MEDICAL CONTRACT MANUFACTURING M&A PULSESynergy % Medtronic/Covidien $ 42,900 $ 27,898 $ 8,559 $ 2,140 $ 850 39.7% Thermo Fisher/Life Technologies 13,600 19,706 9,994 2,499 300 12.0%

CONTENTS

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MEDICAL CONTRACT MANUFACTURING

M&A PULSEFEBRUARY 2015

Introduction Page 3

Market Overview Page 4-9

Medical Manufacturing Transaction Overview Page 10-13

General Transaction & Macroeconomic Discussion Page 14-15

Forecast and Thoughts Page 16

Consolidation Discussion Page 17

Sale Planning Page 18

P&M Corporate Finance, LLC

Medical Contract Manufacturing – M&A Pulse – February 2015

1

BRYAN W. HUGHESDirector312.602.3636 [email protected]

DAVID SASTREAssociate 312.602.3570 [email protected]

MEDICAL TECHNOLOGY TRANSACTION UPDATE

SALE OF SOUTHEASTERN TECHNOLOGY, INC. TO AUTOCAM MEDICAL DEVICE HOLDINGSP&M Corporate Finance (“PMCF”) is pleased to announce that it served as the exclusive financial advisor to Autocam Medical Devices, LLC, of Grand Rapids, MI in the successful acquisition of Southeastern Technology, Inc. (“SET”), of Murfreesboro, TN. SET is a leading contract manufacturer of precision-machined components, assemblies and engineered solutions pri-marily focused on serving original equipment manufacturers (“OEMs”) in the medical device industry. SET serves the orthopedic and spine markets with precision implants and complex instruments. SET also machines precision components for other medical applications such as oncology and dental.

SALE OF FISHER/UNITECH, INC. TO RIVERSIDE COMPANYP&M Corporate Finance (“PMCF”) is pleased to announce that it served as the exclusive financial advisor to FISHER/UNITECH, Inc. (“FISHER/UNI-TECH” or the “Company”), of Troy, MI in a successful recapitalization with The Riverside Company (“Riverside”) of New York City, NY. The transaction and Riverside’s partnership with FISHER/UNITECH will provide access to additional capital and resources to support the next phase of the Company’s growth. This includes investing in the Company’s sales, marketing, and tech support efforts to capitalize on the strong growth in the Company’s core product offerings, as well as entering new markets and supporting new prod-uct offerings both organically and through add-on acquisitions.

FISHER/UNITECH (www.funtech.com) is a market leading value-added re-seller of 3D solid modeling design software, 3D printing hardware and relat-ed products and services to the industrial, automotive, and medical markets.

BRIAN GORSKIVice President312.602.3623 [email protected]

MIKE BROOKSAnalyst 312.602.3644 [email protected]

PMCF Medical Technology Team

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3

IntroductionConsolidation in the Medical Contract Manufacturing MarketIn the wake of Zimmer’s April 2014 announcement that it was acquiring cross-town rival Biomet for $13.4 billion, the medical device press immediately questioned the deal’s impact on a combined workforce and supply-chain. The Wall Street Journal went so far as to lead their coverage with the title “The Deal That Shook Warsaw, Ind.”

Zimmer has stated it expects to realize cost synergies of $270 million annually by the third year after closing. Zimmer CEO David Dvorak explained that the company would go through a “methodical planning process” to “retain the best talent in both organizations” and would “work very hard” to maintain its sales employees and skilled production workers. Com-bined, Zimmer/Biomet will have over 2 million square feet of manufacturing, R&D and administrative facilities in Warsaw.

At the same time, Qmed contributor Stephen Levy frames the synergies impact on the supply-chain stating, “Larger pur-chasers can negotiate better deals with all of their suppliers, from suppliers of raw materials to the companies that make and print the packaging, and these savings will be a significant percentage of that number.”

• To build on that thought, the following is a summary of recent notable transactions in the medical technology space, as well as expected synergies in each case based on assumed outsourced spend. It is interesting to note synergies represent approximately 25% of this number.

• In order to cope with rising costs and increased purchasing power of hospital customers, cash rich OEMs like Zimmer have embarked on an aggressive pursuit of M&A opportunities. In an environment of continued globalization and higher de-mand for medical technology products and services, key players are feeling compelled to scale-up operations, gain market share and diversify their product portfolio in order to improve their negotiating power with hospital systems and comply with the demands of a value-based healthcare model.

• The highly fragmented medical contract manufacturing/outsourcing market is undergoing significant transformation, driv-en by the consolidation among OEM clients as well as sound macroeconomic conditions. Medical OEMs are increasingly aware of CMO’s (contract manufacturing organization) capabilities as true providers of lower-cost, time sensitive and high quality solutions. This versatility enables OEMs to improve their operational performance, and meet shorter product life cycles while maintaining focus on their core business. As a result, the outsourcing of manufacturing functions has increased, a trend that is expected to continue as OEMs seek one-stop solutions to accommodate their growing needs in terms of increased volume, product differentiation and compliance with a more stringent regulatory environment.

• This shift towards outsourcing will likely prompt further consolidation, particularly in the therapeutic, diagnostic and cardio-vascular segments. Large CMOs are expected to lead this industry consolidation by acquiring smaller specialized compa-nies with complementary services from engineering and precision machining to quality assurance. As their multi-faceted cost-saving capabilities broaden, large CMOs are better positioned to become the preferred supplier among OEMs, and ultimately benefit from additional partnerships. This is exemplified by Tecomet, which recently acquired Symmetry Medical Inc.’s OEM Solutions Business and 3D Medical Manufacturing, Inc., in an effort to create a CMO with a global footprint, capable of extending their comprehensive array of services. (Additional information on the Symmetry transaction can be found on page 12).

• Conversely, small players, which account for approximately 40% of the medical manufacturing/outsourcing’s market share, may opt to exit the market by selling to a larger competitor.

Buyer/Target Deal Size Combined Revenue

Combined COGS

Est. Combined Outsourced*

Expected Synergies

Synergy %

Medtronic/Covidien $ 42,900 $ 27,898 $ 8,559 $ 2,140 $ 850 39.7%

Thermo Fisher/Life Technologies 13,600 19,706 9,994 2,499 300 12.0%

Zimmer/Biomet 13,400 7,977 2,144 536 270 50.4%

BD/Carefusion 12,200 12,366 6,118 1,530 250 16.3%

Smith & Nephew/Arthrocare 1,500 4,925 1,230 308 85 27.6%

Total $83,600 $72,871 $28,046 $ 7,011 $1,755 25.0%

Source: S&P Capital IQ, Company Financial Information, Qmed

($ MM)

Source: S&P Capital IQ, Company Financial Information*PMCF Est. combined Outsourced equals 25% of Target and Buyer combined COGS

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4

Market OverviewMedical TechnologyThe medical technology market has expanded in recent years, driven primarily by longer life expectancy and increased expenditure on healthcare, especially in emerging economies. Additionally, the regulatory environment in North America and Europe has created a shift to value-based healthcare solutions, which has resulted in increased competition, changing business models, and innovative strategies to achieve sustainable growth in this dynamic market.

