Manufacturing Report Q2 2016 · REPORT Q2 2016 Explore M&A Activity, Capital Market Conditions and Current Trends for the ... noticeably seen inthe auto industry,where auto sales

720.221.9220 | SDRVENTURES.COMInvestment Banking & Securities Offered Through SDR Capital Markets, Inc., Member FINRA & SIPC.

MANUFACTURING REPORT

Q2 2016

Explore M&A Activity, Capital Market Conditions and Current Trends for the

Manufacturing Industry

http://sdrventures.com/

720.221.9220 | SDRVENTURES.COMInvestment Banking and Securities Offered Through SDR Capital Markets, Inc., Member FINRA and SIPC.

MANUFACTURING REPORTQ2 2016 | VOL 4 | ISSUE 2

U.S. MANUFACTURING RECOVERYThe Institute of Supply Management’s Manufacturing Index (ISM) hit its highestlevel in 16 months at 53.2 in June, compared to a May index of 51.3. Ameasure above 50 for the index indicates that manufacturing activity in theU.S. is expanding while a measure below 50 indicates contraction. The indexhas been on an overall rise since the beginning of this year when it hit a two-year low of 48.0, showing a strong recovery for U.S. Manufacturing.

Top of mind for many U.S. Manufacturers within the recovery is the effect ofBrexit and the impact on the dollar. On June 23, ISM surveyed U.S.Manufacturers and a strong majority believe that the Brexit will have a negligibleimpact on their business strategy. With many U.S. Manufacturers focused on thedomestic market, it’s likely that the global economic turmoil will only have aminimal to modest effect on the industry. One of the key drivers ofmanufacturing growth has been the strength of the U.S. consumer. Consumerconfidence and consumer spending remain high in the U.S. This is mostnoticeably seen in the auto industry, where auto sales hit a record high in 2015,and car parts manufacturers are reaping the benefits of low gasoline prices.

A RESURGENCE IN U.S. MANUFACTURINGCost increase in China has been said to be the leading cause for increased U.S.manufacturing. However, a recent study by AT Kearney shows that thereshoring of manufacturing is not happening as fast as one would think. In fact,many global manufacturers are moving their manufacturing facilities fromChina to other Asian countries. According to the AT Kearney Reshoring Index,in the past five years there has been net offshoring of manufacturing (i.e.,companies offshore manufacturing more often than companies returning toU.S. manufacturing).

So what has been the cause of recovery of U.S. manufacturing? It has beenhighly reliant on vertically focused manufacturing in highly technical goods. Inthese technical industries, U.S. companies not only have lower cost solutionsbut also the people, engineering processes and technology to manufacturehighly technical capital goods. With every dollar invested in the Manufacturingsector generating $1.40 for the economy, the highest multiplier of any sector,manufacturing investment proves to be highly valuable as indicated by recentU.S. transactions such as Honeywell’s acquisition of Intelligrated and H-DAdvanced Manufacturing’s acquisition of Numeric Machine. These transactionshave proven that companies that have created unique manufacturing andengineering processes are highly valued in the marketplace.

ISM PURCHASING MANAGERS INDEX

2

The information contained herein is based on sources we believe reliable but is not guaranteed by us and is not to be considered all-inclusive. It is notto be construed as an offer or consultation of an offer to sell or buy any securities.

Established in 2002, SDR Ventures hasdeveloped deep M&A and capitaltransaction knowledge and expertise.SDR offers transaction advisory, privatecapital formation and businessconsulting services across a wide rangeof industries. We serve business ownersand operators of privately heldcompanies and provide them with aprofessional-class experience.

ABOUT SDR

Transaction ActivityActive BuyersPublic BasketM&A Market ActivityAbout SDR Ventures

MANUFACTURING CONTACTS

CONTENTS

Travis ConwayManaging Director –Manufacturing [email protected]

Anthony WongVice President –Manufacturing [email protected]

51.353.2

4045505560

*Source: Institute of Supply Management’s Manufacturing Index


mailto:[email protected]


720.221.9220 | SDRVENTURES.COM


Investment Banking and Securities Offered Through SDR Capital Markets, Inc., Member FINRA and SIPC.

