PwC Deals $64.8B 10% 65% Global Industrial Manufacturing M&A Deals Insights Q3 2016

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1 Optimize deals PwC Deals M&A Q3 216 Executivesummary The following is an analysis of Global Industrial Manufacturing deals with disclosed value greater than $5 million. M&A deal value for the first nine months of 216 decreased 1% compared to the first nine months of 215. This was driven by a 22% decrease in volume period over period. When comparing Q3 216 vs. Q2 216 there was double digit growth in both deal value and volume. The current quarter was highlighted by 58 deals announced with a total disclosed value of $2.3 billion compared to 49 deals announced with total disclosed value of $12.3 billion in Q2, resulting in an 18% and 65% increase, respectively. The largest deal announced in Q3 216 was the deal between Emerson and Pentair PLC-Valves & Controls Business ($3.2 billion). In Q3 216, financial investor participation rates decreased to levels not seen since late 213, with a deal value participation rate of 17% and deal volume participation rate of 21%. The improvement in deal activity in Q3 216 may be a sign that deal makers economic and geopolitical concerns, both in the US and globally, have begun to subside. We are cautiously optimistic that Q4 216 and fiscal 217 will continue to be a good environment for deal makers. Value by the numbers $64.8B 1% 65% Volume by the numbers 155 Source: Thomson Reuters Decrease in deal value versus YTD Sept. 15 Increase in deal value versus Q % 24% 22% 18% Decrease in deal volume versus YTD Sept. 15 Increase in deal volume versus Q2 216 Global industrial manufacturing deal activity significantly outpaced that of most other sectors in Q This may suggest deal makers economic and geopolitical concerns in certain sectors have begun to subside. Paul Elie, US Industrial Manufacturing Deals Leader Key trends/highlights Deal value for the first nine months of 216 vs. the same period of 215 was $64.8 billion and $72.4 billion, respectively, a 1% decline. Deal volume for the first nine months of 216 saw 155 deals compared to 199 in the same period of 215, a 22% decline. Deal value increased in Q3 216 to $2.3 billion, a 65% increase from Q There were five large deals ($1 to $5 billion) in Q3 216 with total aggregate deal value of $9.9 billion, representing 45% of total deal value for the period. Q3 216 deal activity was highlighted by the Emerson Electrics acquisition of Pentair PLC- Valves & Controls Business ($3.2 billion) and Gree Electric Appliances acquisition of Zhuhai Yinlong Energy ($2.4 billion). For Q3 216 Industrial Machinery and Fabricated Metal Products sub-sectors continue to account for the bulk of total deal value with $6.8 billion and $4.4 billion of deal value, respectively. Deal activity in Q3 216 was dominated by strategic investors, as they drove 83% and 79% of transactions in both deal value and volume, respectively. Q3 216 update 1

2 Highlights of Q3 216 deal activity Global IM M&A Deal Volume and Value Strong growth in M&A activity Q3 216 saw an increase in deal activity as compared to Q Deal value in the quarter was $2.3 billion, a 65% increase from Q There were 58 deals with disclosed value greater than $5 million announced in Q3 216 an increase of 18% from Q Disclosed Deal Value ($bn) $11 $15 $53 $29 $28 $23 $29 $21 $21 $32 $12 $2 Disclosed Deal Value Deal Volume (R-Axis) Deal Volume Megadeals There were no megadeals in Q For the first nine months of 216 there was one megadeal for $22.7 billion between Johnson Controls Inc. (JCI) and Tyco International (TYCO). Compared to the same nine months of 215, megadeal value has increased 2% (two megadeals with aggregate disclosed value of $18.9 billion). Largest transaction In August, Emerson Electric (US factory automation equipment producer) entered into an agreement to acquire the valves and controls unit of Pentair PLC-Valves (Swiss pump manufacturer) for $3.15 billion. The transaction is a part of Emerson