J Curve Managing Private Equity Kuwait Financial Centre “Markaz” PRIVATE EQUITY UPDATE by prl13206


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									                                                   Kuwait Financial Centre “Markaz”
                                                         PRIVATE EQUITY UPDATE

                                Private Equity
                                    Market Trends
Month End January, 2007
Private Equity update:          -   2006 smashed all previous records for private equity fundraising, with a
Compiled from various public        total of $404 billion of new funds of all types were raised in 2006, up
sources                             from $315 billion in 2005 and $181 billion in 2004, growth of 123% in
                                    just two years. Growth in the buyout segment was even more
                                    pronounced, from $65 billion in 2004 to $145 billion in 2005 and a
                                    massive $204 billion in 2006. Real estate private equity funds also saw
                                    tremendous growth, from $20 billion in 2004 to $53 billion in 2006,
                                    while venture grew modestly, from $31 billion in 2004 to $43 billion in
                                    2006. Other fund types also experienced significant growth, most
                                    notably mezzanine and infrastructure funds.
                                    According to the Spotlight magazine, the total global stock of available
                                    equity capital, taken to be the total of all funds committed to private
                                    equity funds globally, has grown from $470 billion in 2003 to $610
                                    billion in 2006, while the available stock for the buyout segment has
                                    grown from $210 billion to $280 billion over this period. (These figures
                                    exclude fund of funds, to avoid double counting.) As the figures show,
                                    private equity funds globally have been calling up their committed
                                    capital at an increasing rate over the recent years – with aggregate
                                    annual LP contributions growing from $124 billion in 2003 to $235
                                    billion in 2005, and over $300 billion in 2006 (provisional figures for
                                    2006 annualized). GPs have clearly been putting their new funds to
                                    work quickly, and the rate of distributions has been growing equally
                                    rapidly. Aggregate global distributions to LPs were around $108 billion
                                    in 2003, growing to $241 billion in 2005, and $259 billion in 2006 over
                                    the period. (These estimates include all major direct fund types -
                                    buyout, venture, real estate, distressed, mezzanine, infrastructure,
                                    balanced, expansion, turnaround & special situations - but exclude fund
                                    of funds and secondaries in order to avoid double counting).
                                    Given the long term nature of private equity investments, and the J-
                                    curve effect, it is clearly very significant that distributions actually
                                    managed to outpace the acceleration in cash calls as the industry grew
                                    rapidly between 2003 and 2005. This is quite an achievement for such a
                                    long-term asset class, and must have played a major role in driving the
                                    interest of existing LPs to invest more in the asset class, and
                                    encouraging new LPs to make their first commitments.
Tania Kalaoui                   -   According to Thomson Financial, the ten biggest global private equity
+965 224 8000 ext. 1308             buyout of 2006 were as follows (excluding debt): HCA ($21.2 billion),
tkalaoui@markaz.com                 Clear Channel Communications ($18.8 billion), Freescale Semiconductor
                                    ($17.7 billion), Harrah’s Entertainment ($17.1 billion), Kinder Morgan
Kuwait Financial Centre             ($14.6 billion), Univision Communications ($12.1 billion), Albertsons
“Markaz”                            ($11.0 billion), Biomet ($10.8 billion), and VNU ($9.6 billion). While the
                                    value of deals recorded by the top private equity dealmakers of 2006
Private Equity Department           were as follows: Texas Pacific Group Inc. ($100 billion), Blackstone
Address: P.O.Box 23444, Safat       Group LP ($93.1 billion), Bain Capital Partners LLC ($84.8 billion),
13095, Kuwait                       Kohlberg Kravis Roberts & Co. ($77.7 billion), Carlyle Group LLC ($71.9
Tel: +965 224 8000 Ext: 1401        billion), Thomas H. Lee Partners LP ($64.6 billion), GS Capital Partners
Fax: +965 242 5828                  LP ($55.8 billion), Apollo Management LP ($48.7 billion), Cerberus
AdvisoryServices@markaz.com         Capital Management LP ($34.2 billion), and Merrill Lynch Global Private
www.markaz.com                      Equity ($32.5 billion).
                         PRIVATE EQUITY UPDATE

