DISCUSSION OF US M&AAND FINANCING TRENDS · Real Estate Lending ... Real Estate Investment Trusts CRE Syndications ... II. US M&A FINANCING TRENDS. US M&A AND M&A RELATED LENDING

DISCUSSION OF US M&A AND

FINANCING TRENDS

PRESENTED TO:

APRIL 19, 2016

TABLE OF CONTENTS

I. US M&A Activity and Trends

II. US M&A Financing Trends

III. Middle Market Lender Environment

LEADING MIDWEST BANKING FRANCHISE

1 – Period end as of September 30, 2015; Loan pie chart excludes $0.4 billion installment and credit card portfolio2 – Includes Missouri, Indiana, Ohio, Michigan and Iowa

18611999

2006

1987

2011 2011

2012

Deposits

> $2 billion

> $1 billion

> $300 million

Associated Bank has over 200 banking locations serving more than 100 communities throughout Wisconsin, Illinois and Minnesota with commercial financial services offices in Indiana, Michigan, Missouri, Ohio and Texas.

WI37%

IL24%

MN12%

In Footprint

11%

Other16%

Third Quarter 20151

WI66%

IL27%

MN7%

Deposits

$20.6 billion

Loans

$18.5 billion

2

2

ASSOCIATED PROFILE

As of December 31, 2015, Associated Banc-Corp (NYSE: ASB) is one of the TOP 50,

publicly traded, U.S. bank holding companies and the parent of Associated Bank,

National Association:

Associated is known for its STRONG RELATIONSHIPS with the customers and

communities it serves:

Assets

$27.7 Billion

Loans

$18.7 Billion

Deposits

$21 Billion

Market Capitalization

$2.8 Billion

Employees

4,400Customers

1 Million

3

CREDIT RATINGS OF LEADING BANKS

Associated Bank, National Association Enjoys a Strong Credit Rating

Leading Banks in the

Midwest

Moody’s

Long-Term Rating

U.S. Bank Aa1

Wells Fargo Bank Aa1

JPMorgan Chase Bank Aa2

PNC Bank Aa2

Comerica Bank Aa3

FirstMerit Bank Aa3

Fifth Third Bank Aa3

Bank of America A1

Citibank A1

Associated Bank A1

TCF Bank A2

First Midwest Bank A2

Johnson Bank Not Rated

MB Financial Bank Not Rated

PrivateBank Not Rated

Wintrust Not Rated

Anchor Bank (ABCW) Not Rated

Source: SNL Financial, October 2015

US Bank, Wells Fargo

JP Morgan, PNC

Comerica, FirstMerit, Fifth Third

Associated Bank, Bank of America, Citibank

TCF, First Midwest

Johnson, MB Financial, Private Bank, Wintrust, Anchor Bank

Aa1

Aa2

Aa3

A1

A2

N/R

4

Corporate and

Specialized

Lending

Consumer and

Business

Banking

Private Client

and Institutional

Services

Commercial

Real Estate

Lending

Private Banking

Personal Trust

Asset Management

Retirement Plan

Services

Associated

Financial Group

Associated

Investment

Services

Community

Markets

Branch Banking

Commercial

Banking

Residential

Lending

Payments and

Direct Channels

Corporate

Commercial and

Specialized

Lending

Commercial

Deposits and

Treasury

Management

Capital Markets

Community, Consumer, and Business Corporate and Commercial

Specialty

Rochester, MN

Eau Claire, WI

La Crosse, WI

Central Wisconsin

Rockford, IL

Peoria, IL

Southern Illinois

CRE Lending

Real Estate

Investment Trusts

CRE Syndications

CRE Tax Credits

FULL RANGE OF FINANCIAL PRODUCTS &

SERVICES

5

I. US M&A ACTIVITY AND TRENDS

I. US M&A ACTIVITY AND TRENDS

GLOBAL M&A VOLUMEGlobal M&A Deal Activity

Source: Thomson Reuters 8

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

200

4

200

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200

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200

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200

8

200

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201

0

201

1

201

2

201

3

201

4

201

5

M&

A d

ea

l a

cti

vit

y

($B

ln)

US Americas (ex. US) Europe Asia Pacific Japan Africa/Middle East

• Global M&A deal activity surpassed $4.5 trillion in 2015, up 42% from 2014 levels.

• US M&A deal activity totaled more than $2.3 trillion, up 64% from 2014 levels.

US M&A PREMIUM TRENDS

9

Average Premium for US Transactions

• Historical takeover premiums in the US have ranged from 20-40%.

Source: Bloomberg

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Av

era

ge

Pre

miu

m

US M&A MULTIPLE TRENDS

10

Median Deal Multiples for US Transactions

• Recent transaction multiples in the US troughed in 2009 but have rebounded significantly in 2015.

• Data quality is imperfect but trend is directionally accurate.

