PE Pulse

Quarterly insights and

intelligence on PE trends
January 2019
 Contents
1

i.

ii.

i.

ii.

iii.

iv.

v.

vi.

The PE Pulse has been designed to help you remain current on capital market trends. vii.
It captures key insights from subject-matter professionals across EY member firms
and distills this intelligence into a succinct and user-friendly publication. viii.

The PE Pulse provides perspectives on both recent developments and the longer-
term outlook for private equity (PE) fundraising, acquisitions and exits, as well as 3
trends in global M&A.
Please feel free to reach out to any of the subject-matter contacts listed on the back
page of this document if you wish to discuss any of the topics covered.

2
 Today’s environment is clearly among the most challenging that PE firms have faced. While
financing remains readily available for most deals, increased competition for assets continues
to push valuations higher, making operational value creation more important than ever. Amid
this backdrop, PE firms are looking for an edge wherever they can — be it sector expertise,
enhanced sourcing capabilities, or operational assets that can help improve companies’ top and
bottom lines. Differentiated insights can increasingly mean the difference between winning a

EY voices deal or losing it, and between a successful investment or a mediocre outcome.

One area where PE firms are achieving these differentiated insights is in the area of social
media analytics. Every day, hundreds of millions of individual data points are created by users,
discussing everything from politics to their favorite brand of underwear. Harnessing this data
to create actionable insights that can help guide strategic decision making is becoming a key
enabler for many PE firms. Social media analytics (SMA) can provide outside-in points of view

1.i. Turning noise to on markets, target companies, customer sentiment, competitors, product launches, marketing
effectiveness, brand affinity, and other important aspects of engagement.

insight — social “The question for deal professionals is not ‘should you use social media?’

media analytics But how do you extract the most effective and actionable insight?”
— Barak Ravid, EY Global Social Media Analytics Leader

as a tool for PE
Fast, insightful, and low-cost
SMA has been around in various forms for more than a decade. Much of this analysis
however has been fairly limited in scope, looking at available data through the lens of
marketing. Today, firms are using SMA as a strategic enabler designed to complement and
enrich the quality of traditional competencies such as origination, due diligence, 100-
day planning, and portfolio company value creation initiatives. Indeed, applications exist
throughout the PE lifecycle.

Through algorithms, firms and management teams can group various streams of thinking
about a wide range of topics into specific emotions or sentiments — effectively, SMA provides
a systematic approach to understanding sentiment over time and relative to a competitor.
Further, the data can typically be segmented by who’s saying it — where they’re based, their
approximate ages, etc.

Most importantly, SMA analyses can typically be done very quickly — often measured in days
vs weeks — and relatively inexpensively, providing rapid insights for deal teams and managers
in fast-moving markets.

3
Five key steps to getting the most out of SMA
1 Tune in to the correct dataset, out of billions of possible social media
conversations: identifying the right keywords, demographics, and time
periods can help the truly meaningful data rise above the social media din.
2 Analyze datasets to answer specific questions and/or hypotheses:
social analytics works best when its seeking to address specific
questions — what was our customers’ sentiment towards a recent
promotion, campaign, or product launch? Are there seasonal elements
to changes in our products’ perception? How can we improve a specific
product or service?
A powerful tool for PE
Social media offers an opportunity to extract insight from unfiltered opinions
in real time, harnessing those conversations for impact throughout the
deal lifecycle. According to our research, many dealmakers make moderate
to extensive use of analytics, but have not yet leveraged the full potential
of big data and/or analytics in M&A. Drawing from the full set of available
data, including the full gamut of social media, can help guide transactional
strategy and insight, and help PE firms create unique, differentiated points of
view that can empower successful investments.

3 Compare to relevant benchmarks, such as datasets for competitors’

products, internal sales data or other external market data: identifying
the right dataset is the first half of the equation; benchmarking it to an
appropriate index of broader data is the second.

4 Let the data analysis guide you toward additional insight beyond the
hypothesis being tested: in particular, look for leading performance
indicators that can inform strategic development.

5 Interpret insight and develop actionable strategies: analytics can

not only help firms generate unique insights to provide an edge,
but can also help identify potential synergies, as well as additional risks
and opportunities.

Working within the limitations of SMA

Limitations certainly exist — among them, limited data availability for non-
consumer facing industries and the self-selecting nature of the populations.
However, understanding these limitations — what the data does, and
does not, tell us — is key to harnessing the power of social media. A well-
designed analysis is one that appreciates the limitations of the dataset,
factors them into the design, and extracts the right insights. For example,
while self-selection bias exists, it also exists in the data of a company’s
competitors, enabling for robust analyses across industries. It’s also assumed
to be relatively constant (ar at least trackable) over time, enabling the
development of time series.

4
 It’s no secret that the world is moving faster and evolving in ways that are less predictable
than perhaps nearly any other time in history. New technologies are rising, only to be quickly
supplanted by even newer technologies. Entire business models are under constant threat of
disruption from all sides, and management teams find themselves under increasing pressure
to understand, assess, and respond to a growing array of threats. The statistics speak to the
impact — right now, the average lifespan of an S&P 500 company is less than 20 years; in the

EY voices 1950s it was 60 years.

For PE firms, these dynamics are multiplied across dozens, or even hundreds of portfolio
companies. Many have suffered from underinvestment prior to an acquisition; all of them,
by virtue of their acquisition by PE, are at a strategic inflection point. As such — even if we
recognize that their own disruptive potential might be central to the investment thesis — they
themselves could be particularly vulnerable to disruptive forces.

1.ii. Preparing for the Currently, the average PE holding period is 5.5 years — roughly the same amount of time it
took Uber to go from a US$350m valuation operating in 5-10 cities, to more than US$50b

punch you don’t see

operating in more than 600 cities. The implication is clear — in some cases, the companies that
PE firms are acquiring and transforming will be increasingly competing with companies that
haven’t even been created yet. In other cases, the emergence of disruptors may not rise to the

coming — disruption
level of existential threat, but identifying them is nonetheless mission critical to success.

diligence Assessing the “unknown unknowns”

Enter disruption diligence. PE managers typically have decades of experience working within
an industry and understand its dynamics at an almost cellular level. However, in today’s
environment, marked increasingly by sector convergence, many of the most pressing
challenges can emerge from purviews that are outside their areas of immediate experience.
PE firms need to look beyond financial, operational and governance levers, and identify and
embrace technological transformation opportunities to create value.

For many firms, the analysis of disruptive threats might occur in the context of the overall
diligence or strategic planning process, and might be based on informal conversations with
a handful of SMEs. Few have a formal process in place for analyzing disruptive threats on
a programmatic basis. However, given that the exponential pace of technology change is
diverging from the rate that organizations change, having a robust, formal process in place
that can predict how a company may be disrupted by technology using a scientific and
structured approach is increasingly crucial.

5
 There are a number of lenses through which the business can be viewed:
A strategic view of emerging technologies
AI, robotics, RPA, IoT — which of these represent the likeliest vectors
of potential disruption for a particular business, and in what ways?
Understanding the emerging technologies that will impact the
business over the course of the holding period and beyond is essential.
Benchmarking a company’s adoption, or the potential for adoption,
of these technologies against industry averages and competitors can
allow companies to identify initiatives needed to maintain — and even
increase — market share.
“While data analytics, blockchain, IoT and other technologies all
represent potential sources of disruption across a range of industries,
it’s AI in particular that sits at the top of the list, according to the latest
EY Disruption Index™. Not only does AI have the ability to automate
tasks that humans currently do, but more significantly, it’s also
powering the arms race, pushing companies to do things better than
their competitors.”
— Viv Sedov, Director, Disruption Diligence, EY LLP
Understanding shifting customer behaviors
How well is the company positioned to serve the customers of
the future? Digital technologies are rapidly changing the ways
that consumers interact with products and services. Analyzing
and understanding the customer and product experience and the
performance of digital solutions and channels can help guide the
development of future technologies and customer adoption scenarios.
The keystone — an organization’s ability to innovate and change
If an organization has a record of delivering low value from innovation,
there is a high likelihood of disruption, unless it changes. Assessing the
value that’s been realized from prior innovation activities can pinpoint
bottlenecks in adaptability — is there enough flex in the operating
model? Does sufficient funding exist? Is the culture sufficiently agile?
Perhaps most importantly, is able to measure the returns generated by
innovative activities?
Careful consideration of the business drivers and assets through these
lenses can help firms develop a robust, value-enhancing emerging
technology strategy and a roadmap that’s underpinned by market research
and advanced analytics and that can provide a rallying point for managers
at a critical point in the company’s lifecycle. Such an exercise can be
undertaken by PE at virtually any point in the lifecycle of the company —
while acquisition represents a natural impetus, analyses can be considered
midstream as part of a strategy refresh or value creation exercise, or as
part of the exit process in helping to articulate the company’s position
relative to others in its industry.
Indeed, understanding and identifying potential disruptors, and both the
value at risk from technology disruption, as well as the value creation
opportunities from leveraging new technologies, is more and more no
longer just a “nice to have.” It’s not about adding another half turn on the
exit multiple. Instead, the effectiveness with which one can parse through
a complex and growing array of emerging technologies will increasingly
separate the winners and losers in tomorrow’s PE landscape. Firms that
have a formal, comprehensive process in place to identify the threats and
opportunities will have a significant edge.
6
 Current state
Investor enthusiasm remains high, as fundraising remains in line with preceding years
• PE firms raised US$682 during 2018, compared with US$775b in 2017, a decline of 12%.
Large funds continue to play an outsized role in the market. The average size of funds
closed in 2018 reached US$675m, up 13% versus 2017.

