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Private Equity in Germany

Roundtable Discussion

Response to the Crisis
Q3 2009
Roundtable Discussion



Speakers around the table 03
Transcription of the discussion 04
Duff & Phelps: Where the debt breaks 08
Latham & Watkins: National legal safeguards against
risks associated with private equity investments
Historical data 13

Roundtable Discussion
Speakers around the table

Robert A. Bartell CFA Michael H. Bork

Managing Director Managing Director

Duff & Phelps Barclays Private Equity

Dr. Jörg Kirchner Sotiris T.F. Lyritzis

Office Managing Partner Managing Director

Latham & Watkins LLP Summit Partners

Artur Meinzolt Catherine Raisig

Senior Manager Managing Editor

Management Remark, The
Consulting - Strategy, Mergermarket Group
M&A, Accenture

Private Equity in Germany: Response to the Crisis
Roundtable Discussion

With current M&A and corporate finance related activity in Germany low, this roundtable event
held in Q3 2009 in Munich examined how the German market has reacted to the financial crisis.
The following is an edited transcript of the discussion.

What has been the impact of the
financial crisis on private equity?
Michael Bork (MB):
MB: There is no doubt that the private equity industry and our day-to-day business has changed a lot in the last 18 months. Deal
flow in the mid-cap and large segments is low, although the lower end of the market is doing well. The financing environment has
improved, but the banks are still not financing many deals and we have seen very few transactions taking place. At the beginning
of the crisis, we concentrated on our portfolio and used tools that would help recover, or improve, existing portfolio businesses.
We feel quite comfortable now – it is a different kind of play, but it is quite interesting as well.

Sotiris Lyritzis (SL): Artur Meinzolt (AM):
SL: We have spent a lot of time with our portfolio companies, AM: We see three value creation levers for private equity funds going
helping them to understand the impact of the changes and how forward: financial engineering; operational levers; and strategic
they need to change their own plans, from budgeting to recruiting, levers, such as opening up new revenue opportunities by taking an
and operational standpoints. I think portfolio work is always very established technology to a new market.
important, but in times of crisis it is even more so and funds that
spend a lot of time with their portfolios will reap the rewards Robert Bartell (RB):
over the longer term. It is correct that deal flow is limited and
difficult, but sometimes you have to be a little bit more creative RB: We are now in a new time where things that would never
when looking at transactions and structure them differently so have been considered a couple of years ago are being thought
that you can make them work. Other times, you just have to be about carefully. Many companies are confronted with a decline in
patient, identify the good companies and stay in touch with them revenues and, as a result, there is more attention paid to things
until they’re ready to take an investment. In difficult periods like like costs. Sponsors and their advisers are looking carefully at
these, we notice that the owners of many of the more attractive what drives a business and what can be cut. However, this needs
businesses prefer to wait instead of taking an investor in. to be carefully thought out because there’s a risk you’re going to
do damage to the future business.
Dr. Jörg Kirchner (JK):
JK: As an adviser, we see that deal flow has gone down and that
How have deal structures
the industry has focussed on portfolio companies. However, changed in the aftermath
private equity firms focussed on restructurings and investments
in stressed and distressed debt are very busy. of the financial crisis?
As far as the general market is concerned, I would say two JK: Deal structures need to tackle the two main problems the
things: firstly, times have changed and overall there are fewer private equity industry currently faces: firstly, it should be noted
bidders out there. We are faced with scenarios where the seller that the business outlook of most target companies is relatively
knows that he has to work with the buyer in order to get to a unpredictable and, consequently, it is hard to find the right
closing and that can mean sharing the risk. It is a totally different purchase price. It is difficult to find business plans that are totally
atmosphere to negotiating a deal two years ago. Secondly, the plausible and convincing. Secondly, the issue of financing needs
financing environment is very tough and leverage continues to to be addressed, but there are all kinds of creative solutions.
be difficult to obtain, it is possible, but you sometimes need to be It is still available for mid-cap transactions, but there needs to
be negotiation with quite a large number of banks with each
underwriting a piece of the debt. Deals can still be done.

Private Equity in Germany: Response to the Crisis

Roundtable Discussion
SL: I agree that you have to try a little harder to find ways to get
to the same spot as before. In addition to the things mentioned,
I should add that structures are now more focussed on earn-
outs or earn-out type constellations. The only way to get around
a situation in which a management team insists that they will
grow a business 50% over the next five years, despite there
having been no growth in the last three years, is to say: let’s put
something in place that rewards you if you manage that, but
that doesn’t punish us if you don’t. You have to now think about
aligning interests and incentivising management over the longer
term rather than a clean deal where everything is wrapped up
from day one.

