Advent International

Global Highlights 2013/14

Business Review

Through persistent focus on growth and operational improvement initiatives, we seek to partner with management teams to increase earnings and build businesses with long-term sustainable value.

Operating Highlights

2013 was a successful year for Advent in terms of capturing the value in our portfolio companies. Capitalizing on strong exit conditions and favorable debt markets globally, we realized $7.8 billion in proceeds, mainly through the sale of shares in post-IPO companies, sale of businesses to strategic and financial buyers and refinancing of portfolio company debt.

A number of our companies completed recapitalizations during the year, taking advantage of the debt markets to reduce the cost of leverage, change structures, improve terms and raise capital for acquisitions. In most cases, the leverage levels were prudently raised only to near the original deal multiples.

Following through on the value creation plans we established with management, our portfolio companies made good progress during the year, achieving earnings growth of 11% and revenue growth of 9% on average. The majority of earnings improvements were driven by revenue growth initiatives.

Within our industry sectors, we completed six new investments in 2013 and signed or closed three more deals in the first quarter of 2014, despite challenging market conditions. We also identified some interesting new areas for our sector and regional deal sourcing activities.

In a continued drive to improve our own firm, we invested significantly in people, financial, compliance and administrative operations and launched a number of initiatives to improve communications with our investors. We continued to roll out our portfolio support program, establishing 19 program management offices at portfolio companies to facilitate best practices and support the implementation of value creation plans.

North America

While the overheated debt markets pushed up deal pricing in North America last year, slowing investment activity across the industry, we were able to complete two new investments. P2 Energy Solutions provides critical software and data solutions to the oil and gas industry. The company is well-positioned to expand its existing customer base, further develop international operations and add new products. The Coffee Bean & Tea Leaf is an independent specialty coffee and tea retailer with over 900 stores in nearly 30 countries. We see potential to create value by improving the operations of this formerly family-run business, accelerating new store openings and continuing to expand internationally, particularly in Asia.

Notable realizations in North America last year included the further sale of shares in two public companies, payment processor Vantiv and value retailer Five Below. We subsequently sold our remaining stake in Vantiv in March 2014 but still own shares in Five Below to take advantage of potential future growth. Additionally, the merger of Bradco Supply and ABC Supply in 2010 created America’s largest roofing products distributor and enabled significant earnings improvements, allowing us to sell our minority stake in the business to the majority shareholder in 2013.

So far in 2014, we have agreed to sell eLearning content provider Skillsoft to another private equity firm. The sale follows several years of significant growth driven by new product development, international sales and acquisitions.

Europe

Investment conditions in Europe remained challenging in 2013 with slow growth and a lack of primary deal flow. Despite this environment, we completed two new acquisitions in the region last year and closed or signed two further deals in early 2014. With Mediq, a Netherlands-based international provider of medical products, pharmaceuticals and associated care, our goal is to further strengthen the company’s position in the Dutch pharmacy market and expand the international homecare division. The transaction marks the second straight year in which Advent completed the largest public-to-private deal in Europe. Belgium-headquartered Allnex, a carve-out from Cytec Industries, develops, produces and sells synthetic resins for the production of paints and coatings as well as printing inks. The deal was a joint effort between Advent’s Frankfurt and New York teams. We are working to improve margins through the carve-out effect, widen the company’s global footprint and continue its push towards higher-value-added products.

In March 2014, we completed the acquisition of UNIT4, a leading global mid-market enterprise resource planning software vendor currently listed on Euronext Amsterdam. The same month, we also announced that we had agreed to acquire Nets in partnership with ATP and Bain Capital. Nets, headquartered in Copenhagen is a leading Northern European provider of payments, information and digital identity solutions.

We fully realized our investments in six companies in Europe over the last 15 months. In December we sold Domestic & General, a provider of extended warranty plans, to another private equity firm, after working with the management team to develop this UK business into Europe’s market leader in the sector. The same month, we completed the sale of Germany-based Oxea, the global market leader in oxo chemicals and derivatives, to the Oman Oil Company, following successful efforts to diversify the company’s activities, increase capacity and expand internationally. We also completed the sale of Deutek, Romania’s largest manufacturer of decorative paints and coatings to Axxess Capital, and in early 2014 we sold Isida, one of Ukraine’s leading medical treatment and healthcare providers. Since our investment in 2011, we supported Isida in adding new specialities, repositioning the business to a new customer segment and opening new outpatient clinics.

Latin America

Highlighting developments in Latin America last year was an increase in investment activity in Colombia, where we completed three deals, including a strategic acquisition for an existing portfolio company. One new investment, Ocensa, Colombia’s largest crude oil transportation system, operates the main pipeline between the country’s Llanos region and the Atlantic Coast, moving approximately 60% of the nation’s crude oil production. The transaction, co-led by Advent’s Bogotá and Boston teams, is our fourth deal in the energy sector in the last three years and first mid-stream oil and gas investment. Alianza Fiduciaria, Colombia’s largest independent trust and custody services provider and asset manager, serves underpenetrated markets that are growing fast as they catch up with global and regional norms. Our local team was able to leverage the global work in asset management completed by Advent’s financial services team to help secure this transaction which closed in early 2014.

In Brazil, we teamed up with another financial sponsor to acquire Dudalina, one of the country’s leading manufacturers and retailers of high-end apparel. We are working with management to expand the company’s retail operations, drawing on our extensive experience in this sector.

In terms of exit activity, we fully realized our positions in four companies over the past 15 months: global travel retailer Dufry and education company Kroton (both public), through block trades, and specialized financial services provider Monte de México and industrial laundry company Atmosfera, through trade sales. We also sold a portion of our shares in the publicly listed restaurant chain International Meal Company (IMC) in a block trade.

Asia Pacific

2013 saw the formal opening of Advent’s Shanghai office as a base in Greater China. The team there has already provided important support to the wider Advent portfolio, assisting two of our new global deals, and has made good progress in building a pipeline of interesting investment opportunities. In India, the team continued to drive our value creation plans at CARE Hospitals, supported an acquisition for a US portfolio company and completed the sale of CAMS, a leading Indian provider of outsourced back-office processing for mutual funds, to the National Stock Exchange of India (NSE) in early 2014.