s strategy to expand its automation offering. Global IM M&A Deals by Disclosed Value Deal Volume of Disclosed Deal Value $25 $423 $935 $49 $435 $389 $36 $298 $285 $671 $251 <$5 mn $5 mn to $25 mn $25 mn to $1, mn >$1, mn Average Deal Size (R-Axis) $ Average Disclosed Deal Value ($mn) Sub-sector category analysis Industrial Machinery, the largest category by deal volume and value, saw a slight decline in deal value from Q2 216 ($6.8 billion vs. $7.5 billion), while all other major sub-sector categories saw deal value at levels not seen since Q Fabricated Metal Products grew three times to $4.4 billion from Q2 216 ($1. billion), which was primarily driven by the large deal between Emerson Electric and Pentair. Electronic & Electrical Equipment deal value for Q3 216 was $5.9 billion, up from $2.1 billion in Q Industrial Machinery Fabricated Metal Products Rubber & Plastic Products Deal Value ($bn) Deal Volume Electronic & Electrical Equipment Miscellaneous IM & Other Q3 216 update 2

3 Key trends and insights Financial vs. strategic investors Strategic investors continue to account for the majority of deals in Industrial Manufacturing. In Q3 216 the buyer group accounted for 83% of the total deal value and 79% of deal volume. Strategic investor deal activity in Q3 216 surged to $16.8 billion and 46 deals while financial investors deal activity dropped both in terms of value and volume compared to Q strategic investors continue to dominate the activity in the Industrial Manufacturing M&A market Deal Value ($bn) Strategic Investors Financial Investors Financial Investor Share of M&A Activity %. 4% % 2. % % 2% 15% 21% 17% 6 4 Deal Volume 1% 5% % Financial Investor Share of Total Value Financial Investor Share of Total Volume Regional analysis Local deals (transactions by targets and acquirers within the same borders) continue to account for the majority of M&A transactions, contributing to 65% of total deal value and 79% of total deal volume this quarter. Still, there appears to be growing interest in cross-border deals, as seen by the Emerson-Pentair deal which accounted for 15% of total deal value this quarter. Meanwhile, the majority of cross-border and local deals continue to be taking place in the Asia & Oceania region. Share of Deal Volume by Acquirer Region Share of Deal Value by Acquirer Region 1% 1% 9% 9% 8% 8% 7% 7% 6% 6% 4% % 2% 1% % 43% 56% 46% 52% 53% 57% 72% 67% 76% 63% 55% 66% 4% % 2% 1% % 24% 38% 6% 27% 35% 53% 34% 63% 74% 19% 53% 57% Asia & Oceania North America South America UK & Eurozone Europe ex-uk & Eurozone Africa/Undisclosed Asia & Oceania South America Europe ex-uk & Eurozone North America UK & Eurozone Africa/Undisclosed. Q3 216 update 3

4 Key trends and insights Regional analysis (continued) Share of Disclosed Deal Volume by Target Region Share of Disclosed Deal Value by Target Region 1% 9% 8% 7% 6% 4% % 2% 1% % 36% 42% 44% 52% 54% 72% 63% 72% 6% 51% 62% 1% 9% 8% 7% 6% 4% % 2% 1% % 24% 38% 6% 22% 34% 34% 35% 58% 65% 16% 52% 52% Asia & Oceania South America North America UK & Eurozone Asia & Oceania North America South America UK & Eurozone Europe ex-uk & Eurozone Africa/Undisclosed Industrial Manufacturing deals by region (YTD 216) North America Local: 19 deals, $5.4 billion Inbound: 9 deals, $23.8 billion Outbound: 1 deals, $6.6 billion UK & Eurozone Local: 13 deals, $3.4 billion Inbound: 1 deals, $3.8 billion Outbound: 8 deals, $23.8 billion Europe ex-uk & Eurozone Local: 2 deals, $.3 billion Inbound: 7 deals, $5.2 billion Outbound: 1 deal, $.4 billion Asia & Oceania Local: 86 deals, $2.6 billion Inbound: 4 deals, $1.5 billion Outbound: 9 deals, $3.5 billion South America Local: 2 deals, $.2 billion Inbound: deals Outbound: deals Africa/Undisclosed Local: 3 deals, $.5 billion Inbound: deals Outbound: 2 deals, $.2 billion Our outlook for the remainder of 216 Industrial Manufacturing has seen declines in deal value and volume for the first nine months of 216. However, that trend changed in 3Q 216. According to PwC s 216 CEO