MB: I think deals are structured in a better way than they were
before. Twelve or 18 months ago, we were more or less asked
to buy very complex businesses with our eyes virtually closed.
Buying a business is different from buying a car, and therefore
the risk should be shared in a more effective way.

In the absence of credit,
can private equity funds
still offer above-market
average returns on
RB: Duff & Phelps recently tested out hypothetical scenarios
of private equity. Even with 33% leverage, the net returns to
LPs were on average, with no operational improvements, still
13-17% higher than the market. This is low compared to what
we know private equity can do, but higher than returns offered
by indices, be they European indices; the S&P 500; or the Asia-
Pacific markets. The point is that even with none or very modest
leverage, the returns that private equity generates is superior
to historical returns in the public markets. Furthermore,
managers are starting to realise that if they can remove the
serious financial risk, which tends to be binary, then they can
really focus on operations and growth.

AM: By taking more time to get to know the business, to get to
know the market, I’m sure that you can find the right targets
and make the right investments to realise the superior returns
that we have seen in the past.

Private Equity in Germany: Response to the Crisis
Roundtable Discussion

SL: The stage at which private equity invests is typically earlier
than the public markets and so there is perhaps more scope “If you do your
for rapid growth. If you do your work well and identify the right
opportunities, manage to invest at decent valuations, and manage work well and
the investments well, then you can generate very attractive returns
for your investors. identify the right
JK: A fund at the end of its lifetime which invested heavily during opportunities,
the boom phase will probably show a smaller return than other
funds. However, funds that are beginning to be invested today face manage to invest at
a very interesting time – if a private equity house makes profitable
investments right now, and is creative, they will be able to show a decent valuations,
very substantial return in the future.
and manage the
MB: We are really looking at businesses that will grow to a level
that they have never achieved before. If we want to sell at high investments well,
valuations, we have to deliver something which is substantially
better than it was before. then you can
generate very
What are the primary attractive returns
challenges and
opportunities for private for your investors.”
equity investors in the
German market? Sotiris Lyritzis

SL: Germany is an attractive market and, because of its size,
companies can grow very quickly and significantly. It is a
technologically advanced economy and there are a lot of companies
with world-class products that have the ability to be dominant global
players. The challenges are very similar to those that are seen
everywhere else. Investors need to make sure that the company
they are investing in has a product that is robust and a firm that has
made the right plans to expand out of their domestic market. Most
of these businesses are competing in a global marketplace and
being strong in the domestic economy is a very good starting point.

MB: Germany is a very interesting market, because there is activity
across a number of industry sectors. We have a lot of innovative
people working here and much of the money is invested in research
and development, this is quite intriguing for the world market.

RB: The principal challenge is managing investments in sectors
that are in decline, or facing regulatory issues. Private equity funds

Private Equity in Germany: Response to the Crisis

Roundtable Discussion
that have expertise and networks in growth industries are well Calls for regulation are coming up because there seem to have
positioned for the next cycle, I say this as it probably can’t get any been some private equity funds that operated in a more secretive
worse than it has been for the last 12 plus months. way towards their LPs than they would have desired. This
arrangement works well as long as the private equity house is
AM: In Germany, you have to be an active investor and take a more reporting good news and sending cheques. It obviously breaks
entrepreneurial role post-deal, fully engaging all the stakeholders down when you have bad news to report. One of the things that
in a company. This means you might have to put in more effort at will come out of this crisis is that private equity funds will have to
portfolio company level, but our clients have told us that you can be a little more transparent with their investors and a lot clearer
achieve better by putting in this effort. It also results in a much on portfolio structure, valuation and overall levels of leverage. LPs
broader strategy and business plan, which can benefit the growth can then continue to feel comfortable with the asset class, even at
of a company. This is obviously to everyone’s benefit. times such as now where it is obviously under pressure.

What kinds of regulations
are appropriate and
necessary to govern the
activity of private equity
JK: I think we need to differentiate between different layers of
regulation and their objectives. There is a need for tax reform,
especially where outside investors raise funds in Germany and
invest in the domestic market.

We also need to address the relationship between the funds and
investors, as well as increasing the credibility of the private equity
industry in the market. This will be addressed by the draft EU
directive which covers elements such as transparency, reporting
requirements and corporate governance. I do not think we need
regulation to protect the investors, since they are all very mature
investors and are aware of what they are doing.

