Q1 08 Q4 07 Q4 08 Q3 08 Q2 08 Q3 08 Q1 09 Q1 08 Q4 08 Q2 08 Q4 07. Western Reserve Partners Industrial Practice. Electric & Electronic Components

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1 Inside this Newsletter: Western Reserve Partners LLC 200 Public Square Suite 3750 Clevel, OH 444 Phone: Economic Indicators 2 M&A Activity & 3 Valuation Trends Focus on Electronic 4 Manufacturing Services Transaction in Focus 6 uary 20 : Focus on Electronic Manufacturing Services Industrials Spark Rise in GDP The economic recovery has strengthened since early 20, with the GDP growth rate exping to 3% in approaching the U.S. historical average of 3.28% since In addition, major U.S. stock indices continue to climb, with the S&P 500 DJIA both up nearly since the trough of the market in October 20. Middle market M&A is still active, but seems to be lagging the broader recovery, with overall 20 activity both in terms of transaction count dollar volume flat to slightly down from 20. Month - Over - Month % Change U.S. GDP Growth Rate Key Industrial Contacts: Joseph G. Carson Managing Director jcarson@wesrespartners.com nt k A. Filippell Managing Director mfilippell@wesrespartners.com Kevin J. Mayer Director kmayer@wesrespartners.com Indexed to 1/3/ , Thomson Stock Performance vs. Middle ket M&A Activity Dow Jones Industrial Average S&P 500 Index S&P 500 Industrial Average Deal Count Western Reserve Partners Industrial Practice Building Products Materials Capital Goods Chemicals, Plastics & Rubber Electric & Electronic Components Energy, Power & Infrastructure Metals & Mining General Industrial Aggregates Construction Materials Building Products Construction Farm Machinery Heavy Trucks Industrial Machinery Process Flow Control Equipment Components Coatings Sealants Commodity Specialty Chemicals Plastic Synthetic Resins Specialty Materials Electronic Manufacturing Services Electrical Components Equipment Power Generation Equipment Construction Utility Services Energy Equipment Services Fabricated Structural Metal Products Iron Steel Forgings Foundries Rolling, Drawing, Extruding Of Diversified Metals Aerospace Defense Automotive Containers Packaging Distribution Environmental Services Transportation Logistics

2 Economic Indicators The continuing economic recovery in the industrial segment is exhibited in a variety of trends highlighted below: Growth in Industrial Indices. The industrial sector of the economy is continuing to show moderate improvement in both the Industrial Production Index ( IPI ) & Institute for Supply Management ( ISM ) manufacturing indices. Strong auto sales helped contribute to this growth, with sales continuing to climb toward pre-recession levels. Durable goods inventories new orders are increasing as well, inventories are surging past pre-recession levels. Jobless claims are at their lowest levels since April 20, the middle of the past recession. Eyeing Energy. Oil priced above per barrel will be a continued headwind for the broader economy, although it will be offset by dramatic decreases in the price of natural gas due to supply increases. Housing on the Rebound. Housing starts have improved dramatically from their lowest points during the recession are close to 700,000 annually. However, prices for the Case-Schiller Index have seen flat to moderate declines since early 20. These numbers should see continued improvement, however, as excess inventory in the re-sale market is slowly cleared. Unemployment Industrial Production % % 8% 6% 4% 2% Unemployment is at its lowest level since April of % The IPI ISM indices are off of recessionary lows ISM Manufacturing Index (Seasonally Adjusted) IPI Auto Sales Auto sales have seen strong growth, approaching pre-recession levels Durable Goods New Orders & Inventories New durable goods orders inventories continue to climb Millions of Units Millions of Dollars $400,000 $300,000 $372,483 8 $200,000,000 $206,925 6 Light Weight Vehicle Sales (Autos & Light Trucks, Monthly, Seasonally Adjusted Annual Rate) Inventories for Durable Goods Industries (Seasonally Adjusted) New Durable Goods Orders Oil & Natural Gas Prices Oil prices are increasing, offset by declines in natural gas prices New Housing Starts & Prices Housing starts continue to rebound as prices remain stagnant DollarsPer Barrel $160 $140 $80 $60 $40 $20 Dollars Per MillionBTU $2.20 $2.51 $16 $14 $ $ $8 $6 $4 $2 Thouss 1,600 1,400 1,200 1, Index Value Oil Natural Gas: Henry Hub, LA New Housing Starts 20-City Case-Schiller Home Price Index Source: Energy Information Administration 2

