valuations,
very substantial return in the future.
and manage the
MB: We are really looking at businesses that will grow to a level
that they have never achieved before. If we want to sell at high investments well,
valuations, we have to deliver something which is substantially
better than it was before. then you can
generate very
What are the primary attractive returns
challenges and
opportunities for private for your investors.”
equity investors in the
German market? Sotiris Lyritzis

SL: Germany is an attractive market and, because of its size,

companies can grow very quickly and significantly. It is a
technologically advanced economy and there are a lot of companies
with world-class products that have the ability to be dominant global
players. The challenges are very similar to those that are seen
everywhere else. Investors need to make sure that the company
they are investing in has a product that is robust and a firm that has
made the right plans to expand out of their domestic market. Most
of these businesses are competing in a global marketplace and
being strong in the domestic economy is a very good starting point.

MB: Germany is a very interesting market, because there is activity

across a number of industry sectors. We have a lot of innovative
people working here and much of the money is invested in research
and development, this is quite intriguing for the world market.

RB: The principal challenge is managing investments in sectors

that are in decline, or facing regulatory issues. Private equity funds

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 07

that have expertise and networks in growth industries are well
positioned for the next cycle, I say this as it probably can’t get any
worse than it has been for the last 12 plus months.
AM: In Germany, you have to be an active investor and take a more
entrepreneurial role post-deal, fully engaging all the stakeholders
in a company. This means you might have to put in more effort at
portfolio company level, but our clients have told us that you can
achieve better by putting in this effort. It also results in a much
broader strategy and business plan, which can benefit the growth
of a company. This is obviously to everyone’s benefit.
Roundtable Discussion
Calls for regulation are coming up because there seem to have
been some private equity funds that operated in a more secretive
way towards their LPs than they would have desired. This
arrangement works well as long as the private equity house is
reporting good news and sending cheques. It obviously breaks
down when you have bad news to report. One of the things that
will come out of this crisis is that private equity funds will have to
be a little more transparent with their investors and a lot clearer
on portfolio structure, valuation and overall levels of leverage. LPs
can then continue to feel comfortable with the asset class, even at
times such as now where it is obviously under pressure.

What kinds of regulations

are appropriate and
necessary to govern the
activity of private equity
funds?
JK: I think we need to differentiate between different layers of
regulation and their objectives. There is a need for tax reform,
especially where outside investors raise funds in Germany and
invest in the domestic market.

We also need to address the relationship between the funds and

investors, as well as increasing the credibility of the private equity
industry in the market. This will be addressed by the draft EU
directive which covers elements such as transparency, reporting
requirements and corporate governance. I do not think we need
regulation to protect the investors, since they are all very mature
investors and are aware of what they are doing.

It is also important to distinguish between the different sorts of

alternative investment vehicles; the current EU directive does not
make a distinction between hedge funds and buyout funds, and
these obviously have very different characteristics and regulatory
requirements.

SL: In relation to the previously mentioned EU directive, private

equity is a global business and a regional directive can only do so
much for it. However, I feel that with greater transparency in the
reporting arrangements between GPs and LPs, you can hopefully
bypass the need for particularly heavy central legislation and
regulation of the industry.

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 08
Roundtable Discussion

Where the Debt Breaks

Robert A. Bartell, CFA (Managing Director, London)
and Dr. Christian Aders (Managing Director, Munich)

Income approach Market multiple approach

The income approach faces limitations in the current economic The market multiple approach has a multitude of questions as
environment, including: well:

• Challenges in estimating the Cost of Capital • Should a valuation use current, historical or projected
- Which risk-free rate should be used? multiples?
- What is the proper equity risk premium? • Is the current EBITDA appropriate for applying to the
- How did the collapse in the financial industry affect my multiple?
firm’s beta? • Will the historical peak-to-trough cycle of a company match
• Assessing the reasonableness of financial projections the future peak-to-trough?
- Are the projections aggressive or conservative given the
current environment? Valuation-driving market multiple selections are even more
- How do we treat the Net Operating Losses, a tax asset, of critical if the value falls within the ‘Red Zone’ in which slight
a company? adjustments could dramatically affect a conclusion.
- What is the amount of “new money” necessary for a
company to achieve its business plan?

