Global Private Markets Update

GLOBAL PRIVATE MARKETS UPDATE Q1 2019 DATA FUNDRAISING INVESTMENT EXIT ACTIVITY Year-on-year (YoY) change in US Buyout key private markets metrics US Venture in Q1 2019 = European Buyout

Asia Pacific

The US buyout market remained investment jumped from $17.2 billion healthy in Q1 2019. Fundraising in Q1 2018 to $46.7 billion in the US BUYOUT was strong to start the year and first quarter of this year, driven by an we expect Limited Partner (“LP”) increase in average deal size. However, if demand to remain robust across the same quarterly pace was maintained 74.0% 2019 given an attractive pipeline of across 2019 transaction value would be YoY rise in UP managers in market. With public lower than in each of the last four years. fundraising market companies trading at a Public-to-private transactions accounted discount to private ones, public-to- for 42.7% of total value, reflecting more private transaction activity is likely attractive public market valuations. 42.7% to remain relatively strong. General By sector, technology, industrials, and Share of UP Partners (“GPs”) will continue to healthcare combined to account for investment sell out of public shares as markets 70.5% of total investment. allow, but IPO and dividend recap activity accounted In terms of exits, overall value was down activity are likely to remain subdued. for by public-to- year-on-year. The data shows that GPs private transactions LPs continue to signal their confidence continued to favor a path to full exit via in the asset class, with fundraising sponsors or strategic investors, with up 74.0% year-on-year in Q1 to M&A and public market sales activity $37.5 billion. Strong performance and relatively stable. M&A value slipped elevated distributions are encouraging 19.0% year-on-year to $23.4 billion, existing investors to reinvest and new but public market sales rose 13.0% ones to allocate for the first time, to $8.7 billion in Q1. IPO activity was, though more than 50% of the total was however, very muted, with just four accounted for by two funds: Thoma listings bringing in only $0.6 billion, while Bravo’s Fund XIII and Genstar Capital’s dividend recaps fell from $11.8 billion Fund IX. in Q1 2018 to $4.4 billion.

Investment activity remained steady, Sources: PitchBook, S&P, CapitalIQ, Buyouts Magazine, SEC, Thomson Reuters. As of March 31, 2019. despite high purchase-price multiples breeding caution among GPs. On a direct year-on-year comparison basis,

HARBOURVEST PARTNERS | JUNE 2019 p1 The US venture market remained the first quarter, after raising just strong in Q1 2019, with fundraising $7.0 billion across the whole of 2018, US VENTURE and investment rising and exit led by Technology Crossover Ventures’ activity stable after a record- tenth fund, TCV X. breaking 2018. We expect fundraising 19.2% to maintain this strength across Despite strong growth in fundraising, UP 2019, with several flagship venture investment continued to outpace YoY investment fundraising in Q1 2019, rising 19.2% growth firms raising new funds. Investment activity is expected to remain robust, year-on-year to $25.0 billion. If this pace with the pace of innovation creating was maintained across 2019, overall a rich landscape of opportunities. investment levels would equal last year’s $200m record high. The largest increases in UP A number of high-profile and high- Median M&A valuation venture listings are likely investment were in expansion and later- exit deal size to support overall exit activity across stage companies, continuing the trend of the year, while strategic acquirers managers looking to maintain exposure should continue to pay attractive to winners as they continue to grow prices for the right companies, within private markets. particularly in the software and Measures of exit activity were mixed in life sciences industries. Q1. IPO median post-offer value slid Fundraising by US venture funds rose slightly – falling 23.6% compared with 36.8% year-on-year in Q1 2019 to Q1 2018 – though it remained high on a $13.3 billion. Interest in venture capital historical basis. Meanwhile, though the continues to be fueled by increased number of M&A exits fell moderately, the distributions in recent years and select median deal size rose sharply, reaching outsized IPOs. The rise in fundraising $200 million, up from $120 million across in Q1 was mainly driven by early-stage 2018. This can be partly attributed to strategies, which attracted $5.8 billion of the acquisition of Qualtrics by SAP for the total, up from $2.4 billion in Q1 2018. $8 billion. Later-stage funds raised $4.0 billion in Sources: PitchBook, ThomsonOne. As of March 31, 2019.

