2Q 2015 Private Equity Environment

Market Overview
Global equity markets were rattled late in the second quarter with the prospect of a Greek debt default

and exit from Europe’s Economic and Monetary Union (EMU). On the second-to-last trading day of the quarter, following Greece’s decision to hold a referendum on the terms of a new debt bailout deal, the MSCI Europe index declined by 2.7%—its largest daily decline since October 2014. In the United States, the S&P 500 declined by more than 2%, which erased the index’s gains for the year. Asian
equity markets also sold off on the news, although most of the region’s equity indices finished the quarter with gains. Fixed income markets performed poorly overall in the second quarter. In particular, despite the commencement of the European Central Bank’s (ECB’s) quantitative easing program that drove much of the eurozone’s sovereign debt market into negative yield territory early in the quarter, euro-area government bonds experienced their largest-ever

quarterly loss, driven by concerns that yields had fallen too low in light of an improving economic outlook for the region.

Highlights

• M&A exit transaction value for PE-backed companies totaled $174 billion in 1H15—a decline of 34.8% from the record-setting 1H14 total but still one of the largest first-half totals ever recorded.
• High-yield default rates remain below historical averages in both the U.S. and Europe. However, sales of nonperforming loans reached a record high of €91 billion in 2014 and are expected to increase further in 2015.
  
• PE firms worldwide raised $92.1 billion in 2Q15, a 9% increase over the prior quarter and a 17% increase over the year-ago quarter. The increase was driven by buyout- and U.S.-focused fundraising activity.

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