North American Private Equity in Review March 2009

Transcription

1 North American Private Equity in Review March 2009 In association with:

2 Contents Bowne foreword 3 Hogan & Hartson foreword 5 Private Equity: Opportunities and Challenges 6 Buyout and exit deal trends 9 Industry trends 12 North American private equity deals 16 North American SBOs 18 Private equity activity tables 20 Financial advisor activity tables 22 Legal advisor activity tables 24 Netezza case study 26 Appendix 28 Contacts 30 Notes 31

3 Bowne foreword Bowne is pleased to present the full year 2008 edition of North American Private Equity in Review. This comprehensive report highlights the latest trends within the North American private equity market, covers activity across various industry sectors and provides analysis of buyout and exit trends for the full year The decline in private equity activity in North America has been dramatic to say the least. The volume of traditional buyouts totaled just 664 worth $70.5bn, compared to 930 worth $427.2bn in Meanwhile, private equity exits totaled 348 worth $70.4bn, compared to 597 worth $130.4bn in The drop in secondary buyout (SBO) activity was just as dramatic: 2008 saw 102 deals worth $7bn, compared to 199 worth $41bn in This data is not particularly surprising given the size and scope of the current financial crisis, not to mention the risk-averse mood hampering investors of all types. Compared to 2007 activity, however, it is apparent that private equity funds have not completely changed their sector preferences. The Industrials, Chemicals & Engineering sector represented the highest percentage of volume (25%) of deal activity in 2007 and again in 2008 (24.7%). At the same time, private equity firms are moving toward the Life Sciences & Healthcare sector even as they scale back their overall activity. In terms of value, Life Sciences & Healthcare accounted for 7% of private equity buyouts in 2007; in 2008, it accounted for 10% of buyout value. A closer look at the buyouts announced throughout 2008 helps to shed some light on private equity s attraction to these sectors. The Industrials, Chemicals & Engineering sector makes up for just under a tenth (9.7%) of overall buyout value in 2008, which is not surprising given that this market typically contains a high volume of deals with relatively low values. And yet in a year when many private equity firms hoped for modest returns at best, this industry saw one of the year s biggest exits. In March 2006, The Carlyle Group announced its $568m acquisition of US based steel manufacturer John Maneely. In August 2008, the private equity firm announced it would sell the company to Russia based Novolipetsk Steel for $3.5bn. Under Carlyle s watch, John Maneely grew significantly with two acquisitions -- the $1.5bn acquisition of Atlas Tube Inc. in 2006 and the acquisition of Sharon Tube Company for an undisclosed sum in and attracted a great deal of interest from a variety of strategic buyers by the time it went up for sale in The Industrials sector also ranked high among the largest SBOs of the year, the second highest of which further demonstrates the viability of Industrials investments. In July, Bain Capital announced its $546m acquisition of Contec Holdings, a New York based equipment repair business servicing the broadband industry, which was a portfolio company of American Capital Strategies. American Capital Strategies purchased the company in 2006 for an undisclosed sum, however at the time Contec s revenue was likely close to the $10m range, compared to its estimated $70m EBITDA of 2008, according to mergermarket intelligence. companies have contributed to some of the year s most significant exits. The largest SBO of the year was the $673m acquisition of Press Ganey Associates, which was sold to Vestar Capital Partners by American Securities in January. While the value of American Securities 2003 acquisition of Press Ganey was never disclosed, the deal was estimated to fall somewhere in the $100m range. Meanwhile, other high profile Healthcare deals were making headlines throughout In May, a consortium involving Avista Capital Partners and Nordic Capital Fund VII announced its $4.1bn acquisition of wound care company ConvaTec Inc. This was the second largest buyout of 2008 overall, and The Blackstone Group s $1.6bn buyout of Apria Healthcare, announced in June, ranked 14th in the year s top 20 buyouts. Industrial and Healthcare companies have proved to be solid investments in the past, and it is likely that private equity will continue to seek a safe haven in these industries while the rest of the financial crisis plays out. At the same time, these two sectors are crucial to the development of the region s infrastructure and medical industries two areas which, under the new presidential administration, are receiving a great deal of attention. With this in mind, the private sector s interest in these areas has hopefully left them well-positioned to reap the benefits of their investments in the near future. Bowne is proud to have assisted in many of the year s market leading transactions. As the world market leaders in M&A transaction services, we provide the full suite of confidential data management services required to accomplish transactions in this challenging environment. Bowne has a rich, 230 year history of confidential document management, and we bring our worldwide reputation for outstanding service to every engagement. In these challenging times, more and more private equity practitioners are turning to Bowne Virtual Dataroom to streamline their processes, from portfolio management and reporting to due diligence data hosting. For more information, visit Or for additional free resources for tracking regulatory developments affecting private equity and hedge funds, visit Bowne s thought leadership library at Brandon Farley Managing Director, Bowne Virtual Dataroom There was also significant private equity activity within the Life Sciences & Healthcare space in 2008 and, like Industrials, Healthcare North American Private Equity in Review 3

