"European Private Equity Outlook 2016": günstiges Fremdkapital und positive Konjunkturerwartung...

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Munich, February 2016

European

Private EquityOutlook 2016

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Our seventh 'European Private Equity Outlook' reveals how expertsview the market and its development in 2016

For the PE Outlook more than 2,600 experts from private equity investment companiesacross Europe were contacted

The results reflect what experts in the market expect for different countries and regionsand what they consider to be relevant factors for the private equity business in 2016

We hope you enjoy reading this study. We would be happy to receive your feedback

and/or have the opportunity to discuss the results with you in more detail

The 'European Private Equity Outlook 2016' is the seventh in a series launched byRoland Berger in 2010

Source: Roland Berger

Preliminary remarks

VII

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Contents Page

 A. Focus of study and methodology 4

B. Executive summary 6

C. Results of the PE Outlook for 2016 9

D. Comparing PE Outlook 2016 to previous years –

 Selection 25

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 A. Focus of studyand methodology

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The study is based on an exclusive survey with professionals fromleading private equity firms across Europe, similar to last year

Overview of Europeanprivate equity

    K   e   y    t   o   p    i   c   s    i   n    2    0    1    6

> Development ofPE M&A market

> Key challengesfor private equity

> Private equitybusiness model

Source: Roland Berger

1) Germany, Austria, Switzerland

68%

23%5 - 10years

< 5

years

> 10years

9%

Private equity survey 2016 

Geographical focus[% of responses]

PE experience[% of responses]

Focus and methodology of the study

2,600experts contacted

Scandinavia 8%

 

12% 

Benelux 

18% 

Europe in total 

4% 

Poland 

10% 

UK 

8% 

France 

3% 

CEE excl. Poland 

Iberia and Italy 

9% 

28% 

DACH1)

    O   v   e   r   v    i   e   w    o

    f   p   a   r    t    i   c    i   p   a   n

    t   s

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B. Executive summary

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The majority of PE professionals expect a growing number of M&Atransactions with PE involvement in 2016

Executive summary

Growth in PE activity is expected to be highest in Germany, closely followed by Iberia/Italy at 3.2% and 3.1%,respectively – Overall, growth expectations for 2016 increased compared to 2015, but still remain at cautious levels3

The mid-cap segment is expected to see most deals in 2016: 83% of transactions in 2016 are expected to be in

the range of up to EUR 250 m –

 But there is clear anecdotal evidence also pointing to a rise in large-cap deals

5

4 Technology & media, pharma/healthcare and consumer goods & retail are expected to yield most M&A dealswith PE involvement in 2016 – More than 60% of the participants see these as leading industries for PE

2 For the first time, political stability is expected to be the most influential factor for PE-driven M&A in 2016,followed by the availability of targets  – The overall economic situation is expected to improve in 2016

1 Nearly two thirds of PE professionals (64%) expect a growing number of M&A transactions with PEinvolvement in 2016 – This constitutes a further increase from 2015 

New investments will again be the most important activity in the PE value chain for 2016 – For the first time, divesting existing investments is expected to be more important than developing portfolio companies 6

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PE professionals are still divided on whether the PE business modelis sufficiently robust and sustainable in the long term

Respondents still appear divided on whether the PE business model is sufficiently robust (45%) or needs tobe adapted (40%) – The perceived need for change decreased vs. last year and optimism re. M&A deals increased9

Sale to strategic investors and sale to other PE investors are expected to be the most promising exit channels 

for PE investments –

 More than 60% of PE professionals consider these two exit channels to be dominant

11

Active portfolio management is a key factor  for success according to all PE managers – Add-on acquisitionsand new products & services are considered the most important value creation measures in 201610

The financing situation across major instruments is expected to improve in 2016 vs. 2015 – Growth financingis expected to be significantly easier ; however, PE professionals expect recapitalization to be more difficult8

More than half of PE professionals expect no change in the competitiveness of fundraising in 2016 and only37% expect the fundraising situation to become more competitive – This is slightly more favorable than in 2015 7

