,Munich, February 2019,European Private Equity Outlook 2019,Our 10th European Private Equity Outlook reveals how experts view the market and its development in 2019,More than 2,500 experts from private equity investment companies across Europe were contacted for the PE outlook,The results reveal what experts in the market anticipatefor various countries andregions and what they consider to be relevant factors for the private equity business throughout 2019,We hope you enjoy reading this study.We would be happy to receive yourfeedback and lookforward to the opportunity to discuss the results with you in more depth,The European Private Equity Outlook 2019 is the 10th consecutive publication in a series launched byRoland Berger in 2010,Source: Roland Berger,10th,Contents,Page,This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation. It may not be passed on and/or may not be made available to third parties without prior written consent from.,A,Focus of study and methodology,4,B,Executive summary,6,C,Results of the PE Outlook for 2019,10,D,Comparing the PE Outlook 2019 to previous years,29,E,Buyout transaction statistics,33,F,Your contacts at Roland Berger,37,A.Focus of study and methodology,Overview of European private equity survey,Key topicsin 2019,Development of the European private equity marketKey challenges for privateequityCompetitive dynamics and the private equity business model,13%,13%,74%, 10years,PE experience% of responses,This study is based once more on an exclusive survey of private equity professionals from leading PE firms across EuropeFocus and methodology of the study,2,500+,expertscontacted,14%Italy,23%DACH1)5%CEE,Overview of participantsPrivate equity survey, 2019% of responsesGeographical focus15%Scandinavia,11%UK9%Benelux11%France,1) Germany, Austria, SwitzerlandSource: Roland Berger,3%Spain &Portugal,9%Pan- European,1,2,3,B.Executive summary,PE professionals are less optimistic about the outlook for Europe in 2019 than they have been in the past,Executive summary,Geographically, respondents differ more in their growth expectations: Positive developments are expected for Spain and Portugal, Scandinavia and CEE in 2019 The lowest growth expectations are for the UK, which is clearly impacted by the uncertainty around Brexit negotiations followed by Italy, Greece and France,The mid/small-cap segment is considered the most promising in 2019 with regard to M&A with PE involvement, whereas PE professionals expect a (slight) decrease for the large-cap segment,Pharma & healthcare, technology & media and business services & logistics are the top three industries expected to yield the most M&A deals with PE involvement in 2019,The outlook for M&A transactions with PE involvement has become less optimistic: For the first time in several years, more PE professionals expect a decrease (48%) rather than an increase (31%) in the number of transactions with PE involvement The share of respondents expressing a positive outlook is 20 ppt. down on 2018,The "development of portfolio companies" is the focus of PE activity for 2019, followed by "making new investments" Last year, the main focus was "divesting existing investments", an activity which is now expected to become slightly less relevant after several years of intense divestment activity,123456,Among the most influential factors for M&A with PE involvement in 2019, PE professionals expect the overall economic situation/cycle and political stability to deteriorate at least slightly On the whole, the availability of attractive acquisition targets is expected to remain broadly stable,IPO as an exit channel is viewed with increasing skepticism Valuation multiples are largely considered overvalued,Executive summary,With regard to exit channels, sales to PE investors and strategic investors are expected to be most promising The IPO channel is increasingly viewed with skepticism, and its importance is expected to decline; this may also be the result of a difficult stock market environment during the survey period (YE 2018),7,Majority shareholdings in family-owned companies and secondary buyouts continue to be seen as the most important sources of attractive targets in 2019 Overall, the target attractiveness level is broadly in line with past years,8,The current valuation multiples paid are considered (slightly) overvalued by the vast majority of PE professionals (91%) Nearly two thirds expect valuation multiples paid to (slightly) decrease in 2019, a strong change from 2018, when respondents still expected stable to slightly increasing multiples,9,The involvement of external consultants is highest during acquisition and pre-exit phases in the lifecycle of PE portfolio companies,11,10,Half of the PE professionals (50%) expect no change in the level of competition for fundraising in 2019,Process