Invest Europe – Pan-European
Private Equity – Full report
November 2020

Invest Europe – Pan-European Private Equity Survey

Agenda1

Background2

Fundraising, support and investment from LPs to GPs

3

Key investment criteria in Private Equity

4

Private Equity transaction market

5

Private Equity operations focus and portfolio management

A

Appendix2

Invest Europe & Arthur D. Little collaboration

Pan-European survey conducted August – September 2020 involving over
350 respondents, with the majority being GPs
Infrastructure◼ Invest Europe in collaboration with Arthur D. Little conducted the‘Pan-European Private Equity Survey’

250 GPs– Assesses impact of COVID-19 on private equity and venture capital◼ Captures the views of more than 350 GPs and LPs on industry actions
during the crisis and future expectations

3%

GrowthCapital16%

Buyout45%

VentureCapital36%◼ Wide range of issues covered, including LP / GP future perspectives on– Portfolio management– Investment focus– Capital allocation– Agreements, and– Investor relations◼ Insights from GPs on PE firm operations going forward, threats but
also potential new opportunities

Secondaryfund
Family 5%
Office7%
Insurancecompany9%
Assetmanager
12%

Other
8%

Fund offunds
26%

100 LPs

Pension fund
13%

Government
agencies
20%

3Invest Europe – Pan-European Private Equity Survey

Agenda1

Background2

Fundraising, support and investment from LPs to GPs

3

Key investment criteria in Private Equity

4

Private Equity transaction market

5

Private Equity operations focus and portfolio management

A

Appendix

4

2 Fundraising, support and investment from LPs to GPs

The Covid-19 pandemic caused the majority of fund-raising processes toslow down, yet more than 20% of the GP respondents reported no impact
Impact on ongoing fund-raising process when Covid-19 struck(Europe, 2020)
GP

0%
Fundraisingprocess sped up

Fundraising process
stopped but was or is
expected to restart(ed) later

20%

60%

5.8%

54.7%

20.9%

80%

100%

◼ The Covid-19 situation has
slowed down the majority ofthe ongoing fund-raisingprocesses– That is, for ~55% of
respondents

18.7%

Fundraising processslowed down

No impact

40%

Comments– The fundraising processes
have fully stopped in~19% of cases (thisincludes those being
restarted later)◼ Only in a significant minorityof cases has fundraising sped
up, i.e. ~6%

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
5

2 Fundraising, support and investment from LPs to GPs

Most GPs and LPs believe that the lifetime of funds will become longer
going forward, but there are disagreements, especially among GPs
The lifetime of funds to become longer going forward

Comments(Europe, 2020)
GP

LP

0%

20%

60%

80%

100%

21.6%

Yes, for funds planned to be terminatedwithin the next 2 to 3 years

28.0%

27.3%

Yes for most of the funds

36.6%
31.2%

Yes, on a case by case basis

No

40%

28.0%
31.2%
7.5%
GP

More than 90%
of LPs andalmost 70% of
GPs expect
longer lifetimefor funds◼ The pandemic is seen as
having an impact on the
lifetime of funds – Fund
lifetimes are expected to
become longer– GPs and LPs are mostlyaligned in this regard– However, roughly a thirdof GPs have a different
view and consider thatthe lifetime will not be
extended– Only 7.5% of LPs disagree

LP

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
6

2 Fundraising, support and investment from LPs to GPs

Both GPs and LPs expect LPs to be supportive in terms of extensions offunds’ lifetime, notably on a case-by-case basis
Expected support from LPs on the extension of funds’ lifetime(Europe, 2020)
GP

LP

0%

20%

Yes, for funds planned to be terminated 0.0%
within the next 2 to 3 years

40%

23.7%

26.9%
53.7%

Yes, on a case by case basis

80%

100%

◼ GPs expect support from
LPs on funds’ lifetime
extension– The majority think so on
a case-by-case basis (i.e.
41.1%)

31.1%

Yes for most of the funds

No

60%

Comments

43.0%◼ The view of LPs align withthat of GPs across the
board

15.3%
6.5%
GP

LP

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
7

2 Fundraising, support and investment from LPs to GPs

The majority (roughly 60%) of GPs and LPs believe that future capital
allocations from LPs to the PE asset class will increase in the next 3 years
Capital allocations from LPs to PE asset class over the next 3 years(Europe, 2020)
0%

GP
LP

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

◼ Whatever the current situation,
the PE asset class remains
attractive for LPs – nearly
60% of the LPs expect to invest
more in the coming 3 years

60.6%
59.1%

More allocation
33.3%
25.8%

No change

6.1%

Less allocation

15.1%

GP

– GPs’ views (~61%) arealignedLP

Investment strategy allocations over the next 6 to 12 months
compared to 2019 (Europe, 2020)
0%

LP

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Distressed asset funds

43.0%

54.8%

2.2%

Secondary asset funds

39.8%

57.0%

3.2%

Credit funds

22.6%
Higher72.0%
Same

Comments

5.4%◼ LPs however show atendency towards slightly
diversifying their portfolio– Approximately 40% of
respondents expressed anincreased interest in
distressed asset funds andsecondary asset funds