PE market insights • Indeed, the top 10 funds closed in 2018 constituted more than 17% of the aggregate
capital raised. The largest fund closed in 2018 was Carlyle Partners VII, which secured
US$18.5b and is focused on North America.

• Buyout remains the active strategy, accounting for 35% of the aggregate fundraising in 2018.

• PE dry powder continues its upward run, reaching US$695b as of December 2018, which

2.i. Private equity: is 15% higher than the same time last year.

Buyout dry powder — three-year compounded growth rates

fundraising Source: Preqin

40%
30%
Executive summary 20%
• Fund-raising activity in 2018 was strong, though off from the record 10%
levels of 2017. PE firms raised approximately US$682b in 2018, down 0%
12% versus 2017. -10%
-20%
• Activity was driven primarily by large-sized funds. Average fund sizes
rose by 13% in 2018 from the previous year.

• Buyout continues to be the dominating strategy, accounting for 35% of

the funds raised in 2018, followed by real estate (20%) and growth (8%).

7
 Dec’18, which is 15% higher than the same time last year. 2014 2015 2016 2017 2018 4Q17 4Q18

Buyout dry powder – three-year compounded growth rates Top funds raised in 2018
Source: Preqin Source: Preqin

Value
40% Environment and horizon Fund Type
(US$b)
30%
20% Solid momentum in fundraising expected in the current year with larger Top funds raised in 2018
Carlyle Partners VII Buyout $18.5
funds to continue dominating the market Source: Preqin
10%
0% • According to Preqin, capital concentration rose significantly, with US$1b+Hellman & Friedman Capital Partners IX Buyout $16.0
Fund Type Value (US$b)
-10% funds having secured 69% of capital raised in 2018, up from 66% in 2017.
EQT VIII
Carlyle Partners VII Buyout
Buyout $13.2
$18.5
-20% Fewer, but larger sized funds are expected to continue dominating the
market in the future. GS Mezzanine PartnersCapital
Hellman & Friedman VII Partners IX Mezzanine
Buyout $13.0
$16.0
• A recent survey by Pepper Hamilton and Private Equity International
quity: fundraising Hillhouse Fund IV Buyout $10.6
EQT VIII Buyout $13.2
shed light on the increased pressure from investors on GPs to adhere to
GS Mezzanine
an increased transparent approach to fees and expenses policies. It led BC European Partners
Capital X VII Mezzanine
Buyout $13.0$8.4
many GPs to change their limited partnership agreements for providing Hillhouse Fund IV Buyout $10.6
more details pertaining to fees and expenses. The survey revealed that
Sequoia Capital Global Growth Fund III Growth $8.0
Environment and horizon BC European Capital X Buyout $8.4
38% of the GPs interviewed updated their limited partnership agreementsStarwood Global Opportunity Fund XI Real Estate $7.6
s strong though off fromSolid momentum
the record levels ofin
followingfundraising
a visit
2017. PEby theexpected
firms SEC, and
raised in the
40% current
changed
approximately yearinwith
their valuation
US$682b policies.
2018, down Sequoia Capital Global Growth Fund III Growth $8.0
larger funds to continue dominating the market KKR Global Infrastructure Investors III Infrastructure $7.4
• Inclination towards long-hold funds is expected to continue going forward. Starwood Global Opportunity Fund XI Real estate $7.6
• fund
arge-sized funds. Average According Ato
sizes rose Preqin,
by 13%
Global PEin capital concentration
2018 2019
Outlook from the previous
survey rose significantly
year.and
by Dechert Mergermarket withrevealedGSO Capital Solutions FundInvestors
III Distressed Debt $7.4$7.3
US$1b+ KKR Global Infrastructure III Infrastructure
nating strategy accounting for 35% of funds
the having
thatfunds
27% thesecured
raised
of in 2018,69% of capital
followed
respondents have by realraised
and in
estate
established, 2018,
(20%)
32% may and up
establish,
from 66% ainlong-hold
2017. Fewer butfunds
fund. Such large-sized
enable PEfunds are
firms to expected
hold to
onto profitable GSO Capital Solutions Fund III Distressed debt $7.3
continue dominating the market in future.
companies longer and make their firm more attractive to sellers.
PE fundraising in 2018 by primary geographic focus
• A recent survey by Pepper Hamilton and Private Equity
Source: Preqin
International
PE shed light
PE:fundraising
fundraising byon
by the
year
year andincreased
andquarter
quarter pressure from investors on
(US$b)
(US$b) PE: fundraising in 2018 by primary geographic focus
GPs to adhere
Source: with an increased transparent approach to fees and
Source: Preqin
Preqin Source: Preqin
s fundraising remains in lineexpenses
with policies. It led many GPs to change their limited
partnership agreements for providing more details pertaining to US 61%
$1,000
2018, compared with US$775b in and expenses. The survey revealed that 38% of the GPs
fees
nds continue to play an outsized
interviewed$800updated their limited partnership agreements following Europe 25%
size of funds closed in 2018
a visit by the SEC, and 40% changed their valuation policies.
us 2017. $600
n 2018 constituted more • than
Inclination
17% towards long-hold funds is expected to continue going Asia 11%
forward.
The largest fund closed in 2018 Global
$400 PE Outlook 2019 survey by Dechert and
Mergermarket
ecured US$18.5b and is focussed revealed that 27% of the respondents have
Australasia 1%
established$200
and 32% are considering to establish a long-hold fund.
Such
gy, accounting for 35% of the funds enable PE firms to hold onto profitable companies for
$0
longer and make their firm more attractive to sellers. Diversi ed Multi-Regional 1%
2014 2015 2016 2017 2018 4Q17 4Q18
ard run reaching US$695b as of
n the same time last year. 2014 2015 2016 2017 2018 4Q17 4Q18 Others 1%

mpounded growth rates Top funds raised in 2018

Source: Preqin

5 Value Private Equity Capital Briefing

Fund Type
(US$b)
8
 Current state
PE deal activity gained solid growth, driven by robust investment environment in the
Americas region
• PE firms have announced deals worth US$480b during 2018, up 11.3% from the previous
year. The deal volume, however, remained flat, growing by 0.2% over 2017 to reach 1,768

PE market insights deals during the year. Average deal size jumped by 11% to reach US$272m in 2018,
versus US$245m in 2017.

• Valuation multiples remained elevated during 2018, driven by a robust strategic

acquisition market and stiff competition from PE buyers, as they vie with one another to
deploy US$695b of dry powder. It is also fueled by competition from existing cash-rich
corporates benefiting from the recent US tax reforms.

2.ii. Private equity: • The Americas continue to dominate the deal activity, representing 48% and 50% of global
deal value and volume, respectively.

acquisitions • The top 10 deals accounted for 24% of deal value in 2018. In the largest deal of the year
Blackstone, along with other investors, acquired a 55% stake in Thomson Financial and Risk
Holdings, Inc. for US$18b.