Medical Technology Global Market Size Estimate*

Company Name

2010

2014

2014 LTM

2014LTMCAGR

2010-2014

Johnson & Johnson $ 24,601 $ 28,490 $ 28,179 7.7% 3.5%

General Electric Co. 16,897 18,200 18,283 5.0% 2.0%

Medtronic Inc.** 15,392 16,589 17,368 4.8% 3.1%

Siemens AG 16,660 17,842 16,828 4.6% 0.3%

Koninklijke Philips Electronics nv 11,410 12,719 12,436 3.4% 2.2%

Roche Holding 10,020 11,308 11,772 3.2% 4.1%

Cardinal Health Inc. 8,750 10,060 11,102 3.0% 6.1%

Covidien Plc** 8,438 10,235 10,659 2.9% 6.0%

Baxter International Inc. 7,203 8,695 9,972 2.7% 8.5%

Stryker Corp 7,320 9,021 9,525 2.6% 6.8%

Total Top 10 126,691 143,159 146,124 40.0% 3.6%

11-25 72,127 78,029 80,461 22.0% 2.8%

26-50 40,802 51,342 53,368 14.6% 6.9%

Remaining 42,137 71,887 85,041 23.3% 19.2%

Total Market $281,757 $344,417 $364,994 100.0% 6.7%

Medical Technology Revenue Market Share

Source: Bloomberg, Company Filings, PMCF Analysis*Company Market Share data is based on the TTM of each company’s most recent reported financials as of 1/6/15**Medtronic acquired Covidien, effective 1/26/15

• Medical Technology market size amounts to an estimated $365 billion in terms of estimated 2014 revenues.

• Top 10 companies account for approximately 40% of the total market.

• Top 50 companies account for approximately 77% of the total market.

• Middle market and start-up technology firms have experienced strong revenue growth, as smaller firms (those outside the top 50) have doubled in aggregate size from $42.1 billion in revenue in 2010 to an estimated $85 billion in 2014. This segment has significantly outpaced the growth of larger players, increasing at a 19% CAGR versus a combined 4% for the top 50 firms.

• With long life expectancy and emerging economies’ increasing expenditure on healthcare, there is an increased demand for technologically superior medical devices. As such, the medical technology market will continue to grow in the U.S., and in other developed countries and emerging markets.

($ MM)

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5

Medical Contract Manufacturing Overview

Market Sizing Methodology/EstimatesApproximating the total size of the medical contract manufacturing market has proven difficult. However, by estimating outsourced manufacturing costs for medical OEMs as a percentage of total cost of goods sold, a reasonable proxy for market size of medical contract manufacturing can be established.

MethodologyStep 1: Revenue Estimates for Overall Medical Technology Market

• Taking a relatively conservative view of medical technology market size, PMCF estimates total 2014 revenue at $365 billion, with an annual growth rate of just under 6.0% to 2020.

Step 2: Gross Margin % Estimates for Overall Medical Technology Market

• Estimated at 60.5% by taking a weighted average of the gross margins of the largest “pure play” medical device OEMs shown in the adjacent chart.

• Given estimated medical device market revenue of $365 billion in 2014 and a 39.5% COGS percentage, total cost of goods sold for the medical device market is estimated at $144 billion for the period.

Step 3: Percentage of OEM Manufacturing Costs Outsourced

• Various market estimates assume medical OEMs outsource approximately 25% of manufacturing costs.

• Using this as a proxy, PMCF estimates the market size for medical contract manufacturing as roughly $36.6 billion in 2014.

Medical Contract Manufacturing Market Estimate

Market Forecast Assumptions• The medical contract manufacturing market presents a long term growth industry driven primarily by the underlying

macro trends of the medical device market as well as increased outsourcing amongst OEMs. We anticipate the broader medical technology market to grow at an annual rate of just under 6% through 2020 to $517 billion in revenue.

• Medical Device OEMs will increasingly outsource services to contract manufacturers with the ability to address growing customer needs. We believe that driven by this trend, amongst others, the medical contract manufacturing market is expected to exceed the growth rate of the medical device market, reaching $61.3 billion in revenue in 2020, which represents a CAGR of 9%.

Top Pure-Play Medical Device OEMs LTM Gross Margin %bioMérieux SA (ENXTPA:BIM) 76.7%Nipro Corporation (TSE:8086) 75.5%Terumo Corporation (TSE:4543) 74.8%Boston Scientific Corporation (NYSE:BSX) 73.3%Hologic Inc. (NasdaqGS:HOLX) 72.9%Smith & Nephew plc (LSE:SN.) 72.7%Medtronic, Inc. (NYSE:MDT) 71.8%Stryker Corporation (NYSE:SYK) 68.7%Becton, Dickinson and Company (NYSE:BDX) 68.6%Zimmer Holdings, Inc. (NYSE:ZMH) 66.2%Coloplast A/S (CPSE:COLO B) 63.3%Varian Medical Systems, Inc. (NYSE:VAR) 62.2%CR Bard Inc. (NYSE:BCR) 54.7%Biomet Inc. 54.3%B. Braun Melsungen AG 52.2%Edwards Lifesciences Corp. (NYSE:EW) 51.2%Getinge AB (OM:GETI B) 51.1%Hitachi Medical Corporation 50.5%St. Jude Medical Inc. (NYSE:STJ) 49.6%Abbott Laboratories (NYSE:ABT) 45.5%Alcon, Inc. 42.7%Baxter International Inc. (NYSE:BAX) 32.9%DENTSPLY International Inc. (NasdaqGS:XRAY) 29.7%Gross Margin Weighted Average 39.5%Average COGS % of Revenue 60.5%

2013 2014 2015 2016 2017 2018 2019 2020Medical Device Market Revenue 344,417$ 364,994$ 386,801$ 409,910$ 434,400$ 460,353$ 487,857$ 517,004$ Estimated % Growth 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Cost of Goods Sold 135,896$ 144,015$ 152,619$ 161,737$ 171,400$ 181,641$ 192,493$ 203,993$ Gross Margin % 60.5% 60.5% 60.5% 60.5% 60.5% 60.5% 60.5% 60.5%Percentage COGS Outsourced 24.7% 25.4% 26.1% 26.9% 27.6% 28.4% 29.2% 30.1%

Contract Manufacturing Revenue 33,546$ 36,565$ 39,856$ 43,443$ 47,353$ 51,615$ 56,260$ 61,324$ Estimated % Growth 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%

Source: PMCF Forecasts, Company Reports, Espicom, Visiongain, IBISWorld, BCC Research, Frost & Sullivan

As of 1/16/15Source: S&P Capital IQ, Company Reports

($ MM)

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6

Medical Contract Manufacturing Market By Segment• The medical contract manufacturing market includes many discrete segments as diverse as the products the

industry produces. To simplify this analysis and market forecast we have allocated all such segments into three catego-ries. These are:

2014 Medical Contract Manufacturing Revenue By Segment ($MM)


Source: S&P Capital IQ, PMCF Estimates, Company Reports

• A breakdown of the estimated $36.6 billion of medical contract manu-facturing revenue in 2014 by segment is shown on the right.