Source: Bloomberg

7.5x

12.5x

17.5x

22.5x

27.5x

32.5x

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Me

dia

n T

ran

sa

cti

on

Mu

ltip

les

(x

:1)

Net Income EBITDA

US M&A DEAL TRENDS AND DRIVERS

11

Trends

• Record high deal flow and volume in 2015.

• Increase in number of very large transactions in 2015.

• Companies have repaired balance sheets and optimized shareholder payout.

– Considering investment opportunities (both organic and M&A).

• Increasing transaction multiples.

• Increased stock market volatility.

Drivers

• High corporate cash balances.

• Historically-low interest rates.

• Low-growth environment with economic statistics mixed to benign.

• Shareholder activism.

• Tax efficiency strategies.

• High dollar, low oil may reflect diminishing global growth.

Source: Ramirez & Co.

II. US M&A FINANCING TRENDS

US M&A AND M&A RELATED LENDINGUS M&A and M&A Lending Activity

Source: Thomson Reuters 13

• Aggregate US M&A related lending totaled $546 billion in 2015, up ~20% from 2014.

$0

$400

$800

$1,200

$1,600

$2,000

$2,400

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

M&

A D

ea

l a

nd

Lo

an

Vo

lum

e($

bln

)

M&A-related loans M&A deal activity

Sr.

Unsecured

Bond

Sr. Secured Loan

GENERAL FINANCING STRUCTURE BY MARKET

14Source: Thomson Reuters LPC

Investment grade market

• Loans to companies rated >= BBB-/Baa3 AND

with a relatively low LIBOR spread

• Loan is usually unsecured and ranked pari

passu with bonds

Sr.

Unsecured

Loan

Equity

Capital

Structure

Leveraged market

• Loans to companies rated <= BB+/Ba1 or

unrated AND a relatively higher LIBOR spread

• Loan is usually secured and ranked senior to all

other debt in the capital structure Equity

Sub. Unsecured BondCapital

Structure

Sr. Secured Loan

Equity

Sub. Debt – Mezzanine,

2nd Lien, etc.

Capital

Structure

Middle market

• Generally defined by Reuters as loans to companies with revenue and bank facility <=$500MM

• Loan is usually secured and ranked senior to all other debt in the capital structure

US INVESTMENT GRADE BRIDGE LOAN VOLUMEUS Investment Grade Bridge Loan Issuance

Source: Thomson Reuters LPC 15

• US investment grade bridge loan issuance set a record in 2015 with $135 billion of volume.

• Aggregate investment grade M&A related issuance totaled $181 billion in 2015.

0

5

10

15

20

25

30

$0

$20

$40

$60

$80

$100

$120

$140

$160

200

6

200

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200

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200

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201

0

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# o

f d

ea

ls

US

IG

bri

dg

e lo

an

is

su

an

ce

($ b

ln)

Volume ($B.) No. of Deals

US LEVERAGED LOAN M&A ISSUANCEUS M&A Leveraged Loan Issuance


• M&A leveraged loan volume continued to grow in 2015, posting its second highest year ever.

• Non-LBO issuance was up 49%, while LBO activity fell 22%.

• During 2015, private equity firms faced stiff competition from strategic buyers for assets.

$0

$50

$100

$150

$200

$250

$300

$350

$400

200

6

200

7

200

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200

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201

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201

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M&

A l

eve

rag

ed

lo

an

is

su

an

ce

($

bln

)

LBOs Non-LBO

MIDDLE MARKET NON-SPONSORED M&A


• M&A activity totaled $9.2 billion in 2015, down 25% from 2014.

US Middle Market Non-Sponsored M&A Activity

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$5

$10

$15

$20

$25

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

M&

A %

of

To

tal

No

n-S

po

ns

ore

d M

&A

Vo

l ($

bln

) M&A Vol M&A % of Total

MIDDLE MARKET SPONSORED M&A


• 2015 LBO volume totaled $18.9 billion (38% of sponsored issuance), an 8% drop from 2014.

• Secondary buyouts represented 43% of the total LBO volume in 2015, up from 36% in 2014.

US Middle Market Sponsored LBO Activity

0%

10%

20%

30%

40%

50%

60%

$0

$5

$10

$15

$20

$25

$30

$35

20

06

20

07

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08

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09

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10

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11

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13

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14

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15

LB

O %

of

To

tal

Sp

on

so

red

LB

O V

olu

me

($

bln

)

LBO Vol LBO % of Total

LBO TRENDS IN SPONSORED MIDDLE MARKET


• Elevated regulatory pressure to more closely adhere to the leveraged lending guidance has impacted market activity,

especially in the large corporate space.

• Average leverage for large corporate LBOs dropped from 6.55x in 2014 to 5.96x in 2015.

• The middle market has been less affected but has been more conservative historically.