It is also important to distinguish between the different sorts of
alternative investment vehicles; the current EU directive does not
make a distinction between hedge funds and buyout funds, and
these obviously have very different characteristics and regulatory

SL: In relation to the previously mentioned EU directive, private
equity is a global business and a regional directive can only do so
much for it. However, I feel that with greater transparency in the
reporting arrangements between GPs and LPs, you can hopefully
bypass the need for particularly heavy central legislation and
regulation of the industry.

Private Equity in Germany: Response to the Crisis
Roundtable Discussion

Where the Debt Breaks
Robert A. Bartell, CFA (Managing Director, London)
and Dr. Christian Aders (Managing Director, Munich)

Income approach Market multiple approach
The income approach faces limitations in the current economic The market multiple approach has a multitude of questions as
environment, including: well:

• Challenges in estimating the Cost of Capital • Should a valuation use current, historical or projected
- Which risk-free rate should be used? multiples?
- What is the proper equity risk premium? • Is the current EBITDA appropriate for applying to the
- How did the collapse in the financial industry affect my multiple?
firm’s beta? • Will the historical peak-to-trough cycle of a company match
• Assessing the reasonableness of financial projections the future peak-to-trough?
- Are the projections aggressive or conservative given the
current environment? Valuation-driving market multiple selections are even more
- How do we treat the Net Operating Losses, a tax asset, of critical if the value falls within the ‘Red Zone’ in which slight
a company? adjustments could dramatically affect a conclusion.
- What is the amount of “new money” necessary for a
company to achieve its business plan?

The “Red Zone”

Positive Equity Value

Low Multiple High Multiple

Senior Debt Second Lien Term Loan / Mezzanine Debt Enterprise Value

Private Equity in Germany: Response to the Crisis

Roundtable Discussion
To assess the financial viability of a company, long-term Step 2: Cash Flows Assess Company Liquidity
projected performance needs to be reviewed in conjunction Can cash flows pay debt obligations?
with the current situation. Companies that look solvent today
may not be solvent tomorrow. A simple example comparing
two companies with similar free cash flow but different capital Capex: 10
structures demonstrates the importance of not only measuring Taxes 25
the current health of a company but also estimating its future FCF1 215
Principle Due: 200
Which company is in a Interest Due: 85

better position? Total Fixed Charges 285

Fixed Charge Coverage Ratio2: 0.75x
Step 1: Balance Sheet Assessing Where the Debt Breaks
Is enterprise value greater than outstanding debt?
Capex: 10
(€ in 000s)
Taxes 25
Company 1
FCF1 215
Enterprise Value €300,000
Debt Securities Principle Due: 100
Interest Due: 85
Senior Debt (125,000)
Total Fixed Charges 185
Second Lien Term Loan / Mezzanine Debt (100,000)
Aggregate Equity Value Surplus/(Deficit) €75,000 Fixed Charge Coverage Ratio2: 1.16x

Free Cash Flow “FCF” = EBITDA - Cash Taxes - Capital Expenditures
Fixed Charge Coverage Ratio = FCF/Fixed Charges
(€ in 000s)
Company 2 Step 3: Conclude Which Company is in Better Position?
Enterprise Value €140,000 In the first scenario, Company In the second scenario,
1’s enterprise value exceeds Company 2’s enterprise value
Debt Securities
the outstanding debt but is less than the outstanding
Senior Debt (125,000) Company 1 may not have debt but Company 2 should
Second Lien Term Loan / Mezzanine Debt (100,000) the ability to refinance in the have the ability to service
current environment. upcoming payments.
Aggregate Equity Value Surplus/(Deficit) -€85,000
Solvency Tests Solvency Tests
Balance Sheet: Pass Balance Sheet: Fail
Cash Flow: Fail Cash Flow: Pass

Duff & Phelps is well positioned to provide a debtor, creditor or security trustee an independent going concern business enterprise
value and expert testimony. We are confident in assessing and defending ‘where the debt breaks’ in connection with negotiations
amongst various stakeholders.

Private Equity in Germany: Response to the Crisis
Roundtable Discussion

National legal safeguards against risks
associated with private equity investments
Dr. Jörg Kirchner and Dr. Liane Bednarz

Introduction This article will summarise:
(i) The legal and tax regimes for “asset stripping” from
limited liability companies;
On 30 April 2009, the European Commission published a (ii) The protection of limited liability companies against
proposal for a Directive of the European Parliament and Council undue financial assistance and other forms of upstream
on Alternative Investment Fund Managers (AIFM) (AIFM- loans/security imposed by their shareholders;
Directive Proposal). In this proposal, Alternative Investment (iii) The protection of listed limited liability companies against
Funds are defined as funds that are not regulated under secret stake building and;
the envisaged recast of the Directive on the coordination of (iv) The transparency requirements relating to a significant
laws, regulations and administrative provisions relating to divestment of assets vis-à-vis the employees of a
undertakings for collective investment in transferable securities portfolio company. All Key Jurisdictions contain extensive
(UCITS-Directive). Hence, private equity funds and their legal provisions covering these aspects.
managers would fall within the scope of the AIFM-Directive.

