Deals driver Automotive trends and transactions

February 2018

kpmg.ca/automotive

Rapid change and exceptional profits – What’s next? By Peter Hatges, Partner & National Automotive Sector Leader, KPMG in Canada

As we embark on 2018, the Auto The integration of technology and the driving experience is in full force Industry is in the midst of a rapid as autonomous driving and collision avoidance become the top technology evolution. Disruption looms as the focus points for OEMs. This ecosystem is evolving and technology companies are having a significant impact on the driving experience future demographics of the car and driver safety. Mobile connectivity in the car is an essential requirement buying public point to a decreasing for the modern traveler. Of the executives surveyed, 85% believe that love affair with the automobile. data and cybersecurity will be the number 1 consideration for future Sedans are out, SUVs are in and purchasing decisions. OEM profits are exceptionally Over half (56%) of executives surveyed believe that the number of retail strong for each of the ten major outlets will be reduced by 30% to 50% by 2025. And almost half of the car global manufacturers. Total owners today will not want to own vehicles personally by 2025. Whether this revenue from the top 10 exceeded translates to rural areas of North America remains to be seen. CDN $2.1 trillion in the last The pure electric vehicle is not expected to prevail as the infrastructure twelve months and cumulative required to enable long distance travel will not be sufficiently developed. EBITDA amounted to just over Trends indicate that various drivetrains will be available in the future and fuel CDN $223 billion. Each of the cell technology is expected to attract significant development dollars over top 10 OEMs was profitable last the near term. Fuel cells use hydrogen and oxygen as fuel, turning them into year. In a period of unprecedented electricity, heat and water. Fuel cells have higher efficiency than diesel or gas change, our 2018 Global engines, and eliminate pollution caused by burning fossil fuels. With much shorter potential refueling times compared to electric batteries, fuel cells Automotive Executive Survey have the potential to emerge as the dominant alternate engine technology. gives an interesting lens on the future of the automobile and its There are a number of interesting trends and survey results in our 2018 Global immediate environment. Automotive Executive Survey and I encourage you to read through it.

© 2018 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Automotive EV/LTM EBITDA last 3 years

26.0x

24.0x

22.0x

20.0x

18.0x

16.0x

14.0x

12.0x

10.0x

EV/LTM EBITDA EV/LTM 8.0x

6.0x

4.0x

2.0x Dec-14 Marc-15 Jun-15 Sept-15 Dec-15 Mar-16 jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sept-17 Dec-17

GM Magna Johnson Controls Ford BMW Toyota Daimler

Source: Capital IQ

Company comp set

Company Name Market Total enterprise LTM Tangible LTM total LTM EBITDA LTM Diluted capitalization value latest book value/ revenue EPS latest share Volkswagen Aktiengesellschaft 141,598 341,607 129.11 351,248 42,176 21.31 (XTRA:VOW3)

Toyota Motor Corporation (TSE:7203) 250,653 416,922 70.48 325,429 41,387 7.33

Daimler AG (XTRA:DAI) 122,495 278,752 83.68 248,957 26,764 13.62

General Motors Company (NYSE:GM) 77,200 171,551 31.99 203,032 25,766 5.81

Ford Motor Company (NYSE:F) 58,912 201,047 10.75 192,954 16,582 2.34

Fiat Chrysler Automobiles N.V. (BIT:FCA) 46,036 56,202 ( 4.68) 172,049 17,687 3.12

Honda Motor Co., Ltd. (TSE:7267) 78,706 134,917 43.61 167,189 15,068 4.06

SAIC Motor Corporation Limited 79,369 78,407 3.4 160,120 5,909 0.57 (SHSE:600104) Bayerische Motoren Werke 93,800 216,950 120.39 150,236 20,219 17.75 Aktiengesellschaft (DB:BMW)

Nissan Motor Co., Ltd. (TSE:7201) 51,816 135,076 14.35 136,567 12,224 1.9

TOTAL 1,000,584 2,031,431 2,107,780 223,783

Source: Capital IQ, as at Jan 25th, 2017

© 2018 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Public comparable companies (C$M)

LTM multiples NTM multiples

Company Country EV/Revenue EV/EBITDA P/E EV/EBITDA EV/EBIT P/E

American Axle & Manufacturing Holdings, Inc. United States 0.6x 3.9x 5.7x 3.6x 5.6x 5.5x

