John Hill hill@hydeparkcapital.com (813) 383-0205 John McDonald mcdonald@hydeparkcapital.com (813) 383-0206 Jeff Hendricks Vice President jhendricks@hydeparkcapital.com (678) 523 3073 Quarterly M&A Report Q3 2018 Josh Mastracci Associate mastracci@hydeparkcapital.com (813) 383-0204 Matt Gladdish Analyst gladdish@hydeparkcapital.com (813) 383-0203 Hyde Park Capital Advisors, LLC 701 N. Franklin Street Tampa, FL 33602 Tel: 813-383-0202 www.hydeparkcapital.com Member FINRA/SIPC
Capital Markets Overview Commentary Select Initial Public Offerings Q3 2018 During the twelve month period ended September 30, 2018, the Nasdaq increased 23.5%, while the S&P 500 gained 15.2%. Both major indices traded at all-time highs during the trailing three months, ending the quarter down only 0.6% and 1.0% from records, respectively. IPO activity cooled off in the third quarter after a hot start to the year, with 43 initial public offerings during Q3 (versus 63 in Q2). Elanco Animal Health, Inc. (NYSE:ELAN), a developer of animal disease prevention products, raised $1.5 billion in the largest IPO during Q3 2018. Offer Date Issuer Industry Sector Transaction Type Transaction Value ($MM) 09/19/18 Elanco Animal Health Inc. Healthcare IPO $1,510 09/06/18 Churchill Capital Corp. Financial Services IPO $600 07/25/18 Focus Financial Partners Inc. Financial Services IPO $535 08/09/18 Spartan Energy Acquisition Corp. Financial Services IPO $480 09/06/18 Gores Holdings III, Inc. Financial Services IPO $375 07/25/18 Bloom Energy Corp. Industrials IPO $270 07/26/18 Tenable Holdings, Inc. IPO $251 There were a number of significant deals announced during Q3, including Broadcom Inc. s announced acquisition of CA, Inc. for $18.4 billion, and Renesas Electronics Corp. s planned purchase of Integrated Device, Inc. for $6.9 billion. Public Market Performance (LTM) 07/17/18 Rubius Therapeutics, Inc. Healthcare IPO $241 09/19/18 Eventbrite, Inc. IPO $230 08/01/18 Sonos, Inc. IPO $208 Select Announced U.S. M&A Transactions Q3 2018 130% Announced Date Target Buyer Industry Enterprise Value ($MM) 120% 110% 100% 23.5% 15.2% 07/11/18 CA, Inc. Broadcom Inc. $18,448 09/10/18 Integrated Device, Inc. Renesas Electronics Corp. $6,946 08/06/18 Bemis Company, Inc. Amcor Ltd. Industrials $6,824 09/12/18 Sedgwick Claims Management Services, Inc. 08/08/18 The Dun & Bradstreet Corp. The Carlyle Group $6,700 Thomas H. Lee Partners / Qatar Investment Authority Business Services $6,605 07/23/18 LifePoint Health, Inc. RCCH HealthCare Partners Healthcare $5,598 09/20/18 Marketo, Inc. Adobe Systems Inc. $4,750 90% Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Source: Capital IQ. S&P 500 Nasdaq 07/17/18 Ply Gem Parent, LLC NCI Building Systems, Inc. Industrials $3,606 07/22/18 Syntel, Inc. Atos SE $3,542 09/24/18 Pandora Media, Inc. Sirius XM Holdings Inc. $3,318 2
Total Transaction Volume Total Transaction Value ($ in billions) M&A Market Overview Commentary U.S. M&A Transactions by Deal Size Deal volume continued its downward trend from a peak in 2015, as the total volume of closed transactions with disclosed values fell 13% during the first three quarters of 2018 (YTD 2018) compared to YTD 2017; however, the trend is less drastic when viewed on a broader basis, as year-over-year the decrease across all deals (not just those with reported values) was only 5%. The sharpest decline in deal flow was seen in deals valued less than $100 million falling 17%, with a corresponding 17% decrease in deal value. One factor contributing to slower deal flow is a