M&A 2015 CONFERENCE D E S M O I N E S A U G U S T 6 - PowerPoint PPT Presentation

M&A 2015 CONFERENCE D E S M O I N E S ▼ A U G U S T 6

Welcome Bruce Engler Partner | Faegre Baker Daniels Mike Abbott Partner | Faegre Baker Daniels 2 0 1 5 M & A C O N F E R E N C E 2 0 1 5 M & A C O N F E R E N C E

Conference Information WI-FI ACCESS Network ► Marriott Conference Password ► FaegreBD CONFERENCE MATERIALS & SPEAKER BIOGRAPHIES Access the conference materials and speaker biographies at: FaegreBD.com/IowaMA15 Email Questions to MAConference@FaegreBD.com 3 2 0 1 5 M & A C O N F E R E N C E

Conference Information QUESTIONS? Email questions for our panelists to MAconference@FaegreBD.com DISCUSS #MACon15 Email Questions to MAConference@FaegreBD.com 4 2 0 1 5 M & A C O N F E R E N C E

Conference Information CHARGING STATIONS Need to charge your mobile device or laptop? Charging stations are available near the registration desk. NEED ASSISTANCE? Stop by the registration desk if you need any assistance throughout the day. Email Questions to MAConference@FaegreBD.com 5 2 0 1 5 M & A C O N F E R E N C E

Market Update: Current Deal Activity, Valuations and Outlook Moderator: Mike Abbott , Partner , Faegre Baker Daniels Mike Clausman , Hormel Foods Corporation Adam Claypool , Bridgepoint Merchant Bank Scott Hebbeler , Lincoln International Melanie Wadsworth , Faegre Baker Daniels 2 0 1 5 M & A C O N F E R E N C E 2 0 1 5 M & A C O N F E R E N C E

Conference Information QUESTIONS? Email questions for our panelists to MAconference@FaegreBD.com DISCUSS #MACon15 Email Questions to MAConference@FaegreBD.com 7 2 0 1 5 M & A C O N F E R E N C E

Middle-Market M&A Overview Market multiples now exceed peak levels while M&A volume continues to build Middle-Market M&A Transaction Count Average EV/EBITDA in U.S. Middle-Market Transactions 2,500 12.0x 10.0x 9.6x 10.2x 9.7x 10.1x 9.9x 10.2x 2,047 2,107 9.4x 9.5x 9.9x 10.0x 9.0x 8.9x 1,845 2,000 1,768 1,804 1,797 7.9x 1,625 1,488 1,494 8.0x 1,415 1,500 1,279 6.0x 873 1,000 4.0x 500 2.0x 0.0x 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Mar-15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 LTM 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 Source: Factset Mergerstat Source: Factset Mergerstat Note: Reflects deals up to $500mm with disclosed values Note: Reflects deals up to $500mm with disclosed values Email Questions to MAConference@FaegreBD.com 8 2 0 1 5 M & A C O N F E R E N C E

Middle-Market M&A Valuations ► The chart illustrates valuation multiples of private equity-sponsored, middle-market* M&A transactions by transaction size since 2011. ► Transaction multiples are at their highest levels since 2011, with the $100-250mm transaction size range leading the way at 8.3x. Valuation Multiples by Transaction Size 8.5x 8.3x 8.0x 7.9x 7.6x 7.7x 7.5x 7.4x 7.5x 7.5x 7.1x 7.2x TEV/EBITDA 7.0x 6.9x 6.8x 6.7x 6.5x 6.3x 6.1x 6.0x 6.0x 5.9x 5.9x 5.7x 5.5x 5.4x 5.3x 5.0x 2011 2012 2013 2014 1Q 2015 $10-25mm $25-50mm $50-100mm $100-250mm Source: GF Data, M&A Report May 2015 *Note: middle market is $10 -$250mm Email Questions to MAConference@FaegreBD.com 9 2 0 1 5 M & A C O N F E R E N C E

Middle-Market M&A Valuations by Industry ► The charts below illustrate valuation multiples of private equity-sponsored, middle-market* M&A transactions by industry and transaction size since 2011. Manufacturing Business Services 12.0x 12.0x 10.0x 10.0x TEV/EBITDA TEV/EBITDA 8.0x 8.0x 6.0x 6.0x 4.0x 4.0x 2011 2012 2013 2014/1Q 2015 2011 2012 2013 2014/1Q 2015 $10-25mm $25-50mm $50-100mm $100-250mm $10-25mm $25-50mm $50-100mm $100-250mm Healthcare Services Distribution 12.0 12.0 10.0 10.0 TEV/EBITDA TEV/EBITDA 8.0 8.0 6.0 6.0 4.0 4.0 2011 2012 2013 2014/1Q 2015 2011 2012 2013 2014/1Q 2015 $10-25mm $25-50mm $50-100mm $100-250mm $10-25mm $25-50mm $50-100mm $100-250mm Source: GF Data, M&A Report May 2015 *Note: middle market is $10 -$250mm Email Questions to MAConference@FaegreBD.com 10 2 0 1 5 M & A C O N F E R E N C E

M&A Drivers Corporate Cash On Hand Private Equity Buyout Fundraising / Investing ($ in billions) ($ in billions) $600 $2,500 $535 $2,100 $500 $2,000 $400 $1,500 $293 $269 $300 $220 $192 $1,000 $189 $200 $128 $129 $117 $114 $91 $500 $100 $0 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PE Capital Raised Cumulative Dry Powder Source: Federal Reserve, represents the S&P 500 companies Source: Pitchbook Email Questions to MAConference@FaegreBD.com 11 2 0 1 5 M & A C O N F E R E N C E

