M&A 2016 CONFERENCE D E S M O I N E S A U G U S T 4 1 - - PDF document

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M&A 2016 CONFERENCE D E S M O I N E S A U G U S T 4 1 - - PDF document

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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

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8/2/2016 1

M&A 2016

D E S M O I N E S ▼ A U G U S T 4

CONFERENCE

1 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

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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

Confidential

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

Middle Market M&A Update

August 4, 2016

Iowa M&A Conference

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Confidential

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U.S. Middle Market M&A Statistics

Iowa M&A Conference Total Number of Deals

Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat 8,786 9,327 9,276 8,912 11,395 12,367 12,317 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Confidential 5

U.S. Middle Market M&A Statistics

Iowa M&A Conference

Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat

Valuation Multiples (Median EV/EBITDA)

10.0x 8.4x 9.9x 8.4x 8.9x 10.1x 10.6x 10.4x 9.7x 9.6x 9.9x 8.5x 8.3x 9.7x 11.0x 9.9x 10.1x 10.5x 12.0x 11.1x 10.2x 9.3x 9.8x 10.0x 8.0x 9.0x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

Confidential

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U.S. Private Equity Statistics

Iowa M&A Conference Fundraising (dollars in billions)

Source: PitchBook $67 $108 $112 $122 $146 $126 $27 108 137 141 183 186 163 48 50 100 150 200 $0 $50 $100 $150 $200 2010 2011 2012 2013 2014 2015 Q1 2016 Capital Raised ($B) Number of Funds Closed

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Confidential

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U.S. Private Equity Statistics

Iowa M&A Conference

Source: PitchBook

Overhang (dollars in billions) $470 $474 $499 $530 $533 $543 $0 $200 $400 $600 $800 2010 2011 2012 2013 2014 2015 Confidential

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U.S. Middle Market Acquisition Activity

Iowa M&A Conference Total Number of Deals by Buyer Type

Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook 5,959 6,741 7,799 6,875 9,153 9,655 9,433 1280 1448 1760 1644 2041 2058 2000 7,239 8,189 9,559 8,519 11,194 11,713 11,433 3,000 6,000 9,000 12,000 15,000 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Strategic Financial Confidential 9

U.S. Middle Market Acquisition Activity

Iowa M&A Conference

Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook

Aggregate Transaction Value by Buyer Type (dollars in billions) $122 $126 $139 $113 $171 $155 $164 $241 $273 $301 $301 $421 $390 $376 $363 $399 $440 $414 $592 $545 $540 $0 $200 $400 $600 $800 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Strategic Financial

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Confidential

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U.S. Middle Market Acquisition Activity

Iowa M&A Conference Strategic Buyer Acquisition Statistics (dollars in billions) 5,959 6,741 7,799 6,875 9,153 9,655 9,433 $122 $126 $139 $113 $171 $155 $164 $0 $50 $100 $150 $200 3,000 6,000 9,000 12,000 15,000 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Total Number of Deals Aggregate Deal Value ($B)

Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook Confidential 11

U.S. Middle Market Acquisition Activity

Iowa M&A Conference

Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook

Financial Buyer Acquisition Statistics (dollars in billions) 1,280 1,448 1,760 1,644 2,041 2,058 2,000 $241 $273 $301 $301 $421 $390 $376 $0 $100 $200 $300 $400 $500 600 1,200 1,800 2,400 3,000 2010 2011 2012 2013 2014 2015 TTM 6/30/2016 Total Number of Deals Aggregate Deal Value ($B) Confidential

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U.S. Middle Market Acquisition Buyer Types

Iowa M&A Conference Percentage of Acquisitions by Buyer Type (% of total number of deals)

Note: Middle Market defined as deals valued betw een $1 m illion and $500 m illion, plus undisclosed deals. Source: FactSet Mergerstat, PitchBook 82% 82% 82% 81% 82% 83% 18% 18% 18% 19% 18% 17% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2011 2012 2013 2014 2015 Strategic Financial

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2 0 1 6 M & A C O N F E R E N C E

Email Questions to MAConference@FaegreBD.com

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  • 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

Bridgepoint Midwest M&A Index

Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16)

Bridgepoint Midwest M&A Quarterly Update, Q2-16

(70) (50) (30) (10) 10 30 50 40 50 60 70 80 90 100 110 120 130 140 Yr/Yr Change (%) Index Yr/Yr Change Index Quarterly Midwest M&A Median Valuation 2 0 1 6 M & A C O N F E R E N C E

