MEDICAL DEVICE OUTSOURCING Q BOSTON CHICAGO LONDON LOS ANGELES PHILADELPHIA SAN DIEGO SILICON VALLEY TAMPA CONTACTS

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1 MEDICAL DEVICE OUTSOURCING CONTACTS Eric Williams Managing Director (215) Mark Surowiak Director (215) Daniel Schultz Director of Business Development (617) M&A ACTIVITY: 2014 REVIEW There was no shortage of M&A transactions in the medical device outsourcing industry in 2014, as activity rose in concert with the improving performance of both targets and buyers in the sector. Accelerating activity also reflected a higher level of CEO confidence that accompanied a settling of the industry, following several recent disruptive changes which included healthcare reform and the corresponding excise tax on medical device sales as well as an increase in the capital gains tax rate, all of which that took effect in With these changes behind them, buyers resumed their acquisition plans, targeting a wide variety of medical device outsourcing companies as they searched for strategic additions to their operations or, in the case of private equity buyers, platform investments or add-ons to their portfolio holdings. Many of the industry s transactions continue to be motivated by contract manufacturers seeking to add specific competencies to their offerings, with the goal of building a turnkey solution offering engineering, product development, regulatory, quality assurance and other services as well as a range of manufacturing and assembly capabilities. We have also noted increased interest by private equity firms who are attracted to the sector s long-term growth opportunities and fragmented structure, as well as the chance to play an important role in supporting a company s expansion efforts during periods ofgrowth and scale-building. As a result of these interests, the year s transactions included a diverse group of outsourcing companies such as those providing EMS, grinding, machining, stamping, casting and plastic injection molding or extrusions. There was also a very strong showing of companies that provide services and solutions to medical device OEMs, including product development, design and engineering, research and marketing, regulatory and protocol, commercialization, prototyping, testing and validation, and clinical trial services. BOSTON CHICAGO LONDON LOS ANGELES PHILADELPHIA SAN DIEGO SILICON VALLEY TAMPA 2015 OUTLOOK While 2014 was a banner year for mergers & acquisitions, activity is projected to be even stronger in This expectation is a result of excellent market conditions that include readily available and inexpensive transaction financing and generally cash-rich buyers. In addition, CEO confidence has improved. The U.S. economy is positioned for growth, most economic indicators have now fully recovered from the recession and more people are re-entering the labor force with better prospects for employment, all contributing to a healthy environment. Transaction valuations are also at healthy levels, further contributing to robust M&A activity. Based on these positive market conditions for both buyers and sellers alike, Capstone expects that M&A activity in the industry will continue at an active pace in 2015.

2 INDUSTRY GROWTH & TRENDS Rising M&A activity in the medical device outsourcing industry is in large part a result of the positive growth outlook for the industry, which is being supported by an aging population that requires more and more medical procedures, continued advances in medical technology, and the many benefits that outsourcing delivers to OEMs. According to Transparency Market Research, the global medical device outsourcing market is projected to reach $40.8 billion by 2018, representing a compound annual growth rate of 11.6% from $21.1 billion in Outsourcing services for Class II devices remain the largest market, as these products are complex enough to benefit from outsourcing, but are required to adhere to fewer regulations compared to Class III devices. Underpinning the outsourcing industry is the U.S. medical device market, which is forecast to see steady growth over the next five years, despite the impact of the newly introduced Medical Device Excise Tax and uncertainties within the healthcare system in the wake of the Patient Protection and Affordable Care Act. According to Espicom, at an estimated $125.4 billion, the U.S. medical device market is the world's largest, and is projected to grow at a CAGR of 6.1% through 