The PitchBook Platform. Credits & Contact. 3 Overview. Introduction. 4-6 M&A by Sector & Size. 7 Spotlight: B2C. 8 Spotlight: IT. 9 Spotlight: Energy

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1 2017 1Q M&A Report

2 Credits & Contact PitchBook Data, Inc. JOHN GABBERT Founder, CEO ADLEY BOWDEN Vice President, Market Development & Analysis Content DYL AN E. COX Analyst Contents BRYAN HANSON Data Analyst NIZAR TARH U NI Analysis Manager K YLE STANFORD Publisher J ENNIFER SAM Senior Graphic Designer Contact PitchBook pitchbook.com Introduction 3 Overview 4-6 M&A by Sector & Size 7 Spotlight: B2C 8 Spotlight: IT 9 Spotlight: Energy 10 Private Equity Q 2017 League Tables 13 Methodology 14 The PitchBook Platform The data in this report comes from the PitchBook Platform our data software for VC, PE and M&A. Contact sales@pitchbook.com to request a free trial. 2 P I TC H B O O K 1 Q 2017 M & A R E P O R T RESE ARCH reports@pitchbook.com EDITORIAL editorial@pitchbook.com SALES sales@pitchbook.com COPYRIGHT 2017 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means graphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and retrieval systems without the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.

» Strong stock market performance and perceived stability pushed US M&A multiples even higher, to 10.9x in 1Q 2017. Meanwhile, the median EV/EBITDA multiple in Europe fell to 7.5x.

3 Global M&A activity on respectable pace Introduction Key Takeaways» M&A activity slowed in the first quarter of the year. Deal value fell especially sharply in Europe, where investors have been waiting to see if Brexit s separatist sentiment will pass through to other parts of the continent.» Strong stock market performance and perceived stability pushed US M&A multiples even higher, to 10.9x in 1Q Meanwhile, the median EV/EBITDA multiple in Europe fell to 7.5x.» Private equity exits to strategic acquirers decreased substantially. Secondary buyouts have become more common as industry dry powder grows. After a gargantuan year in 2016, global M&A activity got off to a slow start in the first quarter of this year. Too much capital and not enough investment opportunities have kept prices high, particularly in the US, where rising public company valuations will put pressure on private markets. Even so, plenty of opportunities for consolidation remain, particularly in the IT and energy sectors. Look up a company. And its cap table. And its investors. And its EBITDA multiples. And its board members. In seconds. The PitchBook Platform has the data you need We hope this report is useful in your practice. As always, feel free to send any questions or comments to reports@pitchbook.com. to close your next deal. Learn more at pitchbook.com DYL AN E. COX Analyst 3 P I TC H B O O K 1 Q 2017 M & A R E P O R T

4 While activity has slowed, US bolsters deal multiples Overview M&A players hitting the brakes M&A activity in the first quarter of 2017 was historically strong, but well behind the pace we ve witnessed in the last two years. Just 3,785 deals were completed, totaling $385.0 billion in value. These figures represent 37.8% and 34.6% year-over-year decreases, respectively. While not up to par with activity in 2015 and 2016, global M&A activity is still respectably on pace with 2014 levels in terms of dollars, if not the number of transactions. With this slowdown came a corresponding decrease in valuation/ebitda multiples to 8.4x in North America and Europe, down from 9.1x last quarter, and the lowest figure we ve seen since 2Q EV/EBITDA multiples stay relatively high Global M&A EV/EBITDA multiples 7.3x 3.5x 8.2x 4.5x 7.7x 7.7x 3.2x 4.5x 8.8x 9.0x 9.0x 3.9x 4.9x 5.0x 4.5x 4.5x 8.4x Debt/EBITDA Equity/EBITDA Valua on/ebitda 3.6x 4.8x Deal activity declines for fourth consecutive quarter Global M&A activity $700 $600 $500 Deal Value ($B) Deal Count 4,987 7,000 6,000 5,000 $400 $300 $200 3,938 3,785 4,000 3,000 2,000 $100 $0 $209 $232 $287 $247 $194 $407 $267 $268 $260 $314 $267 $365 $255 $343 $296 $387 $340 $388 $438 $533 $600 $452 $536 $532 $589 $562 $553 $482 $385 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 1,

