Market Observations Q2 2017

A quarterly compilation of high-level perspectives on M&A, public equity, private capital, and the capital markets.

• Mega M&A Deals Involving Foreign Targets in 2017 • Global Corporate And Sovereign Credit Outlook: Credit Markets Remain Stable, Though New Risks And Opportunities Are Emerging • Political Gridlock Weighing On US Bank Loan Growth • M&A Transaction Activity by Sector and Geography • Top M&A Deals in 2017’s Top Performing Sectors – Q2

Table of Contents

Table of Contents ...... 2 Mega M&A Deals Involving Foreign Targets in 2017 .... 3 Global Corporate And Sovereign Credit Outlook: Credit Markets Remain Stable, Though New Risks And Opportunities Are Emerging ...... 5 Political Gridlock Weighing On US Bank Loan Growth ...... 6 Transaction Activity by Sector ...... 7 Global Transaction Activity by Sector ...... 8 Q2 2017 Global Transaction Activity by Geography .... 9 Q2 2017 M&A Valuation by Sector & Geography ...... 10 Top M&A Deals in Q2 2017 Top Performing Sectors .. 11 Top M&A Deals for Financials – Q2 2017 ...... 12 Top M&A Deals for Industrials – Q2 2017 ...... 13 Top M&A Deals for Consumer Discretionary – Q2 2017 ...... 14 Transaction Activity by Transaction Type – Q2 2017 . 15 Contact Us ...... 16

Q1 2017 | Market Observations 2

MEGA M&A DEALS INVOLVING FOREIGN TARGETS IN 2017 Mega M&A Deals Involving Foreign Targets in 2017 Richard Peterson, Principal Analyst, S&P Global Market Intelligence

In recent trends of mega merger and acquisition deals with transaction valuations of $10 billion and greater, an increasing number of target companies are headquartered outside of the United States.

An examination of $10 billion-plus announced M&A transactions year-to-date as of July 17, 2017, shows fourteen deals involving non-US targets, compared to seven where the target was located in the United States. That compares to year-ago figures showing ten individual deals with U.S. targets acquired for $10 billion or more and five involving non-U.S. targets. The current number of big ticket non-U.S. M&A transactions — fourteen — is at its highest count since the same period of 2007 when eighteen transactions of $10 billion of more occurred. Since 1999, the number of non-US M&A deals valued at $10 billion and greater had outpaced the number of comparably sized U.S. transactions only a handful of times – until now.

So far in 2017, we continue to observe large foreign M&A deals outpacing U.S. deals by a factor of two to one. That stands as the highest year-to-date ratio since 2012 when there were six non-U.S. M&A deals of $10 billion or greater compared to a single mega deal involving a U.S. target.

These results could be an indicator to a possible realignment of M&A activity and where deal makers and bankers could be focusing their energies from domestic to foreign targets. So far this year, announced M&A activity outside of the U.S. is up 15% to $1.05 trillion from year-ago results while U.S. M&A deal value over the same time span has slipped 16% to $657 billion.

Market Observations is generated using the S&P Capital IQ platform as of 4/1/17 through 6/30/2017. To learn more about S&P Global Market Intelligence, please contact us at +1-888-806-5541or [email protected] 3

MEGA M&A DEALS INVOLVING FOREIGN TARGETS IN 2017

M&A deals valued at $10 billion or more: US vs non-US targets Dates* Non-US M&A Deals US M&A Deals Ratio Non-US to US 1999 7 9 0.78 2000 11 15 0.73 2001 7 6 1.17 2002 1 2 0.50 2003 3 1 3.00 2004 2 5 0.40 2005 5 10 0.50 2006 10 11 0.91 2007 18 9 2.00 2008 7 8 0.88 2009 6 7 0.86 2010 6 8 0.75 2011 7 5 1.40 2012 6 1 6.00 2013 3 6 0.50 2014 10 10 1.00 2015 7 20 0.35 2016 5 10 0.50 2017 14 7 2.00