The AIFM-Directive Proposal aims to create a regulatory Asset Stripping
and supervisory framework for AIFM in the European Union,
thereby addressing certain risks of the financial system which 1. Legal regime
crystallised during the financial crisis. While acknowledging Asset stripping for the purpose of this article shall be (i)
that – different from hedge funds – private equity funds did not the disposal of core assets by a company followed by the
contribute to the recent increase of macro-prudential risks, subsequent distribution of the resulting proceeds of the
the AIFM-Directive Proposal, nevertheless, perceives an EU- disposal to its shareholders as well as (ii) the unduly high
wide regulation of private equity funds as necessary, because distribution of liquid assets to the shareholders, e.g. to pay
the latter recently “experienced challenges relating to the off acquisition debt incurred by the shareholders as part of
availability of credit and the financial health of their portfolio a leveraged finance transaction, even when such disposal
companies.” and distribution risk could be materially detrimental to the
company. All Key Jurisdictions contain strict safeguards
It is doubtful to what extent an EU-wide regulatory and under corporate or capital markets laws in order to prevent
supervisory framework for the private equity industry is actually such asset stripping. Creditors and minority shareholders are
needed. The various national legal systems within the EU thereby protected against the adverse effects of the actual
already contain a high level of protection against the risks asset stripping instead of being merely referred to insolvency
which are typically associated with private equity investments. laws. Such preventive regulations against asset stripping
Using the example of certain key jurisdictions of the EU (France, govern both (i) the initial sale of core assets and (ii) the unduly
Germany, Italy, Spain and the United Kingdom; together are high distribution of the proceeds resulting from the disposal
the “Key Jurisdictions”), this article will show that these or of any other liquid assets to the shareholders (whether in
typical risks of private equity investments have been previously the form of a profit distribution, buyback of own shares or a
minimised on a national level. As for the types of limited liability reduction of share capital).
companies, this article is based on the national legal regimes
for the various types of limited liability companies which are a) Initial sale of core assets
used for large and medium-sized companies, as these are the Most Key Jurisdictions contain restrictions on the legal bodies
key targets for private equity investors. Such legal forms are the of a limited liability company (executive board/advisory board/
Société Anonyme (SA) (France), Gesellschaft mit beschränkter shareholders) with respect to the sale of the assets of a
Haftung (GmbH), Aktiengesellschaft (AG) (Germany), Società company. Preventive regulations include measures such as the
per azioni (SpA), Società a responsabilità limitata (Srl) (Italy), requirement of shareholder resolutions prior to the sale of a
Sociedad Anónima (SA), Sociedad de Responsabilidad Limitada substantial part of the assets. A sale without a prior approval
(SL) (Spain), Private company limited by shares (Ltd.) and the of the shareholder meeting might be void and might have to
Public company limited by shares (Plc) (United Kingdom). be rescinded, unless the buyer acts in good faith. Moreover,

