UBS Group AG · SIX:UBSG
UBS — Investor Day (December 1999)
23 slides from UBS's investor day presentation, Dec 14, 1999
Slide 1: UBS Investors' Day: Private Equity
ab UBS Investors’ Day Private Equity Pierre de Weck 14 December 1999
Slide 2: Contents
Contents Section 1 Business Description Section 2 Strategy Section 3 Developing Synergies Section 4 Valuation ab 1 Private Equity
Slide 3: Business Description
Business Description SECTION 1 ab Private Equity
Slide 4: What is Private Equity?
What is Private Equity ? ♦ Equity stakes, typically in unquoted companies ♦ Negotiation with the seller ♦ Optimal capital structure ♦ Working with management over a period of 3-6 years ♦ Increasing the value of the investment ♦ Selling to maximise the capital gain ("Exit") ab 3 Private Equity
Slide 5: Target Investment Characteristics: Late Stage
Target Investment Characteristics Late Stage ♦ Target deal size CHF 75 million - CHF 1.5 billion ♦ Existing earnings and established cash flows ♦ High barriers to entry ♦ Professional management team ♦ Potential for active value creation ♦ Clear 'exit' strategy ♦ Target return: 25% IRR p.a. minimum
Slide 6: Target Investment Characteristics: Early Stage
Target Investment Characteristics Early Stage ♦ Focus on high growth industries — Internet — Software — Telecom ♦ Expansion capital, not seed capital ♦ Professional management team ♦ First mover advantage ♦ Strong growth & market potential ♦ Target return: 30% IRR p.a. minimum ab 5 Private Equity
Slide 7: Experienced Global Team
Experienced Global Team Professionals: Europe 79, Americas 28, Asia Pacific 17 London The Hague Munich Paris Zurich Milan Seoul Tokyo (2000) New York Hong Kong Singapore Sao Paulo Sydney Buenos Aires Our local presence and know-how is a competitive advantage ab 6 Private Equity
Slide 8: Risk Management Procedures
Risk Management Procedures ♦ Risk-conscious investment approach ♦ Centralized approval and monitoring process ♦ Conservative, semi-annual review of financial accounting and fair market valuations ♦ Deferred compensation structure, with offset for losses ♦ Average loss rate of 5% over a 5-year period
Slide 9: Global Portfolio Composition
Global Portfolio Composition CHF 2.4 billion Book Value 30 June 1999 Investment Stage Geography Asia Early 4% 14% Europe North 38% America 50% Late 86% Latin America 8% IRR p.a. of 50 - 60% since inception ab 8 Private Equity
Slide 10: Unrealized Gain of CHF 1.1 billion
Unrealized Gain of CHF 1.1 billion as of 30 June 1999 4.0 3.5 3.5 Unrealized 3.0 gains of 2.4 CHF 1.1 bn 2.5 in CHF bn 2.0 1.5 1.0 0.5 0.0 Book Value Portfolio Valuation 30.6.99 30.6.99 ab 9 Private Equity
Slide 11: Milestones Reached in 1999
Milestones Reached in 1999 ♦ CHF 760 million (CHF 800 million: 1998) of new investments made to-date ♦ Presence established in Australia and Korea ♦ First early stage technology-based investments in Europe ♦ Phildrew Ventures closed GBP 330 million Fund V for the UK ♦ CapVis closed CHF 300 million f
Slide 12: Strategy
Strategy SECTION 2 ab Private Equity
Slide 13: Our Mission
Our Mission Establish UBS as the industry role model for an integrated global Private Equity business with committed capital of CHF 5 billion from UBS and CHF 5 billion from third parties, seizing our unique strategic advantages to maintain our top quartile performance ab 12 Private Equity
Slide 14: UBS and Third Party Investments
UBS and Third Party Investments 6 30.6.99 Target 5 5 5 5 0.7 4 in CHF bn 1.9 3 1.9 2 2.4 1.5 1 0 0.4 UBS Third Party UBS Third Party Funded Commitments Future UBS Commitments ab 13 Private Equity
Slide 15: Developing Synergies
Developing Synergies SECTION 3 ab Private Equity
Slide 16: Developing Synergies
Developing Synergies ♦ Private Banking ♦ Private Banking ♦ Corporate Finance ♦ Equity Research Fund Raising Origination & ♦ Leveraged Investment Finance / High Yield ab Private Equity ♦ Acquisitions ♦ M&A Exit Adding Value ♦ Industry Groups ♦ Corporate ♦ Equity Research Finance ♦ Leveraged ♦ Primary
Slide 17: Valuation
Valuation SECTION 4 ab Private Equity
Slide 18: The Value of UBS Private Equity
The Value of UBS Private Equity ♦ Impressive historical track record with an average IRR of 50-60% p.a. and a historical loss rate of only 5% p.a. ♦ Excellent current investment portfolio with unrealized gains of CHF 1.1 billion (30 June 1999) ♦ Experienced global team managed for long-term performa
Slide 19: The Value of Private Equity
The Value of Private Equity The value of Private Equity exceeds the value of the investment portfolio ♦ Three income sources in private equity — management fees from assets under management — carried interest as General Partner — capital gains from investments ♦ Management fees in Private Equity ran
Slide 20: UBS Private Equity Valuation
UBS Private Equity Valuation Assumptions ♦ CHF 5 billion UBS ♦ Management fees 2% commitments invested ♦ 4 year hold period ♦ CHF 5 billion third party commitments invested ♦ Carried interest 20% NPV of Future Cash Flow (CHF bn) IRR Discount Rate 20% 25% 30% 35% 10% 8.6 11.5 14.9 18.8 12% 6.6 8.7 11
Slide 21: UBS Private Equity, a strongly contributing franchise
UBS Private Equity, a strongly contributing franchise within the global, integrated investment services firm ab 20 Private Equity
Slide 22: Appendix
Appendix ab Private Equity
Slide 23: Historical Pre-Tax Profit
Historical Pre-Tax Profit Year to (in CHF m) 30.9.1999 31.12.1998 31.12.1997 Operating Income 254 585 492 Pre-Tax Profit 138 428 381 Return on regulatory 53 165 189 equity (annualized %) Cost/Income ratio (%) 46 27 23 ab 22 Private Equity