Source: S&P Global Market Intelligence *through 7/31/2017

GLOBAL CORPORATE AND SOVEREIGN CREDIT OUTLOOK: CREDIT MARKETS REMAIN STABLE, THOUGH NEW RISKS AND OPPORTUNITIES ARE EMERGING Global Corporate And Sovereign Credit Outlook: Credit Markets Remain Stable, Though New Risks And Opportunities Are Emerging Global Fixed Income Research Team, S&P Global Ratings

lobal credit markets have generally remained stable through 2017 amid a growing number of both risks and opportunities across sectors and geographic regions. S&P Global Fixed Income Research believes the U.S., Asia, and the eurozone will continue to support global credit stability, while political uncertainty in theG U.K. and Brazil may offset it somewhat. By sector, oil and gas continues to be the most negatively weighted sector globally (despite more supportive energy prices), followed by financial institutions (largely due to sovereign pressure in Latin America and the U.K.), capital goods, and consumer sectors (especially brick-and-mortar retailers). Upgrades will likely be limited and more idiosyncratic through the rest of 2017, though building materials and metals producers continue to improve, albeit slowly, on account of improving metal prices and building material demand due to the robust U.S. housing market.

S&P Global Ratings downgraded 195 global corporate and sovereign issuers in the second quarter of 2017 (accounting for $447 billion in rated debt) and upgraded 144 (accounting for $684.1 billion in rated debt). About half of upgrades and half of downgrades were on U.S. companies.

The outlook for global credit markets is mostly stable, with the U.S., Asia, and the eurozone supporting credit stability and U.K. politics and economic prospects, Brazilian corruption scandals, and China's debt overhang potentially hindering it.

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POLITICAL GRIDLOCK WEIGHING ON US BANK LOAN GROWTH Political Gridlock Weighing On US Bank Loan Growth Zach Fox, Senior Reporter, S&P Global Market Intelligence and Razi Haider, Analyst, S&P Global Market Intelligence

PMorgan Chase & Co. CEO Jamie Dimon kicked off earnings season with an expletive-punctuated tirade blaming political gridlock for hampering economic growth. Since that July 14 earnings call, other bankers have reported soft loanJ growth and anecdotes of commercial clients wary of taking on debt. Across the banking industry, total loans are still growing but the pace has slowed. Among banks that had reported quarterly results as of July 26, the median year-over year increase in loans was 9.5%, down from 10.9% in the first quarter.

"The issue is clearly Washington gridlock. If you look at what's transpired in the last three months, things have only gotten worse," said Peter Winter, an analyst with Wedbush Securities.

Among the 20 largest public U.S. banks, three reported a quarter-over-quarter decrease in total loans and leases: M&T Bank Corp., Fifth Third Bancorp and Wells Fargo & Co. Another six banks showed linked-quarter loan growth of less than 1%. While some banks reported strong lending numbers, that appears to be a case of taking market share rather than an indicator of a growing economy, said Brian Klock, an analyst with Keefe Bruyette & Woods.

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TRANSACTION ACTIVITY BY SECTOR Transaction Activity by Sector

S&P Global Market Intelligence provides detailed information on M&A and financing transactions covering the most active markets in the world. We track all publicly announced mergers, acquisitions, private placements, public offerings, shelf registrations, equity buybacks, and bankruptcies. Transaction data is updated daily from various sources such as regulatory filings, company websites, newsletters, trade publications, and press releases. Market Observations Focusing on the Top Three Sectors:

Financials

Industrials

Consumer Discretionary

Our Transaction Data

S&P Global Market Intelligence covers 1,500,000+ transactions globally.

Source: The S&P Capital IQ platform, data as of 6/30/2017

To learn more about our transaction coverage, history, and collection process, contact [email protected].