2018, as it settles down into a more consistent pattern after the volatile period. The primary motivation for OEMs to outsource continues to be primarily the need to reduce costs, improve product quality and accelerate time-to-market (TTM). Shorter product lifecycles and more sophisticated levels of technology are exerting pressure on OEMs to quickly bring products to the market in order to gain first mover advantages. Intensifying competition at the OEM level is forcing companies to recalibrate their strategies and explore new efficiencies throughout the process from product design and development to manufacturing and marketing. In fact, while manufacturing outsourcing remains essential, the priorities of OEMs are shifting to include contract legal, regulatory, design, marketing and other ancillary and idea-driven services that help OEMs to shorten development and production scale-up time, expand market share, and enjoy premium pricing and cost advantages. This trend is reflected in the industry s M&A activity in There was a noticeable increase in transactions involving targets that provide ancillary services, as buyers moved to add these capabilities to their arsenal. Examples include the recent purchase of Ximedica, LLC, which provides research, product development, regulatory and manufacturing services to medical device makers; the acquisition of Ubiquity Group, which specializes in providing biotech and medical technology marketing services; the acquisition of Apio Partners, LLC, a provider of technology commercialization services to the life sciences industry, including medical device OEMs; and the purchase of J Trotter Research and Consulting LLC, a provider of late stage medical product research and commercialization services. Capstone Partners LLC 2

3 MEDICAL DEVICE OUTSOURCING: SELECT TRANSACTIONS Enterprise EV / LTM Value Date Target Acquirer Target Business Description ($mm) Revenue EBITDA Pending Nov-14 Nov-14 Phillips-Medisize Symmetry Medical, Inc. Lawrence Tool and Engineering Southeastern Technology, Inc. Ubiquity Group Precision Wire Components, LLC Med-Ally LLC Ximedica, LLC Professional Machine, Inc. AccuMED Technologies, LLC Resonetics, LLC. Cadient Group, Inc. Apio Partners, LLC Performance Compounding LLC Biomerics Advanced Catheter Division J Trotter Research and Consulting LLC LSA LLC 3D Medical Manufacturing, Inc. Avalon Laboratories, LLC Autocam, Inc. Interplex Industries, Inc. Microtest Laboratories, Inc. K&L Consulting Services, Inc. Vesta Inc. Solid Concepts Inc. Golden Gate Capital Tecomet, Inc. JunoPacific, Inc. Autocam Medical Device Holdings, LLC The Bawmann Group, Inc. Creganna Medical Kelyniam Global, Inc. (OTCPK:KLYG) SV Life Sciences Advisers, LLC ARCH Global Precision L.L.C. MVC Partners, LLC; Yukon Partners Sverica International Cognizant Tech. (NasdaqGS:CTSH) Foresight Science & Technology, Inc. Lehmann & Voss & Co. KG Biomerics, LLC Continuum Clinical LLC AdvancedCath Technologies Inc. Tecomet, Inc. Nordson Medical NN Inc. (NasdaqGS:NNBR) Amtek Engineering (SGX:M1P) ATS Labs, Inc. Fountain Medical Development Ltd The Lubrizol Stratasys Ltd. (NasdaqGS:SSYS) Provides design, development and contract manufacturing services to medical device and other industries. Provides contract manufacturing for the surgical instrument, orthopedic implant and sterilization case and tray markets. Operates as a tool design and fabrication firm specializing in high-volume medical device production. Contract manufactures precision-machined components, assemblies and parts for medical device and other markets. Specializes in providing biotech and medical technology marketing services. A contract manufacturing company, provides manufacturing and processing services to the medical device industry. Manufactures active implantable medical device systems and equipment for medical device OEMs. Provides research, product development, regulatory and manufacturing services to medical device makers. Manufactures precision machined components for a diverse set of industries, including medical and dental devices. Manufactures medical devices for medical products companies in the United States and internationally. Provides manufacturing services for medical device OEMs specializing in products for minimally invasive procedures. Provides digital marketing services and technology-enabled solutions for medical device and other manufacturers. Provides technology commercialization services to the life sciences industry, including