uncertainty is expected to increase in 2019 Add-ons and digitalization/Industry 4.0 are still seen as key value creators,Executive summary,External financing, especially refinancing and recapitalization, is expected to become slightly more difficult to raise in 2019 Growth financing is expected to see little change,13,Over half of the PE professionals (54%) expect process uncertainty in the M&A environment for PE companies to remain a challenge in 2019 Only 14% of respondents expect a reduction in process uncertainty,14,When it comes to the private equity business model, more active portfolio management, an increase in the portfolio's resilience to economic changes (i.e., the "weatherproof" portfolio company) and geographical expansion are expected to gain importance for the majority of PE professionals,15,Add-on acquisitions, digitalization/Industry 4.0 and cycle resilience of portfolio companies are expected to be the most important portfolio improvement/value creation measures in 2019 Cycle resistance has grown the most in importance (+10 ppt.) compared to the year prior,16,Competition for deals from Chinese strategic and financial investors is not expected to continue to increase in 2019. Survey results instead suggest a stable level of competition from Chinese investors,12,C.Results of the PE Outlook for 2019,0% to +10%,21%,0%,Increase ofmore than 10%,13%,35%,27%,4%,Decline of0% to -10%more than 10% of responses only one response per category possible,> Compared to last year's expectations, PE professionals have become less optimistic in their expectations for 2019 after a successful 2018 and 2017> For the first time in several years, more respondents expect the number of M&A transactions with PE involvement to decrease (48%) rather than increase (31%),1Development of the European private equity marketThe outlook for M&A transactions with PE involvement has changed: More PE professionals expect a decline in numbersM&A transactions with PE involvement 2019 vs. 2018 %,"What change do you expect to see in 2019 regarding the numberof completed M&A transactions with PE involvement?"48%31%,Source: Roland Berger,Importance of factors,> The most important factor is the overall economic situation/ economic cycle, which is expected to deteriorate in 2019 compared to 2018> Political stability is expected to further deteriorate in 2019 Uncertainty associated with the China-US trade war, the Turkish economic crisis, political instability in Italy, ongoing Brexit negotiations, German elections in the eastern federal states, as well as elections in Eastern Europe (e.g., Poland, Ukraine) are key drivers of this development> The availability of attractive acquisition targets is expected to remain stable compared to 2018,"What will be the most influential factors affecting the number ofEuropean M&A transactions with PE involvement in 2019? How will they develop?",2%,26%,62%,3%,24%,9%,57%,2%,0%,15%,24%,60%,28%,1%,32%,37%,2%,1%,42%,11%,46%,0%,8%,47%,42%,3%,0%,Positive trend,Negative trend,% of responses,46%,Development of valuationlevels,Political stability (e.g., Brexit,populist governments),7% 8% 1%,50%,Overall economic situation/economic cycle,Availability of attractive acquisition targets,Availability of inexpensivedebt financing,Trade conflict/regulation,Competition from strategic investors,100 % max. value,Dev elopment of factors in 2019Trend,84%,66%,60%,49%,24%,Deterio- ration,Significant deterioration,14%,Same as in 2018,1%,Improve- Significant mentimprovement,66%,19%,0%,1Development of the European private equity marketThe economy and politics are behind the slightly negative outlook The availability of attractive targets is expected to remain stableOverview of relevant factors for M&A business in Europe 2019 vs. 2018 %,Source: Roland Berger,Spain & Portugal,France,Scandinavia1),Austria & Switzerland,CEE excl. Poland2),1.7%,1.6%,1.4%,0.1%,-0.3%,78,123,> Stronger differentiation with regard to the regional growth outlookMost favorable outlook for PE markets in Spain & Portugal, which may benefit from positive catch-up effectGermany's outlook remains positive, albeit with less intensity than seen in past yearsA slight decline is expected for France. Expectations have shifted sharply away from the positive sentiment around a more reform- oriented agenda in last year's surveyUK expected to see a decline in M&A activities in the context of ongoing difficult Brexit discussions,"What change in PE M&A activities do you expect to see in thefollowing countries in 2019?",% of expected change in PE M&A activity in 2019 compared to previous year only one response per country possible,1Development of the European private equity marketRespondents differ more regarding their regional growth outlook Positive outlooks for Spain/Portugal, Scandinavia and CEEChange in