GLOBAL TRANSACTION ACTIVITY BY SECTOR Global Transaction Activity by Sector

Q2 2017 Transaction Activity by Deal Count Consumer Discretionary Q2 2017 & Q1 2016 Transaction Consumer Staples 261 529 Activity 1216 by Transaction Value Energy 1947 3566 899 100% Financials

Healthcare 4664 90% Industrials

Information 80% Technology 3529 7121 Materials Utilities Telecommunication 2642 70% Services Telecommunication Utilities Services 60% Materials Information 50% Technology Q2 2016 Transaction Activity by Deal Industrials Count 618 Healthcare Consumer 40% Discretionary 239 Consumer Staples Financials 3610 Energy 2351 1222 30% Energy Financials 969 Consumer Staples Healthcare 5252 20% Industrials Consumer Discretionary Information Technology 7872 10% Materials 3665

Telecommunication Services 2762 0% Utilities 2017 2016

Q2 2017 GLOBAL TRANSACTION ACTIVITY BY GEOGRAPHY Q2 2017 Global Transaction Activity by Geography

Q1 2017 Transaction Activity by Deal Count 833 Africa / Middle East

Asia / Pacific Q1 2017 & Q1 2016 Transaction 7548 Activity 13478 Europe by Transaction Value 100%

Latin America and Caribbean 90% 9221 United States and Canada 887 80%

70% United States and Canada Latin America and Caribbean Q1 2016 Transaction Activity by Deal 60% Europe Count 1094 Africa / Middle East 50% Asia / Pacific

Asia / Pacific Africa / Middle East 8637 40% 14013 Europe

30% Latin America and Caribbean 11145 20% United States and Canada 986 10%

0% 2017 2016

Q2 2017 M&A VALUATION BY SECTOR & GEOGRAPHY Q2 2017 M&A Valuation by Sector & Geography

Americas EMEA

60.0x 60.0x

50.0x 50.0x

40.0x 40.0x

30.0x 30.0x

20.0x 20.0x

10.0x 10.0x

0.0x 0.0x

Average Implied Ent. Value / LTM EBITDA Average Implied Ent. Value / LTM EBITDA Average Implied Equity Value / LTM Net Income Average Implied Equity Value / LTM Net Income

APAC

90.0x

80.0x

70.0x

60.0x

50.0x

40.0x

30.0x

20.0x

10.0x

0.0x

Average Implied Ent. Value / LTM EBITDA Average Implied Equity Value / LTM Net Income Market Observations is generated using the S&P Capital IQ platform as of 4/1/17 through 6/30/2017. To learn more about S&P Global Market Intelligence, please contact us at +1-888-806-5541or [email protected] 10

TOP M&A DEALS IN Q2 2017 TOP PERFORMING SECTORS Top M&A Deals in Q2 2017 Top Performing Sectors

Transaction information is seamlessly integrated in the S&P Capital IQ platform and ® the Excel Plug-In and can be viewed alongside the company fundamentals. Top Five M&A Deals in Q2 2017’s Top Performing Sectors*

Financials

Industrials

Consumer Discretionary

Transaction Activity by Transaction Type

*Note: subsequent commentary provided by Rich Peterson, Senior Director, S&P Global Market Intelligence

Industry Specific Data

S&P Global Market Intelligence uses the Global Industry Classification Standard (GICS®) to categorize and tag all companies within our database.

We also collect industry specific & supplemental financials for 17 industries: Airline, Bank, Hotels & Gaming, Healthcare Facilities, Homebuilding, Insurance, Internet Media, Managed Care (HMO), Mining, Oil & Gas, Pharmaceutical, Real Estate, Restaurant, Retail, Semiconductor Equipment, Asset Management, and Telecommunications, Cable & Wireless.

To learn more about GICS or our industry-specific and supplemental data items, contact [email protected].