The fundraising environment of managers in the upper mid-market EUROPEAN remains positive for European and large-cap segments targeting funds buyout funds and the pipeline of more than €2 billion. Through Q1 BUYOUT continues to look strong for 2019, 2019, funds of over €2 billion accounted with several large-cap funds for 63.2% of total capital raised. This currently in market and holding continues the trend in 2018, when larger €0.7bn closings – most notably funds funds accounted for 70.3% of the total. Exit activity managed by Advent International, Permira, Apax Partners, and Cinven. Investment activity was relatively via IPO DOWN Investment and exit activity were subdued in Q1 2019, down 65.4% relatively subdued compared to Q1 year-on-year to €12.9 billion. While this 2018 yet remain strong by historical in part again reflects the strength of 28.2% standards. Several large deals are Q1 2018, GPs are being cautious in an environment of sustained high prices. YoY decline expected to close before the end of the year, which should boost Brexit fears likely contributed to very in fundraising DOWN limited deal activity in the UK. Large deals activity investment, while we anticipate stronger public markets will lift exit continue to drive investment activity and activity across the remainder of 2019. smaller deals – those valued below €500 million Enterprise Value – amounted Fundraising slipped on a year-on-year to just €2.4 billion. basis in the first quarter of the year, down 28.2% to €19.8 billion. However, As with other global markets, exit activity this largely reflects a base comparison via IPO was very weak in Europe in the with a strong Q1 2018. As noted above, first quarter at only €0.7 billion, down we expect this to be a strong year for from €1.9 billion in Q1 2018. M&A exit European fundraising. Fundraising activity activity also moderated, with a modest to-date has been broad-based, with a €35.8 billion reported. large number of funds currently in the Sources: PitchBook, Unquote Data, MergerMarket. market, and an especially deep pipeline As of March 31, 2019.

HARBOURVEST PARTNERS | JUNE 2019 p2 After a record-breaking 2018, As in Q4 2018, investment continues to private markets activity moderated outpace fundraising, with $21.6 billion ASIA PACIFIC in the Asia Pacific region in Q1 put to work in the first quarter of the 2019, with declines in fundraising year, led by China and India. Though and investment on a year-on-year this investment total represents a 25.3% 10% basis. While China continued to decline from Q1 2018, it is still strong UP drive fundraising in the first quarter, YoY increase from a historical perspective. While investment and exit activity were in exit activity China was the single largest market more diversified, reflecting the increasing maturity of private (accounting for 25% of the total), $9.8bn markets in the region. We maintain investment fell 43% compared with our expectation that overall activity Q1 2018, with a notable slowdown DOWN Fundraising will cool across 2019, but the in late-stage investment in Chinese volume market should remain robust from a technology companies. historical perspective on the back of solid GDP growth across the region. Exit activity in the first quarter was driven by Japan, with notable exits Fundraising slowed, as expected, in from Marketo by SunBridge Partners the first quarter of 2019, with volume ($4.8 billion) and Ayumi Pharmaceutical sliding 35.7% year-on-year to $9.8 by Unison Capital ($1.0 billion). This billion. Many large funds completed helped raise overall exit volume across fundraising in 2017 and 2018, driving the region to $13.9 billion, compared to fundraising figures to new heights, $12.6 billion in Q1 2018. The majority and this relative slowdown should of exits (97%) were executed via trade be understood in that context. China sale or share buyback, with IPO activity accounted for more than half of the remaining muted. money raised in the first quarter, Sources: Asian Venture Capital Journal, Centre for Asia supported by closes on funds raised Private Equity Research, Emerging Market Private Equity by CITIC Capital and Boyu Capital. Association as of March 31, 2019.

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HarbourVest is an independent, global private markets investment specialist with more than 35 years of experience and more than $50 billion in assets under management. The Firm’s powerful global platform offers clients investment opportunities through primary fund investments, secondary investments, and direct co-investments in commingled funds or separately managed accounts. HarbourVest has more than 400 employees, including more than 100 investment professionals across Asia, Europe, and the Americas. This global team has committed more than $34 billion to newly-formed funds, completed over $19 billion in secondary purchases, and invested over $8 billion directly in operating companies. Partnering with HarbourVest, clients have access to customized solutions, longstanding relationships, actionable insights, and proven results.

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