Lower

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
8

2 Fundraising, support and investment from LPs to GPs

Most GPs expressed that the Limited Partnership Agreement will notchange in the next 2–3 years, while LPs expect it to change in their favour
Expectation on changes in the Limited Partnership Agreement overthe next 2 to 3 years (Europe, 2020)
GP

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

LP

10.0%
Become more “GP friendly”
10.8%

35.1%
Become more “LP Friendly”

49.5%

55.0%
No change
39.8%

GP

LP

Comments◼ Roughly 50% of LPs
consider that the Limited
Partnership Agreement will
become more LPfriendly, while 55% GPs
consider that there will be
no change– Yet, ~35% of GPs agreewith the LPs regarding theagreement becoming
more “LP-friendly”◼ A minority of GP and LP
respondents answered that it
will become more GPfriendly

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
92 Fundraising, support and investment from LPs to GPs

GPs and LPs have expressed somewhat similar views that there will be nochange regarding the three key clauses of the LPA1
Expectation regarding specific clauses in a Limited Partnership
Agreement (Europe, 2020)
0%

GP

10%

Extension in the investment mandate compared to the current investment scope

50%

60%

70%

2.2%

78.4%
No change

10%

40%

20%

30%

50%

41.9%

Less common
60%

70%

80%

63.4%

28.0%
More common

1.7%

51.6%

34.4%

67.7%
No change

90% 100%
5.6%

71.0%

More common

Extension in the investment mandate compared to the current investment scope

80%

52.8%

19.9%

0%

“No fault divorce clause” (GP removal clause)

40%

26.8%

“No fault divorce clause” (GP removal clause)

Key person clause

30%

41.6%

Key person clause

LP

20%

Comments

Less common

90% 100%
6.5%

2.2%

4.3%

◼ PE professionals do not
expect significant change inthe specific clauses included in
the Limited Partnership
Agreement– However, investment scope is
expected to become wider
going forward to give GPs
more flexibility andopportunities in theirinvestment operations◼ Overall, the view of LPs alignwith GPs– Comparing GPs and LPs, LPsbelieve to a larger extent thatthe “No fault divorce clause”
will become more common

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) LPA = Limited Partnership Agreement102 Fundraising, support and investment from LPs to GPs

GPs are more inclined to think that attention to risk management and IR1
communications towards LPs will become more important
Expected changes in daily operations in the near future, regarding...
(Europe, 2020)
GP

0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

The attention to risk management

68.4%

31.2%

0.4%

Investor Relations
communication towards the LPs

70.1%

29.0%

0.9%

More

No change

Less

Expected changes in the way allocated capital is managed towards thePrivate Equity asset class regarding... (Europe, 2020)LP

0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Your attention to risk management

54.8%

Investor Relations
communication from the GP

49.5%
More

No change

45.2%
49.5%
Less

1.1%

Comments◼ Risk management andInvestor Relations
communication are key
topics to be considered in thenear future– GPs expect to pay more
attention to this (~70% of
the respondents)– Only about 50% of the LP
respondents expect to pay
more attention to this,which potentially meansthat the other half of LP
respondents think that GPs
already tackle thisappropriately

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) IR = Investor Relations
11

Invest Europe – Pan-European Private Equity Survey

Agenda1

Background2

Fundraising, support and investment from LPs to GPs

3

Key investment criteria in Private Equity

4

Private Equity transaction market

5

Private Equity operations focus and portfolio management

A

Appendix12

3 Key investment criteria in Private Equity

GPs and LPs agree that team experience, investment strategy and past
performance are the top three differentiating factors for PE firms
Most important factors for a PE firm to differentiate itself within the Private
Equity market1 / Most important factors when selecting GPs2 (Europe, 2020)GP

LP

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%74.0%

Investment Partner team experience

92.5%
68.0%

Investment strategy

87.1%
66.7%

Past performance / return

92.5%
57.6%

Sector knowledge

77.4%
50.2%
57.0%

Evidence of proactive support of PE
professionals to their portfolio companies
GP

Comments◼ GPs and LPs arealigned in their views on
GP key differentiating
factors– They all highlight GP
Investment strategy,
Investment teamexperience, past
performance andsector knowledge asimportant– Overall, LPs value allimportantdifferentiating
factors higher than
GPs

LP

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) Question asked to GPs. 2) Question asked to LPs
13

3 Key investment criteria in Private Equity

GPs and LPs exhibit notable discrepancies for certain key factors such as
ESG approach and PE firm governance, which LPs see as more important
Most important factors for a PE firm to differentiate itself within the Private
Equity market1 / Most important factors when selecting GPs2 (Europe, 2020)
GP

LP

0%

10%

20%

30%

60%

70%

80%

72.0%
22.1%

Operating Partner
team experience

51.6%
16.5%

PE firm governance

Equity Investment per deal

50%

34.6%

Approach to ESG

Deal size (EV) focus

40%

65.6%
7.8%
35.5%

90%

100%

Comments◼ The views of GPs andLPs are misaligned
regarding several factors– In particularconcerning ESG,
Operating Partner
team experience andPE firm governance– LPs consider these to
be relatively highdifferentiating factors
while GPs do not

3.9%
20.4%
GP

LP

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) Question asked to GPs. 2) Question asked to LPs
14

