Svca presentation eng 081205

1.

The Swedish Private Equity Market

2.

About SVCA

3.

Business Angels

VentureCapitalists

Buyoutfirms

Business Angels

…supporting the interests of….

1.

SVCA’s tasks:

Professional development

Transfer of knowledge

Research and statistics

Ethical guidelines & valuations

principles

Contacts with politicians and policy makers

Information Conferences and network

5.

Swedish private equity follows European standard….

Ethical guidelines based on EVCA’s Code of

Conduct

International Private Equity & Venture Capital

valuation guidelines (AFIC, BVCA, EVCA)

6.

Working towards

improved conditions for

entrepreneurs and

investors

= new jobs and growth

A main task:

7.

What is private equity?

8.

Definition of private equity

Private Equity…equity investments in

unlisted companies with an active ownership

Business Angels… investments by private

individuals in companies without a family connection…

Venture Capital…equity investments

in seed, start-up- or expansion phases

Buyout…investments in more

mature development phases. Financing through

equity and debt

Public Equity…listed companies

9.

Cash flow

Time

Different development stages – different investors

Business Angels & Venture Buyout

Expansion

Maturity

Decline

Seed &Start-up

10.

A significant industry…

Capital under

management

(EUR bn)

Capital

invested

(EUR bn)

Number

of PE

companies

Number

of portfolio

companies

Buyout 31.9 18.4 30 250

Venture Capital 5.8 3.5 90 800

Total 37.7 21.9 120 1050

Source: SVCA member data

…..where the portfolio companies combined turnover constitutes more than 10% of the Swedish GDP

11.

Swedish Private Equity in an international

perspective

EVCA Yearbook 2008

Private equity investments in % of GDP 2007

By country of portfolio company

12.

Swedish Private Equity in an international

perspective

Private equity investments in % of GDP 2007

By country of private equity firm

EVCA Yearbook 2008

13.

Swedish PE funds financed by international capital

Source: SVCA Q1-Q4 2007

Capital origin

BuyoutVenture

14.

Pension funds and fund of funds dominates

Private equity financing sources

Source: SVCA Q1-Q4 2007

BuyoutVenture

15.

Stage distribution

Number of investments 2007Amount invested 2007

Source: SVCA Q1-Q4 2007

16.

Where do Swedish private equity funds invest?

BuyoutVenture

Number of investments 2007

Source: SVCA Q1-Q4 2007

17.

The Private Equity value chain

18.

Different roles in the value chain…

Public financingFamliy, friends, fools

Capital needs

Company development

Business Angels

Venture Capital

Buyout Capital

IPO

19.

Business angel and Venture Capital focus…

Innovative & unique business idea

Strong entrepreneurial team with industry

experience

Growth potential & scalability

Targeting international growth markets

Potential for high profitability

Clear exit possibilities

20.

…but Business Angels ...

... also have different investment criteria compared to

venture capitalists…

Can invest smaller amounts

Investment decisions more based on intuition and

confidence in the entrepreneur – ”gut feeling”

Faster investment decisions – business angels are normally

invests their own money

Often prioritizes local entrepreneurs

Except return, e.g. contribution to society, fun, stimulating

and support to the region can be important reasons for

business angels to invest

21.

Venture Capital investments

…a few Swedish examples…

22.

Venture Capital firms – how they operate

Appoint/restructure

management team

Appoint professional

Board of Directors

Continuous ”sounding

board”

Active board work

Open doors to

potential customers

and partners

Expansion

Financing

Reporting systems

Investment

process

3-6 months

Value creation

3-5 years

Exit

process

4-6 months

23.

Buyout focus

Strong market position

Competent & committed management team

Profit improvement potential

Strong cash flow

Independent of business cycles

24.

Buyout firms – how do they operate?

Board work

Focus on operational

improvements

Focus on core business

Add-on acquisitions

Divestments

Corporate governance

Industrial

restructurings

Expansion

Financing

Reporting systems

Investment

process

4-6 month

Value creation

3-5 years

Exit

process

4-6 months

25.

Buyout investments

…a few Swedish examples

26.