• Moving forward, we believe the primary driver of growth in the medical contract manufacturing space will be an expansion of the EMS seg-ment as increased technological innovations and specializations will influence OEMs to outsource to suppliers with technical expertise. Ad-ditionally, EMS providers have been increasing their service offerings to provide the entire range of outsourcing activities to OEMs.

Raw Materials/ Components

Electronic Manufacturing Services “EMS”

Finished Goods

• Stainless Steel

• Engineered Plastics

• Various Components

• Patient Monitoring

• Diagnostic Imaging

• Pacemakers

• In-vitro Diagnostics

• Instruments/Screws

• Surgical Equipment

• Disposable Devices

• Wound Management

• Disposables

Raw Materials/Components

$10,89530.0%

Electronic Manufacturing Services$16,771

46.0%

Finished Goods$8,89924.0%

Raw Materials/Components Electronic Manufacturing Services Finished Goods

24.2%

46.9%

29.0%

24.0%

47.9%

28.2%

23.8%

48.9%

27.4%

24.5%

44.9%

30.6%

24.3%

45.9%

29.8%

0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

201820142013 2015 2016 2017

23.5%

49.9%

26.6%

23.3%

50.9%

25.9%

23.0%

51.9%

25.2%

20202019

Medical Contract Manufacturing Revenue by Segment ($MM)

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7

Medical Contract Manufacturing Market Share*: Finished Goods

*Company Market Share data is based on the TTM of each company’s most recent report as of 1/6/15.(1) The Herfindahl-Hirschman Index (HHI), measures the market concentration in an industry to determine if the industry is competitive. It is calculated by the sum of the squares of market share for the industry’s largest firms. An HHI of 10,000 would indicate a monopoly. The U.S. Department of Justice considers an industry to be moderately fragmented when HHI reaches 1,500.

Lake Region Medical (Formerly Accellent Holdings Corp.)• Size Estimate: $729 million• Segments: Cardiology, orthopedics, endoscopy, stimulation therapy, urology, cardiovascular applications• Customers: Abbott Laboratories, Johnson & Johnson, Medtronic, Smith & Nephew plc• Acquisitions: Lake Region purchased by Accellent, Inc. – Feb. 2014

Greatbatch, Inc.• Size Estimate: $608.6 million• Segments: Cardiology, neuromodulation, orthopedics, portable medical, vascular• Customers: General Electric Company, Johnson & Johnson, Stryker Corporation• Acquisitions: CCC Medical Devices – Aug 2014

Tecomet, Inc.• Size Estimate: $413.9 million • Segments: Orthopedic reconstruction, trauma, extremities, dental, spine, cardiovascular, radiography• Customers: Smith & Nephew, Stryker Corporation, St. Jude Medical Inc., Medtronic, Inc.• Acquisitions: Symmetry Medical, Inc. – Aug 2014; 3D Medical Manufacturing, Inc. – Aug 2014

Phillips-Medisize Corporation (sold to Golden Gate Capital in May 2014)• Size Estimate: $375 million• Segments: Drug delivery, medical device, primary pharmaceutical packaging, diagnostic products• Customers: Antares Pharma, Inc., Insulet Corporation• Acquisitions: Omni Manufacturing Services SA – July 2013

West Pharmaceutical Services, Inc.• Size Estimate: $299.2 million• Segments: Pharmaceutical packaging systems and proprietary delivery systems• Customers: DexCom, Inc., Discovery Laboratories, Inc., Dyesol Limited• Acquisitions: N/A

Market Facts

• Total 2014 Market Size — $8.9 billion

• HHI(1) — 226

• CAGR (2014-2020) — 8.0%

Finished Goods Segment Leaders


Flexible

LakeRegion/Accellent

8.2%

Industrial9%

B. Braun, 2.5%Orchid 2.8%

Other49.2%

AptarGroup Inc. 2.2%Nolato 2.3%

MedPlast 1.7% Teleflex 1.6%

Lisi Medical 0.9% Nordson 1.1%

Paragon 1.4% Mack Molding 1.6%

Creganna 1.8%

West Pharma 3.4%

Cantel, 3.6%

Phillips-Medisize 4.2%

Tecomet/Symmetry 4.7%

Greatbatch 6.8%

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8

Medical Contract Manufacturing Market Share*: Electronic Manufacturing Services (EMS)

*Company Market Share data is based on the TTM of each company’s most recent report as of 1/6/15.(1) The Herfindahl-Hirschman Index (HHI), measures the market concentration in an industry to determine if the industry is competitive. It is calculated by the sum of the squares of market share for the industry’s largest firms. An HHI of 10,000 would indicate a monopoly. The U.S. Department of Justice considers an industry to be moderately fragmented when HHI reaches 1,500.

Flextronics International Ltd• Size Estimate: $1.6 billion• Segments: Consumer diagnostics, drug delivery, microelectronics for implantable devices, disposable devices, laboratory diagnostics

equipment, imaging & monitoring• Customers: Alimera Sciences, Inc., Cellnovo Limited• Acquisitions: Knightscop, Inc. – Dec 2014; Sonetar, LLC – Sep. 2014; Sønderborg Værktøjsfabrik A/S – Sep. 2014; Tech Mold, Inc. –

May 2014Jabil Circuit Inc.

• Size Estimate: $1.38 billion• Segments: Diagnostics, consumables, medical devices, pharmaceutical• Customers: Abaxis, Inc., Ulthera, Inc., Antares Pharma Inc.• Acquisitions: Nypro, Inc. – July 2013

Celestica, Inc. • Size Estimate: $783 million• Segments: Diagnostic imaging equipment• Customers: International Business Machines Corporation, Honeywell, Hewlett-Packard, Inc.• Acquisitions: D&H Manufacturing Company – Sept 2012

Plexus Corp.• Size Estimate: $697.3 million• Segments: Diagnostic imaging, therapeutic, monitoring, laboratory research, healthcare management• Customers: Physio Controls, Illumina Diagnostics, St. Jude Medical• Acquisitions: Kontron Design Manufacturing Service – Jan 2012

Sanmina Corporation• Size Estimate: $634.5 million• Segments: Consumable equipment, diagnostic imaging, large systems, invasive, implanted, and disposable products• Customers: Medifocus Inc., Haemonetics Corporation, Incline Therapeutics, ReWalk Robotics Ltd.• Acquisitions: N/A

1. Market Facts

• Total 2014 Market Size — $16.8 billion

• HHI(1) — 251

• CAGR (2014-2020) — 11.3%

EMS Segment Leaders


Flexible

Jabil8.2%

Sparton 0.9%

Other66.9%

Benchmark Electronics 1.8%Plexus 4.2%

Sanmina 3.8%

Celestica 4.7%

Flextronics 9.5%

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9

Market OverviewPublicly Held Contract Manufacturers – Finished Goods vs. EMS


20120.0x

20.0x

15.0x

Average Enterprise Value/EBITDA

201420132011201020092008

5.0x

19.5x20.7x

25.0x

10.0x

Average Enterprise Value/Revenue

3.7x 3.9x 3.7x3.2x 2.9x 2.7x 2.5x

17.1x20.7x

15.6x 16.2x

13.2x

Historical Finished Goods CMO Trading Multiples Historical EMS CMO Trading Multiples