3 Key investment criteria in Private Equity

The majority of LPs prefer to partner with long-term established GPs, inparticular Pension funds, Insurance companies and Sovereign wealth funds
Importance of PE establishment when specifying the scope of which
GPs to partner with (Europe, 2020)
LP

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pension fund

91.7%

8.3% 100%

Insurance company

90.0%

10.0% 100%

Sovereign wealth fund

80.0%

Family Office

62.5%

Asset management firm

61.5%

Fund of funds

55.2%

Corporate Investor
Government international organization related

Secondary funds

20.0%
12.5%

3.4%

50.0%
27.3%

25.0%

100%

41.4%

100%

59.1%

100%
100%

16.7%
Long term established

100%

38.5%

50.0%
13.6%

100%

100%
Newly established(1st time fund)Not importantComments◼ The aligned view of GPs and LPs on theimportance of GPs’ Investment teamexperience, past performance andsector knowledge is reflected by thetype of GP that LPs prefer– A majority of LPs (55%) preferto invest in long term
established PE firms, while only
6% are willing to invest in newly
established firms (not depicted ingraph)– 39% of LPs regards it as notimportant (not depicted in graph)◼ Pension funds, Insurance companies andSovereign wealth funds value long term
establishment as the most important◼ Few funds favour newly establishedfunds, and then only in a minority ofcases

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
15

3 Key investment criteria in Private Equity

More than 75% of LPs consider it important or very important that GPs
have an operating partner / dedicated portfolio management in the team
Importance of GPs to have an operating partner /dedicated portfolio manager1 (Europe, 2020)LP

0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Very important

29.0%

Important

47.3%

Neutral

Not important

18.3%

5.4%

76% say it isimportant orvery importantComments◼ ~76% of LPs consider that thepresence of an internally
dedicated operational teamin charge of portfolio
management is important orvery important– 29% rank it as “Veryimportant” and 47.3% as“Important”◼ Most large GPs haveinternalised thesecapabilities, but it is not thecase for smaller GPs– It is not seen by GPs as a key
differentiator

LP
Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) I.e. in addition to the investment team16

3 Key investment criteria in Private Equity

GPs and LPs alike stress ICT, Life Sciences and HC, and Business Services
as the key industries going forward, and LPs do so to a further extent
Selected main industry of focus

Comments(Europe, 2020)
GP

LP

0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
53.6%
61.5%
49.8%

ICT
Life science & healthcare

49.0%

Business services

45.2%

Consumer goods and retail

40.2%
42.3%
33.3%

Industrial equipment
Deep tech

30.7%

Biotech / Medtech

24.9%

Financial Services

24.5%

Renewable energy
GP

LP

80.8%

◼ Sector focus of GPs and LPs isrelatively aligned with top 3 sectors
being Life Sciences and Healthcare,Business Services, Tech and ICT–

Despite current context,
Consumer goods and Retailremains an important sector forboth GPs and LPs–

LPs are also focusing on Techsectors (Deep and Biotech /Medtech) and seeking to invest in
the renewable energy industry

65.4%
61.5%

61.5%
57.7%
53.8%
53.8%

◼ There are discrepancies between theview of GPs and LPs regarding theextent of focus for most industries–

ICT and Industrial equipment are
the two exceptions, within which
focus are aligned

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
17

3 Key investment criteria in Private Equity

The Real estate and Aerospace & Defense industries are receiving theleast attention going forward according to both GPs and LPs
Selected main industry of focus(Europe, 2020)
GP

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

LP
Transportation & logistics
Agro business
Chemicals
Automotive
Tourism & leisure
Energy & utilities

Construction & building materials
Advertising / Medias
Aerospace & Defense
Other
Infrastructure
Real estate

31.8%
23.1%
27.2%
30.8%
25.7%
19.2%
23.4%
15.4%
23.0%
15.4%
21.8%
38.5%
20.7%
15.4%
18.0%
19.2%
14.6%
11.5%
13.0%
7.7%
11.9%
38.5%
4.2%
11.5%
GP

Comments◼ GPs and LPs have overallsimilar views on theindustries receiving the least
attention– Real estate and Aerospace &Defense are the twocategories receiving theleast attention– LPs do nonetheless focus
more on Construction &building materials andInfrastructure compared to
GPs

LP

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
18

Invest Europe – Pan-European Private Equity Survey

Agenda1

Background2

Fundraising, support and investment from LPs to GPs

3

Key investment criteria in Private Equity

4

Private Equity transaction market

5

Private Equity operations focus and portfolio management

A

Appendix19

4 Private Equity transaction market

Over 50% of GPs expect continued growth of future funds in the same
areas as today, while ~30% stress new geographies, sectors and target sizes
Expected areas future funds will grow into1(Europe, 2020)0%GP

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Same areas as today

57.8%

Comments◼ The current context does not
specifically change the investment
strategy for a majority of GPs– That is for ~58% of respondents

New geographies

30.0%

New industry sectors

30.4%

Changes in size oftarget companies
Invest in public equity

35.7%

6.1%
GP

◼ Roughly a third of respondents will
target new geographies, and/or new
sectors, and/or target size covered with
their investments with future funds◼ The distribution of expected areas issimilar for most investment stages– Investments in “Same areas as today”
has the largest share for all stages– “Changes in size of target
companies” is valued higher forfunds at an earlier and later
investment stage– “Invest in public equity” remains lessthan 8% for all investment stages