Executive summary PE: deal activity by deal size range, 2018

Source: Dealogic
• Investment activity remained strong, with 1,768 deals announced valued
at US$480b in 2018, up 11.3% from 2017. US$1b to US$10b 66.3%
• PE deal activity in Americas and EMEA grew at 27% and 16%,
respectively, from 2017. PE firms see North America as the most Above US$10b 14.6%
favorable investment destination, as it accounted for more than 48% of
the total PE acquisitions. US$500m to US$1b 9.1%

• Engaging in buy-and-build strategy, investing in early-stage companies,

US$100m to US$500m 8.8%
and holding companies for longer periods are a few ways in which PE
firms are responding to a highly competitive environment.
Below US$100m 1.2%

9
 strategic acquisition market, and stiff competition from PE buyers
500
as they vie with one another to deploy US$695b of dry powder. It is $100
also fueled by competition from existing cash-rich corporates $0 0
benefitting from the recent US tax reforms. 2014 2015 2016 2017 2018 4Q17 4Q18
• Americas continue to dominate the deal activity, representing 48%
and 50% of global deal value and volume, respectively.
Deal value (US$b) Number of deals
• Top 10 deals accounted for 24% of deal value in 2018. In the
Environment and
largest deal of horizon
the year, Blackstone along with other investors
acquired 55%
Deal environment stake in Financial
characterized & Risk
by increased US Holdings
competition forInc. for US$18b.
a diminished PE: deal activity by value (US$b), 2017 vs. 2018
PE deal activity by value (US$b), 2017 vs. 2018
pool of quality assets, leading to high valuations Source: Dealogic
Source: Dealogic
PE deal
• Higher activity
entry by deal
valuations size
have notrange, 2018holding periods on
only driven $229.5
Source: Dealogic $250
investments to be longer, but also encouraged firms to execute their value $176.4
$200 $181.4
creation plans at a much quicker pace to demonstrate growth early on. $152.4
US$1b
PE firms are to US$10b
making add-on acquisitions within six months to one66.3%
year $150
$97.8
following completion of the acquisition of platform companies. $100 $74.2
Above US$10b 14.6%
$50
• The buy-and-build strategy is increasingly becoming popular in PE.
US$500m to US$1b 9.1% $0
According to a recent Pitchbook analysis, PE funds that complete Americas EMEA Asia-Pacific
more add-on transactions generate better cash-on-cash returns

quity: acquisitions
US$100m to US$500m 8.8%
across most vintages. 2017 2018
Below US$100m 1.2%
• A recent survey conducted by Dechert and Mergermarket revealed that Topdeals
Top dealssosofar
farthis
thisyear
year
creative deal structures are evolving to cope with increasing competition. Source:Dealogic
Source: Dealogic
Some of these included making acquisitions based on industry or market Value
Environment and horizon
differentials (57%), creating vertically integrated portfolio companies
Target Industry
Sponsor Value
(US$b)
Target Industry Sponsor
trong, with 1,768 deals announced valued at US$480b
Deal
instead environmentin 2018,
of horizontal up 11.3% (56%),
characterized
combinations from the
and2017.
by increased competition
building for
a portfolio a
company Financial & Risk US Technology CPPIB, GIC Special (US$b)
17.5
d EMEA grew at 27% and 16% respectively diminished
from
from 2017.
scratch pool of
PEafirms
with quality assets
see North
handpicked leading
America team
management to high
as the valuations
most favorable
(51%). Holdings Inc.
Thomson (55%)&
Financial Technology Investments,
CPPIB, Blackstone
GIC Special $17.5
counted for more than 48% of the total PE •acquisitions.
Higher entry valuations have not only driven holding periods on Ant Small
Risk & Micro
Holdings, Inc. Technology CPPIB, Carlyle,
Investments, Warburg
Blackstone 14.0
• Going investments
forward in 2019,to bePE firms are
longer, but expected to lean toward
also encouraged alternative
firmsinto execute Financial Services Pincus, Temasek
tegy, investing in early-stage companies and holding companies for longer periods are a few ways which PE Ant Small & Micro Technology CPPIB, Carlyle, Warburg $14
y competitive environment. investments
their strategies,
value such
creation as
plans convertible
at a much debt and
quicker minority
pace to investments
demonstrate Group Co. Ltd. Holdings, General
Financial
(9.3%) Services Pincus, Temasek
Atlantic, PrimaveraHoldings,
growth
or increase early
funds on. Private
focused equity firms are
on non-traditional making add-on
PE investments, such as
acquisitions within six months to one year following completion of Group Co. Ltd. (9.3%) General
Capital,Atlantic, Primavera
Silver Lake
credit funds or real estate funds as a way to diversify away from the
the acquisition of platform companies. Johnson Controls Industrials Capital, Silver Lake
Caisse de Depot et 13.2
current risks associated with traditional PE acquisitions.
• The buy-and-build strategy is increasingly becoming International
Johnson Plc
Controls Placement
Industrials Caisse du Quebec
de Depot et $13.2
PE acquisition values and in
popular volumes
PE. As byperyear and quarter
PitchBook, (US$b)
PE funds that complete Akzo Nobel NV
International Plc Materials GIC SpecialduInvestments,
Placement Quebec 12.5
h driven by robust investment PE: acquisition
Source: Dealogic values and volumes by year and quarter (US$b) (Specialty chemicals) Carlyle Group
more add-on transactions generate better cash-on-cash Akzo Nobel NV Materials GIC Special Investments, $12.5
Source: Dealogic
returns across most vintages. TDC A/S Telecom Macquarie Infra & Real 10.7
(Specialty chemicals) Carlyle
Assets Group
worth US$480b during 2018, up $600 2,500
• A recent survey conducted by Dechert and Mergermarket revealed EnLink
TDC A/SMidstream OilTelecom
& Gas TPG Capital,
Macquarie Infra & Real Assets 9.9
$10.7
The deal volume, however, remained
$500 that creative deal structures are growing in prominence to cope Partners LP (78.6%) Global Infrastructure
to reach 1,768 deals during the 2,000 EnLink Midstream Oil and gas TPG Capital, Global $9.9
with increasing competition. Some of these included making Management
by 11% to reach US$272m in 2018 $400 Partners LP (78.6%) Infrastructure Management
acquisitions based on industry or market differentials (57%), 1,500 Envision Healthcare Health care KKR 9.6
$300 creating vertically integrated portfolio companies instead of Envision Healthcare Industrial
Sydney Motorway Health care KKR
CPPIB, Abu Dhabi $9.6
9.5
d during 2018 driven by a robust horizontal combinations (56%), and building a portfolio company 1,000
$200 Corp. Pty. Ltd
Sydney Motorway (51%) Industrial Investment Authority
CPPIB, Abu Dhabi $9.5
d stiff competition from PE buyers from scratch with a handpicked management team (51%).
500 BMC Software Inc. Technology GIC Special Investments, 8.3
deploy US$695b of dry powder. It is $100 Corp. Pty. Ltd (51%) Investment Authority
• Going forward in 2019, PE firms are expected to lean toward Golden Gate Capital, Bain
m existing cash-rich corporates $0 alternative investments strategies like convertible debt and 0 BMC Software Inc. Technology GIC Special Investments, $8.3
Capital, Insight Venture,
tax reforms. 2014 2015 2016 or 2017 2018 funds focused4Q17 4Q18 Golden
minority investments to increase on non- KKR Gate Capital, Bain
the deal activity, representing 48% traditional PE investments such as credit funds or real estate funds Gramercy Property Real Estate Capital, Insight
Blackstone Venture,
Group LP KKR 7.6
d volume, respectively. as a way to diversify away from the current risks associated with Trust
Gramercy Property Trust Real estate Blackstone Group LP $7.6
% of deal value in 2018. In the traditional PEDeal value (US$b)
take-over. Number of deals
6 Private Equity Capital Briefing
one along with other investors
& Risk US Holdings Inc. for US$18b.
PE deal activity by value (US$b), 2017 vs. 2018
Source: Dealogic 10
2018
 PE market insights

2.iii. Private equity: acquisition activity by region

PE: acquisition activity by key regions and countries
(2017 vs. 2018)

11
PE: deal activity by country and region (by quarter, 2015 through Q4 2018, in US$b)

% Δ Q4 % Δ Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2018
Target 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 vs. Q3 vs. Q4
nationality 2018 2017

Americas

Canada $0.2 $3.2 $1.4 $0.5 $0.3 $1.6 $2.2 $0.7 $0.0 $1.2 $0.1 $4.6 $1.1 $8.7 $0.2 $0.1 -43% -98%

US $25.3 $51.9 $58.7 $60.3 $20.6 $65.7 $51.2 $32.9 $36.3 $48.8 $44.4 $35.4 $54.7 $67.7 $35.4 $59.3 68% 68%

Latin America $1.5 $1.3 $0.8 $4.0 $0.0 $3.9 $5.3 $2.7 $0.6 $1.4 $0.8 $7.9 $0.5 $0.3 $0.1 $0.4 288% -95%

EMEA

UK&I $13.3 $12.6 $8.2 $11.1 $1.6 $4.6 $2.8 $21.2 $5.3 $17.7 $15.2 $14.1 $3.8 $7.3 $12.1 $9.3 -23% -34%

Germany/ $1.4 $7.0 $5.7 $2.7 $4.0 $10.4 $1.5 $12.6 $4.9 $3.2 $6.1 $4.7 $3.2 $9.7 $4.4 $2.1 -52% -55%
Switzerland/
Austria

Belgium / $3.2 $6.0 $10.1 $4.1 $3.3 $15.4 $3.6 $2.4 $4.1 $8.2 $4.5 $7.7 $16.5 $10.5 $3.7 $5.9 62% -23%
Luxembourg /
Netherlands /
France

Nordics $0.4 $0.8 $5.0 $1.8 $0.2 $3.0 $2.1 $0.8 $0.1 $7.4 $6.9 $5.5 $12.4 $3.0 $11.4 $5.8 -50% 4%

