Private Company Financial Intelligence

U.S. Private Market M&A Overview (<$500M)

December 11, 2012

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Speaker Background
Sam Hamadeh
PrivCos Founder and CEO Founded and sold the online job and career information leader Vault.com MBA in Finance from Wharton and a JD from the University of Pennsylvania Law School Extensive background in finance and private company research with experience at Morgan Stanley and Goldman Sachs

Copyright 2012 PrivCo Media LLC. All Rights Reserved.

PrivCo: The Leader in Private Company Financial Intelligence PrivCo is the first and only provider of financial and business data on major privately held companies.

PrivCo provides detailed financial and business data on over 128,000 major private companies and over 43,000 private market deals - in a single searchable source.
Data on private company investors, M&A deals, VC funding, and more. PrivCo acts as a Bloomberg for major private companies.

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M&A Activity Declines In 2012

According to PrivCo data, U.S. private company middle market M&A totaled $37.5 Billion in Q3 2012, down 21% from Q3 2011 Similarly, deal volume fell 16% from 3,290 in Q3 2011, to 2,764 in Q3 2012 For the Q3 last twelve months (LTM), private middle market M&A totaled $144 Billion, down 16% from $167 billion for LTM Q3 2011

US Mid Market Deal Value & Volume (< $500 M)

$60 $50 3,800

$45.7 $35.7

$ In Billions

$40 $30 $20 $10 $0

$37.5

$32.6 $37.5 $36.5 (-8.0%) (-19.9%) (-21.2%)

3,300 2,800 2,300 1,800 1,300 800

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Deal Value

Deal Volume

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Number of Transactions

$47.7

M&A Activity Declines In 2012 (Cont.)

After what seemed to be recovery in 2010 & 2011, 2012 has proven to be a fragile marketplace given the drop in deal volume and transaction value

US Mid Market Deal Value & Volume (< $500 M)

$60 $50 3,800

$45.7 $35.7

$ In Billions

$40 $30 $20 $10 $0

$37.5

$32.6 $37.5 $36.5 (-8.0%) (-19.9%) (-21.2%)

3,300 2,800 2,300 1,800 1,300 800

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Deal Value

Deal Volume

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Number of Transactions

$47.7

Top Corporate Buyers (Deal Value <$500M) 2011-2012

Top Private Company Corporate Buyers - 2011-12

60 50 40 30 20 10 0

48

31
19 19 19

17

16

16

15

15

12

Middle Market Deals

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Select Strategic Buyer Transactions (2012)

Target
Hyper Marketing Inc. Fleet One, LLC Bytemobile PowerReviews, Inc. Airborne Health, Inc

Acquiror
Alliance Data Systems Wright Express Corp. Citrix Systems Bazaarvoice, Inc. Schiff Nutrition International, Inc

Deal Price
$460,000,000 $369,000,000 $435,000,000 $151,900,000 $150,000,000

EV/Rev
1.5x 6.6x 7.2 13.0x 1.3x

Demandforce, Inc.
ID Analytics

Intuit, Inc.
Lifelock

$423,500,000
$185,970,000

11.3x
6.5x

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Financial Buyer (Deal Value <$500M) 2010-2012 Middle Market private equity activity as a percentage of total volume has steadily increased over the past 3 years, with a greater percentage of 2012s deals being sponsor backed, despite the slow down in transaction value
200

$158.6
$'s In Billions
150

$166.5 $144.2

100
50

44%

45% 2011

50% LTM 2012

2010

Total Deal Value

Private Equity Deal Value

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Top Financial Buyers (Deal Value <$500M) 2011-2012

Top Private Company Financial Buyers - 2011-2012

20 18 16 14 12 10 8 6 4 2 0 The Riverside Company Carlyle Group Gores Group TA Associates H.I.G. Private Equity Sun Capital TPG Capital Blackstone Platinum Partners LP Group Equity Marlin Equity Partners

18

18

17 15 15

Middle Market Deals

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Select Financial Buyer Transactions (2012)

Target
Young Innovations, Inc. Oriental Trading Company, Inc. Dick Clark Productions Intelligrated, Inc. Fogo de Chao Holdings LLC Sundance Holdings

Acquiror
Linden Capital Partners Berkshire Hathaway Inc Guggenheim Partners Mandalay Sports Ent. Mosaic Media Group Permira Advisors Thomas H. Lee Partners Brentwood Associates

Deal Price
$314,000,000 $500,000,000

EV/Rev
3.0x 1.0x

$370,000,000

N/A

$500,000,000 $400,000,000 $125,000,000

1.3x* N/A 0.8x

Benihana Inc.
* Estimated

Angelo, Gordon & Co.

$296,000,000

0.9x

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Average Enterprise Value of Transactions (Deal Value <$500M) 2011-2012

Average Enterprise Values in 2012 have increased year over year, up over 10% in Q2 2012 The drop off in value in Q3 reflects global M&A declines, due to macroeconomic uncertainty and market chill ahead of the pending US Elections, in addition to an increase in deals under the $66 million anti-trust threshold

Average Enterprise Value $128.5

$140.0 $120.0 $115.9 $116.4 $99.0

$ In Millions

$103.7

$107.3 (+3%)

(+11%)

$108.6 (-6%)

$100.0 $80.0

$60.0
$40.0

$20.0
$Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012

Average Enterprise Value

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Top 10 Industries For Private Market Deals

Rank Industry 1 2 3 4 5 6 7 8 9 Software Insurance Services Banking Health Care & Related Medical Internet Services Information Technology Social Media Advertising & Marketing

10

Mobile Applications

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Top 10 Geographies For Private Market Deals

Rank 1 2 3 City New York San Francisco Houston

4 5
6 7 8 9 10

Chicago Austin
Atlanta Dallas Los Angeles Seattle San Diego

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The Magic $66 Million Threshold

In 2012, PrivCo data shows that an increased percentage of private companies are being sold for deal values between $55 and $66 million No HSR Act notification is required if the value of voting securities and assets held as a result of the transaction is below this $66 million threshold PrivCo data also indicates that companies (especially those owned by individuals and families), have been looking to sell by the end of 2012, even at haircut valuations, to avoid the $66 million HSR FTC review and close before 2013s tax reform

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Conclusions
Middle market private company transaction value and volume is down in 2012 Private equity funds continue to focus on the middle market, with 2012 showing an increase in transaction value attributed to private equity sales and acquisitions Strategic Buyers will look for lower middle market add-ons, to avoid $66 million HSR FTC review Cautious outlook for 2013 given fiscal cliff negotiations, tax rate increase, European debt crisis and macro instability

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AM&AA 2013 Winter Conference

The Middle Market Our World of Opportunity in 2013 2013 Winter Conference January 14 -17, 2013 Hilton Miami Downtown Contact AM&AA for more information info@amaaonline.org 312-856-9590 MandAconnection.org

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Private Company Financial Intelligence

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