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) Multiple choice answers were possible20

4 Private Equity transaction market

GPs and LPs foresee a decreased evolution of the PE transaction market
in the next 6–12 months, affecting transactions, valuation multiples & ROI
Developments of PE transaction market in the next 6 to 12
coming months compared to 2019 (Europe, 2020)
0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Comments

100%

GP
Number of transactions

18.2%

25.2%

56.5%

Valuation multiples

11.7%

37.9%

50.5%

Return on investments

13.6%

36.0%

50.5%

Higher0%

LP
Number of transactions

10%

Same
20%

12.9%

Valuation multiples 5.4%

Return on investments

18.3%
Higher

30%

Lower
40%

50%

60%

70%

25.8%

61.3%

36.6%

58.1%

34.4%
Same

80%

47.3%
Lower

90%

100%

◼ More than half of the GPs
expect a decrease in volume for
the PE transaction market
during the next 6-12 months– Especially in the Small andMidcap segments, while
lower impact is expected onLarge to Mega buyouts andInfrastructure (not depicted ingraph)◼ The views of LPs are alignedwith GPs– However, larger LPs hold – attimes – a more
pessimistic view, notably
when looking at volume oftransaction (not depicted ingraph)

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
21

4 Private Equity transaction market

Most GPs express that there are stronger investment opportunities in the
coming 12 months compared to 2019
The perception of investment opportunities in the market
within the next 12 months compared to 2019 (Europe, 2020)
GP

0%

10%

20%

30%

40%

Stronger

50%

46.0%

Neutral

35.5%

60%

70%

80%

90%

100%

Comments◼ Overall, GPs expect
investment opportunities tobe stronger in the coming year
compared to 2019
– That is for 46% in thiscontext– And especially in the VC andcap dev / growth fields◼ 18.5% of the respondents
disagree and believe theopportunities to be weaker

Weaker

18.5%◼ 35.5% have a neutral view

GP
Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
22

4 Private Equity transaction market

GPs expect more investment opportunities to come from corporate spinoffs primarily, but also secondary markets
Evolution of investment opportunities for the PE transaction market in
the next 6 to12 months compared to 20191 (Europe, 2020)
0%

GP

10%

20%

Corporate spin-offs

30%

40%

50%

60%

43.5%

70%

80%

90% 100%

49.1%

7.5%

Secondary market

38.8%

52.3%

8.9%

Primary market

37.9%

55.6%

6.5%

Public to private deals
State owned(privatisations)

25.2%

65.9%

11.2%

More

65.9%

Same

Comments◼ The majority of GPs do
not see any specificchange in processes– Yet, spin-offs from
Corporates are expected
to increase, especially in
the PE midcap and large
cap fields (not depicted ingraph)

8.9%

22.9%

Less

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) I.e. in terms of investment opportunities for PE funds23

4 Private Equity transaction market~50% of GPs expect that the divestment market will be weaker in the
coming year compared to 2019
Perception of divestment market within the next 12 months
compared to 2019 (Europe, 2020)
0%

GP

Stronger

10%

20%

30%

40%

50%

60%

7.5%

Neutral

80%

90%

100%

◼ GPs expect interesting
opportunities, but are at thesame time expecting fewer
exits in the market– Lower amount of exits
are expected especially inthe small and midcap
segments

40.5%

Weaker70%

Comments

52.0%

GP
Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
24

4 Private Equity transaction market

According to GPs, the market will remain stable in terms of auctions, buybacks and proprietary situations – but fewer IPOs are expected
The evolution of the PE transaction market in the next 6 to 12 months compared
to 2019, in terms of exit route for companies under ownership (Europe, 2020)
0%GP
Proprietary situations

10%

20%

30%

40%

29.9%

50%

60%

70%

80%

61.7%

90%

100%

8.4%

Management/
Owner buy-back

26.2%

58.9%

15.0%

Auctions

24.8%

62.6%

12.6%

IPOs

17.8%

More

32.2%

Same

Comments◼ PE professionals see traditional
processes around auction
processes, proprietarysituations, and managementbuy-back being stable– Due to the current market’shigh volatility, IPOs may
not be considered as apotential exit route to thesame extent as before

50.0%

Less

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
25

4 Private Equity transaction market

Biotech / Medtech, Life science & healthcare and Deep tech are seen as
the sectors with highest expected change in investment activity
Expected investment operation activity levels compared to 2019 in terms of target sectors(Europe, 2020)
GP

0%

5%

10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

Biotech / MedtechLife science & healthcare
Deep tech
ICT
Renewable energy
Business services
Agro business
Financial Services
Energy & utilities
Transportation & logistics
Infrastructure
Consumer goods and retail
ChemicalsIndustrial equipment
Aerospace & Defense
Tourism & leisure
Advertising / Medias
Automotive
Real estate
Construction & building materials
Higher

