3

CONTRIBUTORS

Todd McMahon

Managing Director

617-619-3334

tmcmahon@capstoneheadwaters.com

John Ferrara

Founder & CEO

617-619-3325

jferrara@capstoneheadwaters.com

Peter Asiaf

Managing Director

617-619-3368

pasiaf@capstoneheadwaters.com

March 2018www.capstoneheadwaters.com

Source: Capital IQ and Capstone Headwaters Research

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Capstone Headwaters

MERGER & ACQUISITION OVERVIEW

The convergence of the evolving Manufacturing industry with the growing

network dependence and data centric nature across all industries, points to

a vibrant future for the Interconnect Components industry from both a

product demand and merger and acquisition (M&A) standpoint. Not

surprisingly, 2018 has already experienced a boom of significant industry

M&A activity with numerous public companies, including Amphenol,

Celestica, Digi International, Applied Industrial Technologies and AVX

having all made acquisitions in the space. This impressive start to 2018

comes despite tempered yet consistent activity in 2016 and 2017, during

which 56 and 63 transactions were announced or closed, respectively.

Public company valuations have reached a mean of 12.8x EBITDA, while middle market deals recorded an average disclosed enterprise value (EV) of

$101.4 million during 2017, both reflective of the growing demand for connectivity solutions. Impressive transaction valuations are in part due to the push by large industry players to implement aggressive buy rather than build growth strategies to capitalize on the downstream demand. Evidenced by the overwhelming strategic participation in the M&A marketplace (76.2% strategic vs. 23.8% financial), larger participants have demonstrated a willingness to pay a premium for quality companies.

TABLE OF CONTENTS

M&A Overview

Key Trends & Drivers

Notable Transactions

Select Transactions

Public Company Data

Firm Track Record

INTERCONNECT COMPONENTS

Q1 2018

M&A Activity: Interconnect Components

84 79

65

102

5663

0

20

40

60

80

100

120

2012 2013 2014 2015 2016 2017

KEY TRENDS & DRIVERS

PURCHASING MANAGERS’ INDEX FOR

JANUARY 201859.1%

The global Passive Component market is expected to

grow at a compound annual growth rate of 6.0% for the

period spanning 2017-2022, according to Technavio.2

Passive components include capacitors, resistors, filters,

inductors and oscillators which are used to regulate, store

and dissipate voltage and current flows in electronic

devices. Impressive projected revenue growth is largely

attributable to corresponding growth in the telecom,

consumer electronics, and industrial machinery industries.

For Interconnect Component companies, strengthening

portfolio offerings of passive components is essential due

to the proliferation and evolution of electronic and

industrial products. Demand for solutions that can

withstand voltage and capacitance related issues that

accompany thinner and more powerful devices should

serve as a catalyst for the passive component industry

and M&A landscape. Major industry players have

invested in inorganic growth strategies to bolster passive

offerings and gain competitive advantages. Maxwell

Technologies acquired Nesscap Energy for and implied EV

of $23.0 million (February), while Corning acquired the

Communication Markets Division of 3M for $900.0 million

in December (highlighted on the following page).

Assuming that manufacturing expansion maintains the

17-month PMI trend and market growth transpires as

predicted, Capstone Headwaters expects there to be

corresponding demand in the M&A market. Interconnect

Component industry players will accelerate consolidation

in the fragmented industry and capitalize on a favorable

investment environment to provide a comprehensive

suite of all-in-one connectivity solutions.

2

Interconnect Components | Q1 2018

PASSIVE COMPONENT COMPOUND

ANNUAL GROWTH 2017-20226.0%

For the 17th consecutive month, the Purchasing Managers’

Index (PMI) registered above 50.0% which indicates

economic expansion in the Manufacturing industry (below

50.0% indicates contraction). The Institute for Supply

Management (ISM) reported a PMI of 59.1% in its January

2018 Report on Business.1 Healthy economic conditions

have supported manufacturing growth since the PMI last

dipped below 50.0% in October 2016.

