Private Equity Capital Briefing - EY - United StatesFILE/ey-private-equity-capital-briefing-april-2017.pdf · Private Equity Capital Briefing April 2017 Monthly insights and intelligence

Private Equity Capital Briefing

April 2017

Monthly insights and intelligence on PE trends

Strong first quarter for PE

Deal value up versus last year

The Private Equity Capital Briefing is designed to help you remain current on capital market trends. It captures key insights from subject-matter professionals across EY and distills this intelligence into a succinct and user-friendly publication.

Private Equity Capital Briefingcan provide perspectives on both recent developments and the longer-term outlook for private equity (PE) fundraising, acquisitions and exits, as well as trends in global M&A, cross-border deal flows, IPOs and the debt and bond markets.

Please feel free to reach out to any of the subject-matter contacts listed on the back page of this document if you wish to discuss any of the topics covered.

Contents

Section 1 Private equity: fundraising 4

Private equity: acquisitions 5

Private equity: exits 6

Section 2 Infrastructure 7

Section 3 Private credit 8

Section 4 M&A 9

Section 5 IPOs 11

Section 6 Loans 12

Section 7 Bonds 13

AppendicesAppendix A PE activity by geography 15

Appendix B M&A activity monthly flash 24

Appendix C M&A multiples and bid premium 25

Appendix D Capital Confidence Barometer 26

1.i. Private equity: fundraising

Executive summary

• PE fundraising remains strong, with firms closing 153 funds valued at US$132b in the first quarter of the year, representing an increase of 6% from the first quarter of 2016.

• Firms are raising capital faster in 2017 than at any period on record. Buyout funds that closed in the first 3 months of 2017 spent an average of just 8 months between launch and final close.

• Funds are also significantly oversubscribed — the average buyout fund closed this year has closed with 120% of its target commitments.

Current state

Fundraising

• PE firms closed 153 funds valued at US$132b in the first quarter 2017, representing an increase of 6% from the first quarter of 2016. Activity was driven by large buyout funds (representing 41% of aggregate Q1 commitments) and infrastructure funds (representing 22% of total commitments raised in Q1).

• Among the largest funds to close was KKR’s 12th flagship fund, which closed with US$13.9b in commitments. The fund surpassed its target of US$10b and reached its hard cap of US$12.5b, and was particularly notable for the amount of capital committed by the firm and its employees, which added US$1.4b to the total (representing a 10% firm commitment). That compares with a median GP commitment last year of just 4%. KKR will target opportunities primarily in the US, Mexico and Canada.

• Firms are raising capital faster in 2017 than at any period on record. Buyout funds that closed in the first 3 months of 2017 spent an average of just 8 months between launch and final close, down from 12 months in 2016 and 13 months in 2015. The time between launch and initial close is down as well to 6 months, from 7 in 2015.

• Funds are also significantly oversubscribed — the average buyout fund closed this year with 120% of its target commitments, the highest on record.

• Buyout funds and growth capital are among the fund types seeing the strongest demand, closing on average in 8 months and 11 months, respectively.

Dry powder

• Dry powder remains high. Buyout funds currently have nearly US$540b in dry powder, the highest on record. Putting those assets to effective use is one of the industry’s biggest current challenges.

• Including other asset types (venture, distressed, mezzanine and growth) brings the sum to nearly US$1.5t.

Environment and horizon

• The Institutional Limited Partners Association (ILPA), recently announced Phase II of its Private Equity Transparency Initiative, which is focused on increasing global adoption of the organization’s reporting templates. The templates, which seek to standardize reporting of fees, expenses and carried interest, were initially rolled out 15 months ago and were endorsed by more than 60 LPs. The latest rollout included a new wave of endorsements from GPs and LPs including Ares Management, Bridgepoint Capital, Oaktree Capital Management and Permira. It includes a number of initiatives to increase adoption of the templates, including the creation of “Communities of Practice” and leveraging current users’ experiences to identify and promulgate best practices for implementation.

• LPs continue to seek the right level of allocation to PE. In March, the Regents of the University of California announced plans to nearly double their PE exposure, from 11.5% to 22.5%. The increase will come from reduced allocations in the public equities portfolio.

• The recent Preqin Private Equity and Venture Capital Spotlight survey of institutional investors found that 40% anticipate allocating more capital to PE over the next 12 months versus the prior year. This was down slightly from 2015, when 43% anticipated allocating more. Investors saw the greatest opportunities in the small and mid-market buyout space, with nearly 60% saying such funds present the best opportunities for investment.

Global PE fundraising by quarter (US$b)

4 Private Equity Capital Briefing

Source: Preqin

Buyout funds — average time to final close (in months)

Source: Preqin

Buyout funds — percentage raised at first and final closes

67% 62% 61%61%

47%

52%

53%53%

59%

55%

64%69%

117%111%

99%90% 90%

104% 106% 105%113%

109% 111%120%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17

First close Final close

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17

Source: Preqin Private Equity and Venture Capital Spotlight, March 2017

58%

28%24%

18% 16% 14%7%

Small andmidmarket

buyout

Venture Large andmega

buyout

Growth Fund offunds

Secondaries Other

Preqin survey of institutional investors — fund types that present the best opportunities over the next 12 months

Source: Preqin

0

50

100

150

200

250

300

350

$0

$50

$100

$150

$200

$250

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17

Value Number of funds

1.ii. Private equity: acquisitions

Executive summary

• PE acquisition activity saw a strong Q1, with firms announcing 316 deals valued at US$69.8b, up 58% from last year.

• Activity was driven by upticks in Europe (up 200% by value) and the US (up 55% by value).

• Large deals continue to drive PE. There have been 23 megadeals in the first quarter of 2017 (deals valued at US$1b or more), accounting for 71% of total PE investment, the highest proportion since 2007.

Current state

• PE activity saw a strong Q1, with firms announcing 316 deals valued at US$69.8b, up 58% from the same period a year ago, and making it the most active Q1 since 2013.

• Activity was driven by strength in both the Americas and EMEA (up 55% and 200%, respectively by value versus 1Q16), while Asia-Pacific saw a decline of 37% by value versus last year.

• Large deals continue to drive PE. There have been 23 megadeals in the first quarter of 2017 (deals valued at US$1b or more), accounting for 71% of total PE investment. That represents the highest proportion since 2007, when deals of US1b and above were 72% of PE activity.

• Technology, Health Care and Consumer Products and Retail continue to see the most activity from PE firms in 2017, collectively accounting for 55% of PE investment by value this year.


• Reports coming out of the annual SuperReturn International conference in Berlin in early March characterized industry participants as bullish on the economy and the outlook for the industry, despite persistently high valuations. In an interview with Bloomberg, The Carlyle Group’s David Rubenstein cited a number of dynamics behind the optimism, particularly in the US, including a less restrictive regulatory environment and the potential for lower taxes. Rubenstein told Bloomberg, “I’ve been coming here for 20 years, and I haven’t seen anything quite as bullish.”

• Credit markets have remained active, particularly in the US, driven by lenders seeking to refinance ahead of future Federal Reserve rate hikes. The first quarter saw aggregate syndicated lending of US$535b, 50% higher than the first quarter of last year. Refinancing activity accounted for 75% of the total.

• In the US, with health care reform failing to pass the House, legislators’ attention is now turning toward the next item on the president’s agenda, tax reform. While specific policy proposals remain under discussion, there are a number of potential changes that could have a significant impact on the industry, including the treatment of carried interest and the elimination of the deductibility of interest. Many industry participants have been hopeful that these changes might be offset by reductions in personal and corporate tax rates. The recent failure to repeal the Affordable Care Act (ACA) — the savings from which was intended to partially offset the cost of the cuts — has shed new doubt on the political feasibility of the deep cuts proposed by the administration and raised fears that a significantly watered-down version is what will be required in order to pass the House and Senate.

Q1 PE deal values by region 2015-Q1 2017 (US$b)

5


Global PE acquisitions by quarter since 2010 (US$b)

Source: Dealogic

Date Target Industry Nationality Sponsor Value (US$b)

23-Feb-17Stada ArzneimittelAG Health Care Germany

Cinven Ltd., Advent International Corp. $5.0

10-Feb-17Aon Hewitt LLC (HR BPO Platform) Technology United States Blackstone Group LP $4.8

13-Mar-17 DH Corp. Technology CanadaVista Equity Partners LLC $3.4

27-Mar-17 Diversey Inc.Consumer Products United States Bain Capital LLC $3.2

14-Mar-17 Air Methods Corp. Transportation United StatesAmerican Securities LLC $2.5

17-Mar-17USI Insurance Services LLC Insurance United States KKR & Co. LP $2.5

12-Jan-17Eagle Ford Shale assets Oil and Gas United States Blackstone Group LP $2.1

8-Jan-17McDonald's China Management Ltd.