5 Precarious politics slowing European activity The drop in prices this quarter was most evident in Europe, where the median EV/EBITDA multiple sank to 7.5x, down from 8.4x for the entirety of Similarly, European M&A deal value nearly halved quarter over quarter to just $103 billion, though the number of completed transactions held EBITDA multiples see a slide in 1Q Median European EV/EBITDA multiples 7.1x 7.1x 6.6x 7.0x 2.8x 3.0x 2.7x 3.4x 8.9x 7.9x 3.5x 9.3x 8.8x 8.6x 4.2x 4.3x steady at 1,673. The economic fallout from Brexit has not yet been what many expected, but uncertainty stemming from the recent Dutch election and the ongoing French presidential election to be completed in May are creating concern that the EU could become more fragmented and therefore more difficult for businesses to navigate. On the 7.6x 8.1x 8.5x 8.4x 8.5x 7.9x 8.6x 3.3x 4.4x 3.6x 3.6x 4.8x 4.5x 6.3x 7.5x 3.6x bright side, 1Q 2017 European public-market earnings growth is expected to be strong. This growth could help investors overcome geopolitical concerns, but will likely keep multiples fairly elevated in the future. US pricing elevates further While Europe faced a slowdown amid political and financial uncertainty, investors in the US were giddy about the possibility of corporate tax cuts and infrastructure bills. Though those initiatives now seem further from fruition, there is still plenty to be excited about. 1Q 2017 S&P 500 earnings growth is expected to be 9.2% year over year, according to FactSet. 4.4x 10.4x 4.3x 6.1x 6.7x 2.6x 4.1x 10.7x 8.8x 9.3x 9.8x 10.0x 9.5x 9.9x 9.3x 9.6x 8.6x 8.6x 8.2x 4.9x 3.6x 5.7x 5.1x 4.9x 4.4x 3.4x 5.2x 5.5x 4.2x 4.6x 5.8x 4.4x 4.7x 4.7x 4.3x 5.7x 4.8x 5.9x 3.3x 6.2x 5.0x 4.9x 4.8x 4.8x 11.5x 10.1x 9.8x Debt/EBITDA Equity/EBITDA Valua on/ebitda 4.3x Debt/EBITDA Equity/EBITDA Valua on/ebitda North American EV/EBITDA multiples still relatively strong Median North American EV/EBITDA multiples 4.9x 4.8x 3.4x 5.7x 5.8x 2.3x 4.7x 5.4x 3.9x 5.9x North America saw a quarterly decrease in median EV/EBITDA multiple, from 10.1x to 9.8x. However, if you exclude deal flow in Mexico and Canada, the trend is reversed. The median EV/ EBITDA multiple for the US jumped from 10.2x in 4Q 2016 to 10.8x in 1Q The US is still seen as a bastion of stability compared to Europe and emerging markets. While the ECB continues its QE, the Fed has proceeded with its long-anticipated, albeit modest rate hikes. This course of action has kept financing incredibly cheap for corporate and financial sponsors, while also giving them confidence that the economy has a better chance at returning to a more normal credit environment. That said, those buyers that pay such high multiples will be especially exposed in the case of an economic downturn. 5

6 US EV/EBITDA multiples 9.2x 9.1x 9.1x 8.1x 8.5x 3.5x 10.1x 4.5x 10.8x 10.9x 5.4x 4.7x Transaction multiples in the US and Europe have moved in opposite directions during 1Q 2017 European EV/EBITDA multiples 4.6x 5.2x 4.7x 5.4x 5.1x 5.7x 5.5x 6.2x Debt/EBITDA Equity/EBITDA Valua on/ebitda 6.6x 3.5x 7.6x 3.9x 7.1x 6.9x 3.0x 8.8x 8.2x 8.4x 4.8x 7.5x 3.6x US 1Q deal value more than double that of entire European continent 3.1x 3.4x 5.0x 4.5x 3.6x Debt/EBITDA Equity/EBITDA Valua on/ebitda US M&A activity Deal Value ($B) Deal Count European M&A activity 9,208 10,824 11,627 9,641 Deal Value ($B) 9,429 Deal Count 10,057 9,130 11,293 9,526 8,175 8,616 8,961 7,104 7,365 1,899 $554 $588 $718 $685 $984 $1,364 $1,386 $265 1,673 $319 $481 $406 $536 $596 $683 $728 $103 6

