M&A Marketplace 2011 Second Quarter Review M&A News Page 2 U.S. Middle Market Watch As 2010 came to a close, most dealmakers private equity groups – both of which are sitting on anticipated resurgence in the merger & acquisition significant levels of cash to deploy for acquisitions. (M&A) marketplace in 2011. Some of the factors Page 3-4 2Q Middle Market attributable to this expected growth include the Although we continue hearing tales of banks being Transactions fact that the economy is growing again, with less open to lending money again, we are still seeing market volatility and buyers have regained the a tightening in appraisals and borrowing ratios ability to finance deals again. At the halfway point that restrict the credit being issued by lenders. Page 5 U.S. Deal Activity in 2011, we have seen increased activity in the M&A However, we are finding success as we help our & Average Multiples marketplace, specifically a significant increase in clients navigate those quagmires, which has not by Industry Group dollar values. The overall dollar value of activity been easy in most cases. As leverage remains low, increased 61% through the first six months of 2011 valuations in mergers and acquisitions are likely as compared to the first six months of 2010 (from to remain lower than the peaks in 2006 and 2007, $323.9 billion in the first half of 2010 to $521.8 but deal activity seems to be picking up as buyers billion in the first half of 2011). appear to be willing to pay a larger percentage of equity for good businesses. However, we are seeing activity that reminds us that some memories may be too short. For example, there In light assets businesses, like technology and has been tremendous activity in the capital markets distribution companies, we continue to see pockets allowing companies with at least $15 million of of activity in mergers and acquisitions. We expect trailing twelve month cash flows to fund as much as this activity to increase through the rest of 2011 as six times (6x) those cash flows in debt. We have seen companies continue pulling through inventories a company with ten times (10x) leverage in a senior and start re-investing in technology investments asset based facility decide not to take advantage of (e.g., systems, hardware, software and infrastructure) an ability to sell some non-core assets to deleverage they have been putting off since 2008. the business. In building products and services businesses, we We are working towards several closings with a are seeing some activity, which is certainly anmazzonE & aSSoCiatES, inC. significant uptick in the last two weeks of potential improvement from no activity. Interestingly, the engagement opportunities for the second half of activity has very strong margins – sometimes double the year. We are looking forward to having a or triple the margins from the peaks in 2006 andCONTACT US continued strong pipeline of deal activity and are 2007. We do not expect strong top-line growth inEight PiEdmont CEntEr, SuitE 510 working hard to ensure our clients’ expectations are building products and services companies. Instead,3525 PiEdmont road, nE in line with the current capital markets. Fortunately, we are hoping for some slow, consistent growthatlanta, ga 30305 all our clients’ businesses seem to be performing as housing inventories slowly move downward, well, so we are encouraging them to remain steady creating some need for new