The “Red Zone”

Positive Equity Value

Low Multiple High Multiple

Senior Debt Second Lien Term Loan / Mezzanine Debt Enterprise Value

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 09

Roundtable Discussion
To assess the financial viability of a company, long-term Step 2: Cash Flows Assess Company Liquidity
projected performance needs to be reviewed in conjunction Can cash flows pay debt obligations?
with the current situation. Companies that look solvent today
EBITDA 250
may not be solvent tomorrow. A simple example comparing
two companies with similar free cash flow but different capital Capex: 10
structures demonstrates the importance of not only measuring Taxes 25
the current health of a company but also estimating its future FCF1 215
strength.
Principle Due: 200
Which company is in a Interest Due: 85

better position? Total Fixed Charges 285

Fixed Charge Coverage Ratio2: 0.75x

Step 1: Balance Sheet Assessing Where the Debt Breaks
Is enterprise value greater than outstanding debt?
EBITDA 250
Capex: 10
(€ in 000s)
Taxes 25
Company 1
FCF1 215
Enterprise Value €300,000
Debt Securities Principle Due: 100
Interest Due: 85
Senior Debt (125,000)
Total Fixed Charges 185
Second Lien Term Loan / Mezzanine Debt (100,000)
Aggregate Equity Value Surplus/(Deficit) €75,000 Fixed Charge Coverage Ratio2: 1.16x

1
Free Cash Flow “FCF” = EBITDA - Cash Taxes - Capital Expenditures
2
Fixed Charge Coverage Ratio = FCF/Fixed Charges
(€ in 000s)
Company 2 Step 3: Conclude Which Company is in Better Position?
Enterprise Value €140,000 In the first scenario, Company In the second scenario,
1’s enterprise value exceeds Company 2’s enterprise value
Debt Securities
the outstanding debt but is less than the outstanding
Senior Debt (125,000) Company 1 may not have debt but Company 2 should
Second Lien Term Loan / Mezzanine Debt (100,000) the ability to refinance in the have the ability to service
current environment. upcoming payments.
Aggregate Equity Value Surplus/(Deficit) -€85,000
Solvency Tests Solvency Tests
Balance Sheet: Pass Balance Sheet: Fail
Cash Flow: Fail Cash Flow: Pass

Duff & Phelps is well positioned to provide a debtor, creditor or security trustee an independent going concern business enterprise
value and expert testimony. We are confident in assessing and defending ‘where the debt breaks’ in connection with negotiations
amongst various stakeholders.

