a firm belief in the

entrepreneurial spirit“ ”FEI Presentation

September 12, 2017

Investment Banking

Cleary Gull Overview

Investment Banking

33

An employee-owned financial services firm providing

high-quality investment banking services to privately

held and small publicly traded companies and private

equity funds

Helping clients achieve their goals for over 30 years

Focus on the middle market

Extensive experience with manufacturing, consumer,

business and industrial service, and software and

technology companies

International network provides global reach

Superior success rate and proven results

Senior level attention provided by professionals with

significant transaction experience

Cleary Gull At-A-Glance

Investment Banking

44

Investment Banking Services

Mergers & Acquisitions

Targeting $10 to $250 million transactions

Sales of private equity fund portfolio companies,

entrepreneur- and family-owned businesses, corporate

divisions, and going-private transactions

Acquisitions of specifically targeted companies

Capital Placement

Raising from $10 to $250 million of capital

Senior debt, mezzanine debt, and/or equity

Management buyouts, recapitalizations, and growth

capital

Special Situations

Distressed mergers and acquisitions

Debt refinancing and restructuring

Other Financial Advisory Services

Valuations, strategic alternative analyses, and fairness

opinions

Investment Banking

55

Cleary Gull is known for selling excellent companies at

premium prices

Skills, experience and track record heavily weighted

toward sell-side

Track record of maximizing value

Substantial experience and consistent success making

the strategic sale Proven ability to identify and

articulate:

Strategic fit

Synergies

Pro Forma cost structure

Sell-Side Expertise

Investment Banking

66

We are experts at placing private capital for companies

in our target market

Proprietary database of active relationships with many

private capital sources

Staying close to the financing market facilitates

efficient, competitive transaction processes

Substantial experience Well over $2 billion in

completed transaction value

Company

Capital

Structure

Equity

Capital

Equity

Weighted

Mezzanine

Debt

Weighted

Mezzanine

Special

Purpose

Funds

Bank

Debt

Senior

Notes

Hedge

Funds

Real

Estate

Finance

Financing Capabilities

Investment Banking

77

Cleary Gull is a member of the International Association of Investment Bankers (“IAIB”)

(www.iaib.org)

Global Reach

Milwaukee, USA

Los Angeles, USA

Atlanta, USA

Mumbai, India

Munich, Germany

Dublin, Ireland

Helsinki, Finland

London, England

New York City, USA

Singapore, Asia

Dubai, United Arab Emirates

Mauritius, Republic of Mauritius

Delhi, India

Brisbane, Australia

Sydney, AustraliaPerth, Australia

Hong Kong, China

Shanghai, China

Milan, Italy

Investment Banking

88

M&A focused

Regional

Deal size <$250MM

Generalists/specialists

M&A, capital markets

(research and trading), retail

Multi-national

Deal size $250MM to $2.5B

Dedicated industry verticals

Diverse, including M&A,

underwriting, asset

management, trading, lending,

etc.

Global presence

Typical deal size >$1B

Dedicated industry verticals

Investment Banking Hierarchy

Baird

Harris Williams

Houlihan Lokey

Lazard

Piper Jaffray

William Blair

Cleary Gull

Grace Matthews

Quarton International

Prestwick Partners

Definition

Barclays

Goldman Sachs

JP Morgan

Morgan Stanley

UBS

BULGE

BRACKET

MIDDLE

MARKET

BOUTIQUE

Example Firms

Investment Banking

Economy and Capital Markets

Investment Banking

1010

Economic Summary: Late Cycle (?) Growth

Consumer leading the way

Continued low energy prices have increased disposable

income

Despite declines, auto sales remain near record levels

Housing market maintaining momentum

Consumer confidence at record levels

Industrial economy growing

Employment gains have been significant

Wages mysteriously stagnant

Sector-specific manufacturing strength

GDP growth expected to continue into 2018

Market reacting positively to prospect of less regulation and

lower taxes

Potential headwinds

High valuations

Optimism may be running ahead of political reality

Global geopolitical uncertainties

Spectre of “sovereign debt” concerns

Rising interest rates

economy

is strong

Investment Banking

1111

30 Year “Macro” Data Trends

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

10-Year Treasury vs. 3-Month LIBOR

10 Year Treasury 3-Month LIBOR

Source: FRED Source: FRED

Source: FRED Source: IMMA

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Nu

mb

er

of

Tra

nsa

cti

on

s

M&A Activity North America

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

U.S. Real GDP Growth

0

5,000

10,000

15,000

20,000

25,000

DOW Jones Industrial Average

Investment Banking

1212

Capital Markets Update

Lower middle market M&A remains strong

Both strategic and financial buyers are eager to acquire

Record amounts of uninvested capital and corporate cash

With organic growth often difficult, both strategic and

financial buyers looking to “buy” growth

Limited supply of high-quality companies resulting in

premium prices

Acquisition financing remains plentiful

Active mezzanine market

Senior debt markets competitive for middle market

transactions

Commercial banks struggling to grow loan balances

“One-stop”, business development companies, commercial

finance companies, credit opportunity funds, and insurance

companies active in financing middle market transactions

Cash flow and asset-based lenders competing on price and

terms (amortization, availability, covenants)

