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Breakfast Forum
The Current State of the Capital Markets
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Crutchfield Capital CorporationPresentation
toBoyar Miller Breakfast ForumAn Overview
of Institutional Private Equity MarketsHouston,
TexasOctober 17, 2007
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• Fundamentals of Private Equity Markets
• Institutions formed with Specific Investment
  Criteria
• Growth Capital
• Buyout
• Most are Limited Partnerships
• Limited Partners Typically are
• Wealthy Individuals/Families
• Endowments
• Pension Funds
• Insurance Companies

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• Fundamentals of Private Equity Markets
• General Partner Generates Revenue in Two Ways
• Management Fees
• Typically 2 of Committed Funds
• Carried Interest or Waterfall
• Typically 20 of Profits
• In U.S., Calculated and Distributed Deal by Deal
• In Europe, Distributed after Return of Paid-In
  Capital
• Examples
• Blackstone Group KKR
• Fortress Investment Carlyle Group

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• Historical Returns

U.S. Private Equity Performance ( Annual
Returns)1, 2
Source Thomson Financial 1 Investment horizon
through 9/30/2006. 2 Returns are net to investors
after management fees and carried interest.
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• Current Trends in Private Equity Markets
• Extraordinary Sums of Money have been Raised

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• Current Trends in Private Equity Markets
• And, Much Is On the Sidelines

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• Current Trends in Private Equity Markets
• Large Amounts are Being Employed in Leveraged
  Buyouts

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• Current Trends in Private Equity Markets
• Representing an Increasing Percentage of Total MA

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• Current Trends in Private Equity Markets
• Results of High Levels of Liquidity Have Been
• Increasing Competition for Deals
• Higher Purchase Multiples
• Lower Return Expectations
• Large Number of Going Private Transactions
• Effects of Sub-Prime Liquidity Crisis
• Larger, Syndicated and Securitized Transactions
  More at Risk
• Middle Market Transactions Relatively Unaffected

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• Current Trends in Private Equity Markets
• Particularly Attractive Market Sectors for
  Investments
• Technology
• Healthcare
• Media/Entertainment
• Oil and Gas
• Until Recently, Real Estate

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• Outlook for Private Equity
• Current Liquidity Surplus will take Significant
  Time to Absorb
• Sub-Prime Credit Problems will have Limited Long
  Term Effects on Private Equity Transactions
• Nevertheless, Valuations are Likely to Moderate
  Based on General Economic Conditions
• Public Equity Markets Should be Watched for Early
  Warning Signs of Deterioration