DEALS WEST Notable Capital West Deals Q IN THIS ISSUE WESTERN CANADA S CORPORATE TRANSACTION QUARTERLY.

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1 Q4 217 DEALS WEST Notable Capital West Deals IN THIS ISSUE A Successful 217 NAFTA and the Impact on M&A 217 Mid-Market M&A Review Royalty LP Equity partnership with Western Stevedoring MARINE SERVICES Advised the company on a Private Placement RESTAURANT Advised the company on a Private Placement CANNABIS Sale to an investment consortium led by Prospero MARINA Sale to Speyside Equity INDUSTRIAL Senior Debt Financing CONSUMER PRODUCTS Sale of master franchise to SEB EDUCATION Subscribe to Deals West at capwest.com 1

2 Q4 217 NAFTA and the Impact on M&A Since the new U.S. administration took office and even prior to taking office, it was made clear that renegotiating NAFTA was a key objective. Over the past 12 months, NAFTA renegotiation meetings have taken place and more meetings are scheduled in the coming months. By mid-218, the future of what a new NAFTA will look like will be clearer. In early 217, PitchBook reported that private equity deal activity in terms of size and value has decreased in response to NAFTA renegotiations. Private financial market investors have adopted a wait-and-see approach until positive signs of the renegotiated agreement become apparent. Should this not be evident in months to come, protracted NAFTA renegotiations will undoubtedly impact the North American economy and potentially hinder future growth. STATES TRADE MAP Canada is number one trade partner SOURCE: Globe and Mail, Stats Canada Canada is number two trade partner U.S. renegotiations are targeting specific key industries of the Canadian economy, most notably agribusiness, forestry and auto manufacturing. Auto manufacturing has shown to be the most contentious issue as the U.S. wants strict Buy American rules. Significant alterations or complete withdrawal from NAFTA would be impractical for the U.S. considering the significance of its existing trade relationship with Canada. Canada will need to continue focusing its efforts on key members, including the 35 states for whom Canada is the top export market, reminding the U.S. what it stands to lose. While the NAFTA renegotiation cloud is impacting M&A activity in select sectors, M&A activity overall remains robust. Although uncertainty around NAFTA s future may abate appetite for Canadian M&A, low interest rates, a rebounding resource sector and positive domestic market sentiment indicate a generally healthy environment for M&A going forward. With ongoing renegotiations and the next round of talks set for the coming weeks, we should expect to see the U.S. administration begin easing demands especially given electoral time pressures and the consistent reminder that it is the U.S. that has a trade surplus with Canada not the other way around. M&A activity will surely see an uptick as soon as signs that a ratified agreement are close, particularly those involved with the above noted sectors. Subscribe to Deals West at capwest.com 2

3 Q4 217 Q4 217 AND Q4 216 MID-MARKET TRANSACTION COMPARISON IN CANADA Total Canadian mid-market transaction values have reached a three year high of $8.7 billion on a quarterly basis in Q4 217, up 2% from Q Overall, transaction values have improved year over year across major industry sectors, with the exception of industrials & materials, which declined by 13%. The Canadian economy is expected to see an upturn in 218, as corporate liquidity becomes more robust and U.S. tax reform boosts the attractiveness of U.S. companies. With Canadian stocks at record highs, deal activity is set to be further bolstered by active equity markets. By industry, the strongest improvement in M&A activity was seen in real estate, food & beverage, and financial sectors. Q4 216 vs. Q4 217 Canadian Middle Market Transactions Values ($ millions) $3, $2,5 $2, $1,5 $1, $5 $1,238 $2,41 Real Estate $1,783 $1,836 Energy, Mining & Utilities $1,19 $96 Industrials & Materials Q4 216 Q4 217 $75 $813 Food & Beverage $45 $62 Financials $2,397 $2,42 Others CANADIAN DEALS BY INDUSTRY The top ten M&A deals in Canada in Q4 217 involved several industry sectors, with industrial & materials and energy, mining, & utilities being the most common. The most notable deal with presence in Vancouver in the table below was the acquisition of Alterra Power by Innergex Renewable Energy this transaction added eight operating projects and a strong pipeline of prospective projects to Innergex s asset portfolio. Top 1 Canadian Deals in Q4 217 Date Industry Target Buyer Value ($mm) Dec 18 Industrials & Materials Husky IMS International Platinum Equity $ 4,952 Dec 11 Industrials & Materials Canadian Solar Management Buyout $ 4,457 Dec 5 Consumer Products & Services Atrium Innovations Nestlé Health Science $ 2,915 Oct 26 Industrials & Materials Aecon Group CCCC International Holding $ 2,71 Oct 19 Energy, Mining & Utilities Cenovus Energy Schlumberger $ 1,3 Dec 14 Industrials & Materials MacDon Industries Linamar Corporation $ 1,2 Dec 18 Real Estate Non-Core Market Property Portfolio Slate Aquisitions $ 1,14 Oct 3 Energy, Mining & Utilities Alterra Power Innergex Renewable Energy $ 974 Nov 13 Energy, Mining & Utilities Light Oil Assets in Saskatchewan Whitecap Resources $ 94 Oct 3 Financials ECN Capital Candian Western Bank $ 9 Subscribe to Deals West at capwest.com 3