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5 Hogan & Hartson foreword Hogan & Hartson LLP is pleased to present the full year 2008 edition of North American Private Equity in Review in association with Bowne and mergermarket. Private equity activity in 2008 supports what most in the industry have already concluded: supersized leveraged buyouts are on a hiatus that does not appear to be ending soon. An overview of the largest private equity deals in 2007 reflects just how much the private equity landscape has changed. That year, the buyout of BCE Inc. by a consortium involving Teachers Private Capital, Madison Dearborn Partners, LLC and Merrill Lynch Global Private Equity was the largest announced buyout in history, worth $48bn. The smallest of the top 20 announced deals that year, The Carlyle Group s acquisition of healthcare company Manor Care, Inc., was worth $5.8bn. The top deals of 2008 obviously tell a much different story. Aside from TPG Capital and GS Capital Partners $28.1bn exit from Alltel Corporation, which Verizon Wireless Inc. announced it would buy in June 2008, the top 20 deals of 2008 range from $1.3bn to $4.1bn. Secondary buyout (SBO) activity has slimmed down drastically as well: the value of the largest announced SBO in 2008 was $673m, but this deal would have just barely made the bottom of the prior year s list. In 2007, the two smallest SBOs of the year s top 15 were valued at $683m and $655m. Ultimately, many of the 2007 deals fell victim to the painful market conditions of The buyout of BCE Inc. collapsed in December of 2008 when the company s solvency post-acquisition was called into question. The following month, another major buyout of that year, the $25bn buyout of Sallie Mae, unraveled under the weight of the credit crunch. The buyout, backed by J.C. Flowers & Co. LLC and Friedman Fleischer & Lowe, was announced in April of 2007, long before access to credit was essentially cut off. At the time, few would have imagined that one of the key debt providers, Bank of America, would merge with Merrill Lynch and become exposed to its mounting losses. Ironically, the collapse of several financial services companies also fueled some of the most significant private equity activity in The year was spotted with several financial services buyouts stemming directly from the downturn. Indeed, one of the most interesting features of deal activity in 2008 is that the very banks that once financed such deals became targets. In April, Texas Pacific Group (TPG) announced that it was leading a $2bn investment into Washington Mutual, a US based bank severely injured by its subprime mortgage dealings. At the time, some industry insiders worried that banks were falling knives that would only slice their investors as they fell further, a prediction which unfortunately proved to be accurate: TPG and its coinvestors ultimately lost all of this investment when the target was taken over by the Federal Deposit Insurance Corporation (FDIC) and acquired by JPMorgan Chase & Co. the following month. Of course, not all private equity investments in businesses bleeding subprime losses had similar consequences. In July, Lone Star Funds, another Texas based private equity group, announced its $1.5bn acquisition of the Home Lending Business of CIT Group, Inc. The deal allowed CIT Group, Inc. to distance itself from the mortgage business and it allowed Lone Star Funds to take advantage of steep discounts resulting from the industry s fallout. The distress of the banking industry obviously puts an enormous amount of pressure on buyout firms, and played a major role in slowing the year s private equity activity. Of course, most firms are shifting toward smaller deals out of sheer necessity since the debt markets have dried up, which is why even the largest deals of 2008 were only a fraction of the value of the top deals in the buyout boom years. As private equity firms continue to navigate through the new debt-lite economy, deal values will probably stay in their new, modest range. Hogan & Hartson is an international law firm with more than 1,100 lawyers practicing in 27 offices worldwide. Our private equity practice brings a strong sector approach to deal structuring, bringing to bear a legal team that couples transactional experience with our leading national and international regulatory lawyers. Through our private equity coordinating group, we exchange information across offices and around the globe concerning best practices, transactions, industry knowledge, business contacts, deal opportunities, and document precedents. Our lawyers participate in leveraged acquisitions and venture capital investments involving companies and private investment funds in the United States, the United Kingdom, Belgium, Denmark, France, Germany, Norway, the Netherlands, Poland, Russia, Mexico, China, and other parts of Asia. We have the substantive depth to serve as acquisition, financing, regulatory, and securities counsel and we strive to build relationships based upon the simple principle that whatever the issue, we will deliver the answers you need, when you need them. North American Private Equity in Review 5

6 Private Equity: Opportunities and Challenges The financial crisis has played out dramatically on Wall Street and in Washington with the collapse of major banks and the political backlash that followed. Though slightly less prominent in the news, private equity has also been inextricably linked to the financial crisis. The unavailability of credit created an extremely difficult financing environment for private equity funds: the contracting value of institutional investment funds and a wide range of valuation issues have together created a perfect storm for buyout activity in An overview of the trends emerging throughout the year suggests that both challenges and opportunities await in 2009 as the industry reevaluates its strategies post-buyout boom and post-credit crunch. One of the most obvious and pronounced difficulties private equity firms faced this year was securing financing. With limited access to debt, transactions largely came to a stand still. But the impact of the tight credit markets actually had a crippling effect on the deals announced prior to the credit crunch as well. The buyouts of Huntsman Corporation and BCE Inc. are two of the most telling examples: each deal exemplifies the array of financing and valuation issues unique to the ongoing financial crisis. Hexion Specialty Chemicals, an affiliate of private equity group Apollo Management, announced its $9.8bn buyout of Huntsman Corporation in July 2007 after winning an extremely competitive bidding process. The target had originally entered into a merger agreement with competing bidder Access Industries affiliate Basell AF in June 2007, but the following month Apollo submitted a proposal for $27.25 per share, which it increased to $28 per share the same week. Apollo s willingness to increase its bid at this point serves as a stark contrast to the firm s eagerness to terminate the deal in the months that followed. Insolvency was a key issue of contention that played an important role in the deal s collapse. Hexion cited Material Adverse Change (MAC) as its reason for pulling away from the deal, claiming the combined entity would be insolvent post-acquisition. Huntsman refuted this claim and commissioned a solvency opinion from American Appraisal in its defense. Potential insolvency and bad faith not withstanding, securing financing remained one of the most difficult obstacles to completing this deal. Indeed, Huntsman filed suit not only against Hexion parent company Apollo but also against Credit Suisse and Deutsche Bank, the two banks financing the deal, for refusing to provide the $6.5bn necessary to complete the buyout. The deal ultimately lapsed more than a year after its announcement in a culmination of all these issues. In December 2008 Huntsman received the final $425m in payments from Apollo Management affiliates, the last in a series of installments totaling the $1bn in settlements arising from the terminated merger. The historic $48bn buyout of BCE Inc. by a consortium led by Madison Dearborn Partners and Providence Equity Partners encountered similar if not identical obstacles. The deal fell apart over the same time frame it was announced in June 2007 and it lapsed in December 2008 and faced the same insolvency claims from the bidder and financing withdrawal from lenders. Like Huntsman, BCE Inc. s solvency post-acquisition was called into question by the bidder, further adding to speculation that the deal would be re-priced or called off entirely. The target s deteriorating performance indeed played a major part in the deal s collapse, as the bidders C$42.75 per share offer nearly doubled the company s stock price of C$23 per share by the time the deal unraveled in December Nevertheless, as in the Huntsman scenario, the target provided a third-party solvency opinion to refute claims that it was unfit to survive post-acquisition. Lending banks underpinning the BCE Inc. deal account for another important parallel to the Huntsman saga. Deutsche Bank, which was sued by Huntsman for refusing to finance its portion of the deal, was also a key finance provider in the BCE buyout, as was Citigroup, whose historic losses in the year after the deal was announced created yet another block to the deal s completion as banks attempted to renegotiate financing terms throughout the course of Both the Huntsman and BCE buyouts represent a financing climate that is virtually gone today. Private equity firms up until recently were able to tap banks such as Citigroup and Merrill Lynch to fund their deals, but these lenders are obviously in no position to finance mega-buyouts today. In this new environment, buyout firms are tasked with creating their own luck through alternative financing methods. 6 North American Private Equity in Review