3 M&A Activity Valuation Trends Middle market M&A continues to be active early in 20. However, there is a clear trend toward the lengthening of the overall transaction process. That is, each step is seeing greater due diligence review from each respective deal constituent. Nonetheless, M&A activity remains strong, particularly for higher performing companies. Buyers have a significant amount of cash on h S&P 500 cash balances totaled nearly $1.9 trillion at year-end 20, representing a -year high Private equity groups have over $425 billion of dry powder Scarcity value for performing companies has led to premium valuations as buyers fight over these high-quality assets Financing markets have shown improvement, but the market is bifurcated both with regard to size quality of company. Larger, better-performing companies have significantly greater access to the credit markets There is an increased focus from strategic acquirers on gaining market share through acquisition within core business segments versus tangential or complementary M&A opportunities Building Products & Materials $14, $3, $ $3,947 $3, $424 $91 $ $2, Mean EV / EBITDA 8.2x 8.2x 6.9x 9.7x 7.8x 6.1x NA NA.1x Mean EV / Revenue 0.95x 1.22x 0.70x 0.95x 1.21x 0.74x 1.16x NA 1.56x Percent Strategic Buyers 86.2% 93.6% 89.8% 90.2% 85.2% 86.2% 93.8% 74.1% 85. Percent Financial Buyers 13.8% 6.4%.2% 9.8% 14.8% 13.8% 6.3% 25.9% 15. Capital Goods $81,755 $34, $9, $27,933 $44, $,322 $8,613 $17,8 $6, Mean EV / EBITDA 7.6x 9.0x 5.4x 7.4x 8.6x 8.6x 9.3x 8.6x 8.0x Mean EV / Revenue 1.15x 1.17x 0.91x 1.x 1.x 1.15x 0.92x 1.31x 0.89x Percent Strategic Buyers 83.4% 88.2% % 90.4% 90.9% 91.1% 89.6% 90. Percent Financial Buyers 16.6%.8% % 9.6% 9.1% 8.9%.4%. Chemicals, Plastics & Rubber $36, $19,3 224 $28, $21,445 $38, $2,432 $1, $19, $14, Mean EV / EBITDA 8.5x 9.7x 7.8x 7.4x 9.7x.6x NA 8.4x.8x Mean EV / Revenue 1.19x 1.24x 0.85x 1.03x 1.41x 1.66x 0.80x 1.41x 1.43x Percent Strategic Buyers 89.2% 88.4% 92.2% % 94.7% 91.1% 92.7% 86.5% Percent Financial Buyers.8%.6% 7.8% % 5.3% 8.9% 7.3% 13.5% 3

4 M&A Activity Valuation Trends (cont d) Electric & Electronic Components $45,482 $, $3, $,372 $16, $6,495 $2,475 $5,357 $2, Energy, Power & Infrastructure Mean EV / EBITDA 7.5x 6.9x 5.3x 7.8x 8.5x.4x 8.6x 5.6x 8.9x Mean EV / Revenue 2.21x 2.35x 1.82x 1.89x 1.96x 2.25x 2.16x 1.25x 2.01x Percent Strategic Buyers 94.3% 94.4% 95.1% 95.4% 96.2% % 96.3% 95.8% Percent Financial Buyers 5.7% 5.6% 4.9% 4.6% 3.8% % 3.7% 4.2% Metals & Mining Mean EV / EBITDA.1x 8.8x 9.4x 9.4x 8.9x 9.9x 9.8x NA NA Mean EV / Revenue 1.49x 1.51x 1.x 1.46x 1.79x 1.71x 1.76x 1.96x 1.62x Percent Strategic Buyers 89.9% 92.3% % 90.9% 87.1% 95.2% % Percent Financial Buyers.1% 7.7% % 9.1%.9% 4.8% % $228,748 $133, $161, $76,144 7 $42,242 $, $197,574 $163, $17,601 $38, $33,620 $49, $32,166 $48, $4,986 $26,551 $2,823 $4, Mean EV / EBITDA 7.6x 8.0x 4.2x 7.8x 8.7x 8.3x 9.0x 7.6x.9x Mean EV / Revenue 1.42x 1.00x 1.34x 1.15x 1.76x 2.06x 2.42x 0.88x 1.42x Percent Strategic Buyers 95.9% 93.5% 98.2% % 97.6% 96.4% 97.8% 94.3% Percent Financial Buyers 4.1% 6.5% 1.8% % 2.4% 3.6% 2.2% 5.7% All Industrial $568,675 3,584 $244,813 3,065 $130,682 2,513 $278,871 $305,669 3,269 3,266 $60,279 $89,132 $78,045 $78, Mean EV / EBITDA 7.9x 8.5x 6.0x 7.6x 8.5x 8.1x 9.0x 8.6x 8.4x Mean EV / Revenue 1.x 1.17x 0.86x 1.x 1.x 1.04x 0.95x 1.36x 1.00x Percent Strategic Buyers 90.2% 91.5% 94.5% 94.3% 93.5% 93.7% 94.6% 93.2% 92.4% Percent Financial Buyers 9.8% 8.5% 5.5% 5.7% 6.5% 6.3% 5.4% 6.8% 7.6% 4

