This document provides a summary of M&A market activity and valuations for 2011. Key points include: - Private equity groups have $490 billion of dry powder to invest in deals. However, relatively few high-performing target companies exist compared to available capital. - Valuations have rebounded from lows in 2008-2009, with total enterprise value to EBITDA multiples between 5-7x for lower middle market deals of $10-250 million. - Strategic buyers and private equity groups remain active in emerging growth and middle market M&A, seeking growth opportunities without taking on significant risk. Modest economic growth also supports the buy versus build strategy.

1. 2011 M&A Update
for Growth Companies
October 20, 2011

2. MARKET UPDATE
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3. Emerging Growth & Middle Market
Small Large
Companies Middle Market Companies
P O P U L A T I O N
5.4MM 300,000 2,000
G D P
15% 40% 45%
V A L U A T I O N
2‐3x 4‐11x 12x +
5 150 500 1,000
Revenues
($millions)
Source: Middle Market M&A (2012)
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4. A Macro View
S&P 500
Public Markets Flat for the Last 10 Years
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5. PEGs Are Flush
$160 $155.53 $490.26 $500
$140 $450
$130.05
$400
$120
$350
$100 $96.18
$300
$80 $250
$60 $200
$44.19 $150
$40 $36.10
$100
$17.87
$20 $50
$7.73
$2.62
$0 $0
2003 2004 2005 2006 2007 2008 2009 2010
Vintage Year
Cumulative Overhang Under $100M $100M‐$250M $250M‐$500M
$ in Billion
$490 + Billion of Dry Powder
Source: Pitchbook.com
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6. PEG Deal Flow
$250 900
798 725
751 742 $207 719 800
$200 648 650 700
609 613 593
521 600
$150 $144
$129$124 429 438 500
$119 526 403 394 393 388
352 326 373
321 400
$100
$76 $71 $76 300
$58 $65
$50 $42 $38 $40 200
$26 $26 $32 $28
$19 $15 $18 100
$8 $11
$‐ 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
2006 2007 2008 2009 2010 2011
Capital Invested ($B) # of Deals Closed
Source: PitchBook
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7. PEG Industry Focus
Source: Robert W. Baird & Co., M&A Market Analysis 2011
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8. Corporate Cash to Invest
$1.8+ Trillion in Cash on the S&P 500 Balance Sheets
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9. Corporate Development
Source: Deloitte Survey 2010
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10. General Factors Affecting the Market
?
?
?
Source: Robert W. Baird & Co., M&A Market Analysis 2011
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11. Global Market Activity
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12. Cross Border Deals
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13. Add‐on’s Increase
2,500 50%
48%
48%
2,000 46%
43% 44%
1401 42%
1,500 42%
1229
40%
1020 957
1,000 37% 38%
874 669
36%
620 520
500 934 34%
408 722
313 560 648
399 508 140 32%
298 383
181 185 129
0 30%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*
Source: PitchBook
Add‐on Non Add‐on Add‐On % of Buyout
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14. PEG Multiples
8.0
7.5
TEV / EBITDA
TEVs of $10‐250 million
Total Enterprise Value (TEV) / EBITDA
7.0
Total Enterprise Value*
6.5
$10mm to $25mm
$25mm to $50mm
6.0
$50mm to $100mm
$100mm to $250mm
5.5
5.0
4.5
2003 ‐ 2006 2007 2008 2009 2010 H1 2011
Year of Transaction Closing
Source: GF Data Resources
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15. Broad Valuations
12.5
73
11.5
TEV / EBITDA
10.5
Total Enterprise Value (TEV) / EBITDA
8
9.5
$1mm to $10mm
EBITDA
$10mm to $25mm
8.5
$25mm to $50mm
$50mm to $100mm
7.5
$100mm to $250mm
1
$250mm to $1B
6.5
5.5
4.5 0
2006 2007 2008 2009 2010 H1 2011
Year of Transaction Closing
*North American M&A targets of strategics and private equity investors
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16. Other Factors / Drivers of M&A Activity for 2012
• Likely change in effective taxes
• Outlook for individual segments and markets
• Need for PEGs to sell older vintage companies
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17. The Drag on Growth and the Ability
to Get Deals Done
• The bar is set high for target company performance
• Relatively few high performers vs. available capital
• Little cash flow financing for lower middle market
deals
• Time to close
• Lots of attention to emerging growth & middle
market companies
• Widening Size Premium
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18. Positive Deal Drivers
• Strategics actively seeking growth w/o betting the farm
• Target company performance improvements creating more
viable candidates
• PEGs have time pressure to invest funds
• Modest economic growth generally supports buy vs. build
• Credit markets relatively open for larger middle market deals
• Valuations are rebounding
• Cross border interest
• Lots of attention to the emerging growth & middle market
companies
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19. VALUE GAP?
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20. 20

21. Value Gap Survey
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22. Value Gap Survey
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23. The Value Gap
“Most owners do not
have a value creation
framework”
Rob Slee
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24. $$
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25. Focus on Real Value Creation
…not just growth
1 Strategic Health
(products, services, market position, etc…)
2 Management Team Strength
(without the owner / operator)
3 Dependence on the Owner
4 Scalable Infrastructure
5 Capital Formation
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26. Some Changes that Take Time
• Develop and articulate a clear growth strategy
• Measure your company’s performance as the
buyer/investors will ….GAAP
• Assemble the right deal team
• Organize and document your intellectual
capital and get ready for due diligence
• Develop a strategy to maximize after‐tax
proceeds
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