2012 Global Private Equity Report Contents Editor’s Foreword 5 Evolution of Fundraising Market in 2011 34 Overview of Current Fundraising Market 37 Section One: The 2012 Preqin Global Private North American Fundraising 38 Equity Report European Fundraising 39 Keynote Address - Moose Guen, CEO, 7 Asia and Rest of World Fundraising 40 MVision Buyout Fundraising 41 Distressed PE Fundraising 42 Section Two: Overview of the Private Equity Growth Fundraising 43 Industry Mezzanine Fundraising 44 Introduction - The Year Ahead - Helen Kenyon, 11 Natural Resources Fundraising 45 Preqin Venture Fundraising 46 Overcoming the Challenges - Mark Florman, 12 Chief Executive, BVCA Section Six: Placement Agents Emerging Markets: Room to Grow - Sarah 13 Overview of Placement Agent Use in 2011 47 Alexander, President and CEO, EMPEA Profile of the Placement Agent Industry 49 Moving Forward on Shifting Sands - Steve 14 Judge and Bronwyn Bailey, PEGCC Reputation and Regulation: Changing the 15 Section Seven: Fund Administrators Face of Private Equity - Dörte Höppner, Fund Administrators 51 Secretary-General, EVCA Section Eight: Fund Auditors Section Three: Assets under Management, Dry Fund Auditors 53 Powder, Employment and Compensation Assets under Management and Dry Powder 17 Section Nine: Deals Employment and Compensation 19 Talking Deals - Vineet Pruthi, Senior Managing 55 Director, Lincolnshire Management Section Four: General Partners Overview of PE-Backed Buyouts and Exits 56 League Tables - Largest GPs 21 Make-up of PE-Backed Buyout Deals in 2011 60 by Type, Value and Industry Buyout GPs - Key Stats and Facts 25 Most Active Debt Providers and Deal Advisors 62 Distressed PE GPs - Key Stats and Facts 26 Largest PE-Backed Buyouts and Exits 63 Growth GPs - Key Stats and Facts 27 Mezzanine GPs - Key Stats and Facts 28 Section Ten: Performance Natural Resources GPs - Key Stats and Facts 29 Examination of Private Equity Performance 65 Venture GPs - Key Stats and Facts 30 Private Equity Horizon Returns 69 Consistent Performing Fund Managers 70 Section Five: Fundraising Private Equity Returns for Pension Funds 73 Weathering the Storm: How to Maintain the 31 Private Equity Benchmarks 74 GP/LP Relationship in Tough Times - Tripp Brower, Partner, Capstone Partners 1 © 2012 Preqin Ltd. / www.preqin.com The 2012 Preqin Global Private Equity Report - Sample Pages 2. Overview of the Private Equity Industry Section Eleven: Investors Listed Private Equity Funds of Funds 111 Overview of Limited Partner Universe 77 Make-up of Investors in Recently Closed 79 Section Seventeen: Secondaries Funds Review of the Secondary Market and Investor 113 Investor Appetite for Private Equity in 2012 - 81 Appetite in 2012 December 2011 LP Survey Results Perspectives on the Secondary Market - 116 League Tables - Largest Investors by Region 87 François Gamblin, CEO, Secondcap League Tables - Largest Investors by Type 88 Secondaries Intermediaries 118 Investors to Watch in 2012 89 Secondaries GPs - Key Stats and Facts 119 Fundraising Review - Secondaries 120 Section Twelve: Investment Consultants Investment Consultants in Private Equity 91 Section Eighteen: Preqin Products Order Forms 121 Section Thirteen: Fund Terms and Conditions Mid-Market Focus - Sam Kay, Investment 93 Funds Partner, Travers Smith Overview of Fund Terms and Conditions 94 Investor Attitudes towards Fund Terms and 97 Conditions - December 2011 LP Survey Results Sample of 25 Leading Law Firms in Fund 99 Formation Section Fourteen: Sovereign Wealth Funds Sovereign Wealth Funds Investing in Private 101 Equity Section Fifteen: Cleantech Cleantech Fundraising Market in 2011 103 Cleantech Funds in Market 104 Overview of Private Equity Cleantech Fund 105 Managers Investors in Cleantech Funds 106 Section Sixteen: Funds of Funds Review of Private Equity Funds of Funds 107 Fund of Funds Managers - Key Stats and 108 Facts Fundraising Review - Funds of Funds 110 2 © 2012 Preqin Ltd. / www.preqin.com The 2012 Preqin Global Private Equity Report - Sample Pages 2. Overview of the Private Equity Industry Moving Forward on Shifting Sands - Steve Judge, Interim President and CEO, PEGCC - Bronwyn Bailey, Vice President of Research, PEGCC One year ago, the PEGCC wrote about requested information on Form Private pay two levels of tax. The solution that a number of legislative challenges facing Fund (“Form PF”) annually within 120 adds simplicity to the current tax code is private equity. Many of the debates days of the end of the fiscal year, rather to revise the law so all forms of business over tax policy and regulatory reform than quarterly within 15 days of the end are subject to only one level of taxation, anticipated in early 2011 continue today. of the quarter as originally proposed. The instead of requiring