Same

Lower

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
26

Invest Europe – Pan-European Private Equity Survey

Agenda1

Background2

Fundraising, support and investment from LPs to GPs

3

Key investment criteria in Private Equity

4

Private Equity transaction market

5

Private Equity operations focus and portfolio management

6

Appendix27

5 Private Equity operations focus and portfolio management

The main focus of GPs going forward is expected to be operational
development of / support to portfolio companies
Main GP focus in the near future compared to 2019
(Europe, 2020)
0.0%

GP

20.0%

40.0%

Operational development of /support to portfolio companies

52.2%

Proprietary origination

47.0%

Due Diligence

80.0%

71.3%

Regulatory, compliance ,and IR communication tasks

Exit of portfolio companies

60.0%

28.3%

46.1%

50.0%

37.8%

48.3%

27.8%

More
Source: Arthur D. Little Analysis, Invest Europe Private Equity survey

67.0%

Same

100.0%

Less

0.4%

1.7%

3.0%

13.9%

5.2%

Comments◼ GPs’ main near-term focus
compared to 2019 is higher orthe same for all types of activities– The focus on Operational
development of / support toportfolio companies are
expected to see the highest
increase in focus◼ Exit of portfolio companies isthe activity expected to be inleast focus during the coming
months– This is expected by ~14% of
the GP respondents◼ Pure transactional activities(Due Diligence) are mostly
expected to see the same
involvement28

5 Private Equity operations focus and portfolio management

GPs have highlighted certain important improvement initiatives. Cost
reduction is considered the most important one across the board
Most important improvement initiatives being run in portfolio
companies at the moment1 (Europe, 2020)
GP

0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cost reduction

75.5%

Digitalisation

47.0%

Organic growth

40.0%

Liquidity financing

37.5%

Acquisition-led growth

27.0%

Right sizing

27.0%

Sustainability

21.5%

Geographical expansion

20.0%
GP

Comments◼ Four key topics emerge as the mostimportant improvement initiatives, ofwhich cost reduction is significantly themost important (i.e. ~75% of respondents)– Cost reduction is the mostimportant for all fund sizes, andparticularly for Mega buy-out funds– Digitalisation is not as important forthe different types of VC funds incomparison to the larger fundcategories– Organic growth is more emphasized
by larger funds, namely Large and Mega
buy out. Similarly, Organic growth andLiquidity financing are stressed bylarger funds as well
◼ Geographical expansions andsustainability are considered as the least
important, given the current Covid-19
context

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) Multiple choices were possible29

5 Private Equity operations focus and portfolio management

Most portfolio companies that utilised temporary unemployment support
are found among VC, growth, small and mid market companies
Share of portfolio companies receiving temporary government
unemployment support during the Covid-19 pandemic (Europe, 2020)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%GP
Early stage VC / seed fund

47.2%

Late stage VC

41.4%

Growth44.7%

Small Buy out(<15m equity per deal)
Mid market Buy out(15 to 150m equity per deal)
Large Buy out(150 to 300m equity per deal)
Mega Buy out(>300m equity per deal)

43.3%
51.1%
37.8%
34.1%

Infrastructure

40.7%

Average

44.6%
GP

Comments◼ Roughly 44% of portfolio
companies have used or put inplace temporary
unemployment– This is especially the casewithin Early stage VC / seed
fund, Growth and small to Mid
market Buy outs
◼ It is observable that the larger
the investment stage the lesstemporary unemployment
support utilised– Large and Mega Buy-out
received the least amount ofgovernment unemployment
supportSource: Arthur D. Little Analysis, Invest Europe Private Equity survey
30

5 Private Equity operations focus and portfolio management

Predominantly smaller portfolio companies have had to rely on nongovernment supported financing during the pandemic
Share of portfolio companies that had to take on new /additional non-government supported financing1 (Europe, 2020)0%GP

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Early stage VC / seed fund25.2%

Late stage VC

24.7%

GrowthSmall Buy out(<15m equity per deal)
Mid market Buy out(15 to 150m equity per deal)
Large Buy out(150 to 300m equity per deal)
Mega Buy out(>300m equity per deal)
Infrastructure

19.8%
12.1%
13.5%
3.9%
3.5%

Comments◼ The greatest share of portfolio
companies that had to take on
new / additional non-government
supported financing belonged tothe smallest investment stage
categories:– Early stage VC / seed fundexhibit the largest share of
portfolio companies whichhave taken on nongovernment equity or debt
during the pandemic

2.3%

Average

17.4%
GP

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) That is equity or credit315 Private Equity operations focus and portfolio management

VC to mid market portfolio companies received the most government
support during the pandemic while VCs also were granted the least
Share of portfolio companies utilizing
gov. supported loans for financing1
Europe 2020

GP

Share of portfolio companies
requesting but not being granted gov.
support1 Europe, 2020