Debt/EBITDA: Middle Market vs. Broadly Syndicated

2.50

3.50

4.50

5.50

6.50

7.50

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

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15

LB

O D

eb

t to

EB

ITD

A (

x:1

)

Institutional Middle Market Broadly Syndicated Market



• Average equity contributions for large corporate LBOs continued to climb into the high 30% area (38.6%) in 2015.

• Middle market LBO equity contributions ticked up to 45.9% in 2015.

Equity Portion: Middle Market vs. Broadly Syndicated

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

LB

O E

qu

ity

Co

ntr

ibu

tio

n

Institutional Middle Market Broadly Syndicated Market



• The middle market has been more conservative historically when it comes to leverage.

• Leverage increased in 2015 to 4.5x first lien / 5.7x total from 4.3x/5.4x in 2014.

Middle Market LBO Debt and Equity Contribution

25%

30%

35%

40%

45%

50%

55%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

20

06

20

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US

MM

LB

O E

qu

ity

Co

ntr

ibu

tio

n

US

MM

LB

O D

eb

t to

EB

ITD

A (

x:1

) 1st-Lien Debt Total Debt Equity Contrib.

III. MIDDLE MARKET LENDER ENVIRONMENT

MIDDLE MARKET LENDER LANDSCAPEInvolved Parties Transaction Permutations

23

• All Bank Senior

• Stretch Senior or First Out / Last Out

• Bank / Mezzanine

• Bank / Institutional 1st Lien

• Bank / Institutional 1st Lien / Institutional 2nd Lien

• Unitranche

• Regulated Banks

• Non-Regulated FinCos

• CLOs (Collateralized Loan Obligations)

• Insurance Companies

• Retail Loan Funds

• BDCs (Business Development Companies)

• Private Equity Funds

• Mezzanine Funds

• Hedge Funds & Credit Opportunity Funds

Financing Considerations and Tradeoffs

• Relationship and historical experience

• Risk and leverage tolerance

• Certainty of execution

• Investor approach – buy and hold vs. desire for liquidity

• Flexibility (covenants, documentation, etc.)

• All-in cost

• Intercreditor matters

US CLO ASSETS UNDER MANAGEMENTUS CLO Assets Under Management


• US CLO assets under management is now at $423 billion

500

550

600

650

700

750

800

850

900

950

1,000

1,050

1,100

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

Ja

n-1

3

Ma

r-13

Ma

y-1

3

Ju

l-1

3

Sep

-13

No

v-1

3

Ja

n-1

4

Ma

r-14

Ma

y-1

4

Ju

l-1

4

Sep

-14

No

v-1

4

Ja

n-1

5

Ma

r-15

Ma

y-1

5

Ju

l-1

5

Sep

-15

No

v-1

5

Ja

n-1

6

Nu

mb

er

of

CL

Os

CL

O A

gg

reg

ate

Pri

nc

ipa

l B

ala

nc

e

($ B

ln)

CLO APB Number of CLOs in sample

US LOAN FUNDS UNDER MANAGEMENTUS Mutual Funds and ETFs - Assets Under Management

25

• Loan mutual fund & ETF assets under management continue to decline as outflows continued and asset values fell.

• Total assets under management stand at $107 billion, the lowest level since February 2013.

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

$200.0

Ja

n-1

3

Ma

r-13

Ma

y-1

3

Ju

l-1

3

Sep

-13

Nov-1

3

Ja

n-1

4

Ma

r-14

Ma

y-1

4

Ju

l-1

4

Sep

-14

Nov-1

4

Ja

n-1

5

Ma

r-15

Ma

y-1

5

Ju

l-1

5

Sep

-15

Nov-1

5

Ja

n-1

6

Lo

an

Mu

tua

l F

un

d &

ET

F A

UM

($

Bln

)

Source: Thomson Reuters LPC, Lipper

CLO ISSUANCE AND LOAN FUND FLOWSMonthly CLO Issuance and Loan Fund Flows

Source: Thomson Reuters LPC, Wells Fargo, Lipper 26

• US CLO issuance is off to a slow start in 2016. Volume was $2.1 billion in February, up from $826 million in January.

• Meanwhile, loan funds saw another $2.5 billion of outflows in February, the seventh straight month of outflows.

-$8.0

-$6.0

-$4.0

-$2.0

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0Ja

n-1

3

Ma

r-13

Ma

y-1

3

Ju

l-1

3

Sep

-13

Nov-1

3

Ja

n-1

4

Ma

r-14

Ma

y-1

4

Ju

l-1

4

Sep

-14

Nov-1

4

Ja

n-1

5

Ma

r-15

Ma

y-1

5

Ju

l-1

5

Sep

-15

No

v-1

5

Ja

n-1

6

$ B

ln

CLO Issuance Loan fund flows

INVESTOR SHARE OF INSTITUTIONAL LOANSShare of Institutional Loan Balances by Investor Type

Source: Thomson Reuters LPC, Lipper 27

• The CLO share of institutional loan balances is roughly 50%.