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 10
Roundtable Discussion
National legal safeguards against risks
associated with private equity investments
Dr. Jörg Kirchner and Dr. Liane Bednarz
Introduction
On 30 April 2009, the European Commission published a
proposal for a Directive of the European Parliament and Council
on Alternative Investment Fund Managers (AIFM) (AIFM-
Directive Proposal). In this proposal, Alternative Investment
Funds are defined as funds that are not regulated under
the envisaged recast of the Directive on the coordination of
laws, regulations and administrative provisions relating to
undertakings for collective investment in transferable securities
(UCITS-Directive). Hence, private equity funds and their
managers would fall within the scope of the AIFM-Directive.
The AIFM-Directive Proposal aims to create a regulatory
and supervisory framework for AIFM in the European Union,
thereby addressing certain risks of the financial system which
crystallised during the financial crisis. While acknowledging
that – different from hedge funds – private equity funds did not
contribute to the recent increase of macro-prudential risks,
the AIFM-Directive Proposal, nevertheless, perceives an EU-
wide regulation of private equity funds as necessary, because
the latter recently “experienced challenges relating to the
availability of credit and the financial health of their portfolio
companies.”
It is doubtful to what extent an EU-wide regulatory and
supervisory framework for the private equity industry is actually
needed. The various national legal systems within the EU
already contain a high level of protection against the risks
which are typically associated with private equity investments.
Using the example of certain key jurisdictions of the EU (France,
Germany, Italy, Spain and the United Kingdom; together are
the “Key Jurisdictions”), this article will show that these
typical risks of private equity investments have been previously
minimised on a national level. As for the types of limited liability
companies, this article is based on the national legal regimes
for the various types of limited liability companies which are
used for large and medium-sized companies, as these are the
key targets for private equity investors. Such legal forms are the
Société Anonyme (SA) (France), Gesellschaft mit beschränkter
Haftung (GmbH), Aktiengesellschaft (AG) (Germany), Società
per azioni (SpA), Società a responsabilità limitata (Srl) (Italy),
Sociedad Anónima (SA), Sociedad de Responsabilidad Limitada
(SL) (Spain), Private company limited by shares (Ltd.) and the
Public company limited by shares (Plc) (United Kingdom).
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This article will summarise:
(i) The legal and tax regimes for “asset stripping” from
limited liability companies;
(ii) The protection of limited liability companies against
undue financial assistance and other forms of upstream
loans/security imposed by their shareholders;
(iii) The protection of listed limited liability companies against
secret stake building and;
(iv) The transparency requirements relating to a significant
divestment of assets vis-à-vis the employees of a
portfolio company. All Key Jurisdictions contain extensive
legal provisions covering these aspects.
Asset Stripping
1. Legal regime
Asset stripping for the purpose of this article shall be (i)
the disposal of core assets by a company followed by the
subsequent distribution of the resulting proceeds of the
disposal to its shareholders as well as (ii) the unduly high
distribution of liquid assets to the shareholders, e.g. to pay
off acquisition debt incurred by the shareholders as part of
a leveraged finance transaction, even when such disposal
and distribution risk could be materially detrimental to the
company. All Key Jurisdictions contain strict safeguards
under corporate or capital markets laws in order to prevent
such asset stripping. Creditors and minority shareholders are
thereby protected against the adverse effects of the actual
asset stripping instead of being merely referred to insolvency
laws. Such preventive regulations against asset stripping
govern both (i) the initial sale of core assets and (ii) the unduly
high distribution of the proceeds resulting from the disposal
or of any other liquid assets to the shareholders (whether in
the form of a profit distribution, buyback of own shares or a
reduction of share capital).
a) Initial sale of core assets
Most Key Jurisdictions contain restrictions on the legal bodies
of a limited liability company (executive board/advisory board/
shareholders) with respect to the sale of the assets of a
company. Preventive regulations include measures such as the
requirement of shareholder resolutions prior to the sale of a
substantial part of the assets. A sale without a prior approval
of the shareholder meeting might be void and might have to
be rescinded, unless the buyer acts in good faith. Moreover,