Alphaform AG 24.2 35.5 (2.4) 5.9 NM 0.8x NMCantel Medical Corp. 1,845.4 503.3 95.9 93.6 1.0x 3.8x 19.9xGreatbatch, Inc. 1,320.2 694.7 124.3 190.0 1.5x 2.1x 11.7xMerit Medical Systems, Inc. 774.3 496.9 73.3 240.5 3.3x 2.0x 13.8xNordson Corporation 4,863.4 1,704.0 429.4 815.9 1.9x 3.3x 13.1xNolato AB (publ) 655.5 541.1 79.1 8.8 0.1x 1.2x 8.0xRTI Surgical Inc. 302.7 262.8 31.7 87.5 2.8x 1.6x 13.5xTeleflex Incorporated 4,979.8 1,839.8 417.8 1,068.4 2.6x 3.1x 13.8xUtah Medical Products Inc. 219.5 41.3 19.6 4.9 0.2x 5.0x 10.5xVarian Medical Systems, Inc. 9,296.7 3,076.2 657.7 525.0 0.8x 2.9x 13.5xWest Pharmaceutical Services, Inc. 3,820.0 1,421.4 272.7 346.7 1.3x 2.8x 14.4xHigh 9,296.7 3,076.2 657.7 1,068.4 3.3x 5.0x 19.9xMean 2,554.7 965.2 199.9 307.9 1.5x 2.6x 13.2xMedian 1,320.2 541.1 95.9 190.0 1.4x 2.8x 13.5xLow 24.2 35.5 (2.4) 4.9 0.1x 0.8x 8.0x

Benchmark Electronics Inc. 1,281.3 2,844.4 156.0 9.7 0.1x 0.3x 5.6xCelestica Inc. 1,957.7 5,631.3 227.1 - - 0.3x 7.8xFlextronics International Ltd. 6,287.7 27,078.6 1,161.0 2,398.1 2.1x 0.3x 6.2xJabil Circuit Inc. 3,978.5 15,969.9 762.1 1,677.9 2.2x 0.3x 6.2xNortech Systems Inc. 15.6 110.9 3.6 12.7 3.5x 0.3x 7.8xPlexus Corp. 1,345.2 2,509.0 164.8 265.8 1.6x 0.5x 8.3xSanmina Corporation 1,887.9 6,215.1 309.4 547.1 1.8x 0.3x 6.4xSparton Corp. 262.1 338.9 32.1 42.0 1.3x 0.9x 9.3xHigh 6,287.7 27,078.6 1,161.0 2,398.1 3.5x 0.9x 9.3xMean 2,127.0 7,587.3 352.0 619.2 1.6x 0.4x 7.2xMedian 1,616.5 4,237.8 196.0 153.9 1.7x 0.3x 7.1xLow 15.6 110.9 3.6 - - 0.3x 5.6x

20120.0x

20.0x

15.0x

Average Enterprise Value/EBITDA

201420132011201020092008

5.0x

7.4x10.0x

25.0x

10.0x

Average Enterprise Value/Revenue

0.5x 0.5x 0.5x 0.4x 0.4x 0.4x 0.4x

8.8x7.5x 8.1x 7.8x 7.1x

(1) As of 2/23/2015Source: S&P Capital IQ, Company Reports

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10

Medical Manufacturing Transaction OverviewMedical Contract Manufacturing M&A Activity

Due to higher fragmentation, the Finished Goods segment has seen significantly more consolidation throughout the historical period when compared to the EMS section. The five largest firms in the Finished Goods segment account for approximately 25% of the estimated segment size, com-pared to the top five firms in EMS, which account for ap-proximately 33% of the estimated segment size.

Buyer Type Information

Source: S&P Capital IQ, PMCF Research

2010 2011 2012 2013Q1 - Q3

2014Finished Goods 19 39 61 47 39EMS 8 15 10 23 15Other 4 4 3 3 3Total 31 58 74 73 57

• Overall consolidation activity in the medical manufacturing sector has increased significantly in recent years, from 31 transactions in 2010 to 73 transactions in 2013, an annual growth rate of 23.9%. Additionally, once final num-bers are released, 2014 looks to be on pace to continue the growth trend, with 57 transactions completed in the first nine months.

• The number of financial transactions surged in 2013, however the first nine months of 2014 has experienced a slight decrease in PE activity.

Strategic Buyer

Financial Platform

Financial Add-On

47

37

22

72

40

8

10

57

10

7

40

18

15

0

10

20

30

40

50

60

80

70

20112010 2012 2013 Q1-Q3 2014

Num

ber

of D

eals

Total Transaction By Type

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2014 PE Platform Transactions• On May 20, 2014, New Heritage Capital, LLC partnered with management and certain members of the Dearborn

family to acquire a majority stake in Eptam Plastics, Inc. Heritage will own 70% of the stock in the company while the management team and Dearborn family have also invested in the recapitalization.

• Golden Gate Capital entered into a definitive agreement to acquire Phillips-Medisize Corporation from Kohlberg Inves-tors V, L.P. and Kohlberg Investors VI, L.P. managed by Kohlberg & Company, L.L.C. on May 7, 2014. Phillips-Medisize has annual sales of approximately $600 million with medical representing 75%.

• An undisclosed British Virgin Island based private equity company entered into a definitive agreement to acquire Euro-pean Medical Contract Manufacturing B.V. from AAP Implantate AG (XETRA:AAQ.DE) for €18 million in cash on Febru-ary 24, 2014.

