ACG Panel Deck 2015

Bridgepoint Merchant Banking is a Division of Bridgepoint Holdings, LLC.

Current Market Dynamics

October 2015


Historical S&P 500 Index Relative to Fed Funds RateBull vs. Bear Markets

Source: Bridgepoint Merchant Banking, Capital IQ, www.axial.net, www.bloomberg.com, www.qz.com,

www.themiddlemarket.com

Since 1949, the average

length of bull markets

has been 42.5 months

The current bull market

has lasted 49 months to

date

Historically, bull markets

end due to:

High equity

valuations

Tight monetary

policy

Unforeseen

geopolitical

events

2


1,797

2,047 2,107

1,845

1,279

873

1,415

1,6251,488 1,494

1,768 1,804

0

500

1,000

1,500

2,000

2,500

9.4x 9.5x9.9x

7.9x

9.0x 8.9x

10.0x9.6x

10.2x9.7x

10.1x 9.9x 10.2x10.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

U.S. Middle-Market: M&A Transaction Count U.S. Middle-Market: Average TEV / EBITDA

Note: Reflects deals of up to $500mm TEV with disclosed values.

U.S. Middle-Market M&A OverviewMarket Valuations Exceed Peak Levels; M&A Volume Remains Robust


3

1,797

2,047 2,107

1,845

1,279

873

1,415

1,6251,488 1,494

1,768 1,804

0

500

1,000

1,500

2,000

2,500

Source: Factset Mergerstat

U.S. Middle-Market M&A ValuationsValuations at Record Levels

5.3x

5.7x

5.9x

5.4x

5.9x6.0x

6.1x

6.9x

6.3x

7.7x

7.2x

6.8x

6.7x

7.5x

7.9x

7.5x7.4x

7.1x

7.6x

8.3x

5.0x

5.5x

6.0x

6.5x

7.0x

7.5x

8.0x

8.5x

2011 2012 2013 2014 1Q 2015

TE

V/E

BIT

DA

Valuation Multiples by Transaction Size (TEV)

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

Source: GF Data, M&A Report 2015

4


U.S. Middle-Market

transaction multiples

are at their highest

levels in recent history,

with 8.3x meaningful

size premiums

Note: Middle-Market defined as $10 – 250mm TEV

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

Manufacturing Distribution

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

5

Cyclical Sectors Industry Valuations Update

Trucking Valuation Cycle – TEV / LTM EBITDA

3.6x

9.0x

7.2x

Trucking industry

valuation multiples

are trending

downward but still

reflect 2x last cycle

trough

Source: Bridgepoint Merchant Banking, Capital IQ, www.axial.net, www.bloomberg.com, www.qz.com,



Building product

industry multiples are

above historical

averages – more than

2.5x last cycle trough

for manufacturers,

1.9x for distributors

Building Products Valuation Cycle – TEV / LTM EBITDA

4.6x

14.5x

11.7x

7.6x

14.4x

Mfg Dist

Current Median 11.7x 14.4x

Historical Median 10.7x 12.0x

Trough Median (2009) 4.6x 7.6x

Current Median 7.2x

Historical 7-Year Median 7.1x

Trough Median (2009) 3.6x

Source: Bridgepoint Merchant Banking, Capital IQ (07/21/15), www.axial.net, www.bloomberg.com, www.qz.com,


262

288

271281

293

274

303

369

329

269

328318

312 307

284

309

261

312

0

50

100

150

200

250

300

350

400Q2-15 Midwest M&A

transaction volume

rebounded nearly 20%

from Q1-15

Midwest activity doesn’t

necessarily track

national activity over the

same time period

represented by this

chart

Quarterly Midwest M&A Transaction Volume

6


Note: Transaction criteria: Buyer, target and/or seller must be located in the Midwest, and the Midwest participant must have

purchased or sold majority control. Total Enterprise Value must be $10mm or greater. Midwest defined as Iowa, Kansas,

Missouri, Nebraska, North Dakota, Oklahoma, and South Dakota.

Midwest M&A Median Deal Size & Valuations

Median Valuations

(TEV/EBITDA) in Q2-15

were significantly higher

than both the prior

sequential quarter and

the year-earlier quarter

Q2-15 multiples are at

historically strong

levels, the highest since

Q2-13

Corporates and

sponsors have shown a

willingness to pay a

premium to close deals

Midwest M&A deal size

grew to $19.0mm in

Q2-15, up from

$16.5mm in Q1-15



$11.5

$13.0 $10.0

$20.5

$12.0

$14.9

$17.6

$29.8

$9.7

$13.8

$17.5

$31.4

$22.7

$22.9

$15.3

$20.6

$16.5

$19.0

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

Me

dia

n T

EV

($

mm

)