4 Q Mid-Market M&A Review MID-MARKET TRANSACTIONS IN CANADA For a second consecutive quarter, total transaction values surpassed $8.5 billion in Q4 217, a level not experienced since Q The continued M&A momentum indicates a positive outlook for the Canadian economy MID-MARKET ACQUISITIONS IN CANADA ($25 million - $5 million) Number of Transactions Real estate and energy, mining, & utilities were the most active sectors in Canada, collectively accounting for approximately 45% of total transaction values in the country. While real estate has historically been, and continues to be, one of the most active sectors, the energy sector has seen increased consolidation efforts as companies seek to strengthen their balance sheets and diversify assets. In Q4 217 Canadian mid-market M&A activity saw a slight 2% increase by transaction values and a significant increase of 48% by volume compared to Q ($ billions) ($ billions) The value of mid-market deals in Canada also increased in 217 from the prior year, up 1% to $3.3 billion, but still lagging behind the value of mid-market deals over the period. Adjusting these figures to remove energy sector deals, total deal value was also up approximately 1% versus the prior year and thus in line with recent historical averages. Subscribe to Deals West at capwest.com 4

5 Q4 217 Mergers & Acquisitions Review (continued) MID-MARKET ACQUISITIONS IN WESTERN CANADA ($25 million - $5 million) MID-MARKET TRANSACTIONS IN WESTERN CANADA Mid-market transaction activity in Western Number of Transactions Canada remained flat in Q While transaction volume remained constant, the value of mid-market transactions declined by 4% compared to last year ($1.5 billion in Q4 217 compared to $2.5 billion in Q4 216), driven primarily by decreased deal activity in the technology, media & telecom ($1. billion) and energy, mining & utilities sectors ($.4 billion). Compared to Q3 217, the number of transactions increased by 44% in Q4 217, but total value decreased ($1.5 billion in Q4 217 compared to $2.2 billion in Q3 217). ($ billions) ($ billions) Subscribe to Deals West at capwest.com 5

6 Mergers & Acquisitions Review (continued) Q4 217 MID-MARKET ACQUISITIONS IN NORTH AMERICA ($25 million - $5 million) MID-MARKET TRANSACTIONS IN NORTH AMERICA Number of Transactions North American mid-market M&A activity in Q4 217 decreased 16% by volume (83 deals in Q4 216 to 675 deals in Q4 217), while total transaction values decreased by 9% from Q On a quarterly basis, mid-market M&A transaction values in North America increased slightly by 5% in Q4 217 compared to Q On a rolling twelve month basis, mid-market M&A activity in North America continued to dip in Q4 217, with deal values totalling $315 billion, down 17% from a seven year high achieved in Q Overall, transaction activity continues to be driven by a strong North American economy and significant pools of capital from purchasers. Deal activity continues to be driven primarily by strong corporate earnings and availability, as well as low cost of debt capital. Mid-market multiples have increased driven by higher valuations of strategic buyers, optimism on U.S. tax reform, and overall confidence in the U.S. and Canadian economies. Over the past three years, the average EBITDA valuation multiple for an S&P 5 company has increased from 1.2x in January 215 to 12.7x at the end of 217 an improvement of 25%, and generally reflects the robust valuations seen in the mid-market. ($ billions) x 12.5x 12.x 11.5x 11.x 1.5x 1.x 9.5x 9.x S&P 5 - Average EBITDA Multiples ($ billions) Subscribe to Deals West at capwest.com W. Georgia Street Vancouver, BC V6C 3E8 T E cwinfo@capwest.com Copyright 218 Capital West Partners. Deals West is published online quarterly by Capital West Partners of Vancouver. The publication provides a Western Canadian perspective on corporate transactions.