-   Private equity investors are playing a bigger role than ever before, a
    trend that's likely to carry into 2007. The merger boom is being fed by
    low interest rates, rising stock prices, plenty of money in the debt
    markets and greater tolerance for risk among investors worldwide.
    Experts believe that private equity deals will continue to flourish as long
    as the market stays strong and conditions don't change too much.
    But the question is - what if the buyout market cripples due to a
    recession or another pickup in inflation, which could lead to higher
    interest rates and rising payments for companies that have been
    acquired and loaded up with debt. If either of those happens,
    eventually a pull back in the private equity boom could happen due the
    slower economic growth, which would hurt corporate cash flow, and
    highly leveraged companies could have trouble meeting debt payments.

-   As the private equity market heats up, two distinct phenomena are
    starting to show: more competition and more coverage. The total
    buying power of private equity firms reached more than $2 trillion,
    according to The New York Times. Figures like that raise interest
    everywhere, and the volume of media coverage of the PE industry has
    made strategic communications an accepted necessity among most
    large firms - many of which did not even have Web sites until they
    absolutely had to.
    The opportunities for PR agencies to grab a small chunk of PE's
    expanding profits are clearly growing. Firms that once didn't need much
    more than a press release to announce a deal are now turning to
    professional communicators for everything from crisis management to
    labor relations. That brand power helps PE firms raise capital from
    investors, hire and retain the best talent, increase their deal flow, gain
    approval of transactions in regulated industries, and maintain good
    relations with boards of directors and management teams at the
    companies the firm either has acquired, or seeks to acquire.

    PE News

-   Bain Capital Ventures has rounded up $500 million for its latest
    venture fund, according to a regulatory filing. The filing does not say
    whether the fund is done raising capital, but says it has collected
    $499.5 million, twice as much as for the last.
-   Orthopedic device maker Biomet Inc. said it will be acquired by a
    private equity consortium for about $10.9 billion, ending talks with rival
    implant maker Smith & Nephew PLC. The consortium buying Biomet
    includes affiliates of the Blackstone Group, Goldman Sachs Capital
    Partners, Kohlberg Kravis Roberts & Co. and TPG. The deal would
    mark the second-largest acquisition of a health-care company by a
    private equity group, behind the $21 billion leveraged buyout of hospital
    chain HCA, according to research firm Dealogic.
-   Two leading private-equity firms are on the verge of buying casino giant
    Harrah's Entertainment in what would be one of the largest private-
    equity deals in history, the Wall Street Journal reported. Citing Apollo
    Management and Texas Pacific Group have offered at least $90 a
    share, or $16.7 billion.

    Top Deals

-   The Blackstone Group has raised its offer for Equity Office

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                         PRIVATE EQUITY UPDATE