Private Equity in Germany: Response to the Crisis

Roundtable Discussion
most Key Jurisdictions impose a strict liability on the legal
representatives of the company in case they sell assets without National legal
such prior consent of the shareholder meeting. Another widely
spread safeguard against the sale of a substantial part of
safeguards against
assets are national provisions according to which a (majority)
shareholder must not act to the detriment of a subsidiary, for
undue financial
instance by instructing the company to sell its core assets even assistance and other
if such sale is not in the best interests of the company. If a
(majority) shareholder or his representatives violate such rules, forms of upstream
they may be held personally liable.
loans/security imposed
b) Distributions to the shareholders
In all Key Jurisdictions the distribution of assets (i.e. profit
by the shareholders to
distributions, buybacks of own shares and reductions of the the target company
share capital) to the company’s shareholders is restricted
by capital maintenance rules. In the event that assets of the Also, Key Jurisdictions contain strict safeguards against
company have been sold to the detriment of the interests undue financial assistance and other forms of upstream
of the remaining shareholders, creditors or employees, the loans, and security imposed by the shareholder to the target
provisions on distribution of assets still contain very strict company.
rules for payments which are effected with the purpose to
distribute the proceeds from such sale to the shareholders. 1. Financial assistance
In particular, the restrictions on the payment of dividends are Financial assistance for the purpose of this article shall mean
very effective. In all limited liability companies falling within the the assistance given by a company for the purchase of its own
scope of the Second Company Law Directive (Directive 77/91/ shares, or the shares of its parent company by an investor.
EEC as amended by Directive 2008/68/EC), a distribution of Such assistance can be given in different ways, for instance
dividends can only be effected if after such distribution both by an advance payment, a direct loan, or a guarantee or other
the registered capital and any mandatory capital reserves are security for a loan by financing banks in order to support the
covered by assets, the book value of which corresponds to investor’s acquisition debt.
such registered capital and mandatory capital reserves. As
such, provisions protect creditors because they are mandatory All Key Jurisdictions implemented the strict restrictions
and cannot be set aside by a unanimous resolution of the on financial assistance of public limited liability companies
shareholders. Such requirements have been fully implemented required by the wording of Art. 23 of the Second Company
into all Key Jurisdictions. Law Directive (Directive 77/91/EEC) prior to its amendment.
Most Key Jurisdictions not only implemented Art. 23, but also
2. Asset stripping and Taxation enacted additional limitations, namely provisions governing
Most European member states levy ordinary tax rates on capital by-passing structures and transactions with the same effect
gains from the disposal of assets and business units, as well as as the transactions listed in Art. 23. Moreover, many Key
certain duties on fair market values of transferred assets. On the Jurisdictions also enacted restrictions on financial assistance
basis of current tax laws, asset stripping strategies are therefore of private limited liability companies, thereby going beyond the
unattractive precisely because they trigger a considerable tax applicability scope of Art. 23 Directive 77/91/EEC. Art. 23 was
burden. Only share deals may provide for an exemption to these recently deregulated by Directive 2008/68/EC, as the European
rules, often due to the participation exemptions introduced in a legislator intended to ease changes in the ownership while at
number of member states. With a view of the lack of attractiveness the same time stipulating strict safeguards protecting both
of asset stripping strategies, European member states have in the shareholders and creditors. As a result, the protection level
past consequently not seen any reason to provide for specific anti for the latter continuous to be high.
avoidance provisions for asset stripping rules.

Private Equity in Germany: Response to the Crisis
Roundtable Discussion

2. Upstream loans/security which the AIFM needs to fulfil towards the representatives of
All Key Jurisdictions contain a variety of limitations on the employees of a target company, provided the AIF managed
upstream loans/security to a parent company or a third party by such AIFM hold a controlling influence, as further defined in
which do not qualify as financial assistance. Upstream loans the AIFM-Directive Proposal. The term significant divestment of
for the purpose of this article are post-acquisition loans which assets is not defined in the AIFM-Directive Proposal. The AIFM-
the target company grants to its parent company and which do Directive Proposal stipulates that the Member States shall
not qualify as financial assistance. The term upstream security ensure that the AFIM includes into the annual report of each
encompasses security for a loan which a third party has granted AIF a statement on significant divestment of assets. The AIFM
to the parent company. The national safeguards in place shall provide such annual report and hence, the statement
comprise (i) restrictions on related party agreements, (ii) the on significant divestment of assets to all representatives of
requirement that the granting of the loan/security must comply the employees of the company concerned, no later than four
with the target company’s corporate purpose and interest, (iii) months following the end of the respective financial year.
the prohibition to affect the non-distributable reserves when
granting the loan/security, (iv) the test whether the claim This envisaged disclosure requirement vis-à-vis the
against the borrower is fully realisable and (v) the necessity to representatives of the employees does not seem to be
point out the reasons for granting the loan/security. necessary. Most Key Jurisdictions not only contain similar
requirements with respect to the annual report, but also
3. National legal safeguards against secret stake building in comprise disclosure requirements which relate to specific
listed target companies cases of asset disposals. Hence, the employees will be
All Key Jurisdictions contain provisions in order to protect listed informed about such transactions before, or immediately after,
companies against secret stake building, in particular through they have been executed. This level of protection is significantly
notification requirements. Such provisions also govern secret higher than a mere disclosure of a significant divestment of
stake building through certain financial instruments. As a general assets in the annual report, which subsequently has to be made
rule, the aforementioned national provisions are based on the available to the employees’ representatives.
implementation of the Transparency Directive (Directive 2004/109/
EC) and its substantiating Directive 2007/14/EC. According to Moreover, all Key Jurisdictions have implemented the so-called
Art. 13 (1) Directive 2004/109/EC, certain financial instruments Acquired Rights Directive (Directive 2001/23/EC dated March
also have to be considered for the purpose of the voting rights 12, 2001 on the approximation of the laws of the Member States
thresholds. In some Key Jurisdictions, this also includes cash relating to the safeguarding of employees’ rights in the event of
settled equity swaps. Furthermore, certain Key Jurisdictions also transfers of undertakings, businesses or parts of undertakings
require shareholders reaching certain voting right thresholds (e.g. or businesses); or have adopted similar provisions which
10 %) to disclose their intentions and plans for the company. provide for the transparency vis-à-vis the employees in certain
cases of a transfer of assets which entangles a transfer of