Survey, 28% of CEOs in the US and globally have a desire to complete a deal. Although the economic impact of geopolitical uncertainty in the US and globally will likely continue to be on the minds of many deals makers for the remainder of 216, the improved deal activity in the current quarter may be a sign deal makers, in certain sectors, are more optimistic about the future. These are the key trends that we predict will be present in the Industrial Manufacturing M&A environment in the remainder of 216 and into 217: Deal maker cautiousness will subside as outcome to geopolitical events and their potential impact on deal making becomes clearer. Deal makers will continue to pursue less risky strategic alliances to expand market share and optimize value as an alternative to pure M&A plays. Comparatively stronger US economy may lead to increased foreign investment and inbound deals to the North American region. Q3 216 update 4

5 Key trends and insights Top 1 Industrial Manufacturing deals 216 (YTD) Announced Target name Target nation Acquirer name Acquirer nation Status Deal value* Category 1/25/16 Johnson Controls Inc. United States Tyco International PLC Ireland-Rep Completed 22,66 Industrial Machinery 8/18/16 Pentair PLC-Valves & Controls Business Switzerland Emerson Electric Co. United States Pending 3,15 Fabricated Metal Products 6/16/16 Hermes Microvision Inc. Taiwan Ai Pu Ssu Lung Co. Ltd. Taiwan Pending 3,93 Industrial Machinery 8/19/16 Zhuhai Yinlong Energy Co. Ltd. China Gree Electric Appliances Inc. of Zhuhai China Pending 2,421 Electronic & Electrical Equipment 9/19/16 China High Speed Transmission Equipment Group Co. Ltd. Hong Kong Five Seasons XVI Ltd. Hong Kong Intended 2,98 Industrial Machinery 8/2/16 Leroy-Somer Holding SA France Nidec Corp. Japan Pending 1,2 Electronic & Electrical Equipment 1/25/16 Icopal A/S Denmark GAF Corp. United States Completed 1,8 Rubber & Plastic Products 9/12/16 Samsung Electronics Co. Ltd.-Printer Business South Korea HP Inc. United States Pending 1,5 Industrial Machinery 5/9/16 Saft Groupe SA France Total SA France Completed 1,14 Electronic & Electrical Equipment 1/11/16 Kraussmaffei Group GmbH Germany Investor Group China Completed 1,12 Industrial Machinery Top 1 Industrial Manufacturing deals 215 Announced Target name Target nation Acquirer name Acquirer nation Status Deal value* Category 5/13/15 Pall Corp. United States Danaher Corp. United States Completed 13,7 Industrial Machinery 9/1/15 China Shipbuilding Industry Corp.-Assets China Fengfan Stock Co. Ltd. China Completed 5,189 Industrial Machinery 3/31/15 Koninklijke Philips Electronics NV-LED Components & Automotive Lighting Businesses Netherlands Investor Group China Withdrawn 2,9 Electronic & Electrical Equipment 1/15/15 Shandong Iron & Steel Co. Ltd.-Jinan Branch Assets China Shandong Iron & Steel Group Co. Ltd. China Pending 2,2 Fabricated Metal Products 1/29/15 The Manitowoc Co. Inc.-Foodservice Business United States Shareholders United States Completed 1,89 Industrial Machinery 12/3/15 China Railway Group Ltd.-Assets China China Railway Erju Co. Ltd. China Pending 1,843 Fabricated Metal Products 12/21/15 Hussmann Parent Inc. United States Panasonic Corp. Japan Completed 1,545 Industrial Machinery 3/11/15 Domino Printing Sciences PLC United Kingdom Brother Industries Ltd. Japan Completed 1,539 Industrial Machinery 7/13/15 Waddington Group Inc. United States Jarden Corp. United States Completed 1,35 Rubber & Plastic Products 6/23/15 Zoje Resources Investment Co. Ltd. China Investor Group China Pending 1,32 Industrial Machinery Top 1 Industrial Manufacturing deals 214 Announced Target name Target nation Acquirer name Acquirer nation Status Deal value* Category 4//14 Alstom SA-Energy Businesses France General Electric Co.