    Properties Trust from $48.50 per share to $54 per share, bringing the
    overall transaction value to $38.3 billion (including $16 million in
    assumed debt). The move comes one week after Blackstone was
    topped by a $52 per share bid from Vornado Realty Trust, Starwood
    Capital and Walton Street Capital. Even at Blackstone’s original bid
    price, the deal would be the largest leveraged buyout in history.
-   Sun Microsystems Inc. (Nasdaq: SUNW) has received a $700 million
    PIPE infusion from KKR Private Equity Investors, the Amsterdam-listed
    fund of Kohlberg, Kravis Roberts & Co. The deal includes $350
    million of convertible senior notes due in 2012 and $350 million of
    convertible senior notes due in 2014. KKR also will receive a seat on the
    Sun board of directors.
-   Siemens has agreed to acquire UGS Corp. for approximately $3.5
    billion (including assumed debt), from Bain Capital, Silver Lake
    Partners and Warburg Pincus. UGS is a Plano, Texas-based maker of
    product lifecycle management software for industrial manufacturers.
-   TransDigm Group Inc. has agreed to acquire Aviation
    Technologies Inc. from Odyssey Investment Partners for
    approximately $430 million in cash. ATI is a Seattle-based provider of
    products to the commercial and military aerospace markets, including
    flight deck and passenger audio systems, cabin lighting displays and
    brushless motors.
-   Investcorp has agreed to acquire Moody International Ltd. from
    Close Brothers Private Equity for Gbp158 million. Moody is a UK-
    based provider of energy and construction inspection services.
-   Plastic Logic Ltd., a Cambridge, UK-based plastic electronics
    manufacturer, has raised $100 million in fourth-round funding. Oak
    Investment Partners and Tudor Investment Corp. co-led the deal,
    and were joined by return backers Amadeus, Intel Capital, Bank of
    America, BASF Venture Capital, Quest for Growth and Merifin Capital.
    The capital will be used to help build a factory to manufacture plastic
    electronics on a commercial scale, and the round is likely to be
    expanded by a small percentage.
-   The New York Times Co. has agreed to sell its Broadcast Media
    Group to Oak Hill Capital Partners for $575 million. The group
    consists of nine network-affiliated television stations.

    Buyout Deals

-   The Carlyle Group has once been topped in its efforts to acquire
    Dallas-based roofing and building products company ElkCorp (NYSE:
    ELK). Building Materials Corp. of America has raised its bid to
    $43.50 per share, and said that JPMorgan has been added to a
    financing consortium that already included Deutsche Bank and Bear
    Stearns. Carlyle had already raised its bid to $42 per share this week,
    which was its second increase. It had originally bid $38 per share.
-   The Carlyle Group bid approximately $4.7 billion for Tribune Corp.’s
    broadcasting and entertainment unit, according to The New York Post.
    Tribune also received bids for the entire company from the Chandler
    family and from Eli Broad/Ron Burkle.
-   The Carlyle Group and Providence Equity Partners have agreed
    received shareholder approval for their proposed $38 per share
    acquisition of Open Solutions Inc. (Nasdaq: OPEN), a Glastonbury,
    Conn.–based provider of enabling technologies for financial institutions,
    for $38 per share. The total deal is valued at over $1.3 billion, including
    the assumption of debt.
-   Cardinal Health (NYSE: CAH) has agreed to sell its pharmaceutical

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                         PRIVATE EQUITY UPDATE

    technologies and services (PTS) business to The Blackstone Group
    for approximately $3.3 billion. PTS develops, manufactures and
    packages medication and other products for pharma and biotech firms,
    and employs approximately 10,000 people at more than 30 global
    facilities. It generates approximately $1.8 billion in annual revenue.
-   United Utilities PLC has agreed to sell its BPO subsidiary Vertex
    Data Science Ltd. to Oak Hill Capital Partners, GenNx360
    Capital Partners and Knox Lawrence International. The total
    transaction is valued at Gbp217.5 million. The deal is expected to close
    by the end of March.
-   Compagnie de Saint-Gobain SA will receive four buyout bids next
    week for its perfume bottling subsidiary Desjonqueres, according to
    Dow Jones. The offers will be worth approximately Euro 600 million
    each, with likely bidders including The Carlyle Group, PAI Partners,
    LBO France and a partnership of Sagard and Electra Partners. Both
    3i Group and Piramal Industries (India) had expressed initial
    interest, but have since dropped out of the running.
-   Merck KGaA could receive buyout interest for its generic drugs
    business from Cinven, Permira and Texas Pacific Group, according
    to Reuters. Such a sale could generate anywhere from Euro 4 billion to
    Euro 5.5 billion.
-   Lone Star Funds has agreed to sell restaurant chain Shoney's to
    Royal Capital for an undisclosed amount. Lone Star had agreed to sell
    Shoney's last year to Centrum Properties, but the deal later fell through
    and got mired in litigation.
-   Oak Hill Capital Partners has agreed to buy Radiotherapy Clinics
    of Georgia from company founder Frank Critz, according to LBOWire.
    RCG operates seven outpatient radiotherapy centers for the treatment
    of prostate cancer.

