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

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

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

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  • 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.