Purchasing Managers’ Index

46

48

50

52

54

56

58

60

PM

I (%

)

Source: Institute for Supply Management

Demand for a wide array of connectivity components and

solutions wavers with manufacturing production levels

across various key end-markets that are tracked by the

PMI. Most notably, manufacturers of computer and

electronic products, transportation equipment, appliance

components and machinery parts all rely on connectivity

solutions to ensure proper and efficient manufacturing

processes. As reported in the January report, the ISM

registered expansion for new orders, inventory levels,

production, supplier deliveries and the employment

environment for each of the aforementioned end markets.

Numerous industrial component related mega-deals were

announced or closed during 2017, including UTC’s

acquisition of Rockwell Collins for an implied EV of $30.4

billion (August) and ABB’s acquisition of GE Industrial

Solutions for an implied EV of $2.6 billion (September).

Positive momentum established by these deals coupled

with the prolonged expansionary atmosphere should

foster growth and M&A activity for companies offering

industrial and manufacturing connectivity solutions.

Manufacturing

Industry Expansion

56

Contraction

NOTABLE TRANSACTIONS

Several notable transactions were completed or announced in the industry during 2017. Select transactions are outlined

below, followed by a more comprehensive list on the following pages.

Molex, LLC acquires Assets of Triton Manufacturing Company, Inc

(December 2017, undisclosed)

Molex, a leading global manufacturer of interconnect products and systems, has announced the

acquisition of certain assets of Triton Manufacturing Company (Triton), a developer and provider of

power transfer solutions. Terms of the deal were not disclosed. Among its many capabilities, Triton

specializes in the fabrication of flexible power cable assemblies and custom bus bars that are used

in current and heat transfer applications. These include power transfer devices for computers,

industrial electrical power distribution, transportation, aerospace and telecommunications.

By leveraging Triton’s heat dissipation and thermal management solutions, Molex intends to

improve connectivity efficiencies and lower the risk of electronic device failure for a wide range of

applications. Commenting on the capabilities of the combined entity, President of Triton, Kyle

Edward offered, “The Triton team is excited about the new opportunities this transaction brings.

Combining our proven bus bars and Molex high power connectors and harnesses will give the

combined team the capability to design and manufacture a robust and fully-integrated high-power

solution for valued customers.”3

The move further solidifies Molex as an industry leader by strengthening and expanding product

and service offerings. Molex Senior Vice President Tim Ruff commented, “The strategic acquisition

of the Triton business complements our extensive portfolio of power products. Together we’ll be

able to provide our customers with even higher-value electronic solutions.”

Corning Optical Communications acquires 3M Company, Communication Markets Division

(December 2017, $900.0 million)

Corning’s (NYSE:GLW) Optical Communications segment, a leading provider of optical passive

components and solutions, has entered into an agreement with 3M to purchase its Communication

Markets Division for an implied enterprise value of approximately $900.0 million payable in cash

upon completion of the deal. The Austin-based 3M business unit provides optical fiber and copper

passive connectivity solutions for the telecommunications industry and produces annual global sales

of approximately $400.0 million.

Corning has implemented an aggressive M&A strategy as part of its Strategy and Capital Allocation

Framework, wherein the company calls to invest between $1.0 to $3.0 billion in acquisitions. This

particular acquisition will augment Corning Optical Communications’ access to global markets and

will expand its portfolio of optical connectors, assemblies, hardware and various accessories.

Clark Kinlin, Executive Vice Preisdent, Corning commented, “This transaction expands both our

global market reach and our high-bandwidth portfolio. It also provides new co-innovation

opportunities and enhances our ability to serve customers globally. As the industry’s only true end-

to-end manufacturer and supplier of optical solutions, we look forward to bringing these two strong

organizations together.”4

Acquires

Agrees to

Acquire

3

Communication

Markets Division of

Interconnect Components | Q1 2018

Enterprise EV / LTM

Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA

01/24/18 CTI AmphenolDesigns and manufactures interconnect assemblies for

IT Datacom and industrial applications. - - -

01/24/18Atrenne Integrated

SolutionsCelestica

Delivers integrated components, electronic assemblies

and value-add solutions to industrial markets$139.0 - -

01/03/18 Ethertronics AVX Manufactures passive and active antenna systems. $150.0 1.7x -