most Key Jurisdictions impose a strict liability on the legal
representatives of the company in case they sell assets without
such prior consent of the shareholder meeting. Another widely
spread safeguard against the sale of a substantial part of
assets are national provisions according to which a (majority)
shareholder must not act to the detriment of a subsidiary, for
instance by instructing the company to sell its core assets even
if such sale is not in the best interests of the company. If a
(majority) shareholder or his representatives violate such rules,
they may be held personally liable.
b) Distributions to the shareholders
In all Key Jurisdictions the distribution of assets (i.e. profit
distributions, buybacks of own shares and reductions of the
share capital) to the company’s shareholders is restricted
by capital maintenance rules. In the event that assets of the
company have been sold to the detriment of the interests
of the remaining shareholders, creditors or employees, the
provisions on distribution of assets still contain very strict
rules for payments which are effected with the purpose to
distribute the proceeds from such sale to the shareholders.
In particular, the restrictions on the payment of dividends are
very effective. In all limited liability companies falling within the
scope of the Second Company Law Directive (Directive 77/91/
EEC as amended by Directive 2008/68/EC), a distribution of
dividends can only be effected if after such distribution both
the registered capital and any mandatory capital reserves are
covered by assets, the book value of which corresponds to
such registered capital and mandatory capital reserves. As
such, provisions protect creditors because they are mandatory
and cannot be set aside by a unanimous resolution of the
shareholders. Such requirements have been fully implemented
into all Key Jurisdictions.
2. Asset stripping and Taxation
Most European member states levy ordinary tax rates on capital
gains from the disposal of assets and business units, as well as
certain duties on fair market values of transferred assets. On the
basis of current tax laws, asset stripping strategies are therefore
unattractive precisely because they trigger a considerable tax
burden. Only share deals may provide for an exemption to these
rules, often due to the participation exemptions introduced in a
number of member states. With a view of the lack of attractiveness
of asset stripping strategies, European member states have in the
past consequently not seen any reason to provide for specific anti
avoidance provisions for asset stripping rules.
11
Roundtable Discussion
National legal
safeguards against
undue financial
assistance and other
forms of upstream
loans/security imposed
by the shareholders to
the target company
Also, Key Jurisdictions contain strict safeguards against
undue financial assistance and other forms of upstream
loans, and security imposed by the shareholder to the target
company.
1. Financial assistance
Financial assistance for the purpose of this article shall mean
the assistance given by a company for the purchase of its own
shares, or the shares of its parent company by an investor.
Such assistance can be given in different ways, for instance
by an advance payment, a direct loan, or a guarantee or other
security for a loan by financing banks in order to support the
investor’s acquisition debt.
All Key Jurisdictions implemented the strict restrictions
on financial assistance of public limited liability companies
required by the wording of Art. 23 of the Second Company
Law Directive (Directive 77/91/EEC) prior to its amendment.
Most Key Jurisdictions not only implemented Art. 23, but also
enacted additional limitations, namely provisions governing
by-passing structures and transactions with the same effect
as the transactions listed in Art. 23. Moreover, many Key
Jurisdictions also enacted restrictions on financial assistance
of private limited liability companies, thereby going beyond the
applicability scope of Art. 23 Directive 77/91/EEC. Art. 23 was
recently deregulated by Directive 2008/68/EC, as the European
legislator intended to ease changes in the ownership while at
the same time stipulating strict safeguards protecting both
shareholders and creditors. As a result, the protection level
for the latter continuous to be high.
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Roundtable Discussion
