Investor day 23 June 2011 1
Introduction and model for returns Michael Queen 2 2
Agenda 09:30 Introduction and model for returns Michael Queen 09:45 Update on Private Equity strategy Alan Giddins 10:00 Private Equity – case study (Hyva) Alan Giddins 10:15 Private Equity – case study (SMT) Alan Giddins 10:30 Private Equity – case study (Refresco) Guy Zarzavatdjian 10:45 Break 11:00 Debt Management – the business and opportunity Jeremy Ghose 11:30 Infrastructure model and portfolio Cressida Hogg 12:00 3i Asia and the Americas Robert Stefanowski 12:30 Closing remarks Michael Queen Lunch 3
Objectives for today • Understand each business line in more detail • How does 3i generate returns? – business model – case studies • Examine the market dynamics • The future prospects for 3i 3i is an active investor that creates value through its business model and operating style 4
3i today 3i Group AUM £12.7bn Private Equity Infrastructure Debt Management Buyouts Growth Capital Investing primarily in Management of funds Investing in buyouts Minority investing in which invest in senior utilities, transportation with an enterprise high-growth businesses and mezzanine value up to €1 billion in with an enterprise value and social infrastructure corporate debt in a wide in Europe, India and Europe and Asia of up to €1 billion in range of typically large North America Europe, Asia and the and private companies Americas in Europe AUM £5.2bn AUM £2.4bn AUM £1.6bn AUM £3.4bn 17 portfolio companies 8 managed funds 47 portfolio companies 52 portfolio companies 5
AUM – by business Private equity Current Future position 3i External funds 3i External funds Infrastructure Current Future position 3i External funds 3i External funds Debt Management Current Future position 3i External funds 3i External funds 6
Model for returns Debt Management Infrastructure Private Equity 20% 12% 10% Gross return objectives Fee income as a share of returns Reduced volatility Net return objectives 15% 15% 15% 7
Update on Private Equity strategy Alan Giddins 8
Investment strategy Full potential investing + Operational + Realising Premium + expertise full potential mid-market access Breadth of choice Ability to benchmark Functional expertise Advantaged buyer Clarity of value plan Delivering the plan Access to industrial talent Active partnership Sector insight Geographies and sectors • sub-sector hot spots Systematic application of get there early functional improvements Experienced operators deep angles • Business Leaders Network 9
How do we deliver this? Focusing on our core deal criteria Leveraging our key value differentiators Being disciplined on price 10
Core deal criteria Deals with an EV of €100m - €500m • Sub-sectors structurally driven by growth themes • Operational improvement opportunity • Buy and Build platform • International business or with potential to expand internationally • Robust end market which will weather current uncertainties • Key people differentiator Our competitive advantage 11
Western European Private Equity mid-market: €25m-€1bn deal size Western Europe - mid-market PE - market size by calendar year 95.0 100.0 700 90.0 600 80.0 69.1 72.2 500 70.0 Number of deals 57.7 Deal value €bn 60.0 54.3 400 50.0 300 35.1 40.0 30.0 200 18.0 20.0 100 10.0 0.0 0 2004 2005 2006 2007 2008 2009 2010 Buyouts value €25m-€100m Buyout value €100m-€500m Buyouts value €500m-€1bn Growth mandate value Total number of deals Source: Unquote /3i Continued recovery in volumes 12
Our target market: €100m - €500m Buyouts and European Growth Capital opportunities* 50 300 264 45 250 40 215 35 182 Number of deals 200 176 Deal value €bn 30 155 25 150 122 20 100 76 15 10 50 5 0 0 2004 2005 2006 2007 2008 2009 2010 Core target market deal value €m Core target market number of deal * Growth Capital opportunities with a target equity investment between €25m - €125m Source: Unquote/3i We see a future market of 150+ deals in our target space 13
Sector/geographic focus Germany France Nordic UK Benelux Italy Spain Business Services General Industrial TMT Healthcare Consumer 14
Leveraging our key differentiators Global network Sector expertise Active partnership Business Leaders Network Banking team Key elements of value add 15
