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M&A Capital Market Update 2019

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Barry Lutz panel presentation 2019 Summit

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M&A Capital Market Update 2019

  1. 1. Confidential – For Discussion & General Information Purposes Only 19th Annual Summit D&O Conference An Update on M&A and the Capital Markets December 2019 Barry Lutz Managing Director Wells Fargo Corporate & Investment Banking barry.lutz@wellsfargo.com
  2. 2. An Update on M&A and the Capital Markets 2 Macro Observations Weak global growth amidst late stage of economic cycle Significant trade and geopolitical uncertainty …And The Not So GoodThe Good… Ample liquidity and broad access to capital as cost of funding hovers near historical lows Continued strength in domestic GDP and economic fundamentals Federal Reserve supporting growth with accommodative monetary policy Record levels of corporate debt could weigh on companies in an economic downturn U.S. companies cutting back on fixed investment amidst uncertain outlook Strong consumer backdrop with low unemployment and signs of wage growth
  3. 3. An Update on M&A and the Capital Markets 3 Resurgent U.S. Equity Markets Source: FactSet, Bloomberg | Note: Data as of 12/9/19 $280.0 $772.4 $3,186.6 $4,506.3 $13,783.8 $4,744.6 $3,503.9 $171.7 $5,539.4 $1,855.0 $491.3 Jan. '19 Feb. '19 Mar. '19 Apr. '19 May. '19 June '19 Jul. '19 Aug. '19 Sep. '19 Oct. '19 Nov. '19 25.1% (37.6%) 40 50 60 70 80 90 100 110 120 130 12/31/2018 4/24/2019 8/16/2019 12/8/2019 S&P 500 VIX S&P 500 Record High 19.6% 25.1% 29.9% 95 100 105 110 115 120 125 130 135 Dec. '18 Mar. '19 Jun. '19 Aug. '19 Nov. '19 Dow Jones S&P 500 NASDAQ The S&P 500 has closed at a record high on 26 different days in 2019 There have been ~$38.8B raised in IPO proceeds in 2019 YTD; compared to ~$35.9 in 2018 at the same time last year S&P 500 Performance vs. Volatility IndexEquity Market Performance IPO Performance by Sector2019 IPO Volumes by Month ($ in MM) ($ in Millions) IPO Avg. Price Performance Sector # of Deals Volume 1-Day November 2019 YTD Financials 14 $1,558.3 6.6% 9.9% 27.7% Tech. & Svcs. 30 20,931.4 34.6% 5.1% 5.8% Healthcare 58 8,278.8 16.2% 24.3% 34.0% Industrials 3 3,504.3 3.9% 6.8% 10.1% Consumer 6 2,922.7 45.2% 15.0% 66.0% Energy & Power 5 1,420.5 2.6% (3.2%) (7.1%) Real Estate 2 219.0 - (3.4%) (4.3%) Total / Avg.(1) : 118 $38,835.0 20.1% 15.3% 24.7% S&P 500 - 3.4% 25.1% Dow Jones - 3.7% 19.6% NASDAQ - 4.5% 29.9% Avg.: - 3.9% 24.9% (1) Denotes aggregate average performance of all IPOs in 2019 YTD.