BorgWarner Inc. United States 1.2x 7.1x n.m. 7.2x 9.5x 12.3x

Cooper Tire & Rubber Company United States 0.8x 4.2x 10.8x 5.1x 7.2x 11.8x

Cooper-Standard Holdings Inc. United States 0.7x 5.6x 13.0x 5.3x 7.5x 10.3x

Dana Incorporated United States 0.7x 6.5x 4.2x 6.1x 8.9x 11.0x

Dorman Products, Inc. United States 3.1x 14.2x 26.5x 13.1x 14.6x 24.4x

Ford Motor Company United States 0.2x 2.6x 12.4x 3.2x 6.0x 7.4x

General Motors Company United States 0.3x 2.1x 5.4x 2.4x 3.7x 5.9x

Gentex Corporation United States 3.1x 8.8x 16.8x 8.3x 9.9x 16.3x

Gentherm Incorporated United States 1.5x 9.3x 15.9x 9.4x 12.7x 16.2x

Harley-Davidson, Inc. United States 1.9x 9.1x 17.1x 8.6x 10.3x 15.7x

Johnson Controls International plc Ireland 1.3x 13.4x n.m. 11.0x 14.6x 15.4x

LCI Industries United States 1.4x 9.6x 18.0x 8.7x 10.7x 16.6x

Lear Corporation United States 0.6x 5.7x 10.4x 5.2x 6.5x 9.0x

Linamar Corporation Canada 0.8x 4.8x 7.3x 4.8x 7.1x 7.7x

Magna International Inc. Canada 0.5x 4.8x 7.8x 4.9x 7.1x 7.7x

Martinrea International Inc. Canada 0.4x 4.5x 8.6x 4.0x 6.8x 5.8x

Nexteer Automotive Group Limited United States 1.0x 7.1x 11.9x 5.8x 7.9x 10.9x

Tenneco Inc. United States 0.5x 6.2x 9.6x 5.2x 6.9x 9.6x

Tesla, Inc. United States 6.1x n.m. n.m. n.m. n.m. n.m.

The Goodyear Tire & Rubber Company United States 0.9x 5.7x 7.5x 5.6x 7.9x 9.1x

Thor Industries, Inc. United States 0.9x 10.0x 16.9x 8.6x 9.8x 14.3x

Visteon Corporation United States 1.0x 9.3x 27.7x 8.4x 11.1x 17.4x

Valuation Multiples Summary

Group Average 1.3x 7.0x 12.7x 6.6x 8.7x 11.8x

Group Median 0.9x 6.3x 11.4x 5.7x 7.9x 11.0x

Group Maximum 6.1x 14.2x 27.7x 13.1x 14.6x 24.4x

Group Minimum 0.2x 2.1x 4.2x 2.4x 3.7x 5.5x

Source: Capital IQ, as at Dec 31st, 2017

© 2018 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Precedent Transactions (C$M)

Valuation multiples Country of Closed Enterprise EV/LTM EV/LTM Target Acquirer target date value sales EBITDA

2017: Top 10 transactions

Mobileye N.V. Intel Corporation Israel 21-Aug-17 20,195 42.0x 120.2x Harman International Industries, Samsung Electronics America, Inc. United States 28-Feb-17 12,036 1.3x 10.4x Incorporated CLARCOR Inc. Parker-Hannifin Corporation United States 28-Feb-17 5,753 3.1x 17.2x Metaldyne Performance Group Inc. American Axle & Manufacturing United States 6-Apr-17 4,376 1.1x 6.9x Holdings, Inc. Calsonic Kansei Corporation KKR & Co. L.P.; KKR Asian Fund II L.P. Japan 23-Mar-17 4,050 0.3x 5.2x Adam Opel AG Peugeot S.A. Germany 1-Aug-17 1,618 0.1x n.a FTE automotive GmbH Valeo SA Germany 31-Oct-17 1,196 1.6x n.m Ahlstrom Oyj Munksjö Oyj (nka:Ahlstrom- Finland 31-Mar-17 1,052 0.7x 6.2x Munksjö Oyj) Robert Bosch Starter Motors China Renaissance Capital Germany 31-Dec-17 817 0.4x 7.6x Generators Holding GmbH (nka:SEG Investment; Zhengzhou Coal Mining Automotive Germany GmbH) Machinery Group Company Limited; Chizhou Zhongan Zhaoshang Equity Investment LLP AutoChips Inc. NavInfo Co., Ltd. China 2-Mar-17 775 n.a n.a

2016: Top 10 transactions

GETRAG Getriebe- und Zahnradfabrik Magna International Inc. Germany 4-Jan-16 3,455 1.4x n.a Hermann Hagenmeyer GmbH & Cie KG SUMEC Group Corporation Changlin Company Limited (nka:Sumec China 29-Oct-16 1,843 0.2x n.a Corporation Limited) Affinia Group Holdings Inc. Mann + Hummel Holding GmbH United States 4-May-16 1,749 n.a n.a CGS Holding a.s. Trelleborg AB Czech Republic 31-May-16 1,662 1.9x n.a Alliance Tire Group The Yokohama Rubber Co., Ltd. Israel 1-Jul-16 1,646 3.2x 35.3x Alliance Tire Europe BV The Yokohama Rubber Co., Ltd. Netherlands 1-Jul-16 1,564 2.2x n.a Punch Powertrain nv Yinyi Group Co., Ltd. Belgium 31-Aug-16 1,494 3.1x n.a Key Safety Systems, Inc. Ningbo Joyson Electronic Corp. United States 2-Jun-16 1,291 n.a n.a Montupet SA Linamar Corporation France 18-Jan-16 1,233 1.7x 9.1x Shanghai Huizhong Automotive HUAYU Automotive Systems Company China 18-Jan-16 906 n.a n.a Manufacturing Co., Ltd. Limited

