ANNUAL REVIEW 2017 CONNECT TO PERMIRA, CONNECT TO GROWTH

Unlocking the global potential of ambitious businesses PERMIRA Year in Review

GROWING AMBITIOUS BUSINESSES INTO GLOBAL INDUSTRY LEADERS IS CHALLENGING

CONTENTS By partnering with management and providing long-term, flexible support, the Permira funds have helped hundreds of businesses

About Permira on this journey. We bring over 30 years of experience to every Permira at a glance Overleaf new partnership. We listen, we challenge, and we help enterprising Introduction 1 people build more efficient, more sustainable and more technologically-advanced businesses.

Section 1 We are proud of what we do, proud to help companies with About Permira 2 ambition realise their full potential, and proud that this growth The Permira funds in 2017 3 contributes to better outcomes for the millions of pensioners Outlook for 2018 4 who invest in our funds. Investing responsibly 6

Section 2 Introduction 8 Investing well 10 Driving value 12 Selling well 14 Permira Debt Managers Credit 16 Investment strategies 19 Case studies 20 Investing responsibly 21

1 CONNECT TO PERMIRA, CONNECT TO GROWTH

DRIVING GROWTH DECADES OF GLOBAL MULTI-SECTOR EXPERIENCE REACH EXPERTISE

The Permira funds have delivered market-leading returns for our private equity investors for over 30 years by partnering with more than 200 ambitious businesses to support their growth.

Over the past decade, Permira Debt Managers (PDM) has also emerged as a leading independent multi-strategy credit platform.

Global Private Equity Strategy 30+ Years of backing growth

European Credit Strategy 10+ Years of credit investing PERMIRA Year in Review PERMIRA Year in Review

Section ABOUT 1 PERMIRA

The Permira funds in 2017 Bound by tech The Permira funds provide flexible growth funding Technology is more than an investment sector 2017 for businesses through a range of tailored equity for Permira; it is one of the threads that binds and debt solutions. the whole firm. Across private equity, 2017 was a strong year On the equity side, our funds invested in six new Permira’s experience as an early-stage technology for the Permira funds in terms of making new businesses and acquired an additional three investor dates back to the firm’s genesis three investments, driving growth in the portfolio companies as ‘add-ons’ to super-charge growth decades ago. A focus on backing growth, innovation in existing portfolio companies. The portfolio and capitalising on technology shifts has defined and realising mature investments. as a whole enjoyed strong growth during 2017, our approach over that time. Today, we think large, with a cumulative 15% EBITDA uplift across the profitable companies can still be innovative. We think businesses. The quality of growth, in turn, makes the they can still be disruptive, and can still grow quickly. portfolio companies attractive to potential acquirers. Our funds have invested actively in software In 2017, the funds sold nine companies, thereby businesses for the last 20 years and, in the process, returning €2.8bn to our investors. they’ve had a front row seat for a business revolution that has seen technology become a central part of PDM: 11 years of Credit Solutions all large companies. Whether our funds are backing Permira Debt Managers, through its Direct Lending a niche manufacturer, a financial advisory firm or a funds, has established itself as a leading lender over fashion retailer, our experience in the technology the past decade. Alternative sources of financing, space is crucial to helping our funds’ portfolio 1 such as Direct Lending, have become increasingly companies deal with this transition and its challenges. 6 14% attractive to European businesses since banks began Investments Portfolio sales retrenching in the aftermath of the financial crisis. growth In 2017, the business enjoyed another strong year with growth across each of its three business lines. Its Direct Lending funds made loans totalling c.€1.6bn across 24 European businesses. Its A focus on backing growth, Structured Credit funds made 34 investments and it also launched the first of its second generation innovation and capitalising on 2 1 CLOs, as PDM continues to expand into adjacent technology shifts has defined €2.8bn 15% investment strategies. our approach over that time. 1. P5 and P6 portfolio year-on-year growth Gross proceeds Portfolio EBITDA as at LTM Dec 2017 received growth 2. Gross proceeds include proceeds of €198m received for Magento during 2017, following partial realisation agreed in 2016

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Outlook for 2018 In this environment, our funds are working hard Five months into 2018, global economic growth on divesting portfolio companies when their 2018 continues at the upper range of the prior five underlying strategic value is fairly reflected, and on years’ activity, especially across Europe, which helping portfolio companies drive ambitious and Five months into 2018, the Permira funds have has rebounded strongly in recent years. transformational growth plans. See Magento sale to Adobe, page 15. been active making new investments and successful However, this growth is tempered by significant risks divestments. In a high-valuation environment, with in the form of political uncertainties, record equity The majority of our funds’ portfolio companies prices, and the implications of a gradual tightening are performing well, with some particularly strong significant risks on the horizon, maintaining investment of monetary policy. Taken together, we believe these growth stories. However, there are also a small discipline and focus is key. factors contribute to a challenging investment number of companies that need more support environment and, as a result, we continue to take to get them back on plan. a very disciplined and focused approach to our funds’ deployment.