Main reason for not being granted
government support1,2
Europe, 2020

GP
0%

20%

40%

60%

80%

GP

100%

0%

20%

38.1%

Late stage VC

37.0%

Growth37.5%

Small Buy out

38.5%

Early stage VC /seed fund80%

Mid market Buy out

29.8%

100%

23.0%

18.3%

Mega Buy out

20.0%
41.9%

50%
40%

10.1%

Mid market Buy out
21.2%

70%
60%

Growth44.8%

Large Buy out

90%
80%

Late stage VC

Small Buy out

Average

60%

100%

Early stage VC /seed fundInfrastructure

40%

14.7%

Large Buy out

2.6%

Mega Buy out

6.7%

Infrastructure

2.9%

30%
20%

10%
0%

13.5%

8.0%

4.0%

9.5%

6.0%

Company Company Company Company Any otherwas not
was not
was not was eligible
reasoneligible as it eligible as eligible as but the aid
was deemed it was notnational
wasto be of adeemed programmes rejected
too high risk an SME
do notdue to theof failure
cover start- limited size
(undertaking
upsof the state
in difficulty)
aid
programme

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) That is during the Covid-19 pandemic. 2) Multiple choices were available. The choice of “Not applicable” has been excluded”
32

5 Private Equity operations focus and portfolio management

The vast majority of portfolio companies, from all investment stages, do
not have access to an extra credit line at fund level
Access to an extra credit line at fund level to support portfolio
companies (Europe, 2020)
0%GP
Early stage VC / seed fund

10%

20%

15.2%

30%

40%

50%

60%

70%

84.8%

Late stage VC

22.5%

77.5%

Growth

24.1%

75.9%

Small Buy out
17.9%(<15m equity per deal)
Mid market Buy out
34.8%(15 to 150m equity per deal)
Large Buy out
23.1%(150 to 300m equity per deal)
Mega Buy out
8.3%(>300m equity per deal)
Infrastructure

33.3%
Yes

82.1%

65.2%

80%

90%

Comments
100%◼ Overall, the majority of
portfolio companies have
not had (nor have)access to an extra credit
line during the pandemic–

The Mid market andInfrastructure
segments have had
the most access, thatis ~35% and ~ 33%,
respectively

76.9%
91.7%
66.7%

No

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
33

Invest Europe – Pan-European Private Equity Survey

Agenda1

Background2

Fundraising, support and investment from LPs to GPs

3

Key investment criteria in Private Equity

4

Private Equity transaction market

5

Private Equity operations focus and portfolio management

A

Appendix34

Invest Europe – Pan-European Private Equity Survey

AgendaA

Appendix
A.1 General partner profiles
A.2 Limited partner profiles
A.3 Details of certain questions

35

A.1 General partner profiles

The largest share of GPs were active within the Mid market buy out andlower investment stages, while fewer GPs represented the larger stages
Investment stage (multiple choices possible)(Europe, 2020)
GP

0%

10%

20%

30%

Early stage VC / seed fund

60%

70%

80%

90%

100%

21.8%

GrowthInfrastructure

50%

34.5%

Late stage VC

Small Buy out(<15m equity per deal)
Mid market Buy out(15 to 150m equity per deal)
Large Buy out(150 to 300m equity per deal)
Mega Buy out(>300m equity per deal)

40%

26.4%
17.6%
43.7%
6.5%
5.7%
5.4%

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
36

A.1 General partner profiles

The participating GPs are active throughout Europe, and in particular in
Northern and Western European countries
European regions of investment1,2

Main countries of investment1(Europe, 2020)(Europe, 2020)

0%

GP

20%

All of Europe

40%

60%

80%

28.7%

Western Europe

14.6%

Central and Eastern Europe

12.3%

Northern Europe

11.9%

100%

0%
Germany
Netherlands
UK / Great Britain
Belgium
Switzerland
FranceSpain
Austria
Italy
SwedenDenmark
Portugal
Finland
NorwayLuxembourg
Ireland

20%

40%

60%

80%

100%

23.4%
15.7%
14.9%
14.2%
14.2%
12.6%
12.3%
11.9%
11.9%
10.7%
10.7%
10.7%
9.6%
8.8%
6.1%
5.0%

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) Multiple choices possible, 2) Southern Europe was not provided as an option
37

A.1 General partner profiles

Approximately 50% of GPs most recent and currently active funds were
within 50 to 500m EUR, close to 30% were funds between 100 to 300m EUR
Size of the most recent and currently
active fund (Europe, 2020)
0%GP
0 - 10m EUR

20%

40%

60%

80%

Share of capital deployed of most recent
and currently active fund (Europe, 2020)
100%

0%

20%

40%

60%

80%

100%

0.8%

10m - 50m EUR

10.7%

50m - 100m EUR

13.0%

100m - 300m EUR

29.9%

300m - 500m EUR

13.4%

500m - 1bn EUR

16.1%

1bn - 3bn EUR

8.4%

3bn - 7bn EUR

5.0%> 7bn EUR

2.7%

Share of capital
deployed

47.0%

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
38

A.1 General partner profiles

Roughly ~54 of GPs do not have an internal team dedicated to supporting
portfolio companies
Does your fund have an internal team dedicated to supporting portfolio companies, other than
the investment managers1? (Europe, 2020)
GP

0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

No

Yes

54.4%

45.6%

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) For example an operations team39

A.1 General partner profiles

The average number of portfolio companies of GPs participating in thesurvey was 28
Average number of portfolio companies (Europe, 2020)
GP

Average number of portfolio companies

28

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) For example operations team40

Invest Europe – Pan-European Private Equity Survey

AgendaA

Appendix
A.1 General partner profiles
A.2 Limited partner profiles
A.3 Details of certain questions