Mediterranean $2.0 $3.8 $2.7 $4.4 $3.4 $10.0 $5.1 $4.6 $6.3 $2.4 $10.2 $11.1 $10.8 $19.1 $10.5 $2.9 -73% -74%

Western Europe $16.6 $18.6 $18.3 $15.2 $4.9 $20.0 $6.4 $23.6 $9.4 $25.8 $19.7 $21.8 $20.3 $17.8 $15.8 $15.3 -3% -30%

Asia-Pacific

China $1.0 $4.7 $0.5 $0.9 $1.6 $1.2 $0.1 $0.9 $5.3 $8.0 $0.8 $0.2 $4.1 $17.4 $0.6 $3.0 404% 1213%

SE Asia $0.5 $0.3 $0.3 $1.5 $0.4 $0.3 $3.5 $0.7 $0.4 $2.3 $17.6 $5.3 $1.1 $0.8 $0.2 $0.4 93% -92%

India $1.0 $0.6 $1.4 $0.9 $0.1 $1.0 $0.7 $0.6 $2.5 $1.1 $1.9 $0.5 $4.1 $1.7 $2.4 $1.0 -60% 104%

Australia $6.5 $2.4 $2.7 $10.7 $9.3 $1.6 $9.9 $14.3 $0.5 $2.9 $2.5 $0.6 $1.3 $2.9 $10.4 $10.6 3% 1546%

Japan $1.8 $2.1 $0.0 $0.8 $0.6 $0.2 $1.1 $5.8 $1.5 $2.2 $21.1 $1.8 $0.2 $0.0 $0.0 $1.2 5191% -32%

Analysis as of 31 December 2018.

Source: Dealogic. All Rights Reserved.
Note: Data is continually updated and therefore subject to change.

12
 Key themes
Technology remained the key driver behind the continued momentum in PE deal activity
While technology, health care and materials picked up strong momentum, contribution of
consumer goods, utilities and real estate to the aggregate deal value fell in 2018, compared
with 2017.

PE market insights PE: investment by sector as a percentage of total, 2017 vs. 2018
Source: Dealogic

2017 2018
Industry % of % of % of % of
value volume value volume
2.iv. Private equity: Oil and gas 2% 2% 4% 2%

acquisition activity
Materials 7% 12% 11% 13%

Industrials 8% 9% 11% 9%

by sector Consumer goods

Health care
12%

10%
13%

11%
6%

12%
13%

9%

Consumer services 4% 14% 4% 13%

Executive summary Telecom 3% 2% 5% 2%

• PE remains inclined toward software/tech acquisitions, which saw an Utilities 11% 4% 10% 3%
upsurge of 74% in deal value in 2018 versus 2017.
Financials 7% 7% 8% 6%
• Investments in financials increased to 8% of the total PE deal value in
Technology 20% 20% 23% 24%
2018, up from 7% in 2017; insurance remains the key driver.
Retail 1% 4% 1% 3%
• Materials saw an increase in investment by 78% over 2017, mainly
driven by the 128% rise in deals in chemicals over 2017. Real estate 15% 2% 5% 3%
• Another sector that garnered significant investment activity was health
care, wherein investments increased to 12% of total PE deal value in
2018, up from 10% during 2017. Financials
• PE investment in the financials sector took a quantum leap in 2018 at the back of upsurge
in insurance; insurance contributed more than 42% of deal value in financial services
during 2018, up from 25% in 2017.

• Investment management and banking were the other key segments attracting PE interest.

• Insurtech is expected to continue causing disruption across segments; adopting new digital
platforms is becoming imperative.

13
 Industry % of % of % of % of 50% nursing, homecare 60
Materials
2017. 7% 12% 11% 13% $25 120
Value Volume Value Volume Pharma 40
• Industrials
Investment management and 8% banking were 25% 100
9% the other 11% key segments 9% $50 20
Oil and gas
attracting PE interest. 2% 2% 4% 2% Biomed 80
0%$0 0
Consumer goods 12% 13% 6% 13% 60
Materialsis expected to continue
• Insurtech 7%causing 12% disruption 11% across 13% 2017 2018
$25 40
Health care
segments; adopting new digital 8% 10% 11%
platforms becoming 12%
imperative. 9%
Industrials 9% 11% 9% Consumer products 20
Consumer services 4% 14% 4% 13% $0
13% • Consumer industry experienced a decline in PE interest; deal value 0
Consumeringoods
PE: acquisition
Telecom
PE acquisition
financials — values
in financials – values
12%
3%
and volumes 13%(US$b) 6%
2%
and volumes 5% 2%
Health care Others Software
declined by 35% in 2018 over 2017. It was mainly driven by more
Number of deals
Source: Dealogic
Health care 10% 11% (US$b) 12% 9% Health
Source: Dealogic than
• 2018 50%sawdecline in investmentsofacross
the announcement food and
the largest beverages.
health care-focused deal,
Utilities 11% 4% 10% 3% • 2018 saw the announcement of the largest health-care-focused
$50
Consumer services 4% 200
14% 4% 13% • wherein
However, KKR
going bought
forward, Envision Healthcare
innovative and Corporation
non-traditional from
sub-ofClayton
Financials 7% 7% 8% 6% deal wherein KKROthers bought Envision Software Number
Healthcare Corporation deals
from
equity: acquisition activity by sector Telecom 3% 2% 5%
Insurance 2% segments
Dubilier like
& plant-based
Rice for US$9.9b.proteins are expected drive growth in
Clayton
Health Dubilier & Rice for US$9.9b.
Technology 20% 150 20% 23% 24% food segment.
Utilities 11% 4% 10% 3% • •• AsAs2018
per Preqin,
per Preqin,
saw the healthcare
the sector
health care
announcement ofholds
sector US$56b
holds
the US$56b
largest in dry powder
in dry powder,
health-care-focused with
with a
$25
Retail 1% 100 4% Finance
1% 3% PE acquisition
a deal
total
total in food
AUM
assets
wherein of KKR
under and beverages
US$199b
bought –(AUM)
as Envision
management by subsectors
of Nov’18. of US$199b
Healthcare (% as
of of
deal
Corporation value)
November
from 2018.
Financials 7% 7% 8% 6%
Source: Dealogic
Clayton Dubilier & Rice for US$9.9b.
Real Estate 15% 50 3% 6% 3%
Technology 20% 20% No. 23%
of deals 24%
100%
PE •PE acquisition
As per Preqin,
acquisition
in health
in health
— by subsectors
healthcare sector holds
– by subsectors
(% of
(% of
deal value)
US$56b
deal in dry powder with
$0
Retail 1%
0
4% 1% 3% Foodvalue)
ware/tech acquisitions, which saw an upsurge of2015 74% in2016 deal value2017in 20182018 versus 2017 Source:aDealogic
75% Source: total AUM of US$199b as of Nov’18.
Dealogic
Financials
sed to 8% of the total PE deal value in 2018 up Realfrom 7% in 2017; insurance15%
Estate remains the 3%key driver. 6% 3%
Note: Finance includes banking, capital markets, insurance, asset management, alternative 50% 100% Instruments
Alcoholic beverages &
• PE investment in financials sector took a quantum leap in 2018 at
estment by 78% over 2017; mainly driven Note:by the
Finance
assets; 128%
includes
Insurance rise in of
banking,
is inclusive deals
capitalinmarkets,
insurance chemicals
brokers overasset
insurance, 2017.
management, alternative assets. PE acquisition in health – by subsectors (% of dealanalytical value) systems
the back of upsurge in
Insurance is inclusive of insurance brokers. insurance; insurance contributed more than 25% 75%
gnificant investment activity was health care, wherein investments increasedservices
to 12% during
of total2018,
PE deal Source: Dealogic Hospitals, clinics,
42% of deal
Financials value in financial upvalue
from in25% in Non- nursing,
lcoholic homecare
7. 0% 50%
2017. 100% 2017 2018
beveragesInstruments &
• PE investment in financials sector took a quantum leap in 2018 at Pharma
Technology
• Investment management and banking were the
the back of upsurge in insurance; insurance contributed more than other key segments 25%
75%
analytical systems
Private Equity Capital Briefing
attracting PE value
interest. 0% Hospitals, clinics,
Biomed
• 8Technology42% of deal
continues in financial
to attract services
PE capital, during 2018,
as activity increasedup from
by more25% in nursing, homecare
50%
Technology
• 28%
than
2017. is expected to continue causing disruption across
Insurtech
from 2017.
2017 2018
Pharma
behind the continued momentum • Technology • segments;
Investment adopting
continues managementnew digital
to attract and platforms
banking
PE capital becoming
aswere imperative.
the increased
activity other key segments
by
25%
Consumer products
• Add-on
more than deals
attracting
28%accounted
from for an increasing proportion of tech buyout deals,
PE interest.
2017. 0% Biomed
• Consumer industry experienced a decline in PE interest; deal value
aterials picked up strong
comprising
• Add-on • acquisition
PE
42%
Insurtech of
is
deals accounted
the number
in expected for an
financials
of deals
to– continue
increasing
values
made
and
as
causing of November
disruption
proportion
volumes of tech
(US$b)
2018.
across
buyout Consumer products 2017 2018
declined by 35% in 2018 over 2017. It was mainly driven by more
er goods, utilities and real estate to deals, segments;
comprising adopting
42% thenew
ofe-commerce digitalare
number platforms
of deals madebecoming
as
keyofareasimperative.
Nov’18. than 50% decline in investments across foodinand
• FinTech,
Source: health-tech,
Dealogic and among the garnering •Consumer
The consumer products
industry experienced a decline PE beverages.
interest; deal value
8 compared with 2017. • significant
Fintech, health-tech,
PE interest. e-commerce are among the key areas
$50 200 • However,
• declined
Consumer going
by 35% forward,
in 2018
industry innovative
over 2017.a The
experienced and
declinenon-traditional
decline
in PEwas mainly
interest;sub-
driven
deal by
value
garnering significant PE interest. segments like plant-based proteins are expected drive growth in
PE acquisition in financials – values150 and volumes (US$b) Insurance more than aby
declined 50%35% decline
in 2018in investments
over 2017. across food and
It was mainly beverages.
driven by more
food
thansegment.
50% decline in investments across food and beverages.
PE: acquisition in tech — values and volumes by quarter (US$b)
Source: Dealogic
PE acquisition
$25 in tech – values and volumes 100by quarter (US$b) • However, going forward, innovative and non-traditional subsegments, such
Source: Dealogic Finance PE• acquisition
However,ingoingfood forward, innovative
and beverages – by and non-traditional
subsectors (%the sub-
of deal
food value)
$50 200
as plant-based proteins, are expected to drive growth in segment.
017 2018
Source: Dealogic
50150 Insurance Source: segments
Dealogic like plant-based proteins are expected drive growth in
$75 140
No. of deals food segment.
% of % of % of 100%
$0
$25 0 100
Finance
120 PE: acquisition in food and beverages — by subsectors Food (% of deal value)
Volume Value Volume 2015 2016 2017 2018 PE acquisition in food and beverages – by subsectors (% of deal value)
100 75%
Source: Dealogic
$50
2% 4% 2% 50 Source: Dealogic
80
No. ofalternative
Note: Finance includes banking, capital markets, insurance, asset management, deals 50% Alcoholic beverages
60 100%
12% 11% 13% $25 assets;$0
Insurance is inclusive of insurance brokers 0
Food
40 25%
2015 2016 2017 2018 75%
9% 11% 9% 20 Non- lcoholic
0%
$0 Note: Finance includes banking, capital markets, insurance, asset management, alternative
0 50% beverages
Alcoholic beverages
13% 6% 13% 2017 2018
assets; Insurance is inclusive of insurance brokers
25% Private Equity Capital Briefing
11% 12% 9%
0% Non- lcoholic
14% 4% 13% 8
beverages
Others Software Number of deals 2017 2018
2% 5% 2%
Health Private Equity Capital Briefing
4% 10% 3% • 8 saw the announcement of the largest health-care-focused
2018
7% 8% 6% deal wherein KKR bought Envision Healthcare Corporation from
Clayton Dubilier & Rice for US$9.9b.
20% 23% 24%
• As per Preqin, healthcare sector holds US$56b in dry powder with
4% 1% 3% a total AUM of US$199b as of Nov’18. 14
 Current state
Exits environment remains constrained; however, Asia-Pacific outshines
• Exits continue their downward trend, with 1,145 deals valued at US$376b, down 3%
from 2017.