Key Transaction Metrics


$ in Millions Implied ImpliedEnterprise Enterprise Value /

Date Target Name Acquirer Name Value Revenue EBITDADec-14 Southeastern Technolgy, Inc Autocam MedicalSep-14 DiSanto Technology, Inc. Arcam AB (OM:ARCM) 15.8$ 1.3x NMAug-14 Corgenix Medical Corp. (OTCPK:CONX) ORGENTEC Diagnostika GmbH 14.9$ 1.4x 21.7xAug-14 3D Manufacturing Tecomet, Inc.Aug-14 Avalon Laboratories, LLC Nordson Medical Corporation 180.0$ 5.3x 11.0xAug-14 Symmetry Medical, Inc. Tecomet, Inc. 439.5$ 1.1x 7.3xJul-14 CDR Manufacturing, Inc. Key Tronic Corp. (NasdaqGM:KTCC) 46.9$ 0.4x 7.5xMay-14 Aeroflex Holding Corp. Cobham plc (LSE:COB) 1,507.2$ 2.4x 12.3xMay-14 Shenzhen Dong Di Xin Technology Company Limited Kingworld (Hong Kong) Holdings Limited 32.0$ NM NMMay-14 Phjilips Medisize Corporation Golden Gate Capital 800.0$ 1.3x NMApr-14 Advance Tooling Concepts LLC ARC Group Worldwide, Inc. 24.0$ 1.4x 5.5xApr-14 Processing Equipment Solutions, Inc. Middleby Corp. 15.0$ 0.9x NMApr-14 Triad Group, Inc. Medline Industries, Inc. 7.1$ NM NMApr-14 Solid Concepts Inc. Stratasys Ltd. 295.0$ 4.5x NMMar-14 Tri Town Precision Plastics, Inc. Smith & Wesson Holding Corporation (NasdaqGS:SWHC) 22.8$ NM NMMar-14 AVID Technologies, Inc. Premier Farnell plc 13.5$ 1.6x NMMar-14 Medegen Medical Products, LLC Inteplast Group 78.6$ 0.5x 3.3xMar-14 Interplex Industries, Inc. Amtek Engineering Ltd (SGX:M1P) 210.0$ NM 7.5xFeb-14 European Medical Contract Manufacturing BV Undisclosed 24.7$ 1.5x NMFeb-14 Oscor Inc., Lead Business Sorin SpA (BIT:SRN) 20.0$ NM NMFeb-14 Lake Region Medical, Inc. Accellent, Inc.Jan-14 Laser Design, Inc. CyberOptics Corp. 2.7$ 0.5x NMDec-13 ATMI Inc., LifeSciences Business Pall Corporation (NYSE:PLL) 185.0$ NM NMDec-13 Tecomet, Inc. Genstar Capital, LLCDec-13 Beckwood Services, Inc. Sparton Corp. 15.3$ 0.9x NMDec-13 Collbio Ltd. Collagen Solutions PLC (AIM:COS) 6.5$ NM NMNov-13 Patheon Inc. (TSX:PTI) JLL Partners; Koninklijke DSM N.V. (ENXTAM:DSM) 1,922.5$ 1.9x 15.0xNov-13 Paragon Medical, Inc. Beecken Petty O'Keefe & CompanyNov-13 Onefit Medical EOS imaging SA (ENXTPA:EOSI) 7.1$ NM NMSep-13 Molex Incorporated Koch Industries, Inc. 7,228.6$ 2.0x 12.0xAug-13 RIWISA Ag Flextronics International Ltd. (NasdaqGS:FLEX)Jul-13 Opalia Pharma S.A. Recordati SpA (BIT:REC) 48.3$ NM NMJun-13 Product Development Technologies, Inc. Telefonix, Inc. 5.0$ 0.3x 0.3xMay-13 NuVasive Manufacturing LLC NuVasive, Inc. (NasdaqGS:NUVA) 4.5$ NM NMMay-13 Rapid Product Development Group, Inc. 3D Systems Corporation (NYSE:DDD) 44.5$ NM NMApr-13 AndersonBrecon Inc. (nka: Packaging Coordinators, Inc.) Frazier Healthcare Ventures, et. al. 308.0$ 5.3x NMMar-13 Edac Technologies Corp. Greenbriar Equity Group LLC, Greenbriar Equity Fund II, L.P. 141.7$ 1.3x 9.9xMar-13 Trident Manufacturing, Inc. Probe Manufacturing Inc. 3.0$ NM NMFeb-13 Nypro, Inc. Jabil Circuit Inc. 665.0$ 0.6x NMFirst Quartile 15.2$ 0.9x 7.3xMedian 46.9$ 1.4x 8.5xThird Quartile 252.5$ 2.0x 11.5x

PMCF PROPRIETARY

PMCF PROPRIETARY

PMCF PROPRIETARY

PMCF PROPRIETARY

PMCF PROPRIETARY

PMCF PROPRIETARY

Sources: Capital IQ, company filings, news reports, PMCF research

($ MM)

www.pmcf.com


12

Case Study – Symmetry MedicalSince its formation in 1976, Symmetry Medical, Inc. (NYSE: SMA) achieved sustained growth both organically and through acquisition. As detailed below, in the years leading up to the company’s sale to Tecomet, Inc., Symmetry expanded its product and service offerings through nine strategic acquisitions, which increased revenue from $245 million in 2006 to $359 million in 2011. This “roll up” strategy is perhaps indicative of the further consolidation we are likely to see in the medical contract manufacturing space.

• Symmetry Medical, Inc. aggressively pursued acquisitions in recent years, ultimately leading to the sale of its OEM So-lutions business segment to Tecomet, Inc., a portfolio company of Genstar Capital, in December 2014 at an implied Enterprise Value of $439.5 million (1.1x EV/Revenue, 8.7x EV/EBITDA). According to Tecomet, the acquisition creates the largest orthopedic contract manufacturer in the world with 18 facilities located in five countries on three continents. The transaction follows several large deals among publicly traded medical devices companies, and continues the trend of outsourcing firms expanding their capabilities to become “one-stop” solutions for their customers.

• Bill Dow, Chief Executive Officer of Tecomet, said, “The combination of Tecomet and OEM Solutions creates a contract manufacturing enterprise that is capable of meeting the growing needs of our customers. OEM Solutions will not only extend the capabilities we offer but also our global reach. Our experienced and successful Tecomet team looks forward to working with OEM Solutions’ strong management crew and workforce to offer exceptional products, services and capabilities to the industries we serve.”

• Headquartered in Warsaw, IN, OEM Solutions manufactures high precision surgical instruments, orthopedic implants, and plastic and metal sterilization cases and trays, selling its products to global medical device OEMs. OEM Solutions has over 450 customers, nearly 2,300 employees and 13 facilities in the U.S., the U.K., Ireland, France and Malaysia.

• Founded in 1964 and based in Wilmington, MA, Tecomet manufactures orthopedic implants, precision surgical instru-ments, trauma plates and photochemical etched products for medical device customers. Tecomet uses its industry-lead-ing prototyping and engineering capabilities to produce highly complex products that provide innovative solutions for its customers’ most demanding products and applications. Tecomet is also a leading manufacturer of precision components to the aerospace & defense industry, producing products used in missile & satellite propulsion systems, vision systems, and infrared applications.

