8/2/2016 M&A 2016 CONFERENCE D E S M O I N E S ▼ A U G U S T 4 1 Market Update: Current Deal Activity, Valuations and Outlook Robert Biodrowski , Wells Fargo Securities, LLC Tom Cavanagh , BCC Advisers Adam Claypool , Bridgeport Merchant Bank Kyle Crowe , Green Holcomb Fisher Moderator: Bruce Engler , Faegre Baker Daniels 2 0 1 6 M & A C O N F E R E N C E 2 0 1 6 M & A C O N F E R E N C E 2 Confidential Iowa M&A Conference Middle Market M&A Update August 4, 2016 M I N N E A P O L I S P H O E N I X S E A T T L E A T L A N T A 1
8/2/2016 Confidential Iowa M&A Conference U.S. Middle Market M&A Statistics Total Number of Deals 14,000 12,367 12,317 12,000 11,395 10,000 9,327 9,276 8,912 8,786 8,000 6,000 4,000 2,000 0 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat 4 Confidential Iowa M&A Conference U.S. Middle Market M&A Statistics Valuation Multiples (Median EV/EBITDA) 14.0x 12.0x 12.0x 11.0x 11.1x 10.6x 10.4x 10.5x 10.2x 10.0x 9.9x 10.1x 9.9x 9.9x 10.1x 10.0x 9.7x 9.7x 9.8x 10.0x 9.6x 9.3x 8.9x 9.0x 8.4x 8.4x 8.5x 8.3x 8.0x 8.0x 6.0x 4.0x 2.0x 0.0x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat 5 Confidential Iowa M&A Conference U.S. Private Equity Statistics Fundraising (dollars in billions) $200 200 186 183 $150 163 150 141 137 $100 100 108 $146 $122 $126 48 $108 $112 $50 50 $67 $27 $0 0 2010 2011 2012 2013 2014 2015 Q1 2016 Capital Raised ($B) Number of Funds Closed Source: PitchBook 6 2
8/2/2016 Confidential Iowa M&A Conference U.S. Private Equity Statistics Overhang (dollars in billions) $800 $600 $530 $533 $543 $499 $470 $474 $400 $200 $0 2010 2011 2012 2013 2014 2015 Source: PitchBook 7 Confidential Iowa M&A Conference U.S. Middle Market Acquisition Activity Total Number of Deals by Buyer Type 15,000 11,713 12,000 11,433 11,194 2058 9,559 2000 2041 9,000 8,519 8,189 1760 7,239 1644 1448 1280 6,000 9,655 9,153 9,433 7,799 6,741 6,875 3,000 5,959 0 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Strategic Financial Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook 8 Confidential Iowa M&A Conference U.S. Middle Market Acquisition Activity Aggregate Transaction Value by Buyer Type (dollars in billions) $800 $592 $600 $545 $540 $440 $414 $399 $400 $363 $421 $390 $376 $301 $273 $301 $241 $200 $171 $164 $139 $155 $122 $126 $113 $0 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Strategic Financial Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook 9 3
8/2/2016 Confidential Iowa M&A Conference U.S. Middle Market Acquisition Activity Strategic Buyer Acquisition Statistics (dollars in billions) 15,000 $200 $171 $164 $155 12,000 $139 $150 $126 $122 $113 9,000 $100 6,000 9,655 9,153 9,433 7,799 $50 6,741 6,875 3,000 5,959 0 $0 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Total Number of Deals Aggregate Deal Value ($B) Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook 10 Confidential Iowa M&A Conference U.S. Middle Market Acquisition Activity Financial Buyer Acquisition Statistics (dollars in billions) 3,000 $500 $421 $390 2,400 $376 $400 $301 $301 1,800 $273 $300 $241 1,200 $200 2,041 2,058 2,000 1,760 1,644 1,448 1,280 600 $100 0 $0 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Total Number of Deals Aggregate Deal Value ($B) Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook 11 Confidential Iowa M&A Conference U.S. Middle Market Acquisition Buyer Types Percentage of Acquisitions by Buyer Type (% of total number of deals) 100% 18% 18% 18% 18% 17% 90% 19% 80% 70% 60% 50% 40% 82% 82% 82% 81% 82% 83% 30% 20% 10% 0% 2010 2011 2012 2013 2014 2015 Strategic Financial Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook 12 4
