The Private Equity
Value Proposition
How Real Is It ?
Moderator
Peter Wolken
Vice Chairman, Executive Advisory Board
Thunderbird Private Equity Center (TPEC)
April 3, 2008
1
Frog on the Golf Course
April 3, 2008
2
Panelists

Jonathan E. Cole,
Partner


Frederic Sicre,
Executive Director


Abraaj Capital, LLC
John Vester, Partner

April 3, 2008
Edwards Angell
Palmer & Dodge
LLP
Transaction
Advisory Services,
Ernst & Young
3

Jonathan E. Cole,
Partner






April 3, 2008
Edwards Angell Palmer
& Dodge LLP
36 years experience
Leveraged buyouts
Emerging technology
Brown University
Harvard Law School
4
Frederic Sicre, Executive Director
Abraaj Capital, LLC, Dubai, UAE
16 years experience
Established World Economic
Forum in Africa & Middle East
Managing Director of WEF
MBA, IMD, Switzerland
BS Villanova University
Stanford University Fellow
April 3, 2008
5
John Vester, Partner
Transaction Advisory Services, Ernst & Young
20 years of experience
Now at E & Y on US East Coast
Former Head of Corporate Development at Xerox
Management Consultant at McKinsey
MBA Cornell University
MS Electrical Engineering from Yale
BS Industrial Engineering, Northwestern
April 3, 2008
6
Topics of Discussion




April 3, 2008
Do VC and PE “Buyout” firms add
value to their portfolio companies?
To Society?
Impact on labor, taxes, corporate
governance and innovation
Does PE strengthen business?
7
Venture Capital Firms

VC Firms clearly add value

Most of the job creation has been the
result of VC funded entrepreneurial startups, especially in information technology

Over 10 million industrial jobs created in
the past 30 years by VC funded start-ups


April 3, 2008
One new job in industry creates another
ten in the service sectors, so the vast
majority of new jobs are created by VCs.
8
Do PE Buyouts add
value?





April 3, 2008
The jury is still out on recent megabuyout deals
However, the panelists will support the
premise that significant value is being
added
Over 85% of investment has gone into
the buyout sector
Returns on buyouts can be much quicker
than early-stage VC deals
And the risk is much lower when
investing in established companies
9
Market Cap of Recent US
Venture Backed IPO’s









VM Ware
VMW
NetSuite
N
Data Domain
DDVP
Cavium Networks CAVM
eHealth
EHTH
CommVault
CVLT
Acme Packet
APKT
Mellanox
MLNX
DivX
DIVX
$ 16.4 Billion !
$ 1.32 Billion
$ 1.32 Billion
$
675 Million
$
551 Million
$
469 Million
$
463 Million
$
424 Million
$
248 Million
March 31, 2008
April 3, 2008
10
VM Ware







April 3, 2008
VMW
Palo Alto, California firm
Started in 1998
CEO is Diane Greene
Has 5,000 employees
Virtualization Software
Market Cap is $ 16 Billion
Was $ 40 Billion that at the peak,
3 months after the IPO
11
Global IPO Activity at
Record High in 2007
Over $ 255 Billion Raised in 1739 IPOs
Asia Pacific
EMEA
N. America
ROW
April 3, 2008
12
European Venture
Backed IPOs in 2007





April 3, 2008
38 firms raised € 894 million
Down 49% from 2006
Median amount raised was € 15.8
million
Median pre-valuation was € 59
million
Median time from initial financing
to IPO was 6.9 years
13
M & A Activity Robust in 2007
Cisco acquiring again











Signal Works
$ 14 M
Arroyo Video
$ 92 M
Reactivity
$ 135 M
Navini Net
$ 330 M
NetSolve
$ 128 M
DynamicsSoft $ 55 M
Perfigo
$ 74 M
Orative
$ 32 M
Sheer Net
$ 97 M
Scientific Atlanta $ 6.9 B
WebEx
$ 3.2 B
Linksys
Actona
P-Cube
Securent
Fine Ground
IronPort Sys
Meetinghouse
Protego Net
Airespace
Topspin
$ 250 M
$ 500 M
$ 82 M
$ 200 M
$ 100 M
$ 70 M
$ 830 M
$ 44 M
$ 65 M
$ 450 M
Total, 21 firms $ 13.6 Billion
April 3, 2008
Source:
PricewaterhouseCoopers/NVCA Money Tree Report, February 2008
14
What This Means




April 3, 2008
So, VC and Buyouts both
represent good opportunities if
purchased right
We have seen the data and both
asset classes have outperformed
I’ll kick off the discussion with a
few questions for the panelists
Then we welcome your questions
15
Next Steps
April 3, 2008

Please direct your questions to one
of the panelists or to the group

e mail me if you wish to send
questions after the session

< peterwolken@global.t-bird.edu >
16