September 2017 Capital Briefing Monthly insights and intelligence on capital market trends

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The better the question. The better the answer. The better the world works. Capital Briefing has been designed to help you remain current on capital market trends. It captures key insights from subject-matter professionals across EY member firms, and distils this intelligence into a succinct and user-friendly publication. Capital Briefing provides perspectives on both recent developments and the longer- term outlook across M&A, cross-border deal flows, IPOs, , debt and bond markets. Please feel free to reach out to any of the subject-matter contacts listed on the reverse of this document if you wish to discuss any of the topics covered. Contents

Section 1 M&A 4 Section 2 IPOs 6 Section 3 Private equity 7 Section 4 Loans 8 Section 5 Bonds 9

Appendices

Appendix A M&A activity monthly flash 11 Appendix B M&A multiples and bid premium 12 Appendix C Capital Confidence Barometer 13 1. M&A

Executive summary • Global M&A remained robust in August, recording 2,745 deals worth US$232b. • Technology continued to lead activity in terms of volume, recording 722 deals worth US$24b. • The near-term M&A outlook remains positive as companies look to conduct strategic reviews of their portfolios more frequently. • The prospects for Asia-Pacific M&A remains positive for the coming months.

Current state Top 10 announced deals by value, August 2017 • Megadeals boosted deal value in August to US$232b. The month saw Source: Dealogic. four megadeals above US$10b, worth US$59b, accounting for more than Target Sector Country Acquiror Value a quarter of the month’s total deal value, which is 20% up on August 2016. (US$m) The number of deals recorded in the current month was 2,745 against Energy Future Power and utilities US 18,800 2,494 recorded at the same time in 2016 – an increase of 10%. Holdings Corp • Technology continues to be the hottest target sector in terms of volume, Calpine Corp Power and utilities US Energy Transfer Equity 17,389 LP, Access Industries recording 722 deals compared with 702 deals in August 2016. A Inc. and Canada continued upswing in technology M&A is indicative of the growing Pension Plan relevance of technological innovation to survive in today’s digitalized Investment Board world. Kite Pharma Inc. Life sciences US Gilead Sciences Inc. 11,856 • The largest deal of the month was Sempra Energy’s agreement to China Unicom (Hong Telecommunications China China United Network 11,253 acquire Energy Future Holdings Corp., the indirect owner of 80% of Oncor Kong) Ltd (21.7368%) Communications Ltd Electric Delivery Company LLC. Under the agreement, Sempra Energy will China United Network Telecommunications China Investor group 9,253 pay approximately US$9.45b in cash to acquire Energy Future and its Communications Ltd ownership in Oncor, while taking a major step forward in resolving Energy (29.8914%) Future’s long-running bankruptcy case. The enterprise value of the deal is Maersk Olie og Gas Oil and gas Denmark Total SA 7,402 approx US$18.8b, including debt. The development represents a rare blow A/S for Warren Buffett, whose had struck a tentative deal Shenhua Group Corp Power and utilities China China Guodian Corp (22 4,412 to purchase Oncor in July 2017. Ltd (18 coal-fired coal-fired power plant power plant assets) assets ) • Another talked-about deal was Gilead Sciences Inc.’s decision to pay Andeavor Logistics LP Oil and gas US Andeavor Corp 3,768 US$11.9b for Kite Pharma Inc. and its promising new technology for (28.7121%) harnessing the body’s immune system to fight cancer. The acquisition of Songa Offshore SE Oil and gas Norway TransOcean Ltd. 3,380 Kite establishes Gilead as a leader in cellular therapy and provides a foundation from which to drive continued innovation for people with CH2M Hill Cos Ltd. Real estate US Jacobs Engineering 3,314 advanced cancers. Also, the deal provides Gilead with a robust pipeline and Group Inc. technology platform to drive future growth. Deal environment: by area (US$b) Environment and horizon Last 12 months (LTM) to August 2017 versus LTM to August 2016 • The near-term outlook for M&A remains positive, despite complexities Source: Dealogic and EY analysis. arising from geopolitical shifts and rising nationalism. Strategic growth 2,500 through deals continues to be at the heart of corporate strategy. With interest rates low, cash reserves high, a strong deal pipeline and record PE buyouts, M&A markets are likely to remain healthy. 2,000 • Technology-driven activity continues to propel dealmaking, as digital transformation and disruption makes it imperative for companies to look 1,500 for innovation and future-proof their businesses. Companies are showing interest in acquiring technological capabilities to disrupt the current 1,000 marketplace or accelerate convergence across industries and sectors. The growth in Fintech acquisitions in 2017 is indicative of this trend, as 500 financial institutions face the increasing need to digitize the customer experience. Other sectors include automotive, consumer products and retail, and health care. 0 Americas Asia-Pacific EMEA • As companies continue to face disruption, it has become necessary for them to review their portfolios and refocus on their core competencies. LTM value PTM value This looks set to drive divestitures, as companies look to sell noncore assets and deploy capital to fund growth and the acquisition of new Deal environment: by target sector and target area (% share of technologies and capabilities. global value) • European M&A should stay steady in the coming months, as markets LTM to August 2017 settle following the turbulent political events of 2016, coupled with rising Source: Dealogic and EY analysis; excludes real estate asset sales. optimism about the region’s economic prospects. Strategic growth and Note: because of rounding, percentages may not add up to total. value creation through M&A is back on the European boardroom agenda. Big ticket deals, such as Atlantia’s bid for Abertis, the buyout of Luxottica Americas Asia-Pacific EMEA Total Group by Essilor International SA and the merger between LVMH and Oil and gas 10% 1% 2% 14% Christian Dior, have laid a strong foundation for European M&A in 2017. Technology 5% 4% 4% 13% • The Asia-Pacific M&A market outlook remain healthy, despite a brake on Consumer products and retail 6% 2% 4% 13% China outbound deals. In spite of concerns around geopolitical issues and Diversified industrial products 3% 2% 3% 8% protectionism, Asia-Pacific remains agile and resilient to uncertainty and Life sciences 3% 2% 2% 8% volatility. Although China’s outbound activity slowed down recently driven Power and utilities 4% 1% 2% 7% by capital control regulations, the long-term outlook continues to be Media and entertainment 5% 1% 1% 6% positive. “Capital control regulations in China might lead to short-term Automotive and transportation 1% 2% 2% 6% volatility; it is unlikely to be a permanent measure as Chinese corporates continue to invest strategically overseas, in line with major government Real estate 2% 2% 1% 5% initiatives,” commented Harsha Basnayake, EY APAC Managing Partner, Others 9% 6% 6% 21% TAS. All sectors 49% 23% 28% 100%

