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FY 2010 Summary - Market Environment



Public equity markets continued to rebound in the final quarter of 2010. S&P 500 and NASDAQ prices increased 10% and 12% respectively, driven primarily by continued improvements in corporate profits, which rose 2.3% in the fourth quarter, according to the US Bureau of Economic Analysis. During 2010, corporate profits surged 18%, similar to annual gains recorded by major US public equity indices. The public market rally, in turn, drove IPO activity. More than half of the full-year IPO volume was recorded during the fourth quarter alone, the best showing since the onset of the recession. The strong IPO momentum has continued into 2011, and the IPO pipeline looks promising. M&A activity also progressed during the fourth quarter and throughout the year, sup-ported by rising equity prices and increased confidence generated by positive economic news. A number of M&A survey results reveal cautious optimism for 2011 among corporations, with many expecting a continuation of attractive target valuations. Nonetheless, market volatility is still seen as a major obstacle for deal making.

  • IPO and M&A activity improved in 2010, supported by stronger equity and capital markets

Despite market disruptions that occurred in May, August and December as global macroeconomic uncertainties weighed heavily, high-yield issuance set an all-time record in 2010, and leveraged bank loans increased 57% over 2009. Following quantitative easing measures employed by the Federal Reserve, the yield curve steepened further, prompting investors to seek greater yield elsewhere. This, coupled with the corporate need to repay and refinance existing debt, spurred an increase in high-yield and lever-aged bank loan issuance activity. Leveraged bank loan repayments exceeded new issuance volumes, while the high-yield bond market size increased. The size of the combined high-yield and leveraged bank loan market declined slightly, indicating continued deleveraging. The combination of improved company financials with their increased ability to refinance debt had a positive impact on credit quality; Moody’s Speculative Grade US default rate dropped dramatically to 3.3%, from 13.2% in 2009. The default rate is projected to decline further, to 2.2%, in 2011.

  • Economic expansion is expected to continue, despite some headwinds

During 2010, the US economy grew 2.9%, driven by increased consumer spending. Annual job creation was, however, weaker compared to previous post-recession years, although there was a noticeable fourth-quarter improvement in the private sector, which created 438,000 jobs. The federal budget is projected for 2011 with a higher deficit, and any future spending cuts may drag on growth rates. Global market turbulence could also contribute to uneven growth. Despite these headwinds, double-dip recession risks have declined and another year of growth for the US economy can be expected.


  2009 2010 Q409 Q310 Q410 Dy/y Dq/q
Real GDP in % q/q ann 1
(2.6) 2.9 5.0 2.6 3.1 5.5 0.5
0.5CPI in % y/y 1
 (0.4)  1.6  1.4  1.1  1.3 2.0 0.1
Interest rate in % 2  0.25 0.25  0.25  0.25  0.25 0.0 0.0
Unemployment rate in % 2
 9.9 9.4  9.9 9.6  9.4  (0.5) (0.2)
Consumer confidence 2  72.5 74.5  72.5 68.2 74.5 2.0 6.3 
S&P 500 index price 3
23.5% 12.8%  5.5%  10.7% 10.2%  n/m n/m 
NASDAQ Composite index price 3  43.9% 16.9%  6.9%  12.3%  12.0%  n/m n/m 
IPO number
80 194 35 38 73 143% 92% 
IPO in USD bn 
20.2 48.2 9.8 8.1 27.2 139% 237%
M&A in USD bn 
638.8 770.2 203.8  185.4  213.5 21% 15% 
Leveraged loan in USD bn 4 239.3 375.6 84.6 85.2 115.3 57% 35%
High yield bond in USD bn 4 132.8 217.5 38.1 66.5 63.0 64% (5%)

1 Annual figures are annual averages.
2 Period-end figures.
3 Change for the relevant period.
4 New issue values.
Notes: Dq/q is the comparison of Q4 2010 vs. Q3 2010.
n/a - data not available.
n/m - not meaningful.
Period of M&A deals relates to the announcement dates. Data for previous periods may change if pending deals are cancelled.
Geography of M&A deals is based on the location of the target.
Source: Bloomberg, March 31, 2011; Credit Suisse Leveraged Finance Market Update, March 2011.

Public equity markets

Private equity deal activity increased rapidly in the fourth quarter, following the volatile deal-making environment of the first three quarters. Annual LBO investment figures doubled from a cyclical low, and VC investments showed solid progress. The revived IPO environment and an increased corporate M&A appetite supported private equity exits and investments. Driven by successful exits, improvements in comparable public multiples and EBITDA, portfolio valuations continued to rise throughout the year. Although more firms were raising funds this year, volumes fell slightly from 2009 due to weaker VC fundraising, a “wait and see” investor sentiment and a reduction in the size of funds raised.


  • LBO fundraising improved slightly as investors made more commitments to real estate and mezzanine funds

LBO fundraising reached USD 80.2 billion in 2010, representing a 4% increase from 2009, and the number of funds raised rose by nearly a quarter thanks to an increased number of private equity fund launches and slowly growing confidence among investors. Investors favored LBO funds that focused on US real estate, evidenced by a four-fold increase in commitments, to USD 10.9 billion, over 2009. The real estate market appears to have reached the bottom, and real-estate focused LBO funds stand to benefit from the potential upturn. Mezzanine-stage funds, which collected USD 8.7 billion in commitments, a 65% jump over 2009 volumes, displayed the second-best improvement. Furthermore, mezzanine-stage funds also stand to benefit from the comeback of a vibrant leveraged debt market and the improved fundamentals of those companies emerging from the recession. More funds targeting small and mid-market sectors were launched in 2010 than in the prior year. Nevertheless, the average target size of 2010 vintage year funds declined to USD 621 million, compared to the USD 1.0 billion average of 2009 vintage year funds. Consequently, commitments to funds smaller than USD 1.0 billion increased, with these funds securing 41% of overall fundraising, from 27% in 2009.

Following three slow quarters, USD 41.4 billion was invested in the fourth quarter of 2010, representing half of total annual investment volumes. 2010 investment volumes doubled over 2009, driven by improved high-yield credit market conditions and lenders willing to finance deals with good fundamentals. The historically low LIBOR rate and decline in LBO deal spreads (to 462 basis points over LIBOR from 565 in 2009), resulted in even less expensive LBO financing than during the height of the LBO boom in 2007. Even considering the 200 basis points LBO floor, the average LBO interest rate was 6.65% in 2010, compared with 8.00% in 2007.

  • LBO investments accelerated in 2010 on improved confidence and financing conditions

The majority of LBO debt was issued for new deal financing, followed closely by issues for dividend recaps and refinancings. Public-to-private transactions received most of the new deal financing, such as the largest pending LBO deal of 2010, the USD 5.3 billion acquisition of food company Del Monte by KKR, Vestar, and Centerview. Secondary deal financing volumes were the second largest, and the number of such deals even exceeded all other types of deal financings. The USD 3.9 billion acquisition of Burger King by 3G Capital from TPG, Goldman Sachs, and Bain Capital was the second largest completed LBO deal of 2010, following the IMS Health acquisition by TPG and the Canada Pension Plan Investment Board for USD 5.1 billion. Leverage in LBO deals increased to 4.6x EBITDA from 3.7x EBITDA in 2009. Leverage climbed in the fourth quarter to 4.9x EBITDA, decreasing the equity contribution in deals to 41.4%. Similarly, LBO deal acquisition multiples increased to an 8.1 multiple of EBITDA from a 7.2 multiple of EBITDA in 2009, driven by increased market comparables coupled with stiff deal competition.