    VC Deals

-   SmartDrive Systems Inc., a San Diego-based provider of driver risk
    management systems and services, has raised an undisclosed amount
    of Series C funding. Oak Investment Partners led the deal, and was
    joined by return backers Revolution Ventures, the Founders Fund and
    Western Technology Investments.
-   vAuto, an Oakbrook Terrace, Ill.-based provider of inventory
    management solutions for the retail automotive industry, has raised an
    undisclosed amount of VC funding from Bain Capital Ventures.
-   Enclarity Inc., an Aliso Viejo, Calif.-based information management
    and analytic software company focused on the healthcare market, has
    raised $10 million in Series B funding. Bain Capital Ventures led the
    deal, and was joined by return backer Ignition Partners.
-   Mobango, a London-based operator of an online and mobile
    community for cell phone enthusiasts, has raised Euro 2 million in first-
    round funding from Doughty Hanson Technology Ventures.
-   diaDexus Inc., a South San Francisco-based developer of a blood test
    for the prediction of cardiovascular disease, has raised $40 million in
    Series E funding, according to a regulatory filing picked up by
    VentureWire. Baker Brothers Advisors LLC and Scale Venture Partners,
    co-led the deal, and were joined by Burrill & Co. and return backers
    GlaxoSmithKline, Rho Ventures, Bain Capital's Brookside Fund
    and Mosaix Ventures.
-   Apriori Technologies Inc., a Concord, Mass.-based provider of cost
    management software for the discrete manufacturing industry, has
    raised $11.18 million in Series B funding, according to a regulatory

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                         PRIVATE EQUITY UPDATE

    filing. Return backers include Bain Capital Ventures and Sigma Partners.

    PE-Backed IPO

-   U.S. Auto Parts Network Inc., a Carson, Calif.-based provider of
    aftermarket auto parts, has set its proposed IPO terms to 10 million
    common shares being offered between $10 and $12 per share. It plans
    to trade on the Nasdaq under ticker symbol PRTS, with RBC Capital
    Markets and Thomas Weisel Partners serving as co-lead underwriters.
    Oak Investment Partners holds a 30.4% pre-IPO stake.

    PE-Backed M&A

-   TestAmerica a portfolio company of H.I.G. Capital has completed its
    acquisition of Severn Trent Laboratories Inc., an environmental
    testing firm with 32 laboratories throughout the United States, from
    Severn Trent PLC. No financial terms were disclosed.
-   The Qualicaps Group, a global supplier of capsules and capsule filling
    and sealing equipment, has agreed to acquire Pharmaphil Inc., an
    Ontario, Canada-based manufacturer of empty gelatin capsules. No
    financial terms were disclosed. Qualicaps is a portfolio company of The
    Carlyle Group.
-   Healthy Foods Holdings, a portfolio company of Catterton
    Partners, has agreed to acquire CoolBrands Dairy Inc., maker of
    yogurt products under the Breyers and Creme Savers brands, from
    CoolBrands International Inc.

    PE Exits

-   Google is in talks to acquire Adscape Media Inc., a San Francisco-
    based in-game advertising company, according to The Wall Street
    Journal. Adscape shareholders include H.I.G. Ventures.
-   CSR PLC (LSE: CSR) has acquired NordNav Technologies AB and
    Cambridge Positioning Systems Ltd. No financial terms were
    disclosed for the deal, which will help CSR provide low-cost GPS for
    mass-market mobile phones and personal navigation devices. Sweden-
    based NordNav had raised VC funding from 3i Group,
    InnovationsKapital and Siemens Business Accelerator. UK-based
    CPS shareholders included 3i Group, Alta Berkeley Venture Partners,
    Capitalia Sofipa, CapMan, Ericsson Venture Partners, Cipio Partners,
    Intel Capital, Prelude Ventures, Siemens Venture Capital and
    Telesystem-Argo Global Capital.
-   3i Group has agreed to sell Nordic Modular, a Swedish maker of
    modules for temporary buildings, to Kungsleden AB for approximately
    Euro 100 million.