medical device OEMs. Operates as a custom and contract compound manufacturer in the polymer processing industry. Contract manufactures catheter components, procedural devices and finished devices for medical device companies. Provides late stage medical product research and commercialization services. Provides precision medical device manufacturing and assembly services to medical device OEMs. A contract manufacturer, manufactures custom medical implants and devices. Develops and manufactures medical devices to client specifications, from prototypes to full contract manufacturing. Manufactures custom, precision-machined components for OEMs, including medical device manufacturers. Designs and manufactures precision metal and plastic solutions for a variety of industries including medical devices. Provides testing services and contract manufacturing for the medical device, pharmaceutical and biotechnology industries. A contract research organization, provides a range of services in clinical development to medical device and other industries. Provides medical device contract manufacturing and support services to the medical industry worldwide. Provides rapid prototyping, manufacturing, tooling and injection molding of medical components and other products. $ x 8.7x $ $ x 7.6x $ $ x - Capstone Partners LLC 3

4 MEDICAL DEVICE OUTSOURCING: SELECT TRANSACTIONS Enterprise EV / LTM Value Date Target Acquirer Target Business Description ($mm) Revenue EBITDA Jun-14 Vaupell Inc. Sumitomo Bakelite Co. Ltd. (TSE:4203) Jun-14 RadCore Lab, LLC Cardiocore Lab, Inc. May-14 May-14 Aptiv Solutions, Inc. Altronics Manufacturing Inc. AVID Technologies, Inc. Advance Tooling Concepts LLC Processing Equip. Solutions, Inc. Medical Modeling Inc. O.R.M., Inc. Aubrey Group, Inc. Laser Design, Inc. Lake Region Medical, Inc. ICON Public Limited Co. (NasdaqGS:ICLR) Varitron Technologies Inc. Premier Farnell plc (LSE:PFL) ARC Group (NasdaqCM:ARCW) Middleby Corp. (NasdaqGS:MIDD) 3D Systems Corp. (NYSE:DDD) Electri-Cord Manufacturing Sparton Corp. (NYSE:SPA) CyberOptics Corp. (NasdaqGM:CYBE) Accellent, Inc. SYNARC Inc. BioClinica, Inc. Food Technology Service Inc. Integrity Plastics, Inc. Compliance Partners, LLC Reliance Laser, Inc. Northeast Mold & Plastics, Inc. Semblex Pro CNC Inc. IntriCon Tibbetts Tompkins Pharma. Rubber Corp. Directed Manufacturing, Inc. MTI Electronics, Inc. Sterigenics U.S., LLC Brentwood Industries, Inc. Raland Compliance Partners, LLC Okay Industries, Inc. Res-Tech JINHAP Company Ltd. Trulife Group Limited Sierra Peaks Quality Synthetic Rubber, Inc. RTI International Metals (NYSE:RTI) VirTex Assembly Services, Inc. LTM = last twelve months; EV = enterprise value Sources: Capstone Partners LLC research; Capital IQ; public filings and press releases Provides injection molded plastic components and assemblies for medical product OEMs and other markets. Offers imaging endpoint solutions for pharmaceutical, biotechnology and medical device clinical trials. A contract research organization, designs and executes drug and medical device development services. $143.5 Provides electronic contract manufacturing services for the medical device and other industries. A full service product development firm offering electronic products for the medical and other markets. Manufactures high precision injection molded parts for medical device OEMs and other industries. Provides machined and fabricated parts and components for various markets including medical. Provides R&D, prototyping and production services to medical device OEMs. Provides contract manufacturing services to commercial, military, industrial and medical device manufacturing markets. A contract product development and manufacturing company, engages in designing and manufacturing medical devices. Provides ultra-precise and 3D laser scanning systems and services to the medical device and other industries worldwide. Develops and manufactures medical devices and components for OEMs in the United States and internationally. Provides medical imaging, consultation and analysis services for pharma, biotech and medical device clinical trials. Operates an irradiation facility to provide contract sterilization services to the medical device, packaging and food industries. Offers plastic injection molded components for medical device OEMs and other industries. Provides consulting solutions to companies in the FDA regulated life sciences industry, including medical devices. Provides