Weak change management capabilities, followed by unfavorable industry development are considered themost important roadblocks with regard to value creation for PE portfolio companies in 2016 12

Executive summary

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C. Results of the PEOutlook for 2016

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Nearly two thirds of PE professionals expect a growing number ofM&A transactions with PE involvement in 2016  – Increase over 2015

Source: Roland Berger

Increase of

more than 10%

10%

0% to +10%

1%

0%

13%

22%

Decline of

more than 10%

0% to -10%

54%

64%

% of responses [only one answer possible]

Development of PE M&A market

M&A transactions with PE involvement in 2016 compared to 2015 [%]

> 64% of the respondents expect thenumber of M&A transactions with PEinvolvement to increase in 2016

> 14% of all participants anticipate adecrease in the number of M&A

transactions with PE background

> Compared with last year's expec-tations, participants are a bit morepositive with regard to 2016  – 64% ofrespondents expect positive growthin 2016 vs. 62% in 2015

"What change do you expect to see in 2016 regarding the number ofcompleted M&A transactions with PE involvement?"

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Respondents see political stability as the most influential factor forPE-driven M&A in 2016 – Economic situation expected to improve

Source: Roland Berger

% of participants that expect this factor to have a major influence [multiple answers possible]1) Truncated; excl. substantial deterioration and substantial improvement

Development of PE M&A market

Overview of relevant factors for M&A business in Europe [%]

> The most important factor, politicalstability, is expected to deteriorate in2016 compared to 2015 – Mainlyreflecting the refugee crisis for thefirst time since the launch of the PEOutlook

> Especially the overall economicsituation is expected to improvesignificantly in 2016 in comparison tothe previous year

"What will be the most influential factors affecting the number of Euro-  pean M&A transactions with PE involvement in 2016? How will theydevelop?"

 Availability of attractiveacquisition targets

19%

Further developmentof the Euro crisis

21%

Development ofvaluation levels

21%

Overall economicsituation 23%

 Availability of inexpensivedebt financing

23%

Political stability 35%

Importance of factors Development of factors in 20161) 

1

2

3

4

5

Deterioration ImprovementNo change

6

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PE activity across most nations expected to grow at low to moderate levels – Germany and Iberia/Italy with highest expected growth rates

Source: Roland Berger

Greece -0.2%

 Austria & Switzerland 1.0%

2.9%

Iberia & Italy 3.1%

Germany 3.2%

Poland 1.5%

CEE excl. Poland2) 1.6%

Benelux  1.7%

Scandinavia1) 2.0%

France 2.1%

UK 

Expected change in PE M&A activity in 2016 compared to previous year in %1) Includes Denmark, Norway, Sweden 2) Central and Eastern Europe includes Bulgaria, Croatia, Czech Republic, Hungary, Romania, Slovakia and Slovenia

10

2

3

4

5

6

7

89

Development of PE M&A market

Change in PE M&A activity in major countries –

 2016 vs. 2015 [%]

1

> The PE markets of Germany andIberia/Italy are expected to see thestrongest growth in PE M&A activities – up 3.2% on the previous year

> They are followed by the UK (2.9%),

France (2.1%) and Scandinavia witha 2.0% growth rate

> Compared with last year's study,respondents are more positive,expecting faster growth rates acrossalmost all regions

"What change in PE M&A activities do you expect to see in the followingcountries in 2016?"

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TMT, pharma/healthcare as well as consumer goods and retail areexpected to yield the most M&A deals with PE involvement in 2016

Source: Roland Berger

% of participants that expect a high number of transactions [multiple answers possible]

Development of PE M&A market

Likelihood of high number of M&A transactions by industry [%]

> Two thirds of all study participantsexpect technology & media to be themost active sectors/industries interms of the number of M&A trans-actions with private equity involve-ment

> More than 60% of the study partici-pants also believe pharma & health-care and consumer goods & retail will see a large number of M&Atransactions in 2016

> A fairly low number of PE trans-actions is expected for building &construction

"In what European industries do you expect to see the most M&Atransactions with PE investor involvement in 2016?"

