Aerospace & Defense Outlook

Mid-Year Mergers & Acquisitions Update

October 2016

1 NORTH AMERICAN AEROSPACE & DEFENSE M&A ACTIVITY IN 1H 2016

We are pleased to present to you our 2016 Aerospace & Defense Outlook Mid- Year Mergers & Acquisitions Update, which is to be read as addendum to and CONTACTS: conjunction with our full year review.

The first half of 2016 saw a slight softening in M&A activity overall, and the aero- Ian Cookson space & defense sector was no exception. Component Manufacturing activity Managing Director slowed as expected, while Defense IT & Technology has rebounded on the back [email protected] of increased government spending and the sizable, transformative deals of 2015. 617.470.9338 Private equity’s heavy involvement in the sector is likely to ensure an underlying level of M&A transaction activity going forward, and we expect to see something Tess Oxenstierna of a reversal in emphasis by acquirers, back towards defense after a period where Managing Director commercial aerospace has taken the lead. [email protected] 203.524.0888 After two consecutive years of record North American deal counts, Aerospace & De- fense M&A activity inevitably softened in 1H 2016. Deal volume fell ~13% through the end of June 2016 compared with both 1H 2015 and 2H 2015. Across all industries, North David Brinkley American M&A activity as a whole showed ~8% decline compared with both 1H 2015 and Managing Director 2H 2015.[1] Transaction values, meanwhile, were down ~10% year-over-year within A&D [email protected] while unchanged on average across all sectors. 917.817.0375

Component Manufacturing remains the largest A&D subsector comprising 38% of total Thomas McConnell transactions year-to-date, down from its record high of nearly 50% in 2014. Private equity Director groups maintain their focus on the sector accounting for many notable transactions in- [email protected] cluding Liberty Hall’s $220m purchase of AIM Aerospace and J.F. Lehman & Co.’s $307m 303.951.7125 acquisition of API Technologies (1.3x EV/Revenue or 15x EV/EBITDA). Behrman Capital, meanwhile, sold ILC Industries, the parent company of Data Device Corp. (“DDC”), to TransDigm for $1bn in cash, a rich 5.0x DDC’s revenue. Also of note, GE Aviation invest- ed $320m in Convergence Fuel Systems, LLC for a 50% stake, forming its joint venture with Woodward Inc. to develop large engine fuel systems for GE’s existing and future commercial aircraft engines.[2] In January, Berkshire Hathaway completed its previously announced $37.9m acquisition of Precision Castparts (EV/EBITDA 14x). In March 2016, www.headwatersmb.com UTC withdrew from talks of a potential takeover by Honeywell for a reported $91bn

Recent North American M&A Activity (No. of Transactions) 350 25,000

300 20,000 250

15,000 200

150

10,000 All Industries

Aerospace & Defense Aerospace 100 5,000 50

0 - 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H 2015 2H 2015 1H 2016

Component Manufacturing Defense IT &Technology Aerospace & Defense Electronics Support Services & MRO Other Total North America