  4. 4. An Update on M&A and the Capital Markets 4 Continued Strength in Equity Issuance Amidst Heightened Investor Scrutiny IPO / Follow-On Volume Select 2019 IPO Activity ($ in Billions) Pre-IPO IPOs in 2019 have faced enhanced scrutiny from public markets as investors revert back to business fundamentals of profitability rather than top line growth at all costs Launched Canceled $16 $35 $35 $40 $52 $81 $29 $17 $36 $37 $39 $176 $123 $122 $162 $178 $150 $167 $162 $142 $131 $126 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD IPO FO 54 128 118 130 210 263 147 88 172 148 118 644 597 511 611 792 730 713 625 707 538 423 IPOs FOs Source: TrimTabs Investment Research, Barron’s, Press Releases Note: Data as of 12/9/19
  5. 5. An Update on M&A and the Capital Markets 5 Robust and Persistent M&A Market ($ in Trillions) Sector Consolidation and Scope / Capability Extension Buyer Liquidity and High Valuations Industry and Business Model Disruption Expanding Buyer Universe / Pension Funds and Family Offices Increased Market Volatility and Economic Cycle Concerns Key Themes Global and U.S. M&A Market Activity Corporate Clarity / Shareholder Activism Regulatory & Geopolitical Challenges # of Global Transactions # of U.S. Transactions $2.9 $2.0 $2.4 $2.5 $2.5 $2.3 $3.3 $4.2 $3.5 $3.3 $4.0 $3.7 $3.5 $0.9 $0.8 $0.8 $1.0 $0.9 $1.0 $1.4 $1.9 $1.6 $1.3 $1.7 $1.6 $1.7 10.8x 9.2x 10.0x 10.6x 9.7x 10.6x 12.3x 12.2x 12.1x 12.6x 13.0x 13.0x 11.8x 13.1x 9.1x 10.6x 11.4x 10.6x 10.6x 13.5x 13.5x 13.4x 14.2x 13.5x 13.5x 11.9x $0.0 $2.0 $4.0 $6.0 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018 YTD 2019 YTD Global Volume U.S. Volume Global Transaction Multiples U.S. Transaction Multiples 18,461 16,855 18,437 18,028 17,041 15,995 18,487 20,178 20,479 22,361 22,421 20,333 18,258 3,418 2,871 2,945 3,024 3,029 2,841 3,296 3,484 3,533 4,008 4,112 3,828 3,004 184 154 143 148 143 142 187 166 181 214 214 210 147 # of UT Transactions Source: Thomson Reuters Note: Based on announced date; Data as of 11/30/19; Multiples represent median transaction EV / EBITDA multiples
  6. 6. An Update on M&A and the Capital Markets 6 2,910 2,536 2,355 2,402 2,362 2,154 2,445 2,708 2,739 3,211 3,228 2,994 2,326 378 246 432 477 483 510 603 515 544 556 594 556 465 3,288 2,782 2,787 2,879 2,845 2,664 3,048 3,223 3,283 3,767 3,822 3,550 2,791 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018 YTD 2019 YTD <$200MM $200MM - $1B $92 $63 $89 $88 $95 $89 $107 $102 $103 $127 $124 $114 $96 $162 $104 $188 $202 $206 $221 $253 $225 $239 $245 $257 $241 $205 $254 $167 $278 $289 $301 $310 $360 $326 $341 $372 $381 $355 $301 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018 YTD 2019 YTD <$200MM $200MM - $1B U.S. Middle Market M&A Activity Continues, But at a Slower Pace Number of Announced M&A Transactions Dollar Volume of Announced M&A Transactions ($ in Billions) 2017-2018 Growth 1.5% 6.8% 0.5% YTD ‘18-YTD ‘19 Growth (21.4%) (16.4%) (22.3%) 2017-2018 Growth 2.5% 4.9% (2.1%) YTD ‘18-YTD ‘19 Growth (15.3%) (15.1%) (15.8%) Source: ThomsonOne Note: Data as of 11/30/19
  7. 7. An Update on M&A and the Capital Markets 7 38% 46% 57% 47% 46% 44% 46% 43% 47% 46% 45% 41% 39% 40% 26% 30% 25% 22% 24% 26% 23% 23% 23% 24% 22% 25% 25% 28% 33% 22% 18% 30% 29% 29% 30% 32% 29% 28% 32% 33% 34% 31% 3% 1% 1% 1% 1% 1% 1% 1% 1% 2% 2% 2% 2% 1% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018 YTD 2019 YTD Under $25M $25M-$100M $100M-$1B $1B+ Total Dollar Volume of Closed Private Equity Transactions in the U.S. Moderated Sponsor Deal Activity Total Transactions Based on Deal Size Private Equity investment has slowed in 2019 as GPs become more wary of downside risk when selecting investments ($ in Billions) $768 $312 $141 $281 $329 $382 $438 $535 $561 $608 $631 $727 $644 $527 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018 YTD 2019 YTD Source: PitchBook Note: Data as of 11/30/19
  8. 8. An Update on M&A and the Capital Markets 8 Competition for Quality Assets Keeping Sponsor Multiples Elevated More Deals Closed Above 10.0x Than Ever Before U.S. Financial Buyer EV / EBITDA Multiples 5.8x 7.0x 2.9x 4.6x 4.6x 4.3x 5.9x 7.2x 5.3x 5.3x 6.1x 5.8x 5.9x 4.7x 5.0x 4.1x 3.5x 4.6x 4.1x 4.1x 5.7x 4.5x 5.3x 5.8x 5.8x 6.9x 10.5x 12.0x 6.9x 8.1x 9.1x 8.4x 10.0x 12.8x 9.8x 10.5x 11.9x 11.5x 12.9x 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Debt/EBITDA Equity/EBITDA 10% 30% 39% 26% 10% 10% 16% 17% 16% 23% 13% 24% 14% 7% 13% 18% 15% 10% 13% 10% 4% 10% 12% 9% 4% 5% 29% 15% 27% 32% 40% 38% 29% 24% 29% 23% 18% 16% 19% 21% 17% 12% 16% 19% 22% 27% 26% 25% 9% 33% 20% 14% 24% 17% 3% 9% 15% 10% 10% 24% 8% 27% 19% 22% 29% 9% 9% 1% 6% 7% 8% 4% 12% 6% 7% 14% 19% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD <0x 0x - 5x 5x - 10x 10x - 15x 15x - 30x 30x+Source: PitchBook Note: Data as of 11/30/19