7 One of the year s largest private equity buyouts, the 2008 acquisition of The Weather Channel Properties by a consortium of bidders including NBC Universal, Bain Capital, and Blackstone Group Holdings, serves as an example of how some firms are adapting to the current market conditions. The deal is significant for its unique structure and its ability to work around the restricted credit markets as the buyout relied more on equity than on debt, with only some of the $1bn of bank debt coming from Deutsche Bank and GE Capital. Additionally, all of the junior debt and some of the bank debt came from alternative sources: GSO Capital, a debt boutique purchased by Blackstone the previous year, and Sankaty Advisors, a unit of Bain Capital. Leveraged buyouts are indeed noticeably absent from the scene in 2008, but running parallel to the decline in traditional buyout activity is a rise in more targeted investment activity. The growing secondary market, coupled with a heightened interest in distressed investing, for example, have been fueled in large part by conditions in the broader economy and have become some of the strongest features of private equity activity this year. The secondary market has been flooded with private equity commitments, which many institutional investors have been eager to unload as declining public markets drive their private sector allocations higher, percentage wise. CalPERs, the largest pension fund in the US, has already sold off $2bn of its private equity partnerships. Meanwhile, the largest endowments in the US, led by Harvard University and what had been its $36.9bn endowment, are expected to flood the secondary market by unloading up to $100bn of their private equity investments. Distressed investors are already well-positioned to take advantage of this growing secondary market. Distressed investors have raised $37.9bn across 18 funds this year, up 28% from $29.5bn raised by 16 funds at this point last year. US based private equity firm Oaktree Capital Management even raised the largest distressed investing fund to date, with its $10.9bn OCM Opportunities Fund VII LP earlier in On top of all this, distressed sellers such as banks in need of capital are contributing to a wave of asset sales which is equally appealing. Distressed investors and secondary buyers of private equity commitments are seeking opportunity in the midst of a crisis, however, pricing these opportunities is extremely difficult under these unprecedented economic conditions. Private equity markdowns and corporate defaults may very well drive down the price of distressed assets and secondaries, but investors are well aware that cheap targets could be falling knives. Indeed, secondary buyers and distressed investors keep the recent markdowns in mind when valuing bargain priced targets. By the same token, sellers may worry that valuations are far too low. Lehman Brothers sale of Neuberger Berman speaks directly to the other side of the valuation issue. Unlike other potentially toxic assets being unloaded by banks, the Neuberger Berman business represented one of the bank s most prized possessions and historically solid operations. In this case, issues arose over whether valuations were too low rather than too high or too risky. Neuberger Berman attracted a great deal of interest from private equity firms, including Bain Capital and Hellman & Friedman, who in September announced they would acquire the unit for $2.15bn. But shortly after the consortium announced its winning bid, The Carlyle Group objected to the deal claiming Lehman was neglecting its duty to creditors by accepting an offer that did not adequately value the business. Ultimately, in December, the deal lapsed when Bain Capital and Hellman & Friedman reduced their initial offer to reflect poor market conditions. That same month, NBSH Acquisition, LLC, an acquisition vehicle created by Neuberger Berman executives, took over the business in a management buyout worth $1.3bn, representing 51% common shares in the company for an undisclosed stock consideration. The deal resulted in a name change from Neuberger Berman Asset Management to Neuberger Investment Management, and the new entity is now led by original Lehman and Neuberger executives. The stream of banks asset sales in 2008 is probably only the beginning of a much larger and longer-lasting wave of opportunities for private equity with capital to invest. The expected outpouring of attractive bargain priced assets may be enough to motivate firms in 2009, albeit in an unfriendly financing climate. With a new administration in place and an economic rescue package about to take effect, private equity buyers may soon break their streak of slow activity. Financing, fundraising, and valuation issues have collectively created a major test of strength for the private equity industry as a whole but some firms have already demonstrated their ability to maneuver around these difficulties and the rest will hopefully follow close behind in Richard K.A. Becker, Partner Kevin C. Clayton, Partner George A. Hagerty, Partner Jeffrey M. Hurlburt, Partner David A. Winter, Partner Hogan & Hartson LLP North American Private Equity in Review 7