  • Exit activity expanded rapidly following two years of drought

With equity markets continuing to rise in the second half of the year, US LBO firms realized 323 portfolio companies in M&A transactions, an increase of over 100 deals from 2009, and 27 US PE-backed companies went public, compared with 20 in 2009, ac-cording to Buyouts and Thomson Reuters. Consequently, LBO distributions were twice as high during the first three quarters of 2010 than in all of 2009. Mega and large buyout funds were responsible for the lion’s share of distributions as large and mid-market strategic buyer M&A activity gathered pace. Eight of the 10 largest exits during 2010 were trade sales, with the USD 4.7 billion sale of East Resources by KRR to Royal Dutch Shell topping the list. Furthermore, LBO funds benefited increasingly from favorable credit markets and distributed proceeds from dividend recaps. LBO portfolio valuations improved during the first three quarters of 2010 and are expected to exceed 2009 gains. Due to improved trading and exit activity, mega and large buyouts recorded the highest levels of appreciation. The rolling five-year return stood at 3.4%, based on third quarter valuations, which was slightly less than at the end of the year in 2009.


  • VC fundraising fell to a new trough in 2010

In the fourth quarter, 39 US VC funds raised USD 3.1 billion, slightly less than in the previous quarter. Annual commitment volumes declined 24% from 2009, marking the weakest VC fundraising period since 2003 – despite an increase in the number of funds raised. Early-stage fundraising took the hardest hit, with commitment volumes dropping by half from 2009. Seed-stage fundraising, however, boasted a record number of funds and capital raised since the dotcom crash. More than half of the 22 seed-stage funds that raised USD 1.3 billion in 2010 were first-time funds, indicating a growing number of new VC managers. These figures also reflect the expanding number of startup companies that can become viable candidates for VC financing, especially in the consumer web and mobile applications sectors.

  • VC investment activity made solid progress, with consumer information deals driving the largest deals

In contrast with fundraising, VC investments ended the year on a positive note, with volumes increasing 28% from the third quarter. Throughout the year, US VC firms invested USD 26.2 billion in 2,799 venture deals, a 6% increase in deals and an 11% increase in capital invested over 2009, according to Dow Jones VentureSource. Healthcare industry activity continued to dominate VC investments, followed closely by IT. However, healthcare deal values declined 7%, while IT deal volumes increased 8% from 2009. Consumer services (up 67%) recorded the strongest growth in 2010, as maturing consumer information service companies such as Facebook, Groupon, Twitter and Zynga Game Network received a collective USD 3.7 billion in VC investments. The renewable energy sector also enjoyed strong growth, with annual investments totaling USD 2.0 billion, a 35% increase from 2009.

  • VC exits rebounded even more strongly, supported by a resurgence of IPO and M&A activity

VC exit activity rebounded strongly in 2010, as the number of VC-backed company IP-Os skyrocketed in the fourth quarter. Thirty-eight VC-backed companies went public on US exchanges in the fourth quarter, making 2010, with 72 IPOs, the second most impressive of the decade. The IPO value of shares offered reached USD 7.0 billion and the post-offer value of all outstanding shares at the offer date amounted to USD 33.0 billion. In comparison, 12 companies were exited last year, raising USD 1.6 billion of initial proceeds with all outstanding shares valued at USD 7.5 billion at the offer dates. The growing importance of Chinese-based VC-backed companies became apparent in 2010, as US VC firms floated 24 companies from China on US exchanges. VC-backed companies increasingly became acquisition targets in 2010, with M&A exit values reaching USD 35.8 billion across 468 deals; representing a 61% increase in volume and 16% increase in the number of deals from 2009. As a result, distributions during the first three quarters exceed full-year 2009 distributions. Distributions are expected to increase further.

In conclusion, US private equity made solid progress in 2010, with both investment and exit activity on the path to recovery. Given the substantial amount of dry powder, however, LBO investment activity could have been greater had it not been hindered to some extent by the quick recovery of purchase price multiples and low selling pressure on cashrich corporations. Private equity firms benefited from opening exit markets, and in turn, investors saw an increased stream of distributions. Due to stalled exits over the previous two years, some private equity funds were eager to return money to investors through exits and dividend recaps. If current conditions continue, we will see more exits during 2011. Firms that displayed stronger realized performance in 2010 are planning to return to the fundraising market in 2011. We expect this to lead to a substantial increase in fundraising volumes.


all values in USD billion
2009 2010 Q409 Q310 Q410 Dy/y Dq/q


Funds raised 1 77.3 80.2 13.3 22.3 18.6 4% (16%)
Number of funds 2 179 225 60 77 82 26% 6%
Investments 39.0 79.4 25.0 16.0 41.4 104% 159%
Drawdowns 3 26.5 26.7 10.5 10.4 n/a 1% n/m
Distributions 11.3 22.4 5.8 10.1 n/a 99% n/m
Appreciation as % of NAV 7.8% 7.6% 3.3% 3.6% n/a (0.2%) n/m
5 year rolling IRR 4 4.6% 3.4% 4.6% 4.4% 3.4% (1.2%) (1.0%)


Funds raised 1 16.3 12.4 4.1 3.2 3.1 (24%) (3%)
Number of funds 2 151 159 47 49 39 5% (20%)
Investments 23.6 26.2 7.2 5.9 7.6 11% 28%
Drawdowns 3 4.9 3.6 1.5 0.7 n/a (26%) n/m
Distributions 4.1 5.8 2.1 2.0 n/a 40% n/m
Appreciation as % of NAV 2.4% 2.9% 1.7% 2.4% n/a 0.5% n/m
5 year rolling IRR 4 4.6% 3.5% 4.6% 3.8% 3.5% (1.2%) (0.4%)

1 Fundraising represents amounts closed during the period, net of downsized funds. Figures exclude commitments to Fund of Funds to avoid double counting.
2 Number of funds for the year can differ from the sum of the quarters if a fund held several closings during the year.
3 Drawdowns and Investments data are not comparable as Investments include debt. In addition, the figures are based on different sample databases.
4 IRR is calculated on pooled, rolling five-year cash flows and the end-period NAV.
Notes: Prior-period figures may be revised due to ongoing database updates conducted by the source.
Dq/q is the comparison of Q4 2010 vs. Q3 2010 for fundraising and investment data.
n/a Data was not yet published by Thomson One.
n/m not meaningful.
Source: Thomson One, Buyouts for LBO investments; Dow Jones VentureSource for VC investments.


2010 was a turbulent year for capital markets as Eurozone sovereign debt issues escalated on rising government budget deficits and the downgrade of sovereign debt for Greece, Spain, Ireland and Portugal. In response, investors shifted their allocations to corporate debt. The shift led to a surge of high-yield bond issuance, which reached a historic high of EUR 50.8 billion of new issuance volume. Full-year leveraged loan issuance, EUR 70.2 billion, increased from a 2009 cyclical low, though it remains far below the 2007 peak when EUR 230 billion was issued. Most new issuance was dedicated to refinancing, followed by acquisition financing, which regained strength on intensified M&A activity. Major European stock index prices continued to rise in the fourth quarter, driven by improved corporate profits; the DAX advanced 11.0%, the FTSE 100 gained 6.3% and the CAC increased 2.4%. Compared to 2009 year-end values, both DAX and FTSE 100 prices appreciated solidly, while the French CAC 40 could not recoup losses incurred during the second quarter of 2010.

  • Buoyant capital markets supported corporate refinancing and acquisitions

Positive overall stock market developments spurred IPO activity, and 82 floated companies raised EUR 10.4 billion in proceeds during the fourth quarter. Compared to the previous year, the 2010 IPO environment improved considerably, with triple the number of IPOs and volumes up by approximately five times. Likewise, M&A activity was strong in the fourth quarter, with volumes increasing 40% quarter on quarter. On an annual basis, M&A volumes increased 9% dampened by the quiet M&A market in the first half of the year.

