EMEA Private Equity Market Snapshot

• Global GPs’ Activity into EMEA Slows as Another Brexit EMEA Private Equity Extension is Confirmed

• UK’s “Going Private” Deals Taking Off Market Snapshot • PE Investments in European Communication Services Targets Essential tools for strategic decisions on Course to Reach a Decade High December 2019│Issue 23 • Feature Article: Private Equity Leveraging ESG to Create Value

Editor’s Note Authors

Ilja Rubie Pearl rd Welcome to the 23 issue of the EMEA Private Equity Market Hauerhof Corales Snapshot (PEMS), a quarterly publication focusing on the Private Equity (PE) market in Europe, the Middle East and Africa (EMEA) from Senior Manager, Associate, S&P Global Market Intelligence. Product & Market Product & Market Development EMEA Development This issue addresses the overall decline in capital deployed and number of deals felt across EMEA, in spite of some surprising gains S&P Global Market S&P Global Market among the Financials and Healthcare sectors. After discussing the Intelligence Intelligence factors playing into this trend, we take a deeper dive into the number

of PE-backed Public to Private buyout deals on the horizon in the UK. Ewa Madeleine From there, we take a broader view of the Communication Services Skornas Farman sector and look at the implications of its record-setting upwards trajectory over the past five years. We close with a feature article Associate, Senior Editor examining the way investors are increasingly perceiving Investments Data S&P Global Market Environmental, Social and Governance as an investment opportunity S&P Global Market Intelligence to be seized, as opposed to an investment risk to be managed. Intelligence We look forward to receiving feedback and suggestions on regions or

sectors of interest for future analysis. To subscribe or comment on the complimentary EMEA PEMS, please email [email protected]. If you would like to read previous issues of this report, please visit

www.spglobal.com/marketintelligence/emea-pems-archive

EMEA Private Equity Market Snapshot

Global GPs’ Activity into EMEA Slows as Another Brexit also suffered a drop, with both received capital and deal count falling Extension is Confirmed by 24% year-over-year, from €2.4bn to €1.8bn, and 121 deals to 75 deals, respectively. Benelux targets experienced the biggest reduction One month after the end of the third quarter, the European Union (EU) in deployed capital, receiving only €1.7bn in the quarter compared to and the United Kingdom (UK) have agreed on yet another Brexit €9.7bn in the previous year; though it’s important to note that 75% of extension, giving the UK until January 31, 2020 to exit the EU. Given the the Q3 2018 value was attributable to a single deal that saw KKR & Co. uncertainty surrounding Brexit right up until this latest agreement was L.P. acquire the Spreads Business (Upfield Foods) from Unilever PLC 3 reached, it is not for €6.8bn. surprising that global The Financials and General Partners’ (GPs’) Healthcare sectors investments into the attracted significant Europe, Middle East and attention from global GPs Africa (EMEA) region during the quarter, as tumbled in Q3 2019. deal value materially Aggregate capital deployed into EMEA fell almost 40% between Q3 grew in spite of the overall 2018 and Q3 2019, decreasing from €25.2bn to €15.5bn. Deal count decline in investments across EMEA region. Aggregate capital also fell 12% over the same period. Additionally, fewer large deals – deployed in the Financials sector increased more than two-fold, from those valued at €1.0bn or more – were produced, from five deals with only €0.8bn in Q3 2018 to €2.0bn in Q3 2019, notwithstanding a 33% a total value of €13.7bn 1 in the same period last year to only three reduction in the number of deals. Surprisingly, capital invested in deals with a total value of €3.6bn this year.2 Factoring in an economic Healthcare rose by 62%, jumping from €1.4bn in Q3 2018 to €2.2bn in slowdown in China, problems in South America and the threat of an Q3 2019. This trend suggests that Private Equity’s (PE’s) focus at this escalating US/China trade war, the drop is likely reflective of a more point in the cycle is on industries that are non-cyclical in nature, such challenging macro environment in general in 2019. as Healthcare, certain areas of Technology and Business Services.4 On The UK and the Nordics were the hardest hit regions in Q3 2019. The the other hand, a single, large deal involving the acquisition by The volume of investments flowing through the UK in the quarter plummeted by 42% year-over year, from €7.2bn to €4.2bn, with deal count also falling by 12% from 278 to 245. Similarly, Nordics targets