M&A analysis as at 1 September 2017. Note: data is continually updated and therefore subject to change. 4 Capital Briefing Figures have been rounded off to nearest decimal place. 1.i. M&A: cross-border deal flow

Key cross-border M&A deal flow (LTM to August 2017) (Total = US$1.2t)

UK&I to: N America – $111b W Europe – $11b Greater China and N America to: Africa – $3b Middle East – $3b Mongolia to: W Europe – $172b N America – $42b UK&I – $69b W Europe – $26b Middle East – $20b W Europe to: Oceania – $20b N America – $73b Japan to: L America - $12b N America – $44b UK&I - $12b Russia, CIS and CSE – $9b W Europe – $8b

L America to: N America – $7b UK&I - $1b

Key

>$100b

>$50b

>$10b Note: all figures are in US$.

Cross-border M&A deal flow (LTM to August 2017) (US$m)

Target Acquiror# Africa SE Asia Greater Russia, W Europe India Japan Latin Middle North Oceania UK&I Inbound %  (including China and CIS and (excluding America East America total versus Korea) Mongolia$ CSE UK&I) PTM Africa 2,050 13 4,127 1,575 3,076 33 731 - 16 7,165 108 3,305 22,199 65%

SE Asia (including 16 5,282 16,131 126 2,785 372 6,285 24 1,314 2,213 358 1,356 36,261 6% Korea) Greater China and - 3,297 31,848 450 1,257 - 6,440 37 - 6,765 870 195 51,160 9% Mongolia $ Russia, CIS and CSE 138 123 3,183 2,132 9,594 1,080 8,907 427 11,157 1,821 19 1,363 39,944 35%

W Europe (excluding 602 5,223 26,334 282 1,29,573 1,370 7,987 389 3,013 171,863 657 10,876 358,169 52% UK&I) India 503 7,505 1,769 12,912 938 - 5,059 - 68 4,983 58 21 33,816 78%

Japan - 323 1,989 100 225 - - - 11 2,556 14 - 5,219 -84%

Latin America 63 583 11,276 - 12,055 9 257 7,907 608 17,935 1,755 333 52,782 0%

Middle East 83 1,125 5,348 20 1,149 31 1,288 1,500 1,190 19,850 500 3,149 35,234 13%

North America 2,911 15,647 42,303 37 73,450 1,296 43,815 6,689 9,027 1,02,612 5,539 111,482 414,808 2%