Date Target Buyer(s) SegmentAmount($ in Mil)

TEV/Rev

TEV/EBITDA

6/29/2016 Sector 9 Inc. Bravo Sports Corporation Durable Consumer 12.0 - -

6/27/2016 Heartware International Inc. Medtronic, Inc. Medical 1,254.6 - 4.07x

6/21/2016 American Science & Engineering Inc. OSI Systems, Inc. Aerospace & Defense 264.1 - 1.77x

6/16/2016 Dejana Truck & Utility Equipment Co., Inc.

Douglas Dynamics, Inc. Industrial 206.0 - 1.42x

5/27/2016 Blue Bird Corporation American Securities Industrial 70.7 6.72x 0.47x

5/18/2016 Cambridge International, Inc. Rexnord Corporation (NYSE:RXN)

Industrial 210.0 - -

5/13/2016 Great Plains Manufacturing, Incorporated Kubota U.S.A. Inc. Industrial 430.0 - -

5/2/2016 Symmetry Surgical Inc. RoundTable Healthcare Management, LLC

Medical 153.4 15.64x 1.69x

4/20/2016 Hansen Medical, Inc. Auris Surgical Robotics, Inc.

Medical 113.9 - 7.61x

3

ACCESS FULL LISTNote: These data represent recorded transactions only, and are not all-inclusive. Nevertheless, they are typically representative of the industry.

16 46

93

51 64 65

- 20 40 60 80

100

20 or more transactions

11-20 transactions

1-10 transactions

0 transactions

TRANSACTIONS BY SEGMENT TRANSACTIONS BY TYPE

TRANSACTIONS BY LOCATION

TRANSACTION ACTIVITY

Source: S&P Capital IQ



Strategic48%Financial

52%


http://sdrventures.com/manufacturing-ma-update/



Investment Banking and Securities Offered Through SDR Capital Markets, Inc., Member FINRA and SIPC. 4

ACTIVE BUYERSMOST ACTIVE STRATEGIC BUYERS

Note: These data represent recorded transactions only, and are not all-inclusive. Nevertheless, they are typically representative of the industry.

SELECT SPONSORS WITH ACTIVE PORTFOLIO HOLDINGSSource: S&P Capital IQ


Strategic Buyer Inv. Date Select Corporate Acquisitions

US LBM Holdings, LLC 6/1/2016 • Raymond Building Supply Corporation3/31/2016 • American Lumber Corporation1/7/2016 • Darby Doors, Inc.12/23/2015 • NexGen Inc.2/1/2015 • Parker's Building Supply

Medtronic plc 5/31/2016 • Responsive Orthopedics LLC2/1/2016 • Bellco S.r.l.11/18/2015 • Aircraft Medical Limited11/10/2015 • Cardiored S.A.9/28/2015 • Lazarus Effect, Inc

MW Industries, Inc. 2/16/2016 • USA Fastener Group, Inc.10/30/2015 • Precision Manufacturing Group, Inc.2/9/2015 • Helical Products Company, Inc.1/5/2015 • Maudlin & Sons Mfg. Co., Inc.6/30/2014 • HI-Performance Fastening Systems, Inc.

TransDigm Group Incorporated 12/31/2015 • Breeze-Eastern Corporation8/19/2015 • PneuDraulics, Inc.5/14/2015 • Pexco Aerospace, Inc.3/26/2015 • Telair International GmbH and Nordisk Aviation Products a.s. and AAR Cargo System3/31/2015 • Franbke Aquarotter GmbH, Mobile Systems Business (nka: Adams Rite Aerospace

GmbH)Precision Castparts Corporations 11/10/2015 • Andrews Laser Works Corporation

10/30/2015 • Noranco Inc.7/21/2015 • Composites Horizons, Inc.5/6/2015 • Alu-Forge, Inc.4/24/2015 • Press Forge Company

Strategic Buyer Inv. Date Platform Investment(s) Select Holdings

The Riverside Company 5/9/2016 Elite Sportswear, L.P. • Jade Swimwear L.P3/29/2016 • Bentley Laboratories Llc12/16/2015 • The Marena Group, LLC8/31/2015 • Elite Sportswear, L.P.3/25/2014 Harvey Tool Company, LLC • Harvey Tool Company, LLC

Tenex Capital Management 3/14/2016 • Thermoforming Technology Group, LLC12/1/2015 Ohio Medical Corporation • Ohio Medical Corporation12/5/2013 US GreenFiber, LLC • US GreenFiber, LLC10/8/2013 • JPW Industries, Inc.7/30/2013 • Roscoe Medical, Inc.