41

A.2 Limited partner profiles

The largest shares of participating LPs are from Funds of funds,
Government (international org. related), Pension funds and Asset mgmt
Type of investor (Europe, 2020)
0%

LP

10%

20%

Fund of funds

30%

40%

50%

60%

70%

80%

90%

100%

26.1%

Government international organization related

19.8%

Pension fund12.6%

Asset management firm

11.7%

Insurance company

9.0%

Family Office

7.2%

Secondary funds

5.4%

Sovereign wealth fund

4.5%

Corporate Investor

1.8%

Other (please specify)

1.8%

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) Multiple choices were available
42A.2 Limited partner profiles

Roughly 1/3 of LPs had over 10 billion euros under management whilearound 77% had over 1 billion euros
Share of European assets under management
allocated to PE asset class (Europe, 2020)

Total European assets under management(Europe, 2020)
0%

LP

20%

0 - 50m EUR

2.7%

50m - 100m EUR

2.7%

100m - 300m EUR

6.3%

300m - 1bn EUR
1bn - 3bn EUR
3bn - 10bn EUR> 10bn EUR

40%

10.8%

60%

80%

100%

0%

Share of asset

20%

40%

60%

80%

100%

59.0%

18.0%
24.3%
35.1%

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
43

A.2 Limited partner profiles

The GPs of LPs invest throughout Europe, and notably in Northern andWestern European countries
European regions in which the GPs of LPs
invest 1,2 (Europe, 2020)
0%

LP(Europe, 2020)

20% 40% 60% 80% 100%

All of Europe

56.8%Western Europe

27.9%

Northern Europe

25.2%

Central and Eastern Europe

Main countries in which GPs of LPs invest1

12.6%

0%
SwedenBelgium
Denmark
Netherlands
NorwayFinland
UK / Great Britain
FranceGermany
Austria
Luxembourg
Italy
Ireland
Portugal
Spain
Switzerland

20%

40%

60%

80%

100%

14.4%
13.5%
13.5%
12.6%
12.6%
12.6%
12.6%
11.7%
11.7%
10.8%
9.9%
9.9%
9.9%
9.9%
8.1%
7.2%

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) Multiple choices possible, 2) Southern Europe was not provided as an option
44

A.2 Limited partner profiles

Participating LPs invested in PE funds with strategies that covered mostinvestment stages, particularly Growth, Mid market and Late stage VC
Investment strategy of PE funds LPs invest in (multiple choices possible) (Europe, 2020)
LP

0%

10%

20%

30%

40%

Early stage VC / seed fund

50%

60%

70%

90%

100%

56.8%

Late stage VC

69.4%

Growth82.0%

Small Buy out (<15m equity per deal)

63.1%

Mid market Buy out (15 to 150m equity per deal)

76.6%

Large Buy out (150 to 300m equity per deal)

57.7%

Mega Buy out (>300m equity per deal)

36.0%

Infrastructure

34.2%

Real Estate

80%

17.1%

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
45

Invest Europe – Pan-European Private Equity Survey

AgendaA

Appendix
A.1 General partner profiles
A.2 Limited partner profiles
A.3 Details of certain questions46

A.3 Details of certain questions

Most LPs consider it important or very important that GPs have an
operating partner / dedicated portfolio management in the team
Importance that the GP company has an operating partner / dedicatedportfolio management in the team1 (Europe, 2020)0%LP

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Asset management firm

50.0%

Pension fund

41.7%

Sovereign wealth fund

40.0%

Family Office

37.5%

Fund of funds

22.7%

Government - internationalorganization related

22.2%

Insurance company

20.0%

Secondary funds

20.0%

30.0%

10.0% 10.0%

58.3%
40.0%
12.5%

20.0%

37.5%

12.5%

63.6%
38.9%

13.6%
33.3%

60.0%
20.0%

Corporate Investor

20.0%

40.0%

5.6%

Comments◼ Most LPs consider that it is very
important or important that aninternally dedicated operational team incharge of portfolio management ispresent– ~76% of LPs consider that thepresence is important or very
important (not depicted in graph)– I.e. 29% of LPs rank it as “Veryimportant” and 47.3% as “Important”(not depicted in graph)◼ Most large GPs have internalised
these capabilities, but it is not thecase for smaller GPs– It is not seen by GPs as a key
differentiator

100.0%
Very important

Important

Neutral

Not important

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) I.e. in addition to the investment team47

A.3 Details of certain questions

Over 50% of GPs expect continued growth of future funds in the same
areas as today, while ~30% stress new geographies, sectors and target sizes
Expected areas future funds will grow into1 (Europe, 2020)0%LP

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Early stage VC / seed fund

33.1%

17.3%

15.8%

28.6%

5.3%

Late stage VC

31.3%

18.8%

13.8%

30.0%

6.3%

GrowthSmall Buy out(<15m equity per deal)
Mid market Buy out(15 to 150m equity per deal)
Large Buy out(150 to 300m equity per deal)
Mega Buy out(>300m equity per deal)
Infrastructure