5 Focus on Electronic Manufacturing Services ( EMS ) EMS Industry Trends Emerging kets. EMS companies, in an effort to drive revenue growth, will continue to focus on emerging markets such as medical, industrial defense / aerospace. These sectors require a higher skill set allow EMS companies to generate higher operating margins of 6-% compared to high-volume / low-mix business, which produces margins of 1-3%. Profits Under Pressure. EMS industry profit has narrowed due to reduced dem, as well as pressure from rising material costs. Prices of gold, silicon other rare earth metals continue to rise, causing average profits to fall. As material expenses make up 6 of EMS industry revenue, the industry is particularly susceptible to price fluctuations. Non-Tech Outsourcing. OEM vendors in the non-technology sector are facing a variety of challenges in an effort to protect gross margins will seek outsourcing opportunities to lower / or vary their cost structure. 48% Source: IBISWorld 20 Electronic Components ket Segmentation % % 31% Electronic Connectors Bare Printed Circuit Boards Other Electronic Components Printed Circuits Total: $44.5 Billion EMS M&A Trends Looking to Gain ket Share. The EMS sector has seen increased recent activity as companies return to more acquisitive strategies to gain market share, including exping out of pure-play sectors in an effort to increase margins. An Active ket. Both EMS M&A transaction count dollar volume were up in 20, with 46 transactions totaling a volume of more than $2 billion. This volume was driven by two large deals: the sale of Linxens to Astorg Partners Bain Capital Equity Partners SMART Modular Technologies to Silver Lake Partners. Searching Overseas. Companies continue to focus on international manufacturing sites, especially in light of rising labor costs in China, are seeking out new low-cost country outsourcing opportunities in countries such as Vietnam Thail. Drawing a Premium. A premium is being paid for electronic component EMS companies with lower customer concentration high penetration into strong, defensible industries such as medical, aerospace defense, along with niche, value-added capabilities. Indexed to 1/2/ EMS Stock Index EMS Index S&P 500 Dow Jones Industrial Average (Contact WRP for EMS Index Constituents) 17% 6% EMS M&A Activity Recent Notable EMS Transactions Number of Deals $5,000 $4, $4, $4, $3,500 5 $2,361 $3,000 $1, $2, $1,468 $2, $1, $1, $1, $ Date - - Oct- - - Jun- Acquirer / Target (Target Description) Shaw Kwei & Partners / Beyonics Technology Ltd. Provides printed circuit board assembly services Airborn, Inc. / AESCO Electronics Manufactures distributes electronic components Linxens / Astorg Partners, Bain Capital Private Equity French manufacturer of flexible printed circuits Silver Lake Partners / SMART Modular Technologies (WWH), Inc. Manufactures memory products services SMTC Corp. / ZF Array Technologies, Inc. Provides EMS services supply chain management Ducommun Technologies, Inc. / LaBarge, Inc. Manufactures electromechanical interconnect systems Enterprise Value ($mm) EV / EBITDA $3 5.9x NA NA $885 NA $ x $9 5.4x $ x 5

6 Transaction in Focus AESCO Electronics, Inc. The Ready-Mix Assets Eastern Cement Corporation of The Assets of Schwab Materials, Inc. A portfolio co en recapitalized have been acquired by a division of CRH plc have been acquired by has sold its Construction Engineering Services Division to John A. tell Bonnie M. tell Fairness Opinion to the Board of Directors has been recapitalized uary 20 Dan T. Moore Company, Inc. has acquired has completed a reverse stock split Fairness Opinion has been acq a portfolio co een acquired by id J. Joseph Company y owned subsidiary of Valuation Services Series C Redeemable Convertible Participating Preferred Stock Bankruptcy Estate of Driggs Farms of Indiana, Inc. L-O-Sun Dairies, LLC an affiliate of Dean Foods 2 Valuation Services a member