Dining and Lodging China

Carlyle Group LP,CITIC Capital Partners Ltd. $2.1

22-Jan-17Cerba HealthCare SASU Health Care France

Partners Group Holding AG $1.9

7-Mar-17 Allfunds Bank SA Finance SpainHellman & Friedman LLC $1.9

Top PE deals YTD 2017

0

100

200

300

400

500

600

700

$0

$20

$40

$60

$80

$100

$120

$140

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

Value Number of deals

Source: Dealogic

$28.0

$19.7

$11.7

$19.9

$9.9

$14.6

$30.8 $29.9

$9.2

Americas EMEA Asia-Pacific

1Q15 1Q16 1Q170%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Deals of US$1b and up as a percentage of all PE deals (by value)

Source: Dealogic

Source: Dealogic

1.iii. Private equity: exits

Executive summary

• PE exits increased in the first quarter. Firms announced 229 exits valued at US$75.9b, up 15% by value and 9% by volume versus last year.

• An improved market for new issuance was the primary driver of the uptick. Twenty-seven PE-backed companies went public during Q1, raising US$8.6b, more than four times what PE-backed companies raised during the first quarter of 2016.

• Secondary buyouts drove an increasing percentage of M&A exits in Q1, accounting for 29% of deals.

Current state

• Increasing sentiment led to an uptick in exits in the first quarter, with PE firms announcing 229 exits valued at US$75.9b, up 15% by value and 9% by volume versus last year.

• Activity was driven by strong tailwinds in the global IPO markets. Twenty-seven PE-backed companies went public during Q1, raising US$8.6b, more than four times what PE-backed companies raised during the first quarter of 2016. Volume increased 200% from the same period last year.

• Exits via M&A saw modest increases in the first quarter, with PE firms announcing 202 deals valued at US$67.3b, up 5% from last year. Large exits continue to drive activity — there were 24 exit deals via M&A valued at US$1b or greater, representing nearly 70% of PE exit activity by value.

• While exit activity for the last several years has largely been driven by strategic acquirors pursuing growth through M&A-focused strategies, the first quarter saw comparatively less involvement from strategics, while PE firms increased their activity. In total, secondary buyouts totaled US$19.b in 1Q17, up from just 9.5b in 1Q16. This represented 29% of PE M&A exits by value, the highest percentage since 2012.


• Hold periods have risen in recent years, reflecting a shift in LP and GP priorities. According to Preqin’s Private Equity and Venture Capital Spotlight, hold periods have increased from 4.5 years in 2006 to 5.8 years for companies sold in 2016. The increase is reflective of a number of dynamics, including 1) the lingering impact of the global financial crisis, which closed exits markets for 2 to 3 years and effectively pushed back exit timelines for the entire industry 2) the desire of many LPs to keep assets at work in the private markets for longer, and less pressure to quickly exit and 3) more recently, the current high valuation environment. With many PE firms forced to pay high multiples for companies acquired over the last 3 to 4 years, value creation via long-term operational improvements is becoming an increasingly front-and-center driver of performance for the asset class. Given the secular nature of the trend —firms have invested heavily in operations partners and portfolio teams in recent years — hold periods in excess of 5.5 years could become a permanent feature of the model.

• Barring significant exogenous shocks, the IPO markets should continue to be an active route for PE liquidity. Sentiment has increased markedly in recent months as a result of macro stability and low volatility in global equities prices, with several indices hitting all time highs. There are currently 71 PE-backed companies in registration; in aggregate they could raise more than US$11.1b.

PE exits by quarter and type (US$b)

PE hold periods through 2016 (in years)

6


Source: Preqin

Source: Dealogic

Source: Dealogic

Top exits by M&A 2017 YTD (US$b)

Announced Company Sector Sponsor Value

9-Jan-17Surgical Care Affiliates Inc. Health Care TPG Capital LP $3.5

16-Mar-17 Alinta HoldingsUtility and Energy TPG Capital LP $3.1

13-Feb-17ZELTIQ Aesthetics Inc. Health Care Frazier Healthcare Partners $2.5

17-Mar-17USI Insurance Services LLC Insurance Onex Corp. $2.5

7-Feb-17 Mauser Group NV Chemicals Clayton Dubilier & Rice LLC $2.3

24-Jan-17

Multi Packaging Solutions International Ltd.

Forestry and Paper

Carlyle Group LP; Madison Dearborn Partners LLC $2.3

28-Feb-17 USJ Co. Ltd.Leisure and Recreation

Goldman Sachs Capital Partners;MBK Partners Ltd. $2.3

31-Mar-17Reliance Home Comfort LP Construction Alinda Capital Partners LLC $2.1

20-Mar-17 Cision US Inc. Technology GTCR Golder Rauner LLC $2.1

27-Mar-17Florida East Coast Railway Corp. Transportation Fortress Investment Group LLC $2.1

4.5 4.44.1 4.1

5.0 5.15.5

5.8 6.05.7 5.8

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0

50

100

150

200

250

300

350

400

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

M&A exits IPO exits Number of deals

2013 2014 2015 2016 1Q16 1Q17

0%

5%

10%

15%

20%

25%

30%

35%

Secondary buyouts as a percentage of PE M&A exits (by value)

Source: Dealogic

2. Infrastructure

Executive summary

• Fundraising for infrastructure funds remains strong, up 84% by value versus the same period a year ago. At current run rates, the industry is well on its way to its most active year on record for fundraising.

• Dry powder has reached record levels. Firms currently have more than US$147b in capital available for new deals, up 35% from the beginning of 2016.

• While fundraising was up, deal volume was subdued in the first quarter, down 28% by value versus Q1 2016.

Current state

• Fundraising for infrastructure funds remains strong, driven by increased opportunities in the space and a number of closings from large funds. Infrastructure funds valued at US$29.4b have been closed in the first 3 months of 2017, up 84% by value versus the same period a year ago, and up 60% by volume. At current run rates, the industry is well on its way to its most active year on record for fundraising.

• The increase was driven in large part by the January closing of Global Infrastructure Partners’ (GIP) third fund, which raised US$15.8b, exceeding its target of US$12.5b, and making it the largest hard assets fund ever raised. The fund nearly doubled GIP’s prior fund raised in 2012, and added 94 new investors, bringing the total to nearly 200.

• As a result of strong fundraising, dry powder has reached record levels. Firms currently have more than US$147b in capital available for new deals, up 35% from the beginning of 2016.

• While fundraising was up, deal volume remains subdued in the first quarter. Firms announced 339 deals valued at US$85b during the quarter, down 28% by value, and down 48% by volume versus the same period a year ago. Deals for existing infrastructure assets accounted for nearly three-quarters of deals, with brownfield making up 22%, and true greenfield investments comprising 5% of activity.


• Infrastructure is a key pillar of the new US administration’s platform, and the President Trump is taking steps to push forward with his US$1t agenda. The White House held a series of meetings in recent weeks in order to gather support and discuss opportunities for collaboration between the public and private sectors. In early March, the White House convened a meeting of 15 federal agencies to begin work on the administration’s plan, followed by a separate meeting that brought together public officials with key players from PE, real estate, consulting and transportation. In January, the President announced the formation of an infrastructure council to advise on new initiatives in the space.

• The need for infrastructure spending in the US is among the few issues that unites Democrats and Republicans. The American Society of Civil Engineers has graded US infrastructure at D+ and estimated the country needs to invest US$3.6t by 2020. In January, Senate Minority Leader Charles Schumer and others presented their 10-year, US$1t plan for improving the nation’s roads, bridges and ports, to be funded entirely by direct federal spending. The Republican plan being drafted would give some additional increased spending from the government, but would also incorporate regulatory rollbacks, tax credits and other incentives designed to attract private investment.

• Canada is preparing to launch a new infrastructure bank funded with C$35b, which was included in the recently announced 2017 budget; C$20b would be allocated to repayable equity capital, and another C$15b would be allocated toward non-repayable capital, incentivizing private investors for projects that may not otherwise be economically viable. The bank is part of C$180b in infrastructure spending planned between now and 2030.

