Case III Investment opportunity in a Lbo lower mid-market fund

A European GP is raising a new 300 m fund targeting lower mid-market investments in a single European country. The executive summary of the presentation made to investors is the following:

GP --

a) 14 investments professionals led by six partners who have worked together for 15 years. b)Strong sourcing capabilities through the partners industrial network built over many years. c)Targeting smaller middle-market domestic companies with potential of international expansion.

Country --

a) Resilient through crisis with higher GDP growth than rest of Europe in recent years. b)DynamicPrivate Equity market. c)Large pool of small companies seeking to develop and expand internationally that can be approached on a proprietary basis.

Strategy --

a)Partnering with ambitious management teams.b)Investment in majority or minority positions in small-cap Lbos and growth equity transactions. c)Making attractive market leaders through buy & build and international expansion.

Track record --

a)250 million invested in 19 portfolio companies since 2003, through an evergreen vehicle, now in liquidation.

b)9 fully realised investments with a 3.8x gross investment multiple.

c)2.1x gross investment multiple across all investments.

Questions 24 (1 point): Do the GP and the strategy meet the typical investment criteria of investors in PE funds?

Questions 25 (2 points): Is it a good track record?

Summarised track record Transaction Investment date Exit date m invested Realised proceeds NAV Total value 1 2 3 2003 2003 2007 2009 2010 2010 2011 2012 2015 4 5 2006 2007 2008 2013 2012 2012 2012 2015 2015 5,6 0,6 3,5 13,7 15,5 59,3 40,4 34,0 1,0 52,4 29,3 19,1 107,1 0,0 59,3 40,4 34,0 1,0 52,4 29,3 19,1 107,1 0,0 Multiple 10,6x 67,3x 9,7x 0,1x 3,4x 3,3x 2,7x 5,2x 0,0x 9,0 6 7 8 9 7,1 20,6 14,8 Total realised 90,4 342,6 342,6 3,8x Total 10 unrealised transactions 2005 to 2016 159,6 0,0 182,4 182,4 1,1x Total 2003 to 2016 250,0 342,6 182,4 525,0 2,1x Summarised track record Transaction Investment date Exit date m invested Realised proceeds NAV Total value 1 2 3 2003 2003 2007 2009 2010 2010 2011 2012 2015 4 5 2006 2007 2008 2013 2012 2012 2012 2015 2015 5,6 0,6 3,5 13,7 15,5 59,3 40,4 34,0 1,0 52,4 29,3 19,1 107,1 0,0 59,3 40,4 34,0 1,0 52,4 29,3 19,1 107,1 0,0 Multiple 10,6x 67,3x 9,7x 0,1x 3,4x 3,3x 2,7x 5,2x 0,0x 9,0 6 7 8 9 7,1 20,6 14,8 Total realised 90,4 342,6 342,6 3,8x Total 10 unrealised transactions 2005 to 2016 159,6 0,0 182,4 182,4 1,1x Total 2003 to 2016 250,0 342,6 182,4 525,0 2,1x