    Firms & Funds

-   The Carlyle Group is raising around $5.93 billion for its third European
    buyout fund, according to a regulatory filing. It already has secured
    nearly $3.1 billion
-   Kohlberg Kravis Roberts & Co. has closed on $16.1 billion for its
    latest fund, according to LBO Wire. The final target remains $16.625

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                                                                         PRIVATE EQUITY UPDATE

                                         -    Goldman Sachs has closed its first GS Infrastructure Fund with more
                                              than $6.5 billion in capital commitments (including $750 million from
                                              Goldman Sachs). The fund will target opportunities in traditional
                                              infrastructure sectors, including transport infrastructure (i.e., toll roads,
                                              airports and ports) and regulated gas, water and electrical utilities.

                                              Human Resources

                                         -    Ralph Parks has joined Oaktree Capital Management as chairman
                                              of its Asia-Pacific operations. He previously was chairman and CEO of
                                              JPMorgan Asia Pacific.
                                         -    Anthony Leung has joined The Blackstone Group as a senior
                                              managing director and chairman of the firm’s China efforts. He is the
                                              former Financial Secretary of Hong Kong and, before that, held
                                              positions with both JP Morgan and Citigroup. Leung will co-head a new
                                              Hong Kong office, alongside Ben Jenkins, who will relocate from New
                                         -    Bayside Capital LLC, the distressed debt affiliate of H.I.G. Capital,
                                              has promoted Lewis Schoenwetter to Managing Director.
                                         -    The Carlyle Group has promoted 34 professionals to senior positions,
                                              16 to Managing Director and 18 to Principal/Director. They are: Colin
                                              Atkins, David Daniel, Marc Demumieux, Yi Luo, Masato Marumo, Eliot
                                              Merrill, Charlie Moore, Stephen Owens, Thomas Ray, Lori Sabet,
                                              Catherine Simoni, Michael Stewart, Takaomi Tomioka, Alex Wagenberg,
                                              Michael Wand and Brent Whisenant. The new Principal/Directors
                                              promoted from Vice President/Associate Director are: Dan Bellissimo,
                                              Brian Bernasek, Sameer Bhargava, Han Chen, Jacques Galante, Ryan
                                              Harris, Markus Hoffman, Mark Johnson, Horoshi Kawahara, Marilyn
                                              Lucas, Andrew Marino, Heather Mitchell, Thaddeus Paul, David Pearson,
                                              Nicholas Shao, Koichiro Taniyama, David Willich and Feng Xiao.
                                              (Principals and Directors are the same level in Carlyle parlance; Principal
                                              is the title used in the U.S. and Director is the title used in Europe and

This report has been prepared and issued by Kuwait Financial Centre S.A.K (Markaz), which is regulated by the Central Bank of Kuwait.
The information and statistical data herein have been obtained from sources we believe to be reliable but in no way are warranted by
us as to its accuracy or completeness. The report is intended to be circulated for general information only. It does not have regard to
the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report.
Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or
recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should
note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Accordingly,
investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Kuwait
Financial Centre S.A.K (Markaz) does and seeks to do business, including investment banking deals, with companies covered in its
research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of
this report. Investors should consider this report as only one of the factors in making their investment decision. The analysts principally
responsible for the preparation of this report have received compensation based upon various factors, including quality of research,
investor client feedback, performance of stock recommendations, competitive factors and investment banking revenues.

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