Infrastructure dry powder (unlisted funds, US$b)

7


Source: Preqin

Source: Preqin

Top infrastructure funds raised LTM

Fund Target (US$b)

Raised (US$b)

Type Targeting

Global Infrastructure Partners III 12.5 15.8 Primary Brownfield

Brookfield Infrastructure Fund III 12.5 14.0 Primary Brownfield, Greenfield

Macquarie European Infrastructure Fund V

4.5 Primary Brownfield, Secondary Stage

EQT Infrastructure III 3.1 4.2 Primary Brownfield, Greenfield, Secondary Stage

Antin Infrastructure Partners III 3.3 3.8 Primary

Carlyle Energy Mezzanine Opportunities Fund II

2.5500 2.8 Debt/mezzanine Greenfield

Actis Energy Infrastructure Fund IV

2.0 2.8 Primary Brownfield, Secondary Stage

AMP Capital Global Infrastructure Fund

1.3 2.4 Primary Brownfield, Greenfield, Secondary Stage

QIC Global Infrastructure Fund 1.3 1.8 Fund of funds, primary

Brownfield, Greenfield

Chongqing Infrastructure Investment Fund

1.5 Primary Brownfield, Greenfield

$0

$20

$40

$60

$80

$100

$120

$140

$160

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17

17.2% 17.3%19.4%

22.1%

Europe North America Asia-Pacific Rest of the world

Infrastructure dry powder – CAGRs by regions 1Q12-1Q17

Source: Preqin

0

10

20

30

40

50

60

70

80

90

100

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17

Value No. of funds

Infrastructure fundraising (US$b)

Source: Preqin

3. Private credit

Executive summary

• Fundraising activity has opened 2017 with significant strength, with funds raising US$21.1b in the first quarter, up 63% from the same period last year.

• Activity was driven by particular strength in the direct lending space. Direct lending funds valued at US$13.0b have closed so far this year, up more than 200% from last year. Of funds closed this year, direct lending funds have accounted for more than 60% of total assets.

• Credit funds now have more than US$200b in dry powder for investment.

Current state

• Fundraising for private credit funds moderated slightly in 2016 after a record year in 2015, when PE firms raised more than US$102b for deployment. PE firms raised US$97.8b, a decline of 4% from the prior year. However, fundraising activity has opened 2017 with significant strength. PE firms have raised US$21.1b in the first quarter, up 63% from the same period last year.

• Activity was driven by particular strength in the direct lending space. Direct lending funds valued at US$13.0b have closed so far this year, up more than 200% from last year. Of funds closed this year, direct lending funds have accounted for more than 60% of total assets.

• As a result of strong fundraising, credit funds now have just over US$200b in dry powder for investment. This represents a slight decline from its recent peak at the end of 2015, when firms had US$216b at the ready for new deals.

• Funds focused on North America have US$133b in available capital, in line with Jan. 2016.

• Firms focused on Europe have US$57b in capital available, down 11% from Jan. 2016.

• Firms focused on Asia-Pacifc and the rest of the world have 10.9b ready for investment, down 8% from last year.


• Fundraising for private credit funds should remain robust. A recent survey conducted by Preqin of institutional investors in alternatives found that 63% of LPs expected to increase their allocations to private credit over the longer term. Credit was the most commonly cited asset class, ahead of PE (48% increasing their allocations), infrastructure (53% increasing their allocations), and hedge funds (15% increasing their allocations).

• Despite strong fundraising and increased interest in the asset class, fees remain under pressure. The recent 2017 Preqin Global Private Debt Reportfound that average management fees on 2016 vintage funds was 1.63%, down from 2.08% for vintage 2013 funds.

• A recent report from London-based consultancy bfinance, Direct Lending: What’s different now?, highlighted a growing trend of cross-border investment among investors in debt funds, with European investors increasingly seeking to allocate capital to US private debt funds, and US investors looking to invest opportunistically in the European market. Increased experience and sophistication among investors, willingness to consider different types of risk, and the attractive opportunity sets were all cited as drivers behind the trend.

Top credit funds closed LTM

8


Source: Preqin

Source: Dealogic

Credit funds AUM (invested and dry powder, US$b)

Fund Raised (US$b)

Type Primary geographic focus

Oaktree Opportunities Fund Xb 7.7 Distressed debt US

GSO Capital Opportunities Fund III 6.0 Mezzanine US

HPS Mezzanine Partners III 6.3 Mezzanine US

Crescent Mezzanine Partners VII 4.4 Mezzanine US

Hayfin Direct Lending Fund II 3.6 Direct lending Europe

Oaktree Opportunities Fund X 2.9 Distressed debt US

Alcentra European Direct Lending Fund II

2.8 Direct lending Europe

Bain Capital Distressed & Special Situations 2016

2.7 Distressed debt US

Ares Capital Europe III 2.5 Direct lending Europe

OHA Strategic Credit Fund II 2.5 Distressed debt US

0

20

40

60

80

100

120

140

160

180

200

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17

PE credit fundraising (US$b)

Source: Preqin

Credit fundraising by fund type, as a percentage of total

Source: Dealogic

0%

10%

20%

30%

40%

50%

60%

70%

2010 2011 2012 2013 2014 2015 2016 1Q17

Direct lending Distressed debt Mezz. Other

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

$0

$100

$200

$300

$400

$500

$600

$700

-15%

-10%

-5%

0%

5%

-20% 0% 20%

Current state• Market uncertainty did not impact M&A in the first quarter of 2017. The

quarter saw deals worth US$734b, an 11% increase year on year (YOY) and the third time over the last 10 years that deal value surpassed US$700b in the first quarter. The number of deals recorded in 1Q17 was 9,034 against 8,757 recorded in the first quarter of 2016 – an increase of 3% YOY.

• Interestingly, in 1Q17, we saw 136 deals valued at US$1b or more(worth a combined US$482b). This is the highest number of billion-dollar-plus deals recorded in the first quarter of any year since 2007. This is a clear sign of investor confidence in the global economy and boardroom optimism, which is driving companies to pursue substantial acquisitions as they look to boost strategic growth prospects.

• US-based companies topped the charts for cross-border deals, with

US$94.2b in announced acquisitions so far − the highest YTD level on record. Europe was the main target for cross-border acquisitions for US companies (US$66.3b in 1Q17, more than double the value seen a year ago).

• The deal that stole the headlines in March was Intel’s agreement to buy Israeli autonomous vehicle technology firm Mobileye for US$15.3b, as the US chip maker bolsters its position in the fast-growing self-driving vehicle market. The deal was one of the largest in the fast-growing sector, which is expected to be worth up to US$70b by 2030, and sets the stage for increasing competition between Silicon Valley giants and traditional automakers over who will dominate the world of autonomous cars.

• Another noteworthy deal during the month was the merger between Britain's Vodafone Group and Idea Cellular combining their Indian operations in a deal that created the country's biggest telecom business by subscribers, challenging Bharti Airtel, which has been at the top for several years. The deal showed how India's mobile industry is being transformed by the launch of Reliance Jio Infocomm's 4G mobile broadband network last year, which offered free services for months. This forced India's three biggest operators − Bharti, Vodafone and Idea − to slash prices and accept lower profits, and sparked a wave of consolidation.

Environment and horizon• M&A is expected to stay healthy in 2017. With an improving economic

outlook, the search for growth is likely to be the main motivation for deals in the coming months. Companies are set to focus on expansion to tap into new areas, both in terms of product and geography. Supportive market factors, including low interest rates, easy availability of credit, surplus cash reserves and a relatively benign economic climate, are likely to prevail through the year. Furthermore, M&A could provide the fastest route to innovation and digitalization − key for survival in an increasingly disruptive environment.

• Political and regulatory uncertainty is likely to remain in the coming months. Transformative events, such as the new Administration in the US and the UK’s Brexit, have raised concerns over future policy actions and the direction of politics. Furthermore, mounting uncertainty in Europe, with a slew of upcoming elections, may pose further questions. The regulation of dealmaking is expected to remain in the spotlight in the current year, in the wake of uncertainty about regulatory and antitrust policies.

• Sector convergence should continue to drive deals in the coming months. Digital transformation has led to the blurring of sector lines and changing consumer behavior, making companies review and reinvent their business models. Companies are looking for innovative acquisitions outside their core sector, with an aim to future-proof their businesses to survive and thrive in the digital world.