double taxation on We expect that additional financial SEC’s final Form PF rule also removed more enterprises. regulations affecting private equity will several requirements that would have be finalized this year and the industry been unworkable and unnecessary for (2) Based on estimates from Ernst & will continue to face key battles in the private equity advisers. Finally, the SEC Young, flow-through businesses would area of tax policy. Congressional efforts changed the threshold for a “large private see their tax burden rise by 8% ($27bn) to reduce the public debt and increase fund adviser” for private equity advisers per year under budget neutral, corporate- US competitiveness will expedite a to $2bn from $1bn in AUM. only tax reform. This added burden on comprehensive review of tax policy, many companies that are the engines and policymakers will debate various A number of other financial regulations of job creation would hinder economic ways to finance tax reforms. However, have yet to be finalized. Proposed growth. the context of these debates will likely Volcker Rule regulations released in change due to increased scrutiny of the October might impact the ability of private 2. Interest Deductibility industry’s business practices, resulting equity firms to raise capital from certain The tax treatment of interest on from a Presidential contest that includes groups of investors, including non-US corporate debt is also likely to come a candidate who was a successful private banking entities, insurance companies’ under scrutiny this year as a potential equity general partner. Throughout these general and separate accounts, bank- source of additional revenue to finance discussions, the PE industry will need sponsored “customer funds”, and bank- a lower corporate tax rate. Reducing the to aggressively promote the value of its affiliated pension plans. Another critical deductibility of interest would decrease investments. regulatory issue is the Financial Stability incentives for corporations to finance Oversight Council’s second proposed expansion and capital investment with The Politics of Private Equity rule on designation of certain non-bank debt. Although private equity firms and financial companies as “systemically funds generally have little to no leverage, The political discourse around financial important financial institutions” (SIFIs), many private equity portfolio companies regulations and tax policy will likely be which would subject them to capital do utilize debt in their operations. The shaped by the upcoming elections. For requirements. The PEGCC has provided PEGCC believes that reforming the tax the first time in US history, a founder of comments on both regulatory proposals. code in this manner would have negative a major private equity firm has become consequences for US businesses, capital a front-runner for the Republican Tax Reform markets and economic growth. Presidential nomination. As a result, the scrutiny of Mr. Romney’s past career Two issues on the Congressional 3. Carried Interest has put the business model of the entire agenda watched closely by investors, President Obama and some private equity industry under a political ratings agencies and the public will Congressional Democrats continue microscope. The increased attention be reducing the federal deficit and to advocate taxing carried interest as to the industry will likely heighten fundamental tax reform. In the context of ordinary income, rather than as long-term uncertainty around regulators’ and these discussions, at least three specific capital gains. Last fall, the bipartisan Joint legislators’ decisions on issues important policy areas are of interest to private Select Committee on Deficit Reduction to private equity. The result will be a more equity. While it is not guaranteed that any (a.k.a. the “supercommittee”) could not challenging environment to promote the of these proposals will move forward, the find a compromise solution for filling a interests of the private equity industry in PEGCC plans to engage actively on all $1.2tn deficit gap over the next 10 years. the regulatory and tax policy discussions three areas in 2012. Some Democrats and Republicans anticipated for 2012. may continue to seek alternative deficit 1. Taxation of Flow-Through Entities reduction plans in 2012 that could implicate the tax treatment of carried Regulatory Issues Some have suggested that imposing an entity level tax on flow-through interest as a revenue source. Regulatory actions in the Dodd Frank entities, such as business partnerships, would help to reduce tax rates on “C During this election year, the PEGCC Act moved forward in 2011 on multiple will continue to correct misconceptions fronts. The private equity industry made corporations”,