  • IPO activity improved remarkably, and M&A activity made solid progress

The divergence of the economic recovery among European countries remained pronounced. Nordic country economies and that of export-driven Germany expanded strongly, lifting overall Eurozone results, while a few peripheral countries continued to struggle and growth remained subdued in the UK, France and Benelux. Consensus estimates foresee similar overall growth levels for the EU and Eurozone in 2011.


  2009 2010 Q409 Q310 Q410 Dy/y Dq/q
Real GDP in % q/q 1
(4.1) 1.8 0.2 0.4 0.3 5.9 (0.1)
CPI in % y/y 1
 0.3 1.6  0.4 1.7  2.0 1.3 0.23
Interest rate in % 2  1.00 1.00  1.00  1.00  1.00  0.0 0.0 
Unemployment rate in % 2
 9.9 10.0  9.9  10.0  10.0  0.1 0.0 
Consumer confidence 2  (16.1) (11.0)  (16.1)  (11.0)  (11.0)  5.1 0.0
FTSE 100 index price 3
 22.1% 9.0%  5.4%  12.8% 6.3%  n/m n/m 
CAC 40 index price 3  22.3% (3.3%)  3.7%  7.9%  2.4%  n/m n/m 
DAX index price 3 23.8% 16.1% 5.0% 4.4% 11.0% n/m n/m
IPO number
71 242 35 44  82 241%  (36%)
IPO in EUR bn 
5.5 27.1 4.6 2.3 10.4 392%  (76%)
M&A in EUR bn 
363.6 398.0 92.2 119.7 138.6 9% 40%
Leveraged loan in EUR bn 4 47.5 70.2 14.7 15.8 21.9 48% (24%) 
High yield bond in EUR bn 4 29.3 50.8 16.9 13.0 16.1 73% 59%

1 Annual figures are annual averages.
2 Period-end figures
3 Change for the relevant period
4 New issue values
Notes: Dq/q is the comparison of Q4 2010 vs. Q3 2010.
n/a - data not available.
n/m - not meaningful.
Period of M&A deals relates to the announcement dates. Data for previous periods may change if pending deals are cancelled.
Geography of M&A deals is based on the location of the target.
Source: Bloomberg, March 31, 2011; Credit Suisse Leveraged Finance Market Update, March 2011.

Private equity markets

European private equity development was mixed in 2010. Buyout investment and exit activity recovered sharply in the second half of the year thanks to a supportive credit environment, and an eagerness displayed by buyout firms to deploy dry powder and realize portfolio companies that had performed well throughout the recession. Portfolio company valuations increased across all strategies, reflecting strengthened fundamentals. In contrast, VC deal activity remained conservative during 2010, with investment volumes up only slightly, and exit volumes remaining at low 2009 levels. Private equity fundraising dried up further and reached a new low in 2010.


  • LBO fundraising was the slowest since 1996 as fewer and smaller funds were in fundraising and cautious investor sentiment lingered

LBO fundraising deteriorated further in 2010, pressured by two factors: a shrinking pool of private equity funds raising capital and cautious investor sentiment. In 2010, commitment volumes dropped 28% from the previous year, with 51 funds raising EUR 8.3 billion, marking the weakest fundraising year since 1996, according to Thomson Reuters. Target sizes of those funds raised also declined in 2010, with only one fund raising more than EUR 1 billion. LPs preferred to make re-ups with existing GPs relationships, while first-time fundraising was difficult. The number of first-time funds declined to 11 from 22 in 2009, while commitment volumes dropped to EUR 547 million from EUR 3.4 billion in 2009. Among the different fund stages, mezzanine fundraising stood out in 2010. Nine mezzanine funds held closings, raising EUR 1.5 billion and representing a 121% increase over 2009.

In contrast with fundraising, European LBO investments ticked upward during 2010 amid a more certain economic environment that supported investment decisions and improving leveraged debt markets. Following the cyclical low of 2009, annual investment volumes more than doubled in 2010, with disclosed volumes reaching EUR 65.4 billion across 401 transactions. Investment figures are encouraging, as growth was visible across all deal size ranges, indicating a broad-based recovery. Mid-market deal activity, including those in the EUR 100 million to EUR 1 billion range, accelerated most quickly, with deal volumes increasing 173% and deal numbers up 111% from 2009. The large deal segment also turned around, indicated by a 140% increase in volumes. Twelve LBO deals exceeded the EUR 1 billion mark for a combined EUR 21.4 billion. The recovery in the mega deal size segment was supported by an improved availability of debt, evidenced by the leverage increase in LBO deals to 4.4x EBITDA from 4.0x EBITDA in 2009.

  • A broad-based re-bound in investments took place in the second half of 2010

The number of secondary deals that occurred in 2010 nearly doubled from 2009, to 27% from 14%. Secondary deals, which tend to be larger in size than other types of deals of their counterparts, contributed 45% of the overall LBO volume recorded in 2010. The average purchase price multiples of LBO deals increased to an 8.6 multiple of EBITDA in 2010, from an 8.3 multiple of EBITDA in 2009. The upper mid-buyout segment, which includes deals valued between EUR 500 million and EUR 1.0 billion, drove the majority of the increase. Competition in this deal segment intensified as larger funds moved to the market; targets were priced at a 9.1 multiple of EBITDA. A higher proportion of secondary deals that commanded higher valuations combined with generally higher market comparables to push acquisition price multiples higher.

  • LBO deal acquisition multiples increased

LBO deal activity accelerated even more dramatically on the exit side. During the prolonged recession, exit activity stalled, leading to a backlog of LBO portfolio companies ripe for exit. In 2010, LBO firms realized 191 European companies, with exit volumes advancing to EUR 52.8 billion, according to the Private Equity Insight database The figures represent a 25% increase in the number of exits and a 215% increase in exit volume. All exit channels showed solid growth over the previous year, with secondary sales rebounding most strongly. Half of the top 10 deals of 2010 were secondary deals. These secondary exits were driven by a heightened level of LBO investment activity - banks accommodated secondary deal refinancing as LBO loans were repaid close to par value and relatively lower leverage was used in new deals. Some of the secondary deals were partial exits, allowing greater comfort for buyers, while sellers retained upside potential. IPO exit activity resumed in 2010, with 14 buyout-backed companies going public in 2010 in contrast to just three in 2009. Offering proceeds reached EUR 12.8 billion, in stark contrast with the EUR 1 billion raised in 2009.

  • LBO exits staged an impressive turnaround

The largest LBO exit of 2010 was likely the most spectacular as well, when a consortium of investors led by mid-market firm Axcel realized their investment in Danish jewelry retailer Pandora at a 30-times multiple on their original investment with a EUR 3.7 billion IPO, according to Private Equity International. The Danish market was home to other significant partial IPO exits, such as Christian Hansen of PAI Partners and TDC, backed by a consortium of investors including Apax, Blackstone, KKR and Providence. The Nordic region also featured strong exit activity, with EUR 13.5 billion and topping European exit volumes during 2010.

Consequently, LBO distributions tripled from the previous year, according to the sample of buyout funds tracked by Thomson Reuters. Among different buyout funds, mega buyout funds distributed three quarters of all full-year LBO distributions. LBO portfolios appreciated 11% in 2010 following an uptick in 2009 and massive write downs during 2008, when valuations declined 28% on average. Higher comparable multiples and EBITDA, and upcoming realizations supported the increase in valuations. While distressed funds demonstrated the best performance in 2009, mega buyouts reported the highest valuation increases in 2010.