• Consequently, portfolio reorganization will be a key deal driver, making companies active on both the buy side and sell side. We should expect to see an uptick in divestments, with companies reviewing their portfolios and recycling capital in order to invest in growth opportunities. Conducting more frequent and robust strategic reviews will become an imperative to ensure resilient capital allocation, with a view to considering divesting as a preferred route to raise capital for growth.

Deal environment: by area ( YOY % change)

Last 12 months (LTM) to March 2017 versus LTM to March 2016Source: Dealogic and EY analysis

Deal environment: by target sector and target area (% share of global value)

LTM to March 2017Source: Dealogic and EY analysis; excludes real estate asset transactions.

Note: because of rounding, percentages may not add up to total.

Top 10 announced deals by value, March 2017Source: Dealogic

M&A analysis as at 1 April 2017.

Note: data is continually updated and therefore subject to change.

Figures have been rounded off to nearest decimal place.9

Executive summary• 1Q17 reported strong M&A numbers − 9,034 deals worth a combined value of US$734b.

• Billion-dollar-plus deals grabbed the headlines during the first quarter of 2017 (136 deals valued at US$482b).

• The value of overseas acquisitions by US companies hits an all-time year-to-date (YTD) record, with US$94.2b of acquisitions announced.

• The M&A outlook for 2017 remains healthy as companies look keen to reorganize their portfolio more frequently.

• Future-proofing will be an essential M&A driver as companies look for disruptive trends within their core, and innovation outside their sectors.

4. M&A

Target Sector Country Acquiror Value (US$m)

Akzo Nobel NV Diversified industrial products

Netherlands

PPG Industries Inc. 25,028

Mobileye NV Technology Israel Intel Corp. 15,403

Vodafone India Ltd. Telecommunications India Idea Cellular Ltd. 14,400

Oil and gas assets (FCCL Partnership)

Oil and gas Canada Cenovus Energy Inc. 13,245

Oil and gas assets (Athabasca Oil Sands Project )

Oil and gas Canada Canadian Natural Resources Ltd.

8,443

Abengoa SA (95%) Real estate Spain Creditors 5,788

Beijing JingdongShangboguangyiInvestment Management Co Ltd (68.6%)

Technology China Undisclosed acquiror(Richard Liu QiangDong 4.3%)

4,982

Aberdeen Asset Management plc

Wealth and asset Management

UK Standard Life plc 4,880

TerraForm Power Inc. (51%)

Power and utilities US Brookfield Asset Management Inc.

4,339

AMEC Foster Wheeler plc

Real estate UK John Wood Group plc 4,040

Value

Vo

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Americas

EMEA

GlobalAsia-Pacific

Americas Asia-Pacific EMEA Total

Technology 8% 3% 4% 16%

Oil and gas 10% 1% 2% 14%

Diversified industrial products 5% 2% 4% 11%

Consumer products and retail 6% 2% 2% 10%

Life sciences 5% 1% 2% 8%

Power and utilities 3% 2% 2% 7%

Media and entertainment 4% 1% 1% 6%

Banking and capital markets 2% 1% 2% 5%

Real estate 1% 1% 2% 5%

Others 9% 6% 5% 19%

All sectors 52% 21% 27% 100%

Capital Briefing

4.i. M&A: cross-border deal flow

Key cross-border M&A deal flow(LTM to March 2017)(Total = US$1.31t)

N America to:W Europe – $193b

UK&I – $58bLatin America – $19b

Japan to:N America – $41b

UK&I - $35bW Europe – $10b

Russia, CIS and CSE - $9b

UK&I to:N America – $108b

W Europe – $6bAfrica – $4b

Middle East – $3b

L America to:N America – $8b

Russia, CIS and CSE - $1b

Greater China andMongolia to:

N America – $51bW Europe – $34b

Oceania – $19bW Europe to:N America – $140bL America - $16b

UK&I – $9b

Cross-border M&A deal flow (LTM to March 2017)

(US$m)

Key

>$100b

>$50b

>$10b

Note: all figures are in US$.

# Acquiror refers to acquiror’s ultimate holding company.

$ Greater China and Mongolia includes mainland China, Hong Kong, Macau, Mongolia and Taiwan.

M&A analysis as at 1 April 2017.

Source: Dealogic. All Rights Reserved.

Note: data is continually updated and therefore subject to change.

Key >US$100b >US$50b >US$10b

Intra-area cross-border deals

Target Acquiror# Africa SE Asia (including Korea)

Greater China and Mongolia$

Russia, CIS and CSE

W Europe (excluding UK&I)

India Japan Latin America

Middle East

North America

Oceania UK&I Inboundtotal

% versus PTM

Africa 1,040 81 5,690 1,577 3,672 19 1,568 - 112 7,506 895 3,547 25,706 112%

SE Asia (including Korea)

5 7,025 7,671 13 2,674 7 3,024 24 8,173 5,437 143 1,237 35,435 2%

Greater China andMongolia $

- 3,448 26,640 450 3,858 - 659 - - 8,451 514 101 44,122 -4%

Russia, CIS and CSE 1,131 1,293 3,297 2,790 8,551 3,028 8,645 1,048 11,925 1,776 1,752 1,403 46,639 40%

W Europe (excluding UK&I)

3 4,853 34,470 6,170 97,831 1,267 9,647 641 3,183 192,942 988 6,210 358,204 19%

India 398 7,737 2,034 12,922 1,452 - 1,288 - 575 5,213 58 26 31,703 78%

Japan - 295 340 - 326 151 - - - 2,931 29 - 4,072 -88%

Latin America 40 109 17,253 200 15,706 12 69 7,343 1,194 18,855 1,679 321 62,782 39%

Middle East 42 12 17,450 411 6,470 12 26 - 3,632 20,645 101 2,905 51,706 405%

North America 6,937 15,536 51,352 110 139,755 1,617 40,903 8,435 11,145 102,918 5,325 108,310 492,344 12%

Oceania 726 1,991 19,292 1 1,336 48 1,528 - 342 4,846 1,897 1,543 33,551 -22%

UK&I 3,794 798 13,105 213 8,607 1,033 34,558 - 2,235 58,364 657 1,487 124,850 -61%

Outbound total 14,116 43,178 198,594 24,857 290,238 7,194 101,915 17,491 42,516 429,884 14,039 127,089 1,311,112 -2%

% versus previous 12 months (PTM)

5% 78% 3% 211% -36% 8% 60% -19% -31% 18% 16% 13% -2%

10 Capital Briefing

5. IPOs

Executive summary

• Global IPO activity surged in March 2017, witnessing a significant YOY increase in terms of both number of IPOs and proceeds.

• The Asia-Pacific region continued to dominate global IPO activity by both number of IPOs and proceeds.

• Spain’s Bolsa de Madrid accounted for two of the top three deals this month.

• South Korea has emerged as one of the key IPO destinations as several big IPOs are expected to hit the market in the next quarter.

11

Current state• Global IPO activity surged in March 2017, raising US$16.0b via 151 deals,

fueled by strong activity across regions. The level of activity was significantly higher quarter on quarter (up 91% by number of IPOs, 140% by proceeds) and YOY (up 44% by number of IPOs, 104% by proceeds). This month witnessed the highest level of IPO activity in March since 2006 in terms of number of deals.

• Asia-Pacific continued to drive global IPO activity (US$7.1b via 117 deals), accounting for a 77% and 44% share in terms of number of IPOs and proceeds this month respectively. Greater China was the most active in the region, accounting for 50% of IPOs and 60% of proceeds respectively. Japan was the other big contributor, contributing 18% and 21% to the region’s number of IPOs and proceeds respectively.

• EMEA IPO activity increased during March 2017 (24 deals raising US$3.5b). YOY, this region witnessed a 26% and 65% increase in terms of number of IPOs and proceeds respectively. It recorded two of the top three deals this month, both listing on Spain’s stock exchange, Bolsa de Madrid.

• US exchanges recorded another strong month of IPO activity (11 deals raising US$5.8b), making 1Q17 the best first quarter in terms of proceeds since 1Q14, with an average deal size of US$437m. This month also witnessed the biggest IPO of the year so far-Snap Inc.- raising US$3.9b. It is expected to encourage more listings by other unicorns (technology start-ups backed by VC funds with private valuations of more than US$1b).