Source: S&P Capital IQ, Pitchbook, Headwaters MB Proprietary Research

2 ($36bn cash and $55bn Honeywell shares) amidst regulatory and strategic positioning. Still, we anticipate a few more large “trans- market concerns.[3] formative transactions” to complete the current wave of strategic realignment that began in late 2013. Finally, the increase in Feder- Support Services & MRO accounted for 23% of year-to-date activi- al agency spending and prioritization of Federal IT modernization ty. In January, Macquarie Infrastructure Corp. announced it had ac- is creating tailwinds for the industry. We recall the GFY2017 DoD quired the fixed based operations at McClellan-Palomar Airport in budget of $583bn (vs. $580bn GFY2016) allocates $19bn to cyberse- San Diego and at El Paso International Airport, adding to the FBO curity (+35% year-over-year), along with a focus on R&D funding to network of its airport services business Atlantic Aviation.[4] Textron support IT modernization. For more information, see recent Head- acquired airborne training services provider ATAC, LLC while its sub- waters MB article at SecuritySales.com, Cybersecurity Financing sidiary Textron Aviation completed its previously announced pur- Headwinds Cause M&A Market to Heat Up, published 15 September chase of Phoenix-based Able Engineering & Component Services, 2016. Inc. supporting the company’s strategy to enhance its MRO offer- ings and service capabilities.[5] Platinum Equity purchased govern- Defense Budget update: The DOD FY17 budget negotiations, led ment support services firm PAE from Lindsay Goldberg in March. by SASC John McCain (R-Ariz.) and Ranking Member Jack Reed (D-R.I.) and HASC Mac Thornberry (R-Texas) and Ranking Member Aerospace & Defense Electronics continued to attract interest in Adam Smith (D-Wash.), have proven inconclusive in reconciling the 1H 2016 accounting for 21% of A&D activity. After heavy focus on Senate and House versions of the National Defense Authorization C4ISR in 2015, attention has shifted towards ground/maritime robot- Act (NDAA). A key stumbling block was that the House bill would ics and testing equipment. Divestitures remain a tool as companies shift $18bn from the Pentagon’s war fund (known as the Overseas refine strategies and portfolios with, for example, Ducommun’s sale Contingency Operations – OCO) into its base budget. This move of Miltec Corp. to General Atomics, and iRobot’s sale of its defense would circumvent budget caps on the DOD budget, and would leave & security business to Arlington Capital Partners. Also of note was the war fund short by April 2017. The new incoming administration General Dynamic’s purchase of Bluefin Robotics, and Belcan’s acqui- would have to make up the shortfall in emergency supplemental sition of Tandel Systems, Inc., a portfolio company of AE Industrial funding – a move which the Senate disagrees with. Thus the Presi- Partners. dent’s Budget FY17 remains as submitted in February 2016, namely with a base budget of $524bn, and the OCO budget of $59bn, nearly Defense IT & Technology has rebounded from 2014 lows and now the same as the FY 2016 enacted level. Complicating these negotia- accounts for 18% of total A&D transactions with strong interest tions is the call for a Continuing Resolution for one to two quarters, from private equity. The most notable transaction so far this year which if passed would further delay an overall federal government has been Leidos’ $5bn acquisition of Lockheed Martin’s Information budget until early spring 2017. Security & Global Solutions business (1.0x EV/Revenue and 11x EV/ EBITDA) for which CACI and Engility also placed bids in January.[6] Now closed, the deal makes Leidos the largest government services M&A TRANSACTION MULTIPLES firm in the sector with expected revenue of $10bn p.a.[1] Among engineering contractors, Court Square Capital sold Wyle Inc. to KBR Premiums continue for high quality targets amidst industry consol- Holdings for $600m (0.7x EV/Revenue), and Jacobs acquired The idation. Transaction size remains a key factor in A&D transaction Van Dyke Technology Group, Inc. After the number of sizable and values, with multiples on large transaction being ~2x times those of transformative deals in 2015 (see Headwaters MB 2016 Aerospace smaller ones as discussed extensively in our 2016 Aerospace & De- & Defense M&A Outlook Report), activity so far this year has been fense 2016 Outlook[7] The largest increases year-to-date have been geared more toward mid-tier firms seeking acquisitions to carve out amongst the mid-sized $100-$500m deals, reflective of the above mentioned activity amongst mid-tier Defense IT firms as well as by the acquisition of a couple of public companies with depressed earnings. Looking specifically at A&D component manufacturing businesses, the same trends are evident.

In the manufacturing industry as a whole across all industries, acquisitions by private equity groups have shown a slight drop in multiples year-to-date, on an adjusted basis as presented by GF Data. Broadly, those with transaction values of[8]: • $100m-$250m took place around 7.5x ajused EBITDA (down from 8.5x in FY 2015) • $50m-$100m at around 7.5x adjusted EBITDA (unchanged from FY 2015) • $25m-$50m at around 6.0x adjusted EBITDA (down from 6.5x FY 2015) • $10m-$25m at around 6.0x adjusted EBITDA (up from 5.5x in pre vious years)

