ADVERTISING SPECIALTIES CONTACTS Todd McMahon Managing Director (617) 619-3334 tmcmahon@capstonellc.com Matthew Person Vice President (617) 619-3322 mperson@capstonellc.com Peter Asiaf Managing Director Head of Business Development (617) 619-3368 pasiaf@capstonellc.com MERGER & ACQUISITION ACTIVITY High-growth industries are fueling demand for promotional products and distributors are looking to M&A to gain access to these key end markets. The domestic advertising specialties industry continues to thrive, with distributors increasing revenue 3.2% in the second quarter of 2017, according to the Advertising Specialties Institute (ASI). Driving demand are industries experiencing recent growth whose participants are leveraging ad specialties to enhance brand visibility, while others view these products as integral components of corporate wellness and employee benefit programs. In construction, for example, companies are looking to place logos on safety gear as part of awareness initiatives, a boon for providers with experience in regulatory compliant apparel. The healthcare sector is using ad specialties for similar purposes. Hospitals and urgent care facilities need to raise their profile as competition grows amid rising senior populations while management distributes premium products to help make staff feel appreciated. With competition for premium accounts across attractive end markets rising, Capstone expects M&A activity to increase as smaller companies get squeezed out and larger firms try to gain market share by acquiring those with entrenched positions or established client relationships. Such a trend is already bearing out as Bensussen Deutsch & Associates (BDA) recently acquired Boston-based SwervePoint to become further engrained in the Northeast. Additionally, Chocolate Inn acquired Private Label Executive Gifts (PLEG) to further solidify its promotional food offerings through access to PLEG s Jelly Belly brand product line. The rapidly consolidating industry has caught the interest of the private equity community, who are looking to deploy capital at quality targets, and will often ascribe premium valuations to do so. Recent conversations with several leading private equity firms suggest an active appetite for platform investments from which to enter the industry. HIG Capital s investment in BIC Graphic North America garnered the most publicity, but notable platform acquisitions occurred via Gen Cap America (Custom Plastic Specialties) and Pfingsten Partners (Showdown Displays). To date, 25 transactions have been consummated, indicating that the sector is on pace to match, if not surpass, 2016 totals. M&A Activity: Advertising Specialties BOSTON CHICAGO LONDON LOS ANGELES NEW YORK ORANGE COUNTY PHILADELPHIA SAN DIEGO SILICON VALLEY TAMPA Number of Transactions 50 40 30 20 10 20 22 24 34 41 25 0 2012 2013 2014 2015 2016 YTD 2017 YTD ended July 19 Source: Capital IQ; IBIS World; Capstone Partners LLC Research
BIC Graphic is a clear leader in a consolidating market due to its compelling customer value proposition. We see substantial opportunities to grow organically and through M&A. - Camilo Horvilleur Managing Director, HIG Capital (Excerpt from themiddlemarket.com) Advertising Specialties NOTABLE ADVERTISING SPECIALTIES TRANSACTIONS Several significant transactions were completed in the Advertising Specialties industry year-to-date. Select transaction profiles are outlined below, followed by a more comprehensive list in the subsequent table. BDA acquires SwervePoint (July 2017) It s first acquisition since 2011, and largest to date, Bensussen Deutsch & Associates (BDA) acquired Boston-based SwervePoint in part to become further engrained within the Northeast region. Founded in 2004, SwervePoint is known for it s B2B services, e-commerce programs and creative and client-focused website development capabilities. This acquisition provides us the opportunity to continue our growth trajectory while integrating additional resources to better support our east coast clients said Jay Deutsch, co-founder and CEO of BDA. Gen Cap America acquires CPS (July 2017) Custom Plastic Specialties (CPS) was acquired by Gen Cap America, and is the third investment in the private equity firm s latest fund. Founded in 1993, CPS manufactures over 300 items and is known for delivering excellent value in both price and quality. We are extremely excited to make an investment in CPS and partner with their industry leading senior management team, Gen Cap America Managing Director, Chris Godwin, said. We look forward to supporting the team in executing their long term strategy. HIG Capital acquires BIC Graphic NA & Asian Sourcing (June 2017) Its third investment in the promotional products sector, HIG acquired BIC Graphic North America and affiliated Asia sourcing operations from Société BIC. Headquartered in Clearwater, Florida, BIC Graphic is one of the largest suppliers in the industry, generating over $300mm in revenue annually, and is known for its quality writing instruments. Emmanuel Bruno, BIC Graphic s President, stated, HIG is the ideal