M&A Drivers ► Private equity capital raised has increased from a total of $112B in 2011 to $223B and $197B in 2013 and 2014, respectively. Private Equity U.S. Fundraising by Quarter $100 100 80 $75 60 $50 40 $25 20 34 32 25 21 33 37 26 32 36 78 78 43 52 41 61 38 $34 $32 $25 $21 $33 $37 $26 $32 $36 $78 $78 $43 $52 $41 $61 $38 31 $31 $0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2011 2012 2013 2014 2015 Capital Raised ($B) # of Funds Closed Private Equity U.S. Investments-to-Exits Ratio 2,500 4.0x 2,000 3.0x 1,500 2.0x 1,000 1.0x 500 2x 1x 6x 7x 6x 3x 9x 1x 9x 6x 3.2x 3.1x 3.6x 3.7x 2.6x 2.3x 1.9x 2.1x 1.9x 1.6x 0 0.0x 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Investments/Exits # of Investments (excl. add-ons) # of Exits Source: Pitch Book & Renaissance Capital *YTD 2015 Email Questions to MAConference@FaegreBD.com 12 2 0 1 5 M & A C O N F E R E N C E

Quarterly Midwest M&A Transaction Volume Bridgepoint Midwest M&A Quarterly Update, Q2-15  Midwest M&A transaction volume in Q2-15 rebounded nearly 20% from Q1-15 400 369 350 329 328  Midwest M&A 318 312 312 309 307 303 293 transaction volume has 288 300 284 281 274 271 269 been very stable 7 of 262 261 250 the last 10 quarters 200  Midwest activity doesn’t 150 necessarily track national activity over 100 the same time period represented by this 50 chart 0 Source: Bridgepoint Merchant Banking, Capital IQ (07/23/15), www.axial.net, www.bloomberg.com, www.qz.com, www.themiddlemarket.com Email Questions to MAConference@FaegreBD.com 13 2 0 1 5 M & A C O N F E R E N C E

Quarterly Midwest M&A Median Deal Size Bridgepoint Midwest M&A Quarterly Update, Q2-15  Midwest M&A deal $35.0 size grew to $31.4 $29.8 $19.0mm in Q2-15, $30.0 up from $16.5mm in Q1-15 $25.0 $22.9 Median TEV ($mm) $20.6 $20.5 $22.7 $19.0 $20.0 $17.5  After recording one $17.6 of the lowest median $15.0 $11.5 deal size in Q1-15, $16.5 $15.3 $14.9 $13.8 Q2-15 saw Midwest $13.0 $10.0 $12.0 deal sizes increased $9.7 $10.0 to above average $5.0 level of the past 4 years $0.0 Source: Bridgepoint Merchant Banking, Capital IQ (07/23/15), www.axial.net, www.bloomberg.com, www.qz.com, www.themiddlemarket.com Email Questions to MAConference@FaegreBD.com 14 2 0 1 5 M & A C O N F E R E N C E

Quarterly Midwest M&A Median Valuations (TEV/EBITDA) Bridgepoint Midwest M&A Quarterly Update, Q2-15  Median Valuation (TEV/EBITDA) in Q2-15 16.0x was significantly higher 14.6x 13.6x than both the prior 14.0x 12.4x sequential quarter and 12.0x the year-earlier quarter 11.3x 10.8x 10.8x 10.4x 10.1x 9.7x 10.0x 9.1x  Q2-15 multiples are at 8.5x 8.5x 8.5x 8.4x 8.0x 7.6x 8.0x historically strong levels, 7.0x the highest since Q2-13 6.0x 5.4x  Corporates and 4.0x sponsors have shown a 2.0x willingness to pay a premium to close deals 0.0x Source: Bridgepoint Merchant Banking, Capital IQ (07/23/15), www.axial.net, www.bloomberg.com, www.qz.com, www.themiddlemarket.com Email Questions to MAConference@FaegreBD.com 15 2 0 1 5 M & A C O N F E R E N C E

Quarterly Midwest M&A Buyers & Sellers Bridgepoint Midwest M&A Quarterly Update, Q2-15  Quarterly M&A transactions with 230 Midwest buyers increased from 145 in 210 Q1-15 to 166 in Q2-15 190  The number of 170 transactions with Midwest targets 150 increased as well with 130 135 announced or closed transactions in 110 Q2-15 vs. 97 in Q1-15. The figures reiterate 90 the strong buyer appetite for Midwest 70 companies 50 Midwest Buyers Midwest Targets Source: Bridgepoint Merchant Banking, Capital IQ (07/23/15), www.axial.net, www.bloomberg.com, www.qz.com, www.themiddlemarket.com Email Questions to MAConference@FaegreBD.com 16 2 0 1 5 M & A C O N F E R E N C E

Q2-15 Midwest M&A Transaction Volume by Sector Bridgepoint Midwest M&A Quarterly Update, Q2-15  Core industries (including Industrials, Financials 28% Materials and Consumer) accounted for 39% of total Midwest M&A transaction volume in Telecomm / Utilities 4% Q2-14, a slight 1% decrease from Q1-14 Materials 3%  The Consumer sector Energy rebounded with the 7% Consumer biggest increase in Q2- 24% 14, up 3% from Q1-14. The Material and Industrial sectors saw Info Tech 9% the biggest decreases in Q2-14, down 2% from Q1-14 Healthcare 9% Industrials 16% Source: Bridgepoint Merchant Banking, Capital IQ (07/23/15), www.axial.net, www.bloomberg.com, www.qz.com, www.themiddlemarket.com Email Questions to MAConference@FaegreBD.com 17 2 0 1 5 M & A C O N F E R E N C E