Transparency employees.

requirements with
respect to a significant
divestment of assets vis-
à-vis the employees
The recent AIFM-Directive Proposal, mentioned at the
beginning of this article, sets forth certain information
obligations with respect to a significant divestment of assets,

Private Equity in Germany: Response to the Crisis

Roundtable Discussion
Historical data
Top 20 German M&A transactions, Q1-Q3 2009
Ranking Announced Status Target company Target Target Bidder Bidder Seller Seller Deal
date sector country company country company country value

1 Jun-09 C Hypo Real Estate Holding AG Financial Germany SoFFin Germany 2,960
(81.00% stake) Services
2 Mar-09 C Daimler AG (9.10% stake) Industrials Germany Aabar United Arab 1,954
& Investment PJSC Emirates
3 Jan-09 C Commerzbank AG (25.00% Financial Germany SoFFin Germany 1,770
stake) Services
4 May-09 P VNG-Verbundnetz Gas AG Energy, Germany EnBW Energie Germany EWE AG Germany 1,200
(47.90% stake) Mining & Baden-
Utilities Wuerttemberg
5 Jun-09 P E.ON AG (13 hydro power Energy, Germany Oesterreichische Austria E.ON AG Germany 1,000
plants in Bavaria) Mining & Elektrizitaets-
Utilities wirtschaft AG
6 Jan-09 C RWE Westfalen Weser Ems Energy, Germany RWE AG Germany Municipal communities Germany 800
AG (20.03% stake) Mining & (Germany)
7 Feb-09 C Danisco Sugar A/S (Anklam Consumer Germany Suiker Unie Netherlands Nordzucker AG Germany 730
8 Feb-09 C Mitteldeutsche Energy, Germany J&T Finance Czech NRG Energy Inc; URS USA 404
Braunkohlengesellschaft Mining & Group AS; Republic Corporation
mbH Utilities Severoceske Doly
9 Jul-09 C IDS Scheer AG TMT Germany Software AG Germany 401
10 Aug-09 C Deutsche Schiffsbank AG Financial Germany Commerzbank Germany HypoVereinsbank AG Germany 400
(12.00% stake) Services AG
11 Aug-09 C Porsche Automobil Holding Industrials Germany Qatar Holding Qatar Piech family (private Germany 390
SE (5.00% stake) & LLC investors); Porsche
Chemicals family (private investors)
12 Apr-09 P Stadtwerke Bremen AG Energy, Germany EWE AG Germany Freie Hansestadt Germany 360
(25.90% stake) Mining & Bremen (City of Bremen)
13 Apr-09 C DAWAG Real Estate Germany Meravis Germany Vereinte Germany 360
Wohnungsbau- Dienstleistungs-
und Immobilien gewerkschaft
14 Sep-09 C BRAHMS AG Pharma, Germany Thermo Fisher USA HBM BioVentures AG Switzerland 330
Medical & Scientific Inc
15 Jun-09 P Stadtwerke Bremen AG Energy, Germany EWE AG Germany Freie Hansestadt Germany 320
(25.10% stake) Mining & Bremen (City of
Utilities Bremen)
16 Sep-09 P Easycash GmbH Business Germany Ingenico SA France Warburg Pincus LLC USA 290
17 Jun-09 C RMG Group Industrials Germany Honeywell USA Triton Partners United 286
& International Inc Kingdom
18 Feb-09 C Hanseatische Verlags- TMT Germany Verlagsgesell- Germany Axel Springer AG Germany 263
Beteiligungs AG (23.00% schaft Madsack
stake); Kieler Nachrichten GmbH & Co KG
(24.50% stake); Leipziger
Verlags-und Druckerei GmbH
& Co. KG (44.90% stake);
Luebecker Nachrichten
GmbH (49.00% stake)
19 Jul-09 P Infineon Technologies AG TMT Germany Golden Gate USA Infineon Technologies Germany 250
(Wireline Communications Capital AG
20 Aug-09 C Kalle GmbH Industrials Germany Silverfleet Capital United Montagu Private Equity Germany 213
& Partners LLP Kingdom GmbH
C = Completed; P = Pending; L = Lapsed