...we continue to take a very 81 +11% 2 disciplined and focused approach to our funds’ deployment. Investments Revenue growth

23 +13% 2 1. Subject to new investment closing Realisations EBITDA growth conditions 2. P5 & P6 year-on-year growth LTM Mar 2018 3. Magento exit subject to customary closing conditions

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INVESTING RESPONSIBLY

Creating sustainable value never before has this scrutiny had the potential to Responsibility is at the heart of the Permira business model. Permira actively contributes to improving standards cause such major reputational and financial damage. across the industry through its participation in The flip-side is the greater opportunity for Our approach to ESG (Environment, Social and Governance) associations and global initiatives. We are proud businesses and products that are acting responsibly of the recognition we receive for this work but provides a framework for the companies in which our funds and addressing these challenges and concerns. our commitment to ESG is not about accolades, invest, helping them build better businesses. it is about creating sustainable value and giving companies the knowledge and skills to adapt to Being part of the solution IN INVEST TED MEN Our team uses its influence at board level to RA T P fast-moving environments. EG RO NT CE encourage best practice in the portfolio companies I S SE S and rigorously monitor the sustainability of their E C 1 Understanding the changing context I T business model and practices. We actively support C Asset selection L A E Environmental concerns, responsible corporate R D them in their effort to make greener products, P & origination B governance, supply chain issues and the wider social T Y reduce waste and resource use, make processes S D E impact of business have never been more important E B A more efficient and transparent, and improve G L to policymakers, institutional investors and other

N T I business practices. In addition, our funds have 4 2 E R A stakeholders. Such concerns are also critical to the

A Monetisation Due diligence M also invested in businesses that tackle a number of

H S

S purchasing choices of a new generation of consumers. & deal pressing global problems, such as water shortages, execution High profile corporate scandals in recent years, from the need to provide safe and sustainable food A S

C R T 3 E emissions-cheating in the automotive industry, supply for growing populations and the importance of I T O T N Value creation A chain issues in retail, corporate malfeasance cases in improving healthcare outcomes, placing ESG M O & monitoring R T and data misuse by the tech giants, at the heart of our funds’ investment strategy. I E A N business H T W have had a profound influence on public opinion and, A transformation T N These actions help our funds buy well, drive value ED O quite frequently, the bottom line of the companies ED S and sell well. CU involved. Armed with huge amounts of information E A FO SY TO HANDLE and social media networks to play an active role in the debate, stakeholder concerns are changing 1 Asset selection & origination 3 Value creation & monitoring business fast. Millennials, which now form the largest and ESG screening and analysis of portfolio investments and teams transformation noisiest cohort, are concerned by an ever-growing list ... never before has corporate Material issues raised in due diligence addressed by portfolio 2 Due diligence & deal execution company management teams of issues that stretch way beyond more traditional behaviour across all sectors been so concerns around the environment, from data security ESG forms part of due diligence carried out by investment Engagement with portfolio companies, including through ESG closely scrutinised, and never before teams including compliance, liabilities, reputational issues, reviews and site visits to identify opportunities for improvement to inequality. Never before has corporate behaviour risks and opportunities. Potential issues and mitigation Financial and non-financial data gathered, monitored and across all sectors been so closely scrutinised, and has this scrutiny had the potential measures explored with support from ESG specialists addressed where appropriate External advisers engaged where required to cause such major reputational Material ESG matters integrated into value creation plans for 4 Monetisation and financial damage... monitoring over lifetime of investment Detailed consideration is given to progress made by portfolio companies on ESG during the life of the investment Consideration given to information for an exit process and Permira reports annually on its sensitivities of likely acquirers approach to integrating ESG.