of the has acquired Partners in Plastics, Inc. a division of has been ac Members of Ma een acquired by Senior Credit Facility The undersigned acted as exclusive financial advisor to AESCO Electronics, Inc. in this transaction has been reca Bill Bu Members of Management Fairness Opinion Financial Opinion Financial Advisory Services n recapitalized by Fairness Opinion has been reorganized by Timeshare Acquisitions LLC have formed an Equity Joint Venture Members of Management a portfolio co Valuation S en reorganized by rtemiss, LLC n affiliate of has sold certain assets to has sold its Cephalosporin Finishing Facility to has sold its Large Aerospace Turbine Engine Component Repair Business to SR Technics Airfoil Services Limited a wholly-owned subsidiary of Partners in Plastics, Inc. Company Overview Headquartered in Akron, Ohio, AESCO Electronics, Inc. is a full service, ISO Certified electronic contract manufacturer electronic distributor. The company s products range from individually populated circuit boards to completely assembled tested systems. AESCO serves a diverse group of customers, including electronic manufacturers of medical instrumentation, military electronics, semiconductor instruments, industrial controls commercial products. Transaction Overview Western Reserve Partners LLC served as the exclusive investment banker to AESCO in its sale to AirBorn Inc., a leading manufacturer of electronic components provider of value-added services based in Addison, Texas. By adding 300 employees from AESCO, AirBorn will increase its employee base by 3 to approximately 1,400 employees. The acquisition of AESCO also increases AirBorn s bottom line. Combined sales for AirBorn are approximately $160 million. Leading the transaction for Western Reserve were Managing Director k Filippell Director Kevin Mayer, supported by Associate Ante Turcinov Analyst Jessica Fleck. This sale to Airborn is a great outcome for all AESCO stakeholders, said AESCO Chief Executive Officer William Feth. The team at Western Reserve did an outsting job in advising our senior management Board of Directors on the best business legal structure to frame an advantageous deal with Airborn. The combination with Airborn represents the best strategic outcome for all of our stakeholders. Western Reserve s keen understing of our business model competitive lscape were essential in delivering superior value. an Affiliate of Members of Management has sold its redemption op a portfolio company a portfolio of c of lin Equity Western Reserve Partners LLC, based in Clevel, Ohio, is a leading investment banking firm dedicated to providing customized solutions unparalleled results to the premier companies in the middle market. Clients benefit from our focused approach to financial advisory services, particularly in situations involving mergers acquisitions, capital raising, financial opinions financial restructuring. Western Reserve's managing directors average nearly 30 years of experience have collectively executed more than 600 transactions during their careers. We are a member of M&A International, the world s largest international alliance of investment banking firms, as well as World Services Group, a global consortium of middle market focused law firms other professional advisors. Western Reserve is a FINRA-member broker / dealer a member of SIPC. This newsletter is published solely for the general information of clients friends of Western Reserve Partners LLC. Information contained in this publication is based on data obtained from sources we deem to be reliable; however, we do not guarantee or represent that it is accurate or complete, it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only. This material should not be read as advice or recommendations, we are not soliciting any action based upon receipt of this information. Nothing in this publication is intended to be an offer to buy or sell or the solicitation of an offer to buy or sell any specific security or company. 6