Private Equity in Germany: Response to the Crisis
Roundtable Discussion

Top 20 private equity buyout and exit transactions,
Q1-Q3 2009
Ranking Announced Status Target company Target Target Bidder Bidder Seller Seller Deal
date sector country company country company country value

1 Sep-09 C BRAHMS AG Medical, Germany Thermo Fisher USA HBM BioVentures Switzerland 330
Pharma & Scientific Inc AG
2 Sep-09 P Easycash GmbH Business Germany Ingenico SA France Warburg Pincus USA 290
Services LLC
3 Jun-09 C RMG Group Industrials & Germany Honeywell USA Triton Partners United 286
Chemicals International Inc Kingdom
4 Jul-09 P Infineon Technologies TMT Germany Golden Gate Capital USA Infineon Germany 250
AG (Wireline Technologies AG
5 Aug-09 C Kalle GmbH Industrials & Germany Silverfleet Capital United Montagu Private Germany 213
Chemicals Partners LLP Kingdom Equity GmbH
6 Aug-09 P Aleo Solar AG Industrials & Germany Robert Bosch GmbH Germany HANNOVER Germany 192
Chemicals Finanz GmbH;
Marius Eriksen
(private investor)
7 Jul-09 C LEWA GmbH Industrials & Germany Nikkiso Co Ltd Japan Deutsche Germany 172
Chemicals Beteiligungs AG;
Quadriga Capital
Services GmbH
8 Jun-09 P Neumayer Tekfor GmbH Industrials & Germany AXA Private Equity; USA 172
Chemicals Barclays Private
Equity Ltd; Fifth Third
Bancorp; Gartmore
Direct Fund II Scottish
LP; ING; Landesbank
Nationwide Private Equity
Fund LLC; NIBC Bank NV
9 Apr-09 P TMD Friction Holdings Industrials & Germany Pamplona Capital United TMD Friction Luxembourg 100
GmbH Chemicals Management LLP Kingdom Luxembourg Sarl
10 Aug-09 C Actebis Holding GmbH Business Germany Droege Capital GmbH Germany ARQUES Germany 93
Services Industries AG
11 Jul-09 C CeDo Folien und TMT Germany Rutland Fund II United Delton AG Germany 61
Haushaltsprodukte GmbH Kingdom
12 Jan-09 C ddp Deutscher Industrials & Germany BLUO SICAV SIF Luxembourg ARQUES Germany 30
Depeschendienst GmbH; Chemicals Industries AG
Evotape S.p.A; Rohner
AG; The BEA Group
13 Aug-09 P Hallhuber GmbH Consumer Germany Change Capital Fund United Stefanel GmbH Italy 25
II LP Inc Kingdom
14 Apr-09 C Heinrich Berndes Consumer Germany Palace Park United CFC Industrie Germany 23
Haushaltstechnik GmbH Investments Ltd Kingdom Beteiligungen
& Co. KG (34.30% stake) GmbH & Co KGaA
15 Jul-09 C Samas GmbH & Co KG Consumer Germany Innovation Change Germany Samas NV Netherlands 20
(94.00% stake) GmbH; Samas GmbH &
Co KG (MBO Vehicle)
16 Mar-09 C innovatis AG Pharma, Germany Roche Diagnostics Ltd Switzerland Ventizz Capital Germany 15
Medical & Partners Advisory
Biotech AG
17 Feb-09 C Integrata AG (91.04% Business Germany Cornerstone Equity USA Logica plc United 15
stake) Services Investors Kingdom
18 Sep-09 P EliteMedianet GmbH TMT Germany Tomorrow Focus AG Germany Burda Digital Germany 13
(36.93% stake) Ventures GmbH;
Beteiligungs GbR
19 Mar-09 C Pro2 Anlagentechnik Industrials & Germany Deutsche KWK- USA Alkane Energy plc United 9
GmbH Chemicals Gesellschaft mbH Kingdom
20 Jan-09 C Meade Instruments Consumer Germany Bresser GmbH Germany Meade USA 9
Europe GmbH & Co. KG Instruments
C = Completed; P = Pending; L = Lapsed