Oceania 841 1,099 19,682 - 2,595 51 2,937 110 484 5,416 933 1,544 35,692 -16%

UK&I 2,420 2,236 10,564 628 12,339 801 3,687 1,131 3,095 68,961 4,962 1,034 111,859 -58%

Outbound total 9,627 42,456 174,554 18,261 249,036 5,043 87,396 18,214 29,984 412,141 15,773 134,658 1,197,142 -1%

%  versus previous -28% 37% -21% 30% -41% -33% 9% 9% 17% 34% 28% 141% -1% 12 months (PTM)

# Acquiror refers to acquiror’s ultimate holding company. $ Greater China and Mongolia includes mainland China, Hong Kong, Macau, Mongolia and Taiwan. Key >US$100b >US$50 >US$10b M&A analysis as at 1 September 2017. Source: Dealogic. All Rights Reserved. Intra-area cross-border deals Note: data is continually updated and therefore subject to change.

5 Capital Briefing 2. IPOs

Executive summary • While the volume of IPOs in August was up year on year (YOY), we saw a drop in proceeds compared with the strong activity seen in Aug’16. • Asia-Pacific was the most active region for listings during the month, accounting for 76% and 62% of the global number of deals and proceeds respectively. • EMEA IPO activity surged in August 2017 YOY, led by increased activity in the UK. • China will continue to dominate global IPO activity, fueled by high demand for technology IPOs.

Current state Top 10 IPOs by proceeds, August 2017 • Global IPO activity saw mixed results in August 2017 (90 deals raising Source: Dealogic. US$5.1b). While the number of deals increased by 20% YOY, IPO proceeds Issuer name Issuer Sector Exchange Proceeds declined by 43% due to the lack of US$1b+ deals. Activity was in line with location (US$m) average August figures for the last five years, comparing positively with the number of deals (71% higher) but slightly negatively against Venator Materials plc UK Life sciences New York 522 proceeds (8% lower). Triple Point Social Housing UK Real estate London 264 • Asia-Pacific continued to lead global IPO activity, with 68 deals raising REIT plc Aerospace and US$3.2b, accounting for 76% and 62% of the global number of IPOs and Cochin Shipyard Ltd. India Bombay 231 defense proceeds respectively. While the number of IPOs in this region saw a slight increase of 8%, the proceeds saw a decline of 59% compared with August Vodacom Tanzania Ltd. Tanzania Telecommunications Dar es Salaam 212 2016. Greater China accounted for 57% and 76% share of this region’s activity in terms of number of deals and proceeds respectively. China Publishing & Media Media and China Shanghai 181 • EMEA IPO activity (16 deals raising US$1.4b) saw an increase in August Holdings Co. Ltd. entertainment YOY, where the number of IPOs increased threefold and proceeds surged Consumer products Tricot S.A. Chile Santiago 141 by 11 times YOY. The region accounted for three of the top five deals of and retail the month. In fact, EMEA saw the highest August activity since 2011. UKI was one of the main contributors, accounting for 44% and 57% of EMEA’s Clementia Pharmaceuticals Canada Life sciences NASDAQ 138 IPOs and proceeds respectively. Inc. • US IPO activity (six deals raising US$0.9b) declined in August 2017. Guizhou Transportation YOY, this was 25% and 16% lower in terms of number of deals and Planning Survey & Design China Real estate Shanghai 135 proceeds respectively. It was the second-slowest month this year to date Academe Co Ltd Wuhan Hiteck Biological Shenzhen – (YTD), after February 2017. China Life sciences 126 Pharma Co. Ltd. Chinext Anhui Transport Consulting & Environment and horizon China Real estate Shanghai 126 Design Institute Co. Ltd. • The outlook for US IPOs is positive, driven by expectations of lower market volatility due to a more settled political and economic scenario. IPO activity should pick up after the traditionally quiet third quarter as a strong pipeline continues to build across various sectors, led by IPO activity by area (YOY % change) technology and life sciences. • European markets are proving resilient in the face of the forthcoming (LTM to August 2017 versus LTM to August 2016) Brexit negotiations. Moreover, soaring equity indices and low volatility Source: Dealogic; regional classification on the basis of issuer nationality. are likely to encourage positive investor sentiment. This should lead to relatively strong IPO activity in the last quarter of the year, despite Americas (including US) geopolitical uncertainties elsewhere in the world. 70% Asia-Pacific • The UK is expected to see steady IPO activity for the remainder of 2017, Global as the economy has been performing better than expected since the Brexit 50% US vote. The strength of the UK IPO market can be attributed to smaller companies that operate in niche areas that have been largely unaffected 30% by events in the wider economy. Moreover, London continues to attract EMEA cross-border IPOs, which is a sign of confidence. • China will continue to dominate global IPO activity, fueled by high 10% demand for technology IPOs. More local companies are opting for Chinese Value listings rather than listing in the US, on account of higher valuations. -20% -10% 10% 40% 70% 100% 130% Moreover, continued efforts by the China Securities Regulatory Commission (CSRC) to regulate and expand access to capital markets for Volume all types of investors is expected to result in increased participation from -30% both retail and institutional investors. IPO activity by sector and area (% share of global proceeds) • The Australian IPO market will continue to be strong, led by the exceptional post-IPO performance of listings this year and the return of LTM to August 2017 resources companies, as the appetite for such companies is on the rise Source: Dealogic; regional classification on the basis of issuer nationality. after several years of muted investor interest. Note: because of rounding, percentages may not add up to total. • IPO activity in India is headed for a record year as an increased number Americas Asia-Pacific EMEA Total of issuers aim to take advantage of the rally in the stock market and Banking and capital markets 1% 12% 4% 17% increased investor demand. The total proceeds in 2017 could be around US$8b, which would be the highest level since 2010. Technology 4% 6% 4% 13% • Several state-owned and private companies in the Gulf Cooperation Life sciences 2% 5% 3% 10% Council (GCC) countries are looking to go public in order to capitalize on Real estate 2% 4% 3% 9% efforts by the region’s stock exchanges to enhance liquidity. Through Diversified industrial products 1% 5% 3% 9% these listings, companies will try to raise capital from international Consumer products and retail 2% 5% 1% 9% investors, increase their profitability, raise governance standards and meet multiple shareholder interests. Automotive and transportation 1% 6% 1% 8% Power and utilities 0% 2% 3% 6% Oil and gas 4% 1% 1% 5% Others 4% 7% 3% 13% Total 22% 52% 26% 100%