3 FINANCIAL VS. STRATEGIC BUYERS

Strategic investors have been prevalent year-to-date, accounting for Buyer Types Seller Types ~68% of A&D acquisitions while financial investors remain active accounting for ~32%. By comparison, North American transactions as Strategic Financial Corporations Founders Private equity Public a whole included ~80% strategic vs. ~20% financial buyers. Private equity firms are currently sitting on record levels of dry powder ready 14% 16% 34% 32% to be deployed, and of particular interest are A&D technology com- 18% 14% panies following the improved outlook and realignments in that subsector last year. 49% 49% 66% 68% Seller composition continues to be dominated by founders accounting for 49% of all sales in 1H 2016, followed by corporations (21%), 19% 21% public (16%) and private equity (14%). ϮϬϭϱ ϭ,ϮϬϭϲ ϮϬϭϱ ϭ,ϮϬϭϲ

VALUATIONS & EARNINGS

The market value of our public company A&D index has remained In the public markets, EBITDA earnings amongst A&D companies relatively stable with multiples increasing by around 5% in the first were down slightly during the first six months of the year. Com- six months of 2016 offsetting a similar decline in earnings, with mul- ponent manufacturing sector earnings were down 15% following tiples returning to the highs previously seen in 2007 & 2008. This restructuring costs and non-cash charges at certain suppliers in- compares with the S&P 500’s gains of 4% year-to-date. Median pub- cluding Triumph and CPI Aerostructures. Prime defense earnings lic company EV / LTM EBITDA multiples by subsector as of Q2 2016 were down 3% following cost reclassifications at Boeing. Earnings can be summarized as: Component Manufacturing (11.1x), Support in Aerospace & Defense electronics were up 3% with Harris ben- Services & MRO (11.7x), Prime Defense (10.3x), Defense IT & Tech- efitting from the acquisition of Exelis in 2015. Support Services & nology (10.3x), A&D Electronics (11.1x). MRO showed a 7% increase with AAR rebounding from prior year weakness. Defense IT benefited from increased government expen- ditures with earnings also up 7%.

Aerospace & Defense Public Company Valuation Multiples by Sector

16.0x Component Manufacturing Support Services & MRO* Prime Defense 16.0x Defense IT & Technology Aerospace & Defense Electronics 14.0x 14.0x

12.0x 12.0x

10.0x 10.0x

8.0x 8.0x

6.0x 6.0x

MedianEV/EBITDAmultiple 4.0x 4.0x 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

4 Aerospace & Defense Public Company Earnings by Sector

400% Component Manufacturing Support Services & MRO* Prime Defense 400% Aerospace & Defense Electronics Defense IT & Technology 350% 350%

300% 300%

250% 250%

200% 200%

150% 150%

100% 100%

Cumulative LTM earnings growth index growth earnings LTM Cumulative 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sources: Capital IQ, company press releases; *MRO valuation skewed by weighting to Asia/Paciﬁc market

COMMERCIAL AIRCRAFT

Industry-wide revenue passenger kilometers (RPKs) were up 6.0% year-over-year during 1H 2016 (similar gains to 1H2015) driven in part Commercial Aircraft: Orders, by lower airfares.[11] Industry load factors have stabilized at ~80% as Deliveries & Backlog airlines have slowed capacity growth. The U.S. market (36% of global), has now achieved significantly higher profit margins, and so is lift- Calendar Year YoY ing overall global air passenger profitability. Cargo revenues continue Airbus 227 382 -41% to decline and are down year-to-date, contrasting with passenger Total Orders Boeing 310 317 -2% traffic. During the period, Boeing outpaced Airbus in number of new Airbus 183 348 -47% orders with net 273 (down -3% year-over-year) compared with Air- Net Orders bus’ net 183 (down ~47% year-over-year). Boeing and Airbus deliver- Boeing 273 281 -3% ies year-over-year in 1H 2016 were similarly down -1.6% and -2.0%, re- Airbus 298 304 -2% Deliveries spectively. To date, delivery deferrals, cancellations and other change Boeing 375 381 -2% requests have been minimal.[12] Airbus 6,716 Backlog Boeing 5,700 Notable in Airline M&A transactions in 1H 2016, was Alaska Air’s $2.5bn announced acquisition of Virgin America Inc. (1.6x EV/Revenue Source: Boeing & Airbus earnings releases. and 11x EV/EBITDA).