1 3 Q3 2018 global entry investments into EMEA-based targets in the €1.0bn+ plus bracket: Upfield Foods, ZPG KKR & Co. L.P. (NYSE:KKR) completed the acquisition of Spreads Business from Unilever PLC (LSE:ULVR) on Limited, Pret A Manger (Europe) Ltd, TIP Trailer Services Management B.V., and Ammeraal Beltech Holding July 2, 2018 (As of 30/09/19). S&P Capital IQ Platform. Retrieved from B.V. https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=546954145&com panyId=546954102 2 Q3 2019 global entry investments into EMEA-based targets in the €1.0bn+ plus bracket: Howden Group Ltd., 4 Forgital Italy S.p.A., and Luminor Group AB. “Global Private Equity 2019: The Year Ahead.” (As of 20/02/19). Private Equity Wire. Retrieved from https://www.privateequitywire.co.uk/special/global-private-equity-2019-year-ahead 3

EMEA Private Equity Market Snapshot

Carlyle Group of Forgital Italy S.p.A. for €1.0bn5 paved the way for the from €31.9bn to only €20.0bn in Q3 2019. Both cross-border and local meteoric rise in capital deployed to the Materials sector, which targets felt the impact of the weakening investments, with the jumped from €0.2bn to a high of percentage decline reaching double digits. EMEA-based GPs’ €1.7bn. investments into cross-border targets dipped by 39% to €10.8bn across 339 deals, compared to €17.7bn across 318 deals in the same With a hard Brexit still on the period last year. Similarly, investments into local targets were down line in Q3, the value of PE exits 30% falling from €14.2bn across 1,058 deals in the same period last also dwindled. Global GPs’ year to €9.9bn across 942 deals this year. aggregate capital realized from EMEA based targets fell by 42% from €32.8bn to €18.8bn, and deal Among cross-border targets, Asian targets were hit the hardest with a count was reduced by 23% from 297 to 219. The drop is likely 77% decline in capital connected to the decline in large deal divestments, with only three received and ended this large deals during the quarter with a total value of €7.4bn, 6 a quarter with aggregate significant dive from the nine large deals with a total value of €18.0bn7 investments of €1.9bn in the same period last year. A decline in capital realized was evident across 74 deals across all regions in EMEA, but most pronounced in Return on Equity compared to €8.4bn targets, which were left with aggregate capital realized of only €1.0bn across 54 deals in the compared to €5.4bn in the previous year. same period last year. Even removing the single, EMEA-based GPs’ Activity Weakens Globally large deal in Q3 2018 involving the acquisition of Sydney Motorway 8 During the quarter, Corporation Pty Limited for €5.8bn, aggregate capital invested in EMEA-based GPs’ Asian targets would still be down 30%. In the same way, UK targets investment activity also also suffered a 66% dip in capital received from EMEA-based GPs, showed signs of from €6.2bn across 240 deals to only €2.1bn across 215 deals. slowdown, as capital Additionally, there were no deals in the €1bn plus range. deployed fell by 35%

5 7 Carlyle Europe Partners V and Carlyle Partners VII, L.P. funds of The Carlyle Group L.P. (NasdaqGS:CG) Q3 2018 global exit investments into EMEA-based targets in the €1.0bn+ plus bracket: Sky Betting and completed the acquisition of Forgital Italy S.p.A. from Fondo Italiano di Investimento fund of Neuberger Gaming, OOO Stroygazconsulting, Direct Energie Société Anonyme, Ufinet Telecom, S.A.U., iZettle AB, Pret A Berman AIFM Limited, Asset Management Arm and Spezzapria family on September 11, 2019. (As of Manger (Europe) Ltd, SIG Combibloc Group AG, TIP Trailer Services Management B.V., and Ammeraal Beltech 30/09/19). S&P Capital IQ Platform. Retrieved from Holding B.V. https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=616267921&com 8 panyId=5722303 Transurban Group (ASX:TCL), Canada Pension Plan Investment Board, AustralianSuper Pty Ltd and Tawreed Investments Ltd. completed the acquisition of 51% stake in Westconnex from the Government of New South 6 Q3 2019 global exit investments into EMEA-based targets in the €1.0bn+ plus bracket: BTG International Wales on September 27, 2018. (As of 30/09/19). S&P Capital IQ Platform. Retrieved from Ltd., Global Switch Holdings Limited, and Parques Reunidos Servicios Centrales, S.A. 4