2. Upstream loans/security
All Key Jurisdictions contain a variety of limitations on
upstream loans/security to a parent company or a third party
which do not qualify as financial assistance. Upstream loans
for the purpose of this article are post-acquisition loans which
the target company grants to its parent company and which do
not qualify as financial assistance. The term upstream security
encompasses security for a loan which a third party has granted
to the parent company. The national safeguards in place
comprise (i) restrictions on related party agreements, (ii) the
requirement that the granting of the loan/security must comply
with the target company’s corporate purpose and interest, (iii)
the prohibition to affect the non-distributable reserves when
granting the loan/security, (iv) the test whether the claim
against the borrower is fully realisable and (v) the necessity to
point out the reasons for granting the loan/security.
3. National legal safeguards against secret stake building in
listed target companies
All Key Jurisdictions contain provisions in order to protect listed
companies against secret stake building, in particular through
notification requirements. Such provisions also govern secret
stake building through certain financial instruments. As a general
rule, the aforementioned national provisions are based on the
implementation of the Transparency Directive (Directive 2004/109/
EC) and its substantiating Directive 2007/14/EC. According to
Art. 13 (1) Directive 2004/109/EC, certain financial instruments
also have to be considered for the purpose of the voting rights
thresholds. In some Key Jurisdictions, this also includes cash
settled equity swaps. Furthermore, certain Key Jurisdictions also
require shareholders reaching certain voting right thresholds (e.g.
10 %) to disclose their intentions and plans for the company.
Transparency
requirements with
respect to a significant
divestment of assets vis-
à-vis the employees
The recent AIFM-Directive Proposal, mentioned at the
beginning of this article, sets forth certain information
obligations with respect to a significant divestment of assets,
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which the AIFM needs to fulfil towards the representatives of
the employees of a target company, provided the AIF managed
by such AIFM hold a controlling influence, as further defined in
the AIFM-Directive Proposal. The term significant divestment of
assets is not defined in the AIFM-Directive Proposal. The AIFM-
Directive Proposal stipulates that the Member States shall
ensure that the AFIM includes into the annual report of each
AIF a statement on significant divestment of assets. The AIFM
shall provide such annual report and hence, the statement
on significant divestment of assets to all representatives of
the employees of the company concerned, no later than four
months following the end of the respective financial year.
This envisaged disclosure requirement vis-à-vis the
representatives of the employees does not seem to be
necessary. Most Key Jurisdictions not only contain similar
requirements with respect to the annual report, but also
comprise disclosure requirements which relate to specific
cases of asset disposals. Hence, the employees will be
informed about such transactions before, or immediately after,
they have been executed. This level of protection is significantly
higher than a mere disclosure of a significant divestment of
assets in the annual report, which subsequently has to be made
available to the employees’ representatives.
Moreover, all Key Jurisdictions have implemented the so-called
Acquired Rights Directive (Directive 2001/23/EC dated March
12, 2001 on the approximation of the laws of the Member States
relating to the safeguarding of employees’ rights in the event of
transfers of undertakings, businesses or parts of undertakings
or businesses); or have adopted similar provisions which
provide for the transparency vis-à-vis the employees in certain
cases of a transfer of assets which entangles a transfer of
employees.
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Roundtable Discussion
Historical data
Top 20 German M&A transactions, Q1-Q3 2009
Ranking Announced Status Target company Target Target Bidder Bidder Seller Seller Deal
date sector country company country company country value
(€m)