PE market insights
• Growth in PE exits by M&A remained flat at 0.1% over 2017, amounting to US$349b as Asia-
Pacific witnessed strong growth, offset by a decline in both the Americas and EMEA regions.

• PE exits through M&A by value was down 6% in the Americas, and down 3% in EMEA.

• Asia-Pacific saw a notable upswing, with PE exits by M&A value up 51% from 2017.

• PE-backed IPOs proceeds in 2018 were down 29%. The number of PE-backed IPO deals

Private equity: exits

declined 31%, at 77 deals, from 111 deals announced in 2017.
2.v. • IPOs constituted 7% of total proceeds in 2018, down from 10% witnessed in 2017.

Environment and horizon

Executive summary
Longer holding periods prior to exit may become a norm for PE firms
• PE exits have witnessed a modest decline in 2018, with 1,145 deals
• According to Preqin, PE firms are inclined towards holding companies for longer duration,
valued at US$376b, down 3% from 2017.
with average holding periods of approximately five years.
• Exits through IPOs declined by 31% over the previous year; however,
• According to PitchBook, the longer holding period is also attributed to the additional
change in M&A exits remained flat.
time it takes to execute on an add-on acquisition, given the increase in buy-and-build or
• While Americas and EMEA regions saw declines in exits during 2018, add-on strategies by PE firms.
activity in Asia-Pacific soared by 32% versus 2017.
• A recent survey by Dechert and Mergermarket revealed that the negotiated sale to a
strategic partner is expected to be the most favorable form of exit in 2019, followed by
sale to another PE firm and broad auction.

• The secondary buyout market (SBO) remained buoyant in 2018, though slightly off from
2017’s record levels, but higher than preceding years. SBO’s deal value dipped by 19% in
2018 from 2017. However, it remains higher than the preceding five years. SBO is expected
to continue offering key opportunities for PE firms to realize the value of their investments.

15
 by sale to another PE firm and broad auction. Holding Ltd. Investment
• SBO market remained buoyant in 2018, though a bit off from Management Co.
2017’s record levels, but higher than preceding years. SBO’s deal Ltd.
value dipped by 19% in 2018 from 2017, however, it remains ADT Inc. Prof Firms & Apollo Global 10.5 IPO
higher than the preceding five years. SBO is expected to continue Services Management
offering key opportunity for PE firms to realize value of their LLC
investments. Adyen N.V. Technology Temasek 8.3 IPO
PE: secondary buyout deals (US$b) Largest PE exit deals in 2018Holdings (Pte)
PE secondary buyout deals (US$b)
Source: Dealogic Source: Dealogic Ltd; General
Source: Dealogic
Atlantic LLC
Value
$150 500 Target
BMC Software IndustryKKR
Technology Sponsor 8.3 Secondary Type
equity: exits $100
400
300
Blue Buffalo Pet Consumer
ProductsHaidilao products
General Mills Inc. 8.0
RE, hospitality Shanghai Yunfeng
(US$b)
Strategic
$12.1 IPO
200 SedgwickInternational
Claims Insurance Carlyle Group
& construction Investment 6.7 Secondary
$50
equity: exits
Management
Holding Ltd. L.P. Management Co. Ltd.
100
Services
$0 0
ADT Inc. Automotive
Aston Martin Prof firms & Apollo Global
InvestIndustrial 5.6 IPO $10.5 IPO
odest decline in 2018, with 1,145 deals valued at US$376b, down 3% from 2017. Lagonda Global and services L.P. Management LLC
by 31% over the previous year, however, change in M&A exits remained flat. Holdings Plc. transportation
Adyen N.V. Technology Temasek Holdings $8.3 IPO
gions saw declines in exits during 2018, activity in Asia-PacificDeal valueby 32% versus
soared Number of deals
2017. DJO Global Inc Health care Colfax Corp. 5.5 Strategic
dest decline in 2018, with 1,145 deals valued at US$376b, down 3% from 2017. Techem GmbH Energy Partners(Pte)
GroupLtd; 5.4
GeneralSecondary
Holding,Atlantic
CDPQ, LLC
y 31% over the previous year, however, change in M&A exits remained flat. Ontario Teachers
BMC Software Technology KKR $8.3 Secondary
ions saw declines in exits during 2018, activity in Asia-Pacific soared by 32% versus 2017. Pension Plan
PE: M&A exits by year and quarter (US$b) Blue Buffalo
StandardAero Consumer
Automotive General Mills
Carlyle Group 5.0 Inc. Secondary
$8 Strategic
PE M&A
Source: exits by year and quarter (US$b)
Dealogic
BusinessPet Products
Aviation and productsL.P.
transportation
strained, however, APAC outshines Source: Dealogic Sedgwick Insurance Carlyle Group L.P. $6.7 Secondary
rd trend, with 1,145 deals valued at
$600 1,400 Claims
$500 1,200 Management
17. PE9 M&A exits by year and quarter (US$b) Private Equity Capital Briefing
$400 1,000 Services
emained flat at 0.1%
rained, however, APACover 2017,
outshines Source: Dealogic
800
AC witnessed strongdeals
growth, offset $300
$600 1,400
trend, with 1,145 valued at by 600 Aston Martin Automotive InvestIndustrial L.P. $5.6 IPO
d7.EMEA regions. $200
$500 1,200
400 Lagonda and
$100 1,000
M&A
mainedby value
flat atwas
0.1%down
over6% in the
2017,
$400 200 Global transportation
$0 800
0
wn 3% in EMEA.
C witnessed strong growth, offset by $300 Holdings Plc.
2014 2015 2016 2017 2018 4Q17 4Q18 600
notable
EMEA upswing, with PE exits by M&A $200
regions. 400 DJO Global Inc Health care Colfax Corp. $5.5 Strategic
2017.
A by value was down 6% in the $100 200
2018
3% in were
EMEA. down 29%. The number of $0 Deal value (US$b) Number of deals 0 Techem GmbH Energy Partners Group $5.4 Secondary
dotable
31%, upswing,
reaching with
to 77PE
deals PE-backed
2014 IPOs by year
2015 2016and quarter
2017 (US$b)
2018 4Q17 4Q18 Holding, CDPQ,
exitsfrom 111
by M&A
Source: Dealogic Ontario Teachers
2017.
$120 Deal value (US$b) 250 Pension Plan
proceeds
018 were in 2018,
down down
29%. Thefrom 10%of
number PE-backed IPOs by year and quarter (US$b) Number of deals
31%, reaching to 77 deals from 111 $100
PE-backed IPOs by year and quarter (US$b) 200 StandardAero Automotive Carlyle Group L.P. $5 Secondary
Source: Dealogic
$80
Source: Dealogic Business and
150
roceeds in 2018, down from 10% $60
$120 250 Aviation transportation
100
$40
$100 200
exit may become a norm for PE firms $20
$80
50
150
s are inclined towards holding $60$0 0
on, with average holding periods of $40
2014 2015 2016 2017 2018 4Q17 4Q18 100
w.
xit may become a norm for PE firms 50
$20
Book, the longer
are inclined holding
towards period is also
holding $0 Deal value (US$b) Number of deals 0
dditional time itholding
, with average takes to execute
periods of on an Largest2014PE exit2015
deals 2016
in 20182017 2018 4Q17 4Q18
, given the increase in buy-and-build or
Source: Dealogic
by PE firms.
ook, the longer holding period is also Deal value (US$b) Number ofValue
deals
yditional
Dechert anditMergermarket revealed Target Industry Sponsor Type
time takes to execute on an (US$b)
d sale to a strategic partner is expected Largest PE exit deals in 2018
given the increase in buy-and-build or Haidilao RE, Hospitality Shanghai 12.1 IPO
yorable form of exit in 2019, followed Source: Dealogic
PE firms. International & Construction Yunfeng
PE firm and broad auction. Holding Ltd. Investment Value 16
Dechert and Mergermarket revealed Target Industry Sponsor Type
(US$b)
 Current state
Firms positioning for late cycle opportunities
• In line with the broader fundraising environment for private capital, fundraising for credit
vehicles fell modestly in 2018 after a record year in 2017. Firms closed 157 separate
vehicles with aggregate commitments of US$110.2b, down 12% from 2017. As final figures