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9 Buyout and exit deal trends Buyout and exit trends by volume Buyout and exit trends by value 300 Buyouts Volume Exits Volume 250,000 Buyouts Value ($m) Exits Value ($m) , Volume of deals Value of deals ($m) 150, , ,000 0 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q The volume of buyout and exit activity in 2008 saw a significant decrease since Volume dropped from 930 to 664 over this time, while value dropped from $427.2bn to $70.5bn. Typically, buyout and exit volumes mirror each other from quarter to quarter, but from Q2 to Q3 of 2008, buyout volume increased while exit volume decreased. Buyout activity saw a steady increase across the first three quarters of 2008, though the sharp decrease that followed in Q4 left buyout and exit volumes less than half of their Q levels. Buyout deal size by volume In terms of value, buyout and exit activity in 2008 is dwarfed by the activity seen in Buyout and exit values in Q reached their lowest point since Q did stand out with a sharp increase in exit value, however, causing exit value to exceed buyout value in this quarter. It should be noted, however, that this sudden uptick in exit value is driven almost entirely by the $28.1bn Alltel exit, announced in June. Buyout deal size by value 1, > $501m $251m - $500m $101m - $250m $15m - $100m < $15m Not disclosed 500, , , ,000 > $501m $251m - $500m $101m - $250m $15m - $100m < $15m Volume of deals Value of Deals ($m) 300, , , , , , Market conditions in 2008 made it extremely difficult for buyout firms to secure deal financing. The drop in deal volume overall and the drop in deal volume in particular price ranges reflects this environment, as buyout firms gravitated toward smaller deal values. The total volume of buyout deals in 2008 decreased by approximately 29% since 2007, and there was also a major shift away from the >$500m range over this time. In 2007, 13% of the announced deals fell in the >$500m range; in 2008, deals worth more than $500m made up only 5% announced deals Like the decrease in volume, the sharp drop in value stems largely from financing difficulties brought on by the global credit crisis. The value of deals announced in 2008 is less than a fifth that of 2008, while deals worth more than $500m account for significantly less of overall deal value. The >$500m still accounts for more than half (57%) of all other announced deal values combined, but deals worth more than $500m accounted for about 89% in North American Private Equity in Review 9

10 Buyout and exit deal trends Exit deal size by volume Exit deal size by value Volume of deals > $501m $251m - $500m $101m - $250m $15m - $100m < $15m Not disclosed Value of deals ($m) 140, , ,000 60,000 40,000 > $501m $251m - $500m $101m - $250m $15m - $100m < $15m , In 2008, private equity exits in the > $501m range were far less prominent than in 2007, which is not surprising given the combination of financing difficulties, valuation difficulties and the stagnant IPO market. The mid-market range still dominates exit activity though, with the $15m-$100m range accounting for the largest portion of exit activity in terms of volume, not including deals with undisclosed value. The largest portion of announced exit values in 2008 comes from the >$501m range, as it has in previous years. The percentage of deal value coming from the $251m-$500m range has nearly halved, however, as has the percentage of deal values in the $15m- $100m range. While the total value of exits in 2008 was nearly half (46%) that of 2007, the decrease in buyout value was far more drastic: the total value of buyouts in 2008 is only 17% of the previous year s buyout value (see Buyout Deal Sizes by Value). 10 North American Private Equity in Review

11 Secondary buyout trends by volume and value 70 SBO Value SBO Volume 16, , ,000 Volume of deals ,000 8,000 6,000 4,000 Value of deals ($m) 10 2, Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Secondary buyout (SBO) trends in 2008 reflect the unpredictability of all deal activity in the wake of the financial crisis. Q saw a steep drop in secondary buyout value and volume from the previous quarter, followed by a spike in deal volume, which then declined steadily for the two remaining quarters. In the end, SBOs followed the same trend as buyouts and exits with a substantial drop in volume and value: 2008 saw 102 SBOs worth $7bn, compared to 199 SBOs worth $41bn in Although Q2 saw the highest volume of SBO activity, Q1 saw the highest value, which was strongly influenced by some of the year s largest SBOs. In January, Vestar Capital Partners announced its $673m acquisition of Press Ganey Associates, a portfolio company of American Securities, marking the year s largest SBO. The same month, J.W. Childs Associates announced it would buy The Mattress Firm from Sun Capital Partners for $450m, marking the third largest SBO of North American Private Equity in Review 11

12 Industry trends Value Mix Buyouts by Industry Volume Mix Buyouts by Industry 10% 9.7% 1.2% 1.1% <0.1% 3.5% 4.4% 19.6% 15.5% Business Services Financial Services Energy, Mining, Oil & Gas TMT Consumer Life Sciences & Healthcare Industrials, Chemicals & Engineering Transportation Construction 6.8% 8.3% 5.9% 0.9% 0.9% 0.5% 2.9% 2.4% 3.2% 24.7% Industrials, Chemicals & Engineering Business Services Consumer TMT Life Sciences & Healthcare Financial Services Energy, Mining, Oil & Gas Construction Leisure Leisure Real Estate 15.4% Transportation Real Estate 10.3% 10.4% 13.9% Agriculture Defense 13.9% 14.5% Agriculture Defense The Business Services sector accounts for 19.6% of buyout value in 2008, followed by Financial Services with 15.5%. The largest Business Services deal was the $2.5bn undisclosed majority stake sale of the government advisory business of Booz Allen & Hamilton in May. Meanwhile, the Financial Services sector saw one of the year s most famous deals with Texas Pacific Group s (TPG) $2bn investment in Washington Mutual Inc., announced in April. The Industrials, Chemicals & Engineering sector saw the highest volume of private equity buyouts in 2008, representing nearly a quarter (24.7%) of the year s deals. Industrials far outpaced all other sectors, while the second highest percentage of deals, stemming from the Business Services sector, totaled 15.4%. Energy, Mining, Oil & Gas accounts for the third largest percentage (13.9%) of 2008 buyouts in terms of value, due in large part to Canadian activity. In one of the largest buyouts of the year, announced in August, Canada based Borealis Infrastructure Management teamed with Singapore based GIC Special Investments to purchase a 19.75% stake in Oncor Electric Delivery Company for $1.3bn. 12 North American Private Equity in Review