1 Jun-09 C Hypo Real Estate Holding AG Financial Germany SoFFin Germany 2,960
(81.00% stake) Services
2 Mar-09 C Daimler AG (9.10% stake) Industrials Germany Aabar United Arab 1,954
& Investment PJSC Emirates
Chemicals
3 Jan-09 C Commerzbank AG (25.00% Financial Germany SoFFin Germany 1,770
stake) Services
4 May-09 P VNG-Verbundnetz Gas AG Energy, Germany EnBW Energie Germany EWE AG Germany 1,200
(47.90% stake) Mining & Baden-
Utilities Wuerttemberg
AG
5 Jun-09 P E.ON AG (13 hydro power Energy, Germany Oesterreichische Austria E.ON AG Germany 1,000
plants in Bavaria) Mining & Elektrizitaets-
Utilities wirtschaft AG
6 Jan-09 C RWE Westfalen Weser Ems Energy, Germany RWE AG Germany Municipal communities Germany 800
AG (20.03% stake) Mining & (Germany)
Utilities
7 Feb-09 C Danisco Sugar A/S (Anklam Consumer Germany Suiker Unie Netherlands Nordzucker AG Germany 730
factory)
8 Feb-09 C Mitteldeutsche Energy, Germany J&T Finance Czech NRG Energy Inc; URS USA 404
Braunkohlengesellschaft Mining & Group AS; Republic Corporation
mbH Utilities Severoceske Doly
9 Jul-09 C IDS Scheer AG TMT Germany Software AG Germany 401
10 Aug-09 C Deutsche Schiffsbank AG Financial Germany Commerzbank Germany HypoVereinsbank AG Germany 400
(12.00% stake) Services AG
11 Aug-09 C Porsche Automobil Holding Industrials Germany Qatar Holding Qatar Piech family (private Germany 390
SE (5.00% stake) & LLC investors); Porsche
Chemicals family (private investors)
12 Apr-09 P Stadtwerke Bremen AG Energy, Germany EWE AG Germany Freie Hansestadt Germany 360
(25.90% stake) Mining & Bremen (City of Bremen)
Utilities
13 Apr-09 C DAWAG Real Estate Germany Meravis Germany Vereinte Germany 360
Wohnungsbau- Dienstleistungs-
und Immobilien gewerkschaft
GmbH
14 Sep-09 C BRAHMS AG Pharma, Germany Thermo Fisher USA HBM BioVentures AG Switzerland 330
Medical & Scientific Inc
Biotech
15 Jun-09 P Stadtwerke Bremen AG Energy, Germany EWE AG Germany Freie Hansestadt Germany 320
(25.10% stake) Mining & Bremen (City of
Utilities Bremen)
16 Sep-09 P Easycash GmbH Business Germany Ingenico SA France Warburg Pincus LLC USA 290
Services
17 Jun-09 C RMG Group Industrials Germany Honeywell USA Triton Partners United 286
& International Inc Kingdom
Chemicals
18 Feb-09 C Hanseatische Verlags- TMT Germany Verlagsgesell- Germany Axel Springer AG Germany 263
Beteiligungs AG (23.00% schaft Madsack
stake); Kieler Nachrichten GmbH & Co KG
(24.50% stake); Leipziger
Verlags-und Druckerei GmbH
& Co. KG (44.90% stake);
Luebecker Nachrichten
GmbH (49.00% stake)
19 Jul-09 P Infineon Technologies AG TMT Germany Golden Gate USA Infineon Technologies Germany 250
(Wireline Communications Capital AG
business)
20 Aug-09 C Kalle GmbH Industrials Germany Silverfleet Capital United Montagu Private Equity Germany 213
& Partners LLP Kingdom GmbH
Chemicals
C = Completed; P = Pending; L = Lapsed