housing starts. If so,tElEPhonE - (404) 931-8545 and practical about their decisions. we believe building product and service companiesFax - (404) 574-5738 will focus on trying to hold their margins rather We believe that good opportunities currently exist than ramp up to flood the markets again causingwww.globalmna.Com for stable businesses interested in selling because downward pricing pressures. of strong demand from strategic buyers andMANAGINGDIRECTORSdominiC mazzonE FIRM OVERVIEW(404) 574-5745dmazzonE@globalmna.Com Mazzone & Associates is a middle market mergers and acquisitions advisory firm experienced in delivering successful results to our clients. Our dynamic professionals provide direction, access to capital markets and the intellectual horsepower to drive our clients’ objectives forward with proven expertise and integrity. Wematt ConnElly successfully navigate each transaction with our specialized processes and focused service. We measure(404) 574-5744 success by exceeding our clients’ objectives and delivering optimal bottom line results. Mazzone & AssociatesmConnElly@globalmna.Com provides comprehensive transactional services for middle market companies, private equity groups and individuals buying and selling companies, raising capital and structuring debt. Our firm is relationshipmikE bloom focused. We appreciate that our assignments are “life events” for our clients – particularly for management teams, entrepreneurs and family-owned businesses who have substantial portions of their net wealth at risk(404) 347-8284 in their business. 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M&A Marketplace 2011 Second Quarter Review U.S. Middle Market Watch Merger & Acquisition Activity Recent Trends $s in billions Deal Volume Number of Deals $1,600 12,000 $s in 000s 12 Months Ended $1,400 Total Dollar Value 10,000 Deal Size Jun-30-2011 Jun-30-2010 Change $1,200 Number of DealsMore than $1,000 185 118 57% $1,000 8,000$500 to $1,000 174 98 78% $800 6,000$250 to $500 255 161 58%$100 to $250 391 309 27% $600 4,000$50 to $100 367 279 32% $400$25 to $50 369 343 8% 2,000$10 to $25 421 480 -12% $200Less than $10 826 1,168 -29% $0 0Undisclosed 6,586 5,509 20%Total 9,574 8,465 13% Source: Merger Stat Review and Flashwire Monthly * YTD activity through June 30, 2011, annualized Source: Merger Stat Review and Flashwire Monthly Interest Rates and Deal Volume Quarterly M&A Activity and Multiples Deal Volume Deal Volume Multiple 7.00% 12,000 3,000 12.0 1 Year LIBOR Number of Deals Fed Funds Avg. EV / EBITDA 6.00% Number of Deals 10,000 2,500 10.0 5.00% 8,000 2,000 8.0 4.00% 6,000 1,500 6.0 3.00% 4,000 2.00% 1,000 4.0 2,000 1.00% 500 2.0 0.00% 0 2,105 1,561 1,521 1,715 1,835 1,994 2,313 2,280 2,350 2,415 2,458 2,351 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM as of 0 0.0 6-30-11 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Source: Merger Stat Review and Flashwire Monthly, Source: Merger Stat Review and Flashwire Monthly the Wall Street Journal and MoneyCafe.com Although interest rates are at all-time lows, liquidity/access to capital, Deal volume decreased slightly in 2011 with multiples remaining stable and though improving, continues to negatively impact the M&A market. markedly higher than the trough in 1Q 2009. Trailing Twelve Month Deal Activity U.S. Mid-Market M&A by Transaction Size by Target Industry $0M - $50M $50M - $250MDeal Volume $250M - $1,000M 1,000+ 2nd Quarter 2011 2,800 2,400 5.2% 15.9% Energy 4.3% 2,000 2.8% Materials 1,600 Industrials 18.4% Consumer Discretionary 1,200 15.3% Consumer Staples 800 Healthcare 2.9% 400 Financials 8.2% - Information Technology Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 27.0% Utilities Source: Merger Stat Review and Flashwire Monthly Source: Capital IQ Middle market ($0-$250 million) deal volume accounts for 82% of total deal volume and has increased by 22% since July 2010.