Environment and horizon• Global IPO activity will continue at high levels following a brisk start to the

year, underpinned by strong investor confidence and positive momentum from a high level of IPO activity in the fourth quarter of 2016, and bolstered by continued strong post-IPO performance of recent listings.

• Asia-Pacific IPO activity is expected to dominate the global IPO landscapefor the remainder of this year, as the region’s relative insulation from political uncertainty elsewhere in the world, ample liquidity in emerging markets and steady stock market gains have provided an ideal environment for IPO-ready candidates to list.

• Greater China is expected to remain one of the most active markets for IPOs globally, China Securities Regulatory Commission (CSRC) – the mainland China regulator, is looking to reduce the size of the IPO pipeline and accelerate the pace of new listings, as well as reduce government intervention in share sales to allow the market to play a bigger role. We also expect to see a surge in the cross-border listings from the region, especially from the FinTech and education sectors looking to list on US exchanges.

• The resurgent Hong Kong equity market is creating a healthy environment for IPOs and, as the Shenzhen-Hong Kong Stock Connect program becomes more established, this will be further supported by an increased inflow of capital from mainland China.

• South Korea has emerged as one of the key IPO destination in the Asia-Pacific region as several big IPOs are expected to hit the market in the next quarter, including Netmarble Games (US$2.4b) and Celltrion Healthcare (US$0.9b).

• The US IPO market is upbeat for the coming quarter following the strongest start to the year since 2014. This is likely to encourage more technology companies and unicorns to the public markets, and further encourage IPO candidates from the oil and gas, and real estate sectors. Financial sponsors are also likely to remain key players in the IPO market and will continue to provide a robust IPO pipeline.

• The outlook for EMEA IPO activity is positive going forward, backed by solid economic fundamentals, with many major equity indices trending upward and low levels of market volatility. Several countries within the Middle East, including the United Arab Emirates (UAE), are taking steps to make themselves less dependent on oil and switching their focus to commodities. Saudi Arabia is also looking to overhaul its economy, including plans to privatize the state-owned energy giant Saudi Arabian Oil Company (Saudi Aramco), which could become one of the largest IPOs by proceeds ever. It has been reported that multiple venues are being considered for listing, including London, the US, Hong Kong, Japan and other European exchanges.

Top 10 IPOs by proceeds, March 2017Source: Dealogic

Issuer name Issuer location Sector Exchange Proceeds(US$m)

Snap Inc. US Technology New York 3,910

Prosegur Cash S.A. Spain Other sectorsBolsa de Madrid

798

Neinor Homes S.A.U. Spain Real estateBolsa de Madrid

770

Sushiro Global Holdings Ltd.

Japan Real estate Tokyo 611

Eco World International Bhd

Malaysia Real estateBursa Malaysia

584

Macromill Inc. Japan Other sectors Tokyo 433

ProPetro Holding Corp.

US Oil and gas New York 402

Ardagh Group S.A. LuxembourgDiversified industrial products

New York 354

Oppein Home Group Inc.

ChinaConsumer products and retail

Shanghai 301

Canada Goose Holdings Inc.

CanadaConsumer products and retail

New York 290

IPO activity by sector and area (% share of global proceeds)

LTM to March 2017Source: Dealogic; regional classification on the basis of issuer nationality.

Note: because of rounding, percentages may not add up to total.

Americas Asia-Pacific EMEA Total

Banking and capital markets 1% 14% 1% 16%

Real estate 3% 8% 2% 13%

Technology 4% 5% 3% 12%

Consumer products and retail 3% 6% 2% 10%

Diversified industrial products 1% 5% 2% 9%

Life sciences 1% 5% 3% 8%

Automotive and transportation 1% 6% 1% 8%

Oil and gas 3% 1% 2% 6%

Power and utilities 0% 1% 4% 5%

Others 2% 7% 4% 13%

Total 20% 57% 23% 100%

IPO activity by area (YOY % change)

(LTM to March 2017 versus LTM to March 2016)Source: Dealogic; regional classification on the basis of issuer nationality.

-30%

-10%

10%

30%

-50% -40% -30% -20% -10% 0% 10% 20%

Value

Vo

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Americas(including US)EMEA

Global

Asia-Pacific

US

Capital Briefing

6. Loans

Executive summary

Global investment-grade loans (US$b)Source: Thomson ONE.

Global high-yield loans (US$b)Source: Thomson ONE.

Top arrangers ranking, YTD March 2017 (US$b)Source: Thomson ONE.

Global loan issuance by industry, March 2017Source: Thomson ONE.

Proceeds Issues

Bank of America Merrill Lynch 74.3 357

JP Morgan 61.1 297

Citi 51.0 222

Barclays 44.8 188

Mizuho Financial Group 43.1 284

All loans by region, YTD March 2017 (US$b)Source: Thomson ONE.

Market share Proceeds Issues

Americas 61.6% 581.9 975

EMEA 22.2% 209.7 225

Asia-Pacific 16.1% 152.3 829

0

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400

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0

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800

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17

Proceeds (LHS) Number of issues (RHS)

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12

• The first quarter of 2017 recorded the largest global volume since 2007, taking advantage of strong demand and falling new issue yields.

• Opportunistic refinancings, repricings and recaps dominated the landscape of the global loan market.

• The US had expected a healthy environment for dealmaking, but issuers were cautious and went with a “wait-and-see” approach in 1Q17.

• Sponsors are preferring the loan market and shifting their capital structures away from high yield.

• Lenders don't expect the pace of repricings and opportunistic refinancings to change any time soon.

• The trend of bond to loan is expected to gather pace going forward as the attraction of the loan product increases.

0 20 40 60 80 100 120 140

Financials

Consumer staples

High technology

Health care

Consumer products and services

Real estate

Government and agenciesProceeds (US$b)

Capital Briefing

Current state• In March, US$65b of loans were issued in the US and €16b in Europe,

taking the 1Q17 global issuance to US$238b, up 125% from the same period in 2016. The first quarter recorded the largest global volume since 2007, taking advantage of strong demand and falling new issue yields.

• The US dominated the market this time, with its largest-ever quarterly loan volume, compared to 2007 in which there was a far greater contribution from European issuances. Asia-Pacific lending in 1Q17 fell to the lowest first-quarter volume in seven years, due to China’s slowdown and thin M&A activity. Meanwhile, macroeconomic and political fears weighed heavily on lending in Africa, Central and Eastern Europe, and the Middle East, which was 58% down YOY, the lowest quarterly volume since the 1Q09.

• Opportunistic refinancings, repricings and recaps dominated the landscape of the global loan market. Repricing activity included issuers that were involved in repricing waves last year and jumped back into market as yields continued to fall.

• In the first quarter, 40% of loan issuance in the US and 26% in Europe was for M&A, down by 22% in Europe and up by 24% in the US when compared with the same period last year.

• Sponsors are increasingly showing a preference for the loan market. Not only are they turning to this space to finance Leverage Buyouts, but there has also been an uptick in firms shifting their capital structures away from high yield by issuing term loans specifically to take out bonds. As loans are becoming comparable with bonds when it comes to lack of covenants and the looseness of documents, sponsors are moving away from the bond market.

• The supply-demand imbalance has led to further tightening of yield in March, continuing from last year, clearly enticing more borrowers to come to market; the average clearing yield for single-B rated term loans dipped in the US to 5.08% from 5.11% in February, and tightened to 4.07% from 4.32% in EU, explaining the repricing wave of the past few months.

Environment and horizon• The loan market remains highly liquid, and borrowers continue to have

access to competitively priced loan financing but, with banks facing more rigorous regulations and macroeconomic and political challenges expected in 2017, lenders may become more selective in the deals they do.

• The rate of repricings and opportunistic refinancings is not expected to change any time soon, but tightening of pricing on recent loan transactions prompted nervousness about pricing reaching its limit in the market. Also, with the Federal Reserve (Fed) raising rates in March and two more rate hikes likely, lenders do not expect a slowdown in demand.

Opportunities• The trend of bond to loan is expected to gather pace going forward as

the attraction of the loan product increases. Bankers fully expect not only bonds to be refinanced with loans, but loans to be chosen ahead of bonds when it comes to LBOs.

• In the US, collateralized loan obligation funds are adding provisions to refinancing deals that will allow them to cut interest payments for a second time and boost payments to equity holders if President Donald Trump goes ahead with plans to dismantle the Dodd-Frank Act, attracting investors and making it easier to sell.