12/20/17Triton

ManufacturingMolex

Manufactures flexible power cable assemblies and

fabricates custom bus bars.- - -

12/11/173M,Communication

Markets Division

Corning Optical

Communications

Produces optical fiber and copper passive connectivity

solutions.$900.0 2.2x -

11/20/17 CaviumMarvell

Technology

Develops semiconductor processors for intelligent and

secure networks.$6,690.6 7.0x -

09/25/17GE Industrial

SolutionsABB

Manufactures technological products that are used to

distribute, protect and control electrical equipment.$2,600.0 1.0x -

09/04/17Rockwell

CollinsUTC Aerospace

Produces and supports communications and aviation

systems.$30,365.2 5.0x 22.6x

08/28/17 IXYS Littelfuse Designs semiconductor products. $701.7 2.2x 15.7x

08/02/17 Numerex Sierra Wireless Offers end-to-end IoT solutions, including smart

devices, network connectivity and service applications.$121.5 1.9x -

08/01/17Pacific Insight

Electronics

Methode

Electronics

Offers interior LED system products and electronic

control modules.$104.4 1.1x 9.2x

07/31/17Energy Satellite

ServicesRigNet

Provides data transmission and VOIP telephone

connectivity through satellite networks. $22.2 - -

07/26/17 Telect Amphenol Designs products for network connectivity, fiber,

power distribution and rack management. - - -

07/12/17 Cable Devices CommScopeManufactures fiber optic and copper assemblies for

voice, data and video.$120.0 - -

06/26/17 GC Pivotal GTT AmericasOffers a platform for access network solutions and

offers connectivity solutions.$176.3 - -

06/26/17Hirschmann

Car TE Connectivity

Manufactures transmitter and receiver systems for

mobile communication and data transmission.$166.4 - -

06/20/17 PerseusGTT

Communications

Provides connectivity, managed hosting, market data

and time-as-a-service.$40.5 - -

06/09/17Intelligente

SensorsystemeAmphenol

Develops pressure, temperature and air mass sensors

for auto, plant construction or mobile hydraulics. - - -

05/24/17 Texstar EnterprisesDycom

Industries

Offers aerial, underground splicing and inside

fiber/coax/phone installation services. $26.4 - -

05/04/17 Thinklogical Belden Designs signal extension and switching systems for

video-rich Big Data. $160.0 3.1x 9.3x

05/03/17 Microphase Digital Power Designs RF and microwave filters, solid state amplifiers,

detectors, limiters and integrated assemblies.$6.6 1.2x -

04/05/17Empire Wire

& SupplyEIS

Manufacture custom cable assemblies and distributes

network, electrical, automation and safety products.CF CF CF

02/28/17 Nesscap EnergyMaxwell

Technologies

Manufactures capacitive energy storage and power

delivery solutions.$23.0 1.1x -

Source: Capital IQ and Capstone Headwaters Research 4

SELECT TRANSACTIONS

Interconnect Components | Q1 2018

PUBLIC COMPANY TRADING & OPERATING DATA

Price % 52 Wk Market Enterprise LTM EV / LTM

Company 02/26/18 High Cap Value Revenue EBITDA Margin Revenue EBITDA

Amphenol Corporation $90.83 97.0% $27,747.1 $29,589.6 $7,011.3 $1,658.4 23.7% 4.2x 17.8x

Belden Inc. $73.38 84.2% $3,076.9 $4,077.1 $2,388.6 $433.2 18.1% 1.7x 9.4x

CommScope $38.73 90.6% $7,396.3 $11,311.8 $4,560.6 $899.4 19.7% 2.5x 12.6x

Corning $29.30 83.5% $25,123.4 $28,314.4 $10,116.0 $3,149.0 31.1% 2.8x 9.0x

General Cable $29.85 98.9% $1,511.1 $2,532.7 $3,765.3 $180.2 4.8% 0.7x 14.1x

Hubbell $134.52 90.3% $7,374.8 $8,054.2 $3,668.8 $628.3 17.1% 2.2x 12.8x

Littelfuse $210.15 92.9% $4,773.3 $4,839.2 $1,221.5 $281.5 23.0% 4.0x 17.2x

Methode Electronics $40.60 83.8% $1,550.3 $1,399.5 $846.7 $155.3 18.3% 1.7x 9.0x

TE Connectivity $102.27 94.5% $35,917.9 $39,218.9 $13,530.0 $2,919.0 21.6% 2.9x 13.4x