partner for us given the firm s deep industry experience and historical success investing in our sector We will build on our successful history and be more nimble and responsive as a standalone entity. epromos acquires Motivators (June 2017) By acquiring certain assets of Motivators, including motivators.com and its customer base, epromos is continuing to execute on its strategy to serve as a platform company within the promotional products industry. A Top 40 distributor with $47.6mm in revenue in 2016, epromos has grown into one of the largest web-driven distributors. The acquisition of Motivators helps further cement this position as the distributor, founded in 1979, was one of the first to become e-commerce enabled. Additionally, epromos viewed Motivators as having an exciting account base, which includes coveted enterprise level clients. Corporate Inc. acquired by The Artcraft Group (May 2017) Following the recent trend in corporate award and recognition transactions, The Artcraft Group acquired Corporate Inc., a specialist in awards and incentives along with distribution of other business gifts and imprinted apparel. Corporate will be merged into Top 40 distributor Artcraft Promotional Concepts in order to provide additional services to clients said Judith Zimmerman, Artcraft s President. The Corporate executive team and all the company s employees will remain in their current roles at this time. Capstone Partners LLC 2
ADVERTISING SPECIALTIES : SELECT M&A TRANSACTIONS Enterprise EV / LTM Ann. Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA 07/19/17 SwervePoint 07/11/17 06/20/17 06/03/17 Custom Plastic Specialties Paparazzi Promo Badger Graphic Systems Bensussen Deutsch Creates branded merchandise and promotional & Associates campaigns to connect brands with people. GenCap America Hasseman Quality Resource Group Supplier of promotional products. Offers marketing services focused on distribution of promotional products. Offers print management and marketing services including logo apparel and promotional products. 06/19/17 Motivators epromos Distributes promotional products. 06/08/17 06/06/17 05/16/17 05/09/17 05/08/17 BrandSource Incentives BIC Graphic NA & Asian Operations Showdown Displays Corporate Handstands PROMO 05/01/17 RPM Associates 04/13/17 PrintManagement 03/29/17 03/20/17 02/21/17 02/07/17 02/07/17 Peoples Promotions Visions by Phoenix Private Label Executive Gifts Michael C. Fina Recognition 02/02/17 Catalyst 01/17/17 Premier Group Sharp Incentives Provides branded products for businesses to reward, recognize and incentivize employees and clients. H.I.G. Capital Supplies of premium writing instruments. $80.0 - - Pfingsten Partners The Artcraft Group Private Investor Winbrook Associates OneTouchPoint- Berman Image Pros Souders Brand Chocolate Inn / Taylor & Grant HALO Branded Solutions Grossman Group HALO Branded Solutions Midwest Premiums Incentives & Promotions International Manufactures visual communication, event and display products to the Promotional Products industry. Manufactures promotional awards, incentives, apparel and business gifts. Designs, develops, manufactures and sells promotional products and accessories. Offers print and promotional items to New England banks and credit unions. Operates as a commercial printer and distributor of business forms and promotional products. Distributes imprinted branded apparel, promotional items and gifts, and customized trophies and awards. Distributes promotional products to businesses. Manufactures imprinted advertising specialty and corporate incentive products. Provides employee recognition programs and engagement services. Provides marketing services and promotional products. Operates as a creative merchandise agency, sourcing and creating merchandise solutions. Distributes promotional products. 01/16/17 Soul Kix SnugZ USA Manufactures custom printed shoes. 01/16/17 J.America Top of The World 01/11/17 Logistical Outsourcing 01/11/17 Magna-Tel Thumbprint Fey Promotional Products Group Provides sportswear for collegiate, resort and high school markets. Provides integrated promotional and marketing solutions from concept development to launch. Manufacturers and supplies promotional products, including magnets, calendars and other paper products. 01/10/17 Diversified-Adtee Ball Pro Distributes promotional kitchenware and golf products. 01/06/17 DLX Industries Royal Industries Manufactures and supplies promotional products under the Pamcolite line. Capstone Partners LLC 3
ADVERTISING SPECIALTIES: PUBLIC COMPANY TRADING & OPERATING DATA Price % 52 Wk Market Enterprise LTM 1-Yr Rev EV / LTM Company 7/18/17 High Cap Value Revenue EBITDA Margin Growth Revenue EBITDA 4imprint Group plc $21.04 85.0% $590 $567 $558 $39 7.1% 12.3% 1.0x 14.4x Cimpress N.V. $93.70 89.9% $2,918 $3,970 $2,050 $173 8.4% 21.4% 1.9x 22.9x Ennis Inc. $19.30 99.2% $491 $436 $361 $56 15.4% (4.9)% 1.2x 7.8x InnerWorkings Inc. $11.72 98.2% $623 $706 $1,087 $45 4.1% 2.7% 0.6x 15.8x Gildan Activewear Inc. $30.13 90.3% $6,763 $7,489 $2,657 $547 20.6% 5.2% 2.8x 13.7x EV = Enterprise Value; LTM = Last Twelve Months $ in Millions, except per share data NM = Not Meaningful; NA = Not Available Mean 11.1% 7.3% 1.5x 14.9x Median 8.4% 5.2% 1.2x 14.4x Harmonic Mean 8.1% NM 1.2x 13.3x Last Twelve Month Revenue Growth 25% 20% 21.4% 15% 10% 5% 12.3% 2.7% 5.2% 0% -5% 4imprint Group plc Cimpress N.V. Ennis Inc. InnerWorkings Inc. Gildan Activewear Inc. -4.9% Year-to-Date Performance 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% -20.00% -25.00% Adverising Specialties Peer Group Dow Jones Industrial Average S&P 500 Index Capstone Partners LLC 4