Source: S&P Capital IQ, Company Press Releases

Date TargetDeal Size

($MM)Rationale

Year Ending Revenue ($MM)

12/12/2011 Codman and Shurtleff, Inc. 165.0 Distributes specialized surgical instrumentation for the O.R. 359.0

8/3/2011 Olsen Medical, LLC 11.0Manufactures medical devices for electrosurgical market. Also designs and fabricates large industrial equipment, compo-nents, and machined parts

359.0

1/25/2008DePuy Orthopedics, Inc., Orthopedic Instrument Manufacturing Facility

45.3 Manufactures orthopedic instruments as well as general surgi-cal instruments and small implants 423.0

9/04/2007 Specialty Surgical Instrumen-tation, Inc. 15.1 Distributes surgical instruments and sterilization containers,

respectively, directly to hospitals 290.9

4/3/2007 TNCO, Inc. 7.0 Designing and supplying instruments for arthroscopic, laparo-scopic, sinus and other minimally invasive procedures 290.9

1/9/2007 Clamonta Engineering Co., Ltd. 10.0 Machining and finishing products for the global aerospace

industry 290.9

8/31/2006Everest Metal Finishing, LLC and Everest Metal Interna-tional

10.2 Machining and finishing for the orthopedic industry 245.0

5/02/2006 Riley Medical 45.0 Specializes in cases and trays for the orthopedic industry 245.0

6/11/2003 Mettis (UK) Ltd. 163.9 Expanded the company into manufacturing forged, cast and machined implants for the global orthopedic device market N/A

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13

Private Equity Hold Analysis and Recent PlatformsWith an average investment age of 5.2 years, medical contract manufacturing “platform” companies represent a maturing portion of private equity portfolios. While a wave of forced liquidity events is not expected, the age of CMO investments, along with an attractive lending environment and high levels of available capital, should result in increased M&A activity.

• Phillips-Medisize Corporation Acquired by Golden Gate Capital – May 2014

Golden Gate Capital entered into a definitive agreement to acquire Phillips-Medisize Corporation from Kohlberg Inves-tors V, L.P. and Kohlberg Investors VI, L.P. managed by Kohlberg & Company, L.L.C. on May 7, 2014. Phillips-Medisize has annual sales of approximately $600 million. Based in Hudson, WI, Phillips-Medisize is an injection molder that estimates 75 percent of its business is in health care applications such as medical devices, pharmaceutical packaging, drug delivery, glucose meters, drug inhalation devices, and disposable surgical devices and diagnostic components. The company also is a player in defense, automotive and consumer markets.

• Tecomet, Inc. Acquired by Genstar Capital – December 2013

Genstar Capital, LLC acquired Tecomet, Inc. from Charlesbank Capital Partners, LLC on December 19, 2013. Tecomet, Inc. is a leading precision contract manufacturer supporting the medical device and aerospace & defense industries. Based in Wilmington, MA, Tecomet manufactures orthopedic implants, precision surgical instruments, trauma plates and photochemical etched products for medical device customers. Rob Rutledge, Principal at Genstar Capital, said, “Tecomet is led by an outstanding management team that we are excited to partner with. Bill Dow, John Connolly and the rest of Tecomet’s employees have built the company into one of the premier precision manufacturers for the medical device and aerospace & defense industries, driving growth both organically and through the sourcing and integration of strategic acquisitions. Genstar is eager to partner with the Tecomet management team to expand the company’s capabilities, product offering and geographic reach while continuing to provide excellent quality and service to its customers.”

Source: Company press releases

5+ Years35%

4–5 Years23%

2–3 Years13%

3–4 Years28%

1–2 Years1%Source: S&P Capital IQ, PMCF research

1. Representative 5+ Year Investments

• Avalign Technologies, Inc. (acquired by Round-Table Healthcare Management, LLC in 2007)

• Seabrook International, LLC (acquired by FdG Associates LP in 2005)

• Lake Region Medical/Accellent Holdings Corp. (acquired by KKR in 2005)

• Tegra Medical (formed by the simultaneous acquisitions of New England Precision Grinding and Accu-Met Laser by Riverside Partners in 2007)

Recent Noteworthy PE Acquisitions

CMO Platform Aging in Private Equity Portfolios

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14

General Transaction & Macroeconomic DiscussionU.S. M&A Activity Overview

• Following a moderate dip in M&A activity in 2013, U.S. middle market M&A activity was on pace to surpass 2013 levels through Q3 2014.

• M&A activity in 2014 was driven by a variety of factors, including the following:

• Sustained improvement in the outlook for U.S. economic growth, driving buyer interest for M&A

• Strong performing public markets and attractive interest rates to fund transactions

• Strategic companies returning to M&A to put large cash reserves to work in order to increase shareholder value while private equity firms, which have significant uninvested capital, continue aggressively pursuing acquisitions

• As of December 31, 2013, Private Equity investors have accumulated approximately $486 billion of undeployed capital, sometimes referred to as dry powder. This represents a 5% decline from 2012, in which there was $509 billion in dry powder.

• 58% of undeployed PE capital in 2013 consists of funds raised in 2013 (30%) and 2012 (28%). Funds raised in the years immediately following the financial crisis have relatively little dry powder as a result of weak fundraising environments at the time.

• Funds less than $500 million represent 14% of available PE capital, which amounts to $67.2 billion. Funds of this size are more likely to invest in the size of companies that represent the medical manufacturing industry, which is highly frag-mented with many small players.

Source: S&P Capital IQ, PMCF research

Private Equity Excess Capital

Q1’12

0

2,000

4,000

6,000

1,000

3,000

5,000

Deal Volume Deal Value

$60

$140

$100

$40$20 $0

Q2’14

Q1’14

Q4’13

Q3’13

Q2’13

Q1’13

Q4’12

Q3’12

Q2’12

Q4’11

Q3’11

Q2’11

Q1’11

$120

$80

Q3’14

$160

3,790 4,016 4,053 4,267 3,966 4,235 4,307

5,625

3,742 3,7944,527 4,479 4,336

4,731 4,864

20110

12,000

20,000

2,000

8,000

16,000

Deal Volume Deal Value

$150

$350

$250

$100$50

$0Q3

YTD’14Q3

YTD’13201320122010200920082007

$300

$200

$400$450$500

4,000

10,000

18,000

6,000

14,000 13,01211,531

10,342

14,31516,126

18,13316,542

12,06313,931

U.S. M&A Activity: Deals < $500 MillionDeals in Billions

U.S. M&A Activity: Deals < $500 MillionDeals in Billions

Source: S&P CapitaI IQ, PMCF research Source: S&P CapitaI IQ, PMCF research

Flexible

$250M–$500M8%

Under $250M6%

$500M–$1B12%

$1B–$5B38%

$5B+

36%

PE Capital Overhang by Fund Size

$525.62 $504.06 $483.87 $497.04 $508.64 $486.35

$0

$100

$200

$300

$400

$500

$600

2008 2009 2010 2011 2012 2013

As of Year

2013

2012

2011

2010

2009

2008

2007

2006

Overhang by Vintage

Cumulative Overhang

PE Capital Overhang ($B)

Source: Pitchbook

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15

Medical Device Sector Overview• Global M&A activity in the medical device sector remained strong in 2014.

The total number of medical device transactions between Q1 and Q3 2014 was 451 compared to 358 between Q1 and Q3 2013.

• Corporate buyers’ robust M&A activity was motivated by the following:

• The desire to broaden portfolio capabilities, access new geographies and consolidate core businesses in order to achieve scale, and thus respond to increased competitive and financial pressure. This strategy has resulted in an increase in mega-deals, particularly in the therapeutic area, exempli-fied by Medtronic’s $42.9 billion acquisition of Covidien plc. and Zim-mer’s $13.4 billion acquisition of Biomet Inc.