laser welding, cutting and marking services and writes validation protocols for medical device manufacturing. Designs, develops and manufactures injection molded parts for the medical components and other industries. Manufactures and supplies cold formed fasteners for OEMs in the medical device and other industries. Provides machining and assembly services to OEMs and contract manufacturers in the medical device industry. Develops and contract manufactures magnetic telecoils and miniature transducers for medical devices and other products. Manufactures custom molded rubber pharmaceutical packaging and medical device components. Manufactures plastic and metal parts, components and assemblies for the aerospace and medical device industry. Provides contract electronic assembly and manufacturing services to OEMs in medical, industrial and military markets. $ $ x - $ x - $ x - $ $ x 8.2x $ $ Capstone Partners LLC 4

5 CAPSTONE PARTNERS: INDUSTRY ACTIVITY AWARDS 2014 MIDDLE MARKET CROSS BORDER DEAL OF THE YEAR 2014 NORTH AMERICA MIDDLE MARKET DEAL OF THE YEAR In November, Capstone Partners won the 2014 Cross Border Deal of the Year award for its work on the sale of T-DOC Company, LLC, a manufacturer of medical diagnostic products specializing in air-charged disposable urodynamic catheters. T-DOC was acquired by LABORIE, a portfolio company of Audax Private Equity and a leading global developer, manufacturer and marketer of innovative medical technology. The award was bestowed upon Capstone by the M&A Advisor in recognition of the leading deal teams, firms and professionals whose activities set the standard for M&A transactions and represent the highest levels of performance. Earlier in the year, Capstone Partners was awarded the 2014 North America Deal of the Year award at The M&A Atlas Awards, also for its work on the sale of T-DOC Company, LLC. These awards honor excellence in executing value and growth-generating transactions. The transaction expanded T-DOC s product offering, allowing it to develop the aircharged catheter market internationally. Commenting on the transaction, Russell Lalli, COO of T-DOC, said Hats off to the Capstone team in ensuring this complex deal reached the finish line as well as for the effort they extended over several years serving as a valued strategic advisor to the Company. MDDI ARTICLE In August, Medical Device and Diagnostic Industry (MDDI) published an article written by Capstone s Eric Williams in its spotlight on Contract Manufacturing Services. The article explores how companies with a full offering of production capabilities and ancillary services are best positioned to meet growing OEM demands, and how that requirement is motivating a flurry of mergers and acquisitions in the industry. The article draws upon a recent Capstone poll of corporate buyers and private equity firms with holdings or interest in the medical device outsourcing industry. In the poll, buyers noted that acquisitions are an increasingly important part of their strategic plans. Many respondents suggested that, before 2013 they were more concerned with internal initiatives, but now that the industry is experiencing better growth they are again looking to make strategic acquisitions. The full article can be found on the MDDI website. PRESENTATION AT MDM EAST CONFERENCE In June, Eric Williams, Managing Director and head of Capstone s medical device outsourcing practice, presented to conference attendees at MD&M East. His presentation, entitled Medtech Outsourcing: How to Benefit from Accelerating M&A Markets, reviewed the current M&A environment for medical device outsourcing companies, showing attendees how to read between the lines to pinpoint the realities of the market. In addition, the presentation discussed the variety of transaction alternatives available to middle market business owners in the space and the pros and cons of each, provided value building and optimal timing suggestions, discussed best-practice process and negotiation strategies, and provided tips for managing the nuances of a transaction. Capstone Partners LLC 5