EMEA Private Equity Market Snapshot

EMEA-based GPs continued to invest heavily in the Information €6.2bn across 33 deals, even with 33% fewer total number of deals. Technology (IT) sector, putting in €5.5bn of new money across 463 The rise in total realized capital within Healthcare was largely boosted deals during the quarter, similar to last year. The Healthcare sector, on by a single, and the largest, deal of the quarter, which involved the the other hand, has only started to attract interest, as aggregate acquisition of BTG International by Boston Scientific for €3.7bn.10 capital grew by 15% from €3.0bn to €3.5bn in Q3 2019, despite a 7% Shifting the focus onto the Venture Capital (VC) universe reveals just a decline in the number of deals. With no large deals executed during the 4% decline in global VC capital deployment in EMEA region, from quarter, the Industrials, Consumer Discretionary, and Communication €3.4bn in Q3 2018 to €3.3bn in Q3 2019 and fewer number of deals (562 Services sectors all suffered a decline in aggregate capital deployed, versus 635 in the previous year). At 30%, IT received the highest with the largest drop falling to the Industrials sector, with investments allocation of capital from global VCs, standing €1.2bn across 252 plunging by 80% from €9.4bn across 157 deals in Q3 2018 to €1.9bn deals. EMEA-based VC firms investments globally, on the other hand, across 139 deals in Q3 2019. grew incrementally at €6.7bn across 744 deals – a 3% growth – with Divestiture activity of EMEA-based GPs also lessened, with a 55% the new money largely concentrated (57%) in North American targets. reduction in aggregate capital realized when compared to the same On a sector view, Healthcare stood side by side with IT, amassing period last year. €1.75bn of aggregate capital across 103 deals in Q3 2019 from €1.37bn During the quarter, across 108 deals the year prior. capital realized only totaled €18.5bn across 213 deals, versus €40.9bn UK’s “Going Private” Deals Taking Off across 274 deals in In line with the overall decline in deal volume across the EMEA region, the previous year, PE investments in UK targets followed a similar trend in the first three though it should be quarters of 2019 as compared to the year prior, although the decline noted that a single exit deal in 2018 that saw Walmart acquire Flipkart was a marginal 5.5%, from 843 to 796 closed transactions (Chart 1). 9 Private for €13.5bn accounted for 33% of this value. Even removing Over the same period, the reported PE capital deployed into UK targets this outlier transaction, however, aggregate capital realized would still dropped 9% from £12.9bn to £11.8bn, resulting in the UK falling behind be down 30%. From a sector view, the value realized from the the Nordics (£12.9bn), who attracted more GP’s capital year-to-date. Healthcare industry more than tripled, from €2.6bn across 22 deals to The latter will most likely be a short-term phenomenon as some big- https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=579495878&com 10 panyId=285732216 Boston Scientific Corporation (NYSE:BSX) completed the acquisition of BTG plc (LSE:BTG) from Woodford Investment Management Limited, Novo Holdings A/S, INVESCO Asset Management Limited and others on 9 Walmart Inc. (NYSE:WMT) completed the acquisition of 77% stake in Flipkart Private Limited from a group August 19, 2019. (As of 30/09/19). S&P Capital IQ Platform. Retrieved from of sellers on August 18, 2018. (As of 30/09/19). S&P Capital IQ Platform. Retrieved from https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=591945718&com https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=563483103&com panyId=127549 panyId=309452892 5

