Orrick Panel Event: M&A & IPO Market Update http://blogs.orrick.com/totalaccess/events/event/ma-and-ipo-market-update/

1. U.S. M&A Market Review

2. U.S. M&A Market Activity
Total U.S. M&A
($ in billions)
# of Deals Undisclosed
# of Deals – Middle-Market
16,000
8,000
7,812
8,877
8,935
11,128
9,597
11,202
11,876
Deal Value
$2,500
13,254
10,269
7,978
$2,000
$1,500
$1,000
4,000
$500
0
Deal Value
# of Deals
12,000
11,730
# of Deals > $1.0 billion
$0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Middle-Market U.S. M&A
($ in billions)
6,000
5,000
4,000
3,000
2,000
1,000
0
# of Deals – $500M - $1,000M
5,403
3,695
3,954
3,850
3,867
3,639
3,602
4,560
Deal Value
$600
4,423
3,322
2,975
$450
$300
$150
$0
2003
2004
2005
_____________________
Source: Dealogic and Robert W. Baird & Co. Incorporated M&A Market Analysis.
1
# of Deals – $100M - $499M
2006
2007
2008
2009
2010
2011
2012
2013
Deal Value
# of Deals
# of Deals – < $100M

3. U.S. M&A Activity By Industry
Number of transactions
2012
2013
Technology
Professional Services
Healthcare
Real Estate/Property
Finance
Oil & Gas
Construction/Building
Telecommunications
Machinery
Consumer Products
Retail
Insurance
Utility & Energy
Transportation
Chemicals
Food & Beverage
Dining & Lodging
Auto/Truck
Publishing
Leisure & Recreation
Mining
Metal & Steel
Forestry & Paper
Holding Companies
Aerospace
Textile
Agribusiness
Defense
Government
Closed End Funds
2,845
1,881
1,306
1,047
729
537
442
355
340
327
326
312
297
295
291
289
251
238
234
216
196
193
64
63
58
57
50
12
1
1
0
500
1,000
1,500
_____________________
Source: Dealogic and Robert W. Baird & Co. Incorporated M&A Market Analysis.
2
2,000
2,500
3,000
Technology
Professional Services
Healthcare
Finance
Real Estate/Property
Oil & Gas
Construction/Building
Telecommunications
Machinery
Insurance
Transportation
Retail
Dining & Lodging
Utility & Energy
Food & Beverage
Consumer Products
Chemicals
Publishing
Auto/Truck
Metal & Steel
Leisure & Recreation
Mining
Forestry & Paper
Agribusiness
Textile
Aerospace
Holding Companies
Defense
Government
2,203
1,618
965
656
484
399
315
276
276
275
274
272
260
252
247
241
202
193
166
165
162
120
55
54
49
45
40
7
2
0
500
1,000
1,500
2,000
2,500
3,000

4. U.S. M&A Activity By Industry
Transaction dollar volume (in millions)
2012
2013
Healthcare
Oil & Gas
Technology
Real Estate/Property
Telecommunications
Finance
Food & Beverage
Utility & Energy
Chemicals
Professional Services
Machinery
Retail
Leisure & Recreation
Insurance
Consumer Products
Transportation
Construction/Building
Dining & Lodging
Publishing
Metal & Steel
Aerospace
Forestry & Paper
Auto/Truck
Mining
Textile
Defense
Holding Companies
Agribusiness
Closed End Funds
Government
$124,991
$116,717
$112,118
$80,676
$75,775
$58,508
$43,274
$42,975
$31,988
$29,212
$24,699
$20,703
$18,822
$18,106
$15,950
$13,573
$13,223
$12,736
$12,315
$11,456
$7,111
$5,566
$4,062
$3,632
$804
$748
$631
$349
$210
$1
$0
$50,000
_____________________
Source: Dealogic and Robert W. Baird & Co. Incorporated M&A Market Analysis.
3
$100,000
$150,000
Healthcare
Real Estate/Property
Technology
Telecommunications
Food & Beverage
Utility & Energy
Oil & Gas
Insurance
Professional Services
Finance
Transportation
Retail
Machinery
Chemicals
Dining & Lodging
Consumer Products
Forestry & Paper
Construction/Building
Metal & Steel
Leisure & Recreation
Mining
Auto/Truck
Textile
Aerospace
Publishing
Agribusiness
Holding Companies
Defense
Government
$160,683
$121,089
$107,968
$68,163
$60,182
$57,859
$56,265
$49,553
$41,131
$39,919
$31,779
$26,174
$21,510
$14,111
$12,548
$11,380
$11,172
$10,171
$9,103
$8,848
$7,262
$6,899
$4,387
$3,469
$2,860
$2,112
$1,825
$897
$3
$0
$40,000
$80,000
$120,000
$160,000
$200,000

5. U.S. Technology Sector M&A Activity
($ in millions)
Total Number of Deals
Total Dollar Volume
3,000
$150,000
2,845
2,623
2,435
2,500
2,203
2,043
2,000
2,009
1,853
1,714
1,500
1,998
1,712
1,464
$100,000
1,000
500
0
$50,000
2003
2004
2005
2006
_____________________
Source: Dealogic and Robert W. Baird & Co. Incorporated M&A Market Analysis.
Note:Figures exclude transactions involving minority stakes, stock repurchases, and spin-offs.
4
2007
2008
2009
2010
2011
2012
2013