13 Value Mix Exits by Industry Volume Mix Exits by Industry 6.6% 6.6% 8.9% 0.5% 0.4% 2.4% 2.1% 4.8% 49.5% TMT Industrials, Chemicals & Engineering Life Sciences & Healthcare Business Services Energy, Mining, Oil & Gas Consumer Agriculture Financial Services Leisure Construction 10.1% 11.5% 6.9% 0.9% 0.3% 0.3% 0.3% 1.7% 1.7% 29% TMT Industrials, Chemicals & Engineering Business Services Consumer Life Sciences & Healthcare Energy, Mining, Oil & Gas Financial Services Construction Leisure Transportation Agriculture Defense 18.3% 14.1% 23.3% TMT accounted for nearly half (49.5%) of 2008 secondary buyout and exit activity in terms of value, though this unusually high percentage is driven by a single deal: 80% of deal value in this sector, which totaled $34.8bn, is attributed to Texas Pacific Group and GS Capital Partners $28.1bn exit from Alltel. Industrials, Chemicals & Engineering, which saw the highest volume of buyouts and exits combined in 2008, accounts for the second highest percentage of deals in terms of value (18.3%), followed by Life Sciences & Healthcare, which accounts for 8.9% of exit value, up from 6% at the close of H TMT and Industrials, Chemicals & Engineering dominated the secondary buyout market in 2008 in terms of volume, making up 29% and 23.3% of the year s private equity exits respectively. Deals were otherwise distributed almost evenly across the Business Services (14.1%), Consumer (11.5%) and Life Sciences & Healthcare (10.1%) sector. North American Private Equity in Review 13

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16 North American private equity deals Top 20 private equity deals Announced Date Target Company Target Sector Bidder Company Bidder Description Seller Company Deal Type Deal Value ($m) Jun Alltel Corporation, Inc. TMT Verizon Wireless Inc US based telecom company Atlantis Holdings LLC Exit 28,100 May ConvaTec Inc Life Sciences & Healthcare Avista Capital Partners; Nordic Capital Fund VII US based private equity firm; Sweden based fund of Nordic Capital Bristol-Myers Squibb Company IBO 4,100 Aug John Maneely Company Industrials, Chemicals & Engineering Novolipetsk Steel Russia based steel producer also operating in mining, steelmaking and rolling The Carlyle Group; and The Zekelman family Exit 3,530* Jul Weather Channel Properties (Weather Channel Networks, Channel Interactive, Weather Services International, Enterprise Electronics Corporation ) TMT Bain Capital; Blackstone Group Holdings; and NBC Universal US based private equity firm; US based private equity investor that provides financial advisory services including M&A; and US based media and entertainment company involved in the development, production and marketing of entertainment, news and information Landmark Communications IBI 3,500 Jul Graham Packaging Holdings Company Industrials, Chemicals & Engineering Hicks Acquisition Company I Inc US based special purpose acquisition company Blackstone Group Holdings Exit 3,171 Aug Talecris Biotherapeutics Inc Life Sciences & Healthcare CSL Limited Australia based developer, manufacturer and marketer of vaccines and medications of biological origin. Ampersand Ventures; and Cerberus Partners Exit 3,100 May Booz Allen & Hamilton (undisclosed majority stake in government advisory business) Business Services The Carlyle Group LLC US based private equity firm Booz Allen & Hamilton IBI 2,540 Feb CHC Helicopter Corporation Transportation First Reserve Corporation US based private equity firm with focus on the energy sector IBO; Take Private 2,370 Sep Neuberger Berman Inc Financial Services Bain Capital; and Hellman & Friedman US based private equity firms Lehman Brothers Holdings MBO 2,150* Feb Getty Images Inc Business Services Hellman & Friedman US based private equity firm IBO; Take Private 2,037 Apr Washington Mutual Inc (undisclosed economic interest) Financial Services TPG US based private equity firm IBI 2,000 Feb TimberSTAR Southwest Agriculture Hancock Timber Resource Group US based timberland investment management company MSD Capital; Perry Capital; TimberStar; and York Capital Management Exit 1,710 Jun PNA Group Inc Industrials, Chemicals & Engineering Reliance Steel & Aluminum Company US based supplier of metal processing services and distributor of metal products to the manufacturing, construction, transportation, aerospace and semiconductor industries Platinum Equity Exit 1,692 * indicates deal has lapsed 16 North American Private Equity in Review