Trends

European investments at €73.8 Billion (Equity only from private equity funds)

8,514,4 15,3

12,117,9 20,7

26,6

34,4

53,9

61,6

4,1

6,0

10,7

19,7

12,2

9,88,4

10,3

12,7

17,3

12,1

5,60

10

20

30

40

50

60

70

80

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

€ billion

Venture Capital

Buyout

Source: PEREP_Analytics for 2007 figures

Venture Capital: Seed, Start-up, Expansion, Rescue/Turnaround

Buyout: Buyout, Replacement capital

The bigger picture – All private equity activity flows in Europe (industry statistics)

Source: PEREP_Analytics for 2007; Thomson Reuters/PwC for previous years;

€ billion

29.

Source: SVCAs quarterly surveys 2004-2008

0

50

100

150

200

250

300

0

5000

10000

15000

20000

25000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2004 2005 2006 2007 2008

Total invested amound Number of investments

Investments 2001-2008, MSEK

30.

Investments 2001-2008, MSEK

Source: SVCA quarterly surveys 2001-2008

6713 6514 5688

12789

35988

39560

43 290

29 820

5042 3072 4000 3814 43996395

5552 5196

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

2001 2002 2003 2004 2005 2006 2007 2008 Q1-

Q3

Buyout* Venture

The total invested amount within venture and buyout constitutes

94% and 69% respectively compared to the full year 2007

31.

VC focus on start-up and expansion

Early-stage investments 2001-2008, amount (MSEK)

Source: SVCA quarterly surveys 2001-2008

24793 81 190 114 108 204

64

911630

1515

1205

16381 759 1 784

959

3884

2349 2404 24192647

4 528

3 564

4183

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2001 2002 2003 2004 2005 2006 2007 2008 Q1-Q3

Seed Start-up Expansion

Tydlig förskjutning mot expansionsinvesteringar under

de tre första kvartalen 2008.

Investments in Swedish portfolio companies

2005-2008

32.

12405

16233

22075

17006

2090

4089 39764618

0

5000

10000

15000

20000

25000

2005 2006 2007 2008 Q1-Q3

Buyout* Venture

Positive trend for invested amount into Swedish companies for

the three first quarters 2008 and the amount invested in

Swedish venture companies has already reached all time high.

33.

Medtech , biotech and IT attract most investments

Source: SVCA Q1- Q4 2007

Number of investments

34.

Largest investments within healthcare and service

Invested amount, MEUR

Source: SVCA Q1- Q4 2007

35.

Investments in Cleantech

Cleantech accounted for 9.1 % of all venture

investments into Swedish companies during 2007.

Total invested amount and number of investments since Q1 2006

40

142

24

63

26

92 85

155

205

70

284

6

8

5

9

12

17

11

21

5

14

16

0

5

10

15

20

25

0

50

100

150

200

250

300

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2006 2007 2008

MSEK Number of investments

36.

Exits

37.

Exit alternatives

IPOIndustrial

trade sale

Financial

sale

Write-offBuyback of entrepreneur

38.

Divestments 2001-2007

Received amounts

Source: SVCA quarterly reports 2001-2007

39.

Källa: SVCA kvartalsrapporter Q1-Q4 2007

Divestments 2007

Number of divestments

BuyoutVenture

40.

Belopp Vinstmultipel 1

Venture 755 2,0

Buyout 9 385 5,1

High multiples for exits 2007

1. Encompasses 93% of divested amountSource: SVCA Q1-Q4 2007

41.

High multiples for exits 2006

1. Encompasses 88% of divested amountSource: SVCA Q1-Q4 2006

Amount (MEUR) Multiple 1

Venture 782 2,4

Buyout 3 511 2,6

42.

Source: ”Rapporten Utvecklingen för riskkapitalbolagens portföljbolag 2001-2006”

Swedish private equity financed companies

grow faster!

43.

The industry’s messages

Private equity is an industry that...

… generates good returns for investors

… creates new jobs

… generates growth and new companies

… develops business environment

… attracts international capital

… is fun, stimulating and attracts highly

qualified people

… develops entrepreneurship in Sweden!

… and contributes with capital, active

ownership and long-term value creation