April 3, 2008 1

The Private Equity Value Proposition

How Real Is It ?

Moderator

Peter WolkenVice Chairman, Executive Advisory Board

Thunderbird Private Equity Center (TPEC)

April 3, 2008 2

Frog on the Golf Course

April 3, 2008 3

Panelists

Jonathan E. Cole, Partner

Edwards Angell Palmer & Dodge LLP

Frederic Sicre, Executive Director

Abraaj Capital, LLC

John Vester, Partner Transaction Advisory

Services, Ernst & Young

April 3, 2008 4

Jonathan E. Cole, Partner

Edwards Angell Palmer & Dodge LLP

36 years experience Leveraged buyouts Emerging technology Brown University Harvard Law School

April 3, 2008 5

Frederic Sicre, Executive DirectorAbraaj Capital, LLC, Dubai, UAE

16 years experience

Established World Economic Forum in Africa & Middle East

Managing Director of WEF

MBA, IMD, Switzerland

BS Villanova University

Stanford University Fellow

April 3, 2008 6

John Vester, PartnerTransaction Advisory Services, Ernst & Young

20 years of experience

Now at E & Y on US East Coast

Former Head of Corporate Development at Xerox

Management Consultant at McKinsey

MBA Cornell University

MS Electrical Engineering from Yale

BS Industrial Engineering, Northwestern

April 3, 2008 7

Topics of Discussion

Do VC and PE “Buyout” firms add value to their portfolio companies?

To Society? Impact on labor, taxes, corporate

governance and innovation Does PE strengthen business?

April 3, 2008 8

Venture Capital Firms

VC Firms clearly add value

Most of the job creation has been the result of VC funded entrepreneurial start-ups, especially in information technology

Over 10 million industrial jobs created in the past 30 years by VC funded start-ups

One new job in industry creates another

ten in the service sectors, so the vast majority of new jobs are created by VCs.

April 3, 2008 9

Do PE Buyouts add value? The jury is still out on recent mega-

buyout deals However, the panelists will support the

premise that significant value is being added

Over 85% of investment has gone into the buyout sector

Returns on buyouts can be much quicker than early-stage VC deals

And the risk is much lower when investing in established companies

April 3, 2008 10

Market Cap of Recent US Venture Backed IPO’s

VM Ware VMW $ 16.4 Billion ! NetSuite N $ 1.32 Billion Data Domain DDVP $ 1.32 Billion Cavium Networks CAVM $ 675 Million eHealth EHTH $ 551 Million CommVault CVLT $ 469 Million Acme Packet APKT $ 463 Million Mellanox MLNX $ 424 Million DivX DIVX $ 248 Million

March 31, 2008

April 3, 2008 11

VM Ware VMW

Palo Alto, California firm Started in 1998 CEO is Diane Greene Has 5,000 employees Virtualization Software Market Cap is $ 16 Billion Was $ 40 Billion that at the peak,

3 months after the IPO

April 3, 2008 12

Global IPO Activity at Record High in 2007

Over $ 255 Billion Raised in 1739 IPOs

Asia Pacific EMEAN. AmericaROW

April 3, 2008 13

European Venture Backed IPOs in 2007

38 firms raised € 894 million Down 49% from 2006 Median amount raised was € 15.8

million Median pre-valuation was € 59

million Median time from initial financing

to IPO was 6.9 years

April 3, 2008 14

M & A Activity Robust in 2007 Cisco acquiring again

Signal Works $ 14 M Linksys $ 500 M Arroyo Video $ 92 M Actona $ 82 M Reactivity $ 135 M P-Cube $ 200 M Navini Net $ 330 M Securent $ 100 M NetSolve $ 128 M Fine Ground $ 70 M DynamicsSoft $ 55 M IronPort Sys $ 830 M Perfigo $ 74 M Meetinghouse $ 44 M Orative $ 32 M Protego Net $ 65 M Sheer Net $ 97 M Airespace $ 450 M Scientific Atlanta $ 6.9 B Topspin $ 250 M WebEx $ 3.2 B

Total, 21 firms $ 13.6 Billion

Source: PricewaterhouseCoopers/NVCA Money Tree Report, February 2008

April 3, 2008 15

What This Means

So, VC and Buyouts both represent good opportunities if purchased right

We have seen the data and both asset classes have outperformed

I’ll kick off the discussion with a few questions for the panelists

Then we welcome your questions

April 3, 2008 16

Next Steps

Please direct your questions to one of the panelists or to the group

e mail me if you wish to send questions after the session

< peterwolken@global.t-bird.edu >