A Global Reach with a Local Perspective Current Economic Conditions Affecting Your Business

 Favorable US economic trends  Substantial cash, increasing M&A activity  US banks’ recovery & lending policies  Favorable valuations 2014 M&A Outlook

 Labor costs, labor unions, manufacturing costs down  US preeminence returns & recovering US Dollar  Positive inflows into equity after 5 years  No bubble yet, stock market peak likely off, top near  Technology gains continue  US banks continue recovery and improve lending Favorable 2014 US Trends

 For Financial Investors  Slow 2013, prior uncertainties now clearer, substantial cash  For Strategic Acquirers  Increasing international interest in southeastern US  Substantial cash, balance sheets, growth planning  For US Economy & Lending  Favorable trends and policies  For Liquidity & Diversification  Valuations, structure, alternatives and opportunities M&A Outlook

 Investors predict 4 industries having most potential for growth in 2014:  Health care, financial services  Technology  Energy  Manufacturing  Changing regulations in healthcare and financial services, increased O&G production, evolving world of technology, and US manufacturing opportunities will increase investment activity Potential Sectors

 M&A Drivers:  New technology  Geographic growth  Product/service growth  Customer growth  Challenges:  Regulatory uncertainty  Valuation disparities  Volatile energy prices  Inability to forecast future performance Energy / O&G Sector

All-In Valuations Note: 2013 H1 volume is annualized Source: GF Data

All-In Valuations Source: GF Data

TEV YTD TotalN = Total N = Size Premium Please note that N for encompasses six years of activity Data is through 3Q. Source: GF Data

TEV/EBITDA – By Industry Industry YTD TotalN = Manufacturing Business services Health care services Retail Distribution Publishing/Media Technology NA6.338 Other N = Please note that N for encompasses six years of activity Data is through 3Q Source: GF Data

Transaction Structure Trends Source: GF Data

 Price does not equal value  Three valuation approaches –  Asset approach  Market approach  Income approach  Typical buyers –  Strategic buyers  Financial buyers So how does all this effect the value of my business?

Example Company

Valuation based on EBITDA multiple

Assuming average 2013 transaction structure

From the buyer’s perspective

 Investors wary in 2013 due to uncertainty surrounding politics, monetary policy, global issues, and economic environment  Private equity ended 2013 with a record high $1 trillion of dry powder… 2013 reported best year for PE fundraising since financial crisis  Strategic buyers continue to hold large amounts of cash – another $1 trillion Investors Looking to Put Capital to Work

 Seller activity affected by:  Diversification objectives  Liquidity goals  Continuing profitability trends  Succession issues, exit planning  Buyer Activity fueled by:  Large cash reserves, low interest rates  Improved consumer confidence  Opportunities in emerging markets  Middle market most active sector Increasing Activity in 2014

 2013 should have been a banner year for PE deals, but deal volume decreased.  Sellers accessed loose debt markets and did more than $60bn in dividend recapitalizations  Capital “under pressure,” or nearing the end of a fund’s investment period, actually declined  Asian markets cooled considerably  Strategics spent the post-recession years cleaning up their balance sheets had the cash to spend on M&A  IPOs soared on the back of historically strong equity markets Igniting Dry Powder

 PE fund-raising surged in 2013  $461bn in new capital worldwide  21% increase over 2012  Debt markets open and eager to finance new deals  The excess of unassigned capital will keep asset valuations high in all industries  Strategic partnerships between corporations and PEs (and hedge funds) will increase the number of “hybrid” deals, and increase demand Igniting Dry Powder

 Generating organic growth continues to be a challenge in the current economic environment  Slow economic growth  Weak aggregate demand  Near-zero inflation  M&A remains the best way for corporations to act on growth opportunities  PE funds believe they are best positioned to assist with growth mandates  Expect to see PE-sponsorships for corporate M&A For strategic buyers

Unallocated capital in PE

Private Equity IRRs

Value of a business with $1mm in free cash

 Confluence of factors:  IRRs have a inverse relationship with your company’s valuation.  PE IRRs remain lower, the base of capital has expanded, debt markets are hungry  PE firms still believe they can run your business better than you  2014 could be the right time to partner with PE to create liquidity and diversify. Why This is Good News

M&A By Sector

M&A by Sector

 TEV/Total Revenue Healthcare Industry Metrics: Southeast US

 EBIT and EBITDA Multiples Healthcare Industry Metrics: Southeast US

 TEV/EBITDA Manufacturing: U.S. Middle Market

 Number of Transactions Manufacturing: U.S. Middle Market

 PEs and strategic buyers have cash on hand, ready to deploy  After an historic year for equities, shareholders will demand additional share price appreciation, and M&A is the fastest way to achieve those results  In the manufacturing space, watch for firms to build by buying, often in partnership with PEs or possibly hedge funds  Health care companies can expect renewed deal volume as volatility declines with a proliferation of understanding the complexities of Obamacare A Seller’s Market