7


7.6x

10.8x10.1x

8.5x

5.4x

8.5x

9.7x10.4x

13.6x14.6x

10.8x

7.0x

9.1x8.5x

11.3x

8.4x 8.0x

12.4x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

TE

V /

EB

ITD

A

Quarterly M&A

transactions with

Midwest buyers

increased from 145 in

Q1-15 to 166 in Q2-15

The number of

transactions with

Midwest targets

increased as well with

135 announced or

closed transactions in

Q2-15 vs. 97 in Q1-15

Midwest buyers have

been increasingly

acquisitive



50

70

90

110

130

150

170

190

210

230

Midwest Buyers Midwest Targets

Quarterly Midwest M&A Buyers & Sellers

8


55%

57%

53%

56%

53%56%

54%44%

54%

54%

59%55%

51%

47%

42%

48%

40%

45%

Note: Buyers, % sellers by quarter

9

Financials, Consumer

and Industrials

Industries remained in

the top, accounting for

68% of total Midwest

M&A transaction

volume in Q2-15, a

slight 2% decrease

from Q1-15

The Consumer sector

is up 5% from Q1-15.

The Industrials sector

on the other hand, saw

a steep decrease of 7%

from Q1-15



Energy7% Materials

3%

Industrials16%

Consumer24%

Healthcare9%

Financials28%

Info Tech9%

Telecomm / Utilities

4%

Quarterly Midwest M&A Transaction Volume By Sector


Middle-Market Leverage Multiples

Middle-Market M&A Loan Volume

Source: Standard & Poor’s Leveraged Commentary and Data

Favorable Debt Financing Environment

Competition among

lenders have driven

the strongest lending

markets since at least

2007

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

4.1x3.3x

2.5x3.2x

3.6x 3.5x4.0x 4.3x 4.4x

5.6x

4.5x

3.3x

4.2x 4.3x4.5x

4.8x5.3x

4.9x

0.0x

2.0x

4.0x

6.0x

2007 2008 2009 2010 2011 2012 2013 2014 Q1'15

Sr. Debt Other

10


Note: Middle-Market defined as $10 – 250mm TEV

Borrowers with less than $15mm EBITDA Borrowers with at least $15mm EBITDA Borrowers with at least $35mm EBITDA

Pricing Multiples Pricing Multiples Pricing Multiples

Asset Based

Senior

L + 175 – 275

LIBOR Floor: none N/A

L + 150 – 250


L + 150 – 250


Cash Flow

Senior

L + 475 – 575

LIBOR Floor: 100 2.75x – 3.25x EBITDA

L + 425 – 525


L + 425 – 525


Senior Stretch Unlikely N/A L + 500 – 600


L + 500 – 600


Unitranche L + 700 – 850


L + 650 – 800


L + 600 – 750


2nd Lien Loans Unlikely 4.00x – 5.00x EBITDA L + 850 – 1000


L + 850 – 1000


Sub Debt

Cash of 11.0% – 13.0%

PIK of 1.0% – 2.0%

All-in of 12.0% – 14.0%

4.00x – 5.00x EBITDA

Cash of 10.0% – 11.0%

PIK of 1.0% – 2.0%

All-in of 11.0% – 13.0%


Cash of 10.0% – 11.0%

PIK of 1.0% – 2.0%

All-in of 11.0% – 13.0%


Equity N/A Approximately 35%+ N/A Approximately 30% –

35% N/A Approximately 30%+

Overview of U.S. Middle Market Debt Pricing and

Terms

11


Source: Bridgepoint Merchant Banking

Current Trends in Senior Debt Structure

Pre 2008 2008 - 2009 2015

Hold Levels $50 million $25 million max $50 million+

Stretch Pieces Aggressive Nonexistent Yes

Term Loan Amortization Little or none Nearly a prerequisite Little or back-end loaded

Covenants Limited to 1 or 2 and loose Full package, much tighter 1 to 2 covenants; looser

Advance Rates Aggressive (ABL-Lite) Conservative (ABL-Heavy) Aggressive (ABL-Lite)

Rate Floors Rare Standard Standard

Rate Protection Language Minimal Robust and complex Robust and complex

Prepayment Penalties Rare Standard Less or none

Bank Commitment Fully underwritten Best efforts Best efforts

Market Flex Language Limited, if any Required Required

Bank Group Syndications Relationship driven "Club Deals" Syndications

12


Source: Bridgepoint Merchant Banking

Historical S&P 500 Index Relative to Political Party Presidential Election Years



75% of the time, the

markets have rallied

leading up to an election

year (since the 1968

election)

6 out of 12 election

years were followed by

a bear market within

one year

13


Economy & Finance

ACG Panel Deck 2015