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Section INVESTMENT 2 STRATEGIES

PRIVATE EQUITY CREDIT

Our funds provide equity funding for ambitious businesses PDM funds provide liquidity to the primary and secondary to help them become global champions. In addition credit markets in Europe. Founded 11 years ago, the business to a private equity offering focused on control operates three distinct investment strategies; Direct Lending investments, our funds also offer large minority provides flexible credit facilities directly to small and medium- investments in high-growth companies. sized European businesses, while Structured Credit and CLO Management provide liquidity through a range of products and third party funds.

€33bn 200+ 3 Top 21 Of committed Investments in Investment Position in capital 30+ years strategies Direct Lending

1. By GCA Altium MidCapMonitor 2018 Ranking in Europe, published Q1 2018

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PRIVATE EQUITY

INVESTING WELL DRIVING VALUE SELLING WELL 2017 INVESTMENTS

COMPANY DESCRIPTION SECTOR INVESTMENT CASE FUND

Permira’s strategy is designed to identify investment Asian leader in outsourced corporate Using multiple levers to drive growth, including pricing P5 services. and packaging optimisation, customer segmentation opportunities in sectors that enjoy strong secular growth, and crossborder selling.

with minimal dependency on the cycle, such as ageing and Largest e-commerce player and Improving the general ecosystem to increase conversion P6 internet brand in Poland. and average basket size, and enhancing user experience growing populations, water shortage and cloud migration. for both buyers and sellers.

In a market where prices are high and bargains scarce, Leading omnichannel fashion retail Increasing monetisation of existing customers and P6 business for private members. targeting new customers through use of big data having a long-term view is key to buying with conviction. analytics, pricing, CRM and marketing automation In 2017, our funds invested in six businesses across all technologies. Sterile lyophilisation (freeze-drying) Potential to vertically integrate into the attractive active P6 five of our key sectors. and fill and finish of drugs and devices. pharmaceutical ingredients category and broaden the manufacturing footprint across geographies through Deployment remained active in the first few months of 2018 facility acquisitions. Distributor of ancillary components Organic growth targeting existing customers and P6 with the completion of three additional investments and the for installations and maintenance of expanding into new product categories, and potential heating, ventilation, air conditioning for add-on acquisitions. announcement of five more. and refrigeration units.

GROWTH OPPORTUNITIES STRATEGY COMPANY DESCRIPTION SECTOR INVESTMENT CASE FUND

An innovative payments company A proven product-innovator which will benefit from PGO11 which facilitate e-commerce continued e-commerce growth both locally and transactions across borders. internationally.

2018 NEW INVESTMENTS2 COMPANY DESCRIPTION SECTOR INVESTMENT CASE FUND

Leading valuation and specialist International growth opportunities by leveraging the P6 advisory firm. existing brand in under-penetrated markets such as Asia, Latin America and Europe.

Italian market leader in fast casual Development of store network in Italy and potential to P6 6 €3.2bn dining. expand internationally, with the benefit of a flexible and portable concept. New Equity Largest provider of diagnostic imaging Opportunity to consolidate the market in Australia via P6 investments invested services in Australia. acquisitions, with potential expansion into Asia, realising synergies from system consolidation.

1. Investment transferred into PGO1 as at June 2018 2. Subject to new investment closing conditions 10 11 PERMIRA Year in Review PERMIRA Year in Review

PRIVATE EQUITY

INVESTING WELL DRIVING VALUE SELLING WELL SELECTED PORTFOLIO ADD-ON INVESTMENTS IN 20171

COMPANY DESCRIPTION SECTOR INVESTMENT CASE FUND

We help drive growth in portfolio companies by assembling European outsourced manager Acquired in excess of 97% of TBS Group, a pioneer P5 of healthcare equipment. in multi-vendor maintenance services for hospital highly relevant sector and operational experts together with biomedical equipment. specialist external advisers to support, advise and challenge Creates a leading pan-European player in vendor- independent healthcare technology management, management over the course of the investment. extending geographical reach to over 15 countries.

Leading European receivables Acquired 100% of Nordic assets of Intrum Justitia/ P5 management business. Lindorff, which were mandated to be sold by the European Union anti-trust authorities. Opportunistic situation allow entry to the Nordic markets at scale and establish Lowell as a pan-European leader.

Fund administration and corporate Acquired Cortland, a high-growth asset in US alternatives P6 services provider. administration. Significantly enhances position in the US and in credit, with substantial cost and revenue synergies.