Bain Capital Private Equity 12/21/2015 • Big Tex Trailer Manufacturing, Inc.8/20/2014 • TOMS Shoes, LLC4/7/2014 • The Manischewitz Company, Inc.10/10/2012 • Apex Tool Group, LLC

Altamont Capital Partners 10/23/2013 • Mervin Manufacturing, Inc.7/16/2013 • Da Kine Hawaii, Inc.7/1/2013 • Blue Ribbon Sausage & Bacon, LP and Richards Cajun

Foods Corp. and Carlton Foods Corporation12/17/2012 • Cascade Windows, Inc.

ShoreView Industries 3/3/2016 Edstrom Industries, Inc. • Edstrom Industries, Inc.7/20/2015 • SOURIAU PA&E, Inc.6/23/2014 • Mori Lee, LLC8/13/2013 • RollEase Acmeda Inc.1/21/2013 • MI Windows and Doors, LLC





PUBLIC BASKET

5


MANUFACTURING SEGMENTS VS. S&P 500Running 12 Months

-20.00%

-10.00%

0.00%

10.00%

20.00%

6/30/2015 8/31/2015 10/31/2015 12/31/2015 2/29/2016 4/30/2016 6/30/2016

Aerospace & Defense Building Products Durable Consumer IndustrialNon-Durable Consumer Medical S&P 500

Source: S&P Capital IQDURABLE CONSUMER

Company Name Symbol Market Cap($ in Mil) Price Stock Price

Quarter Change YTD Change Price/ LMT EPS

Price/ Book

TEV/ Rev

TEV/ EBITDA

Newell Brands Inc. NYSE:NWL $22,181 $49 9.7% 10.2% 27.9x 7.3x 4.3x 24.8x

Whirlpool Corp. NYSE:WHR $12,659 $167 (7.6%) 13.5% 19.8x 2.7x 0.9x 8.6x

Hanesbrands Inc. NYSE:HBI $9,487 $25 (11.3%) (14.6%) 21.3x 10.0x 2.2x 12.6x

Gildan Activewear Inc. NYSE:GIL $8,856 $29 (3.9%) 3.2% - - 2.9x 14.3x

Brunswick Corporation NYSE:BC $4,107 $45 (5.5%) (10.3%) 16.2x 3.1x 1.0x 8.0x

Tupperware Brands Corporation

NYSE:TUP $2,842 $56 (2.9%) 1.1% 16.0x 16.8x 1.6x 9.6x

G-III Apparel Group, Ltd. NasdaqGS:GIII $2,084 $46 (6.5%) 3.3% 19.9x 2.3x 0.8x 9.7x

La-Z-Boy Incorporated NYSE:LZB $1,361 $28 4.0% 13.9% 18.5x 2.5x 0.8x 8.4x

Culp, Inc. NYSE:CFI $339 $28 5.4% 8.5% 19.8x 2.6x 0.9x 8.4x

Flexsteel Industries Inc. NasdaqGS:FLXS $303 $40 (9.3%) (10.3%) 13.9x 1.5x 0.6x 6.8x