EMEA Private Equity Market Snapshot

ticket PE-backed Public to Private (P2P) buyout deals, worth a combined £8bn, are awaiting regulatory approval and would easily propel the UK back to the top. Thoma Bravo sees an “attractive opportunity to increase its exposure to the large and growing cyber security market” 11 by acquiring the Sophos Group plc (LSE:SOPH), a deal that values the firm in the range of £3.12bn, with an Implied Enterprise Value (EV)/Last Twelve Months (LTM) Earnings Before Interest Tax Depreciation and Amortization (EBITDA) multiple of 46.7x.12 Furthermore, the US PE firm Advent International Corporation already received the “green light” from investors but is awaiting the British government’s decision on its acquisition of the UK Aerospace and Defense company Cobham plc (LSE:COB) in a deal worth £4.5bn and an Implied EV/LTM EBITDA multiple of 15.4x.13

Data as of 30/09/19. Source: S&P Global Market Intelligence. For illustrative purposes only.

It is somewhat not surprising to see a slight uptick in the P2P activities targeting UK-based firms, but it is worth highlighting the significant increase in deal value. One factor that has potentially played a key role is the weakening British Pound. The GBP/USD rate fell to a historical low of $1.1885 in August this year as a result of the prolonged political debate around Brexit. Additionally, there is a strong appetite among institutional investors for private markets, as evidenced by record levels of global PE fundraising activity. The significant amount of “dry powder” in the market, as well as the low interest environment, are all possible factors driving the attention of foreign PE players to UK public

11 13 “UK Security giant Sophos heading for £3.1bn acquisition.” (As of 31/10/2019). NS Tech. Retrieved from Cobham plc (LSE:COB). (As of 31/10/2019). S&P Capital IQ Platform. Retrieved from https://tech.newstatesman.com/security/sophos-thoma-bravo-acquisition https://www.capitaliq.com/ciqdotnet/Transactions/transactionDetail.aspx?transactionId=640450270&comp anyId=159951597 12 Sophos Group plc (LSE:SOPH). (As of 31/10/2019). S&P Capital IQ Platform. Retrieved from https://www.capitaliq.com/ciqdotnet/Transactions/transactionDetail.aspx?transactionId=640450270&comp anyId=159951597 6

EMEA Private Equity Market Snapshot

assets. 14 According to S&P Capital IQ data, if the above mentioned deals pass through the regulatory hurdles, the total amount of PE- backed “Going Private” deals could reach levels not seen since 2011; even more remarkably, the total deal value for those deals in 2019YTD would top the total amount paid across all PE-backed P2P UK deals over the past nine years (Chart 2).

Data as of 30/10/19. Source: S&P Global Market Intelligence. For illustrative purposes only.

tors/Our%20Insights/Private%20markets%20come%20of%20age/Private-markets-come-of-age-McKinsey- 14 “Private markets come of age.” (As of 31/10/2019). McKinsey & Company. Retrieved from Global-Private-Markets-Review-2019-vF.ashx https://www.mckinsey.com/~/media/McKinsey/Industries/Private%20Equity%20and%20Principal%20Inves 7