6 Capital Briefing 3. Private equity

Executive summary • PE fund-raising continues to climb, even as the number of funds raised continues to fall, with closed funds valued at US$415.8b through the end of August 2017, up 11.7% from a year ago. • Investment activity was steady through August 2017, with firms announcing 929 deals valued at US$218.6b, up 3.5% from last year, despite a 15.4% decline in volume. Take-privates are a growing share of acquisition value. • Exits increased through August 2017 from a year earlier, with PE firms announcing 679 exits valued at US$240.9b, up 15.5% by value, while volume slid 1.6%.

Current state Global PE fund-raising by year (in US$b) Fund-raising Source: Preqin. • PE fund-raising continues to climb even as the number of funds raised Proceeds (US$b) (LHS) Number of issues (RHS) continues to fall. Through August 2017, PE firms raised US$415.8b, up 800 1,200 11.7% from a year ago, while the number of funds raised fell 16.6% to 583 from 699. 600 900 • Dry powder is up for the year but down slightly since last month, and now stands at US$594.5b. 400 600 Acquisitions 200 300 • Investment activity was steady through August 2017, with firms announcing 929 deals valued at US$218.6b, up 3.5% from last year, 0 0 despite a 15.4% decline in volume. 03 04 05 06 07 08 09 10 11 12 13 14 15 16 YTD 17* • Takeovers of listed companies in recent months are part of a growing *YTD to 31 August 2017. trend. Take-privates have accounted for 21% of PE-backed buyouts through July 2017, totaling US$77.7b across 36 deals compared with US$59.8b across 59 deals throughout 2016, representing just 9% of all Global PE dry powder by region (in US$b) PE-backed buyouts, according to Dealogic. Source: Preqin.

Exits 800 North America Europe Asia Rest of the world (ROW) • Exits increased through August 2017 from a year earlier, supported largely by M&A activity, with PE firms announcing 679 exits valued at 600 US$240.9b, up 15.5% by value, while volume slid 1.6%.

• IPOs, in particular, are up 44.3% by value and 23.3% by volume through 400 August 2017 from a year earlier, after a strong start to the year. However, the pace slowed to one deal raising US$88m in August following 200 high-profile disappointments from Snap Inc. and Blue Apron Inc.