Private Equity in Germany: Response to the Crisis

Roundtable Discussion
German M&A trends
All German M&A German buyouts
Period Volume Value(€m) Avg. deal size Period Volume Value(€m) Avg. deal size
(€m) (€m)
Q1 2004 132 11,591 88 Q1 2004 22 1,276 58
Q2 2004 157 16,455 105 Q2 2004 28 6,886 246
Q3 2004 140 10,359 74 Q3 2004 28 5,806 207
Q4 2004 183 19,066 104 Q4 2004 40 5,250 131
Q1 2005 134 14,810 111 Q1 2005 25 2,596 104
Q2 2005 149 38,950 261 Q2 2005 33 8,293 251
Q3 2005 183 13,670 75 Q3 2005 40 5,702 143
Q4 2005 196 26,740 136 Q4 2005 44 8,911 203
Q1 2006 155 26,375 170 Q1 2006 41 2,178 53
Q2 2006 151 10,428 69 Q2 2006 44 4,663 106
Q3 2006 177 18,720 106 Q3 2006 40 5,609 140
Q4 2006 198 27,641 140 Q4 2006 58 14,605 252
Q1 2007 173 14,693 85 Q1 2007 38 6,213 164
Q2 2007 156 31,450 202 Q2 2007 35 7,124 204
Q3 2007 174 24,943 143 Q3 2007 38 4,058 107
Q4 2007 174 12,215 70 Q4 2007 39 2,105 54
Q1 2008 143 4,983 35 Q1 2008 34 1,566 46
Q2 2008 154 16,886 110 Q2 2008 48 10,831 226
Q3 2008 155 48,384 312 Q3 2008 37 3,242 88
Q4 2008 113 14,271 126 Q4 2008 17 193 11
Q1 2009 115 6,616 58 Q1 2009 16 63 4
Q2 2009 96 7,411 77 Q2 2009 17 303 18
Q3 2009 92 3,662 40 Q3 2009 17 662 39
Total 3,500 420,319 Total 779 108,135

German exits German M&A all
Period Volume Value(€m) Avg. deal size
(€m) sector analysis YTD 30
Q1 2004
Q2 2004
September 2009
Q3 2004 15 1,397 93
Sector Value Sector Volume
Q4 2004 17 3,240 191
Q1 2005 18 4,329 241
Financial Services 5,489 Industrials 90
Q2 2005 16 1,708 107
Energy, Mining & Utilities 4,530 Consumer 47
Q3 2005 16 3,995 250
Industrials 3,601 Business Services 36
Q4 2005 16 3,211 201
Consumer 1,115 TMT 35
Q1 2006 16 847 53
TMT 969 Energy, Mining & Utilities 27
Q2 2006 15 3,185 212
Business Services 968 Financial Services 26
Q3 2006 19 3,571 188
Pharma, Medical & Biotech 462 Pharma, Medical & Biotech 19
Q4 2006 29 7,617 263
Real Estate 393 Construction 7
Q1 2007 25 7,203 288
Construction 142 Leisure 6
Q2 2007 26 7,647 294
Defence 20 Transportation 6
Q3 2007 21 5,502 262
Leisure Real Estate 2
Q4 2007 23 3,253 141
Transportation Defence 1
Q1 2008 11 1,348 123
Agriculture Agriculture 1
Q2 2008 24 4,088 170
Total 17,689 303
Q3 2008 20 2,045 102
Q4 2008 5 147 29
Q1 2009 9 52 6 Notes:
Q2 2009 10 317 32 Based on announced deals, excluding lapsed and withdrawn bids
Based on dominant geography of target being Germany
Q3 2009 10 1,303 130
Based on dominant sector of target
Total 382 72,652 YTD 2009 is from 01 January to 30 September

Private Equity in Germany: Response to the Crisis
Roundtable Discussion

GERMan M&a trends German private equity
buyout trends
250 60,000 70 16,000

60 14,000

value of deals ( m)

value of deals ( m)
number of deals


number of deals
30,000 8,000
10 2,000

0 0 0 0

volume value( m) volume value( m)

German M&A sector German M&A sector
split by volume, split by value,
Q1 2004-Q3 2009 German M&A sector split by volume, Q1 2004-Q3 2009 Q1 2004-Q3 2009
German M&A sector split by value, Q1 2004-Q3 200
2% <1% 2%
<1% <1%
2% 2% 3%
Industrials Financial Services
6% Consumer
5% Energy, Mining & Utilities
29% Business Services 32%
TMT Industrials
Energy, Mining & Utilities 6% Consumer
Financial Services
Pharma, Medical & Biotech
Business Services
9% Construction
Leisure Pharma, Medical & Biotech

Transportation Real Estate
Real Estate 20%
12% 16%
Agriculture Defence


German private equity exit trends
German private equity exit trends
35 9,000


value of deals ( m)
number of deals

20 5,000

15 4,000



0 0

volume value( m)

Private Equity in Germany: Response to the Crisis
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