7 Deal sizes continue growth in 2017 M&A by sector & size M&A activity (#) by deal size 100% 90% 80% 70% 60% 50% $5B+ $1B-$5B $500M-$1B The median transaction size for each M&A type during 1Q was significantly higher than in % 30% 20% 10% 0% $250M- $500M $100M- $250M Under $100M Median M&A deal size ($M) $250 Acquisi on Add-On Buyout $200 Pla orm Buyout $ $150 $108.7 IT has seen the most growth as an M&A target $100 $50 $41.5 $75.0 $0 $26.0 $31.3 M&A activity (#) by sector 100% 90% Materials & Resources M&A activity ($) by sector 80% 70% 60% 50% 40% 30% 20% 10% 0% IT Healthcare Financial Services Energy B2C B2B 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Materials & Resources IT Healthcare Financial Services Energy B2C B2B 7

8 B2C M&A off to a slow start Spotlight: B2C Tight margins contribute to cautious deal environment The B2C industry saw a flurry of activity in Driven by megadeals such as AB InBev s 79 billion acquisition of SABMiller B2C deal flow slow to start 2017 B2C activity 3,208 Deal Value ($B) 3,897 4,046 Deal Count 4,060 4,745 and Charter Communications $80 billion deal for Time Warner Cable, B2C deal value totaled $551.7 billion in 2016, a 47.9% increase from the previous year. The first quarter of 2017, however, got off to a slow start. Just $48.35 billion 5,376 4,220 in consumer M&A was completed across 793 transactions. In the US specifically, deal flow has suffered due to concerns about a possible border adjustment tax or other trade policies that would reduce unit economics in the industry. Retail businesses in particular have struggled with wage growth, poor earnings performance and a tight real estate market. Meanwhile, industry stalwarts are still figuring out their ecommerce strategies and adapting to more experienceoriented customers. The best B2C targets are still commanding high multiples, but these opportunities will be fewer and further between as the B2C shake-out continues its course. 793 $149 $230 $193 $267 $336 $373 $552 $48 Median B2C deal size ($M) B2C M&A (#) by acquirer type $60 1,600 35% $50 $40 $30 $39.0 $50.0 $40.7 1,400 1,200 1, % 30% 25% 24.7% 20% 15% $ % $ % $ % Sponsor Backed Corporate M&A Sponsor-backed % 8

9 IT increasingly becoming target for M&A Spotlight: IT IT deal flow booms Tech companies accounted for nearly one in five (19.2%) M&A transactions in North America and Europe in the first quarter, up from 17.5% in 4Q 2016 and the highest proportion of any quarter since at least IT companies now make up a larger portion of the world economy. Both business and consumer-facing strategies have clearly evolved to include new technologies over time. Take, for example, Atlassian s $425 million acquisition of Trello, an online collaboration and business productivity tool. In another age, Trello s project management and communication functions could have been serviced by what we might think of as an old-fashioned B2B. Trello, however, is considered an IT company due to the digital, albeit enterprise-facing, nature of their tools. Additionally, as sub-sectors like social media and business intelligence software reach maturation, winners and losers will emerge atop the crest of a wave of consolidation. Due to the currently higher enterprise values and maturing nature of the industry, financial sponsors have started increasing the frequency with which they make wagers on the industry. PE Industry maturity causing buyers to take a look IT activity 2,373 $184 Deal Value ($B) 2,679 $172 2,872 2,769 $154 Deal Count $219 acquisitions made up 28.4 % of all IT M&A in 1Q 2017, the highest such percentage in our datasets. Specialty funds, lenders and other providers have created an ITfocused financial ecosystem that will only propel deal flow further in the coming years. 3,237 $315 3,595 $254 3,324 $ $69 Median IT deal size ($M) IT M&A (#) by acquirer type $40.0 $35.0 $30.0 $25.0 $31 $26 $35 1, % 28.4% 30.0% 25.0% 20.0% 15.0% $ % $15.0 $10.0 $ % 0.0% $0.0 Sponsor-backed Corporate M&A Sponsor-backed