OUTLOOK 2H 2016

The industry remains fairly fragmented with many players, and since the number of aerospace component manufacturing transactions private equity firms now own a significant portion of the sector, that to continue to soften after more than a decade of consolidations in itself is likely to generate M&A activity as they continue to pursue (and given questions around commercial aerospace manufactur- both buy and build strategies while also selling investments at the ing outlook), while the number of defense acquisitions are likely to end of their required hold periods. As discussed at length in Head- continue upwards from post sequestration lows with the Pentagon’s waters’ 2016 Aerospace & Defense M&A Outlook Report, we expect renewed interest in defense technologies.

5 APPENDIX M&A TRANSACTIONS 1H 2016 Aerospace & Defense Component Manufacturing Date Target Description Acquirer [Ultimate Parent] 1/4/16 MSA Aircraft Products, Inc. Window systems and other composite components Aero Shade Technologies, Inc. 1/4/16 Giga-tronics Inc. (Multiple Products) Power meter, amplifiers, sensors, signal generators Spanawave Corporation 1/5/16 Gemcor II, LLC Assembly automation machinery and other AIP Aerospace Tooling Group LLC 1/5/16 Silverado Cable Company Inc. Custom wire harnesses and cable assemblies Phoenix Logistics Inc. 1/6/16 Boyd Coatings Research Co., Inc. High-performance coatings Katahdin Industries, Inc. 1/7/16 Predator Tactical LLC Firearms and training solutions Industry Armament 1/8/16 Convergence Fuel Systems, LLC Fuel systems for commercial aerospace applications General Electric Company 1/11/16 Tejas Plastics, Inc. Custom blow molded plastic products Lifecycle Biotechnologies, LP 1/12/16 Niagara Thermal Products LLC High performance heat exchangers and transfer fins Aavid Thermalloy, LLC 1/13/16 Andrews Laser Works Corp. Stainless steel and precision cut metal parts Berkshire Hathaway Inc. 1/13/16 Quest Aircraft Company, LLC Designs and manufactures aircraft incl. KODIAK Mitsui & Co. Ltd. 1/18/16 SAM Aircraft Inc. Designs and manufactures aircrafts Zenair Ltd.; Zenith Aircraft Co. 2/1/16 PurePOWER Technologies, LLC High-performance diesel fuel-injection systems Kensington Capital; Smithfield Group 2/2/16 Key Safety Systems, Inc. Advanced engineered safety products Ningbo Junsheng Investment Group 2/2/16 MICO, Incorporated Hydraulic components, controls, and brake systems WABCO Holdings Inc. 2/3/16 AIM Aerospace, Inc. Composite ducting, sub structural, interiors parts Liberty Hall Capital & others 2/4/16 New Age EMS, Inc. Printed circuit boards & systems (Low/mid-vol. production) PPI-Time Zero, Inc. 2/17/16 Fulton Bellows, LLC Thin wall precision metal bellows and assemblies US Hose Corporation 2/18/16 Thrust-UAV LLC Unmanned aerial vehicles and related applications PCS Edventures!.com, Inc. 2/19/16 Doncasters, Inc. Precision machining of engine ready airfoils business PIETRO ROSA TBM Srl 2/29/16 Blue Falcon I Inc Wings, tanks, rotor blades, airframes, other Albany International Corp. 2/29/16 API Technologies Corp. RF, microwave, power, and security solutions J.F. Lehman & Company 2/29/16 Stag Arms LLC Manufactures and markets rifles White Wolf Capital LLC 2/29/16 Wesco Aircraft Canada (division) Industrial Fastener Business Hi-Tech Fasteners, Inc. 3/17/16 Jackson Flexible Products, Inc. Custom molded rubber products Tillerman & Co. 3/21/16 Airco Industries, Inc. Display and control panels, simulation systems, other Firan Technology Group Corporation 3/23/16 Ferco Aerospace Group Tubes and brackets for gas turbine engines NOVARIA HOLDINGS LLC 3/23/16 Microsemi Corp. (division) RF Integrated Solutions Mercury Systems, Inc. 4/5/16 Fall Machine Company, Inc. Machined products for aerospace and other Aero Precision, Inc. 4/6/16 SRI Connector Gage Company RF microwave interconnect products Winchester Electronics Corporation 4/11/16 Kovatch Mobile Equipment Corp.Specialty trucks, chassis, and vehicles REV Group, Inc. 4/14/16 Piper Plastics, Inc. Polymer materials; precision machined plastics Mitsubishi Chemical Holdings Corp. 4/26/16 Kaydon Corporation Friction and velocity control products Stabilus S.A. 4/27/16 Fabricated Components Corp. Printed circuit boards HCI Equity Partners 4/27/16 KCA Electronics Inc. High-end printed circuit boards (flexible & rigid) HCI Equity Partners 4/29/16 ADI American Distributors Inc. Contract manufacturing and assembly; distribution Stonebridge Partners & others 5/2/16 Premier Engineering & Manuf., Inc. Aircraft deicers, and aftermarket parts and systems Textron Inc. 5/3/16 Filconn Inc. Precision filtered, EMP suppression, other PEI-Genesis, Inc. 5/10/16 Machine2Order Precision machined parts for cucstomers worldwide FAB 2 ORDER, Inc. 5/16/16 Multisource Manufacturing LLC Contract manufacturing services Industrial Group Holdings, LLC 5/19/16 AC&A, LLC Composite and metallic parts and tooling AE Industrial Partners 5/24/16 Engineered Castings, Inc. Precision parts manufacturing Pelco Products, Inc. 5/24/16 ILC Industries, LLC Data bus, motion control, power controller TransDigm Group Incorporated 5/25/16 Hangar 78 UAV, LLC Unmanned aerial system, incl. Yield Defender Air Tractor, Inc. 5/28/16 Standard Components Inc. Checking & holding fixtures, gages, assembly tooling Summit Equity Group, LLC 5/29/16 Xolve, Inc. Nanomaterials; produces and supplies graphene Reliance Industries Limited 5/31/16 Kreisler Manufacturing Corp.Precision metal components and assemblies United Flexible, Inc. 6/1/16 D.L. Horton Enterprises, Inc. Precision machining products and assemblies Aerostar Aerospace Manufacturing 6/15/16 Seals Unlimited Inc. Seals and gaskets for various applications Applied Industrial Technologies, Inc. 6/16/16 Precision Made Products, LLC Metal injection molding and other machining Alpha Sintered Metals, Inc. 6/20/16 Bombardier Inc. (division) Amphibious Aircraft Program Viking Air Ltd. 6/21/16 J&M Machine, LLC Precision machined metallic parts and assemblies Accurus Aerospace Corporation