smaller pool of quality targets remaining as the current credit cycle matures; however, pricing has seen less decline as the increased competition has kept valuation multiples at near record levels. ($ in billions) Deal Size Volume Value Volume Value Volume Value Less than $100M 700 $26 581 $22 (17%) (17%) $100 - $499M 327 $75 316 $72 (3%) (3%) $500 - $999M 86 $62 77 $55 (10%) (11%) Total Middle Market 1,113 $163 974 $149 (12%) (8%) Greater than $1 Billion 133 $614 113 $516 (15%) (16%) Total Market 1,246 $777 1,087 $665 (13%) (14%) % of Total Market YTD 2017 YTD 2018 % Change Less than $100M 56% 3% 53% 3% $100 - $499M 26% 10% 29% 11% $500 - $999M 7% 8% 7% 8% Total Middle Market 89% 21% 90% 22% Greater than $1 Billion 11% 79% 10% 78% Total Market 100% 100% 100% 100% U.S. M&A Activity Annual Trends: VOLUME U.S. M&A Activity Annual Trends: VALUE 2,500 $1,250 $1,183 $1,167 2,000 1,500 1,970 1,148 1,756 1,943 2,057 1,782 2,149 2,216 1,855 1,698 1,246 1,087 $1,000 $750 $753 $550 $542 $597 $651 $625 $817 $1,008 $777 $665 1,000 $500 500 $250 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2017 YTD 2018 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2017 YTD 2018 Less than $100M $100 - $499M $500-999M Greater than $1 Billion Less than $100M $100 - $499M $500-999M Greater than $1 Billion Source: Capital IQ. Includes deals with disclosed values greater than $10 million. Excludes Real Estate, Energy and Utilities transactions. Note: Due to rounding, numbers may not sum precisely. 3
Total Transaction Volume Total Transaction Value ($ in billions) Quarterly M&A Activity Commentary U.S. M&A Transactions by Deal Size As detailed in the table on the right, M&A transaction volume fell during Q3 2018 compared with the prior year period. Deal flow decreased 11% to 355 completed deals down from 400 in Q3 2017. The total volume of transactions completed in the middle market fell 9% during the third quarter, and transaction value in this range declined 10% compared with the prior year period. The significant decrease (60%) in total market deal value was impacted by a notable slow down in headline deals, and more pointedly, the values of those deals that did close. The absence of these deals, however, can be seen as a positive economic indicator, as large deals are driven, in part, by a need to create value within an environment that lacks organic growth a notion less so the case in light of the impact of tax reform earlier this year. ($ in billions) Deal Size Volume Value Volume Value Volume Value Less than $100M 205 $8 194 $8 (5%) (7%) $100 - $499M 115 $27 98 $23 (15%) (15%) $500 - $999M 30 $21 28 $20 (7%) (3%) Total Middle Market 350 $56 320 $51 (9%) (10%) Greater than $1 Billion 50 $293 35 $88 (30%) (70%) Total Market 400 $349 355 $139 (11%) (60%) % of Total Market Q3 2017 Q3 2018 % Change Less than $100M 51% 2% 55% 6% $100 - $499M 29% 8% 28% 16% $500 - $999M 8% 6% 8% 15% Total Middle Market 88% 16% 90% 36% Greater than $1 Billion 13% 84% 10% 64% Total Market 100% 100% 100% 100% U.S. M&A Activity Quarterly Trends: VOLUME U.S. M&A Activity Quarterly Trends: VALUE 700 $400 600 601 $350 $359 $349 $348 500 400 300 488 454 463 450 406 440 400 452 379 353 355 $300 $250 $200 $150 $282 $286 $292 $231 $213 $214 $232 $178 $139 200 $100 100 $50 0 $0 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Less than $100M $100 - $499M $500-999M Greater than $1 Billion Less than $100M $100 - $499M $500-999M Greater than $1 Billion Source: Capital IQ. Includes deals with disclosed values greater than $10 million. Excludes Real Estate, Energy and Utilities transactions. Note: Due to rounding, numbers may not sum precisely. 4