Mean 19.7% 2.5x 12.8x

Median 19.7% 2.5x 12.8x

Harmonic Mean 15.2% 1.9x 11.5x

EV = enterprise value; LTM = last twelve months

$ in millions, except per share data

32.9%

40.8%38.9% 39.9%

11.9%

31.8%

41.5%

27.1%

33.7%

23.7%

18.1%19.7%

31.1%

4.8%

17.1%

23.0%

18.3%

21.6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Amphenol

Corporation

Belden Inc. CommScope Corning General Cable Hubbell Littelfuse Methode

Electronics

TE Connectivity

Gross Margin % EBITDA Margin %

Last Twelve Month Margin Performance

Source: Capital IQ and Capstone Headwaters Research as of February 26, 2018 5

Interconnect Components | Q1 2018

11.5%

1.4%

-7.4%

7.7%

-3.5%

4.7%

15.7%

6.0%

8.5%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Amphenol

Corporation

Belden Inc. CommScope Corning General Cable Hubbell Littelfuse Methode

Electronics

TE Connectivity

Last Twelve Month 1-Year Revenue Growth

6

FIRM TRACK RECORD: SELECT CONNECTIVITY AND EMS TRANSACTIONS

Interconnect Components | Q1 2018

CYPRESS

HOLDING LTD

valuation & financial advisory has been acquired byhas been acquired byhas been acquired by

has been acquired by has been acquired byhas recapitalized withhas been acquired by

has been acquired by

has sold certain assets to

has recapitalized withhas been acquired by

a subsidiary of

has been acquired by has been acquired by

has acquired certain

assets of

has been acquired by

7

CITATIONS

1. Institute for Supply Management, "January 2018 Manufacturing ISM Report On Business,” https://www.instituteforsupplymanagement.

org/ISMReport/MfgROB.cfm?SSO=1, accessed February 7,2018.

2. Business Wire, "Global Passive Component Market - Top Drivers and Forecasts by Technavio,” https://www.businesswire.com/news/hom

e/20170628006342/en/Global-Passive-Component-Market---Top-Drivers, accessed February 7, 2018.

3. Molex, “Molex Acquires Assets of Triton Manufacturing Company, Inc.,” https://www.molex.com/molex/news/display_news.jsp?channel

=New&channelId=- 8&oid=2319&pageTitle=Molex+Acquires+Assets+of+Triton+Manufacturing+Company,+Inc., accessed February

7, 2018.

4. Corning, “Corning to Acquire Substantially All of 3M’s Communication Markets Division,” https://www.corning.com/worldwide/en/abou

t-us/news-events/news-releases/2017/12/corning-to-acquire-substantially-all-of-3ms-communication-markets-division.html, accessed

February 7, 2018.

Interconnect Components | Q1 2018

Disclosure: This newsletter is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisi-

tion activity. Information contained in this newsletter should not be construed as a recommendation to sell or buy any security. Any reference to or omission of

any reference to any company in this newsletter should not be construed as a recommendation to buy, sell or take any other action with respect to any security

of any such company. We are not soliciting any action with respect to any security or company based on this newsletter. The newsletter is published solely

for the general information of clients and friends of Capstone Headwaters. It does not take into account the particular investment objectives, financial

situation or needs of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not

suitable for all investors. This newsletter is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it

should not be relied upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may cause actual

results to vary mate- rially. We are under no obligation to update the information contained in this newsletter. Opinions expressed are our present opinions

only and are subject to change without notice. Additional information is available upon request. The companies mentioned in this newsletter may be clients

of Capstone Headwaters. The decisions to include any company in this newsletter is unrelated in all respects to any service that Capstone Headwaters may

provide to such company. This newsletter may not be copied or reproduced in any form, or redistributed without the prior written consent of Capstone

Headwaters. The information contained herein should not be construed as legal advice.

