Private Equit . Prefer small/mid-cap buyout in US / emerging markets; Recommendations UBS View distressed debt in Europe Strategic (1 to 2 years) . ; ; ; ; ; ; } j e We prefer small-/mid-cap buyouts in North e Private equity deals in today's volatile and uncertain markets are conservatively financed, with an average America given the better economic equity cushion of 40%. We like mid-market buyout strategies, which offer long-term exposure to attractive outlook vs Europe, higher transaction corporate assets and which rely less on large bank debt syndications. certainty and more attractive entry prices. ¢ Our house view sees large parts of Europe in a stagnation, and business owners are reluctant to selltheir © Investors looking for downside protection companies, reducing PE deal flow in the region significantly. We therefore prefer North America, which and stability during economic will see continuous (albeit suboptimal) growth, and emerging markets, which show positive fundamentals. uncertainties can consider large-cap ¢ Prices for PE transactions have corrected by around 10% this year, although they are still 20% above the buyouts in the US, which offer exposure attractive levels seen during the successful years between 2000 and 2004. However, significant dry powder to large, diversified companies at more and high cash positions at corporations keep competition high and hinder prices from falling much further. _ @ttractive prices. 7 e In Europe, the crisis and ongoing @ Positive scenario Prefer small-/mid-cap buyout and secondaries deleveraging nave ee to ara . .. . . ; . . opportunities for special situations. We e An abating Eurozone debt crisis and improved business confidence would increase deal flow and exit . thus recommend investing in distressed opportunities for private equity managers, but would also increase entry prices. In such a positive scenario, debt to benefit from the macroeconomic we would perceive commitment strategies to secondary funds as att