  • VC fundraising reached a new trough in 2010

Similar to buyouts, European VC fundraising slowed further in 2010, with the number of funds that held closings dropping 40%.. Risk-averse investors continued to under allocate to European VC as the majority of such funds underperformed other private equity strategies during the past decade. The under allocation partially explained the slow fundraising of follow-on funds, as the number of follow-on fund closings halved from 2009 and volumes dropped by a third. In contrast, commitments to first-time funds in-creased 8% in 2010 as investors sought new VC talent. Annual commitment volumes declined 24% to EUR 4.1 billion, from EUR 5.3 billion in 2009, marking the weakest VC fundraising year since 2003. Nevertheless, in positive developments, average commitments per fund increased from 2009 despite the decline in average target size. Balanced funds received the highest commitment volumes in 2010, while early-stage funds were favored last year. Among European countries, Danish VC funds raised the largest funds, while Germany featured the greatest number of VC funds raised.

  • Investments were choppy, but aver-age deal sizes increased

European VC investment activity revealed a mixed picture. On the one hand, investment volumes increased 7% in 2010 from an all-time low in 2009. However, investments were choppy throughout the year. Investment activity started slowly in the first quarter, then accelerated in the second quarter, driven by positive economic news. The momentum did not materialize into a firm recovery though, as investor nervousness surrounding sovereign debt issues persisted and investment volumes trended down in the second half of 2010. The number of completed deals declined 7%, with average deal sizes increasing as more companies attracted larger VC investments in 2010 than in 2009. There were nine companies that received at least EUR 50 million in VC investments compared to six companies in 2009. In 2010, 755 VC managers made investments in European companies, compared to 817 in 2009, indicating more money was invested per VC manager. The healthcare industry continued to dominate VC investments, followed closely by IT. Both industries were able to attract more money in 2010 than in the previous year. Healthcare deal volumes grew 14% and IT company investments surged 20%. The energy and utility industry was the only one that failed to grow during 2010, due to smaller investments in renewable energy companies. UK VC-backed companies received most of the VC financing, followed by France and Germany. VC growth occurred in all three countries in 2010, with investments in Germany increasing the most, by 31%.

  • Exit recovery seen in the first half faltered in the second half

After a bright first half of 2010, European VC M&A exit activity slowed significantly, resulting in annual volumes of EUR 4.6 billion, a 7% decline from 2009, according to Dow Jones VentureSource. In contrast, the IPO environment improved, with 15 companies raising EUR 445 million in initial proceeds compared with just three companies and EUR 112 million in 2009. Despite the improvement, IPO exit activity remains far from robust. Annual volumes were boosted by the EUR 314 million share offering of UK online retailer Ocado that was backed by a consortium of individual investors and the John Lewis Partnership. The deal represented the largest European exit of 2010. The combined exit volume of both exit channels did not change from the depressed 2009 level, indicating European-backed VC companies continued to suffer from the constrained exit environment. As a result, distributions during 2010 reached a new low for the sample of VC funds tracked by Thomson Reuters. Nevertheless, VC fund asset valuations increased 2.3% in 2010, driven by improved financial results and the resurgence of public prices.

European private equity made some progress in 2010 as portfolio company trading improved across the board and buyout segment deal activity accelerated as we had expected. We expect further improvement in buyout deal activity as M&A momentum in the large and mid market gain strength. Deals announced after the year end, such as the sale of Kabel Württemberg and Yoplait, underline growing confidence in the market. Despite higher confidence, debt maturity profiles of European portfolio companies have not yet improved substantially and thus pose a significant challenge. Refinancing success will depend largely on continued robustness within the high-yield bond markets, as well as the market capacity of banks and collateralized loan obligation (CLO) market. Venture capital managers continued to make capital-efficient deals and were conservative in their new and follow-on investments given a low level of dry powder, slow fundraising and an exit environment sensitive to capital market volatility. We expect similar developments for VC in 2011. While it may take some time for a broad recovery in exit activity, we have seen positive developments in early 2011, exemplified by the EUR 1 billion valuations of BioVex and Spotify.


all values in EUR billion
2009 2010 Q409 Q310 Q410 Dy/y Dq/q


Funds raised 1  11.5 8.3  (1.8)  1.6  1.7  (28%)  9%
Number of funds 2  69 51  18  20  11  (26%)  (45%)
Investments 27.6 65.4 12.2 21.8 21.8 137% 0%
Drawdowns 3  9.2 10.8  3.1  3.6  3.6  18%  (1%)
Distributions  2.2 6.6  0.7  0.6  1.5  198%  163% 
Appreciation as % of NAV  4.4% 11.3%  4.0%  (0.4%)  3.6%  7.0%  4.0% 
5 year rolling IRR 4  9.1% 6.0%  9.1%  6.0%  6.0%  (3.0%)  0.0% 


Funds raised 1  5.3 4.1  0.5  1.2  0.4  (24%)  (63%) 
Number of funds 2  104 62  16  11  (40%)  22% 
Investments  3.6 3.9  1.0  1.0  0.8  7%  (16%) 
Drawdowns 3  1.1 0.5  0.4  0.1  0.1  (53%)  6% 
Distributions  0.4 0.1  0.1  0.0  0.0  (68%)  (72%) 
Appreciation as % of NAV  (3.1%) 2.3%  (2.0%)  (2.7%)  1.8%  5.4%  4.5% 
5 year rolling IRR 4  (0.7%) (1.6%)  (0.7%)  (1.3%)  (1.6%)  (0.9%)  (0.3%) 

1 Fundraising represents amounts closed during the period, net of downsized funds. Figures exclude commitments to Fund of Funds to avoid double counting.
2 Number of funds for the year can differ from the sum of the quarters if a fund held several closings during the year.
3 Drawdowns and Investments data are not comparable as Investments include debt. In addition, the figures are based on different sample databases.
4 IRR is calculated on pooled, rolling five-year cash flows and the end-period NAV.
Notes: Prior-period figures may be revised due to ongoing database updates conducted by the source.
Dq/q is the comparison of Q4 2010 vs. Q3 2010 for fundraising and investment data.
n/a Data was not yet published by Thomson One.
n/m not meaningful.
Source: Thomson One, Buyouts for LBO investments; Dow Jones VentureSource for VC investments.


During 2010, all major Asia-Pacific economies expanded. Increased domestic consumer consumption, strong industrial production and a higher number of exports were the main propellants of the robust recovery. Furthermore, the region became the engine that drove much of the global economic recovery. Growth in the region is expected to slow somewhat in 2011, however, as governments gradually withdraw economic stimulus policies and production levels normalize. Fluctuations in global demand and higher commodity prices, combined with catastrophic events in Australia, Japan and New Zealand, present further downside risks to the same rate of expansion seen in 2010. Nevertheless, despite the risks, economic growth is expected to remain robust, supported by strengthening middle class consumption from emerging markets in Asia.

  • Asia-Pacific region recorded a record breaking year for IPOs

Following a sharp rebound in 2009, the Sensex and Kospi stock index prices continued to rise at elevated levels. The Nikkei 225, Shanghai Composite and ASX 200 also rallied in the final quarter of 2010, which offset losses incurred in the second quarter when European sovereign debt problems pushed the market into turbulence. Despite a peaking trend in equity prices and increased volatility, IPO activity set a new record in terms of the number of IPOs conducted and proceeds issued in both developed and developing countries. During the fourth quarter, 324 companies were floated on Asia-Pacific exchanges, raising offering proceeds of USD 72.9 billion. The quarter’s volume included the region’s second-largest IPO of the year; the IPO of the American International Group’s subsidiary AIA Group raised USD 17.8 billion on the Hong Kong Stock Ex-change.