-Energy Assets United States Completed 1,72 Industrial Machinery 9/21/14 Dresser-Rand Group Inc. United States Siemens AG Germany Completed 6,687 Industrial Machinery 4/1/14 Metso Oyj Finland Weir Group PLC United Kingdom Withdrawn 6,218 Industrial Machinery 7/16/14 International Game Technology United States GTECH SpA Italy Completed 6,156 Miscellaneous IM & Other 4/27/14 Alstom SA-Gas Business France Siemens AG Germany Withdrawn 5,85 Industrial Machinery 4/4/14 Gates Corp. United States Blackstone Group LP United States Completed 5,4 Rubber & Plastic Products 4/27/14 Alstom SA-Steam & Nuclear Business France Mitsubishi Heavy Industries Ltd. Japan Withdrawn 5,6 Industrial Machinery 1/24/14 Duracell International Inc. United States Berkshire Hathaway Inc. United States Completed 4,7 Electronic & Electrical Equipment 11/24/14 SIG Combibloc Group AG Switzerland Investor Group Canada Completed 4,666 Industrial Machinery 12/17/14 Halla Visteon Climate Control Corp. South Korea Investor Group South Korea Completed 3,54 Industrial Machinery * In $US millions Q3 216 update 5

6 About PwC Authors Optimize Paul Elie deals US Industrial Manufacturing Deals Leader Detroit, Michigan (313) Bobby Bono US Industrial Manufacturing Leader Charlotte, North Carolina (74) Barry Misthal Leader Lausanne, Switzerland Smart deal makers are perceptive enough to see value others have missed, flexible enough to adjust for the unexpected, aggressive enough to win favorable terms in a competitive environment, and circumspect enough to envision the challenges they will face from the moment the contract is signed. But in a business environment where information can quickly overwhelm, the smartest deal makers look to experienced advisors to help them fashion a deal that works. PwC s Deals group can advise industrial manufacturing companies and industrial manufacturing-focused private equity firms on key M&A decisions, from identifying acquisition or divestiture candidates and performing detailed buy-side diligence, to developing strategies for capturing post-deal profits and exiting a deal through a sale, carve-out, or IPO. With more than 9,8 deals professionals in 75 countries, we can deploy seasoned teams that combine industrial manufacturing industry skills with local market knowledge virtually anywhere and everywhere your company operates or executes transactions. Although every deal is unique, most will benefit from the broad experience we bring to delivering strategic M&A advice, due diligence, transaction structuring, M&A tax, merger integration, valuation, and post-deal services. In short, we offer integrated solutions, tailored to your particular deal situation and designed to help you extract peak value within your risk profile. Whether your focus is deploying capital through an acquisition or joint venture, raising capital through an IPO or private placement, or harvesting an investment through the divesture process, we can help. For more information about M&A and related services in the global industrial manufacturing industry, please visit or About thedata The information presented in this report is an analysis of deals in the global industrial manufacturing. Deal information was sourced from Thomson Reuters and includes sector deals for which targets have an SIC code that falls into one of the 111 industrial manufacturing industry groups. Certain adjustments have been made to the information to exclude transactions which are not specific to industrial manufacturing or incorporate relevant transactions that were omitted from the SIC industry codes. This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between January 1, 213 and September, 216, with a deal status of completed, intended, partially completed, pending, pending regulatory, pending completion, withdrawn, and unconditional (i.e., initial conditions set forth by the buyer have been met but deal has not been withdrawn and excludes all rumors and seeking buyers). Additionally, transactions that are spin-offs through distribution to existing shareholders are included. Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals. 216 PwC. All rights reserved. PwC and PwC US refer to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors vc