Johnson Outdoors Inc. NasdaqGS:JOUT $252 $26 15.7% 17.4% 13.4x 1.2x 0.5x 5.8x

CSS Industries Inc. NYSE:CSS $243 $27 (4.0%) (5.5%) 14.3x 0.9x 0.5x 4.6x

Delta Apparel Inc. AMEX:DLA $174 $23 17.8% 60.6% 21.6x 1.2x 0.7x 10.1x

Escalade Inc. NasdaqGM:ESCA $146 $10 (13.0%) (22.7%) 17.7x 1.5x 1.1x 9.3x

Black Diamond, Inc. NasdaqGS:BDE $128 $4 (8.4%) (6.3%) NM 0.7x 0.3x NM

Segment Average $4,344 (1.3%) 4.1% 18.5x 3.9x 1.3x 10.1x

Source: S&P Capital IQNON-DURABLE CONSUMER



Price/ Book

TEV/ Rev

TEV/ EBITDA

Colgate-Palmolive Co. NYSE:CL $65,369 $73 3.6% 9.9% 29.4x NM 4.5x 16.4x

General Mills, Inc. NYSE:GIS $42,393 $71 12.6% 23.7% 27.2x 8.6x 3.1x 14.8x

Campbell Soup Company NYSE:CPB $20,534 $67 4.3% 26.6% 29.4x 12.3x 3.0x 15.0x

The Clorox Company NYSE:CLX $17,899 $138 9.8% 9.1% 28.4x 69.1x 3.4x 15.5x

Church & Dwight Co. Inc. NYSE:CHD $13,204 $103 11.6% 21.2% 33.6x 6.9x 4.1x 18.0x

Coty Inc. NYSE:COTY $8,813 $26 (6.6%) 1.4% 38.2x 19.9x 3.0x 17.2x

Edgewell Personal Care Company

NYSE:EPC $5,010 $84 4.8% 7.7% 35.1x 2.7x 2.7x 16.1x

Avon Products Inc. NYSE:AVP $1,649 $4 (21.4%) (6.7%) 17.7x NM 0.6x 8.4x

Inter Parfums Inc. NasdaqGS:IPAR $887 $29 (7.5%) 19.9% 31.0x 2.3x 1.8x 12.8x

Segment Average $19,529 1.2% 12.5% 30.0x 17.4x 2.9x 14.9x






PUBLIC BASKET (CONTINUED)

6

AEROSPACE & DEFENSE




Price/ Book

TEV/ Rev

TEV/ EBITDA

Honeywell International Inc. NYSE:HON $88,649 $116 3.8% 12.3% 22.3x 4.9x 2.5x 12.3x

The Boeing Company NYSE:BA $82,729 $130 2.3% (10.2%) 19.9x 20.6x 0.9x 9.6x

General Dynamics Corporation NYSE:GD $42,558 $139 6.0% 1.4% 17.3x 4.1x 1.4x 9.4x

Airbus Group SE ENXTPA:AIR $40,332 $52 (11.3%) (16.6%) 27.3x 5.1x 0.7x 8.2x

Mohawk Industries Inc. NYSE:MHK $14,060 $190 (0.6%) 0.2% 22.0x 2.7x 2.1x 11.6x

TransDigm Group Incorporated NYSE:TDG $13,970 $264 19.7% 15.4% 30.8x NM 7.3x 16.4x

Textron Inc. NYSE:TXT $9,828 $37 0.3% (13.0%) 16.0x 2.0x 1.0x 8.2x

Spirit AeroSystems Holdings, Inc.

NYSE:SPR $5,118 $43 (5.2%) (14.1%) 11.8x 2.4x 0.8x 5.3x

B/E Aerospace Inc. NasdaqGS:BEAV $4,719 $46 0.1% 9.0% 18.6x 50.5x 2.4x 11.3x

Bombardier Inc. TSX:BBD.B $4,395 $2 47.0% 44.8% 127.7x NM 0.6x 16.3x

HEICO Corporation NYSE:HEI $3,953 $67 11.1% 22.9% 34.0x 5.0x 3.6x 15.2x

Curtiss-Wright Corporation NYSE:CW $3,750 $84 11.3% 23.0% 24.4x 2.9x 2.0x 11.1x

Esterline Technologies Corp. NYSE:ESL $1,821 $62 (3.2%) (23.4%) 26.4x 1.2x 1.3x 10.2x

Triumph Group, Inc. NYSE:TGI $1,758 $36 12.8% (10.7%) NM 1.9x 0.8x NM

RBC Bearings Inc. NasdaqGS:ROLL $1,686 $73 (1.0%) 12.2% 24.8x 2.7x 3.4x 13.9x

Aerojet Rocketdyne Holdings, Inc.

NYSE:AJRD $1,175 $18 11.6% 16.7% 48.4x NM 1.0x 10.9x

Ducommun Inc. NYSE:DCO $221 $20 29.7% 21.9% 73.4x 1.1x 0.6x 9.0x


Source: S&P Capital IQBUILDING PRODUCTS



Price/ Book

TEV/ Rev

TEV/ EBITDA

Mohawk Industries Inc. NYSE:MHK $14,060 $190 (0.6%) 0.2% 22.0x 2.7x 2.1x 11.6x

USG Corporation NYSE:USG $3,932 $27 8.7% 11.0% 19.8x 2.6x 1.4x 8.9x

Armstrong World Industries, Inc.