17 North American private equity deals Top 20 private equity deals (cont d) Announced Date Target Company Target Sector Bidder Company Bidder Description Seller Company Deal Type Deal Value ($m) Jun Apria Healthcare Group Inc Life Sciences & Healthcare Blackstone Group Holdings US based private equity investor that provides financial advisory services including M&A, restructuring and reorganization advisory services and fund placement services IBO; Take Private 1,571 Jul CIT (Home Lending Business) Financial Services Lone Star Funds US based private equity firm CIT Group IBO 1,500 Jul Unilever Plc (North American Laundry Business) Consumer Vestar Capital Partners US based private equity firm focused on management buyouts, recapitalizations and growth capital investments Unilever IBO 1,450 Apr Norcross Safety Products L.L.C. Industrials, Chemicals & Engineering Honeywell International US based diversified technology and manufacturing company, serving the following industries: aerospace, control technologies, automotive products, turbochargers and specialty materials Odyssey Investment Partners Exit 1,438 Dec Neuberger Berman Inc Financial Services NBSH Acquisition US based acquisition vehicle created by management of Neuberger Berman Inc Lehman Brothers Holdings Insolvency; MBO 1,290 Jan Bright Horizons Family Solutions L.L.C. Business Services Bain Capital US based private equity firm IBO; Take Private 1,260 Aug Oncor Electric Delivery Company LLC (19.75% stake) Energy, Mining, Oil & Gas Borealis Infrastructure Management, Inc; GIC Special Investments Pte Ltd (GICSI) Canada based investment company that invests in and manages infrastructure assets; Singapore based soveriegn wealth fund that manages Singapore s foreign reserves Energy Future Holdings Corp. IBI 1,254 North American Private Equity in Review 17

18 North American SBOs Top 15 secondary buyouts Announced Date Target Company Target Sector Bidder Company Seller Company Deal Value ($m) Jan Press Ganey Associates Inc Life Sciences & Healthcare Vestar Capital Partners Inc American Securities 673 Jul Contec Holdings Ltd Industrials, Chemicals & Engineering Bain Capital LLC American Capital Strategies Ltd 546 Jan The Mattress Firm Inc Consumer J.W. Childs Associates LP Sun Capital Partners Inc 450 Feb Critical Homecare Solutions Holdings Inc Life Sciences & Healthcare MBF Healthcare Acquisition Corp Kohlberg & Company LLC 420* Jan AGS Sports Inc Consumer Quad-C Management Inc Linsalata Capital Partners 405 Aug Old Mother Hubbard Inc Consumer Berwind Corporation Catterton Partners; Scott family 400 Jan Ranpak Inc Industrials, Chemicals & Engineering Odyssey Investment Partners LLC American Capital Strategies Ltd 400 Nov U.S. Silica Company Industrials, Chemicals & Engineering Golden Gate Capital Harbinger Capital Partners Master Fund I Ltd; and Harbinger Capital Partners Special Situations Fund L.P. 337 May Angelica Corporation Life Sciences & Healthcare Clothesline Holdings, Inc Steel Partners II LP 296 Mar Anchor Drilling Fluids USA Inc Energy, Mining, Oil & Gas Castle Harlan Inc American Capital Strategies Ltd 250 Jan Au Bon Pain Leisure LNK Partners AlpInvest Partners NV; and PNC Mezzanine Capital 250 Aug Chalker Energy Partners II; Rusk Energy Ltd Energy, Mining, Oil & Gas NFR Energy LLC Freeman Group; Quantum Energy Partners 245 Aug Maxxam Analytics International Corporation Business Services OCPI MA Holdings Callisto Capital LP 237 Mar Essex Crane Rental Corporation Industrials, Chemicals & Engineering Hyde Park Acquisition Corp Kirtland Capital Partners LP 210 Jun Preferred Freezer Services LLC Industrials, Chemicals & Engineering Fenway Partners Inc TA Associates Inc 200 * indicates deal has lapsed 18 North American Private Equity in Review

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20 Private equity activity tables - buyouts Buyouts - Volume Rank Company Name Value ($m) Number of Deals 1 HIG Capital Sun Capital Partners 1, The Riverside Company Audax Private Equity Group GS Capital Partners Blackstone Group Holdings 6, The Carlyle Group 3, One Equity Partners Falconhead Capital Monomoy Capital Partners Patriarch Partners Bain Capital 5, First Reserve 3, MatlinPatterson Global Advisers 1, Kohlberg & Company Golden Gate Capital Vista Equity Partners American Industrial Partners Marwit Capital Avista Capital Partners 4,600 3 Buyouts - Value Rank Company Name Value ($m) Number of Deals 1 Blackstone Group Holdings 6, Bain Capital 5, Avista Capital Partners 4, Nordic Capital 4, The Carlyle Group 3, First Reserve 3, Hellman & Friedman 2, TPG 2, Vestar Capital Partners 2, Riverstone Holdings 1, GIC Special Investments 1, Lone Star Funds 1, Warburg Pincus 1, Apax Partners 1, MatlinPatterson Global Advisers 1, W.L. Ross & Co 1, Oaktree Capital Management 1, Irving Place Capital 1, Sun Capital Partners 1, Corsair Capital Note: The tables are based on private equity houses as the bidder on buyouts and buyins announced between 01/01/2008 and 12/31/2008, where the target is North American, excluding lapsed and withdrawn deals. The Private Equity Activity Tables reflect the activity of buyout firms, venture capitalists, investment firms, financial institutions and all parties whose activities wholly involve, or include making private equity investments. Please note that the values in the Value column do NOT reflect the equity contribution of the investors but represent the total values of deals they were involved in. 20 North American Private Equity in Review