Middle-Market M&A Activity by Industry ($ in billions) U.S. M&A Activity by Industry Sector: VALUE % Change Consumer $21 $128 83% Financials $19 $25 28% Healthcare $35 $59 42% Industrials $23 $100 77% $23 $35 35% $0 $20 $40 $60 $80 $100 $120 $140 Q3 2017 Q3 2018 U.S. M&A Activity by Industry Sector: VOLUME % Change Consumer 65 76 14% Financials 43 48 12% Healthcare 58 75 23% Industrials 70 86 19% 43 88 51% 0 10 20 30 40 50 60 70 80 90 100 Source: Capital IQ (includes all closed deals with disclosed deal value between $10 million and $1 billion). 5
Number of Announced Transactions Recent Private Equity Activity Commentary Select Announced Private Equity Transactions Q3 2018 Financial sponsors remained active during Q3 2018, announcing a number of large deals, shown in the table to the right, as funds continue to sit on a record amount of dry powder and face increased competition for quality companies as the current credit cycle approaches maturity. Private equity transactions included Thomas H. Lee Partners announced acquisition of Dun & Bradstreet Corp. for $6.7 billion, Francisco Partners planned $500 million investment in LegalZoom.com, Inc., and Brynwood Partners acquisition of The J.M. Smucker Co. s U.S. Baking Business for $375 million. Notably, investment in the Industrials space edged for most active this quarter, with 251 announced sponsor-led transactions. 300 250 200 150 100 50 Financial Sponsors Industry Transactions 245 106 111 125 251 Announced Date Target Buyer Industry 9/27/2018 Loring Ward Holdings Inc. 9/17/2018 TE Connectivity Ltd. (Subsea Comm. Unit) BAM Advisor Services Cerberus Capital Financial Services Enterprise Value ($MM) 9/13/2018 MPM Holdings Inc. SJL Partners Industrials $2,665 9/12/2018 Sedgwick Claims Management Services, Inc. The Carlyle Group 9/4/2018 Apttus Corp. Thoma Bravo 9/4/2018 Transportation Insight, LLC Gryphon Investors Industrials 8/31/2018 Mark VII, Inc. York Capital Industrials $239 8/28/2018 Aspen Insurance Holdings Ltd. Apollo Global Financial Services 8/14/2018 MercuryGate International, Inc. Summit Partners 8/13/2018 Quorum Business Solutions, Inc. 8/8/2018 The Dun & Bradstreet Corp. Thoma Bravo Thomas H. Lee Partners 8/2/2018 BBB Industries, LLC Genstar Capital 7/31/2018 LegalZoom.com, Inc. Francisco Partners 7/26/2018 Bay Clubs Co., LLC KKR $325 Industrials $6,675 7/17/2018 Cetera Financial Group, Inc. Genstar Capital Financial Services 7/16/2018 Linde Aktiengesellschaft (American Assets) 7/10/2018 Centrify Corp. Thoma Bravo 7/9/2018 The J. M. Smucker Co, (U.S. Baking Business) CVC Capital Industrials $3,300 Brynwood Partners $375 0 Consumer Financials Healthcare Industrials 7/3/2018 Affinion Benefits Group, LLC Mill Point Capital Business Services $550 7/3/2018 PLI Card Marketing Solutions Platinum Equity Industrials Source: Capital IQ; PitchBook. Graphic includes transactions with undisclosed transaction values. Industrials industry includes Materials. 6
Integrity Expertise Results John Hill hill@hydeparkcapital.com (813) 383-0205 Recent Transactions John McDonald mcdonald@hydeparkcapital.com (813) 383-0206 Jeff Hendricks Vice President jhendricks@hydeparkcapital.com (678) 523 3073 Josh Mastracci Associate mastracci@hydeparkcapital.com (813) 383-0204 Matt Gladdish Analyst gladdish@hydeparkcapital.com (813) 383-0203 Hyde Park Capital Advisors, LLC 701 N. Franklin Street Tampa, FL 33602 Tel: 813-383-0202 www.hydeparkcapital.com Member FINRA/SIPC