14%

14%

17%

18%

28%

40%

49%

60%

62%

65%

2 Pharma & healthcare

4 Logistics & business services

3 Consumer goods & retail

5 Financial services

10 Building & construction

1 Technology & media

7 Automotive

6 Capital goods & engineering

9 Energy & utilities8 Chemicals

1   0   0   %

 m a x .v  a l    u  e 

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The mid-cap segment is likely to dominate again  – 83% of trans-actions in 2016 expected to be in the range of up to EUR 250 m

Source: Roland Berger

% of responses [only one answer possible]

Development of PE M&A market

Expected range of PE transaction value in 2016 [%]

> Large-cap deals with enterprisevalues above EUR 500 m are stilllikely to be infrequent. But there isclear anecdotal evidence pointing toa rise in these

> 83% of all PE transactions in 2016are expected to be below EUR 250 m – In line with 2015 (86%) and 2014(88%)

> 58% of respondents expect theenterprise value of most PE trans-actions to be below EUR 100 m in2016 (61% in 2015)

"Most PE transactions on the European M&A market in 2016 will be in therange of …"  

25%

EUR

100-250 m

EUR

250-500 m

1%

15%

EUR

500-1,000 m

1%

EUR

>1,000 m

EUR

50-100 m

39%

EUR

<50 m

19%

83%

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Just as in 2015 and 2014, making new investments will also be themost important activity in the value chain of PE investors for 2016

Key challenges for private equity

Source: Roland Berger

Making newinvestments

38% 26% 

Developingportfolio

companies

Divestingexisting

investments

23% 

Fund-raising

12% 

Focus of PE investors on lifecycle stages in 2016 [%]

> Making new investments is again toppriority for PE funds in 2016 – In prioryears this has been very similar

> The importance of divesting existinginvestments slightly increased for

2016 from 25% in 2015 to 26% in2016 making this the second mostimportant factor – This is due to thecurrent attractiveness of sellingportfolio companies

> Developing portfolio companies is notas much in the focus anymore, withonly 23% stating that they will placemost of their focus on this in 2016

compared to 31% in 2015

"On which phase of the PE value chain will you focus most in 2016?"

Extendingexisting

funds

1% 

% of participants that will place most of their focus on this phase of the PE value chain [multiple answers possible] 

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More than half (58%) of PE professionals expect no change in thecompetitiveness of fundraising – Slightly more positive than last year

Source: Roland Berger

% of responses [only one answer possible]

Expected degree of competitiveness in fundraising in 2016 [%]

> 58% of interviewees anticipate nochange in the competition for funds in2016 compared to the status quo in2015. Last year's figure was 46%

> The number of PE professionals who

expect a more intense competitivesituation decreased from 46% for2015 to 37% for 2016, yielding amore favorable view – Only 5%expect a significant improvement inthe fundraising situation

"What degree of competitiveness do you expect in fundraising in 2016?"

Competitive situation easing

Competitive situation

becoming more intenseNo change in

competitive situation58%37%

5%

Key challenges for private equity

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The financing situation across major instruments is expected toimprove in 2016 vs. 2015 – Recapitalization slightly more difficult

Source: Roland Berger

 Availability of external financing in 2016 [%]

Growth financing

i.e. working capital, lines for add-onacquisitions or CAPEX

Recapitalization i.e. debt substituting equity,dividend to sponsor

Slightly moredifficult to raise

Slightlyeasier to raise

Nochange

Refinancing i.e. improvement of terms

Leveraged buy-outs i.e. new transactions

> Overall, growth financing i.e. CAPEX,working capital, is anticipated to beslightly easier to raise in 2016

> A positive dynamic is also expectedfor leveraged buy-outs and

refinancing, whereas recapitalizationis expected to be slightly moredifficult in 2016 compared to theprevious year

"Compared to 2015, how easily available will external financing be in2016?"