  • M&A activity reached nearly heights of 2007

M&A activity picked up significantly in the Asia-Pacific region, thanks to the strongest quarterly M&A deal activity in the region’s history, which took place in the fourth quarter. In 2010, 8,776 Asia-Pacific based companies became targets for mergers and acquisitions. The transaction volume reached USD 519.2 billion, just 5% short of the 2007 level, the highest M&A volume in the Asia-Pacific region. China was the major driver, boasting 2,890 deals, worth USD 131.1 billion. Looking ahead, Asia-Pacific companies are expected to be the most active in the global M&A market in 2011, according to an M&A survey conducted by Bloomberg.


2009 2010 Q409 Q310 Q410 Dy/y Dq/q



Real GDP in % q/q 1
 (6.3) 4.0  1.8  0.8  (0.3)  10.3  (1.1) 
CPI in % y/y 1 (1.4) (0.7) (1.7) (0.6) 0.0 0.7 0.6
Interest rate in % 2 0.10  0.10  0.10  0.10  0.10   0.0 0.0 
Unemployment rate in % 2 5.2 4.9 5.2 5 4.9  (0.3) (0.1)
Consumer confidence 2 37.9 40.2 37.9 41.4 40.2 2.3  (1.2)
Nikkei 225 index price 3 19.0% (3.0%) 4.1% (0.1%) 9.2% n/m  n/m

Real GDP in % y/y 1
9.2 10.3 0.7 9.6 9.8  1.1 0.2
CPI in % y/y 1
(0.7) 3.3 0.7 3.5 4.7 4.0 1.2
Interest rate in % 2 5.31 5.81 5.31 5.31 5.81  0.5 0.5
Shanghai Composite price 3 80.0% (14.3%) 15.2% 10.7% 5.7% n/m  n/m
India Real GDP in % y/y 1 7.0 8.7 7.3 8.9 8.2  1.7 (0.7)
CPI in % y/y 1 10.8 12.1 13.3 10.3 9.2  1.3 (1.2)
Interest rate in % 2 3.25 5.25 3.25 5 5.25  2.0 0.3
Bombay index price 3 81.0% 17.4% 2.0% 13.4% 2.2% n/m  n/m
 Korea Real GDP in % y/y 1 0.3 6.2 0.2 0.6 0.5 5.9  (0.1)
CPI in % y/y 1 2.8 3.5 2.8 3.6 3.5 0.7  (0.1)
Interest rate in % 2 2 2.5 2 2.25 2.5  0.5 0.3
Unemployment in % 2 3.5 3.5 3.5 3.4 3.5  0.0 0.1
 Kospi index price 3 49.7% 21.9% 0.6% 10.3% 9.5% n/m  n/m
Australia Real GDP in % y/y 1 1.3 2.8 0.7 0.1 0.7 1.4 0.6
CPI in % y/y 1 1.9 2.9 2.1 2.8 2.7  1.0 (0.1)
Interest rate in % 2 3.75 4.75 3.75 4.50 4.75  10 0.3
Unemployment in % 2 5.5 4.9 5.5 5.1 4.9  (0.6) (0.2)
ASX 200 index price 3 30.8% (2.6%) 2.7% 6.5% 3.5%  n/m n/m
Total Asia  IPO number 496 914 231 216 324 84% 50%
 IPO in USD bn 77.1 175.4 43.8 41.4 72.9 128%  76%
M&A in USD bn  404.3 519.2 132.1 147.7 184.3 28%  25%

1 Annual figures are annual averages.
2 Period-end figures
3 Change for the relevant period
4 New issue values
Notes: Dq/q is the comparison of Q4 2010 vs. Q3 2010.
n/a - data not available.
n/m - not meaningful.
Period of M&A deals relates to the announcement dates. Data for previous periods may change if pending deals are cancelled.
Geography of M&A deals is based on the location of the target.
Source: Bloomberg, March 31, 2011; Credit Suisse Leveraged Finance Market Update, March 2011

Private equity markets

  • Fundraising improved significantly from the trough of 2009, driven by China focused funds

Fundraising was vibrant in Asia-Pacific during 2010. It was the only major region to achieve an increase in private equity fundraising volumes in 2010, despite some slow-down in the final quarter of 2010. Fundraising volumes increased 39% to USD 29.4 billion, albeit from the low base of 2009. Investors from Western countries diversified with increased allocations to Asia-Pacific focused funds, drawn by the region’s robust growth that presents attractive investment opportunities for private equity funds. This, combined with the increased participation of local sovereign fund investors, drove fund-raising volumes. The number of large funds rose substantially, resulting in higher volume despite a decrease in the overall number of funds. Carlyle Asia Partners III and Baring Asia V, each raising nearly USD 2.5 billion, were the largest funds of the year, and two of nine that raised more than USD 1 billion during 2010. The improvements were similar across different strategies. LBO funds collected USD 10.7 billion in 2010, representing a 39% increase over 2009, while VC and growth funds received USD 18.6 billion of commitments, a 40% increase over 2009. From a country-specific perspective, China displayed its dominance as its share in Asia-Pacific fundraising increased to 46% from 29% in 2009. In 2010, the number of Chinese RMB-denominated funds, which are not subject to certain investment restrictions like USD-denominated funds, increased rapidly. Nonetheless, USD-denominated funds still attracted the most investor money.

  • Growth and venture capital investments are on the rise, with investments in India increasing the most

Despite a decline during the final quarter of 2010, annual private equity investments totaled USD 54.2 billion, representing a healthy 13% gain over 2009. Growth and venture capital investments increased 26%, while LBO investments declined slightly, by 2%. The decline was attributable to the smaller number of turnaround deals, suggesting turnaround investment opportunities shrank as company fundamentals continued to improve. Of note is the 8% increase in pure buyout deal volume from 2009. Three countries garnered three-quarters of all annual investments: China, with USD 19.2 billion or 36% of the region’s total, followed by Australia with USD 11.6 billion and India with USD 8.5 billion. Investment volumes in India posted the strongest annual growth, as volumes doubled from USD 4.3 billion in 2009. Financial services targets attracted nearly a quarter of all regional private equity investments. The investor consortium of Temasek Holdings, Qatar and Kuwait Investment Authorities and the China National Council for Social Security Fund invested USD 6.1 billion in a mezzanine/pre IPO deal which became the largest IPO of 2010 worldwide – the Agricultural Bank of China. Private equity also participated in the largest fourth-quarter IPO worldwide, AIA Group, by investing USD 1.2 billion in the same type of deal.

As private equity in Asia-Pacific matures, the level of exit activity has increased substantially. Exit activity in the fourth quarter of 2010 reached an unprecedented level. Both exit channels posted record-breaking quarters. M&A exit volumes totaled USD 15.6 billion across 82 transactions and IPO exit volumes reached USD 42.1 billion from 82 exits. 2010 marked the third-best year in Asia-Pacific private equity history for M&A, while IPO exits surpassed 2006 and 2007 levels. Consequently, annual exit volumes increased 89% for M&A and 179% for IPOs from 2009. However, it should be noted that private equity ownership in floated companies, such as AIA Group and the Agricultural Bank of China, were minority stakes. Therefore, the proceeds returned to private equity fund investors will be significantly lower than total IPO exit volumes suggest. In addition, M&A figures include the pending USD 4.1 billion sale of Korea Exchange Bank by Lone Star to Hana Financial Group; the deal awaits a court decision and an approval by financial authorities. The largest completed M&A exit of 2010 was the sale of China Network Systems by MBK Partners to Want Want Holdings, in a deal worth USD 2.2 billion. The India-based companies were favored targets for M&A deals, with 87 PE-backed companies exited in M&A deals.