EMEA Private Equity Market Snapshot

A recent study published by the Thinking Ahead Institute15 observed a PE Investments in European Communication Services significant shift within the public and private markets and highlights Targets16 on Course to Reach a Record High in a Decade some key implications as a result of the changing dynamics. First, the average number of Initial Public Offerings per year across major Over the last five years, the Communication Services sector in EMEA markets, like the US and the UK, has dramatically declined in the last has attracted relatively stable funding from global GPs when excluding decade as compared to the period between 1980 and 2000. Secondly, mega deals.17 In our study period, from January 1, 2015 to September the number of firms listed on the US equity market dropped by 50%, to 30, 2019, the total amount invested into the sector hit €44.7bn across just 4000 firms today, compared to the peak in the late 1990s. A key 2525 transactions. Put into context, the sector accounted for almost driver of the reduced number of firms is the overall perception of public 10% of the share of aggregate PE capital deployed to the region over markets as being increasingly impatient and short-term focused. the study period. Though the number of deals was almost unchanged, Finally, there is an abundance of private capital, enabling private this year’s investment value totaled €4.7bn as of September 30, 2019, companies to access new capital outside public markets. In today’s a substantial drop on the astounding €11.2bn put to work during the ecosystem, companies that do go public are more likely to be more same period in 2018 (Chart 3). mature and come with a significant price tag attached to them. Given their long investment horizon, PE firms are taking advantage of the That said, three mega-deals worth more than €1bn helped to boost above developments, and it is not surprising that institutional aggregate deal values in the first three quarters of 2018. They included a €3.5b acquisition of Irish Telecom Air Limited,18 a €2.8 acquisition of investors are ramping up their exposure to private markets as a way to 19 access fast-growing, innovative companies. UK-based ZPG Limited, and a €1.1bn investment in Imagina Media Audiovisual S.L. by Orient Hontai Capital.20 By comparison, there was only one mega deal on average in each year between 2014 and 2017.

15 The evolving role of public and private markets (As of 31/10/2019), Thinking Ahead Institute Retrieved from 18 Eir Limited. (As of 30/9/2019). S&P Capital IQ Platform. Retrieved from https://www.thinkingaheadinstitute.org/-/media/TAI/Pdf/Research-Ideas/a_public/Private-Equity.pdf https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=547205239&com 16 As per the Global Industry Classification Standard (GICS) Communication Services sector comprises panyId=47125283 Telecommunication Services and Media & Entertainment Industry Group. (As of 30/9/2019). S&P Capital 19 ZPG Limited. (As of 30/9/2019). S&P Capital IQ Platform. Retrieved from Global Market Intelligence. Retrieved from https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transctionId=564134278&comp https://www.spglobal.com/marketintelligence/en/documents/112727-gics- anyId=10255072 mapbook_2018_v3_letter_digitalspreads.pdf 20 17 IMAGINA MEDIA AUDIOVISUAL, S.L. (As of 30/9/2019). S&P Capital IQ Platform. Retrieved from Mega deal is considered to be €1bn or more in value. https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=540994879&com panyId=7023697 8

EMEA Private Equity Market Snapshot

Media and Services segment are consistently outperforming their Media & Entertainment peers, with an average EBITDA margin of 18.5% and an average net profit margin of 14.5%, which likely explains the strong deal-making activity into the segment. Movies & Entertainment and Integrated Telecommunication Services round up the top three most invested sub-industries, contributing 16% and 15% of the share of money invested, respectively. Interestingly, the largest growth deal into the Movies & Entertainment sub-industry recorded so far this year was a €86m investment into Plimsoll Productions Ltd. by LDC (Managers) Ltd.21 As more broadcasters and media tech companies launch their own streaming services, content is increasingly seen as a differentiating factor in winning over viewers. As a result, programming budgets are skyrocketing, likely leading to increased PE interest in the TV production segment. According to S&P Global Market intelligence, over the course of five years, over-the-top (OTT) video subscription in the UK grew by a 106.4% Compound Annual Growth Rate (CAGR) against a 3.4% multichannel equivalent, which makes the UK one of Data as of 30/09/19. Source: S&P Global Market Intelligence. For illustrative purposes only. the most developed OTT video markets in Europe, 22 though other Within the broader Communication Services sector, some of the sub- European countries are following suit. For example, the streaming industries appear more attractive to GPs, shaping the overall video market in Germany increased threefold from 2015, reaching composition of entry deals. The Interactive Media and Services €14.6m in 2018. All this comes against the backdrop of stagnating industry has by far dominated the Communication Services landscape, multichannel customer growth in Europe. Between 2019 and 2028 the both in terms of deal volume and deal count. The industry attracted number of multichannel subscribers in Western Europe is projected to €11.4bn (1526 deals), which amounts to a 25% share of aggregate deal increase by a CAGR of 0.4% (Chart 4), and by a CAGR of 1.3% for values and 60% of the deal count over the study period. S&P Global Market Intelligence fundamentals data for the last five years shows that EMEA-based private companies operating in the Interactive