2015: Top 10 transactions

ZF TRW Automotive Holdings Corp. ZF Friedrichshafen AG United States 15-May-15 14,472 0.8x 7.3x Anhui Jianghuai Automobile Group Anhui Jianghuai Automobile Co., Ltd. China 21-Apr-15 10,524 1.6x n.a Co., Ltd. (nka:Anhui Jianghuai Automobile Group Corp.,Ltd.) Hyundai Hysco Co. Ltd. Hyundai Steel Company South Korea 1-Jul-15 2,395 0.5x 5.9x Veyance Technologies, Inc. ContiTech AG United States 30-Jan-15 2,110 0.9x 7.1x C.R. Laurence Co., Inc. Oldcastle BuildingEnvelope, Inc. United States 3-Sep-15 1,718 n.a n.a Armored Autogroup Parent Inc. Spectrum Brands Holdings, Inc. United States 21-May-15 1,686 3.2x 12.3x Remy International, Inc. BorgWarner Inc. United States 10-Nov-15 1,525 1.0x 9.3x Eagle Ottawa, LLC Lear Corporation United States 5-Jan-15 926 n.a n.a Delphi Automotive PLC, MAHLE Behr GmbH & Co. KG United Kingdom 1-Jul-15 910 0.5x n.a Thermal Business Stackpole International Inc. Johnson Electric International (UK) Canada 27-Oct-15 867 1.8x 10.6x Limited; JE International Engineered Products Canada Limited; JE International Powder Metal Canada Limited

Source: Capital IQ, as of Dec 31st, 2017

© 2018 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Precedent Transactions (C$M)

Valuation Multiples Country of Closed Enterprise EV/LTM EV/LTM Target Acquirer target date value sales EBITDA

2014: Top 10 Transactions

Pinafore Holdings B.V. (nka:Gates The Blackstone Group L.P. United States 3-Jul-14 7,708 2.4x 12.6x Industrial Corporation plc) Firth Rixson Limited Alcoa IH Limited (nka:Arconic IH United Kingdom 19-Nov-14 3,214 3.0x n.a Limited) Oerlikon Metco Management AG Oerlikon Balzers Coating AG Switzerland 2-Jun-14 1,230 n.a n.a Schrader International, Inc. Sensata Technologies B.V. United States 14-Oct-14 1,094 2.2x 19.5x Grede Holdings LLC American Securities LLC United States 2-Jun-14 906 0.8x n.a Zhengzhou Jingyida Auto Parts Zhengzhou Yutong Bus Co., Ltd. China 24-Dec-14 784 1.4x n.a Co., Ltd. Jason Incorporated Jason Partners Holdings Inc. United States 30-Jun-14 595 0.8x 6.7x (nka:Jason Industries, Inc.) Hercules Tire & Rubber Company, Inc. American Tire Distributors, Inc. United States 31-Jan-14 482 0.7x 18.8x Nedfast Investment B.V. Shanghai Prime Machinery Company Netherlands 25-Aug-14 480 0.6x 6.6x Limited Rexair Holdings, Inc. Sunbeam Products, Inc. United States 29-Aug-14 377 n.a n.a

Valuation multiple summary

Group Minimum 377 0.2x 5.9x Group Median 1,509 1.4x 9.3x Group Average 2,361 1.6x 12.4x Group Maximum 14,472 3.2x 35.3x

Source: Capital IQ, as of Dec 31st, 2017 Recent transactions

KPMG advised on the following recent transactions:

KPMG Corporate Finance KPMG Corporate Finance

acted as exclusive financial advisor to acted as financial adviser to the Town+Country BMW on its sale to Pfaff shareholders of D&V Electronics Inc. on Automotive Partners the disposition to Motorcar Parts of America, Inc.

Value Undisclosed Value Undisclosed May 2017 July 2017

© 2018 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Contact us

For more information on how our Automotive industry practice can help you, please contact our KPMG in Canada professionals today.

Toronto/Vaughan Southwestern Ontario Peter Hatges Doug Dawdy Partner & National Automotive Partner, Deal Advisory Sector Leader T: 519-747-8807 T: 416-777-3614 E: [email protected] E: [email protected] Tom Kostopoulos Tammy Brown Partner in Charge, Enterprise National Industry Leader, T: 416-224-4153 Industrial Markets E: [email protected] T: 416-777-8344 E: [email protected]

Derek Peters Partner, Audit T: 416-777-3400 E: [email protected]

Victoria Wilkes Analyst T: 416-777-8968 E: [email protected]

For the latest in Automotive industry publications, webcasts, and more please visit: kpmg.ca/automotive

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2018 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 19166 The KPMG name and logo are registered trademarks or trademarks of KPMG International.