• The cardiovascular segment has been experiencing significant consolida-tion among major corporations in the wake of market saturation and low growth rates of therapeutic devices, especially pacemakers, defibrillators and drug eluting stents. In turn, key players have been acquisitive in grow-ing areas such as ventricular assist devices and atrial fibrillation, trends that are expected to continue.

• Reduction of healthcare costs, particularly in the areas of preventive moni-toring and early detection. Additionally, hospitals are adopting a more prudent approach to device purchases and are demanding new technolo-gies that improve patient experiences and outcomes. These trends may drive acquisitions designed to innovate and transform business models.

• Consistent upward trends in in-vitro diagnostic, equipment, and services. These three segments have been increasing their share and accounted for approximately 50% of transactions in the medical device industry through Q3 2014.

• Divestments of non-core assets by large companies as a means to offset the medical excise tax in businesses where they don’t have a strong foot-hold or critical mass. Relevant large examples include:

• Abbott Laboratories’ $5.3 billion divestiture of a share of its generics pharmaceuticals business to Mylan Inc., aimed at saving taxes and expanding its portfolio.

• $4.0 billion divestiture of Johnson & Johnson’s orthoclinical diagnostic business to the Carlyle Group to increase its focus on the core pharma business.

• Tax inversions to address repatriation of cash accumulation. Tax inver-sions, which allow US corporations to be domiciled in foreign countries with lower corporate tax rates, account for approximately 39% of global cross-border M&A activity across all industries year to date through Q3 2014, but face an increasingly stringent regulatory environment. A recent example of this type of transaction in the medical technology space is Medtronic Inc.’s recent acquisition of Covidien Plc.

• Large cash reserves, and availability of credit with favorable terms. The number of US companies with more than five years of cash increased approximately 40% year-over-year to 14% in 2013. Arguably, this is one of the reasons behind the decline in capital raised in the US and Europe, which amounted to $22.8 billion between July 2013 and June 2014.

Source: Reuters, EY, S&P Capital IQ, Company Reports, PMCF Research

Source: S&P CapitaI IQ, PMCF research

Source: EY, S&P Capital IQ and company financial statement data

Source: EY, BMO Capital Markets, Dow Jones Venture-Source and S&P Capital IQ

M&A Transactions Avg. Transaction Value

Num

ber

of M

&A

Tra

nsac

tions

0 Ave

rage

Tra

nsac

tion

Val

ue ($

MM

)

$0

$50

$100

$150

$200

$250

$300

20 40 60 80

100 120 140 160 180

Q3 ’12 Q4 ’12 Q1’13 Q2’13 Q3’13 Q1’14 Q2’14Q4’13 Q3’14

<1yr 1-2 yrs >5 yrs

51%

17%

14%

48%

24%

10%

50%

23%

8%

0%10%20%30%40%

60%

80%90%

20122011 2013

50%

70%

100%

8%10%

9%10% 11%

7%

2-3 yrs 3-5 yrs

$0

$20

$15

IPO

Jul 2013-Jun 2014

Jul 2012-Jun 2013

Jul 2010-Jun 2011

Jul 2009-Jun 2010

$5 $0.8

$11.8

$25

$10

Debt

$2.4$0.4

$20.1

$4.2$1.4

$19.4

$0.2$1.0

$23.1

$2.0

Follow-on and other

Capital Raised in the U.S. and Europe

U.S. Public Medtech Cash Index, 2011-13

Medical Device M&A Transaction Statistics

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16

Forecast and ThoughtsKey Market Trends• The underlying regulatory framework established by

the Affordable Care Act and other developed econo-mies continues to enhance a value-based healthcare system, whereby the cost of a product is based on the value of care provided. As a result, companies will continue to revisit their business models and re-evaluate their products in order to comply with this trend.

• In the upcoming years, global M&A in the medi-cal technology market is expected to be driven by the higher incidence of chronic diseases (diabetes, respiratory, neurological and cardiovascular), an increasing aging population, a higher demand for home monitoring devices and cost-saving strategies based on preventive care. These factors will positive-ly increase the target patient base for drug delivery services, particularly those that treat the increasing prevalence of prostate and breast cancer.

• The aforementioned increase in chronic diseases and age-related conditions, which facilitate degenerative joint dysfunc-tions such as osteoarthritis, coupled with the improvement and longer durability of new materials and implants, are expected to be important catalysts for the orthopedic and related markets. Additionally, the increasing adoption of active lifestyles and the advent of technologically advanced products will foster growth in the industry by allowing surgeons to treat a larger and increasingly younger patient population.

• Scale-driven acquisitions is another area of attention, as medical technology companies continue to build their product portfolio, generate more cross-selling opportunities, and attempt to improve their negotiating power with hospitals, which has been mitigated in recent years by a scenario of falling prices for medical devices. Companies that offer enhanced technological applications, such as integrated diagnostic imaging products, in-vitro molecular diagnostics, or mobile technology used in hospitals (acute ventilators, portable anesthesia workstations and intra-oral scanners), can also be attractive acquisition targets. These circumstances create opportunities for vertical integration and greater supply-chain synergies.

• As medical technology companies strive to partner with hospitals to structure a wider range of cost-cutting and efficient operational strategies, acquirers could seek M&A opportunities in companies with significant experience dealing with FDA approval and the regulatory environment.

• Increased healthcare spending by developing countries has also played a significant factor in recent industry trends. Although the United States accounts for approximately one third of the global medical technology market share, the do-mestic market is considered relatively mature. Greater expansion opportunities exist in several countries, such as China, India, Russia and Brazil. Many players have established a presence in some of these markets but will likely pursue further opportunities. China is currently the 6th largest market, worth $9 billion, and is expected to grow 15% to 20% in the following years, driven by higher demand for medical devices and an increasingly larger middle class.

• According to EvaluateMedtech, IVD is expected to remain the largest medical technology subsector by sales, reaching $58.8 billion in 2018, while increasing its global market share from 12.5% to 12.9% in the same period. Ophthalmics and endoscopy are other relevant areas that are expected to gain market share by 2018. Ophthalmics is forecasted to account for 7.2% of medtech’s global market’s share in 2018, a 40 bp increase from 2012, while endoscopy is expected to account for 5.3% in 2018, a 20 bp increase over the same period.

Source: Capital EvaluateMedtech, September 2013, PMCF Estimates, Company Reports

Increase in chronic

diseases/aging population

Scale and technology

driven acquisitions

Vertical integration

Developing countries

Value-based health care

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17

Consolidation DiscussionPMCF believes the medical CMO industry is in the early stages of consolidation

In outlining the strategic rationale for divesting its OEM Solutions business to Tecomet, Symmetry Medical kicked off an inves-tor slide with the following statement:

Clearly the question has to be asked — as Symmetry management suggested — is the medical manufacturing industry poised for consolidation? At PMCF we’ve asked the same question in previous market overviews, and recent industry publications have posed the same asking, “Will the Medtech Outsourcing Market See a Wave of Consolidation?” — (European Medical Device Technology, December 2014). This is not entirely a new question; in its March 2004 edition, MDDI published a similar article suggesting, “As Outsourcing Increases, So Does Consolidation”.

