Q Market Report

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1 Q4 218 Market Report Mergers & Acquisitions Private Equity Financial Advisory 441 Northside Parkway Suite 395 Atlanta, Georgia 3327 (44) Member SIPC and FINRA

2 CONTACT US Frank H. Bo Briggs, III (44) Edward S. Croft, III (44) OVERVIEW Since 1996, Croft & Bender has provided superior M&A, private capital raising, and financial advisory services to middle-market and emerging growth companies. The senior professionals have completed more than corporate finance engagements, resulting in deep experience across a broad set of industries and types of transactions. In addition, the firm manages C&B Capital, three growth equity funds with over $82 million under management. R. Neale Fisher nfisher@croft-bender.com (44) Ronald B. Goldman rgoldman@croft-bender.com (44) Steve B. Tye stye@croft-bender.com (44) Erik M. Zalenski ezalenski@croft-bender.com (44) BUSINESS SERVICES Information Services Marketing Services Financial Services Outsourced Services A/R Management Staffing Consulting BROAD INDUSTRY EXPERTISE TECHNOLOGY Software/SaaS Financial Technology Human Capital Management Internet Marketing E-Commerce Security/Compliance Business Intelligence Telecommunications INDUSTRIAL General Manufacturing Building Products Logistics Specialty Contracting Distribution Industrial Services Chemicals Durable Goods Kyle C. Schickner Director kschickner@croft-bender.com (44) Michael J. Janovec Vice President mjanovec@croft-bender.com (44) HEALTHCARE Healthcare IT Clinical Services Outsourced Services Alternate Site Care Medical Products/Distribution CONSUMER Products/Services Franchising Restaurants Retail Entertainment/Leisure Matthew A. Veal Vice President mveal@croft-bender.com (44) W. Christopher Schatzman Business Development cschatzman@croft-bender.com (44) MERGERS & ACQUISITIONS Buy side/sell side Enterprise Values up to $3 million Exceptions to typical EBITDA criteria: High growth companies Technology companies Special situations DEAL CRITERIA EQUITY & DEBT CAPITAL RAISES Middle-market companies Emerging growth businesses Large market opportunity Experienced management team Differentiated product or service Greater than $1 million capital need 441 Northside Parkway Suite 395 Atlanta, Georgia 3327 Phone: (44) Fax: (44) Member SIPC and FINRA 2

3 REPRESENTATIVE TRANSACTIONS BUSINESS SERVICES TECHNOLOGY INDUSTRIAL HEALTHCARE CONSUMER a portfolio company of Secretariat is a leading provider of dispute resolution advisory services to public and private sector clients across the world. Gro Solutions provides a digital sales platform for financial institutions. Lexington Manufacturing is a leading provider of engineered components to window and door OEMs in the United States and internationally. HCSC is a leading provider of hospice and palliative care services in the Southeast. ASP is the leading swimming pool cleaning franchisor in the U.S. AN GLOBAL Mudlick Mail provides data-driven, direct mail and related marketing solutions to small and medium-sized businesses. 4th Source is a leading provider of nearshore software development and IT services to sophisticated clients with complex technology requirements. Regent is a leading manufacturer and distributor of custom cabinets and countertops to the multi-family construction industry. Dominion Youth Services a leading provider of behavioral and mental health support services to the youth and adolescent market. Carousel Designs is a leading online provider of original and customdesigned baby bedding, fabric and nursery décor. has merged with a portfolio company of Juniper Landscaping is a leading provider of landscaping services to commercial customers. ControlScan is a leading provider of security and compliance solutions. The Erosion Company provides erosion control and related site services to the construction industry. Nuesoft Technologies is a leading provider of SaaS solutions and RCM services for the healthcare industry. Service Brands is a leading multiconcept residential services franchisor. has received an equity investment from has sold Harris Research, Inc. Franchisor of to Coverall is a leading franchisor of commercial cleaning services. Bridge2 Solutions provides the leading SaaS platform enabling the redemption of loyalty reward points for goods and services. VNS is a leading supplier and manufacturer of building products. ML Healthcare provides financing and access to care for patients unable to afford medical services. HRI is a leading franchisor of in-home consumer services. 3