21 Plimsoll Productions Ltd. (As of 30/9/2019). S&P Capital IQ Platform. Retrieved from https://www.capitaliq.com/ciqdotnet/Transactions/TransactionSummary.aspx?CompanyId=328485466&tra 22 S&P Global Market Intelligence (As of 30/9/2019). Retrieved from nsactionViewType=1 https://platform.marketintelligence.spglobal.com/web/client?auth=inherit#news/article?id=53064635&Key ProductLinkType=24 9

EMEA Private Equity Market Snapshot

Eastern Europe (Chart 5). At the opposite end is the Middle East and Africa, with a CAGR of 7%, the highest among other regions.23

Data as of 30/09/19. Source: S&P Global Market Intelligence. For illustrative purposes only.

Data as of 30/09/19. Source: S&P Global Market Intelligence. For illustrative purposes only. Regional Domination – Spotlight for the UK The UK proved to be an unquestionable destination for investments into Communication Services. The country amassed almost €12bn, equivalent to the combined capital invested into France, Germany, Spain and Sweden over the last five years, with strong funding from local investors. Single buyer deals data reveals that in three quarters

23 S&P Global Market Intelligence (As of 30/9/2019). Retrieved from https://platform.marketintelligence.spglobal.com/web/client?auth=inherit&overridecdc=1&#industry/Glob alMultichannelRank 10

EMEA Private Equity Market Snapshot

of completed transactions, money came from UK-based investors. FEATURE ARTICLE While deal count in the first three quarters of 2019 was on par with the four-year average over the same period in 2018, deal value amounted PE Leveraging ESG to Create Value to €588mm, a drop of 65% from 2016 (€1.6bn) and way below the mark of the unprecedented €4.2bn registered in 2018. Yet the collapse in PE has shifted its view of Environmental, Social and invested capital in 2019 versus the previous period appears not to be Governance (ESG) factors to a means through which it can add value, constrained to UK, but Europe wide. An exception is France, where rather than simply a way to mitigate risk. money deployed to Communication Services targets (€2.2bn) has In some cases, assets in which a firm might consider investing have already surpassed the previous years’ full figure. Notably, a €1.8bn implemented ESG strategies to the highest degree, and, as such, a firm acquisition of SFR FTTH led by a consortium of Allianz Capital may deem there is no room for further improvement. At the other end Partners, OMERS Infrastructure and AXA IM – Real Assets drove up of the spectrum, some assets are too risky for firms to considering 24 investment value. improving. Between these two poles lies a gray area, which has come Despite the falling deal count, PE players are willing to splash capital further into the spotlight as consumers grow increasingly more when the right opportunity arises, driving up the M&A valuation. The ethically aware. average Implied EV/EBITDA increased from 11.3x in 2015 to 12.5x in For instance, a potential investment may not have a strong ESG track 2018. record and therefore would raise red flags during due diligence, but Although 2019 got off to a slow start for PE investments into the that also could translate into an opportunity for the investor in terms Communications sector, as the year draws to a close, deal volume is of raising its ESG score and winning support from conscientious on course to surpass the previous year’s level and even reach a decade consumers. high. There is a further €15bn to be injected into the sector if all Cornelia Gomez, ESG director at PAI Partners, notes that investing in announced deals are to close. Indeed, in the UK, deal value is set to businesses that have areas where they can improve on ESG is precisely 25 soar by €5bn once the Inmarsat Plc transaction receives regulatory where PE owners can have an impact: "We will have a lot of levers to approvals from competition authorities, showing that despite global improve them, to push them towards certifications, labeling, and more political and economic uncertainties, the Communications sector in transparency, more traceability." EMEA remains quite resilient. Firms with PE strategies are searching for ways to make improvements. The head of ESG at one large U.S.-headquartered alternative asset manager, which manages billions of dollars in assets, said the firm looks to advance ESG best practices across sectors