Current state• Global high-yield activity continued to rise in March on a monthly basis.

High-yield issuance was US$37.6b in the US and €11.5b in Europe, taking the 1Q17 total global issuance to over US$100b, up 131% compared to the same period last year.

• The European high-yield market had a strong start to the year, generating the largest quarterly volume recorded since 1Q15.

• In Europe, the European Central Banks’s corporate bond buying program (CSPP) remains a key driver of falling yields. Not only is the CSPP driving investment-grade buyers into high yield, but positive fund flows and a firm secondary market have played their part too.

• Use of reverse Yankees has shot up, as the swap from dollars into euros is less attractive than it was few years back, so there is less economic benefit in setting up a cumbersome swap line. If a US company has euro revenue, it’s best to raise money outright in euros.

• However, the overall bond market has been contracting, and part of the reason for this has been companies turning to the even cheaper covenant-lite loan market. Not only has this led many to opt for loans over bonds, it has also caused, rise in trend of loans refinancing bonds.

• High-yield issuance for M&A activity in 1Q17 was US$17.83b, contributing 24% to the total in the US. In Europe, there was €2.87b of high-yield issuance, or a 12% contribution. Also, corporate acquisitions look to be the most likely source of new-money supply in the near term.

• Clearing yields for single-B rated bonds tightened in the US to 6.49% in the three months to the end of March from 6.50% at the end of February, and yields tightened to 5.64% from 6.28% in Europe, the lowest yield since the first quarter of 2010.

Environment and horizon• In 1Q17, it was believed that many issuers had pulled deals forward

because of the expectation that funding costs would rise after interest rate hikes by the Fed. But, even after the Fed hiked rates, borrowers were able to raise fresh debt at ultra-low levels, while investors show they have plenty of cash to put to work.

• Market conditions have been highly accommodating for borrowers, but the pipeline of issuers has not been as large as bankers would have liked. This is partly because a lot of refinancing has already been done in recent years, due to a lack of M&A or LBO activity, and also because issuers are turning to the loan market, and sometimes even to direct lenders.

Opportunities• Sterling issuance accounted for the largest quarterly market share since

4Q15, and more sterling supply is expected as companies look to lock in funds before the uncertainty and implications of Brexit negotiations begin.

• LBOs are expected to utilize the loan market increasingly, as seen in first quarter. In order to have a strong second quarter high-yield volume, a pickup in corporate M&A is required.

• Post the Fed hike, technicals have softened a little in March, opening the market for companies looking to issue bonds as these are rarely to be found conditions.

0 20 40 60

High technology

Energy and power

Industrials

Telecommunications

Health care

Consumer staples

Real estate

Materials

Consumer products and services

Media and entertainment

Retail

Proceeds (US$b)

Executive summary

Euro bond issuancesSource: Thomson ONE.

US bond issuancesSource: Thomson ONE.

Top 10 corporate bond issuers, YTD March 2017 (US$b)Source: Thomson ONE.

Global bond issuance by industry, YTD 2017Source: Thomson ONE.

Issuer Nation Industry Proceeds

Microsoft Corp US High technology 17.0

Broadcom Corp US High technology 13.6

Verizon Communications Inc

US Telecommunications 11.0

Apple Inc US High technology 11.0

AT&T Inc US Telecommunications 10.5

China Railway Corp China Industrials 8.7

Siemens NV Netherlands High technology 7.5

Deutsche Telekom International

Netherlands Telecommunications 7.3

Telefonica Emisiones S.A.U Spain Telecommunications 5.7

Rockwell Collins Inc USConsumer products and services

4.7

0

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100

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Jan16

Feb16

Mar16

Apr16

May16

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Proceeds (US$b) (LHS) Number of issues (RHS)

13

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Proceeds (US$b) (LHS) Number of issues (RHS)

7. Bonds

• Global high-yield activity continued to rise in March on a monthly basis with both the US and Europe experiencing volume increases.

• The European high-yield market generated the largest quarterly volume as a number of trends played out, with low-yielding BBs dominating, significant refinancing, high sterling issuance and plenty of Floating rate notes (FRNs), reverse Yankees and debut issuers.

• The use of reverse Yankees has shot up, as there is less economic benefit in setting up a cumbersome swap line.

• Issuers had pulled deals forward but, even after the Fed hiked rates, borrowers were able to raise fresh debt at ultra-low levels.

• Bank loans are expected to continue to become an increasingly attractive alternative to high-yield bonds.

Capital Briefing

Appendices

Dry powder — buyout funds — by region

Global PE fundraising

Appendix AGlobal PE fundraising activity

Source: Preqin

0

200

400

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1,000

1,200

$0

$100

$200

$300

$400

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

Commitments (US$b) Number of funds

0%

2%

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6%

8%

10%

12%

14%

16%

$0

$100

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$300

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

North America Europe

Asia-Pacific and rest of world Asia-Pacific and rest of world as percentage of total

Private Equity Capital Briefing15

Source: Preqin

Source: Dealogic

Global PE value and volume — quarterly trend (US$b)

PE acquisitions by year (in US$b)

Appendix AGlobal PE acquisition activity

Source: Dealogic

0

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700

$0

$20

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1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17


Private Equity Capital Briefing16

0

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD2017


17

Americas PE acquisitions — the top deals with disclosed financial terms in 2017

Appendix AGlobal PE acquisition activity by region — Americas

Americas PE acquisitions (in US$b)

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Source: Dealogic

Announcementdate

Completiondate

Company Sector Value (US$b) Acquiror

10-Feb-17 Aon Hewitt LLC (HR BPO Platform) Technology $4.8 Blackstone Group LP

13-Mar-17 DH Corp. Technology $3.4 Vista Equity Partners LLC

27-Mar-17 Diversey Inc. Consumer Products $3.2 Bain Capital LLC

14-Mar-17 Air Methods Corp. Transportation $2.5 American Securities LLC

17-Mar-17 USI Insurance Services LLC Insurance $2.5 KKR & Co. LP

12-Jan-17 1-Mar-17 Eagle Ford Shale assets Oil and Gas $2.1 Blackstone Group LP

17-Jan-17 Leslie's Poolmart Inc. Consumer Products $1.8 Catterton Management Co. LLC

20-Feb-17 20-Feb-17Property portfolio (21 US properties) Real Estate/Property $1.7 Blackstone Group LP

3-Jan-17 23-Jan-17 LANDESK Software, Inc. Technology $1.2 ClearLake Capital Group LP

19-Jan-17power station (four natural gas and one hydro plant) Utility and Energy $0.9 LS Power Equity Advisors LLC

Source: Dealogic

Appendix AGlobal PE acquisition activity by region — EMEA

EMEA PE acquisitions (in US$b)

Source: Dealogic

18


Announcement date

Completion date

Company Sector Value (US$b) Acquiror

23-Feb-17 Stada Arzneimittel AG Health Care $5.0 Cinven Ltd.; Advent International Corp.

22-Jan-17 Cerba HealthCare SAS Health Care $1.9 Partners Group Holding AG

7-Mar-17 Allfunds Bank SA Finance $1.9 Hellman & Friedman LLC

20-Mar-17Property Portfolio (German and Dutch property portfolio)

Real Estate/Property $1.4 Blackstone Group LP

31-Mar-17 31-Mar-17Bradford & Bingley plc (Mortgage loans portfolio) Finance $1.2 Blackstone Group LP

30-Mar-17 30-Mar-17 Corialis International SA/NV Metal and Steel $1.1 CVC Capital Partners Ltd.

31-Mar-17 Novo Banco SA Finance $1.1 Lone Star Global Acquisitions Ltd.

31-Mar-17Compania Logistica de Hidrocarburos SA - CLH Oil and Gas $1.1 CVC Capital Partners Ltd.

21-Feb-17 Zabka Polska SA Retail $1.1 CVC Capital Partners Ltd.

24-Mar-17Shell Gabon SA;Shell Upstream Gabon SA Oil and Gas $1.0 Carlyle Group LP

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Source: Dealogic

EMEA PE acquisitions — the top deals with disclosed financial terms in 2017

Appendix AGlobal PE acquisition activity by region — Asia-Pacific

Asia-Pacific PE acquisitions (in US$b)

Source: Dealogic

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Announcement date

Completion date Company Sector Value (US$) Acquiror

8-Jan-17McDonald's China Management Ltd. Dining and Lodging $2.1b

Carlyle Group LP; CITIC Capital Partners Ltd.