4 FEATURED TRANSACTION COMPANY OVERVIEW Lexington Manufacturing, Inc. ( Lexington ) is a leading provider of engineered components to window and door OEMs in the U.S. and internationally The Company s products are comprised of a variety of materials, including hardwoods, softwoods, aluminum, plastics, MDF, particleboard and other panel products Lexington has nearly employees across three manufacturing plants The Company was wholly owned by co-founders Bob and John Dimke, who started the Company in 1981 with their father DEAL OVERVIEW Croft & Bender was engaged to help the Company evaluate strategic alternatives, including a majority recapitalization or strategic sale Croft & Bender worked with the Company to build a financial model, develop marketing materials, conduct management presentations, manage the diligence process and negotiate with potential buyers Croft & Bender ran a competitive process that included a broad group of potential partners Croft & Bender successfully negotiated the sale of the Company to Watkins Associated Industries Lexington Manufacturing is a leading provider of engineered components to window and door OEMs in the United States and internationally. COMPANY OVERVIEW Gro Solutions, Inc. ( Gro ) provides a leading digital sales platform for financial institutions The Gro platform enables customers to make personalized recommendations and cross-sell products from deposit accounts to loans for both retail and business clients Gro s solution combines advanced, multichannel account opening with targeted marketing capabilities and a shopping cart experience DEAL OVERVIEW In 217, C&B Capital helped put together a Series A equity round that included several leading Southeastern venture capital funds (TTV Capital, BIP Capital, and BLH Ventures) Following the transaction, Steve Tye served as a board observer, advising the company on growth initiatives and strategic opportunities Given the knowledge and relationships C&B had in the Fintech space, in mid-218 the Company engaged Croft & Bender to assist in evaluating its strategic alternatives Croft & Bender worked with the Company to contact and manage discussions with a targeted group of potential strategic acquirors Croft & Bender successfully negotiated the sale of the Company to Q2 Holdings, Inc. (NYSE:QTWO) Gro Solutions provides a digital sales platform for financial institutions. 4

5 KEYCAPITAL MARKETS DATA Public Equity Markets Middle Market Deal Volume ($ in billions) 8.% 6.% $342 $347 $347 $327 $396 $385 $385 $38 $384 4.% 2.% 33.9% 32.5% 22.7%.% (2.%) 12/15 6/16 12/16 6/17 12/17 6/18 12/18 S&P NASDAQ Dow Jones ($ in billions) Private Equity Dry Powder Cash on Corporate Balance Sheets ($ in trillions) $1,26 $1,197 $5.3 $5.4 $5.6 $5.9 $6. $5.7 $5.9 $6.3 $6. $614 $594 $557 $669 $681 $743 $83 Middle Market EBITDA Multiples Middle Market Leverage Multiples x x x 4.5x x 5.3x 5.3x 5.5x 5.5x Note: Middle-market transactions are defined as those with a disclosed transaction value of less than $1 billion. 5

6 KEY ECONOMIC DATA Real GDP Growth Industrial Production (1) 5.% 11 4.% 18 3.% 16 2.% 14 1.% 12.% Consumer Confidence (2) Unemployment Rate 14 8.% % 11 6.% 5.% % 7 3.% Retail Sales Consumer Spending ($ in billions) $1, $1,3 $1, $1, ($ in trillions) $15 $14 $13 $12 $11 $ $1 [1] Indexed relative to 212. [2] Indexed relative to

7 AVERAGE PUBLIC MULTIPLES & U.S. DEAL ACTIVITY BY SELECT INDUSTRY GROUPS General Industrial IT Consulting & Other Services 2,33 2,425 2,145 2,169 2, x 9.9x 9.9x 1.3x , 2, 2, 1, x x 11.5x 1.7x x Building Products Trading Companies & Distributors x 9.7x 9.3x x x 11.3x 9.9x.....7x Retailing Consumer Services 2 15x 5x x 13.5x x x 1.3x x ,112 1, x 12.9x 13.9x 12.1x 2.3x 2.3x 2.5x , 8 6 *Latest twelve months as of December 31, 218. Note: EV = Enterprise Value. 7