PE market insights trickle in over the course of the next month, it’s our expectation that fundraising will see a
modest single-digit year-over-year decline.

• After a significant slowdown in 2017, as investors focused on opportunities in the direct

lending space, fundraising for mezzanine vehicles increased dramatically in 2018, as LPs
positioned for increased late cycle opportunities. PE firms closed 46 vehicles with aggregate
commitments of US$30.9b, a 155% increase from 2017, when just US$12.1b was raised.

2.vi. Private credit And while a significant percentage of 2018’s total was driven by one fund — the US$11.1b
GS Mezzanine Partners VII — even without the fund, activity was up more than 60% from
2017.

Executive summary Mezzanine fundraising (US$b)

Source: Preqin
• Consistent with the broader private capital fundraising market,
fundraising for private credit funds saw another strong year in 2018, Commitments (US$b) Number of funds closed
though off of 2017’s record pace. $40 70
$35 60
• Firms raised US$110.2b across 157 separate vehicles in 2018, down $30 50
12% from 2017. $25
40
$20
30
• Mezzanine saw increased interest from LPs as investors positioned for $15
$10 20
late cycle opportunities. 10
$5
$0 0
• The outlook for fundraising remains strong, with nearly 400 funds

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
currently on the road, seeking an aggregate US$168b in fresh capital.

• As a result, firms now have more than US$290b in dry powder for credit investments, up
17% from the beginning of 2017. Consistent with fundraising trends, the greatest growth
has occurred in the direct lending space, where available capital is up 37% versus 2017.
It now comprises nearly 40% of dry powder in the space.

17
 $5 10 the world
$0 0
2016 2017 2018

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
edit
edit As a result, firms now have more than US$290b in dry powder • A recent Preqin survey found that

62%
for credit investments, up 17% from the beginning of 2017.
Consistent with fundraising trends, the greatest growth has Environment and horizon
occurred in the direct lending space, where available capital is up
er private capital fundraising market, fundraising • Thefor outlook
privatefor
37% the
credit asset
funds
versus class in 2019
saw Itanother
2017. now remains
strong
comprises year strong.
in 40%Currently,
nearly there
of dry powder in
s record pace. are nearly 400 the private
space. credit vehicles at various stages of the fundraising A recent Preqin survey found that
of alternative investors

62%
er private
cross 157capital
separatefundraising
vehicles inmarket,
2018,fundraising
down 12% for private
from
process. 2017. credit funds
In aggregate, theysaw
areanother
seekingstrong
moreyear
thaninUS$168b from of alternative investors expect to increase their
s recordfrom
nterest pace.LPs as investors positioned for late cycleEnvironment
investors.opportunities. and horizon
Most importantly, there is reason to believe they’ll find success. expect to increase their allocations to private
gcross 157strong,
remains separate vehicles
with nearlyin400
2018, down
funds 12% from
currently
A recent
2017.
•Preqin
on the The survey
road, outlook for
an the
seekingfound asset
aggregate
that 62%class
of in
US$168b 2019in remains
alternative strong.
investors expect to debt over the next five years.
nterest from LPs as investors positioned for late cycle opportunities. Currently, there are nearly 400 private credit vehicles at various
increase their allocations to private debt over the next five years.
g remains strong, with nearly 400 funds currently on the road, stages of thean
seeking fundraising
aggregateprocess.
US$168b In aggregate,
in they are seeking
more than US$168b from investors. Most importantly, there is Breakdown of available capital for investment in the credit space
Private
Private credit
credit fundraising
reason (US$b)
to (US$b)
fundraising believe they’ll find success. A recent Preqin survey Breakdown
Source: Preqin.
of available capital for investment in the credit space
aising environment for private Source:
Source: Preqin
Preqin. found that 62% of alternative investors expect to increase their Source: Preqin
vehicles fell modestly in 2018 after allocations(US$b)
Private credit fundraising to private debt over the next five years.
closed 157 separate vehicles
aising environment for private with $140
Source: Preqin. 200 39%
US$110.2b,
vehicles felldown 12% from
modestly 2017.
in 2018 after $120
rclosed
the course of the next month,with
it’s $100 150 26%
157 separate vehicles $140 200
sing will see a modest single-digit
US$110.2b, down 12% from 2017. $80
$120 21%
100
r the course of the next month, it’s $60
$100 150
13%
sing will see
in 2017 a modest focused
as investors single-digit
on $40
$80 50
$20 100
nding space, fundraising for $60
dindramatically in 2018focused
as LPs on $0
$40 0
2017 as investors 50
2000 2000
2001 2001
2002 2002
2003 2003
2004 2004
2005 2005
2006 2006
2007 2007
2008 2008
2009 2009
2010 2010
2011 2011
2012 2012
2013 2013
2014 2014
2015 2015
2016 2016
2017 2017
2018 2018
cycle space,
nding opportunities. PE firms
fundraising for closed $20
Direct lending Distressed Mezzanine Special
dommitments
dramaticallyofinUS$30.9b,
2018 as LPs a 155% $0 0
Situations
st US$12.1b
cycle was raised.
opportunities. And closed
PE firms while a Commitments (US$b) Number of funds closed
18’s total wasofdriven
ommitments by oneafund
US$30.9b, 155%- 10
Partners
st US$12.1b VII –was
even without
raised. Andthe
while a Commitments (US$b) Number of funds closed
an 60%
18’s totalfrom
was2017.
driven by one fund - Private credit fundraising by region (US$b)
Partners VII – even without the Source: Preqin.
Private credit fundraising by region (US$b)
an 60% from 2017. Private credit fundraising by region (US$b)
Source: Preqin
$80 Preqin.
Source:
$70
Number of funds closed
$60
$80
$50
$70
70 $40
$60
Number of funds closed
60 $30
$50
70
50 $20
$40
60
40 $10
$30
50
30 $0
$20
40
20 $10 Americas Europe Asia and rest of
30
10 $0 the world
20
0 Americas Europe Asia and rest of
2016 2017 2018 the world
2008 2008
2009 2009
2010 2010
2011 2011
2012 2012
2013 2013
2014 2014
2015 2015
2016 2016
2017 2017
2018 2018

10
0
2016 2017 2018

more than US$290b in dry powder A recent Preqin survey found that

62%
% from the beginning of 2017.
rends,
more theUS$290b
than greatest growth has
in dry powder A recent Preqin survey found that

62%
g%space, where
from the available
beginning of capital
2017. is up
mprises nearly
rends, the 40% of
greatest dry powder
growth has in
g space, where available capital is up of alternative investors
mprises nearly 40% of dry powder in
expect to increase theirof alternative
allocations toinvestors
private 18
ss in 2019 remains strong. debt over the next five years.
 Current state
Fundraising remains high as firms seek deployment opportunities
• Infrastructure fundraising remained active in 2018, in direct contrast to most other private
capital asset classes, which saw modest declines in the pace of commitments. 68 separate
funds closed, raising an aggregate US$95b in commitments, up 23% from 2017, and a new

PE market insights record for the asset class.