PE M&A activity in major countries 2019 vs. 2018 %,1) Includes Denmark, Norway, Sweden2) Central and Eastern Europe includes Bulgaria, Croatia, Czech Republic, Hungary, Romania, Slovakia and Slovenia,Source: Roland Berger,22%,20%,11%,7%,Pharma & healthcare72%Technology & media (TMT)70%,Energy Chemicals AutomotiveBuilding & construction,100% max. value,> The pharma & healthcare, TMT and business services & logistics industries are expected to be the most active in terms of the number of M&A transactions with PE involvement> Respondents also expect the consumer goods and financial services sectors/industries to account for a large number of M&A transactions in 2019> A fairly low number of PE transactions is expected in the building & construction industry (a decline of 11 ppt. from last year's survey),"In what industries do you expect to see the most M&A transactionswith PE involvement in 2019?",1Development of the European private equity marketPharma & healthcare, TMT and business services & logistics are expected to yield the most M&A deals with PE involvement in 2019Likelihood of a high number of M&A transactions by industry 2019 vs. 2018 %,% of participants who expect a high number of transactions,Source: Roland Berger,18%,48%,11%,41%,30%,14%,56%,> The small-cap segment, with deals up to EUR 100 m, followed by the mid-cap size classes of EUR 100-500 m, are considered the most promising in 2019> For the large-cap segment, with enterprise values above EUR 500 m, a large number of PE professionals expect a stable to slightly decreasing development (97% in 2019 vs.50% in 2018),EUR 100-250 m21%45%34%,EUR 500-1,000 m,EUR 250-500 m33%49%,>EUR 1,000 m,"Please estimate the development of the European M&A marketwith PE involvement by size classes."Size classDevelopment of size classes in 20191)<EUR 100 m 18%34%48%,Trend,(Slight) increase,(Slight) decreaseStable compared to 2018Trend towards (slight) increase Trend towards (slight) decrease,1Development of the European private equity marketThe mid/small-cap segment is expected to further drive growth, whereas the large-cap segment is expected to slightly decreaseDevelopment of PE transaction size classes 2019 vs. 2018 %,1) Simplified; excluding significant decrease and significant increase,Source: Roland Berger,32%,25%,22%,12%,9%,Making new investments,Divesting existing investments,Development of portfolio companies,Fund- raising,Prolongation of existing funds,> The development of portfolio companies is the new top priority for financial investors in 2019, up 10 ppt. from 2018> The top priority in 2018, cited by 30% of respondents, was the divestment of existing investments At 22% in 2019, this has become slightly less important,"On which phase of the PE value chain will you focus most in 2019?",1Development of the European private equity marketIn 2019, PE activity is expected to focus on developing portfolio companies and making new investmentsFocus of PE investors on lifecycle stages 2019 %,% of participants who plan to place most of their focus on this phase of the PE value chain,Source: Roland Berger,> In 2019, all exit channels are viewed less favorably compared to past yearsSale to both strategic and PE investors is slightly more conservative but still considered promising: 29% and 38% of respondents expect an increase, respectivelyPE professionals expect IPO exits, dual tracks (e.g., IPO and M&A process) and triple tracks (e.g., IPO, M&A process and refinancing) to decrease (slightly) in 2019,Triple track (e.g., IPO, M&A process and refinancing),"How do you expect the individual exit channels to changein 2019?",M&A with strategic investors,IPO,Dual track,(e.g., IPO and M&A process),27%,2%,23%,46%,2%,35%,48%,13%,1%3%,0%,27%,Significant increase,Significant decrease,SlightStable decrease comparedto 2018,Slight increase,49%,19%,5%,13%,49%,30%,0%,8%,17%,46%,26%,11%,0%,Trend,Exit channelsDevelopment of exit channels in 2019M&A with PE investors,Positive trend,Negative trend,1Development of the European private equity marketThe exit channel "sale to PE investors" is anticipated to develop favorably IPO channel expected to decrease in importanceChange in exit channels 2019 vs. 2018 %,only one answer possible for each exit channel,Source: Roland Berger,> Majority shareholdings in family-owned companies are viewed by 65% of PE professionals as the most important source of attractive targets in 2019 The 2019 figure is significantly above 2018's 58% and roughly on the 2017 level (72%)> The importance of secondary buyouts and parts of groups/ carve-outs is the same as in 2018> Listed companies (taking private) and insolvent companies/distressed deals increased in attractiveness compared to 2018 by +9 ppt. and +10 ppt., respectively> Minority investments are considered less important: -4 ppt. compared to 2018,