8/2/2016 Bridgepoint Midwest M&A Index Bridgepoint Midwest M&A Quarterly Update, Q2-16 140 50 Quarterly Midwest M&A Median Valuation 130 30 120 Yr/Yr Change (%) 110 10 100 Index 90 (10) 80 (30) 70 60 (50) 50 40 (70) Yr/Yr Change Index The Bridgepoint Midwest M&A Index decreased 14.5% from Q1-16 to Q2-16, its lowest level since Q4-09 On a year-over-year basis, the Index decreased 18.0% from Q2-15, continuing the declining trend in Midwest M&A transactions over the past four years While 2015 was a record year for M&A, 2016 is shaping up to be one of the worst years in terms of transaction volume since 2009 Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16) 2 0 1 6 M & A C O N F E R E N C E Email Questions to MAConference@FaegreBD.com 4 Quarterly Midwest M&A Volume & Sector Analysis Bridgepoint Midwest M&A Quarterly Update, Q2-16 Quarterly Midwest M&A Transaction Volume 400 369 350 329 328 318 312 307 309 312 Transaction Volume 303 294 300 284 274 278 269 261 233 250 226 200 150 100 50 0 Total Midwest M&A transaction volume in Q2-16 increased 3.1% from Q1-16 Demand for quality investment opportunities remains strong, but activity continues to be inhibited by lower quality supply Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16) 2 0 1 6 M & A C O N F E R E N C E Email Questions to MAConference@FaegreBD.com 5 Quarterly Midwest M&A Volume & Sector Analysis Bridgepoint Midwest M&A Quarterly Update, Q2-16 Quarterly Midwest M&A Median Valuation Telecomm / Utilities [CATEGORY NAME] 4% [PERCENTAGE] Consumer 24% [CATEGORY NAME] [PERCENTAGE] Energy 9% Financials Info Tech 18% 16% [CATEGORY NAME] [PERCENTAGE] Consumer Services, Financial Services and Industrials accounted for 59% of total Q2-16 Midwest M&A transaction volume Information Technology increased 8.8% while Financials decreased 6.3% Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16) Email Questions to MAConference@FaegreBD.com 2 0 1 6 M & A C O N F E R E N C E 5 5
8/2/2016 Quarterly Midwest M&A Valuations & Deal Sizes Bridgepoint Midwest M&A Quarterly Update, Q2-16 Quarterly Midwest M&A Median Deal Size $40.0 $36.8 $35.5 Median Deal Size ($mm) $35.0 $31.4 $29.8 $30.0 $25.0 $20.0 $22.7 $20.0 $15.0 $17.5 $16.5 $14.9 $15.3 $10.0 $9.7 $5.0 $0.0 The median Midwest M&A deal size grew to $36.8mm in Q2-16, a five-year high Median deal sizes remain elevated compared to the historical median of $20.0mm, which is consistent with recent trends nationally Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16) 2 0 1 6 M & A C O N F E R E N C E 6 Quarterly Midwest M&A Valuations & Deal Sizes Bridgepoint Midwest M&A Quarterly Update, Q2-16 Quarterly Midwest M&A Median Valuation 16.0x 15.0x 14.6x 13.6x 14.0x 13.1x Valuation (TEV/EBITDA) 12.4x 12.0x 11.3x 11.3x 10.8x 10.4x 9.7x 10.0x 9.1x 8.5x 8.5x 8.4x 8.0x 8.0x 7.0x 6.8x 6.0x 4.0x 2.0x 0.0x Median TEV/EBITDA valuations of 11.3x in Q2-16 recovered from the Q1-16 low of 6.8x Valuations remain above the historical average of 10.4x but lower than recent highs in Q3-15 Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16) 2 0 1 6 M & A C O N F E R E N C E 6 Quarterly Midwest M&A Buyers & Sellers Bridgepoint Midwest M&A Quarterly Update, Q2-16 230 Quarterly Midwest M&A Issuers and Investors Transactions with Midwest buyers increased 15.6% from 210 115 in Q1-16 to 133 in Q2-16, the lowest level since Q2-12 190 170 Transactions with Midwest targets decreased 4.7% from 150 107 in Q1-16 to 102 in Q2-16 130 Available targets decreased only 110 slightly while volatility forced 90 buyers to show more discretion in their acquisition selections 70 50 Midwest buyers continue to outpace available targets regionally, a trend persistent since Q1-14 Midwest Buyers Midwest Targets Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16) 2 0 1 6 M & A C O N F E R E N C E 7 6
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