10 Energy sector set for third year of decline Spotlight: Energy Oil & gas in recovery After falling off a cliff in mid- 2014, Brent crude oil prices hit a low of about $29/bbl in January 2016, but have since rebounded Deal flow light in the energy sector Energy activity 833 $161 Deal Value ($B) 949 $ $ $189 Deal Count 1,047 $222 nearly 80% to the current price of about $52/bbl. This recovery and relative stability crude has now stayed between $40 and $60 per barrel for over a year has given renewed confidence to the oil & 906 $ $ $72 gas companies that were able to ride out the downturn. Those firms with financial sponsors or cash on hand are snatching up competitors, hoping to gain market share before prices recover further. In addition, lower prices prompted a wave of innovation that will allow exploration & production companies to continue operating even if prices stay at about half the level they were just a few years ago. Energy M&A totaled $72.2 billion across 106 transactions in the first quarter, representing a sizable decrease in the number of deals, but simultaneous increase in value. Not captured here are the four North America-headquartered oil & gas companies that completed IPOs in the first quarter, a sign of both improving public company valuations and rising global crude prices. Median energy deal size ($M) Energy deal flow (#) by type $250 $200 $ % 33% 50.0% 45.0% 40.0% 35.0% 30.0% $ % $100 $50 $100 $ % 15.0% 10.0% 5.0% 0.0% $0 Sponsor-backed Corporate M&A Sponsor-backed

11 Strategic acquisitions see large decrease Private equity Add-on % highest since financial crisis PE activity (#) by type 50% 1,947 1,916 53% 53% 54% 54% 2,193 2,441 2,254 2,535 2,132 2,477 2,598 3,087 56% 57% 2,687 3,362 2,431 3,172 59% Add-on Non Add-on Add-on % Strategic exits dry up While the number of secondary buyouts (SBOs) has remained relatively flat in recent quarters, the number of PE-backed exits via strategic acquisition has diminished substantially. Just 185 PE portfolio companies were sold to strategic acquirers in the first quarter, a 32.7% quarter-overquarter decrease. Meanwhile, the number of SBOs has remained relatively flat at 238 across North America and Europe. If public company earnings and economic fundamentals continue to improve, strategics will be incentivized to reinvest in their own businesses rather than inorganic growth. On the contrary, other PE firms with plenty of newly raised capital to deploy should become a more common exit strategy in the year ahead. Secondary buyouts account for growing % of M&A PE-backed exits (#) by type Secondary Buyout Strategic Acquisi on 0 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

12 More than $757 billion ready to deploy North American & European PE dry powder by year $800 $700 $600 $500 $400 $300 $200 $100 $0 Cumula ve $733 $739 $ * Dry powder should drive deal flow, mega-deals in the year ahead Overhang by vintage *As of 9/30/2016 Mega-deals should return PE-backed activity in North America and Europe totaled $65.2 billion in the first quarter, or just 16.9% of total M&A value. In 2015 and 2016, PE activity accounted for 24.0% and 20.4% of completed deal value, respectively. The decrease in 1Q can be attributed to the lack of PE mega-deals (defined here as having enterprise value greater than $2.5 billion), particularly in the US, which saw just one buyout of that size in the first quarter, compared to 20 strategic acquisitions of comparable magnitude. In the next few quarters, however, we expect PE acquirers to continue their spending on gargantuan targets. Dry powder sits at a record $757 billion for North American and European funds, while financing remains relatively affordable and 12 such mega-deals have been announced, but not yet closed since the beginning of the year. PE M&A activity (#) by type PE M&A activity ($B) by type 20,000 Sponsor-backed Corporate M&A $2,000 18,000 $1,800 Sponsor-backed Corporate M&A 16,000 $1,600 14,000 $1,400 12,000 $1,200 10,000 $1,000 8,000 $800 6,000 $600 4,000 $400 2,000 $200 0 $0 12

