MIDWEST M&A QUARTERLY UPDATE FIRST QUARTER 2019

MIDWEST M&A QUARTERLY UPDATE FIRST QUARTER 2019

Bridgepoint Investment Banking is a division of Bridgepoint Holdings, LLC. Securities offered through an unaffiliated entity, M&A Securities Group, Inc., member FINRA/SIPC. This entity is not affiliated or associated with, authorized or sponsored by Bridgepoint Advisers Limited bridgepointib.com MIDWEST M&A QUARTERLY UPDATE FIRST QUARTER 2019 Frothiness Persists, but Sectors Diverging Middle market valuations remain elevated due to excess dry powder at both private equity groups and strategic buyers; certain industries are experiencing headwinds in 2019 driven by uncertainty in the macro environment

EXECUTIVE SUMMARY Buyer Trends Midwest strategic buyers and investors Moving Down Market continue to hold record levels of cash as A factor driving frothiness in the middle they pursue increasingly scarce market is larger buyout firms and strategic attractive target opportunities. The acquirors, priced out of their own markets, limited number of qualified targets have coming down market to find deals been driving competition amongst Minority Investments buyers as valuations endure well above In order to deploy capital, many PE firms historical averages – valuation multiples are increasingly willing to make minority in Q4 2018 for $10-$250mm transactions equity investments – which was historically rose to an average 7.8x TEV / Adjusted uncommon in middle market M&A EBITDA Roll-up Acquisition Strategies After acquiring a sizable platform Seller awareness of ballooned company, buyers often move down market

valuations and eager capital requiring to find add-on opportunities to meet return near-term deployment has created an thresholds

environment where they are equally, if not more, anxious to complete a It continues to be a seller’s market, with both debt and transaction. As both parties sense equity investors hungry to deploy capital. However, we have “ looming market risk, increased debt begun to see a move to normalization in certain sectors as prices and continued slow organic the timing of an eventual slowdown weighs on every buyer’s mind. Potential sellers should consider exploring growth, the urgency to transact has “ their options while valuations remain high; particularly increased those in more recession-resistant industries, as investors are willing to pay a premium for future stability. Bridgepoint Midwest M&A Index(a) 140 30 Erik Latterell, Director Stone Arch Capital 130 20 Yr/Yr Change (%) Yr/Yr 120 10 110 Q4-18 Midwest M&A Index 100 0 By State MIDWEST TARGETS 90 (10) Missouri 38 80 Kansas 19 (20) 70 1 Iowa 16 60 (30) 3 Oklahoma 14 Nebraska 8 4 Yr/Yr Change Index 5 South Dakota 4 INDEX SUMMARY: The Bridgepoint Midwest M&A Index, a North Dakota 1 measure of corporate merger and acquisition activity in the 16 100 U.S. Midwest region, decreased by 3.6% in the fourth quarter 8 16 of 2018. Year-over-year, the index decreased 3.3% compared 13 MIDWEST BUYERS to Q4-17. Quarter-to-quarter, the index decreased to 82.9 Missouri 56 from 86.2 in Q3-18 19 38 Oklahoma 30 INDEX DEFINITION 22 56 Kansas 22 (a) Q3-06 = 100. As defined by Bridgepoint Investment Banking, the Bridgepoint Midwest M&A Index is assembled by summing the number of transactions Iowa 16 (for transactions that meet the Transaction Requirements below, as sorted 14 by announced date) announced over the latest two quarters. Year-over- Nebraska 13 year and quarter-over-quarter percent change is calculated and then 30 applied to the index number for the previous applicable period. South Dakota 5 North Dakota 3 Sources: Bridgepoint Investment Banking, S&P Capital IQ, PitchBook, GF Data Targets Buyers 145 bridgepointib.com 1 MIDWEST M&A QUARTERLY UPDATE FIRST QUARTER 2019