8 AVERAGE PUBLIC MULTIPLES & U.S. DEAL ACTIVITY BY SELECT INDUSTRY GROUPS Healthcare Facilities Healthcare Software x 11.3x x x 2 15x 5x x 23.9x 24.3x 2.7x x 3.5x 3.7x 4.1x 3.9x Healthcare Services Data Processing & Outsourced Services x x x x x 5x x 4.7x 4.5x 4.7x 19.7x 19.3x 5.9x Application Software General Software & Services 3 25x 2 15x 5x x 22.9x 24.3x x x x 5x 1,522 1,42 1,44 1,376 1, x 15.7x x 3.5x x 1,6 1, 8 *Latest twelve months as of December 31, 218. Note: EV = Enterprise Value. 8

9 $289 $344 $371 $44 $529 $556 $69 $68 $665 $18 $24 $22 $22 $4 $46 $4 $43 $66 $31 $45 $42 $48 $71 $83 $77 $83 $131 PRIVATE CAPITAL DATA U.S. VC Activity by Year Median VC Round Size by Stage $14 $12 $ $8 $6 $4 $2 Deal value ($B) # of deals closed 9,31 7,882 6,759 5,49 1,573 1,74 9, 9,489 8,948 12, 1, 8, 6, 4, 2, ($ in millions) $12 $1 $8 $6 $4 $2 Angel/Seed Early VC Later VC $11.4 $1. $6.4 $5.2 $1. $1.2 $ $ U.S. Growth Equity Activity by Year U.S. Growth Equity Deal Size Metrics $7 $6 $5 $4 $3 $2 $1 536 Deal value ($B) # of deals closed ,57 1, 8 6 ($ in millions) $25 $ $15 $ $5 Median pre-money valuation Median deal size $169.9 $. $4. $47. $ $ $8 $7 $6 $ $ $3 $ $ $ U.S. Private Equity Activity by Year Deal value ($B) # of deals closed 4,578 4,24 4,365 4,35 4,552 3,123 3,494 3,47 2,743 5, 5, 4, 4, 3, 3, 2, 2, 1, U.S. Private Equity Deals by Deal Size (# of deals) 2, 2, 1, Under $25M $25M-$M $M-$M 2,27 1,861 1,73 1, ,143 9

10 DISCLOSURES Croft & Bender LP ( is a leading middle market investment bank focused on the advisory needs of clients nationwide. The firm has extensive industry knowledge, transaction expertise, and a commitment to its clients success. Croft & Bender LP provides sell-side and buy-side advisory, capital raising, and financial advisory. Investment banking services are provided by Croft & Bender, a registered broker-dealer and member of FINRA and SIPC. THIS REPORT MAY CONTAIN REFERENCES TO REGISTERED TRADEMARKS, SERVICE MARKS AND COPYRIGHTS OWNED BY THIRD-PARTY INFORMATION PROVIDERS. NONE OF THE THIRD-PARTY INFORMATION PROVIDERS IS ENDORSING THE OFFERING OF, AND SHALL NOT IN ANY WAY BE DEEMED AN ISSUER OR UNDERWRITER OF, THE SECURITIES, FINANCIAL INSTRUMENTS OR OTHER INVESTMENTS DISCUSSED IN THIS REPORT, AND SHALL NOT HAVE ANY LIABILITY OR RESPONSIBILITY FOR ANY STATEMENTS MADE IN THE REPORT OR FOR ANY FINANCIAL STATEMENTS, FINANCIAL PROJECTIONS OR OTHER FINANCIAL INFORMATION CONTAINED OR ATTACHED AS AN EXHIBIT TO THE REPORT. FOR MORE INFORMATION ABOUT THE MATERIALS PROVIDED BY SUCH THIRD PARTIES, PLEASE CONTACT US AT THE ADDRESSES OR NUMBERS AT THE BEGINNING OF THE REPORT. The information and views contained in this report were prepared by Croft & Bender LP. It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Croft & Bender to be reliable, but Croft & Bender makes no representation as to the accuracy or completeness of such information. Transaction numbers include those transactions that closed during the year they appear under and the industry classification assigned to the target by S&P Capital IQ. Croft & Bender and/or its affiliates act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Croft & Bender and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Croft & Bender s judgment and are subject to change without notice. The financial instruments discussed in this report may not be suitable for all investors, and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Croft & Bender s prior written consent. Sources of information include S&P Capital IQ and Pitchbook. 1