NYSE:AWI $2,172 $39 (19.1%) (14.4%) 20.6x 2.8x 1.2x 8.4x

Advanced Drainage Systems, Inc.

NYSE:WMS $1,490 $27 28.5% 13.9% 72.2x 7.0x 1.7x 14.6x

Apogee Enterprises, Inc. NasdaqGS:APOG $1,334 $46 5.6% 6.5% 20.5x 3.1x 1.3x 9.2x

Builders FirstSource, Inc. NasdaqGS:BLDR $1,239 $11 (0.2%) 1.5% NM 9.2x 0.7x 14.4x

American Woodmark Corp. NasdaqGS:AMWD $1,082 $66 (11.0%) (17.0%) 19.0x 3.8x 1.0x 8.5x

Gibraltar Industries, Inc. NasdaqGS:ROCK $988 $32 10.4% 24.1% 27.3x 2.4x 1.0x 10.8x

Continental Building Products, Inc.

NYSE:CBPX 4906 $22 19.8% 27.3% 40.5x 3.0x 2.7x 11.5x

Insteel Industries Inc. NasdaqGS:IIIN $537 $29 (6.5%) 36.7% 19.4x 2.7x 1.2x 8.9x

Armstrong Flooring, Inc. NYSE:AFI $470 $17 - - 58.8x 0.7x 0.4x 8.5x







PUBLIC BASKET (CONTINUED)

7


INDUSTRIAL



Price/ Book

TEV/ Rev

TEV/ EBITDA

United Technologies Corporation

NYSE:UTX $85,821 $103 2.4% 6.7% 20.1x 3.0x 1.8x 10.0x

Illinois Tool Works Inc. NYSE:ITW $37,432 $104 1.7% 12.4% 22.4x 7.2x 3.1x 12.5x

Eaton Corporation plc NYSE:ETN $27,356 $60 (4.5%) 14.8% 20.3x 1.8x 1.7x 10.8x

Ingersoll-Rand Plc NYSE:IR $16,395 $64 2.7% 15.2% 20.6x 2.8x 1.5x 10.9x

Parker-Hannifin Corporation NYSE:PH $14,552 $108 (2.7%) 11.4% 20.6x 2.9x 1.4x 9.9x