10+ €150m Add-ons Equity committed in 2017 to add-ons

1. Shown for add-ons where additional Permira funds equity has been invested 12 13 PERMIRA Year in Review PERMIRA Year in Review

PRIVATE EQUITY

INVESTING WELL DRIVING VALUE SELLING WELL FULL AND PARTIAL DIVESTMENTS 2017

COMPANY DESCRIPTION SECTOR INVESTMENT CASE FUND Our partnership with companies is built on the clear Leader in online legal services. Completed refinancing. P5 understanding that our funds will sell down their participation Proceeds used to partially finance the investment when the time is right in order to return capital to our in Tricor. Global leader in secure remote Refinanced existing debt. P5 support software. fund’s investors. 42% equity stake in business maintained on a fully diluted basis.

The funds only contemplate divesting when we are satisfied Leading supplier of vitamins, minerals Sale agreed of 100% of shares to Nestlé for Enterprise P5 that they have achieved their investment goals and helped and supplements. Value of €2.3bn.

build robust companies with strong future growth prospects. Japan’s largest sushi restaurant chain. Initial IPO on Stock Exchange in March 2017. P4 Remaining 33% stake sold to Shinmei, a leading rice wholesaler, in September at 11% premium to IPO price.

World leader in drip irrigation Sale agreed of 100% of shares to Mexichem for an P4 solutions. Enterprise Value of US$1.9bn.

Multi-national pizza delivery business. Remaining stake sold. PE3

Europe’s largest frozen food business. Remaining shares sold to Nomad. PE3

2.5x Leading specialist fashion retailer. Sold remaining position in Grupo Cortefiel to CVC PE2 and PAI. Aggregate gross multiple1 Leader in retirement income solutions. Partial exit from sale of 57m shares in March 2017 and P4 a further 50m shares in January 2018. 17% stake retained by the fund.

2018 REALISATIONS1 COMPANY DESCRIPTION SECTOR INVESTMENT CASE FUND

2 Leader in fast-growing digital Sale agreed of remaining equity to Adobe Systems for P5 9 €2.8bn 1. Gross multiple for all full and partial commerce software space. Enterprise Value of $1.68bn (signed May 2018). realisations in 2017 and 2018. Partial realisations based on total value at 31 Leader in retirement income solutions. Final exit from sale of remaining shares in May 2018. P4 Full or partial Gross proceeds Dec 2017. Includes proceeds for Magento realisations received (subject to closing conditions) 2. Gross proceeds include proceeds received for Magento during 2017, following partial realisation agreed in 2016 1. Subject to closing conditions 14 15 PARTNER WITH US, FOR PRIVATE CREDIT SOLUTIONS Year in Review PARTNER WITH US, FOR PRIVATE CREDIT SOLUTIONS Year in Review

CREDIT

Eleven years of private credit investing This network enables us to build strong relationships Permira Debt Managers (PDM) is an independent debt Now in its eleventh year, PDM operates three with European businesses, especially smaller, often distinct strategies: Direct Lending, Structured Credit family-owned enterprises. It helps us assess these management business comprising three strategies: and CLO Management. businesses through the perspective of equity investors, forming a complete picture on the Direct Lending, Structured Credit and CLO Management. The business was established to take advantage of the fundamentals driving companies and enabling retrenchment of banks from the European corporate us to provide funding that is tailored around their Founded over a decade ago, it is now one of Europe’s lending market, driven by regulatory change. leading specialist debt investors, advising investment funds specific needs. Flexible solutions for European businesses and products which have provided c.€5.2bn of debt capital Liquidity for the European credit market On the Direct Lending side, our funds partner with As the European market has evolved, we have to over 120 European businesses. European businesses to provide quick and flexible launched products in Structured Credit and CLO credit solutions that are better tailored to their Management that enable our funds to provide growth and other needs. The PDM team benefits liquidity to both the primary and secondary markets, significantly from the wider Permira office network, financing larger transactions in a rapidly evolving sector expertise and relationships with banks, European credit space. lawyers, accountants and other service providers to European businesses.

€5.2bn1 120+ Capital committed Businesses across ...our funds partner with European strategies businesses to provide quick and flexible credit solutions...