M&A Marketplace 2011 Second Quarter Review2Q 2011 Announced/Closed Transactions For deals with total enterprise value between $50 and $250 millionDate Target Buyers/Investors Size ($s in millions) 26-Apr SchoolNet, Inc. Pearson plc (LSE:PSON) $ 230.0 23-May Exterran Holdings, Compression & Processing Assets Exterran Partners, L.P. (NasdaqGS:EXLP) 228.0 18-May USM Services Holdings, Inc. EMCOR Group Inc. (NYSE:EME) 225.0 2-May Wheeler Bros., Inc. VSE Corp. (NasdaqGS:VSEC) 220.0 28-Apr KGen Hinds LLC Entergy Mississippi, Inc. 206.0 1-Jun OF Air Holdings Corporation Air Methods Corp. (NasdaqGS:AIRM) 200.0 27-May Philadelphia Gear Corporation Timken Industrial Services, LLC 200.0 29-Jun Sensis Corporation Saab AB (OM:SAAB B) 195.0 7-Apr National Surgical Care, Inc. AmSurg Corp. (NasdaqGS:AMSG) 173.5 20-Jun Ned Davis Research Inc. Euromoney Institutional Investor plc (LSE:ERM) 173.0 31-May Atlanta Hockey Club, LLC True North Sports & Entertainment Ltd. 170.0 28-Apr Shopzilla, Inc. Symphony Technology Group 165.0 31-May Lunda Construction Company Tutor Perini Corporation (NYSE:TPC) 163.5 3-May Amcor Limited, Glass Tubing Business Nipro Corporation (TSE:8086) 161.0 1-Jun Marlborough Campus Limited Partnership Hines Global REIT Properties LP 160.9 10-May Equitrac Corporation Nuance Communications, Inc. (NasdaqGS:NUAN) 157.0 18-May Chicago Tube & Iron Company Olympic Steel Inc. (NasdaqGS:ZEUS) 156.0 19-May Weasler Engineering, Inc. Actuant Corporation (NYSE:ATU) 153.0 19-May Sanuk U.S.A. LLC and C & C Partners Ltd. Deckers Outdoor Corp. (NasdaqGS:DECK) 149.8 10-Apr Tasty Baking Co. Flowers Bakeries, LLC 149.7 22-Apr Coining Holding Company Ametek Inc. (NYSE:AME) 148.0 17-May Nobel Learning Communities Inc. (NasdaqGM:NLCI) Leeds Equity Partners 147.9 2-Jun High Performance Technologies, Inc. Dynamics Research Corp. (NasdaqGM:DRCO) 143.0 16-May J&B Software Inc. and Regulus Group, LLC Cerberus Capital Management, L.P. 137.0 12-Apr ARGUS Software, Inc. Altus Group Limited (TSX:AIF) 130.0 29-Apr EC Source Services, LLC MasTec, Inc. (NYSE:MTZ) 129.8 28-Apr Coradiant, Inc. BMC Software Inc. (NasdaqGS:BMC) 125.0 15-Apr Beacon Hospice, Inc. Amedisys Inc. (NasdaqGS:AMED) 125.0 11-May East Bluebell Bill Barrett Corp. (NYSE:BBG) 120.0 20-Apr Smoothstone IP Communications, Inc. West Corporation 120.0 2-May Continuous Computing Corporation RadiSys Corporation (NasdaqGS:RSYS) 119.9 12-May DEI Holdings, Inc. (OTCPK:DEIX) Charlesbank Capital Partners, LLC 114.0 1-Jun Frontier-Kemper Constructors, Inc. Tutor Perini Corporation (NYSE:TPC) 113.0 21-Jun iFrogz Inc. ZAGG Incorporated (NasdaqGM:ZAGG) 108.9 21-Apr OpenFeint Inc. GREE International, Inc. 104.0 1-Apr Encore Discovery Solutions, Inc. EPIQ Systems, Inc. (NasdaqGS:EPIQ) 100.0 16-May Omnium LLC Northern Trust Corporation (NasdaqGS:NTRS) 100.0 17-May Ambassadors International Inc., Substantially All The Anschutz Corporation 96.8 25-May Renaissance Food Group, LLC Calavo Growers Inc. (NasdaqGS:CVGW) 95.6 28-Jun OneNeck IT Services, Corporation TDS Hosted & Managed Services, LLC 95.0 12-Apr US Radiosurgery, LLC Alliance Oncology, LLC 91.0 29-May H20 Plus, LLC POLA Orbis Holdings, Inc. (TSE:4927) 91.0