6 Defense IT & Technology Date Target Description Acquirer [Ultimate Parent] 1/11/16 Marshall Communications Corp. Broadband satellite comm. and IP multimedia Mission Solutions Group, LLC 1/12/16 Tetra Concepts, LLC Cloud analytic development & software engineering Preferred Systems Solutions, Inc. 1/26/16 Lockheed Martin (division) Information Systems & Global Solutions Business Leidos Holdings, Inc. 1/29/16 New World Solutions Inc. Imagery science, cyber analytics, technology R&D SOS International, LLC 1/29/16 Wavefront Technologies, Inc. Communications and IT support incl. engineering Ball Corporation 2/4/16 iRobot Corporation (division) Defense & Security Business Arlington Capital Partners 2/9/16 Nova Defense & Aerospace International, LLIT solutions and business strategy consulting Assured Enterprises Inc. 2/22/16 Bluefin Robotics CorporationAutonomous underwater vehicles and related tech. General Dynamics Corporation 2/24/16 The KEYW Corporation (division) Systems Eng. & Technical Assistance Business Quantech Services, Inc. 2/29/16 Nci.ca Cyber security products, services, and solutions MNP LLP 2/29/16 The Omega Group, Inc. Geographic information systems software solutions TriTech Software Systems Inc. 3/4/16 NAL Research CorporationIridium satellite modems and tracking terminals Drew Marine, Inc. 3/14/16 INDUS Corporation Information technology (IT) solutions Tetra Tech, Inc. 3/17/16 Vormetric Data security solutions Thales Group 3/21/16 IHS Inc. Information, insights, and analytics IHS Markit Ltd. 3/30/16 netAura LLC IT engineering and analytics to comm. & federal CenturyLink, Inc. 4/7/16 Hexis Cyber Solutions, Inc.Cybersecurity solutions incl. HawkEyeG PE backed security tech. purchaser 4/12/16 The Van Dyke Technology Group Information systems engineering Jacobs Engineering Group Inc. 5/2/16 Total Recall Corporation Video surveillance solutions incl. CrimeEye Convergint Technologies LLC 5/5/16 Teledyne Printed Circuit Technology Instrumentation, digital imaging, engineered systems Firan Technology Group Corporation 5/6/16 Prime Solutions, LLC Engineering services focusing on computer network ops Altamira Technologies Corporation 5/13/16 World Defense Holdings WDH Ltd.Program based defense services Applied Inventions Management 5/23/16 Wyle Inc. Engineering, IT and other services to US government KBR, Inc. 6/13/16 Oceans Edge Cyber .&).$$2).&ŉ7)2$,$333/,54)/.3Ŋ ManTech International 6/23/16 EOIR Technologies, Inc. ISR services and engineering support servicesSoftware Arlington Capital Partners 6/29/16 Mobile Active Defense, Inc. development incl. Mobile Active Defense Cyber adAPT, Inc.