24-Feb-17 24-Mar-17 Daesung Industrial Gases Co. Ltd. Chemicals $1.6b MBK Partners Ltd.

13-Jan-17 22-Mar-17 Hitachi Koki Co. Ltd. Consumer Products $1.2b KKR & Co. LP

28-Mar-17 28-Mar-17 Bharti Infratel Ltd. Telecommunications $949.1mCanada Pension Plan Investment Board

1-Feb-17 Hyundai Card Co. Ltd. Finance $583.9m

Affinity Equity Partners (HK) Ltd.; Carlyle Group LP

24-Feb-17NEC TOKIN Corp. (EM device business ) Technology $428.3m

Japan Industrial Partners Inc.

16-Feb-17 Zhaopin Ltd. Technology $407.0m FountainVest Partners

24-Mar-17 TASAKI & Co. Ltd. Retail $360.1m MBK Partners Ltd.

31-Jan-17 31-Mar-17 Allied Mills Pty Ltd. Food and Beverage $344.3mPacific Equity Partners Pty. Ltd.

4-Jan-17 4-Jan-17MEDall Healthcare Pvt. Ltd. Health Care $235.0m Abraaj Capital Ltd.

Source: Dealogic

Asia-Pacific PE acquisitions — the top deals with disclosed financial terms in 2017

Source: Dealogic

Global PE-backed IPOs — value and volume — quarterly trend (US$b)

Appendix AGlobal PE exit activity

Global PE-backed exits by M&A — value and volume — quarterly trend (US$b)

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Source: Dealogic

Source: Dealogic

Appendix AGlobal PE exit activity — Americas

Americas PE exits — top exits 2017

Americas PE exits (in US$b)

Announcementor filing date

Completion or priced

date

Company Sector Value (US$b) Sponsor Type

6-Jan-17 31-Jan-17 Invitation Homes Inc. Real Estate $6.3 Blackstone Group LP IPO

9-Jan-17 24-Mar-17Surgical Care Affiliates Inc. Health Care $3.5 TPG Capital LP M&A

19-Dec-16 26-Jan-17 Jagged Peak Energy Inc. Oil and Gas $3.2 Quantum Energy Partners IPO

13-Feb-17 ZELTIQ Aesthetics Inc. Health Care $2.5 Frazier Healthcare Partners M&A

17-Mar-17USI Insurance Services LLC Insurance $2.5 Onex Corp. M&A

1-Jun-16 26-Jan-17 JELD-WEN Holding Inc. Construction/Building $2.4 Onex Corp. IPO

2-Oct-15 31-Jan-17 Laureate Education Inc. Professional Services $2.4

Sterling Partners Inc.;Citigroup Private Equity;KKR & Co. LP;Snow Phipps Group LLC IPO

24-Jan-17Multi Packaging Solutions International Ltd. Forestry & Paper $2.3

Carlyle Group LP;Madison Dearborn Partners LLC M&A

31-Mar-17Reliance Home Comfort LP Construction/Building $2.1 Alinda Capital Partners LLC M&A

20-Mar-17 Cision US Inc. Technology $2.1 GTCR Golder Rauner LLC M&A

0

20

40

60

80

100

120

140

160

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90


M&A value IPO value M&A volume IPO volume

21

Source: Dealogic


Source: Dealogic

Appendix AGlobal PE exit activity — EMEA

EMEA PE exits — top exits 2017

EMEA PE exits (in US$b)


Completion orpriced date


7-Feb-17 3-Apr-17 Mauser Group NV Chemicals $2.3 Clayton Dubilier & Rice LLC M&A

22-Jan-17 Cerba HealthCare SAS Health Care $1.9 PAI Partners SAS M&A

7-Mar-17 Allfunds Bank SA Finance $1.9Warburg Pincus LLC;General Atlantic LLC M&A

14-Mar-17Kemble Water Holdings Ltd. Utility & Energy $1.6

Macquarie Infrastructure & Real Assets Pty Ltd. M&A

6-Mar-17 28-Mar-17 Neinor Homes SAU Real Estate $1.4Lone Star Global Acquisitions Ltd. IPO

23-Mar-17Vanderlande Industries BV Machinery $1.3 NPM Capital NV M&A

30-Mar-17 30-Mar-17Corialis International SA/NV Metal & Steel $1.1 Advent International Corp. M&A

31-Mar-17

Compania Logistica de Hidrocarburos SA -CLH Oil & Gas $1.1 Ardian SA M&A

21-Feb-17 Zabka Polska SA Retail $1.1Mid Europa Partners LLP;Ardian SA M&A

30-Jan-17 30-Jan-17Zenith Vehicle Contracts Ltd. Finance $0.9 HgCapital LLP M&A

0

20

40

60

80

100

120

140

160

$0

$10

$20

$30

$40

$50

$60

$70



22

Source: Dealogic


Capital Briefing23

Source: Dealogic

Appendix AGlobal PE exit activity — Asia-Pacific

Asia-Pacific PE exits — top exits 2017

Asia-Pacific PE exits (in US$b)

0

5

10

15

20

25

30

35

40

45

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45



Source: Dealogic



Completion orpriced date


16-Mar-17 Alinta Holdings Utility and Energy $3.1 TPG Capital LP M&A

28-Feb-17 USJ Co Ltd.Leisure and Recreation $2.3

Goldman Sachs Capital Partners;MBK Partners Ltd. M&A

24-Feb-17 24-Mar-17Daesung Industrial Gases Co Ltd. Chemicals $1.6

Goldman Sachs Capital Partners M&A

5-Jan-17 22-Mar-17China Modern Dairy Holdings Ltd. Agribusiness $1.5

CDH China Holdings Management Co. Ltd.;KKR & Co. LP M&A

22-Feb-17 21-Mar-17Sushiro Global Holdings Ltd. Dining and Lodging $0.9 Permira Ltd. IPO

8-Feb-17 13-Mar-17 Macromill Inc.Professional Services $0.7 Bain Capital LLC IPO

27-Feb-17Crystal Orange Hotel Holdings Ltd. Dining and Lodging $0.5 Carlyle Group LP M&A

6-Feb-17 6-Feb-17 Yongle Tape Co. Ltd. Chemicals $0.2 Shaw Kwei & Partners Ltd. M&A

4-Jan-17 4-Jan-17MEDall Healthcare PvtLtd. Health Care $0.2

Abraaj Capital Ltd.;Peepul Capital LLC M&A

23-Feb-17 24-Feb-17POSCO ENERGY Co. Ltd. Utility and Energy $0.2

STIC Investments Inc.;SkyLake Incuvest & Co. M&A

8-Feb-17Abacus Property Group Real Estate $0.2 KKR & Co. LP M&A

Appendix AM&A activity monthly flash

Volume Value Volume Value

Calendar YTD

YTD % ∆ Calendar YTD

YTD % ∆ LTM LTM % ∆ LTM LTM % ∆

2017(to March 17)

vs. 2016(to March 16)

2017(to March 17)

vs. 2016(to March 16)

LTM(to March 17

vs. PTM(to March 16)

LTM (to March 17)

vs. PTM(to March 16)