Rockwell Automation Inc. NYSE:ROK $14,956 $115 0.9% 11.9% 24.1x 6.8x 2.4x 11.9x

Crane Co. NYSE:CR $3,307 $57 5.3% 18.6% 15.3x 2.7x 1.4x 8.4x

Hubbell Inc. NYSE:HUBB $5,835 $105 (0.4%) 4.4% 21.6x 3.7x 1.9x 10.9x

Colfax Corporation NYSE:CFX $3,245 $26 (7.5%) 13.3% 19.5x 1.1x 1.2x 10.0x

Barnes Group Inc. NYSE:B $1,778 $33 (5.5%) (6.4%) 18.1x 1.5x 1.9x 8.8x

Actuant Corporation NYSE:ATU $1,331 $23 (8.5%) (5.6%) 27.6x 2.5x 1.5x 11.3x

Albany International Corp. NYSE:AIN $1,278 $40 6.2% 9.2% 29.9x 2.5x 2.0x 10.1x

EnPro Industries, Inc. NYSE:NPO $964 $44 (23.0%) 1.3% 40.5x 2.4x 1.3x 10.6x

Chart Industries Inc. NasdaqGS:GTLS $738 $24 11.1% 34.4% 19.7x 1.1x 0.8x 6.9x

Columbus McKinnon Corporation

NasdaqGS:CMCO $285 $14 (10.2%) (25.1%) 11.7x 1.0x 0.8x 7.5x

Segment Average $14,352 (2.1%) 7.8% 22.1x 2.9x 1.7x 10.0x

Source: S&P Capital IQMEDICAL



Price/ Book

TEV/ Rev

TEV/ EBITDA

Medtronic plc NYSE:MDT $121,021 $87 15.7% 12.8% 37.5x 2.3x 4.8x 16.0x

DENTSPLY SIRONA Inc. NasdaqGS:XRAY $14,532 $62 0.7% 2.0% 37.7x 1.7x 5.5x 26.4x

Hologic Inc. NasdaqGS:HOLX $9,648 $35 0.3% (10.6%) 46.6x 4.7x 4.6x 12.7x

Abaxis, Inc. NasdaqGS:ABAX $1,063 $47 4.1% (15.2%) 36.7x 4.5x 4.3x 17.6x

Analogic Corporation NasdaqGS:ALOG $983 $79 0.5% (3.8%) 46.1x 1.9x 1.6x 14.6x

Integer Holdings Corporation NYSE:ITGR $953 $31 (13.2%) (41.1%) 20.8x 1.3x 2.7x 14.7x

AngioDynamics Inc. NasdaqGS:ANGO $521 $14 16.9% 18.4% 68.2x 0.9x 1.8x 13.6x

Misonix, Inc. NasdaqGM:MSON $40 $5 (15.0%) (45.0%) NM 1.7x 1.4x NM

Amedica Corporation NasdaqCM:AMDA $18 $1 (14.8%) (25.9%) NM 1.4x 1.3x NM

Allied Healthcare Products Inc. NasdaqCM:AHPI $5 $1 (14.3%) (46.3%) NM 0.3x 0.1x NM

Segment Average $14,878 (1.9%) (15.5%) 41.9x 2.1x 2.8x 16.5x






Source: GF Data*

*The most current source of GF Data is as of March 31, 2016, and lags one quarter behind the current quarter.Source: GF Data*


CAPITAL STACKOVERALL U.S. LOWER MIDDLE MARKET M&A ACTIVITY

M&A ACTIVITY

TRANSACTION MULTIPLESEBITDA Multiples By Transaction Size

34.3% 39.5% 40.1% 43.7% 37.9%

17.1% 13.1% 18.0% 16.5% 17.3%

48.0% 47.4% 41.9% 39.8% 44.9%

38.2% 35.6% 37.3% 44.1% 39.2%

16.4% 11.0% 14.7% 10.7% 19.6%

45.4% 53.3% 48.0% 45.3% 41.2%

36.6% 37.6% 36.5% 41.8% 36.3%

15.0% 13.1% 12.0% 11.5%18.5%

48.5% 49.3% 51.4% 46.8% 55.2%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016

Senior Debt Sub Debt Equity

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800

2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2

Cap

ital Invested ($m

m)

Dea

ls C

lose

d

Deals Closed Capital Invested

5.3x5.8x 5.9x

5.4x5.9x

6.5x6.4x 6.2x6.8x 6.6x 6.7x

6.1x

7.5x6.7x 6.8x

8.6x

7.5x6.9x

7.7x 7.4x 7.5x 7.8x

9.0x

7.7x

0.0x

3.0x

6.0x

9.0x

2011 2012 2013 2014 2015 YTD 2016

$10-25mm $25-50mm $50-100mm $100-250mm





SDR SERVICE OFFERINGS

COMPREHENSIVE MANUFACTURING EXPERTISEFrom injection molding to microchips, we have been providing M&A services to the Manufacturing industry since our inception in 2002. Since then, we have completed multiple transactions ranging from industrial mergers and acquisitions to capital sourcing for small neighborhood businesses. We serve all companies across the industry, but have particular expertise in:

Aerospace & Defense Building Products Medical Durable Consumer Non-Durable Consumer Industrial

SELECT TRANSACTION EXPERIENCESDR has completed numerous transactions types throughout the Manufacturing industry, including:

BUY-SIDE STRATEGIC SALES CAPITAL FORMATIONS

CONTACT USTravis ConwayManaging Director –Manufacturing [email protected]

Anthony WongVice President –Manufacturing [email protected]

PRIVATE CAPITAL FORMATIONSELL-SIDE ADVISORY

BUY-SIDE ADVISORY STRATEGIC CONSULTING




Documents

Manufacturing Report Q2 2016 · REPORT Q2 2016 Explore M&A Activity, Capital Market Conditions and Current Trends for the ... noticeably seen inthe auto industry,where auto sales