M&A: Deals in 2013, Expectations for 2014

Presenter logoHereM&A Outlook

What to Expect in the Year ahead:Who’s Buying and Why?

Which Sectors Are “Hot” in 2014?

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Presenter LogohereM&A Outlook

• Strategic Acquirers• Increasing international interest in Houston• Sale of Excel Engineering to Ramboll

• A “Second Bite of the Apple”• Second bite almost as big as first…

• What if I get a knock at the door?• Hybrid approach

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Investors Looking to Put Capital to Work

• Investors wary in 2013 due to uncertainty surrounding ACA, monetary policy and economic environment

• Private Equity ended 2013 with a record high $1 trillion of dry powder… 2013 cited as best year for PE fundraising since financial crisis

• Meanwhile, strategic buyers continue to hold large amounts of cash

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Increased activity in 2014

• Deal activity fueled by:• Large cash reserves• Interest rates at historic low• Improved consumer confidence• Opportunities in emerging markets

• Middle market expected to be most active sector• 77% of 2014 deals expected to fall in the middle market (KPMG)

• Smaller deals easier to finance and integrate

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Which Sectors are “Hot”?

• Investors predict 4 industries having most potential for growth in 2014:• Health care• Technology• Energy• Manufacturing

• Changing regulations in healthcare and financial services, increased O&G production and evolving world of technology will increase investment opportunities

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Energy/O&G Sector• M&A Drivers:

• New technology • Geographic growth • Product/service growth • Customer growth

• Challenges: • Regulatory uncertainty • Valuation disparities• Volatile energy prices • Inability to forecast future performance

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All‐In Valuations

Source: GF DataNote: 2013 H1 volume is annualized

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All‐In Valuations

Source: GF Data

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Size Premium

Source: GF Data

TEV 2003-08 2009 2010 2011 20122013 YTD Total N =

10-25 5.4 4.9 5.3 5.2 5.5 6.0 5.4 31225-50 6.1 6.2 6.1 5.8 6.3 7.7 6.1 266

50-100 6.7 6.5 6.8 7.4 6.6 7.2 6.8 196100-250 7.7 8.8 6.8 7.5 7.5 6.0 7.6 62

Total 6.1 5.9 6.1 6.1 6.2 7.0 6.1 836

N = 479 29 73 93 131 31 836

Please note that N for 2003-08 encompasses six years of activity2013 Data is through 3Q.

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TEV/EBITDA – By Industry

Source: GF Data

INDUSTRY 2003-08 2009 2010 2011 2012 2013 YTD Total N =

Manufacturing 5.9 5.7 5.9 6.0 5.9 5.8 5.9 749Business services 6.1 5.8 6.0 6.5 5.8 6.6 6.1 310Health care services 6.7 6.3 6.7 7.4 7.3 7.7 6.9 165Retail 6.5 5.2 5.5 6.1 6.3 5.1 6.3 54Distribution 6.0 5.6 5.4 6.0 6.3 7.6 6.0 186Publishing/ Media 7.4 7.4 4.2 6.1 11.4 5.9 7.3 33Technology 5.7 6.6 5.5 8.1 7.4 NA 6.3 38Other 5.7 6.4 5.7 5.1 6.3 6.7 5.8 205

N= 964 91 191 193 228 73 1740

Please note that N for 2003-08 encompasses six years of activity.2013 Data is through 3Q

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Leverage Trends

Source: GF Data

1.8x2.2x 2.4x 2.4x

2.6x

1.0x0.8x

1.0x 1.0x 0.7x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

2009 2010 2011 2012 2013 1H

Debt MultiplesSub Debt/EBITDA Sr Debt/EBITDA

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Presenter LogohereM&A Group Contacts

Tim Moore, CPAManaging Shareholder, Doeren [email protected]

Steven Silverman, CM&AA M&A Director, Doeren [email protected]

Yasmine MalikSenior M&A Analyst, Doeren [email protected]

M&A: Deals in 2013, Expectations for 2014

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