• Consequently, firms have a collective US$180b in capital available for deals, up 8% from a
year ago. Nearly half this amount is focused on opportunities in the Americas, while Europe
represents more than 33% of the industry’s dry powder. In Asia, capital accumulation bucked
global trends and saw a modest decline, falling 14% from US$23b at the beginning of 2017.

Infrastructure
• Between dry powder and capital already deployed in existing projects, infrastructure
2.vii. managers now have nearly US$500b in AUM.

Top infrastructure funds raised 2018

Source: Preqin
Executive summary
Target Commitments
• In contrast to most other private capital strategies, fundraising for Fund Type
(US$b) (US$b)
infrastructure continued unabated in 2018.
KKR Global Infrastructure
• Unlisted funds raised US$96.4b in 2018, up 24% from the prior year, $7.0 $7.4 Brownfield, Secondary
Investors III
and set a new record for the asset class.
Stonepeak Infrastructure
• As a result, infrastructure funds have more than US$180b in capital to $5.0 $7.2 Brownfield, Greenfield
Partners III
deploy, up 8% from the beginning of 2017.
ISQ Global Infrastructure Brownfield, Greenfield,
• Deal activity remained somewhat muted; however, down 9% from 2017. $5.0 $7.0
Fund II Secondary

Alinda Infrastructure
$5.0 $5.0 Brownfield, Secondary
Fund III

Copenhagen Brownfield, Greenfield,

$3.4 $4.3
Infrastructure III Secondary

• While fundraising remains robust, the pace of deployment remains off the highs of the
last several years. Firms invested in approximately 2,700 projects during 2018 with an
aggregate value of US$371b, down 9% from 2017, and down 31% from 2016.

19
 represents more than 33%
projects, infrastructure of the industry’s
managers now havedry powder.
nearly In Asia,
US$500b in $0 Commitments (US$b) Number of funds closed 0
capital accumulation
assets under bucked global trends and saw a modest
management.
decline, falling 14% from US$23b at the beginning of 2017.
Top infrastructure funds raised 2018
• Between dry powder and capital already deployed in existing Infrastructure dry powder by region 2018 versus 2017 (in US$b)
Source: Preqin.
projects, infrastructure managers now have nearly US$500b in Source: Preqin.
Commitments (US$b) Number of funds closed
assets under management. Target Commitments
Fund
Top infrastructure funds raised (US$b)2018 (US$b) Type $85.3
cture Environment
Source:
KKR and
Preqin.
Global horizon$7.0
Infrastructure
Investors III
$7.4 Brownfield,
Secondary
$90
Infrastructure
Infrastructure
$80 Preqin.
Source:
Source: Preqin
drypowder
dry powderbybyregion
$74.5
region 2018
2018 versus
versus 2017
2017 (in (in US$b)
US$b)

Target $70 $63.0

• World Bank President
Stonepeak Jim Yong Kim
Infrastructure $5.0 Commitments
surprised many
$7.2 whenBrownfield,
he announced $58.3
Fund (US$b) (US$b) Type $60 $85.3
he would be resigning
Partners III from the institution effective February 1 to join
Greenfield $90
KKR Global Infrastructure
Infrastructure $7.0 $7.4 Brownfield, $50 $74.5
ISQ Global
Global Infrastructure Partners, one of$5.0
the world’s $7.0
largest Brownfield,
infrastructure $80
Investors
Fund II III Secondary
Greenfield, $40
$70 $63.0 $28.0
investors.continued
rivate capital strategies, fundraising for infrastructure News outlets
Stonepeak unabated quoted
Infrastructure Kim in$5.0
in 2018. an email to World Bank
$7.2 staff as
Brownfield,
Secondary $30 $58.3 $23.1
$60
6.4b in 2018, up 24% from the year prior, and saying,
a new “The
record opportunity
Partners for the
III asset
Alinda Infrastructure Fund to join
class. the private
$5.0 sector$5.0was unexpected,
Brownfield, but
Greenfield $20
$50
unds have more than US$180b in capital to deploy, up 8%
I’ve concludedIII from
ISQ that
Globalthe beginning
this
Infrastructure of 2017.
is the path through
$5.0 which I will beBrownfield,
$7.0 able to make
Secondary $10
$40
ewhat muted however, down 9% from 2017. the largestFund II
impact
Copenhagen onInfrastructure
major global issues $3.4 like climate
$4.3 change Greenfield,
and the
Brownfield, $0 $28.0
Secondary $30 $23.1
III Greenfield, Americas Europe Asia and rest of the
infrastructure deficit in emerging
Alinda Infrastructure Fund
markets.”
$5.0 $5.0 Brownfield, $20 world
Secondary
III Secondary $10
• Copenhagen
While fundraising remains $3.4
Infrastructure robust, the pace$4.3 of deployment
Brownfield, $0 2017 2018
Infrastructure fundraising (US$b)
Infrastructure remains off(US$b)
IIIfundraising the highs of the last several years. Firms invested in
Greenfield, Americas Europe Asia and rest of the
Source: Preqin approximately 2,700 projects during 2018 with an aggregate world
mained active in 2018, in direct Source: Preqin. Secondary
value of US$371b, down 9% from 2017, and down 31% from Infrastructure deals by year (US$b)
e capital asset classes, which saw $120 2017 2018
• While2016.fundraising remains robust, the pace of deployment120
of commitments. 68 separate funds Source: Preqin.
Infrastructure deals by year (US$b)
$100 remains off the highs of the last several years. Firms invested 100 in
US$95b in commitments, up 23%
$80 approximately 2,700 projects during 2018 with an aggregate 80 Source: Preqin
d for the asset class. Environment and horizon
$60 value of US$371b, down 9% from 2017, and down 31% from 60 Infrastructure deals by year (US$b)
ollective US$180b in capital • 2016.Panelists at the recent IFC/Emerging Markets Private Equity $600Preqin. 4,000
m a year ago. Nearly half this $40 Association annual conference discussed the impact and the 40 Source:
$500
unities in the Americas, while Europe $20 potential of “disruptive infrastructure”: technology-enabled 20 3,000
the industry’s dry powder. In Asia, $0 Environment
infrastructure and horizon
assets that have very different profiles from 0 $400
global trends and saw a modest • Panelists
traditionalatdeals.the recent
As theIFC/Emerging Markets Private
risks of obsolescence increase, Equity
investors $300
$600
2,000
4,000
$23b at the beginning of 2017. Association annual conference
have to be increasingly careful discussed
about viewing the impact and the as a
infrastructure $200
$500 1,000
ital already deployed in existing potential
long-termofasset “disruptive infrastructure”:
class; emergent technology-enabled
technologies can leapfrog over $100 3,000
infrastructure assets thatAs have very different profiles fromthat the $400
agers now have nearly US$500b in constraints
Commitments very quickly.
(US$b) a result,
Number many
of funds areclosed
predicting $0 0
traditional
infrastructure deals.
as As the risks
a service of obsolescence
model increase, investors
will become increasingly $300 2,000
have to be increasingly
important, and that firms careful
need about viewing infrastructure
to be increasingly as a
flexible in their $200
ed 2018 1,000
long-term to asset class; emergent technologies can leapfrog over
Infrastructure approach
dry powder by developing
region 2018 and versus
extracting2017 value from
(in US$b) assets. One $100
constraints very quickly.
example – electrified roads Asare
a result,
beingmany
developedare predicting that the
that can charge $0 Deal value (US$b) Number of deals 0
Source: Preqin.
infrastructure
electric vehicles asasa service model
they drive, will become
something thatincreasingly
could create
et Commitments
important, and that firmsfor
significant opportunities need to be increasingly
investors in roadwaysflexible in their
and change
b) (US$b) Type
$90 the $85.3
approach
model,tofrom developing
charging and extracting
tolls to sellingvalue from assets.
electricity. Many of One
.0 $7.4 Brownfield, $74.5 example – electrified roads areare being developed that can charge
$80 these emergent opportunities likely to be less regulated with Deal value (US$b) Number of deals
Secondary electric vehicles as they drive,
$70 fewer incumbents. $63.0something that could create
.0 $7.2 Brownfield, significant opportunities $58.3 for investors in roadways and change
$60
Greenfield the model, from charging tolls to selling electricity. Many of
$50
.0 $7.0 Brownfield, these emergent opportunities are likely to be less regulated with
Greenfield, $40 fewer incumbents. $28.0
Secondary $30 $23.1
11
.0 $5.0 Brownfield, $20 Private Equity Capital Briefing
Secondary $10
.4 $4.3 Brownfield, $0
Greenfield, 11Americas Europe Asia and rest of the
Secondary world Private Equity Capital Briefing

bust, the pace of deployment 2017 2018

ast several years. Firms invested in
s during 2018 with an aggregate
from 2017, and down 31% from Infrastructure deals by year (US$b)
Source: Preqin.
20
 Current state
• 2018 was the third-strongest on record, with US$3.8t of deals announced — a 24% rise
against 2017. While the year ended on a softer note, with December recording the lowest
monthly deal value of 2018, the recent announcement of Bristol-Myers and Celgene
combining in a US$97b deal boosted prospects of a healthy M&A year ahead.