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 14
Roundtable Discussion

Top 20 private equity buyout and exit transactions,

Q1-Q3 2009
Ranking Announced Status Target company Target Target Bidder Bidder Seller Seller Deal
date sector country company country company country value
(€m)

1 Sep-09 C BRAHMS AG Medical, Germany Thermo Fisher USA HBM BioVentures Switzerland 330
Pharma & Scientific Inc AG
Biotech
2 Sep-09 P Easycash GmbH Business Germany Ingenico SA France Warburg Pincus USA 290
Services LLC
3 Jun-09 C RMG Group Industrials & Germany Honeywell USA Triton Partners United 286
Chemicals International Inc Kingdom
4 Jul-09 P Infineon Technologies TMT Germany Golden Gate Capital USA Infineon Germany 250
AG (Wireline Technologies AG
Communications
business)
5 Aug-09 C Kalle GmbH Industrials & Germany Silverfleet Capital United Montagu Private Germany 213
Chemicals Partners LLP Kingdom Equity GmbH
6 Aug-09 P Aleo Solar AG Industrials & Germany Robert Bosch GmbH Germany HANNOVER Germany 192
Chemicals Finanz GmbH;
Marius Eriksen
(private investor)
7 Jul-09 C LEWA GmbH Industrials & Germany Nikkiso Co Ltd Japan Deutsche Germany 172
Chemicals Beteiligungs AG;
Quadriga Capital
Services GmbH
8 Jun-09 P Neumayer Tekfor GmbH Industrials & Germany AXA Private Equity; USA 172
Chemicals Barclays Private
Equity Ltd; Fifth Third
Bancorp; Gartmore
Direct Fund II Scottish
LP; ING; Landesbank
Baden-Wuerttemberg;
Nationwide Private Equity
Fund LLC; NIBC Bank NV
9 Apr-09 P TMD Friction Holdings Industrials & Germany Pamplona Capital United TMD Friction Luxembourg 100
GmbH Chemicals Management LLP Kingdom Luxembourg Sarl
10 Aug-09 C Actebis Holding GmbH Business Germany Droege Capital GmbH Germany ARQUES Germany 93
Services Industries AG
11 Jul-09 C CeDo Folien und TMT Germany Rutland Fund II United Delton AG Germany 61
Haushaltsprodukte GmbH Kingdom
12 Jan-09 C ddp Deutscher Industrials & Germany BLUO SICAV SIF Luxembourg ARQUES Germany 30
Depeschendienst GmbH; Chemicals Industries AG
Evotape S.p.A; Rohner
AG; The BEA Group
13 Aug-09 P Hallhuber GmbH Consumer Germany Change Capital Fund United Stefanel GmbH Italy 25
II LP Inc Kingdom
14 Apr-09 C Heinrich Berndes Consumer Germany Palace Park United CFC Industrie Germany 23
Haushaltstechnik GmbH Investments Ltd Kingdom Beteiligungen
& Co. KG (34.30% stake) GmbH & Co KGaA
15 Jul-09 C Samas GmbH & Co KG Consumer Germany Innovation Change Germany Samas NV Netherlands 20
(94.00% stake) GmbH; Samas GmbH &
Co KG (MBO Vehicle)
16 Mar-09 C innovatis AG Pharma, Germany Roche Diagnostics Ltd Switzerland Ventizz Capital Germany 15
Medical & Partners Advisory
Biotech AG
17 Feb-09 C Integrata AG (91.04% Business Germany Cornerstone Equity USA Logica plc United 15
stake) Services Investors Kingdom
18 Sep-09 P EliteMedianet GmbH TMT Germany Tomorrow Focus AG Germany Burda Digital Germany 13
(36.93% stake) Ventures GmbH;
EliteMedianet
Beteiligungs GbR
19 Mar-09 C Pro2 Anlagentechnik Industrials & Germany Deutsche KWK- USA Alkane Energy plc United 9
GmbH Chemicals Gesellschaft mbH Kingdom
20 Jan-09 C Meade Instruments Consumer Germany Bresser GmbH Germany Meade USA 9
Europe GmbH & Co. KG Instruments
Corporation
C = Completed; P = Pending; L = Lapsed

Private Equity in Germany: Response to the Crisis

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 15

Roundtable Discussion
German M&A trends
All German M&A German buyouts
Period Volume Value(€m) Avg. deal size Period Volume Value(€m) Avg. deal size
(€m) (€m)
Q1 2004 132 11,591 88 Q1 2004 22 1,276 58
Q2 2004 157 16,455 105 Q2 2004 28 6,886 246
Q3 2004 140 10,359 74 Q3 2004 28 5,806 207
Q4 2004 183 19,066 104 Q4 2004 40 5,250 131
Q1 2005 134 14,810 111 Q1 2005 25 2,596 104
Q2 2005 149 38,950 261 Q2 2005 33 8,293 251
Q3 2005 183 13,670 75 Q3 2005 40 5,702 143
Q4 2005 196 26,740 136 Q4 2005 44 8,911 203
Q1 2006 155 26,375 170 Q1 2006 41 2,178 53
Q2 2006 151 10,428 69 Q2 2006 44 4,663 106
Q3 2006 177 18,720 106 Q3 2006 40 5,609 140
Q4 2006 198 27,641 140 Q4 2006 58 14,605 252
Q1 2007 173 14,693 85 Q1 2007 38 6,213 164
Q2 2007 156 31,450 202 Q2 2007 35 7,124 204
Q3 2007 174 24,943 143 Q3 2007 38 4,058 107
Q4 2007 174 12,215 70 Q4 2007 39 2,105 54
Q1 2008 143 4,983 35 Q1 2008 34 1,566 46
Q2 2008 154 16,886 110 Q2 2008 48 10,831 226
Q3 2008 155 48,384 312 Q3 2008 37 3,242 88
Q4 2008 113 14,271 126 Q4 2008 17 193 11
Q1 2009 115 6,616 58 Q1 2009 16 63 4
Q2 2009 96 7,411 77 Q2 2009 17 303 18
Q3 2009 92 3,662 40 Q3 2009 17 662 39
Total 3,500 420,319 Total 779 108,135