CAPSTONE PARTNERS: SELECT MARKETING SERVICES TRANSACTIONS Capstone Partners has completed several transactions within the Services industry. These transactions span major categories, from direct marketing and fulfillment services to lead generation and commercial printing. Capstone s experience in the Services industry provides insight into the valuable attributes and likely valuation of a target company, the active buyers in the industry and the nuances of the transactions. has secured financing from PRIVATE INVESTOR GROUP has secured financing from Capstone Partners LLC 5
THE ADVERTISING SPECIALTIES TEAM Todd McMahon, Managing Director tmcmahon@capstonellc.com (617) 619-3334 Todd McMahon possesses over 20 years of transaction, financial services and corporate executive experience. Prior to Capstone, Todd was President of Array Financial Services, a Boston based boutique M&A advisory firm he founded in 2002. He began his career at Putnam Investments, later moving to Bank Boston s investment banking group. Later, Todd served as Managing Director at Ross Crossland Weston/RCW Mirus, where he was responsible for managing the firm s technology investment banking practice. Todd s investment banking experience is complemented by his involvement as an entrepreneur and investor where he was involved in various consolidation transactions, raised over $30mm of debt and equity financing and was responsible for managing all aspects of operations. He earned his MBA from Boston University and his BA from the University of Massachusetts. Matthew Person, Vice President mperson@capstonellc.com (617) 619-3322 Matthew works closely with senior team members while executing a variety of corporate finance transactions. Prior to joining Capstone, Matthew worked as an investment banker with a consumer products M&A boutique firm. He also worked with Breakaway Innovation Group, a hybrid venture capital and strategy firm focused on early to growth stage businesses. Before entering the finance industry, Matthew enjoyed a long career in professional sports management with executive operations responsibility for various Minor League Baseball franchises. He earned an MBA in Entrepreneurship and an MS in Finance from the Carroll School of Management at Boston College, graduating with honors as a member of Beta Gamma Sigma. He holds a BA in Economics from Colgate University and is a Series 79 and 63 Registered Securities Representative. 2017 LEADING M&A DEAL MAKER 2017 US MIDDLE MARKET INVESTMENT BANK 2017 CROSS-BORDER DEAL INTERNATIONAL AWARDS 2016 MIDDLE MARKET INVESTMENT BANKING FIRM 2016 US MIDDLE MARKET INVESTMENT BANK 2016 USA DEAL Capstone Partners LLC 6
CAPSTONE S OFFICE LOCATIONS BOSTON 176 Federal Street 3rd Floor Boston, MA 02110 (617) 619-3300 CHICAGO 200 South Wacker Drive Suite 3100 Chicago, IL 60606 (312) 674-4531 LONDON 42 Brook Street London W1K 5DB United Kingdom +44 (0) 203 427 5068 LOS ANGELES 401 Wilshire Suite 1200 Santa Monica, CA 90401 (858) 926-5950 NEW YORK 340 Madison Avenue 10 th Floor New York, NY 10173 (212) 634-0855 ORANGE COUNTY 23046 Avenida de la Carlota Suite 600 Laguna Hills, CA 92653 (949) 460-6431 PHILADELPHIA 1515 Market Street 12th Floor Philadelphia, PA 19102 (215) 854-4063 SAN DIEGO 12707 High Bluff Drive Suite 200 San Diego, CA 92130 (858) 926-5950 SILICON VALLEY 228 Hamilton Avenue 3rd Floor Palo Alto, CA 94301 (650) 319-7370 TAMPA 1550 W Cleveland Street Suite 10 Tampa, FL 33679 (813) 251-7285 ABOUT CAPSTONE PARTNERS Capstone Partners LLC is an award-winning investment banking firm dedicated to serving the corporate finance needs of middle market business owners, investors and creditors. Over the past 15 years, Capstone has earned a reputation as one of the most innovative firms in the industry, offering corporate sale & divestiture, merger & acquisition, private placement, corporate restructuring, valuation and financial advisory services. The firm maintains seven industry practices, including: Business Services, Consumer Products, Education & Training, Government Services, Health & Medical, Manufacturing & Industrial, and Technology & Telecom. Headquartered in Boston, Capstone has offices in Chicago, London, Los Angeles, New York, Orange County, Philadelphia, San Diego, Silicon Valley and Tampa with an international presence that spans 450+ professionals in 70 offices across 31 countries. For more information about our expertise, please visit www.capstonellc.com World Class Wall Street Expertise. Built for the Middle Market. 2017 Capstone Partners LLC. All rights reserved.