Environment and horizon 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 YTD • The UK’s Financial Conduct Authority (FCA) released its annual 17* Practitioner Panel survey of more than 2,000 regulated firms that *YTD to 31 August 2017. responded earlier this year. While overall the survey showed that the industry’s rating of the FCA’s effectiveness increased, it also highlighted a PE acquisitions by quarter (US$b) number of areas for improvement. For example, many respondents felt that FCA staff lack understanding of the difference between PE and hedge Source: Dealogic. funds, and only 42% agreed that staff had sufficient knowledge to Value Number of deals understand their firm. The survey also found that asset managers want 150 800 clearer communication around Brexit and increased transparency about 600 future plans. 100 • Investors are lowering return expectations rather than holding 400 uninvested cash. According to a survey by Palico, 47% of limited partners 50 (LPs) will target lower returns if they can deploy an exceptionally large 200 investment. Among other findings, 51% of respondents said that a high level of dry powder for buyout strategies is driving them to “less crowded” 0 0 PE strategies with lower purchase prices, while 59% of LPs and general partners (GPs) believe that, “amid high purchase prices,” the typical buyout fund formed today will not produce double-digit returns. *3Q17 to 31 August 2017. • Technology investments have significantly outperformed other PE buyouts since the recession, according to data from investment decision PE exits by quarter and type (in US$b) platform CEPRES. Investments in the sector have achieved an EV of 11.14x EBITDA at exit since 2007, compared with just 9.96x for other Source: Dealogic. buyouts. Technology investments also achieved a 26.3% gross deal mean M&A exits (LHS) IPO exits (LHS) Number of deals (RHS) internal rate of return over the period, compared with 17.6% for other 200 400 deals. Technology business models have very attractive characteristics because they tend to be scalable and capital efficient. 100 200

0 0

*3Q17 to 31 August 2017.

7 Capital Briefing 4. Loans

Executive summary • YTD issuance has already surpassed 2016 levels in Europe and is on track to beat 2016 levels in the US. • Loan volume in August remained low in both the US and Europe due to the holiday season. • Refinancing and dividend recaps account for more than 50% of total deals in both the US and Europe till date in FY17. • European loan issuance continues to move toward the US-style covenant-lite high-yield bond amid surging demand. • Loan volumes are expected to be high in September with several large deals in the pipeline.

Current state Global investment-grade loans (US$b)* • US YTD issuance is US$445b, 92% of the full-year 2016 volume. Issuance Source: Thomson ONE. in Europe, on the other hand, has shown a higher YOY growth and, at €71.5b, has already surpassed 2016’s full-year figure. 800 600 • In July, US$31.6b of loans were issued in the US and €0.6b in Europe, taking the YTD global issuance to US$523b. 600 • August saw relatively low activity in the European markets with €0.6b of 400 institutional supply, compared with €11.2b in July and €2.9b in August 2016. 400 • Refinancing and dividend recaps still accounted for more than half of deals in 2017, in both the US and Europe. 200 200 • European loan issuance has been inclining toward US-style high-yield bond incurrence covenants instead of the typically more restrictive covenant package. 0 0 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 QTD • Covenant lite, traditionally seen in the larger, more liquid loans, is August increasingly being seen in the smaller middle market, indicating continued competition in the European leveraged loan market. Proceeds (LHS) Number of issues (RHS) • Despite the increase in deal flow since June, the supply and demand *Data until 31 Aug 2017. imbalance still prevails. Strong investor appetite is expected to continue in September with large amounts of investable cash available in the market. Global high-yield loans (US$b)* • With the higher deal flow expected in September, investors are expected to Source: Thomson ONE. be in a position to be able to cherry-pick the stronger deals. • The demand-supply imbalance persists, driving loosening 1,200 3,000 documentation. Elements such as portability, freebie baskets and a greater allowance for dividends and acquisitions are appearing regularly in 900 European buyout loans of all sizes. 2,000 • As market conditions remain strong, issuers and arrangers are now looking to get a head start before the flurry of issuances expected to hit the 600 market later in September. 1,000 • Yields increased slightly in August with average yield to maturity on TLBs 300 at 4.14%, compared with 4.07% in July and 3.98% in June.

Environment and horizon 0 0 • The September pipeline is strong, with the continuation of event-driven 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 QTD deal flow. Jumbo deals, including those from German drug maker Strada, August are expected to hit the market after the holiday season in September. Proceeds (LHS) Number of issues (RHS) • September is also expected to see a good flow of cross-border syndications as the market heats up after the holidays. *Data until 31Aug 2017. Opportunities Top arrangers ranking, YTD 2017 (US$b) • Although activity has picked up in recent months, there continues to be considerable unmet demand from collateralized loan Source: Thomson ONE. obligations, loan funds and foreign investors. Proceeds Issues • With a number of €1b+ deals set to launch in September, relatively smaller deals may have a tough time attracting investor attention. Bank of America Merrill Lynch 194.9 987 • Both the US and the European loan markets are on track for a record year JP Morgan 170.2 870 of supply as strong activity continues after the holiday season. Citi 152.4 577 Wells Fargo & Co 109.2 731

Global loan issuance by industry, YTD Aug 2017 Barclays 102.6 475 Source: Thomson ONE.