[only one answer possible]

Key challenges for private equity

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33% of survey respondents expect target availability to be moreattractive in 2016, which is less than in previous years

% of responses [only one answer possible]

Source: Roland Berger

Expected development of investment opportunities in 2016 [%]

> 33% of all private equity professio-nals expect targets for investmentsto be more attractive in 2016 than in2015 – This is a decrease from 2015,when 44% expected more attractiveinvestment opportunities to become

available

> The number of  study participantswho "somewhat agree" experienceda sharp decrease from 40% in 2015to 30% in 2016

"The targets available on the market in 2016 will be more attractive thanin 2015 – Do you agree/disagree to this question?"

3%

30%

44%

23%

0%

Neither agree

nor disagree

Somewhat

disagree

Somewhat

agree

Completely

disagree

Completely

agree

33%

Key challenges for private equity

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Secondary buy-outs are perceived as the most important source ofattractive targets in 2016, followed by family-owned firms

Source: Roland Berger

% of participants that expect this source of targets to be important or very important [multiple answers possible]

Sources of most attractive targets in 2016 [%]

> 67% of PE professionals ratesecondary buy-outs as the mostimportant source of attractive targetsin 2016 – A strong increase from2015 levels

> In comparison with 2015 results,parts of groups/carve-outs decreasedmarkedly from 69% in 2015 to 54% in2016

> Going private transactions are onceagain considered least important

"What will be the source of the most attractive targets in 2016?"

64%

5%

11%

54%

67%

5 Listed companies (taking private)

4 Insolvent companies/distressed deals

3 Parts of groups/carve-outs

2 Majority shareholdings

in family-owned companies

1 Secondary buy-outs

1   0   0   % m a x .v  a l    u  e 

Key challenges for private equity

K h ll f i t it

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M&A with strategic investors or other PE investors are expected tobe the most promising exit channels for PE investments

Source: Roland Berger

% of participants that expect a slight or significant increase in this exit channel [multiple answers possible]

Change in exit channels in 2016 compared to 2015 [%]

> The dominant exit channels in 2016are sale to strategic investors andsale to PE investors  – This is thesame picture as last year

> Overall, confidence in M&A trans-actions increased, compared to 2015

 – Last year, only 61% of PE

professionals expected M&A withstrategic investors to be the mostdominant exit channel

> All other exit channels clearly lostground compared with 2015 results(dual track: -4 ppt, IPO: -3 ppt, tripletrack: -6 ppt)

"What will be the dominant exit channel for PE investments in 2016compared to 2015?"

16%

22%

22%

61%

69%

5 Triple track (i.e. IPO,

M&A process and refinancing)

4 IPO

3 Dual track (i.e. IPO

and M&A process)

2 M&A with PE investors

1 M&A with strategic investors

1   0   0   % m a x .v  a l    u  e 

Key challenges for private equity

Pri ate eq it b siness model

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21Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

Respondents still appear divided on whether the PE business modelis sufficiently robust (45%) or needs to be adapted (40%)

Source: Roland Berger

Private equity business model

Necessity of adjusting Private Equity business model [%]

> Last year, the majority (62%) stillbelieved it is necessary to changethe PE model – However, this year45% of all participants think that noadjustment is necessary

> This reflects the increase inconfidence of the professionalsregarding the next year and thegreater optimism regarding PE-driven M&A deals development andan improved fundraising situation

"The Private Equity business model is just as robust now as it was beforethe crisis. No adjustment is necessary. Agree or disagree?"

Somewhatdisagree

Somewhatagree

Completelydisagree

Neitheragree ordisagree

Completely agree

40%of all participants

15%of all participants are

45%of all participants

disagreeneutral

agree

% of responses [only one answer possible]

20%

83%

17%

80%

Private equity business model

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22Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

 Active portfolio management is key for success to all PE managers – Passive approaches are not expected to work any longer

Source: Roland Berger

% of responses [only one answer possible]

Private equity business model

Importance of active portfolio management [%]

> Just as last year, responses gene-rally reflect the investment approachof the participating funds – Activeinvolvement in (major) businessdecisions of the portfolio companiesis key

> Simply holding investments using apassive strategy and financial engi-neering is not expected to work anylonger

"Managing portfolio companies actively will become more important in thefuture – Passive management is no longer suitable. Agree or disagree?"