Rather than debate this question further (we are assuming some level of consolidation is likely) we have started to ask a more important question — Assuming the industry does consolidate, what will it look like? And what can companies do to best position themselves when it does?We will explore this topic in future editions of M&A Pulse; here we simply overlay current industry data with one industry con-solidation framework.

• Merger Endgames S-Curve Framework, proposed by consulting partners at A.T. Kearney in early 2000s

•Studied≈1,500transactionsand25,000companies

• Proposed that all industries consolidate and follow a similar course

• 4 stages over 20–25 year cycle

• Given fragmentation of medical manufacturing, the industry has a CR3 score (industry concentration) around 20 which likely places it in the early phases of Stage 2 — Scale

• Within the Endgames Framework, by the end of Stage 2 the number of industry participants is reduced by 75%

• While the 25 year cycle is theoretical, based on this framework the medical manufacturing industry likely has 5–7 years until it reaches the beginning of the next stage (Stage 3 — Focus)

• While average profitability bottoms at the mid-point of Stage 2, it is forecast to increase as much as 700 bp over the next decade

• The authors suggest private equity investors should acquire companies at the lower part of the curve (NOW) and sell at the beginning of the next stage

Aerospace / Rolls Royce ExampleWe can also look at other industries as a predictor of how consolidation in the medical manufacturing supply chain will unfold. In the aerospace example at right you can clearly see both the scale and speed of supplier consolidation.

With its RB211 engine, which was ultimately superseded by the Trent family of engines, Rolls Royce utilized over 400 direct suppliers. By the time the Trent 500 class was placed in service 25 years later, the supply base had been reduced by approximately 37% to 250.

While it took 25 years to see this 150 supplier reduction, Rolls Royce focused on rationalization over the coming decade and when the XWB was placed in service for the Airbus 350, the direct supply chain had been reduced by 80%.

Source: EMDT, MDDI, Winning the Merger Endgame: A Playbook for Profiting From Industry Consolidation - Financial Times, Rolls Royce Company Reports, Deloitte LLP

“Recent transactions imply a risk of consolidation in OEM Solutions competitive market, increasing the need for Symmetry Medical to explore acquisitions - both in orthopedic implants and adjacent medical device categories - to

maintain a leadership position” – Symmetry Medical Investor Presentation, August 4, 2014

400

250

130

7050

0

50

100

150

200

250

300

350

400

450

RB211-524 Trent 500 Trent 900 Trent 1000 Trent XWB

-37.5%15 yrs

-80.0%≈10 yrs

Rolls RoyceCommercial Engine Supplier

Consolidation

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18

Sale PlanningPicking the right time to sell can be a daunting task. In fact, you may never know the “right” time to sell your company. Fac-tors that impact the value of your business – breadth and depth of product lines and value-added service offerings, customer entrenchment, strength of vendor relationships, geographic coverage, the presence of sustainable and supportable growth opportunities, balance sheet strength, capabilities of your management team and employees, macro level industry trends and M&A market activity, among others – are numerous and overwhelming to assess quickly when trying to time your ultimate exit.

To help simplify the process of assessing your company’s sale readiness, we have narrowed the laundry list of attributes into three broader categories – (1) market readiness, (2) company readiness and (3) personal readiness. The first attribute – mar-ket readiness – can be an important contributor to the success of any sale process and accordingly should be followed closely. However, it is also the category over which you have the least control. As such, we consider company readiness and personal readiness – attributes you can significantly influence – to be the most important areas to focus your efforts if a sale or capital transaction is in your future.

Transaction planning involves balancing shareholder and company goals – a challenging exercise. Our senior bankers can assist in guiding your decision making with insight regarding shareholder succession, timing, acquisitions, major capital ex-penditures, personnel changes, and other key milestones.

Readiness DiscussionPMCF is ready to assist in the preparation or refinement of your strategic planning by bringing industry expertise, information, and insight gained from 20 years of experience and the nearly 200 transactions we have successfully completed.

1. Transaction Planning Approach 1. Working with PMCF

• PMCF is frequently requested to complete an analysis of a company’s strategic positioning within the medical device marketplace

• Our review may consider your operations, products, end markets, financial trends, growth opportunities, and management team

• We are available to brief your management team, own-ership, or board with our thoughts on strategic alterna-tive including capital raises, acquisitions, or a sale

• PMCF can provide a benchmark comparison of your organization’s strengths and weaknesses and our view-points on valuation

• PMCF is a licensed and FINRA-registered investment banking organization

• Confidentiality is of the highest importance and we wel-come the execution of appropriate agreements prior to the exchange of data

• Our strategic planning services are generally provided on a no-fee basis as we work toward our goal of demon-strating long term value

• PMCF’s senior bankers will respond to any inquiries and will be directly involved in all discussions

• If engaged, the majority of PMCF’s costs are contingent on a successful transaction

• Maximize Financial Performance and Growth

• Improve Competitive Position

• Maintain Financial Flexibility

• Generate Returns for Shareholders

• Maximize Shareholder Value

• Maintain Adequate Risk/Return Profile

• Liquidity/Wealth Diversification

• Adequate Succession Planning/Exit Strategy

Company Goals Shareholder GoalsImpact

ValuationROI

Sale Timing

www.pmcf.com

Select PMCF Medical Technology Transactions

has acquired

Universal Container Corporation

has acquired

P&M Corporate Finance (“PMCF”) is an investment bank-

ing firm, focused exclusively on middle market transac-

tions, with professionals in Chicago, Detroit and across the

globe through Corporate Finance International associates.

Our dedicated Medical Technology team has deep industry

knowledge and covers a wide range of industries including

contract manufacturing, diagnostics, drug delivery, clinical

laboratories, medical devices and orthopedic implants. Of-

fering a breadth of advisory services, the Medical Technology

team has helped clients worldwide meet their sale, acquisi-

tion, financing and strategic growth objectives.

Investment Banking Services:

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This market overview is not an offer to sell or a solicitation of an offer to buy any security. It is not intended to be directed to investors as a basis for making an investment decision. This market overview does not rate or recommend securities of individual companies, nor does it contain sufficient information upon which to make an investment decision.

P&M Corporate Finance, LLC will seek to provide investment banking and/or other services to one or more of the companies mentioned in this market overview.

P&M Corporate Finance, LLC, and/or the staff who prepared this market update, may own securities of one or more of the companies mentioned in this market overview.

The information provided in this market overview was obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not to be construed as legal, accounting, financial, or investment advice. Information, opinions, and estimates reflect P&M Corporate Finance, LLC’s judgment as of the date of publication and are subject to change without notice. P&M Corporate Finance, LLC undertakes no obligation to notify any recipient of this market overview of any such change.

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Documents

MEDICAL CONTRACT MANUFACTURING M&A PULSESynergy % Medtronic/Covidien $ 42,900 $ 27,898 $ 8,559 $ 2,140 $ 850 39.7% Thermo Fisher/Life Technologies 13,600 19,706 9,994 2,499 300 12.0%