AerospaceAerospace & D&e fDefenseense Elect rElectronicsonics Date Target Description Acquirer [Ultimate Parent] 1/4/16 Diffraction Ltd. Optical, electrical, and mechanical systems Beretta Holding S.p.A. 1/4/16 L-3 Communications Klein Associates Sonar equipment, waterside security and surveillance Mitcham Industries Inc. 1/7/16 DIT-MCO International Corporation Wiring analyzers for automated testing applications Capital for Business; Sage Capital 1/13/16 Tandel Systems, Inc. Engineering, test systems, technical services Belcan Corporation 1/13/16 PulsedLight, Inc. Communications security devices, systems, and services Garmin Ltd. 2/3/16 Space/Ground System Solutions, Inc. Command, control, and embedded space applications The O'Neil Group Company, LLC 2/4/16 Tideland Signal Corporation Aids to marine navigation products Xylem Inc. 2/18/16 Sigma Space Corporation Remote sensing solutions incl. LiDAR, laser ranging, etc. Hexagon AB 2/25/16 Miltec Corporation Designs, develops, tests missile and aerospace systems General Atomics Corp. 3/9/16 Green Sustainability Partners, LLC Owns rights to develop drones for research Anything Technologies Media Inc. 3/10/16 Global Dynamics Incorporated Marine towing systems, consulting & contracting ION Geophysical Corporation 3/13/16 CTG Advanced Materials, LLC High-performance piezoelectric single crystals CTS Corporation 3/16/16 Jeppesen Marine USA - Inc. Electronic charting and cartography services Digital Marine; Navico Holding AS 3/31/16 Pacific Instruments, Inc. Computer-automated physical measurement systems Vishay Precision Group, Inc. 4/6/16 PCB Group, Inc. Piezoelectric sensors and components MTS Systems Corporation 4/7/16 Interconnect Systems, Inc. Packaging and interconnect solutions for top-tier U.S. OEMs Koch Industries, Inc. 4/12/16 Maxwell Technologies (division) Microelectronics Product Line TransDigm Group Incorporated 4/21/16 Morpho Detection, Inc. Detection systems for explosives, narcotics BRN Smiths Group plc 5/10/16 SELEX Galileo Inc. - facility Avionics System Integration Facility in Stennis, MS Tyonek Native Corporation 5/11/16 Vanguard Space Technologies, Inc. ightweight and precision aerospace 3425"452$3 /,$2/Technologies Corporation 5/23/16 Radio Frequency Simulation Systems Designs digital RF memories VadaTech IncorporatedPlatinum 5/31/16 Electro Rent Corporation Rents, leases, and sells electronic T&M equipment Equity, LLC 6/10/16 Micro-Coax, Inc. Transmission line solutions for RF and microwave Carlisle Companies Incorporated 6/17/16 Electro Optical Industries, Inc. Photonics and infrared systems HGH Systèmes Infrarouges SAS 6/21/16 American Science & Engineering Inc. Detection products incl. X-ray inspection OSI Systems, Inc. 6/23/16 Giga-tronics Inc. (division) Switch product line Astronics Corporation 6/28/16 Armasight Inc. Night vision and precision electro-optical productsAir FLIR Systems, Inc. 6/30/16 Thales-Raytheon Systems Co. operation C&C, surveillance radars and other Raytheon Company