24 25 SFR FTTH. (As of 30/9/ 2019). S&P Capital IQ Platform. Retrieved from Inmarsat Plc (LSE:ISAT). (As of 30/9/2019). S&P Capital IQ Platform. Retrieved from https://www.capitaliq.com/CIQDotNet/BusinessRel/investors.aspx?companyId=584271941 https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=606921695&com panyId=3574059 11

EMEA Private Equity Market Snapshot

without taking unnecessary risks. It sees opportunities in companies more sustainable or more socially aware approach to a tricky industry that need investments to reach best practice standards, particularly can also lead to investment ideas that can mitigate some of the around safety and any type of environmental emission improvements. negatives. Investments in companies that are more difficult to manage can also Investment firm EQT AB's head of sustainability, Therése Lennehag, create returns for investors. Where investments are more difficult to recalled having a conversation with an LP about a tobacco restriction, manage, "we feel that our investors are being appropriately rewarded and the same day her firm announced it had agreed to invest in Fertin for managing risks that somebody's got to manage," they said. Pharma, a producer of medicated chewing gum primarily targeting Moving Past the Negative those looking to quit smoking. At one time, it took convincing to get those in the industry to see the "Sometimes we've been trying to take a different view on that negative possible benefits of ESG. Some 10 years ago, Principles for screen," Lennehag said. She added that firms can find ways to make a Responsible Investment (PRI), the United Nations-supported positive difference when they look to do more than just avoid certain organization that aims to help investors incorporate ESG, had only a industries. handful of PE members. Natasha Buckley, a senior manager at PRI, ESG Part of Overall Process said her organization had "quite difficult conversations" convincing Limited and General Partners that ESG "is not about sacrificing Many in the industry note that it's important to distinguish ESG from returns. This does not breach of your fiduciary duty." restriction-based investing. ESG is about integrating related factors into the due diligence process "irrespective of whether or not we move Initially, market participants commonly associated ESG with forward on a deal" and across the ownership of an asset, said investment restrictions that Limited Partners (LPs) required of their Blackstone Group Inc.'s global head of ESG, Alison Fenton-Willock. GPs, said Buckley. But investment restrictions are not necessarily tied to ESG. Rather, they may take into account the avoidance of bad Today, ESG is incorporated into the due diligence carried out by LPs, publicity, or sectors LPs already have strong market exposure to, PE and some are pushing PE firms for further information. The increased industry sources said. Common examples are assets involved with awareness has changed how the industry views ESG, said Buckley, tobacco, pornography, gambling or certain types of weapons. whose firm now has some 400 GPs as members. "It's gone from being a marketing discussion or an investor relations discussion to be more Although these sorts of restrictions are still in place for many LPs, they about operational value creation," Buckley said. are not looking to lengthen the list and limit the investments their managers can make. Some managers have found that a push to take a

EMEA Private Equity Market Snapshot – Data Pack

EMEA-Based Targets

Number and aggregate deal value (€bn) of PE entry Number and aggregate deal value (€bn) of PE entry transactions by region transactions by industry Q3 2018 vs. Q3 2019 Q3 2018 vs. Q3 2019 12 300 8 450 7 400 10 250 6 350 300 8 200 5 250 4 6 150 200 3 150 4 100 2 100 2 50 1 50 0 0 0 0 Africa BeNeLux France Germany Middle Nordics RoE Southern United East Europe Kingdom

Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count

Number and aggregate deal value (€bn) of PE exit Number and aggregate deal value (€bn) of PE exit transactions by region1 transactions by industry1 Q3 2018 vs. Q3 2019 Q3 2018 vs. Q3 2019 12 70 12 70 60 10 10 60 50 50 8 8 40 40 6 6 30 30 4 4 20 20 2 10 2 10 0 0 0 0 Africa BeNeLux France Germany Middle Nordics RoE Southern United East Europe Kingdom

Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count

For illustrative purposes only. Source: S&P Global Market Intelligence. As of June 31, 2019 EMEA Private Equity Market Snapshot – Data Pack