Government and Agencies Telecommunications Real estate Retail All loans by region, YTD 2017 (US$b) Media and entertainment Source: Thomson ONE. Consumer products and services Health care Market share(%) Proceeds Issues Consumer staples High technology Americas 62.0 1,671.9 2,825 Materials Industrials EMEA 22.3 600.1 858 Financials Energy and power Asia-Pacific 15.7 423.5 2,036 0 200 400 Proceeds (US$b) 8 Capital Briefing 5. Bonds

Executive summary • Global high-yield activity increased in August, driven by higher activity in the US. • Refinancing continued to account for more than 50% of total deals in both the US and Europe. • August saw a further tightening of yields in the market. • August was a relatively quiet month for the European markets owing to the holiday season.

Current state • Global high-yield activity increased on a month on month basis in August. Euro bond issuances High-yield issuance was US$19b in the US and €275m in Europe, taking Source: Thomson ONE. the YTD total global issuance to US$233.8b. • European high-yield volume in August was lower at €275m, compared with 250 250 €7.9b in July and €2.3b in August 2016. • The bulk of new issuances were used to fund refinancing this year, at 66% 200 200 in the US and 62% in Europe. This is similar to 2016, when 63% of volume refinanced existing debt in both the US and Europe. 150 150

• YTD, FY17 high-yield issuance for M&A activity accounted for 22% of 100 100 volume in the US and 16% of volume in Europe. • High-grade companies have sold more than US$1t of bonds in 2017, 50 50 passing that milestone for the sixth straight year, as companies look to take advantage and borrow while it’s still cheap. 0 0 • Yields for B-rated bonds averaged 5.83% on a rolling three-month basis, 13bps wider over the previous month, while yields on BB-rated bonds averaged 3.2%, unchanged since the start of the month. Proceeds (US$b) Number of Issues • A large number of issuers have tapped the Nordic bond market in 2017 to take advantage of the low-yield environment. FY17 issuance volumes are on a trajectory to hit the highest levels since 2014. The Nordic markets are increasingly witnessing refinancings by replacing loans with bonds as US bond issuances bonds continue to see loosening covenants. Source: Thomson ONE. • Debut borrowers contributed €13.2b of bond volume in Europe till the end 400 600 of August in 2017, compared with €4.8b during the same time last year. In 350 the three-month period from June to August, debut issuers have 500 contributed €5.1b of bond supply. 300 400 Environment and horizon 250 200 300 • Although, market participants are wary of political concerns such as the 150 debt-ceiling negotiations in the US and heightened tensions between the 200 US and North Korea, overall market sentiment is expected to be strong as 100 100 sponsor-backed deals drive issuances in the global markets. 50 • The US Federal Reserve has adopted a more cautious stance on the 0 0 outlook for future interest rate hikes. This, coupled with soft inflation numbers have caused the market to price in lower odds for an interest rate hike. Opportunities Proceeds (US$b) Number of issues • With a number of high-value M&A deals lined up for the remainder of the year, September is expected to be a good month for M&A-driven issuances. • As of 4 September, the month has already got off to a good start with five borrowers lining up €2.85b-equivalent of deals in total, with a number of further deals expected to come throughout the month. Top 10 corporate bond issuers, YTD August 2017 (US$b) Source: Thomson ONE. Issuer Nation Industry Proceeds

Global bond issuance by industry, YTD 2017 AT&T Inc. US Telecommunications 44.7 Source: Thomson ONE. Apple Inc. US High technology 23.8 Media and entertainment China Railway Corporation China Industrials 23.4 Consumer products and services Retail Verizon Communications Inc. US Telecommunications 19.2 Health care Materials Microsoft Corporation US High technology 17.0 Consumer staples Amazon.com, Inc. US Retail 16.0 Real estate High technology Broadcom Corporation US High technology 13.6 Telecommunications Qualcomm Inc. US Telecommunications 11.0 Energy and power Industrials Becton, Dickinson and Company US Health care 10.5 0 50 100 150 200 250 State Power Investment China Energy and power 10.3 9 Proceeds(US$bn) Corporation

Capital Briefing Appendices Appendix A M&A activity monthly flash

Volume Value Volume Value

Calendar YTD % ∆ Calendar YTD % ∆ LTM LTM % ∆ LTM LTM % ∆ YTD YTD

2016 2017 2015 2016 2017

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A

2017 vs. 2016 2017 vs. 2016 LTM vs. PTM LTM vs. PTM (to August 17) (to August 16) (to August 17) (to August 16) (to August 17) (to August 16) (to August 17) (to August 16)