7 Support Services & MRO Date Target Description Acquirer [Ultimate Parent] 1/4/16 LDiscovery, LLC eDiscovery management solutions The Carlyle Group 1/6/16 Hawaii Island Air, Inc. Passenger transportation services in Hawaii Malama Investment; PaCap Aviation 1/6/16 Talentscale, LLC Aircraft maintenance and logistic services SCST, Inc. 1/11/16 Consolidated Aviation Services LLC Cargo, passenger, ramp, and mail handling services WFS Global SAS 1/11/16 Cutter Aviation Phoenix, Inc. FBO at El Paso International Airport in El Paso, TX Macquarie Infrastructure Corp. 1/11/16 Phoenix Heli-Support, LLC Support center for Airbus and Turbomeca Aerometals, Inc. 1/12/16 Palomar Jet Center Flight support and concierge services Macquarie Infrastructure Corp. 1/15/16 Aviation Logistics, LLC Online fuel card management ForeFlight, LLC 1/19/16 Pacific Architects and Engineers Inc. Integrated services for missions worldwide Platinum Equity Partners 1/19/16 Southern Air Holdings, Inc. Air cargo charter and aviation Atlas Air Worldwide Holdings, Inc. 2/24/16 The KEYW Corporation (division) Systems Eng. and Technical Assistance Business Quantech Services, Inc. 2/29/16 TAG One, Inc. Aircraft purch, sale, & leasing consulting services AE Materials Group, Inc. 3/3/16 Sun Air Express, LLC Passenger airline in MD, NY, PA, VA Southern Airways Corporation 3/9/16 Avjet Corporation Private transport., aircraft marketing, MRO General Dynamics Corporation 3/14/16 Jetscape, Inc. Commercial aircraft leasing and financing Nordic Aviation Capital A/S 3/17/16 Phoenix Heliparts, Inc. MRO, parts sales, engineering, avionics, STC, PMA Kuskokwim Corp 3/17/16 Tempus Jets, Inc. Corp. and special mission aircraft sales & leasing Tempus Applied Solutions Holdings 3/21/16 LITESHIP International, LLC Customs brokerage, warehousing, distribution Everglory Logistics Inc. 3/29/16 Ranger AirShop Holdings, Inc. Air cargo acquisition company First New England Capital, L.P. 3/31/16 American Scaffold Inc. Scaffolding and environmental containment J.F. Lehman & Company 4/4/16 Virgin America Inc. Air travel services to 23 airports in US & Mexico Alaska Air Group, Inc. 4/29/16 West Star Aviation, Inc. MRO for the business aviation industry Norwest Equity Partners 5/3/16 Kansas Aircraft Corporation Trading services for buying/selling used aircraft jetAVIVA, LLC 5/3/16 Tampa International Jet Center, LLC Pilot and guest amenity services incl. concierge Holland Sheltair Aviation Group 5/5/16 Airborne Tactical Advantage Co., LLC Outsourced civilian tactical airborne training Textron Inc. 5/9/16 KD Analytical Consulting, Inc. Customized training/support to US CBRNE Federal Resources Supply Company 5/16/16 Armed Forces Services Corporation Management consulting and program delivery Magellan Health, Inc. 5/17/16 Herndon Aerospace & Defense Co. Distributor of supply chain management solutions KLX Inc. 6/13/16 TSM Corporation Training, engineering, and logistics support Xator Corporation 6/20/16 Stinar HG, Inc. Manuf. & sells aircraft ground support equipment Kruckeberg Industries, LLC 6/29/16 KIRA Incorporated Facilities maintenance and construction services Tlingit and Haida Tribes of Alaska

8 Aerospace, Defense, Government & Security Coverage x Advanced Materials x Cybersecurity / Warefare x Homeland Security x Aerostructures x Missiles, Ordnance & Propulsion x National Security & Intelligence Solutions x Avionics x Strike Warfare / Non-lethal x Technical & Support Services x Specialty Component Manufacturing x Unmanned Systems / Robotics x MRO & Support Services x Fed IT x C4ISR / Net-Centric Solutions x Government Services

Ian Cookson David Brinkley Managing Director Managing Director 617.470.9338 917.817.0375 [email protected] [email protected]

Tess Oxenstierna Thomas McConnell Managing Director Director 203.524.0888 303.951.7125 [email protected] tmcconnell@headwatersmb. com