PE market insights • The key value range driving M&A in 2018 was the US$1b−US$10b band. The year saw 643
deals worth US$1.7t, the second-highest yearly value and volume seen in this band, after 2007.
This highlights the role that M&A continues to have as an integral part of corporate strategy.
• While the overall deal volume declined, the deals in the US$100m+ bracket have risen 7%
YOY. The decline was primarily in the deals with lower value or undisclosed.

Global M&A activity

• Technology remains the top performing sector, recording the second-highest yearly deal value
2.viii. of US$665b. Oil and gas was the second most favorable sector, with US$414b of deals, driven
by five mega-deals (US$10b and above), accounting for 30% of the sector’s total deal value.
• The year saw North American companies on a dealmaking spree, registering deals valued at
US$1.8t, trying to surpass the highs of 2015. Europe was comparatively subdued in terms
Executive summary of M&A activity, reporting 8,771 deals valued at US$976b, owing to the persisting concerns
• Global M&A activity reached US$3.8t in 2018 — the third-strongest year over Brexit and ongoing political and trade tensions.
on record.

• Technology remains the most targeted sector, with US$665b
worth deals.
• The year saw North American companies on a dealmaking spree,
recording deals valued at US$1.8t.
• The deal market is expected to stay healthy, as M&A continues to be an
integral part of corporate strategy.
• Rising political and trade concerns are perceived as a potential
impediment to dealmaking.
• Intersection of technology across sectors continues to be the key trend.
• Significant action could be seen around portfolio realignment and non-
core divestitures.
Environment and horizon
• As we enter 2019 with huge cash piles held by corporates, and record levels of private capital
dry powder, we expect global deal activity to remain healthy in the coming year. The positive
GDP growth in the US, as well as high consumer spending propelled by fiscal policy provided
a major boost to corporate profits and cash reserves. Further, strategic drivers, such as
integration to derive synergies, the adoption of inorganic routes to counter digital disruption,
and cross-sector activity, is expected to further underpin M&A activity in the near-term.
• However, there are potential risks to dealmaking caused by political and trade concerns.
Also, the uncertainty around Brexit and subdued growth in the European Union presents
a mixed economic picture across regions. This might dampen the appetite for European
assets in the near to medium term.
• Another key trend for M&A in the current market is the intersection of technology
across all industries, thereby breaking traditional industrial boundaries. Sectors, such as
automotive, health care, consumer products and retail, remain at the fore. As a result,
more “traditional” businesses will strive to keep up with their new digital savvy rivals and
M&A will play an integral part of their corporate strategy.
• Significant action could also be seen around strategic realignments and non-core
divestitures amid the uncertainty and technological disruption. Deconglomeration is a
rising trend in the current environment, and it has become imperative for companies to
review their portfolios more frequently and recycle their capital to derive growth.

21
 Global M&A — relative performance by sector
Global M&A — relative performance by sector
(LTM to December 2018)
(LTM to December 2018)
h US$3.8t of deals
the year ended on Many deals, High Many deals,
lowest monthly low value volume moderate value
nt of Bristol-Myers
osted prospects of Consumer products
and retail Technology

as the Diver ed
industrial products
als worth US$1.7t,
Other sectors
seen in this band,
A continues to Financial services
gy. Real estate
Automotive and Life sciences
deals in the transportation
Low High
decline was value value
disclosed. Media and entertainment
tor, recording the Power and utilities
b. Oil and gas was Mining and metals
$414b of deals, Health care
ve) accounting for Oil and gas
Govt, public sector
Telecommunications
a dealmaking Aerospace and
trying to surpass defense
ly subdued in Few deals, Few deals,
Low
s valued at low value volume high value
over Brexit and

EV/Ebitda multiples
multiples greater than 30x and bid premium greater than 100% have been excluded from calculation of median.
by corporates, and M&A analysis as at 1 January 2019. Source: Dealogic. All Rights Reserved.
we expect global Note: data is continuously updated and therefore subject to change.
22
g year. The positive
EV/EBITDA multiples
Multiples greater than 30x and bid premium greater than 100% have been excluded from calculation of median.
M&A analysis as of 1 January 2019. Source: Dealogic. All Rights Reserved.
Note: data is continuously updated and therefore subject to change

Average deal multiple — EV/EBITDA

Sectors Global Americas EMEA

LTM PTM LTM PTM LTM PTM LTM PTM

(to Dec. 18) (to Dec. 17) (to Dec. 18) (to Dec. 17) (to Dec. 18) (to Dec. 17) (to Dec. 18) (to Dec .17)

Aerospace and defense 12.3x 10.6x 14.7x 21.0x 8.3x 4.5x 26.7x 18.0x

Automotive and transportation 9.9x 10.3x 8.5x 9.7x 10.8x 10.5x 9.2x 11.0x

Consumer products and retail 10.7x 9.6x 9.8x 10.4x 12.3x 9.6x 10.3x 9.1x

Diversified industrial products 10.8x 10.9x 10.1x 10.2x 11.7x 12.9x 9.6x 8.7x

Financial services 10.8x 10.7x 11.8x 13.9x 10.6x 7.1x 11.0x 7.9x

Govt, public sector 12.4x 9.7x 11.0x 12.5x 13.4x 10.3x 12.4x 8.3x

Health care 11.7x 8.5x 8.5x 11.1x 15.8x 5.8x 10.9x 12.0x

Life sciences 13.6x 14.2x 12.9x 13.3x 15.7x 17.4x 12.2x 13.3x

Media and entertainment 11.7x 9.3x 9.7x 9.9x 14.8x 9.4x 11.1x 8.8x

Mining and metals 8.8x 6.9x 8.7x 12.8x 9.1x 6.9x 7.3x 5.1x

Oil and gas 10.3x 11.0x 10.5x 12.7x 12.0x 11.8x 7.9x 8.4x

Other sectors 9.7x 10.1x 9.7x 9.3x 11.1x 10.3x 8.8x 10.3x

Power and utilities 11.0x 10.0x 11.6x 11.1x 12.4x 9.6x 10.2x 9.3x

Real estate 9.4x 10.7x 12.5x 11.2x 7.8x 12.2x 7.8x 8.8x

Technology 13.1x 11.8x 11.6x 12.3x 14.0x 11.6x 10.2x 10.5x

Telecommunications 9.5x 7.2x 10.9x 6.6x 9.3x 5.6x 11.2x 8.1x

Total 10.9x 10.3x 10.4x 11.3x 11.9x 10.5x 9.8x 9.2x

23
3 Contacts

Private Equity PE editor

Andres Saenz Jeff Hecht Pete Witte Saurabh Yadav

EY Global PE Leader EY Global PE Tax Leader EY Knowledge Private Equity EY Knowledge, Transaction Advisory Services
+1 617 478 4619 +1 212 773 2339 +1 312 879 4404 +91 124 677 9321
andres.saenz@parthenon.ey.com jeffrey.hecht@ey.com peter.witte@ey.com saurabh.yadav@gds.ey.com

Andrew Wollaston John Weisel

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+44 207 951 9944 +1 212 773 8273
awollaston@uk.ey.com john.weisel@ey.com

Transaction Advisory Services Transaction Advisory Services editor

Steve Krouskos Julie Hood Barry Perkins

EY Global Vice Chair EY Global Deputy Vice Chair Transaction EY Knowledge Transaction
Transaction Advisory Services Advisory Services Advisory Services
+44 207 980 0346 +44 20 7980 0327 +44 20 7951 4528
steve.krouskos@uk.ey.com julie.hood@uk.ey.com bperkins@uk.ey.com

24
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