Email Questions to MAConference@FaegreBD.com

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Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16)

Quarterly Midwest M&A Volume & Sector Analysis

Bridgepoint Midwest M&A Quarterly Update, Q2-16

  • 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

274 303 369 329 269 328 318 312 307 284 309 261 312 278 294 226 233 50 100 150 200 250 300 350 400 Transaction Volume Quarterly Midwest M&A Transaction Volume 2 0 1 6 M & A C O N F E R E N C E

Email Questions to MAConference@FaegreBD.com

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Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16)

Quarterly Midwest M&A Volume & Sector Analysis

Bridgepoint Midwest M&A Quarterly Update, Q2-16

  • 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%

Consumer 24% Financials 18% [CATEGORY NAME] [PERCENTAGE] Info Tech 16% Energy 9% [CATEGORY NAME] [PERCENTAGE] [CATEGORY NAME] [PERCENTAGE] Telecomm / Utilities 4%

Quarterly Midwest M&A Median Valuation

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Quarterly Midwest M&A Valuations & Deal Sizes

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Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16)

Bridgepoint Midwest M&A Quarterly Update, Q2-16

$14.9 $29.8 $9.7 $17.5 $31.4 $22.7 $15.3 $16.5 $35.5 $20.0 $36.8 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 Median Deal Size ($mm) Quarterly Midwest M&A Median Deal Size

  • 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

2 0 1 6 M & A C O N F E R E N C E

Quarterly Midwest M&A Valuations & Deal Sizes

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Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16)

Bridgepoint Midwest M&A Quarterly Update, Q2-16

8.5x 9.7x 10.4x 13.6x 14.6x 10.8x 7.0x 9.1x 8.5x 11.3x 8.4x 8.0x 12.4x 15.0x 13.1x 6.8x 11.3x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x Valuation (TEV/EBITDA) Quarterly Midwest M&A Median Valuation

  • 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

2 0 1 6 M & A C O N F E R E N C E

Quarterly Midwest M&A Buyers & Sellers

Bridgepoint Midwest M&A Quarterly Update, Q2-16 7

50 70 90 110 130 150 170 190 210 230 Midwest Buyers Midwest Targets

Source: Bridgepoint Merchant Banking, Capital IQ (07/19/16)

Quarterly Midwest M&A Issuers and Investors

  • Transactions with Midwest

buyers increased 15.6% from 115 in Q1-16 to 133 in Q2-16, the lowest level since Q2-12

  • Transactions with Midwest

targets decreased 4.7% from 107 in Q1-16 to 102 in Q2-16

  • Available targets decreased only

slightly while volatility forced buyers to show more discretion in their acquisition selections

  • Midwest buyers continue to
  • utpace available targets

regionally, a trend persistent since Q1-14

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Bridgepoint Midwest Capital Raise Index

Bridgepoint Midwest Capital Raise Quarterly Update, Q2-16 8

Source: Bridgepoint Merchant Banking, Capital IQ (07/20/16), Pitchbook

  • On a year-over-year basis, the private equity index increased from 103.1 in Q2-15 to 107.8 in Q2-16,

representing a 4.5% increase. On a quarter-to-quarter basis, the index rose 7.8%, from 100.0 in Q1-16 to 107.8 in Q2-16

  • 50.0
  • 40.0
  • 30.0
  • 20.0
  • 10.0

0.0 10.0 20.0 30.0 40.0 50.0 70.0 80.0 90.0 100.0 110.0 120.0 130.0 Q2-11Q3-11Q4-11Q1-12Q2-12Q3-12Q4-12Q1-13Q2-13Q3-13Q4-13Q1-14Q2-14Q3-14Q4-14Q1-15Q2-15Q3-15Q4-15Q1-16Q2-16 Yr/Yr Change PE Index Bridgepoint Midwest Private Equity Index (Q1-11 = 100) 2 0 1 6 M & A C O N F E R E N C E

Bridgepoint Midwest Capital Raise Index

Bridgepoint Midwest Capital Raise Quarterly Update, Q2-16 8

Source: Bridgepoint Merchant Banking, Capital IQ (07/20/16), Pitchbook

  • On a year-over-year basis, the venture capital index decreased 22.4%, from 128.9 in Q2-15 to 100.0 in