38.7%

17.2%

20.4%

19.4% 4.3%

34.3%

20.9%

17.9%

23.9%

3.0%

34.4%

22.1%

19.6%

19.6%

4.3%

29.0%

16.1%

42.3%
29.4%

17.6%

22.6%

25.8%

6.5%

11.5% 11.5%

26.9%

7.7%

17.6%

29.4%

5.9%

Same areas as today

New industry sectors

New geographies

Changes in size oftarget companies

Invest in public equity

Comments◼ The current context does not
specifically change the investment
strategy for a majority of GPs– That is for ~58% of respondents (notdisplayed in graph)◼ Roughly a third of respondents will
target new geographies, and/or new
sectors, and/or target size covered with
their investments with future funds◼ The distribution of expected areas issimilar for most investment stages– Investments in “Same areas as today”
has the largest share for all stages– “Changes in size of target
companies” is valued higher forfunds at an earlier and later
investment stage– “Invest in public equity” remains lessthan 8% for all investment stages

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) Multiple choice answers were possible48

A.3 Details of certain questions

Most GPs express that there will be stronger investment opportunities in
the coming 12 months compared to 2019
The perception of investment opportunities in the market within thenext 12 months compared to 2019 (Europe, 2020)0%GP

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Early stage VC / seed fund

57.5%

35.0%

7.5%

Late stage VC

54.5%

37.9%

7.6%

Growth

53.7%

35.2%

11.1%

Small Buy out(<15m equity per deal)
Mid market Buy out(15 to 150m equity per deal)
Large Buy out(150 to 300m equity per deal)
Mega Buy out(>300m equity per deal)
Infrastructure

43.6%

30.8%

41.7%

50.0%

39.3%

33.7%

38.5%

8.3%
27.0%

53.8%

33.3%
Stronger

25.6%

22.2%
Neutral

7.7%
44.4%

Comments◼ Overall, GPs expect
investment opportunities tobe stronger in the coming year
compared to 2019
– Especially for the Early Stage
VC / seed fund, Late stage
VC and Growth stage– Mid market and Mega market
are exceptions, where themajority consider thatinvestment opportunities will
be neutral (i.e. neither
stronger nor weaker) in theupcoming 12 months
compared to 2019

Weaker

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
49

A.3 Details of certain questions

Prioritised initiatives are similar for most portfolio companies: cost
reduction, digitalisation and organic growth are stressed as most common
Most important improvement initiatives currently being run in portfolio companies1(Europe, 2020)
73%

GP
61%

65%

61%
57%

57%
53%

61%

57%

51%

47% 47%

46%
39%

36%

19%

26%
20% 20%

13%
12%
10%

25%
23%

30%
25%

18%
12%

33%

19%

11%

14%

17%
14%

33%

30%

22%

19%

24%

21%

36% 36%33%

32% 32%

20%
24% 24%

13%

12%

43%

40%

39%

32%
28%

47% 47%

29%

24%
18%

12% 12%

29%

29%

27%
21%

20%

13% 13%

14%

7%
0%

Early stage VC/ seed fund

Late stage VC

GrowthSmall Buy out(<15m equity
per deal)

Customer retention

Organic growth

Liquidity financing

Cost reduction

Geographical expansion

Right sizing

Digitalisation

Acquisition-led growth

Sustainability

Mid market Buy out(15 to 150m equity
per deal)

Large Buy out(150 to 300m
equity per deal)

Mega Buy out(>300m equity
per deal)

Infrastructure

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
Note: 1) Multiple choices were possible
50A.3 Details of certain questions

Similarly,VC, growth, small and mid market companies received the most
government supported loans during the Covid-19 pandemic
Share of portfolio companies utilising government supported loans forfinancing during the Covid-19 pandemic (Europe, 2020)0%GP

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Early stage VC / seed fund

38.1%

Late stage VC

37.0%

Growth37.5%

Small Buy out(<15m equity per deal)
Mid market Buy out(15 to 150m equity per deal)
Large Buy out(150 to 300m equity per deal)
Mega Buy out(>300m equity per deal)

38.5%
44.8%
21.2%
20.0%

Infrastructure

41.9%

Average

37.3%
GP

Comments◼ Roughly one third of mostinvestment stage categories had
utilised government
supported loans– Mid market companies
employed the most loans, i.e.
44.8% of all mid market-sizedcompanies◼ Similarly to temporary
government unemployment
support, Large and Mega Buyouts received the least
government support for
financing–Around 20% of theirportfolio companies utilised
government supported loans

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
51

A.3 Details of certain questions

Only a small portion of larger portfolio companies were denied
government support, the smaller companies stand out in this regard
Share of portfolio companies requesting government support that were
not granted such support during the Covid-19 pandemic (Europe, 2020)0%GP

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Early stage VC / seed fund

29.8%

Late stage VC

23.0%

GrowthSmall Buy out(<15m equity per deal)
Mid market Buy out(15 to 150m equity per deal)
Large Buy out(150 to 300m equity per deal)
Mega Buy out(>300m equity per deal)
Infrastructure

18.3%
10.1%
14.7%

Comments◼ The lower investment stages
were the most impacted by
Covid-19 in terms of not being
granted government
support– This might mainly be due tohigh risk of failure or
limitations of the state aid
programmes

2.6%
6.7%
2.9%

Average

17.8%
GP

Source: Arthur D. Little Analysis, Invest Europe Private Equity survey
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