Selected Midwest Q4-18 M&A Transaction Statistics Quarterly Midwest M&A Transaction Volume Q4-18 Midwest M&A Transaction Volume by Sector Materials Utilities 350 6% 307 309 312 4% 294 Consumer 284 290 300 278 19% 261 269 265 Energy 258 256 251 247 248 245 6% 250 226 233 228 Healthcare 200 8% 150 Financials 100 16% Information 50 Technology 15% Industrials 0 26% Q1-17 Q1-15 Q1-16 Q1-18 Q2-17 Q3-17 Q4-17 Q2-15 Q2-14 Q2-16 Q2-18 Q3-15 Q3-14 Q3-16 Q3-18 Q4-15 Q4-14 Q4-18 Q4-16

US Middle Market PE Buyout Multiples The Inflow of capital into the private markets is driving 15.0x the average TEV / EBITDA multiple of private assets 12.0x 12.4x 12.0x above that of public assets for the first time since the 11.5x 10.2x 10.3x 10.6x financial crisis in 2008 9.2x

8.6x 5.3x 5.0x 10.0x 8.1x 5.8x The size premium and the quality premium expanded 7.0x 5.3x 5.3x 4.6x in 2018 – reflecting the demand by PE groups to invest 4.0x 4.6x 4.3x

in high quality businesses. Deals valued between $50- 3.5x 7.1x 7.0x

5.0x 4.0x $250mm sold for almost 3 turns more in EBITDA than 6.2x 6.2x 6.2x 5.7x deals in the $10-$50mm space 5.3x 4.6x 4.6x 4.3x

Add-on acquisitions continue their prevalence in the 0.0x 3.0x middle market M&A, constituting over half of all deals in 2018 (53.3%) – Bridgepoint expects this trend to 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Debt / EBITDA Equity / EBITDA EV / EBITDA continue throughout 2019 Selected Midwest Q4-18 M&A Transactions ANNOUNCED TARGET TARGET LOCATION BUYER BUYER LOCATION TARGET SECTOR 12/31/2018 Humboldt Rotational Molding California Tank Holdings Corp. Minnesota Materials

12/20/2018 CEI Equipment Company LLC Iowa R.C. Tway Company, Inc. Kentucky Industrials

12/19/2018 OurPet's Company (OTCPK:OPCO) Ohio Hyper-Pet LLC Kansas Consumer Discretionary

12/07/2018 iSolutions, Inc. Alberta Emerson Electric Co. (NYSE:EMR) Missouri Information Technology

12/05/2018 Economics Partners, LLC Colorado Ryan, LLC Texas Industrials

12/04/2018 Hidden Creek Golf Club, L.L.C. New Jersey Dormie Network, LLC Nebraska Consumer Discretionary

11/29/2018 S&S Star Water Solutions, LLC Oklahoma Bison Oilfield Services LLC Oklahoma Industrials

11/28/2018 The First National Bank of Girard Kansas GNBank Kansas Financials

11/14/2018 Consolidated Lumber Company, LLC Minnesota American Construction Source LLC Missouri Consumer Discretionary

11/07/2018 RSS Roofing Services & Solutions, LLC Missouri Tecta America Corp. Illinois Industrials

11/02/2018 Uplift Data Partners LLC Illinois PrecisionHawk Inc. North Carolina Industrials

10/30/2018 WildHorse Resource Development Texas Chesapeake Energy Corporation Oklahoma Energy

10/25/2018 Zimmerman Alfa Romeo and Fiat Iowa Van Horn Automotive Group, Inc. Wisconsin Consumer Discretionary

10/22/2018 American Railcar Industries, Inc. Missouri ITE Management LP New York Industrials

10/22/2018 Dorsey Engineering, Inc. Georgia Kennedy Associates, Inc. Missouri Industrials

10/18/2018 Redel Insurance Agency, Inc. Missouri Seeman Holtz Property and Casualty, Inc. Florida Financials

10/15/2018 Fremont First Federal Credit Union Nebraska Pentagon Federal Credit Union Virginia Financials

10/10/2018 Metropolitan Fire Extinguisher, Inc Arkansas Marmic Fire & Safety Co. Missouri Industrials

10/04/2018 Sweetman Construction Co. South Dakota Knife River Corporation North Dakota Industrials

10/03/2018 TSi Auto Solutions Inc. New Brunswick NCM Associates, Inc. Missouri Information Technology

Sources: S&P Capital IQ, GF Data, PitchBook, Hugh MacArthur of Bain & Co

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