Favorable market for “storied” credits

Leverage ratios at record levels

market

is strong

Investment Banking

1313

Middle Market Leverage Multiples

Total debt availability for middle market companies edged up during first half of 2017

Asset-based market healthy and competitive

Cash flow market highly competitive on leverage, price, covenants, and amortization

Non-bank lenders now interested in transactions < $5 million in EBITDA Most competitive for

transactions >$10 million EBITDA

Larger transactions support higher leverage

Source: GF Data® Source: GF Data®

2.8x2.3x

1.8x2.2x 2.4x 2.4x 2.6x 2.7x

3.0x 3.1x 3.3x

0.9x

1.0x

1.1x0.8x

1.0x 1.1x 0.8x1.0x

1.0x 0.9x0.9x3.7x

3.3x

2.9x 3.0x

3.4x3.5x 3.4x

3.7x4.0x 4.0x

4.2x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1H

2017

To

tal

De

bt

/ E

BIT

DA

Bank Debt / EBITDA Non-Bank Debt / EBITDA

Average LBO Debt Multiples for Deals with$10M - $250M of Enterprise Value

2.2x2.9x

2.1x3.0x

2.4x3.2x

2.3x3.3x

2.7x3.5x

2.7x3.7x

2.9x

4.0x

1.0x

1.2x

1.1x

1.3x

0.8x

0.8x

1.0x

1.0x

1.0x

1.3x

0.6x

1.1x

0.9x

1.1x

3.2x

4.1x

3.2x

4.3x

3.2x

4.0x

3.3x

4.3x3.7x

4.8x

3.3x

4.8x

3.8x

5.1x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

$1

0-$

25

$1

00

-$250

$1

0-$

25

$1

00

-$250

$1

0-$

25

$1

00

-$250

$1

0-$

25

$1

00

-$250

$1

0-$

25

$1

00

-$250

$1

0-$

25

$1

00

-$250

$1

0-$

25

$1

00

-$250

2003 - 2011 2012 2013 2014 2015 2016 1H 2017

To

tal

De

bt

/ E

BIT

DA

Bank Debt / EBITDA Non-Bank Debt / EBITDA

Average LBO Debt Multiples for Deals with$10M - $25M and $100M - $250M of Enterprise Value

Investment Banking

1414

Middle Market Deal Volume

U.S. middle market transaction volume down 14.4% in YTD 2017 compared to YTD 2016

Global dollar value of transactions basically flat YTD 2017 vs LY

Source: Robert W. Baird Source: Robert W. Baird

0

1,000

2,000

3,000

4,000

5,000

6,000

2009 2010 2011 2012 2013 2014 2015 2016 07/16

YTD

07/17

YTD

# o

f T

ran

sacti

on

s

U.S. Middle Market M&A Volume for DealsUnder $500M of Enterprise Value

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 07/16

YTD

07/17

YTD

($'s

in

bil

lio

ns)

Global M&A Deal Value

Investment Banking

1515

Middle Market Prices

Average multiples for middle market transactions at or near cyclical highs

Averages conceal important detail relating to size, industry, financial performance, and

management continuity Average for larger deals nearly 3x EBITDA higher than for smaller

transactions

High performance and management continuity add more than 1.0x EBITDA to PE-backed LBO

valuation multiple

Source: GF Data® Source: GF Data®

6.2x

6.0x 6.0x 6.0x

6.4x6.3x

6.5x

6.7x 6.7x

6.9x 6.9x

5.0x

5.3x

5.5x

5.8x

6.0x

6.3x

6.5x

6.8x

7.0x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1H

2017

Pu

rch

ase

Pri

ce

/Ad

just

ed

EB

ITD

A

Average Purchase Price/Adjusted EBITDA Multiples for Private Equity-Backed LBOs with $10M - $250M of Enterprise Value

5.4x 5.4x 5.5x

5.2x 5.3x

5.8x6.0x

5.6x5.8x

6.0x5.8x

7.4x

6.7x

7.2x7.0x

7.7x

7.4x 7.5x

7.8x

9.0x 9.0x

8.7x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1H

2017

EV

/ E

BIT

DA

$10M - $25M $100M - $250M

EV/EBITDA Multiple Comparison Based on Transaction Size

Investment Banking

1616

Multiples by Industry Sector

Average multiples vary considerably by industry and are driven by various factors including

growth outlook, stability, and profitability

Nearly all industries’ multiples are above historic averages

Source: GF Data®

Note: Reported multiples are TEV/EBITDA

Investment Banking

1717

Demand for Transactions

Private equity firms have a large amount

of “dry powder” $906 billion of

uncalled capital through the first half of

2017

Add-ons as a percentage of private equity

transactions have climbed dramatically

Source: Pitchbook and Prequin Ltd. Source: Pitchbook

Source: FactSet and Capital IQ

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1H

2017

($'s

in

bil

lio

ns)