79%

18%

1%1%1%

Somewhat

agree

Somewhat

disagree

Neither agree

nor disagree

Completely

agree

Completely

disagree

97%

Private equity business model

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23Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

 Add-on acquisitions as well as new products & services are expectedto be the most important value creation measures in 2016

Source: Roland Berger

21%12%

New products & services 15%29%

5%

Footprint optimization 10%8%

Cost reduction initiative

Add-on acquisitions 22%31%

-2 ppt

+14 ppt

-9 ppt

+9 ppt

Refinancing -5 ppt

-2 ppt

-2 ppt

-4 ppt

Working capital optimization/

Capex efficiency 7%

5%

Purchasing/

supply chain optimization 9%

9%4%

Pricing 7%5%

Importance of value creation measures –

 2016 vs. 2015 [%]

> Respondents consider add-onacquisitions as well as new products& services to be the most importantvalue creation measures in 2016  – Both measures are considered moreimportant than in prior years

> Cost reduction initiatives andrefinancing are considered lessimportant in 2016 compared to theprevious year – Likewise footprintoptimization, purchasing and workingcapital optimization as well as pricingmeasures are considered lessimportant

"Which of the following portfolio improvement /value creation measuresdo you consider most important in 2016; which measures have been mostimportant in 2015?"

Private equity business model

2015

2016

% of responses [maximum of four responses possible]

Private equity business model

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24Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

Weak change management capabilities are considered the mostimportant roadblock with regard to value creation measures in 2016

Source: Roland Berger

% of participants that expect a slight or significant increase in this exit channel [multiple answers possible]

Most important roadblocks for PE value creation in 2016 [%]

> Approximately one third of allparticipants name weak changemanagement capabilities as mainroadblock with regard to performanceimprovement/value creation at PEportfolio companies

> 24% state that an unfavorableindustry environment as a mainroadblock for 2016 – This is the onlyexternal factor, as all other factorsare seen within the portfolio companyor within the relationship between PEinvestor and the portfolio company

"Which potential roadblocks with regard to performance improvement/value creation measures are most important in 2016?"

24%

6%

10%

22%

32%

5 Too many different stakeholders

4 Decision process delays

3 Insufficient

implementation skills

2 Unfavorable

industry environment

1 Weak change

management capabilities

1   0   0   % 

m a x .v  a l    u  e 

Private equity business model

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25Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

D. Comparing PE Outlook2016 to previous years – Selection

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26Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

"What change do you expect to see in 2015 (2014/2013)regarding the number of completed M&A transactions with PE involvement?"

Participants are slightly more confident on the number of M&Atransactions with PE involvement than last year  

Source: Roland Berger

24%

12%9%

53%

20%

10%8%   10%

54%

22%

13%

1%

Increase of more than 10%0% to +10%

58%

0%0% to -10%

5%

Decline of more than -10%

1%

M&A transactions with PE involvement in 2016/15 vs. 2015/14 and 2014/13 [%]

64% (2016) vs. 62% (2015) vs. 82% (2014)

% of responses in 2015 [only one answer possible]

% of responses in 2014 [only one answer possible]

% of responses in 2016 [only one answer possible]

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27Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

"What change in PE M&A activities do you expect to see in the following countries in 2016 (2015/2014)?"