M&A activity by areas and regions

Global 24,878 1% 1,912,759 -2% 36,776 1% 3,427,127 0%

Americas 8,901 -2% 1,021,579 -7% 13,321 -3% 1,978,903 5% Canada 1,294 -30% 116,186 -12% 2,098 -22% 218,663 9% MeCAR 150 1% 13,185 -5% 218 -11% 19,044 -32% SA region 506 -10% 50,224 -5% 768 -16% 78,334 1% US 7,575 5% 896,144 -9% 11,172 2% 1,793,487 6%

EMEA 9,317 4% 680,263 4% 13,534 3% 1,208,252 3% Africa 421 -3% 16,203 -47% 582 -10% 32,761 -22% CIS 708 8% 15,188 -28% 967 3% 58,731 13% CSE 599 -18% 18,159 -13% 848 -23% 48,183 29% GSA 1,936 29% 149,819 -25% 2,659 17% 259,658 1% Israel 238 36% 24,196 21% 297 13% 27,216 5% Mediterranean 1,114 17% 130,054 73% 1,518 9% 176,288 45% MENA 173 -26% 26,976 -29% 243 -28% 53,005 4% Nordics 1,082 15% 62,358 31% 1,541 17% 90,302 35% UK&I 2,210 -8% 160,477 24% 3,526 -1% 343,760 -9% WEM 2,103 -3% 167,698 28% 3,157 3% 267,553 -29%

Asia-Pacific 9,432 3% 562,822 -17% 14,124 5% 985,809 -12% ASEAN 1,248 1% 48,923 -18% 1,845 4% 75,349 -14% Greater China 3,917 10% 357,379 -16% 6,002 18% 595,495 -15% India 819 -1% 40,522 18% 1,126 -8% 73,432 42% Japan 2,240 7% 75,051 -35% 3,306 5% 142,337 -28% Korea 731 -21% 46,057 18% 1,068 -24% 70,894 14% Oceania 1,040 -5% 45,173 14% 1,612 -4% 103,274 29%

M&A activity by sectors Aerospace and defense 240 5% 27,853 76% 377 8% 43,512 62% Automotive and transportation 1,756 6% 153,609 -14% 2,576 5% 230,303 -23% Banking and capital markets 1,484 -6% 145,749 -22% 2,181 -8% 245,166 -37% Consumer products and retail 3,545 -2% 305,082 46% 5,266 -1% 487,440 -2% Diversified industrial products 3,342 4% 178,569 -46% 5,012 5% 387,818 -24% Government and public sector 425 3% 20,287 70% 619 0% 35,992 45% Health care 802 5% 40,150 21% 1,169 3% 65,223 39% Insurance 702 4% 77,097 23% 1,057 1% 147,611 19% Life sciences 1,606 -1% 201,032 -34% 2,417 0% 270,172 -33% Media and entertainment 1,595 -3% 78,391 -5% 2,333 -6% 239,359 48% Mining and metals 1,289 -14% 57,783 -13% 1,924 -12% 107,562 9% Oil and gas 888 -5% 232,737 43% 1,400 -2% 504,189 96% Other sectors 2,881 7% 74,089 -12% 4,209 2% 129,405 3% Power and utilities 1,008 9% 146,319 13% 1,512 9% 273,679 26% Real estate 2,407 4% 126,628 0% 3,544 6% 237,928 15% Technology 7,202 10% 303,566 -31% 10,298 8% 504,401 -31% Telecommunications 496 10% 110,469 24% 735 5% 286,212 80% Wealth and asset management 599 -9% 33,911 21% 959 -3% 56,828 40%

Regions’ M&A numbers represent a summation of domestic, inbound and outbound M&A activity involving the region. Sectors’ numbers represent involvement from either side, i.e., target or acquiror, except in the case of wealth and asset management, where only target-side involvement has been mapped. M&A analysis as at 1 September 2017. Source: Dealogic. All Rights Reserved. Note: data is continually updated and therefore subject to change.