21 Private equity activity tables - exits Exits - Volume Rank Company Name Value ($m) Number of Deals 1 American Capital Strategies 1, Intel Capital Accel Partners Redpoint Ventures Francisco Partners Oak Investment Partners HIG Capital Insight Venture Partners The Carlyle Group Metalmark Capital Atlas Venture Austin Ventures US Venture Partners Harbinger Capital Partners 1, Adams Street Partners Sun Capital Partners New Enterprise Associates Draper Fisher Jurvetson Norwest Venture Partners Charles River Ventures Exits - Value Rank Company Name Value ($m) Number of Deals 1 GS Capital Partners 28, TPG 28, Blackstone Group Holdings 6, = Ampersand Ventures 3, = Cerberus Capital Management 3, = MSD Capital 1, = Perry Capital 1, Platinum Equity 1, Odyssey Investment Partners 1, Harbinger Capital Partners 1, American Capital Strategies 1, Stone Point Capital 1, Welsh, Carson, Anderson & Stowe 1, Ontario Teachers Pension Plan ArcLight Capital Partners Balderton Capital Advent International Adams Street Partners Golden Gate Capital Francisco Partners Note: The tables are based on private equity houses as the seller on exits announced between 01/01/2008 and 12/31/2008, where the target is North American, excluding lapsed and withdrawn deals. The Private Equity Activity Tables reflect the activity of buyout firms, venture capitalists, investment firms, financial institutions and all parties whose activities wholly involve, or include making private equity investments. Please note that the values in the Value column do NOT reflect the equity contribution of the investors but represent the total values of deals they were involved in. North American Private Equity in Review 21

22 Financial advisor activity tables - buyouts Buyouts - Volume Rank Company Name Value ($m) Number of Deals 1 Deutsche Bank 8, Credit Suisse 7, JPMorgan 6, Lehman Brothers 4, Wachovia 2, Banc of America Securities 4, Goldman Sachs 2, Barclays Bank 3, Morgan Stanley 2, Piper Jaffray & Co 1, Financial Technology Partners Deloitte RBC Capital Markets 1, Citigroup 1, Blackstone Group Holdings UBS Merrill Lynch Houlihan Lokey PricewaterhouseCoopers Financo Buyouts - Value Rank Company Name Value ($m) Number of Deals 1 Deutsche Bank 8, Credit Suisse 7, JPMorgan 6, Banc of America Securities 4, Lehman Brothers 4, Barclays Bank 3, Allen & Company 3, Morgan Stanley 2, Wachovia 2, Royal Bank of Scotland Group 2, Goldman Sachs 2, RBC Capital Markets 1, Piper Jaffray & Co 1, Evercore Partners 1, Citigroup 1, Greenwich Capital Markets Blackstone Group Holdings = HSBC Bank = Old Well Financial Technology Partners Note: The tables are based on financial advisors to the bidder on buyouts and buyins announced between 01/01/2008 and 12/31/2008, where the target is North American, excluding lapsed and withdrawn deals. 22 North American Private Equity in Review

23 Financial advisor activity tables - exits Exits - Volume Rank Company Name Value ($m) Number of Deals 1 Harris Williams & Co Goldman Sachs 35, Houlihan Lokey 1, Jefferies & Company 2, Edgeview Partners William Blair & Company 1, Credit Suisse Group 2, Lazard Lincoln International Robert W. Baird & Co Oppenheimer & Co Citigroup 30, Deutsche Bank 4, Wachovia 1, Morgan Stanley 3, Lehman Brothers 1, Banc of America Securities 1, JPMorgan Pagemill Partners Montgomery & Co Exits - Value Rank Company Name Value ($m) Number of Deals 1 Goldman Sachs 35, Citigroup 30, Royal Bank of Scotland Group 28, Deutsche Bank 4, Morgan Stanley 3, Blackstone Group Holdings 3, Credit Suisse Group 2, Jefferies & Company 2, Houlihan Lokey 1, Lehman Brothers 1, National Bank Financial 1, UBS Investment Bank 1, Banc of America Securities 1, Wachovia 1, William Blair & Company 1, RBC Capital Markets GMP Securities Allen & Company Robert W. Baird & Co Harris Williams & Co Note: The tables are based on financial advisors to the seller/target on exits announced between 01/01/2008 and 12/31/2008, where the target is North American, excluding lapsed and withdrawn deals. North American Private Equity in Review 23

24 Legal advisor activity tables - buyouts Buyouts - Volume Rank Company Name Value ($m) Number of Deals 1 Kirkland & Ellis 6, Jones Day 1, Latham & Watkins 3, Weil Gotshal & Manges 10, Ropes & Gray 7, Simpson Thacher & Bartlett 12, DLA Piper Hogan & Hartson 4, Stikeman Elliott 1, Dechert 4, O Melveny & Myers Skadden Arps Slate Meagher & Flom 3, Vinson & Elkins 1, Bingham McCutchen 1, Goodwin Procter 1, White & Case 5, Proskauer Rose 1, Morgan Lewis & Bockius Blake, Cassels & Graydon 4, Gibson Dunn & Crutcher 1,441 9 Buyouts - Value Rank Company Name Value ($m) Number of Deals 1 Simpson Thacher & Bartlett 12, Weil Gotshal & Manges 10, Debevoise & Plimpton 7, Ropes & Gray 7, Kirkland & Ellis 6, White & Case 5, Hogan & Hartson 4, Freehills 4, Osler Hoskin & Harcourt 4, Blake, Cassels & Graydon 4, Arnold & Porter 4, Levy & Salomao 4, = Araoz & Rueda 4, = De Brauw Blackstone Westbroek 4, = Mallesons Stephen Jaques 4, = Vinge 4, Dechert 4, Latham & Watkins 3, Cleary Gottlieb Steen & Hamilton 3, Skadden Arps Slate Meagher & Flom 3, Note: The tables are based on law firms advising the bidder on buyouts and buyins announced between 01/01/2008 and 12/31/2008, where the target is US and Canada, including lapsed and withdrawn deals. 24 North American Private Equity in Review