Q2-16 . On a quarter-to-quarter basis, the index rose to 100.0 from 95.2 in Q1-16 (Q1-11=100), a 5% increase

  • 50.0
  • 40.0
  • 30.0
  • 20.0
  • 10.0

0.0 10.0 20.0 30.0 40.0 50.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 Yr/Yr Change VC Index Bridgepoint Midwest Venture Capital Index (Q1-11 = 100) 2 0 1 6 M & A C O N F E R E N C E

Quarterly Midwest Private Equity Financing

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Source: Bridgepoint Merchant Banking, Capital IQ (07/20/16), Pitchbook

Bridgepoint Midwest Capital Raise Quarterly Update, Q2-16

41 28 36 42 34 32 32 22 40 40 37 25 28 25 37 26 31 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Median Size ($mm) Transaction Volume PE Volume PE Median Transaction Size Quarterly Midwest PE Financing Volume

  • Quarterly Midwest Private Equity financing volume increased by 46.4% to 41 transactions in Q2-16 from

28 transactions in Q1-16

  • The quarterly median deal size in Q2-16 decreased to $2.0mm, down from $3.5mm in Q1-16, vs. the

historical median of $2.5mm

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2 0 1 6 M & A C O N F E R E N C E

Quarterly Midwest Private Equity Financing

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Source: Bridgepoint Merchant Banking, Capital IQ (07/20/16), Pitchbook

Bridgepoint Midwest Capital Raise Quarterly Update, Q2-16

Healthcare 23.1% Financials 23.1% Info Tech 12.8% Consumer Staples 12.8% Consumer Discretionary 10.3% Industrials 7.7% Materials 5.1% Energy 2.6% Utilities 2.6% Q2-16 Midwest PE Transaction Volume by Sector

  • Healthcare and Financials accounted for nearly half of total Midwest private equity financing transaction

volume in Q2-16, consistent on a quarter-over-quarter basis

  • Consumer investment increased 10.6% while Information Technology decreased 16.3%

2 0 1 6 M & A C O N F E R E N C E

Quarterly Midwest Venture Capital Financing

9 Bridgepoint Midwest Capital Raise Quarterly Update, Q2-16

Source: Bridgepoint Merchant Banking, Capital IQ (07/20/16), Pitchbook

45 59 40 73 62 72 73 91 68 69 73 82 70 58 57 84 48 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 $1.8 $2.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13 Q4-12 Q3-12 Q2-12 Median Size ($mm) Transaction Volume VC Volume VC Median Transaction Size Quarterly Midwest PE Financing Volume

  • Quarterly Midwest venture capital volume decreased by 23.7% from 59 transactions in Q1-16 to 45

transactions in Q2-16

  • Transaction size has decreased from its Q3-15 peak of $1.6mm, to $1.0mm in Q2-16, in line with the

historical median of $1.0mm

2 0 1 6 M & A C O N F E R E N C E

Quarterly Midwest Venture Capital Financing

9 Bridgepoint Midwest Capital Raise Quarterly Update, Q2-16

Source: Bridgepoint Merchant Banking, Capital IQ (07/20/16), Pitchbook

Info Tech 50.0% Consumer Discretionary 16.7% Industrials 13.3% Healthcare 10.0% Financials 6.7% Energy 3.3% Q2-16 Midwest PE Transaction Volume by Sector

  • Information Technology dominated total Midwest venture capital financing in Q2-16 at 50.0%, up from

39.5% in Q1-16

  • Additionally, Industrials investment increased 8.0% vs. the prior quarter while Healthcare decreased

sharply by 16.3%

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  • Total private equity and

venture capital transactions with Midwest issuers decreased 1.1% from 87 in Q1-16 to 86 in Q2-16

  • Transactions with Midwest

investors did not change quarter-over-quarter, as 28 transactions were recorded in both Q1-16 and Q2-16

  • The demand for investments

in Midwest companies remains high; however, due to the inadequate investor base, local companies routinely seek out-of-market capital to meet their financing needs – “importing capital”

Quarterly Midwest Financing Issuers & Investors

10 Bridgepoint Midwest Capital Raise Quarterly Update, Q2-16

Source: Bridgepoint Merchant Banking, Capital IQ (07/20/16), Pitchbook

20 40 60 80 100 120 140 Midwest Issuers Midwest Investors Quarterly Midwest Financing Issuers and Investors

M&A 2016

D E S M O I N E S ▼ A U G U S T 4

CONFERENCE

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