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Private Equity Club 2008Exploring what’s on the horizon*
*connectedthinking
Slide 2
Global Private Equity Report 2008
PricewaterhouseCoopers Global Private Equity Report 2008
Brendan McMahon – Global Private Equity Leader
• Overview of the report
• Building the business model
• Sustainable growth become critical
• Reconciling responsibility with returns
• Fair value challenges in the current environment
• Addressing tax in a wider world
• Conclusion - A new phase
Slide 3
Global Private Equity Report 2008
Overview of the report
• Canvas opinions of Private Equity
• PwC thoughts on the current and future market for Private Equity
• Collation of data on fund-raising and investment on a global basis:
- Fund raising for 2007 - $459bn (2006: $437bn)
- Investment globally in 2007 - $297bn (2006: $235bn)
- Rise of emerging markets – investment ahead of fund-raising
Slide 4
Global Private Equity Report 2008
The world viewInvestment & fund raising trends
Private Equity Club 2008
PricewaterhouseCoopers LLPPricewaterhouseCoopers LLP
Building thebusiness model
Slide 6
Global Private Equity Report 2008
Building the business model
• Diversification of strategies
- Infrastructure
- Distressed Debt
- Emerging Markets
• Focus on brand
- Going public?
- Sovereign Wealth Funds
- Need for controls
Private Equity Club 2008
PricewaterhouseCoopers LLPPricewaterhouseCoopers LLP
Sustainablegrowth becomecritical
Slide 8
Global Private Equity Report 2008
Sustainable growth become critical
• Focus on earnings growth
- Cost-savings and revenue growth
- Working with management
- Change in skill sets / resources
• Buy and build
Private Equity Club 2008
PricewaterhouseCoopers LLPPricewaterhouseCoopers LLP
Reconcilingresponsibilitywith returns
Slide 10
Global Private Equity Report 2008
Reconciling responsibility with returns
• Not just a nice to have anymore
- Public and regulatory pressure
- Potential Liabilities
- Opportunity for value creation in portfolio companies
• Investment in clean energy rose by 60% in 2007
• Focus on areas other than Climate Change
• UN Principles for Responsible Investment
Private Equity Club 2008
PricewaterhouseCoopers LLPPricewaterhouseCoopers LLP
Fair valuechallenges inthe currentenvironment
Slide 12
Global Private Equity Report 2008
Fair value challenges in the current environment
• Combination of factors
- Most difficult economics conditions in years
- An increased focus on debt values
- A decrease in the number of transactions
• Inconsistencies in valuation techniques and transparency
• Disconnect between investors and houses
- 63% companies considered their valuation policies were effective inmanaging risk compared to 25% of investors.
Private Equity Club 2008
PricewaterhouseCoopers LLPPricewaterhouseCoopers LLP
Addressing taxin a wider world
Slide 14
Global Private Equity Report 2008
Addressing tax in a wider world
• Globalisation of investment portfolios
- Developed countries – proliferation of audit activity
• Transfer pricing
• Substance
• Permanent establishment risk
- Increased competition produces more favourable jurisdictions
• FIN 48
Private Equity Club 2008
PricewaterhouseCoopers LLPPricewaterhouseCoopers LLP
BRICOpportunities
Slide 16
Global Private Equity Report 2008
BRIC Opportunities
• Fund investment in Brazil, Russia, India and China growing rapidly
• Supported by data collected on level of investment
• Different risks to the more developed markets – generally related toregulatory and fiscal regimes
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