25 Legal advisor activity tables - exits Exits - Volume Rank Company Name Value ($m) Number of Deals 1 Kirkland & Ellis 4, Wilson Sonsini Goodrich & Rosati P.C. 1, Latham & Watkins 4, Ropes & Gray 28, Weil Gotshal & Manges 2, O Melveny & Myers 1, Cooley Godward Kronish 1, Goodwin Procter Skadden Arps Slate Meagher & Flom 1, Jones Day Paul Weiss Rifkind Wharton & Garrison 2, Dewey & LeBoeuf 1, Gibson Dunn & Crutcher Bingham McCutchen 1, Andrews Kurth Perkins Coie Dechert Reed Smith 1, Hogan & Hartson Davies Ward Phillips & Vineberg Exits - Value Rank Company Name Value ($m) Number of Deals 1 Ropes & Gray 28, Morrison & Foerster 28, = Cleary Gottlieb Steen & Hamilton 28, = Wachtell Lipton Rosen & Katz 28, Latham & Watkins 4, Osler Hoskin & Harcourt 4, Kirkland & Ellis 4, Arnold & Porter 3, Simpson Thacher & Bartlett 3, Sullivan & Cromwell 3, Paul Weiss Rifkind Wharton & Garrison 2, Weil Gotshal & Manges 2, Cravath Swaine & Moore 2, Dewey & LeBoeuf 1, Katten Muchin Rosenman 1, Akin Gump Strauss Hauer & Feld 1, Skadden Arps Slate Meagher & Flom 1, Bingham McCutchen 1, Blake, Cassels & Graydon 1, Freshfields Bruckhaus Deringer 1,436 1 Note: The tables are based on law firms advising the seller/target on exits announced between 01/01/2008 and 12/31/2008 where the target is North American, including lapsed and withdrawn deals. North American Private Equity in Review 25

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28 Appendix Source data Buyout and Exit Trends Secondary Buyout Trends Buyouts Exits Period Value ($m) Number Value ($m) Number of Deals of Deals Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , Q , , TOTAL 1,270,811 4, ,727 2,439 Period Volume of Deals Value ($m) Q ,573 Q ,624 Q ,281 Q ,784 Q ,301 Q ,232 Q ,544 Q ,052 Q ,559 Q ,960 Q ,216 Q ,182 Q ,591 Q ,268 Q ,923 Q ,765 Q ,135 Q ,706 Q ,632 Q ,559 Q ,470 Q ,253 Q ,929 Q TOTAL ,539 Buyout Deal Size Data by Volume Volume Not disclosed < $15m $15m - $100m $101m - $250m $251m - $500m > $500m TOTAL Buyout Deal Size Data by Value Value < $15m $15m - $100m 6,709 7,993 7,951 8,722 7,498 5,297 $101m - $250m 7,533 14,988 13,036 12,579 15,682 9,552 $251m - $500m 9,675 18,127 18,567 18,712 22,343 14,937 > $500m 30,729 90, , , ,330 40,496 TOTAL 54, , , , ,151 70, North American Private Equity in Review

29 Appendix: Source Data Exit Deal Size Data by Volume Volume Not disclosed < $15m $15m - $100m $101m - $250m $251m - $500m > $501m TOTAL Exit Deal Size by Volume Value < $15m $15m - $100m 2,257 4,612 6,318 8,578 7,348 4,579 $101m - $250m 4,497 9,596 12,106 14,808 13,028 8,835 $251m - $500m 6,756 13,372 19,750 19,114 24,109 10,229 > $501m 14,570 25,536 82,947 65,353 85,606 46,574 TOTAL 28,206 53, , , ,372 70,388 Buyouts - Industry Breakdown Sector Value ($m) Volume Agriculture Automotive Biotechnology Chemicals and materials 1, Computer services 1, Computer software 1, Computer: Hardware Computer: semiconductors 15 4 Construction 2, Consumer: Foods 1, Consumer: Other 2, Consumer: Retail 2, Defense 26 3 Energy 9, Financial Services 10, Industrial automation Industrial products and services 1, Industrial: Electronics Internet / ecommerce Leisure Manufacturing (other) 2, Media 4, Medical 6, Medical: Pharmaceuticals Mining 74 3 Real Estate Services (other) 12, Telecommunications: Carriers 75 4 Telecommunications: Hardware Transportation 3, Utilities (other) 85 2 TOTAL 70, Exits - Industry Breakdown Sector Value ($m) Volume Agriculture 1,710 1 Automotive 95 4 Biotechnology Chemicals and materials 1, Computer services Computer software 3, Computer: Hardware Computer: semiconductors Construction Consumer: Foods 1, Consumer: Other 1, Consumer: Retail 1, Defense - 1 Energy 3, Financial Services 1,449 6 Industrial automation 59 3 Industrial products and services 5, Industrial: Electronics Internet / ecommerce 1, Leisure Manufacturing (other) 5, Media Medical 1, Medical: Pharmaceuticals 4, Mining 1,585 3 Real Estate - - Services (other) 4, Telecommunications: Carriers 28,528 4 Telecommunications: Hardware 32 3 Transportation - 1 Utilities (other) - - TOTAL 70, Note: Based on announced buyouts or buyins for the period January 1, 2008 to December 31, 2008, excluding those that lapsed or were withdrawn Note: Based on announced buyouts or buyins for the period January 1, 2008 to December 31, 2008, excluding those that lapsed or were withdrawn North American Private Equity in Review 29