U.S. PE Dry Powder

0%

10%

20%

30%

40%

50%

60%

70%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1H

2017

Ad

d-o

n %

of B

uyo

uts#

of

Tra

nsa

cti

on

s

Private Equity Add-on Activity

Add-on Non Add-on Add on % of Buyouts

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

2009 2010 2011 2012 2013 2014 2015 2016 2017

($'s

in

bil

lio

ns)

S&P 500 Cash & Short-Term Investments (Ex-Financials)

Total Q2 2017 Cash & Short-Term

Investments: $1.59 trillion

Investment Banking

Recent Developments and Best Practices

Investment Banking

1919

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2010 2011 2012 2013 2014 2015 2016 1H

2017

Sp

on

sor %

of M

&A#

of

Tra

nsa

cti

on

s

U.S. Transactions by Buyer Type

Corporate M&A Sponsor-Backed Sponsor % of M&A

Completed Transactions by Type of Buyer

Ratio of PE-backed to strategic buyer deals remarkably consistent

Source: Pitchbook

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010 2011 2012 2013 2014 2015 2016 1H

2017

Sp

on

sor %

of M

&A#

of

Tra

nsa

cti

on

s

U.S. Middle Market Transactions by Buyer Type

Corporate M&A Sponsor-Backed Sponsor % of M&A

Source: Pitchbook

Investment Banking

2020

Strategic buyers are more focused on their core business Highly competitive if it is a

strategic fit, but less willing to consider new markets/channels

Can be highly competitive on price and speed Often less competitive on indemnification

terms

“Dropping” later in the process Deal team likes the deal, but board makes a different capital

allocation decision

Less concerned about interim performance, more concerned about contingent liabilities

Strategic Buyer Trends

Investment Banking

2121

Significant increase in the number of buyers in the market

PE funds, family offices, independent sponsors

“Changing of the guard” with new funds being created by younger partners from established firms

Winning bidders usually have an “angle” Advisory board members, portfolio company, prior

investments

Seemingly fewer “platform” buyers Many funds focused on add-on acquisitions

Diverging diligence strategies

Growing number of buyers willing to do more work pre-LOI to differentiate their proposals

Post-LOI due diligence more thorough than ever Can be a “game” to re-trade a deal

PE Buyer Trends

Investment Banking

2222

More difficult than ever to qualify independent sponsors

Usually bid high to win May not have their capital providers identified pre-LOI

Can be attractive buyer when they partner with a family office, bring relationships, have

industry expertise, or help facilitate management transition

Independent Sponsor Trends

Investment Banking

2323

Competition is resulting in deals “priced to perfection”

Results in buyers doing much more due diligence

Buyers pushing all deficiencies back to the seller

“Time is the enemy of all deals”

More important than ever to carefully compare buyer proposals Many relevant factors

Investment thesis/strategic rationale

Financing

Diligence plan

Timeline to close

Advantageous to defer picking a winner as long as possible

Transaction Process Environment

Investment Banking

2424

“Q of E” now required by buyers to close most deals Consumes time and resources

A profit center for buyers Balance sheet and income statement

Sellers increasingly using “sell side Q of E”

Required by some PE sellers

Some sellers engage before investment bankers

Especially useful for

Carve outs

No audit

Heavy addbacks and/or significant pro forma adjustments

Budget

6-10 weeks

$50K - $150K

Sell Side Q of E

Investment Banking

2525

85%

65%

33%

97%

86%91%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Basket Cap* Survival

Indemnification Parameters

≤1%

≤2%

≤10%

≤15%

≤12 months

≤18 months

Earnouts

Present in 14% of deals

Roughly equally distributed over 1, 2 or 3 year periods

2/3 based on revenue and 1/4 based on earnings

Current Transaction Terms

Note: Median cap for smaller deals (≤$25 million) is 20%

Source: June 2017 SRS Acquiom M&A Deal Terms Study

Investment Banking

2626

Coverage Descriptions

Breach of R&W in a definitive agreement

May cover buyer or seller

Transaction Size

Policy < $10 million considered “small”

$5 million minimum

Premium

Typically 3% - 4% of amount of coverage

Retention

Generally 2% of enterprise value

Duration

Typically 18 months – 3 years (6 years for “fundamental”)

Who Pays

A negotiated point

R&W Insurance Overview

Investment Banking

2727

Timing

Usually 2-4 weeks after nearly final definitive agreement available

Common concerns/exclusions

Requires audited financial statements

Foreign exposure

Environmental (consider separate policy)

IP

Collectability of A/R, salability of inventory, or tax attributes

Adequacy of product liability coverage

Healthcare and financial services

Exclusions

Most diligence findings

The bottom line: may be more trouble than it’s worth

Other R&W Insurance Considerations

Investment Banking

Questions?