  • Private equity exit activity surged dramatically, supported by a buoyant IPO and M&A environment

In conclusion, all indicators point to a firm recovery of Asia-Pacific private equity. We expect the already higher M&A activity to increase on cross-border acquisitions which will drive trade and secondary exits. US and European companies acquired approximately 16% of all Asia-Pacific M&A targets in 2010. That percentage will likely rise as non-regional companies look for consolidation opportunities in the rapidly expanding markets of Greater China, India and Southeast Asia. IPO exits may decline as public equity prices appear to be peaking, at least in the short term. Overall, buoyant exit activity is sure to attract more investors to private equity funds, suggesting fundraising will increase in turn. Higher cross-border M&A interest may, on the other hand, drive acquisition multiples higher, which will hinder, to some extent, private equity fund investment activity.


all values in USD billion

2009 2010 Q409 Q310 Q410 Dy/y Dq/q


Funds raised 1  7.8 10.7  2.5  1.7  1.0  39%  (41%) 
Number of funds 2 68 44 23 9 7 (35%) (22%)
Investments 22.4 22.0 6.4 9.4 8.6 (2%) (8%)
Number of deals 122 151 36 35 41 24% 17%

Funds raised 1 13.3 18.6 2.2 5.1 3.3 40% (36%)
Number of funds 2 189 172 57 52 31 (9%) (40%)
Investments 25.5 32.2 8.3 8.4 7.8 26% (7%)
Number of deals 1,032 1,139 294 276 274 10% (1%)
PE M&A exit values 16.5 31.1 3.7 6.8 15.6 88% 128%
Number of exits 259 302 47 66 82 17% 24%
IPO exit values 30.5 85.1 24.2 26.0 42.1 179% 62%
Number of IPO exits 174 299 96 63 111 72% 76%
Total exit values 47.1 116.1 27.9 32.8 57.7 147% 76%

1 Fundraising represents amounts closed during the period, net of downsized funds. Figures exclude commitments to Fund of Funds to avoid double counting.
2 Number of funds for the year can differ from the sum of the quarters if a fund held several closings during the year.
Note: Prior-period figures may be revised due to ongoing database updates conducted by the source.
Source: Asian Venture Capital Journal database, as of March 31, 2011.


  • After sharp GDP growth in 2010, Brazil’s economy is expected to return to sustainable growth levels

Following a contraction of 0.6% in 2009, the Brazilian economy recovered rapidly, with GDP advancing 7.6% in 2010. Growth was particularly strong during the first half of the year, before slowing down during the second half. Brazil’s unemployment rate has declined steadily and is now at its lowest rate in history. At the same time, the average real income level has increased by about 5% since the early 2000s, alleviating some of the country’s poverty issues and allowing the middle class to swell to 46% in 2008, from 36% in 2000, and creating a substantial consumer market. With tighter monetary policy being implemented, the Brazilian economy is expected to return to more sustainable levels of growth in 2011. According to a Bloomberg consensus estimate, the Brazilian economy is expected to expand 4.5% in 2011.

  • 2010 was a record-breaking year for Brazilian M&A

Driven by the solid recovery of public equities prices – the BOVESPA index gained 83% in 2009 – and improved investor confidence, M&A activity reached new heights in 2010. Brazil experienced the strongest M&A activity in its history, with 486 announced deals worth USD 146.9 billion during 2010. The region also boasted the largest M&A deal worldwide in 2010, with the USD 42.5 billion pending acquisition of Offshore Brazil Oil Properties by PETROBAS.

  • Large funds were raised successfully in 2010

As its returns are not driven by financial leverage, Brazilian private equity was not affected by the financial crisis. Since 2004, the industry has grown steadily, with the percentage of committed capital compared to GDP more than doubling since 2004. The private equity environment in Brazil continues to be very strong, with several managers successfully closing larger funds last year. For example, in 2010, Advent International raised USD 1.6 billion, targeting investments in Brazil and Latin America, and Southern Cross received USD 1.5 billion. According to the latest data from the Centro de Estudos em Private Equity e Venture Capital (Private Equity and Venture Capital Study Center), the amount of dry powder available at the beginning of last year was approximately USD 17.8 billion, which gives local private equity managers the capacity to complete larger transactions.

  • The number of international private equity firms investing in Brazil is on the rise

In 2010, a number of international managers made their first investments in Brazil. For example, Carlyle invested a majority stake in Latin America’s largest tour and travel company, CVC Brasil Operadora e Agência de Viagens S.A., and Apax Partners acquired a 54% stake in IT company Tivit Terceirizacao de Tecnologia e Servicos S.A. for about USD 1 billion. Other managers, such as Actis and First Reserve, also invested last year, sending a clear message that international players are paying close attention to the Brazilian market.


  2009 2010 Q409 Q309 Q410 Dy/y Dq/q
Real GDP in % y/y 1  (0.6) 7.6   5.0 6.7  5.0  8.2  (1.7) 
CPI in % y/y 1  4.9 5.0  4.3  4.7  5.9  0.1  1.2 
Interest rate in % 2  8.8 10.8  8.8  10.8  10.8  2.0  0.0 
Unemployment in % 2 6.8 5.3 6.8 6.2 5.3 (1.5) (0.9)
Consumer confidence 2 117.2 117.1 117.2 118.3 117.1 (0.1) (1.2)
IBOVESPA total return index 3 82.7% 1.0% 11.5% 13.9% (0.2%) n/m n/m
IPO number 6 11 4 1 3 83% 200%
IPO in USD bn 12.0 5.9 8.0 0.1 2.0 (51%) 232%
M&A in USD bn 58.9 146.9 7.6 62.1 28.6 150% (54%)
Country bonds in USD bn 4
19.1 44.5 4.1 14.1 8.5 133% (40%)

1 Annual figures are annual averages.
2 Period-end figures
3 Change for the relevant period
4 New issue values
Notes: Dq/q is the comparison of Q4 2010 vs. Q3 2010.
n/a - data not available.
n/m - not meaningful.
Period of M&A deals relates to the announcement dates. Data for previous periods may change if pending deals are cancelled.
Geography of M&A deals is based on the location of the target.
Source: Bloomberg, March 31, 2011


  • Economic recovery continued in the MENA region throughout 2010, although governments had to take charge of capital spending

MENA economies continued on the road to recovery in the fourth quarter of 2010, with Dubai, Saudi Arabia and Bahrain working through corporate restructuring processes, aided by active government involvement. As banking and debt situations stabilized further, consumer confidence also inched up during the quarter.

  • Qatar will increase infrastructure spending dramatically in the run-up to the 2022 World Cup

In 2010, foreign investment by developed countries retrenched further, leaving local governments to support infrastructure projects. However, the pace of infrastructure spending in the region’s largest economy, Saudi Arabia, slowed to USD 43 billion from USD 57 billion in 2009; just slightly higher than the United Arab Emirates spent on infrastructure in 2010. Smaller countries, including Oman and Qatar, increased infrastructure expenditure during 2010, and Kuwait nearly doubled its capital project investments, in conjunction with its USD 100 billion five-year plan.

In December 2010, Qatar was successful in its bid to host the 2022 World Cup. The sporting event is expected to drive up to USD 60 billion in infrastructure spending, including a USD 4 billion stadium program that will result in nine new venues.

Real GDP across the MENA region expanded 3.8% from 2009 levels, fueled mainly by oil prices that remained in the USD 60 to USD 80 per barrel range that is considered sustainable by most OPEC producers. Along with growth, inflation concerns also returned to the forefront in 2010. Food price inflation is an especially important challenge in the MENA region as heavy subsidies often put pressure on government budgets or fail to keep pace with market costs. Higher food prices, high unemployment rates and corruption sparked mass protests in Tunisia in December 2010, following a street vendor’s self-immolation.

  • There was a marked decline in private equity activity in 2010

Private equity fundraising and investment in the MENA region declined dramatically throughout 2010. Fundraising decreased from USD 1.07 billion to USD 448 million, and investments decreased from USD 2.22 billion to USD 793 million. Only 23 deals were completed in 2010, versus 34 that were completed one year prior.