13 1Q 2017 League Tables Select largest US acquisitions in 1Q 2017 Company Deal size (M) Buyer Date HQ Industry St. Jude Medical $25,000 Abbott Laboratories (NYSE: ABT) 1/4/2017 Saint Paul, MN Therapeutic Devices Linear Technology $14,800 Analog Devices (NASDAQ: ADI) 3/10/2017 Milpitas, CA Semiconductors FMC Technologies $13,000 Technip (PARIS: TEC) 1/16/2017 Houston, TX Energy Services Harman International Industries $8,020 Samsung Electronics (KRX: ) 3/11/2017 Stamford, CT Electronics Ariad Pharmaceuticals $5,200 Takeda Pharmaceuticals (TKS: 4502) 2/16/2017 Cambridge, MA Pharma & Biotech Select largest European acquisitions in 1Q 2017 Company Deal size (M) Buyer Date HQ Industry Formula One $8,000 Boehringer Ingelheim (consumer healthcare business) Liberty Media Group (NASDAQ: LMCA) $8,000 Sanofi (PAR: SAN) 1/1/2017 1/23/2017 London, UK Commercial Services Ingelheim, Germany Pharma & Biotechy Quironsalud 5,810 Fresenius (ETR: FRE) 2/1/2017 Madrid, Spain Healthcare Services Banca Popolare di Milano Società Cooperativa $5,309 Banca Popolare Società (MIL: BP) 1/1/2017 Milan, Italy Commercial Banks Avio 2,570 Space2 (IT: SPA2), Leonard (IT: LDO) 3/31/2017 Rome, Italy Aerospace & Defense Select largest US buyouts in 1Q 2017 Company Deal size (M) Investor(s) Date HQ Industry Team Health Holdings $6,100 Blackstone, Public Sector Pension Investment Board 2/6/2017 Knoxville, TN Healthcare Services Optiv Security $2,000 KKR 2/1/2017 Denver, CO Software Anadarko Petroleum (South Texas Oiland-Gas Assets) Apollo Education Group $1,140 $1,150 Blackstone, GSO Capital Partners 3/1/2017 San Antonio, TX Energy Equipment Apollo Global Management The Vistria Group LANDESK Software $1,100 Clearlake Capital, Heat Software 1/23/2017 2/1/2017 Phoenix, AZ Education South Jordan, UT Software Select largest European buyouts in 1Q 2017 Company Deal size (M) Investor(s) Date HQ Industry Bradford and Bingley (loan portfolio) $7,366 Blackstone 3/31/2017 Bingley, UK Financial Services Allegro $3,253 Cinven, Permira. Mid Europa Partners 1/18/2017 Poznan, Poland Software Atotech Deutschland $3,200 The Carlyle Group 1/31/2017 Berlin, Germany NXP Semiconductors (Standard Products business) $2,750 JianGuang Asset Management Company, Wise Road Capital 2/7/2017 P3 Logistic Parks $2,548 GIC 1/4/ Eindhoven, Netherlands Prague, Czech Republic Materials and Resources Semiconductors Consumer Products and Services

14 K E EPI N G I T S I M PL E OUR M &A R E S E A RCH M E THODOLOGY We define M&A as the substantive transfer of control or ownership. Other information providers include non-control deals, announced or rumored transactions, etc. We cut through the noise by analyzing only completed control transactions. Here are our qualifiers for this report: Eligible transaction types include control acquisitions, leveraged buyouts (LBOs), corporate divestitures, reverse mergers, mergers of equals, spin-offs, asset divestitures and asset acquisitions M&A is defined as the substantive transfer of control or ownership. We don t include debt restructuring or any other liquidity, self-tenders or internal reorganizations. The target company (the entity being acquired) must be headquartered in either North America or Europe. We count completed deals, not announced, rumored or cancelled. Transactions must involve small-to-medium enterprises or corporations.

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The PitchBook Platform. Credits & Contact. 3 Overview. Introduction 4-6. Spotlight: Target Company Characteristics

The PitchBook Platform. Credits & Contact. 3 Overview. Introduction 4-6. Spotlight: Target Company Characteristics 2017 3Q M&A Report Credits & Contact PitchBook Data, Inc. JOHN GABBERT Founder, CEO ADLEY BOWDEN Vice President, Contents Market Development & Analysis Content DYL AN E. COX Analyst II BRYAN HANSON Data