EMEA-Based GPs

Number and aggregate deal value (€bn) of PE entry Number and aggregate deal value (€bn) of PE entry transactions by region transactions by industry Q3 2018 vs. Q3 2019 Q3 2018 vs. Q3 2019 10 300 10 600 9 9 250 8 8 500 7 200 7 6 400 6 5 150 4 5 300 3 100 4 3 200 2 50 1 2 100 0 0 1 0 0

Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count

Number and aggregate deal value (€bn) of PE exit Number and aggregate deal value (€bn) of PE exit transactions by region transactions by industry Q3 2018 vs. Q3 2019 Q3 2018 vs. Q3 2019 16 60 12 60 14 50 12 10 50 40 10 8 40 8 30 6 30 6 20 4 4 20 10 2 2 10 0 0 0 0

Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count

For illustrative purposes only. Source: S&P Global Market Intelligence. As of June 31, 2019 EMEA Private Equity Market Snapshot – Data Pack

VC EMEA-Based GPs

Number and aggregate deal value (€m) of VC entry Number and aggregate deal value (€m) of VC entry transactions by region transactions by industry Q3 2018 vs. Q3 2019 Q3 2018 vs. Q3 2019 3000 140 2000 400 1800 2500 120 350 1600 100 300 2000 1400 80 1200 250 1500 60 1000 200 1000 40 800 150 600 500 20 100 400 0 0 200 50 0 0

Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count

VC EMEA-Based Targets

Number and aggregate deal value (€m) of VC Number and aggregate deal value (€m) of VC transactions by region transactions by industry ¹ Q3 2018 vs. Q3 2019 Q3 2018 vs. Q3 2019 1000 160 1400 350

900 140 1200 300 800 120 1000 250 700 600 100 800 200 500 80 600 150 400 60 400 100 300 40 200 200 50 100 20 0 0 0 0 Africa BeNeLux France Germany Middle Nordics RoE Southern UK East Europe

Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count Q3 2018 Aggregate Deal Value Q3 2019 Aggregate Deal Value Q3 2018 Deal Count Q3 2019 Deal Count

For illustrative purposes only. Source: S&P Global Market Intelligence. As of June 31, 2019 EMEAData Private Pack Equity Market Snapshot – Data Pack Footnotes

1. The exit transaction aggregates have been calculated after removing the following deal to avoid overestimating the trend: Walmart Inc. (NYSE:WMT) completed the acquisition of 77% stake in Flipkart Private Limited for 13.5bn EUR from a group of sellers on August 18, 2018. Retrieved from https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=563483103&companyId=309452892 Multiples Table EMEA

Implied Enterprise Value/EBITDA EMEA PE exits 01/07/2018 - 30/09/2019 EMEA all M&A 01/07/2018 - 30/09/2019 Communication Services 16.1 12.3 Consumer Discretionary 12.0 11.0 Consumer Staples 6.3 11.9 Energy 8.2 8.6 Financials 13.1 10.7 Health Care 13.5 13.5 Industrials 11.6 9.5 Information Technology 12.9 12.6 Materials 10.3 9.1 Real Estate 33.4 22.3 Utilities 12.3 11.0

Implied Equity Value/LTM Net Income EMEA PE exits 01/07/2018 - 30/09/2019 EMEA all M&A 01/07/2018 - 30/09/2019 Communication Services 34.0 27.5 Consumer Discretionary 20.5 17.8 Consumer Staples 7.0 15.7 Energy 15.4 17.1 Financials 21.6 15.0 Health Care 28.3 20.4 Industrials 14.7 14.3 Information Technology 32.8 20.2 Materials 8.4 15.5 Real Estate 7.4 12.5 Utilities 36.9 24.4

• Multiples highlighted in bold & italics represent the sector average over a 2 year time horizon in order to provide a more comprehensive sector average • Colour legend can be defined as "RED" representing the lowest multiple and "GREEN" representing the highest multiple observed across industry sectors, deal structures and multiple types during the period mentioned. 16

For illustrative purposes only. Source: S&P Global Market Intelligence. As of June 31, 2019

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