2009 2010 Q409 Q310 Q410 Dy/y Dq/q



Real GDP in % q/q ann 1
 4.7 5.2  (1.9)  2.5  (1.7)  0.5  (4.2) 
CPI in % y/y 1 16.2 11.7 13.2 11.0 10.3 (4.5) (0.7)
Interest rate in % 2 9.8 9.8 9.8 9.8 9.8 0.0 0.0
Unemployment rate in % 2 9.4 8.9 9.4 8.9 8.9 (0.5) (0.0)

Real GDP in % y/y 1
0.8 4.6 4.9 4.6 7.7 3.8 3.1
CPI in % y/y 1
3.3 2.7 3.9 2.4 2.7 (0.6) 0.3
Interest rate in % 2 1.3 2.0 1.3 2.0 2.0 0.8 0.0
Unemployment rate in % 2 7.3 6.6 7.3 6.6 6.6 (0.7)  0.0
TA-25 index price 3  74.9% 15.8% 15.1% 15.4% 8.2%   n/m  n/m
Saudi Arabia Real GDP in % y/y 1 0.6 3.7 0.2 n/a 3.8 3.1 n/m
CPI in % y/y 1 5.1 5.4 4.3 5.9 5.4 0.3 (0.5)
Interest rate in % 2 2.0 2.0 2.0 2.0 2.0 0.0 0.0
Unemployment rate in % 2  10.5 10.0 10.5 n/a 10.0  (0.5)  n/m
SASEIDX index price 3 27% 8% (3%) 5% 4% n/m  n/m
All MENA Real GDP in % y/y 1,5 1.8 3.8 n/a n/a n/a 2/0 n/m
CPI in % y/y 1,5 6.5 6.9 n/a n/a n/a 0.4 n/m
MSCI Arabian ex SA price 3 (13.9%) 5.6% (8.1%) (3.8%) 5.4% n/m n/m
IPO number 16 56 4 14 15 250% 7%
IPO in USD bn 3.0 5.1 0.7 0.7 2.2 71% 202%
M&A in USD bn  16.5 23.1  1.8 3.1  4.0  40%  28% 
Region bonds in USD bn 4  42.2 45.2  31.4  13.3  15.8  7%  19% 

1 Annual figures are annual averages.
2 Period-end figures
3 Change for the relevant period
4 New issue values
Notes: Dq/q is the comparison of Q4 2010 vs. Q3 2010.
n/a - data not available.
n/m - not meaningful.
Period of M&A deals relates to the announcement dates. Data for previous periods may change if pending deals are cancelled.
Geography of M&A deals is based on the location of the target.
Source: Bloomberg, April 12, 2011.The International Monetary Fund World Economic Outlook April 2011 database


  • Regional growth was strong in 2010, although South Africa lagged its Sub-Saharan peers

Real GDP in Sub-Saharan Africa increased 5.0% in 2010, compared with 2.8% in 2009. Excluding South Africa, the region’s economy expanded at an estimated 5.8% in 2010. South Africa, the region’s largest economy, expanded 2.8% during 2010. The faster pace of economic growth can be attributed to several factors. Export volumes, led by metal and minerals exporters who experienced a 34.7% increase in business from the previous year, moved closer to pre-crisis activity levels. Oil exports rebounded at a slower pace, with an 18.2% volume increase. As the only region to have higher inflows of foreign funds in 2009, Sub-Saharan Africa continued to benefit from higher tourism rates led by the 2010 FIFA World Cup in South Africa. International tourism arrivals were up 16% midway through the year, with key destinations like Kenya, Mauritius, the Seychelles, Cape Verde and Tanzania all welcoming more visitors.

  • FDI to Sub-Saharan Africa also picked up in 2010, against a prior-year decline

Foreign direct investment (FDI), the most important source of private capital for Sub-Saharan Africa, also rebounded to aid the recovery. In 2010, FDI to the region totaled USD 32 billion, representing an increase of 6% compared to a 12.3% decline in the previous year. FDI has increased in six of the past eight years, and approximately 40% of 2010 inflows went to the region’s three largest economies of South Africa, Nigeria and Angola.

In 2010, South Africa was the only country in the region to issue foreign-denominated bonds, raising USD 4.7 billion. Nigeria is preparing to issue international bonds and Ghana and Gabon’s recent issues continue to be actively traded on global markets.

  • Private equity fund-raising levels and the number of deals increased in 2010

Private equity fundraising and deal activity for the Sub-Saharan Africa region mirrored the rebound in economic growth and foreign capital flows. Fundraising increased 55% from 2009 levels to approximately USD 1.5 billion, and the number of deals completed increased 30% to 48 transactions. Investment volume, however, declined 54% to USD 631 million during the year. South African private equity represented 28% of total funds raised, but only 7.5% of invested capital.


2009 2010 Q409 Q310 Q410 Dy/y Dq/q


South Africa

Real GDP in % y/y 1
 (1.7) 2.8   3.1 2.7  4.4  4.5  1.7 
CPI in % y/y 1 7.1 4.3 6.3 3.2 3.5 (2.9) 0.3
Interest rate in %
7.0 5.5 7.0 6.0 5.5 (1.5) (0.5)
Unemployment in %  24.2 24.0 24.2 25.3 24.0 (0.2)  (1.3)
ZADOW (SA) index price 3  24.2% 17.6%  5.8% 11.7%  7.4%  n/m  n/m 

Real GDP in % y/y 1
7.0 8.4 n/a n/a 0.0 1.4 n/m
CPI in % y/y 1
12.5 13.6 13.9 13.7 11.7 1.1 (2.0)
Interest rate in % 
6.0 6.3 6.0 6.3 6.3 0.3 0.0
Unemployment in %  19.7 n/a 19.7 n/a n/a n/m n/m
Kenya Real GDP in % y/y 1 2.1 4.1 2.8 6.2 n/a 2.0 n/m
CPI in % y/y 1 5.1 5.4 5.6 3.3 3.8 0.3 0.5
Interest rate in %
4.3 5.4 7.0 6.0 6.0 1.2 0.0
All SSA Real GDP in % y/y 1,5 2.8 5.0 n/a n/a n/a 2.1 n/m
CPI in % y/y 1,5 10.5 7.5 n/a n/a n/a (3.0) n/m
MSCI EFM Africa price 3 43.6% 28.7% 6.7% 21.5% 11.8% n/m n/m
SSAXSA50 index price 3  (13.9%) 5.6%  (8.1%) (3.8%)  5.4%  n/m n/m 
IPO number 2 12 1 2 5 500% 150%
IPO in USD bn 0.0 0.5 0.0 0.0 0.3 1610% 1590%
M&A in USD bn  18.4 43.0  4.5  9.6  13.4  134%  39% 
Region bonds in USD bn 4  14.6 10.4  2.9  4.9  1.3  (28%)  (72%) 

1 Annual figures are annual averages and quarterly figures are period end values.
2 Period-end figures
3 Change for the relevant period
4 New issue values
5 Estimates of the International Monetary Fund
Notes: Dq/q is the comparison of Q4 2010 vs. Q3 2010.
n/a - data not available.
n/m - not meaningful.
Period of M&A deals relates to the announcement dates. Data for previous periods may change if pending deals are cancelled.
Geography of M&A deals is based on the location of the target.
Source: Bloomberg, April, 2011. The International Monetary Fund World Economic Outlook April 2011 database.