• Loan mutual funds & ETF market share is down to 12% following consistent outflows.

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

Ja

n-1

3

Ma

r-13

Ma

y-1

3

Ju

l-1

3

Sep

-13

Nov-1

3

Ja

n-1

4

Ma

r-14

Ma

y-1

4

Ju

l-1

4

Sep

-14

Nov-1

4

Ja

n-1

5

Ma

r-15

Ma

y-1

5

Ju

l-1

5

Sep

-15

Nov-1

5

Ja

n-1

6

Inve

sto

r s

ha

re o

f in

sti

tuti

on

al lo

an

o

uts

tan

din

gs

(%

)

CLOs Loan Funds Other

US BDC PORTFOLIO BALANCESEstimated BDC Portfolio Balances

28

• Estimated BDC portfolio balances stand at $87 billion as of 4Q 2015.

Source: Wells Fargo Securities

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.01

Q0

6

2Q

06

3Q

06

4Q

06

1Q

07

2Q

07

3Q

07

4Q

07

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

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4Q

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1Q

11

2Q

11

3Q

11

4Q

11

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12

2Q

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13

2Q

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2Q

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15

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$ B

ln

PRODUCTS AND SERVICES. Associated Bank and affiliates offer a variety of products and services, some of which are in this

presentation. Such products and services are subject to applicable underlying agreements for such products and services. These

disclosures are intended to supplement underlying product and service agreements and such underlying product and service

agreements control in cases of conflicting provisions. Not all products and services are available in all geographic areas and the

terms and fees of such products and services may vary by geographic region. Product information is subject to change without

notice. Your eligibility for products and services is subject to review and acceptance by the Associated affiliate providing such

products or services.

Deposit and loan products are offered by Associated Bank, N.A. Associated Bank, N.A. is an affiliate of Associated Banc-Corp.

Associated Bank, N.A. is a Member FDIC, an Equal Housing Lender and an Equal Opportunity Lender. Loan products are subject

to credit approval and involve interest and other costs. Please ask about details on fees, conditions and terms of these products.

***Non-deposit investment products are NOT deposits or obligations of, insured or guaranteed by Associated Bank, N.A. or any

bank or affiliate, are NOT insured by the FDIC or any agency of the United States, and involve INVESTMENT RISK, including

POSSIBLE LOSS OF VALUE.

SECURITIES AND ADVISORY SERVICES (OTHER THAN THOSE PROVIDED BY REPRESENTATIVES OF ASSOCIATED

FINANCIAL GROUP, LLC) ARE OFFERED BY ASSOCIATED INVESTMENT SERVICES, INC (“AIS”) , member FINRA and

SIPC, d/b/a Associated Investment Services Group in Minnesota. • Insurance products are offered by licensed agents of

Associated Financial Group, LLC (“AFG”). • SECURITIES AND ADVISORY SERVICES PROVIDED BY REPRESENTATIVES

OF AFG ARE OFFERED BY LPL FINANCIAL , member FINRA and SIPC. • Investment management services are provided by

representatives of AFG through Financial Resource Management Group, Inc. d/b/a AFG Financial Services ("FRMG”). • Fiduciary,

administrative, and planning services are provided by Associated Trust Company, N.A. (“ATC”). Investment management

services are provided to ATC by Kellogg Asset Management, LLC ® (“KAM”), an SEC-registered investment adviser. • Securities

and insurance products are offered are NOT deposits or obligations of, insured or guaranteed by Associated Banc-Corp

(“AB-C”) or any bank or affiliate, are NOT insured by the FDIC or any agency of the United States, and involve

INVESTMENT RISK, including POSSIBLE LOSS OF VALUE . • Advisory services may not be available in all locations. • AIS,

AFG, FRMG, ATC and KAM are all affiliates of AB-C. • LPL is NOT an affiliate of AB-C.

Associated Private Client Services, Associated Institutional Trust Services, and HR Solutions are marketing names AB-C uses for

products and services offered by Associated Bank, ATC, KAM and AFG.

Associated Merchant Services is a contractual alliance between Associated Bank N.A. (AB) and First Data Merchant Service

Corporation.

Neither Associated Banc-Corp nor any of its affiliates give tax or legal advice. Consult with your tax and/or legal advisor for

information specific to your situation.

All trademarks, service marks and trade names referenced in this material are the property of their respective owners.

DISCLOSURES

Documents

DISCUSSION OF US M&AAND FINANCING TRENDS · Real Estate Lending ... Real Estate Investment Trusts CRE Syndications ... II. US M&A FINANCING TRENDS. US M&A AND M&A RELATED LENDING