Global network Stockholm Aberdeen Copenhagen Manchester Amsterdam London Frankfurt Paris Milan New York Beijing Shanghai* Delhi Madrid Mumbai Hong Kong Singapore São Paulo • Operations in 13 countries across Europe, Asia and the Americas • Local teams in each market • Unique ability to benchmark opportunities across sectors internationally • Ability to help businesses grow internationally Bringing global perspective and connections to local markets 16
Sector expertise General Industrial Business Services Healthcare Point in the cycle White collar Services Automotive TIC Care Services Specialist components Testing, Inspection, Certification Delivery of Care Services Energy efficient Regulatory compliance Product MedTech Diagnostics Instruments Surgical Interventional Instruments Demonstrating the benefit of sub-sector insight 17
Active partnership • Systematic approach to best-in-class capabilities – making companies the best that they can be – driving change and EBITDA improvement – focused on how a business delivers its core functions • Various governance techniques – SteerCo – PMOs (light and full blown) – Change offices • Examples Driving value 18
Business Leaders Network Chairman: Michel Bleitrach NXD: Patrick L’Hostis Chairman: Pete Regan, NXD: Ad Verkuyten Chairman: Peter Linzbach, NXD: Anders Moberg Chairman: Peter Chambre Craig Stinson, Peter Grosch Chairman: Colin Holmes Key people differentiator 19
Banking team • Proactive interaction across the portfolio taking advantage of improving debt markets – Labco (Jan 2010)/Refresco (May 2011): capitalising on high yield bond markets. Achieved extended maturities, flexible covenants, reduced overall cost and created additional capacity for acquisitions – Hobbs (April 2011): refinancing of existing debt on quasi-corporate terms – Xellia (May 2011): achieved 4.5 year covenant reset – Memora (May 2011): refinanced senior and mezzanine debt with all senior and achieved debt funded acquisition of further stake in SFB • Ensuring recent financings are on market leading terms – Amor: competitive pricing for a retail exposed business – SMT: competitive terms, eg EBITDA equity cures and acquisition flexibility – OneMed: all senior structure in upper quartiles for distribution-linked business – Go Outdoors : 3 year debt facility to support store roll-out plans Making a difference 20
Disciplined on pricing – last eight deals Average entry multiple of 8.9x EBITDA Double digit earnings growth budgeted for 2011 On average 5% plus outperformance YTD 21
Conclusion International businesses Active partnership potential Robust markets Relationship with management + Growth themes Differential knowledge Buy and Build Knowledge and insight Discipline Consistency Focus 22
Private Equity case study – Hyva Alan Giddins 23 23 23
Case study – Hyva Return statistics: • €300m proceeds • MM: 10x • IRR: 41% 24
Starting point Products Hydraulic solutions for commercial vehicles Hydraulic Hydraulic Other – Stable, cash generative European base cylinders cranes with attractive growth in BRIC economies – But: incomplete management team with founder/CEO retiring Geographic split EV €118m buyout completed in 2004 Americas Other – Sales €146m CEE 3% 4% 7% – EBITDA margin of 11% Asia 8% – Western Europe accounts for 78% of sales Western Europe 78% 25
Accelerated performance during 3i ownership “Pioneering” “Inter- “Globalisation” “Crisis” “Recovery” nationalisation” New economies Other markets % 5 . 9 1 + : 8 0 - 1 2009-2010 2010-2012 0 0 2 ‘ R G • Continued strong • Strong growth in all A C growth in China markets except Greater Europe • India and Brazil (potential recovery back to growth in 1979 in this region second half 2009 leaving further • Foundation of the company • Restructuring upside for growth) Europe • Greater Europe well positioned – post restructuring of the operations base – when markets potentially Sales 1983 Sales 1992 Sales 1996 Sales 1999 Sales 2001 Sales 2004 Sales 2006 Sales 2008 Sales 2009 recover €18m €56m €64m €91m €129m €171m €255m €448m €312m Hyva accelerated its development to a true global leader under 3i ownership 26
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