6. Middle-Market Transaction Multiples Analysis by Sector
Sector multiples have rebounded from 2009
Median U.S. EV / EBITDA Middle Market Multiple Analysis by Sector
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
7.4x
6.6x
8.6x
9.0x
7.1x
8.6x
11.1x
8.4x
10.0x
8.8x
7.3x
7.4x
10.4x
9.0x
8.2x
8.4x
7.8x
8.5x
9.4x
9.7x
9.2x
8.1x
6.9x
6.4x
9.5x
8.4x
9.1x
9.8x
7.7x
12.0x
12.2x
10.3x
10.8x
8.8x
9.1x
8.3x
7.7x
8.0x
9.0x
8.4x
6.5x
8.0x
8.2x
7.3x
8.2x
9.0x
6.9x
7.5x
11.1x
10.9x
11.5x
10.0x
8.4x
10.8x
12.9x
10.1x
12.3x
8.5x
7.4x
6.6x
Business Services
Multiple
Consumer & Retail
Multiple
Healthcare
Multiple
Industrial
Multiple
Technology
Multiple
_____________________
Source: Capital IQ.
Note:The multiples reported above reflect disclosed transactions and exclude multiples greater than 20.0x except for the technology sector which excludes multiples greater than 30.0x. Middle market transactions defined as those with a disclosed transaction value of
less than $1 billion.
5

7. Factors Affecting the M&A Environment
Mid 1990s –
2000
2002 – 2007
2008 – 2009
2010 – 2012
2013 – 2014
Economic Environment






Stock Market Performance






Credit Market Strength






Investor Confidence






CEO Confidence






Bankruptcies / Restructuring /
Corporate Scandals






Geopolitical Situation






Political Landscape






Shareholder Activism






Valuation
6
2000 – 2002







8. S&P 500 Index vs. M&A Activity
Total U.S. Deals
S&P Closing Price
Deal Value
14,000
12,000
11,128
8,877
11,730
11,202
1,800
11,876
10,269
9,597
8,935
1,400
7,978
7,812
1,600
1,200
1,000
6,000
800
S&P Price
S&P Price
# of Deals
10,000
8,000
2,000
13,254
600
4,000
400
2,000
0
Total U.S. Deals
S&P Closing Price
Deal Value
200
2003
7,812
1,112
$598
2004
8,877
1,212
$865
2005
8,935
1,248
$1,159
2006
11,128
1,418
$1,460
2007
11,730
1,468
$1,495
2008
9,597
903
$777
2009
7,978
1,115
$771
2010
11,202
1,258
$948
2011
11,876
1,258
$994
2012
13,254
1,426
$901
2013
10,269
1,848
$942
0
_____________________
Source: Dealogic and Robert W. Baird & Co. Incorporated M&A Market Analysis.
Note: Middle-market transactions defined as those with a disclosed transaction value of less than $1 billion. Figures include transactions involving corporate acquirors and corporate targets. Figures exclude transactions involving minority stakes, stock repurchases,
and spin-offs.
7

9. Overall U.S. Financing Market Environment
Annual New-Issue Leveraged Loan Volume
Average LBO Leverage Statistics
Senior Debt / EBITDA
$605
Dollars in billions
$625
$480
$500
6.0x
$465
$265
5.6x
$295
$234
4.5x
4.9x
4.0x
4.2x
5.2x
4.7x
4.3x
4.5x
5.3x
4.8x 5.4x
40%
3.3x
3.0x
$157
$125
Equity Contribution
50%
4.0x
$166
Subordinate Debt / EBITDA
6.2x
5.0x
$375
$375
$250
$535
7.0x
30%
2.0x
$77
1.0x
$0
0.0x
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
20%
2007
2013
2008
2009
2010
Left Column = Less than $50M EBITDA
2011
2012
2013
Right Column = More than $50M EBITDA
_____________________
Source: Standard & Poor’s LCD.
_____________________
Source: Standard & Poor’s LCD..
New-Issue First-Lien Leveraged Loan Yields
New-Issue High Yield Bond Yields
All Loans
9%
BB
B
B
9%
7%
8%
6%
4.9%
4.9%
5%
4%
3.5%
10/19/10
_____________________
Source: Standard & Poor’s LCD.
8
BB
10%
8%
3%
12/31/09
All Bonds
11%
8/7/11
5/25/12
3/13/13
12/31/13
7.3%
6.8%
7%
6%
5.2%
5%
4%
12/31/09
10/19/10
_____________________
Source: Standard & Poor’s LCD.
8/7/11
5/25/12
3/13/13
12/31/13

10. Baird Investment Advisor Co., Ltd., an affiliate of Robert W. Baird & Co. Incorporated.
Robert W. Baird Ltd. and Baird Capital Partners Europe are authorized and regulated in the UK by the Financial Conduct Authority.