US M&A Market Review: Orrick Panel Event: M&A & IPO Market Update

U.S. M&A Market Review

U.S. M&A Market Activity

Total U.S. M&A

($ in billions)

7,8128,877 8,935

11,128 11,7309,597

7,978

11,202 11,87613,254

10,269

$0

$500

$1,000

$1,500

$2,000

$2,500

0

4,000

8,000

12,000

16,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

DealV

alue#

ofD

eals

# of Deals Undisclosed # of Deals – Middle-Market # of Deals > $1.0 billion Deal Value

Middle-Market U.S. M&A

($ in billions)

_____________________Source: Dealogic and Robert W. Baird & Co. Incorporated M&A Market Analysis.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

3,695 3,954 3,850 3,867 3,639 3,602 3,322

5,4034,560 4,423

2,975

$0

$150

$300

$450

$600

0

1,000

2,000

3,000

4,000

5,000

6,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

DealV

alue#

ofD

eals

# of Deals – < $100M # of Deals – $100M - $499M # of Deals – $500M - $1,000M Deal Value

1

2,845

1,881

1,306

1,047

729

537

442

355

340

327

326

312

Technology

Professional Services

Healthcare

Real Estate/Property

Finance

Oil & Gas

Construction/Building

Telecommunications

Machinery

Consumer Products

Retail

Insurance

U.S. M&A Activity By Industry

2012 2013

Number of transactions

2,203

1,618

965

656

484

399

315

276

276

275

274

Technology


Healthcare

Finance


Oil & Gas


Telecommunications

Machinery

Insurance

Transportation312

297

295

291

289

251

238

234

216

196

193

64

63

58

57

50

12

1

1

0 500 1,000 1,500 2,000 2,500 3,000

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


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

Transportation

Retail

Dining & Lodging

Utility & Energy

Food & Beverage

Consumer Products

Chemicals

Publishing

Auto/Truck

Metal & Steel


Mining

Forestry & Paper

Agribusiness

Textile

Aerospace

Holding Companies

Defense

Government

2

U.S. M&A Activity By Industry

2012 2013

Transaction dollar volume (in millions)

$124,991

$116,717

$112,118

$80,676

$75,775

$58,508

$43,274

$42,975

$31,988

$29,212

$24,699

$20,703

Healthcare

Oil & Gas

Technology


Telecommunications

Finance

Food & Beverage

Utility & Energy

Chemicals


Machinery

Retail

$160,683

$121,089

$107,968

$68,163

$60,182

$57,859

$56,265

$49,553

$41,131

$39,919

$31,779

Healthcare


Technology

Telecommunications

Food & Beverage

Utility & Energy

Oil & Gas

Insurance


Finance

Transportation


$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 $100,000 $150,000

Retail


Insurance

Consumer Products

Transportation


Dining & Lodging

Publishing

Metal & Steel

Aerospace

Forestry & Paper

Auto/Truck

Mining

Textile

Defense

Holding Companies

Agribusiness

Closed End Funds

Government

$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

Transportation

Retail

Machinery

Chemicals

Dining & Lodging

Consumer Products

Forestry & Paper


Metal & Steel


Mining

Auto/Truck

Textile

Aerospace

Publishing

Agribusiness

Holding Companies

Defense

Government

3

U.S. Technology Sector M&A Activity

1,714 1,712

2,043 1,998 2,009

1,853

2,623

2,435

2,845

2,203

$150,000

2,000

2,500

3,000

Total Number of Deals Total Dollar Volume($ in millions)

_____________________Source: Dealogic and Robert W. Baird & Co. Incorporated M&A Market Analysis.Note:Figures exclude transactions involving minority stakes, stock repurchases, and spin-offs.

1,464

$50,000

$100,000

0

500

1,000

1,500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

4

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Business Services

Multiple 7.4x 6.6x 8.6x 9.0x 7.1x 8.6x 11.1x 8.4x 10.0x 8.8x 7.3x 7.4x

Consumer & Retail


Middle-Market Transaction Multiples Analysis by Sector

Median U.S. EV / EBITDA Middle Market Multiple Analysis by Sector

Sector multiples have rebounded from 2009

Healthcare


Industrial


Technology


_____________________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

Factors Affecting the M&A Environment

Economic Environment

Stock Market Performance

Credit Market Strength

Investor Confidence

Mid 1990s –2000

2013 – 20142000 – 2002 2002 – 2007 2008 – 2009 2010 – 2012

Investor Confidence

CEO Confidence

Bankruptcies / Restructuring /Corporate Scandals

Geopolitical Situation

Political Landscape

Shareholder Activism

Valuation

6

S&P 500 Index vs. M&A Activity

7,812

8,877 8,935

11,12811,730

9,597

7,978

11,20211,876

13,254

10,269

1,000

1,200

1,400

1,600

1,800

2,000

8,000

10,000

12,000

14,000

S&

PP

rice

#o

fD

eals

Total U.S. Deals S&P Closing Price Deal Value

_____________________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.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Total U.S. Deals 7,812 8,877 8,935 11,128 11,730 9,597 7,978 11,202 11,876 13,254 10,269

S&P Closing Price 1,112 1,212 1,248 1,418 1,468 903 1,115 1,258 1,258 1,426 1,848

Deal Value $598 $865 $1,159 $1,460 $1,495 $777 $771 $948 $994 $901 $942

0

200

400

600

800

1,000

0

2,000

4,000

6,000

S&

PP

rice

#o

fD

eals

7

Overall U.S. Financing Market Environment

Average LBO Leverage Statistics

Senior Debt / EBITDA Subordinate Debt / EBITDA Equity Contribution

5.6x6.2x

4.5x4.9x

3.3x4.0x 4.2x

4.7x4.3x

5.2x4.5x

5.3x 4.8x 5.4x

20%

30%

40%

50%

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

2007 2008 2009 2010 2011

Annual New-Issue Leveraged Loan Volume

2012

$166

$265$295

$480$535

$157

$77

$234

$375

$465

$605

$0

$125

$250

$375

$500

$625

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Do

llars

inb

illio

ns

2013

3%

4%

5%

6%

7%

8%

9%

12/31/09 10/19/10 8/7/11 5/25/12 3/13/13 12/31/13

All Loans BB B

_____________________Source: Standard & Poor’s LCD.

New-Issue High Yield Bond Yields

_____________________Source: Standard & Poor’s LCD..

Left Column = Less than $50M EBITDA Right Column = More than $50M EBITDA

2007 2008 2009 2010 2011

New-Issue First-Lien Leveraged Loan Yields


20122003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

4%

5%

6%

7%

8%

9%

10%

11%

12/31/09 10/19/10 8/7/11 5/25/12 3/13/13 12/31/13

All Bonds BB B

4.9%

3.5%

4.9%

5.2%

6.8%


7.3%

2013

8

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.

US M&A Market Review: Orrick Panel Event: M&A & IPO Market Update

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