  • The region’s recovery continues to be bipolar, with debt and inflow-reliant countries lagging

Real GDP growth in Central Eastern Europe and Commonwealth of Independent States rebounded significantly in 2010, to 4.2% and 4.6% respectively from a decrease of 6.4% and 3.6% in 2009, according to International Monetary Fund. The recovery was uneven across the region, however, as countries more dependent on international capital flows and expansion through private debt accumulation did not rebound as quickly as some of their peers. Bulgaria, Lithuania and Romania, for example, recorded annual growth rates of 0.0%, 0.4% and -1.9%, respectively. Countries adhering to fixed exchange rate regimes, such as Lithuania, were constrained to limited fiscal policy measures in response to the economic crisis.

Credit availability remained subdued across the region in 2010, with the notable exceptions of Russia and, to a larger extent, Turkey. Non-performing loans (NPLs) represented an emerging region-leading median 11% of all loans, impeding a recovery of lending rates. Historical developed-market lenders, such as Swedish banks, have pulled back significantly from the region. Rising unemployment also remains an issue in several countries, including Bulgaria and Lithuania, which recorded annual average unemployment rates of 10.3% in 2010 (from 6.9% in 2009) and 17.8% (from 13.7% in 2009), respectively.

  • Turkey and Russia are leading regional growth due to commodity prices, capital inflows and increased demand

On the other hand, resurgent trade growth and rising commodity prices led to the rapid recovery of Armenia, Azerbaijan, Belarus, Georgia, Russia, Turkey, Turkmenistan, Ukraine and Uzbekistan. Russia and Turkey – which represent approximately 75% of the region’s GDP – grew at 4.0% and 8.2%, respectively, in 2010. Russia benefitted from a fiscal stimulus injection equal to 5.3% of GDP, higher oil prices, increased regional import demand (up 7%) and a higher level of remittances (up 11% in 2010 versus an 18% decline in 2009). Turkey’s impressive growth was bolstered by stronger domestic demand, increased foreign capital inflows, and accommodative monetary and fiscal policies.

Private equity fundraising and investment in the region declined dramatically throughout 2010. Fundraising decreased to USD 1.19 billion from USD 1.59 billion in 2009, and investment decreased to USD 2.40 billion from USD 3.32 billion. However, the number of deals completed rose to 117 during the year, compared to 76 in the prior year. Russia-focused fundraising declined 84% to USD 75 million, although transaction volume in-creased nearly seven-fold to USD 1.52 billion across 45 deals.


2009 2010 Q409 Q310 Q410 Dy/y Dq/q



Real GDP in % y/y1
 (4.7) 8.2  5.9  5.2  9.2  12.9  4.0 
CPI in % y/y 1  6.3 8.6  6.5  9.2  6.4  2.3  (2.8) 
Interest rate in % 2  6.5 6.3  6.5  6.5  6.3  -0.3  -0.3 
Unemployment rate in % 2  13.5 11.4  13.5  11.3  11.4  (2.1)  0.1 
Consumer confidence 2  78.8 91.0  78.8  90.4  91.0  12.2  0.6 
XU100 index price 3  96.6% 24.9%  10.3%  19.9%  0.3%  n/m  n/m 
IPO number  1 22  2100%  (14%) 
IPO in USD bn  0.0 1.9  0.0  0.1  1.1  n/m  839% 
M&A in USD bn  2.7 13.1  1.7  1.9  7.5  387%  293% 
Country bonds in USD bn 4  3.8 7.4  0.0  1.1  1.1  98%  (4%) 

Real GDP in % y/y 1
 (7.8) 4.0  (2.9)  3.1  4.5  11.8  1.4 
CPI in % y/y 1
 11.7 6.9  8.8  7.0  8.8  (4.8)  1.8 
Interest rate in % 2  8.8 7.8  8.8  7.8  7.8  (1.0)  0.0 
Unemployment in % 2  8.2 7.2  8.2  6.6  7.2  (1.0)  0.6 
RTS index 3  128.6% 22.5%  15.2%   12.6% 17.4% n/m   n/m
IPO number  0 n/m  0% 
IPO in USD bn  0.0 0.5  0.0  0.0  0.0  n/m  50% 
M&A in USD bn  2.7 13.1  1.7  1.9  7.5  387%  293% 
Country bonds in USD bn 4  31.8 35.4  11.4  8.8  10.5  11%  19% 
 Ukraine Real GDP in % y/y 1  (15.0) n/a  (6.8)  3.6  3.3  n/m  (0.3) 
CPI in % y/y 1  15.9 9.4  12.3  10.5  9.1  (6.5)  (1.4) 
Interest rate in % 2  10.3 7.8  10.3  7.8  7.8  (2.5)  0.0 
Unemployment in % 2  9.4 n/a  9.4  7.1  n/a  n/m  n/m 
PFTS index 3  90.1% 70.2%  3.5%  3.3%  24.4%  n/m  n/m 
IPO number  0 n/m  n/a 
IPO in USD bn  0.0 0.0  0.0  0.0  0.0  n/m   n/a
M&A in USD bn  2.7 13.1  1.7  1.9  7.5  387%  293% 
Country bonds in USD bn 4  1.7 3.1  1.6  2.0  1.1  80%  (45%) 

1 Annual figures are annual averages and quarterly figures are period end values.
2 Period-end figures
3 Change for the relevant period
4 New issue values
Notes: Dq/q is the comparison of Q4 2010 vs. Q3 2010.
n/a - data not available.
n/m - not meaningful.
Period of M&A deals relates to the announcement dates. Data for previous periods may change if pending deals are cancelled.
Geography of M&A deals is based on the location of the target.
Source: Bloomberg, April 12, 201


all values in USD million   2008 2009 % of total 2010 % of total Dy/y

Funds raised  6,875 1,070  5%  448  2%  (58%) 
Investments  3,370 2,215  10%  793  3%  (64%) 
Number of deals  67 34  5%  23  3%  (32%) 
PE penetration in % 1  0.15 0.11    0.04    (0.07) 

Funds raised  2,241 964  4%  1,499  6%  55% 
Investments  2,889 1,383  6%  631  2%  (54%) 
Number of deals  50 37  5%  48  6%  30% 
PE penetration in % 1  0.29 0.16    0.06    (0.10) 
CEE & CIS Funds raised  5,559 1,586  7%  1,192  5%  (25%) 
Investments  6,344 3,323  15%  2,398  8%  (28%) 
Number of deals  74 76  11%  117  14%  54% 
Russia 2 Funds raised  880 455  2%  75  0%  (84%) 
Investments 2,647   217  1%  1,516  5%  599%
Number of deals  29 20  3%  45  5%  125% 
PE penetration in % 1  0.15 0.02    0.10    0.08 
Latin America & Caribbean Funds raised  4,461 2,248  10%  5,608  24%  149% 
Investments  6,962 1,318  6%  6,648  23%  404% 
Number of deals  64 54  8%  92  11%  70% 
Brazil 2 Funds raised  3,589 401  2%  1,078  5%  169% 
Investments  3,020 989   4%  4,604  16%  366%
Number of deals  36 20  3%  53  6%  165% 
PE penetration in % 1  0.18  0.06    0.23    0.17
Emerging Asia Funds raised  39,660 15,938  71%  14,206  61%  (11%) 
Investments  28,270 13,867  63%  18,308  64%  32% 
Number of deals  500 473  70%  576  67%  22% 
Multiregion Funds raised  7,721 801  4%  524  2%  (35%) 
Global Emerging Markets Funds raised  66,517 22,607  100%  23,477  100%  4% 
Investments  47,835 22,106  100%  28,778  100%  30% 
Number of deals  755 674  100%  856  100%  27% 

1 Private equity penetration is calculated as a share of annual investments in % of the GDP.
2 Data is included in CEE & CIS and Latin America & Caribbean, respectively.
Note: Dy/y is the comparison of 2010 vs. 2009.
Source: Emerging Markets Private Equity Association, as of March 25, 2011.


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