John Ferrara

Founder & CEO

jferrara@capstoneheadwaters.com | 617-619-3325

John Ferrara is the Founder and CEO of Capstone Headwaters and is responsible for the firm’s investment

and merchant banking operations, as well as managing client transactions. John has executed well over 150

transactions and related engagements and his entrepreneurial endeavors have included serving as a

founding member of seven financial service practices and a principal shareholder in five startup businesses.

Under his leadership, Capstone has expanded to 10 offices in the US and UK with an international platform

that spans 450 professionals in 40 countries worldwide.

Prior to 2002, when he acquired the practice he initially founded from Arthur Andersen to form Capstone,

John served as a Regional Managing Partner with Andersen Corporate Finance LLC. While with Andersen,

John held various national and global leadership positions. He started his career in Lehman Brothers' M&A

group in New York, London and Riyadh, later becoming a founding member of Rodman & Renshaw's M&A

practice in New York. After a break to compete in Australia's semi-professional baseball league, John joined

The Deloitte Consulting Group in Los Angeles to focus on turnaround and interim management

engagements.

Peter Asiaf

Managing Director

pasiaf@capstoneheadwaters.com | 617-619-3368

Peter has more than 20 years of experience as a senior business development executive across theprofessional and financial services industries. He has been a growth-oriented leader in early stage, middlemarket and Fortune 500 enterprises, helping them to design and execute strategic expansion plans, optimizebrand positioning and strengthen key market relationships. Prior to joining Capstone, Peter led twoemerging growth firms focused on providing business and professional services to the financial, technologyand healthcare industries. Peter also worked as a senior business development officer for Booz AllenHamilton in McLean, Virginia where he was responsible guiding the firm’s re-entry strategy in variouscommercial markets. He was Executive Vice President of North America for Dextrys, a leading provider of ITservices, and Vice President of Business Development at Darwin Partners, where he focused on expansion inthe Technology, Telecommunications and Healthcare verticals. Peter spent his early career in the financeindustry with Mellon Bank and The Boston Company.

INTERCONNECT COMPONENTS REPORT CONTRIBUTORS

8

Interconnect Components | Q1 2018

Todd McMahon

Managing Director

tmcmahon@capstoneheadwaters.com | 617-619-3334

Todd McMahon possesses over 20 years of transaction, financial services and corporate executive experience.

Prior to Capstone, Todd was President of Array Financial Services, a Boston based boutique M&A advisory

firm he founded in 2002. He began his career at Putnam Investments, later moving to Bank Boston’s

investment banking group. Later, Todd served as Managing Director at Ross Crossland Weston/RCW Mirus,

where he was responsible for managing the firm’s technology investment banking practice. Todd’s

investment banking experience is complemented by his involvement as an entrepreneur and investor where

he was involved in various consolidation transactions, raised over $30mm of debt and equity financing and

was responsible for managing all aspects of operations. He earned his MBA from Boston University and his

BA from the University of Massachusetts.

Report Title | Q4 2017

Kapil PuriDirector

203-813-3880 x202

kpuri@capstoneheadwaters.com

EXTENDED INDUSTRIAL TECHNOLOGY TEAM

US MIDDLE MARKET

INVESTMENTBANKOF

THE YEAR

2017

BOUTIQUE RESTRUCTURING

INVESTMENT BANK OF

THE YEAR

2017

MIDDLE MARKET

INVESTMENT BANK OF

THE YEAR

2016

9

Samrat KarnikCo-Head of Industrial Technology

303-531-4601

skarnik@capstoneheadwaters.com

Grant GarbersManaging Director

949-706-8440 x10

ggarbers@capstoneheadwaters.com

Peter NamCo-Head of Industrial Technology

949-706-6682

pnam@capstoneheadwaters.com

TOP 10 MOST REFERRED

INVESTMENTBANKS

2016

Report Title | Q4 2017

12

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