M&A Marketplace 2011 Second Quarter Review2Q 2011 Announced/Closed Transactions For deals with total enterprise value between $50 and $250 millionDate Target Buyers/Investors Size ($s in millions) 30-Apr Outsource Partners International, Inc. Exlservice Holdings, Inc. (NasdaqGS:EXLS) $ 91.0 20-Apr Chemring Detection Systems, Inc. Chemring Group plc (LSE:CHG) 90.0 22-Jun Portico Systems, Inc. McKesson Health Solutions LLC 90.0 1-Jun Hewlett-Packard Company, Visual Collaboration Polycom, Inc. (NasdaqGS:PLCM) 89.0 23-May SeaSpine, Inc. Integra LifeSciences Holdings Corp (NasdaqGS:IART) 89.0 5-May Aidells Sausage Company, Inc. Sara Lee Corp. (NYSE:SLE) 87.0 6-May Novacap Investments, Inc. 86.8 5-Apr Orchid Cellmark Inc. (NasdaqGM:ORCH) Laboratory Corp. of America Holdings (NYSE:LH) 84.0 1-Apr Mode Transportation Hub Group Inc. (NasdaqGS:HUBG) 83.4 20-Apr Brooks Automation Inc., Semiconductor Equipment Celestica Inc. (TSX:CLS) 82.0 Contract Manufacturing Operations 27-Apr Bloodhound Technologies, Inc. Verisk Analytics, Inc. (NasdaqGS:VRSK) 82.0 23-Jun SeraCare Life Sciences, Inc. (NasdaqCM:SRLS) MSMB Capital Management LLC 82.0 1-Apr Anderson Companies, Inc. Tutor Perini Corporation (NYSE:TPC) 80.8 18-Apr Bell and Howell, LLC Versa Capital Mgmt, Inc.; Access Value Investors LLC 80.0 27-Apr Rules-Based Medicine, Inc. Myriad Genetics Inc. (NasdaqGS:MYGN) 80.0 14-Jun The Care Pavilion Of Walnut Park Plaza Inc Grubb & Ellis Healthcare REIT II, Inc. 75.0 16-Jun IC RailMarine Terminal Company, Inc. Raven Energy, LLC 73.0 12-May Black Diamond Performance Reporting, LLC Advent Software, Inc. (NasdaqGS:ADVS) 73.0 2-May Chemical Market Associates, Inc. IHS Inc. (NYSE:IHS) 73.0 11-May Harvest Technologies Corporation Terumo Medical Corporation 70.0 21-Apr Greystripe, Inc. ValueClick Media, Inc. 70.0 16-May HearUSA Inc., Substantially All Assets William Demant Holding A/S (CPSE:WDH) 70.0 18-May BridgeCo Inc. Standard Microsystems Corp. (NasdaqGS:SMSC) 68.9 7-Apr Jingle Networks, Inc. Marchex, Inc. (NasdaqGS:MCHX) 68.0 5-Apr Forrest City Grocery Company Core-Mark Holding Company, Inc. (NasdaqGS:CORE) 66.0 4-Apr Abunda Nutrition, Inc. Evolva Holding SA. (SWX:EVE) 63.8 1-Jun Neighborhood Diabetes Shoppe, Inc. Insulet Corporation (NasdaqGM:PODD) 62.4 13-Apr Solantic Corporation Welsh, Carson, Anderson & Stowe 62.0 11-Apr Tatto, Inc. Ozura World Ltd. 60.0 17-Jun Nesher Pharmaceuticals Inc. And DrugTech Zydus Pharmaceuticals (USA) Inc. 60.0 26-May MerchantCircle, Inc. Reply! Inc. 60.0 23-May AWR Corporation National Instruments Corporation (NasdaqGS:NATI) 58.0 12-May Home Loan Center, Inc. Discover Bank 55.9 8-Jun Vitro America, LLC, Super Sky International, Inc., VVP American Glass Enterprises, LLC 55.1 Finance Corporation 20-May The Topline Corporation Steven Madden, Ltd. (NasdaqGS:SHOO) 55.0 7-Apr BeamOne, LLC Synergy Health plc (LSE:SYR) 55.0 2-Apr Graphic Packaging International, Inc. 53.5 28-Jun Contessa Premium Foods, Inc. Sun Capital Partners, Inc. 51.0 16-Jun C&D Technologies, Inc. (OTCPK:CHHP) Angelo, Gordon & Co. 50.7 10-Jun Goodyear Tire & Rubber Co., Global Wire Business Hyosung Corp. (KOSE:A004800) 50.0