6 THE MEDICAL DEVICE OUTSOURCING TEAM Eric Williams, Managing Director (215) Eric serves as Managing Director and Head of the Atlantic Region for Capstone, based out of Philadelphia. Prior to Capstone, Eric was responsible for managing the Eastern region for Morgan Stanley Smith Barney s Capital Strategies Group and its predecessor, Citi Capital Strategies. Eric has more than 20 years of experience managing strategic sale assignments and leveraged recapitalizations for owners of privately held companies. He is head of Capstone s Health and Medical practice and has successfully completed over 100 transactions in a wide range of industries including medical device, contract manufacturing, pharmaceutical outsourcing, health care services and education and training. In 2013, he received the M&A Advisor s M&A Deal of the Year award for his work on the acquisition and majority recapitalization of Invo HealthCare Associates, Inc. In 2014, Eric won the M&A Advisor s Cross- Border Middle-Market Deal of the Year award and the Global M&A Network s North American Deal of the Year award for his work on the sale of T-DOC Company. Eric has executed complex cross-border transactions with foreign buyers based in London, Germany, Sweden, and Switzerland and has structured deals with leading private equity groups and strategic corporate buyers. He graduated cum laude from the University of California and is a Series 7 and 63 Registered Securities Representative as well as a Series 24 Registered Securities Principal. Mark Surowiak, Director msurowiak@capstonellc.com (215) Mark is a Director in the Philadelphia office, supporting the management of the Atlantic Region. Previously, Mark served over 10 years as a senior investment banking professional in Morgan Stanley Smith Barney s Capital Strategies Group. Over his career, Mark has focused on developing deep credentials and expertise in the sale and recapitalization of privately held businesses. Mr. Surowiak's experience spans a broad range of industries including health and medical, nutraceuticals, post-secondary education, contract manufacturing, and outsourced business services sectors. Prior to investment banking, Mark enjoyed a career in the social services field. Mark is a graduate of Illinois State University with a BS in Business Administration. He is a Series 7 and 63 Registered Securities Representative. Daniel Schultz, Director of Business Development dschultz@capstonellc.com (617) Dan oversees Capstone s national business development and industry coverage activities activities, working closely with current and prospective clients of the firm on matters related to corporate sales, recapitalizations, mergers & acquisitions and growth financings. In his role, Dan is able to deliver specific market intelligence to clients regarding M&A, financing, strategic, industry and competitive trends. Prior to spearheading the firm s business development and market initiatives, he was a Vice President in Capstone s M&A group, managing numerous successful transactions across a variety of industries. Dan also gained hands-on transaction experience as an investment banker at Headwaters MB. He started his career with Ernst & Young s National Professional AABS practice in New York and later worked in Assurance and Advisory Business Services in the Denver office. Dan received a BE in Biomedical Engineering with a Business Minor from Vanderbilt University. He earned an MBA and a Master of Accountancy from the Daniels College of Business at the University of Denver. Capstone Partners LLC 6

7 CAPSTONE S OFFICE LOCATIONS BOSTON 176 Federal Street 3rd Floor Boston, MA (617) CHICAGO 200 South Wacker Drive Suite 3100 Chicago, IL (312) LONDON 42 Brook Street London W1K 5DB United Kingdom +44 (0) LOS ANGELES Avenida de la Carlota Suite 600 Laguna Hills, CA (949) PHILADELPHIA 1515 Market Street 12th Floor Philadelphia, PA (215) SAN DIEGO High Bluff Drive Suite 200 San Diego, CA (858) SILICON VALLEY 228 Hamilton Avenue 3rd Floor Palo Alto, CA (650) TAMPA 1550 W Cleveland Street Suite 700 Tampa, FL (813) ABOUT CAPSTONE PARTNERS Capstone Partners LLC is a premier investment banking firm dedicated to serving the corporate finance needs of middle market business owners, investors and creditors. The firm provides corporate sale & divestiture, merger & acquisition, private placement, corporate restructuring, valuation and financial advisory services. Capstone maintains various industry specialties including one in the industry. The firm also has a merchant banking capability to actively co-invest in transactions. Headquartered in Boston, Capstone has offices in Chicago, London, Los Angeles, Philadelphia, San Diego, Silicon Valley and Tampa. For more information about our expertise, please visit World Class Wall Street Expertise. Built for the Middle Market Capstone Partners LLC. All rights reserved.