11 Capital Briefing Appendix B M&A multiples and bid premium

Median deal multiple — EV / EBITDA Global Americas Asia-Pacific EMEA LTM PTM LTM PTM LTM PTM LTM PTM (to Aug 17) (to Aug 16) (to Aug 17) (to Aug 16) (to Aug 17) (to Aug 16) (to Aug 17) (to Aug 16)

Aerospace and defense 7.6x 13.8x 7.6x 9.7x 4.6x 14.4x 12.0x 15.0x

Automotive and transportation 10.1x 9.5x 9.0x 11.5x 10.9x 10.0x 9.5x 8.4x

Consumer products and retail 9.6x 10.5x 10.6x 10.6x 9.6x 10.9x 9.0x 9.7x

Diversified industrial products 10.6x 9.4x 11.1x 9.6x 11.3x 10.7x 9.4x 8.7x

Financial services 10.6x 10.0x 13.6x 12.2x 7.5x 8.0x 7.3x 7.6x

Government and public sector 8.6x 8.7x 8.6x 8.2x 10.5x 5.6x 7.7x 8.8x

Health care 13.4x 10.9x 13.4x 11.1x 15.9x 11.0x 13.2x 10.8x

Life sciences 9.3x 10.6x 10.3x 9.3x 9.5x 13.3x 8.7x 10.1x

Media and entertainment 6.9x 8.4x 9.8x 6.3x 5.1x 11.1x 6.7x 8.9x

Mining and metals 11.2x 8.0x 12.1x 8.0x 13.9x 7.7x 6.1x 8.4x

Oil and gas 10.7x 10.4x 10.5x 13.8x 11.9x 10.4x 9.2x 8.3x

Other sectors 9.9x 10.9x 12.4x 10.6x 12.2x 15.3x 7.7x 9.8x

Power and utilities 10.9x 11.9x 4.9x 8.2x 8.5x 12.3x 11.8x 13.0x

Real estate 10.3x 9.3x 12.8x 9.3x 11.4x 9.1x 9.0x 10.0x

Technology 11.8x 11.3x 12.7x 12.6x 12.0x 11.5x 10.4x 10.3x

Telecommunications 7.4x 7.6x 6.9x 12.1x 7.5x 7.6x 7.6x 7.1x

Total 10.3x 10.0x 11.7x 10.3x 10.7x 10.7x 9.0x 9.5x

Median bid premium to four-week stock price Global Americas Asia-Pacific EMEA LTM PTM LTM PTM LTM PTM LTM PTM (to Aug 17) (to Aug 16) (to Aug 17) (to Aug 16) (to Aug 17) (to Aug 16) (to Aug 17) (to Aug 16)

Aerospace and defense 31% 31% 37% 60% 12% 31% 31% 15%

Automotive and 22% 16% 23% 21% 27% 15% 12% 7% transportation

Consumer products and retail 16% 20% 26% 32% 15% 15% 12% 24%

Diversified industrial products 23% 22% 29% 30% 23% 19% 15% 22%

Financial services 19% 22% 27% 29% 17% 10% 15% 14%

Government and public sector 23% 27% 31% 44% 7% 18% 23% 19%

Health care 26% 32% 36% 50% 19% 20% 14% 11%

Life sciences 22% 20% 25% 34% 18% 14% 22% 15%

Media and entertainment 21% 28% 23% 32% 18% 21% 21% 28%

Mining and metals 19% 27% 17% 39% 15% 23% 21% 20%

Oil and gas 20% 21% 29% 31% 12% 18% 32% 19%

Other sectors 11% 23% 15% 27% 8% 19% 10% 22%

Power and utilities 28% 13% 35% 9% 29% 14% 6% 52%

Real estate 25% 19% 23% 28% 25% 16% 17% 16%

Technology 21% 24% 31% 35% 16% 19% 14% 17%

Telecommunications 12% 23% 39% 34% 13% 20% 10% 15%

Total 20% 23% 27% 31% 19% 18% 14% 17%

Deal multiples greater than 30x and bid premium greater than 100% have been excluded from calculation of median. M&A analysis as at 1 September 2017. Source: Dealogic. All Rights Reserved. Note: data is continually updated and therefore subject to change.

12 Capital Briefing Appendix C Capital Confidence Barometer (April 2017): by area

Respondents who expect their company to pursue acquisitions in the next 12 months

Global Americas EMEA

100% 100% 100%

81%

75% 75% 67% 75% 62% 59% 57% 57% 56% 56% 54% 50% 50% 48% 47% 46% 50% 50% 50% 44% 40% 34% 30%

25% 25% 25%

0% 0% 0% Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17 Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17 Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17

Asia-Pacific China Germany

100% 100% 100%

75% 75% 75% 61% 57% 56% 56% 49% 51% 50% 47% 46% 50% 45% 44% 50% 43% 43% 50% 38% 40% 38%

28% 28%

25% 25% 25%

0% 0% 0% Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17 Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17 Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17

Japan UK US

100% 100% 100%

74% 75% 75% 68% 75% 75% 61% 61% 63% 58% 59% 57% 51% 52% 48% 50% 43% 50% 42% 50% 35% 33% 31%

25% 25% 16% 25%

0% 0% 0% Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17 Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17 Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17

13 Capital Briefing Notes

14 Capital Briefing Notes

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