132 c.40 European PDM

countries professionals 1. As at 31 May 2018 2. Based on location of company headquarters for PCS fund investments

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CREDIT TO ACHIEVE THIS PDM FOLLOWS THREE KEY INVESTING STRATEGIES:

DIRECT LENDING PDM’s Direct Lending funds provide credit solutions PDM aims to partner with European businesses to provide to mid-market European companies across the the capital they require for growth and generate market-leading . The Permira credit solutions funds risk-adjusted returns for investors in PDM funds. have a track record of providing additional funding for organic and external growth, in particular overseas expansion, and buy-and-build strategies.

STRUCTURED CREDIT Our Structured Credit funds provide long-term capital to CLO managers in both the primary and secondary capital markets. This strategy relies on the excellent risk/reward characteristics inherent in senior secured debt, typically issued by larger leveraged . Our Sigma funds specialise in the most junior parts of €1.8bn the capital structure especially equity, where our credit- Invested in 28 led approach provides the greatest differentiation. businesses since Jan 2017

CLO MANAGEMENT Building on 10+ years’ experience as a European credit investor, PDM has relaunched a CLO business with a dedicated investment team. The CLO invests in syndicated loans and bonds that are issued to 38 €363m support portfolio companies of private equity funds. Investments by Size of Providus Providus CLO I was priced in March 2018. Sigma 4 CLO I

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SELECTED DIRECT LENDING INVESTING RESPONSIBLY IN CASE STUDIES DIRECT LENDING

Business overview Why we backed them Daltys is a leading The company has a strong and defensible position across provider of vending and its three key distribution channels: vending machines, The PDM funds have been delivering value to investors for more coffee machines to the coffee machines and coffee shops. Growing demand for coffee distribution and high barriers to entry in established than 10 years. A focus on Environmental, Social and Governance corporate, healthcare SOLE and hospitality sectors locations means that the company is well-positioned to LENDER and also operates continue this growth. (ESG) considerations is an important part of building lasting coffee shops in France. value in the PDM funds’ portfolio companies.

INVESTME D IN NT ESG and sustainability matters TE PRO RA CE EG S are considered as part of the T SE IN S Business overview Why we backed them standard investment analysis Kinaxia is a UK haulage PDM identified the opportunity to back a strong buy-and-

and warehouse business build platform in a rapidly consolidating industry. Further for Direct Lending investments. F

that was created out of reassurance was gained through the existing relationship O 3 1 PDM is further developing its C

a succession of mergers with the founder, who had previously been successfully U Post-investment Asset selection L SOLE S

E approach to integrating ESG E

in the logistics space. backed by the Permira private equity funds. The financing and origination D D LENDER

B

package will enable the company to maintain its acquisitive O considerations in its other Y

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growth in a rapidly consolidating market. D

E

W investment strategies. A

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A T

T E A

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A S T 2 T E Due diligence R Business overview Why we backed them S and deal Soho House is a PDM had strong industry knowledge and relationships execution hospitality company with the Soho House management team through the that operates exclusive previous investment of the PDM funds in the business. 1 Asset selection and origination private members clubs, As it extends its global franchise, the company has built SOLE E A S E as well as hotels, significant brand value, a stable and loyal membership and ESG screening of potential investments Y TO H A N D L LENDER restaurants and spas. high demand to join the clubs. These dynamics help provide protection against the economic cycle and have powered year-on-year growth in membership and revenues for more 2 Due diligence and deal execution 3 Post-investment than a decade. Potentially material ESG risks considered on Direct Lending Ongoing monitoring of material ESG risks identified pre-investment investment as part of standard investment analysis (as relevant) and emerging post-investment Investment professionals access public information, relevant Engagement with selected portfolio companies on managing documents, and the sponsor or company management as and improving ESG, particularly where the PDM funds have a Business overview Why we backed them appropriate and depending on the risk profile of the business board seat or board observer seat RSK advises clients Having backed the company in a previous financing round, Key ESG risks presented to the Investment Committee and Reporting material incidents or developments to investors in the energy, PDM was attracted to its broad and capable management General Partner infrastructure, oil and team, solid growth and opportunities for further expansion. gas, and construction The business is well diversified by geography and sector, and SOLE sectors on a range enjoys strong relationships with blue-chip customers that it LENDER of issues including can service across the entire lifecycle of their projects. project management, regulations and environmental factors. Permira reports annually on its approach to integrating ESG. Designed and produced by Gower Consulting gower-consulting.com

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