M&A activity by areas and regions

Global 9,034 -5% 733,750 11% 35,946 -5% 3,575,659 -11%

Americas 3,499 -3% 424,580 24% 13,376 -9% 2,163,015 -4%

Canada 392 -37% 59,597 -25% 2,440 -3% 216,019 -3%

MeCAR 51 -16% 5,775 -29% 215 -18% 19,011 -35%

SA region 189 -26% 17,157 62% 807 -26% 91,870 44%

US 2,653 -8% 366,505 23% 10,457 -13% 1,965,129 -5%

EMEA 3,414 -3% 307,509 50% 13,065 -1% 1,277,217 -1%

Africa 143 -17% 9,785 8% 570 -13% 48,558 41%

BeNe 199 -13% 36,701 235% 823 -13% 118,932 -60%

CIS 143 -38% 5,260 -42% 823 -13% 60,593 10%

CSE 150 -45% 8,576 7% 887 -18% 53,900 27%

FraLux 538 -17% 59,319 116% 2,266 -3% 170,361 -3%

GSA 576 -1% 67,711 1% 2,257 -4% 312,943 54%

Israel 78 20% 18,344 375% 244 -8% 38,316 -29%

Mediterranean 354 11% 58,080 143% 1,391 -7% 153,387 -6%

MENA 58 -39% 22,178 978% 277 -23% 81,576 216%

Nordics 389 14% 8,270 -52% 1,394 7% 67,547 10%

UK&I 825 -10% 62,156 46% 3,597 4% 327,753 -34%

Asia-Pacific 3,201 -7% 195,765 -31% 13,661 -4% 1,044,226 -14%

ASEAN 389 -9% 17,828 -14% 1,830 5% 83,990 23%

Greater China 1,425 13% 114,287 -40% 5,618 -3% 611,495 -22%

India 229 -32% 25,315 102% 1,081 -21% 83,107 73%

Japan 742 -2% 26,350 -39% 3,062 -2% 165,299 -4%

Korea 106 -70% 8,797 -40% 1,120 -16% 58,716 -41%

Oceania 338 -15% 14,430 -31% 1,637 -5% 92,507 -1%

M&A activity by sectors

Aerospace and defense 72 -20% 15,657 892% 344 -10% 44,965 43%

Automotive and transportation 629 -4% 40,184 -58% 2,447 -5% 203,752 -32%

Banking and capital markets 556 -12% 57,826 -4% 2,222 -13% 278,653 -32%

Consumer products and retail 1,270 -11% 107,310 17% 5,222 -7% 417,100 -33%

Diversified industrial products 1,190 -2% 109,870 -5% 4,868 -3% 533,014 18%

Government and public sector 167 -2% 2,343 -59% 607 -13% 21,385 -22%

Insurance 268 3% 22,795 1% 1,044 -9% 139,918 -45%

Life sciences 599 -10% 87,508 32% 2,360 -8% 401,703 0%

Media and entertainment 596 -8% 14,646 -61% 2,338 -11% 221,359 -25%

Mining and metals 504 0% 24,376 7% 2,155 4% 121,752 -13%

Oil and gas 346 5% 136,016 200% 1,470 4% 523,966 49%

Other sectors 1,117 1% 22,088 -56% 4,011 -9% 105,942 -30%

Power and utilities 363 2% 46,232 0% 1,438 -4% 274,101 37%

Provider care 308 5% 19,729 115% 1,147 -2% 74,657 49%

Real estate 836 -6% 50,245 9% 3,406 0% 241,153 10%

Technology 2,547 -1% 99,705 -19% 9,588 -4% 617,677 -20%

Telecommunications 168 -5% 31,345 22% 706 -12% 274,977 71%

Wealth and asset management 221 -13% 15,371 123% 994 -3% 60,178 42%

24

Regions’ M&A numbers represent a summation of domestic, inbound and outbound M&A activity involving the region. Sectors’ numbers represent involvement from either side, i.e., target or acquiror, except in the case of wealth and asset management, where only target-side involvement has been mapped.M&A analysis as at 1 April 2017. Source: Dealogic. All Rights Reserved. Note: data is continually updated and therefore subject to change.

Capital Briefing

2016 2017

J F M A M J J A S O N D J F M A M J J A S O N D

2015 2016 2017

J F M A M J J A S O N D J F M A M J J A S O N D J F M

Appendix BM&A multiples and bid premium

Deal multiples greater than 30x and bid premium greater than 100% have been excluded from calculation of median.M&A analysis as at 1 April 2017. Source: Dealogic. All Rights Reserved. Note: data is continually updated and therefore subject to change.

25

Median deal multiple — EV / EBITDA

Global Americas Asia-Pacific EMEA

LTM(to Mar 17)

PTM(to Mar 16)

LTM(to Mar 17)

PTM(to Mar 16)

LTM(to Mar 17)

PTM(to Mar 16)

LTM(to Mar 17)

PTM(to Mar 16)

Aerospace and defense 12.8x 11.6x 10.2x 9.1x 13.9x 14.4x 15.5x 11.6x

Automotive and transportation 9.4x 9.4x 8.5x 11.6x 10.1x 10.0x 9.4x 8.9x

Consumer products and retail 10.7x 11.0x 11.1x 11.0x 11.9x 11.8x 9.7x 10.4x

Diversified industrial products 9.2x 10.2x 10.0x 11.2x 10.9x 10.6x 8.1x 9.3x

Financial services 10.4x 10.2x 12.8x 12.0x 8.8x 7.9x 8.8x 10.0x

Government and public sector 8.2x 11.1x 8.2x 8.6x 8.2x 11.2x 8.3x 10.2x

Health care 10.2x 11.8x 11.4x 10.3x 16.2x 16.3x 8.9x 11.0x

Life sciences 12.2x 10.7x 8.2x 9.5x 13.2x 8.6x 13.0x 12.0x

Media and entertainment 14.0x 11.8x 12.9x 12.6x 19.4x 11.8x 11.6x 11.0x

Mining and metals 10.2x 11.5x 11.0x 9.5x 11.3x 14.5x 9.2x 11.4x

Oil and gas 8.3x 8.8x 7.8x 8.7x 8.5x 9.4x 9.1x 8.9x

Other sectors 8.7x 8.2x 11.1x 7.2x 14.2x 10.5x 5.6x 10.3x

Power and utilities 9.3x 9.4x 13.5x 10.4x 9.0x 11.9x 8.7x 7.8x

Real estate 10.3x 9.4x 11.2x 9.5x 13.3x 9.1x 9.6x 9.6x

Technology 11.6x 11.3x 11.6x 13.7x 11.9x 11.3x 10.4x 9.8x

Telecommunications 8.4x 7.4x 10.3x 6.9x 8.2x 9.6x 8.1x 7.2x

Total 10.3x 10.3x 11.1x 10.6x 11.1x 10.8x 9.1x 9.8x

Median bid premium to four-week stock price

Global Americas Asia-Pacific EMEA

LTM(to Mar 17)

PTM(to Mar 16)

LTM(to Mar 17)

PTM(to Mar 16)

LTM(to Mar 17)

PTM(to Mar 16)

LTM(to Mar 17)

PTM(to Mar 16)

Aerospace and defense 35% 22% 50% 14% 30% 31% 29% -

Automotive and transportation

22% 13% 32% 21% 19% 10% 8% 11%

Consumer products and retail 15% 25% 26% 32% 14% 20% 14% 27%

Diversified industrial products 23% 19% 30% 28% 22% 17% 21% 23%

Financial services 22% 23% 29% 28% 15% 10% 15% 12%

Government and public sector 23% 26% 31% 44% 3% 24% 23% 16%

Health care 15% 20% 16% 28% 5% 10% 14% 21%

Life sciences 25% 18% 25% 32% 29% 16% 28% 2%

Media and entertainment 30% 23% 42% 36% 14% 19% 12% 16%

Mining and metals 21% 18% 24% 25% 17% 12% 25% 17%

Oil and gas 25% 23% 33% 26% 21% 18% 16% 30%

Other sectors 18% 25% 16% 27% 20% 21% 20% 20%

Power and utilities 23% 20% 31% 30% 12% 20% 38% 16%

Real estate 25% 15% 27% 18% 25% 17% 18% 5%

Technology 25% 21% 34% 29% 19% 17% 19% 24%

Telecommunications 13% 17% 43% 26% 14% 20% 6% 15%

Total 22% 21% 30% 28% 18% 17% 17% 18%

Capital Briefing

Appendix CCapital Confidence Barometer (October 2016): by area

Respondents who expect their company to pursue acquisitions in the next 12 months

40%

56%59%

50%

57%

0%

25%

50%

75%

100%

Oct 14 Apr 15 Oct 15 Apr 16 Oct 16

34%

57%

67%

54%

62%

0%

25%

50%

75%

100%


30%

50% 48%44%

47%

0%

25%

50%

75%

100%


Global Americas EMEA

57%

45% 44%

38%

47%

0%

25%

50%

75%

100%


Asia-Pacific China Germany

28%

51%56%

50%

61%

0%

25%

50%

75%

100%


Japan UK US

16%

58%

52%

59%

48%

0%

25%

50%

75%

100%


33%

61%

74%

57%

75%

0%

25%

50%

75%

100%


26 Capital Briefing

56%

43%40%

43%

49%

0%

25%

50%

75%

100%


68%

51%

43%

35%

61%

0%

25%

50%

75%

100%


Notes


Notes


If you would like to discuss any of the topics covered in this publication, please contact your EY advisor or any of the contacts below.

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