M&A Marketplace 2011 Second Quarter Review U.S. Deal Activity & Average Multiples By Industry GroupConsumer Healthcare 2007 2008* 2009 2010 2Q 2011* 2007 2008 2009 2010 2Q 2011 EV / EBITDA Multiple 16.1x 16.9x 10.9x 13.8x 14.3x EV / EBITDA Multiple 24.5x 25.8x 15.2x 20.5x 19.9x EV / Revenue Multiple 1.7x 3.8x 2.1x 2.1x 2.9x EV / Revenue Multiple 6.2x 4.6x 4.5x 5.6x 4.7x Number of Transactions 3,335 2,805 2,274 2,790 1,389 Number of Transactions 1,195 1,080 931 1,231 594 2nd Quarter 2011 Closing (Date) 2nd Quarter 2011 Closing (Date) Conopco acquired Alberto-Culver (NYSE: ACV) (5/10) Danaher (NYSE: DHR) acquired Beckman Coulter (NYSE: BEC) (6/29) DSW (NYSE: DSW) acquired Retail Ventures (NYSE: RVI) (5/26) Endo Pharmaceuticals Holdings (NasdaqGS: ENDP) acquired American Medical *Please note that 2008 does not include the Lamar Advertising of Penn acquisition of Vista Media Group; and 2011 Systems Holdings (NasdaqGS: AMMD) (6/17) does not include the Fortune Food Service acquisition of Tokyo TeryakiEnergy Industrials 2007 2008 2009* 2010 2Q 2011 2007 2008 2009 2010 2Q 2011 EV / EBITDA Multiple 13.0x 12.0x 15.1x 9.8x 17.8x EV / EBITDA Multiple 13.6x 16.3x 10.7x 12.5x 10.5x EV / Revenue Multiple 4.5x 5.8x 6.3x 7.2x 4.7x EV / Revenue Multiple 1.7x 1.5x 1.2x 2.2x 1.4x Number of Transactions 624 560 486 740 334 Number of Transactions 2,663 2,429 1,778 2,265 1,109 2nd Quarter 2011 Closing (Date) 2nd Quarter 2011 Closing (Date) Ensco plc (NYSE: ESV) acquired Pride International (NYSE: PDE) (5/31) Alpha Natural Resources (NYSE: ANR) acquired all outstanding shares of Massey eBay (NasdaqGS: EBAY) acquired GSI Commerce (NasdaqGS: GSIC) (6/17) Energy (NYSE: MEE) (6/1) *Please note that 2009 does not include the 2020 Energy acquisition of New Generation BiofuelsFinancials Information Technology 2007 2008 2009* 2010 2Q 2011 2007 2008 2009 2010 2Q 2011 EV / EBITDA Multiple 17.1x 17.5x 15.1x 12.7x 14.2x EV / EBITDA Multiple 22.2x 28.0x 17.0x 18.9x 18.0x EV / Revenue Multiple 5.4x 6.7x 5.2x 7.5x 9.3x EV / Revenue Multiple 3.0x 3.1x 4.2x 7.4x 4.1x Number of Transactions 1,769 1,933 2,054 3,369 1,658 Number of Transactions 2,616 2,274 1,779 2,331 1,099 2nd Quarter 2011 Closing (Date) 2nd Quarter 2011 Closing (Date) CVS Caremark (NYSE: CVS) acquired Medicare Part D (4/29) CenturyTel (NYSE: CTL) acquired Qwest Communications (NYSE: Q) (4/1) ProLogis (NYSE: PLD) acquired AMB Property (NYSE: AMB) (6/3) Verizon Communications (NYSE, Nasdaq: VZ) acquired Terremark Worldwide (Nasdaq: TMRK) (4/7) *Please note that 2009 does not include the Advenir acquisition of Apartment Investment & Management (NYSE:AIV)Materials Transportation 2007 2008* 2009 2010 2Q 2011 2007 2008 2009 2010 2Q 2011 EV / EBITDA Multiple 10.9x 12.8x 7.1x 10.8x 10.4x EV / EBITDA Multiple 10.6x 16.8x 12.1x 12.5x 8.7x EV / Revenue Multiple 1.3x 5.1x 6.1x 5.7x 1.6x EV / Revenue Multiple 1.8x 1.2x 0.7x 0.8x 1.4x Number of Transactions 859 777 595 726 340 Number of Transactions 281 246 158 192 106 2nd Quarter 2011 Closing (Date) 2nd Quarter 2011 Closing (Date) Southwest Airlines (NYSE: LUV) acquired AirTran Holdings (NYSE: AAI) (5/2) Arch Coal (NYSE: ACI) acquired International Coal Group (NYSE: ICO) (6/14) Clayton, Dubilier & Rice acquired Emergency Medical Services (NYSE: EMS) (5/25) *Please note that 2008 does not include the UFP Technologies Inc. acquisition of Stephenson & Lawyer, Inc.Source: Capital IQPlease note:• Significant outliers were removed where indicated• Data was not available for all transactions to compute the average multiples