  9. 9. An Update on M&A and the Capital Markets 9 Barry Lutz is a managing director and head of Mountain and Southwestern Regional Investment Banking at Wells Fargo Securities. Barry is responsible for providing investment banking and capital markets advisory services to corporate and financial sponsor clients in Utah, Arizona, Colorado, Idaho, Montana, Nevada, New Mexico and Wyoming. Barry has more than 16 years of investment banking experience, providing public, private and private equity clients across industries with advice and execution for capital structure solutions, debt and equity financings and mergers and acquisitions, including the sale of the Harlem Globetrotters to Shamrock Capital, the sale of Air Medical Resource Group to KKR and Air Medical Group Holdings, the $248mm sale of Foam Fabricators to the Compass Group, the sale of Telesphere to Vonage, the acquisition of LifeProof by Otter Products, the $1.2Bn acquisition of Whistler Blackcomb by Vail Resorts, the $225mm initial public offering and $303mm follow-on offering for Carvana, the $147mm initial public offering and $115mm follow-on offering for Health Equity and the $1.5Bn and $2.3Bn convertible debt offerings for Microchip Technology. Prior to joining Wells Fargo Securities, Barry worked in investment banking at Credit Suisse and UBS. He also served for four years as an enlisted member of the U.S. Air Force and is a graduate of the USAF Officer Training School. Barry earned a B.S., with honors, from the University of Arizona and an M.B.A., with honors, from the University of Chicago Booth School of Business. Barry W. Lutz Managing Director, Head of Mountain and Southwestern Regional Investment Banking Speaker Biography
  10. 10. An Update on M&A and the Capital Markets 10 Disclaimer This document and any other materials accompanying this document (collectively, the “Materials”) are provided for general informational purposes. By accepting any Materials, the recipient thereof acknowledges and agrees to the matters set forth below in this notice. Wells Fargo Securities makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in the Materials. Information in the Materials is preliminary and is not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in the Materials represent the judgment of Wells Fargo Securities at this time, and are subject to change without notice. Interested parties are advised to contact Wells Fargo Securities for more information. The Materials are not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described herein. The Materials are not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. No person providing any Materials is acting as fiduciary or advisor with respect to the Materials. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the Materials. Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a member of NYSE, FINRA, NFA and SIPC, Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, and Wells Fargo Bank, N.A. Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC are distinct entities from affiliated banks and thrifts. Notwithstanding anything to the contrary contained in the Materials, all persons may disclose to any and all persons, without limitations of any kind, the U.S. federal, state or local tax treatment or tax structure of any transaction, any fact that may be relevant to understanding the U.S. federal, state or local tax treatment or tax structure of any transaction, and all materials of any kind (including opinions or other tax analyses) relating to such U.S. federal, state or local tax treatment or tax structure, other than the name of the parties or any other person named herein, or information that would permit identification of the parties or such other persons, and any pricing terms or nonpublic business or financial information that is unrelated to the U.S. federal, state or local tax treatment or tax structure of the transaction to the taxpayer and is not relevant to understanding the U.S. federal, state or local tax treatment or tax structure of the transaction to the taxpayer. All information provided in this presentation represents the views of Wells Fargo Securities’ Investment Banking and Equity Capital Markets team, and not the independent views of our Research Analysts. Wells Fargo Securities has adopted policies and procedures designed to preserve the independence of our Research Analysts, whose views may differ from those presented herein. IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in the Materials is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. ©2019 Wells Fargo Securities. All rights reserved.

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