About Headwaters MB: Headwaters MB is an independent, middle-market investment banking firm providing strategic merger and acquisition, corporate finance, and merchant banking services through proprietary sources of capital. Named “Investment Bank of the Year” by the M&A Advisor in 2014 & 2015, Headwaters MB is headquartered in Denver, CO, with six regional offices across the United States and partnerships with 18 firms covering 30 countries. For more information, visit www.headwatersmb.com

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9 SOURCES

1. (i) S&P Capital IQ. (n.d.). M&A Transaction Aggregates. Retrieved September 14, 2016 from S&P Capital IQ database; (ii) Headwaters MB Proprietary Research. 2. GE Aviation. (2015, May 20). GE Aviation and Woodward Combine Fuel Systems Expertise for New Joint Venture [Press release]. www.geaviation.com. Retrieved from http://www.geaviation.com/press/other/other_20150520.html 3. Clevenger, Andrew. (2016, March 4). Honeywell Ends Bid for United Technologies. DefenseNews. Retrieved from http://www. defensenews.com/story/defense/policy-budget/industry/2016/03/04/honeywell-ends-bid-for-united-technologies/81288250/ 4. (i) Atlantic Aviation. (2016, January 12). Atlantic Aviation Acquires Premier Jet at CRQ [Press release]. www.AtlanticAviation. com. Retrieved from https://www.atlanticaviation.com/news/atlantic-aviation-acquires-premier-jet-at-crq; (ii) Macquarie In- frastructure Corporation. (2016, January 11). Macquarie Infrastructure Corporation Announces Additional Growth Invest- ments [Press release]. Retrieved from http://investor.shareholder.com/mic/releaseDetail.cfm?ReleaseID=949666 5. Textron Inc. (2016, January 21). Textron Aviation acquires Able Engineering & Component Services, strengthens aftermarket customer support across Textron - See more at: Http://investor.textron.com/news/news-releases/press-release-details/2016/ Textron-Aviation-acquires-Able-Engineering--Component-Services-strengthens-aftermarket-customer-support-across-Tex- tron/default.aspx#sthash.2GmDJ6v1.dpuf [Press release]. www.Textron.com. Retrieved from http://investor.textron.com/ news/news-releases/press-release-details/2016/Textron-Aviation-acquires-Able-Engineering--Component-Services-strengthens-aftermarket-customer-support-across-Textron/default.aspx 6. Bach, James. (2016, January 26). Leidos emerges as winner in bid for Lockheed's $5B government IT business. Washington Business Journal. Retrieved from: http://www.bizjournals.com/washington/blog/fedbiz_daily/2016/01/leidos-emerges-as-winner-in-bid-for-lockheeds-5b.html 7. Headwaters MB Proprietary Research. 8. Frazier, Graeme B. IV, Greenberg, Andrew T., Wegbreit, Bob. (August 2016). 10th Anniversary GF Data M&A Report August 2016. Retrieved from https://www.gfdataresources.com/. 9. CPI Aerostructures Inc. (2016, May 10). CPI Aerostructures Announces 2016 First Quarter Financial Results. Retrieved from https://www.snl.com/IRW/file/4413920/Index?KeyFile=34250785 10. Harris Corporation. (2016, August 2). Harris Corporation Reports Fiscal 2016 Fourth Quarter and Full Fiscal Year Results. Retrieved from https://www.harris.com/investors/financial-reports. 11. Oxley, David. (2016, August 4). International Air Transport Association (IATA). Air Passenger Market Analysis: June 2016. Retrieved from IATA database. 12. (i) Airbus Group. (2016, July 27). Airbus Group Reports Half-Year (H1) 2016 Results. Retrieved from http://www.airbusgroup. com/int/en.html; (ii) The Boeing Company. (2016, June 30). Form 10-Q. Retrieved from http://investors.boeing.com/investors/financial-reports/default.aspx; (iii) The Boeing Company. (2016, July 27). Second-Quarter 2016 Performance Review. Re- trieved from http://investors.boeing.com/investors/financial-reports/default.aspx; (iv) The Boeing Company. (2016, April 27). First-Quarter 2016 Performance Review. Retrieved from http://investors.boeing.com/investors/financial-reports/default.aspx.