Germany is expected to be the country with highest M&A transactiongrowth (3.2%) in 2016 – Overall, more positive picture than 2015

Source: Roland Berger

1) Includes Denmark, Norway, Sweden 2) Central and Eastern Europe includes Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Slovak Republic and Slovenia

-0.2%

1.0%

1.5%

1.6%

1.7%

2.0%

2.1%

2.9%

3.1%

3.2%

0.6%

2.1%

1.1%

4.3%

1.9%0.8%

6 Benelux 0.8%

10 Greece0.0%

9 Austria and Switzerland2.3%

0.5%

8 Poland2.6%

1.1%

7 CEE excl. Poland2)

4 France

1.7%3.2%

0.5%

3 UK

2 Iberia and Italy

2.1%

5 Scandinavia1)

3.3%

1.7%

1.8%

1 Germany 1.4%

Change in PE M&A activity in major countries in 2016/15/14 [ranked by 2016; %]

Expected change in PE M&A activity in 2014 vs. 2013 in %

Expected change in PE M&A activity in 2015 vs. 2014 in %

Expected change in PE M&A activity in 2016 vs. 2015 in %

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28Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

 All industries are expected to see equal or higher involvement in2016, except for energy & utilities and building & construction

Source: Roland Berger

Ranking of industries by number of M&A transactions in 2016/15/14 [ranked by 2015; %]"In what industries do you expect to see the most M&A transactions with PE investor involvement in 2016(2015/2014)?"

62%

14%

14%

17%

18%

28%

40%

49%

60%

65%

14%

22%

28%

26%

15%

14%

61%

55%

7 Automotive 10%

6 Capital goods & engineering29%

5 Financial services23%

10 Building & construction5%

9 Energy & utilities24%

8 Chemicals 13%

4 Logistics & business services43%

39%

3 Consumer goods & retail 63%48%

2 Pharma & healthcare 49%

1 Technology & media 46%

Expected change in PE M&A activity in 2014 vs. 2013 in %

Expected change in PE M&A activity in 2015 vs. 2014 in %

Expected change in PE M&A activity in 2016 vs. 2015 in %

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29Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

83% of PE professionals still anticipate transactions in 2016 to bebelow EUR 250 m – Very small transactions expected to decrease 

Source: Roland Berger

Expected range of PE transaction value in 2016/15/14 [%]"Most PE transactions on the European M&A market in 2016 (2015/2014) will be in the range of …"

0%1%

13%

25%

37%

24%

1%1%

15%

25%

39%

19%

EUR

>1,000 m

0%

EUR

500-1,000 m

3%

EUR

250-500 m

9%

EUR

100-250 m

27%

EUR

50-100 m

40%

EUR

<50 m

21%

% of responses 2015 [only one answer possible]

% of responses 2014 [only one answer possible]

% of responses 2016 [only one answer possible]

83% (2016) vs. 86% (2015) vs. 88% (2014)

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30Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

Making new investments is expected to become even moreimportant this year

Source: Roland Berger

Focus of PE investors on lifecycle stages in 2016/15/14 [ranked by 2016; %]"On which phase of the PE value chain will you focus most in 2016 (2015/2014)?"

1%

12%

23%

26%

38%

4%

17%

31%

25%

34%

5 Extending existing funds7%

4 Fundraising11%

3 Developing portfolio companies27%

2 Divesting existing investments 23%

1 Making new investments35%

Expected change in PE M&A activity in 2014 vs. 2013 in %

Expected change in PE M&A activity in 2015 vs. 2014 in %

Expected change in PE M&A activity in 2016 vs. 2015 in %

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31Roland Berger_European Private Equity Outlook 2016_final_150216.pptx

 A less significant increase in attractiveness of PE targets isexpected for 2016 compared to previous years 

Source: Roland Berger

Expected development of investment opportunities in 2016/15/14 [%]"Will the targets available on the market in 2016 (2015) be more attractive than in 2015 (2014)/2014(2013)?"

26%

16%

4%

40%41%

11%

4% 3%

30%

44%

23%

0%

Completely agree

9%

Somewhat agree

48%

Neither agree nor disagreeSomewhat disagreeCompletely disagree

1%

33% (2016) vs. 44% (2015) vs. 57% (2014)

% of responses in 2015 [only one answer possible]

% of responses in 2014 [only one answer possible]

% of responses in 2016 [only one answer possible]

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