German exits German M&A all

Period Volume Value(€m) Avg. deal size
(€m) sector analysis YTD 30
Q1 2004
Q2 2004
12
9
3,322
3,325
277
369
September 2009
Q3 2004 15 1,397 93
Sector Value Sector Volume
Q4 2004 17 3,240 191
(€m)
Q1 2005 18 4,329 241
Financial Services 5,489 Industrials 90
Q2 2005 16 1,708 107
Energy, Mining & Utilities 4,530 Consumer 47
Q3 2005 16 3,995 250
Industrials 3,601 Business Services 36
Q4 2005 16 3,211 201
Consumer 1,115 TMT 35
Q1 2006 16 847 53
TMT 969 Energy, Mining & Utilities 27
Q2 2006 15 3,185 212
Business Services 968 Financial Services 26
Q3 2006 19 3,571 188
Pharma, Medical & Biotech 462 Pharma, Medical & Biotech 19
Q4 2006 29 7,617 263
Real Estate 393 Construction 7
Q1 2007 25 7,203 288
Construction 142 Leisure 6
Q2 2007 26 7,647 294
Defence 20 Transportation 6
Q3 2007 21 5,502 262
Leisure Real Estate 2
Q4 2007 23 3,253 141
Transportation Defence 1
Q1 2008 11 1,348 123
Agriculture Agriculture 1
Q2 2008 24 4,088 170
Total 17,689 303
Q3 2008 20 2,045 102
Q4 2008 5 147 29
Q1 2009 9 52 6 Notes:
Q2 2009 10 317 32 Based on announced deals, excluding lapsed and withdrawn bids
Based on dominant geography of target being Germany
Q3 2009 10 1,303 130
Based on dominant sector of target
Total 382 72,652 YTD 2009 is from 01 January to 30 September

Private Equity in Germany: Response to the Crisis

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 16
Roundtable Discussion

GERMan M&a trends German private equity

buyout trends
250 60,000 70 16,000

60 14,000
50,000
200
12,000
50
40,000

value of deals ( m)

value of deals ( m)
number of deals

10,000

number of deals
150
40
30,000 8,000
30
100
6,000
20,000
20
4,000
50
10,000
10 2,000

0 0 0 0

volume value( m) volume value( m)

German M&A sector German M&A sector

split by volume, split by value,
Q1 2004-Q3 2009 German M&A sector split by volume, Q1 2004-Q3 2009 Q1 2004-Q3 2009
German M&A sector split by value, Q1 2004-Q3 200
<1%
<1%
2% <1% 2%
<1% <1%
2% 2% 3%
Industrials Financial Services
5%
6% Consumer
5% Energy, Mining & Utilities
29% Business Services 32%
TMT Industrials
9%
Energy, Mining & Utilities 6% Consumer
Financial Services
TMT
Pharma, Medical & Biotech
Business Services
9% Construction
Leisure Pharma, Medical & Biotech

Transportation Real Estate

Real Estate 20%
Construction
Defence
12% 16%
Agriculture Defence

26%
12%

German private equity exit trends

German private equity exit trends
35 9,000

8,000
30

7,000
25
6,000
value of deals ( m)
number of deals

20 5,000

15 4,000

3,000
10
2,000

5
1,000

0 0

volume value( m)

Private Equity in Germany: Response to the Crisis

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