TOP M&A DEALS FOR FINANCIALS – Q2 2017 Top M&A Deals for Financials – Q2 2017

Announced Target/Issuer Transactions Headquarters Buyers/Investors EV / EV / Date Value - Country EBITDA NI [$USDmm] [Target/Issuer]

Capital Bank Financial First Horizon National 5/4/2017 Corp. (NasdaqGS:CBF) 2,185 United States Corporation (NYSE:FHN) - 30.66 Macquarie Group Limited (ASX:MQG); Universities Superannuation Scheme Limited; UK Green Investment Bank United Macquarie Infrastructure and 4/20/2017 PLC 2,181 Kingdom Real Assets - - 5/11/2017 XP Investimentos S.A. 1,997 Brazil Itaú Unibanco S.A. - - Fidelity & Guaranty Life 5/24/2017 (NYSE:FGL) 1,835 United States CF Corporation (NasdaqCM:CFCO) - 10.78 OneBeacon Insurance Intact Financial Corporation 5/2/2017 Group, Ltd. (NYSE:OB) 1,732 Bermuda (TSX:IFC) - 18.78

Worldwide announced financial sector M&A activity in the second quarter 2017 slumped to its slowest amount of dollar proceeds since the opening quarter of 2014. According to S&P Global Market Intelligence data, second quarter 2017 announced worldwide financial M&A totaled $40.7 billion. That compares to over $66 billion in deals during the first quarter 2017 and marks the lowest amount of deal activity since the first quarter 2014 when $35.1 billion in transactions took place.

The top deal for the past quarter was Tennessee-based bank holding company First Horizon National Corp. (NYSE:FHN) entering into a definitive agreement to acquire North Carolina-based Capital Bank Financial Corp. (NASDAQ:CBF) for $2.184 billion on May 3, 2017. Acting as financial advisor for the target was Sandler O’Neil + Partners, L.P. and UBS Securities LLC. Barclays Capital Inc. and Morgan Stanley & Co. LLC acted as financial advisor for the buyer. The second largest financial sector M&A deal for the past quarter was an investor group, led by Macquarie Group Ltd., buying U.K. Green Investment Bank for $2.18 billion from the British government. Upon completion the transaction would create a force that would be one of the leading lenders in renewable energy sector.

TOP M&A DEALS FOR INDUSTRIALS – Q2 2017 Top M&A Deals for Industrials – Q2 2017

Announced Target/Issuer Transactions Headquarters - Buyers/Investors EV / EV / NI Date Value Country EBITDA [$USDmm] [Target/Issuer]

Abertis Infraestructuras, 5/15/2017 S.A. (BME:ABE) 35,022 Spain Atlantia S.p.A. (BIT:ATL) 9.21 27.97

WIRTGEN GROUP Holding 6/1/2017 GmbH 5,160 Germany Deere & Company (NYSE:DE) - -

West Corporation Apollo Global Management, 5/9/2017 (NasdaqGS:WSTC) 5,123 United States LLC (NYSE:APO) 7.60 9.69

5/18/2017 Berendsen plc (LSE:BRSN) 3,800 United Kingdom Elis SA (ENXTPA:ELIS) 7.61 23.80

5/17/2017 Q-Park N.V. 3,287 Netherlands KKR & Co. L.P. (NYSE:KKR) 15.14 -

Worldwide industrial sector M&A during the second quarter 2017 saw it best period in terms of dollar proceeds since the third quarter 2015. Based on S&P Global Market Intelligence data, worldwide industrial sector deal activity in the past quarter topped $108 billion up from $81.5 billion in the first quarter 2017 and the best showing since $114 billion in deals took place in the September - ending quarter of 2015. The average deal size in the second quarter was $181.7 million with typical valuations calculated at 3.7x revenue and 22.5x EBITDA. In comparison, announced worldwide industrial sector M&A during the first quarter 2017 saw an average deal size of $130.6 million with multiples of 6.5x revenue and 27.2x EBITDA. Nine deals during the quarter 2017 were valued at $2 billion or more compared to eight deals in that price range during the first quarter 2017. The top industrial sector M&A deal in the second quarter was quarter year’s second-largest industrial sector M&A deal was Italian highway operator Atlantia S.p.A. (BIT:ATL) making an offer to acquire Spain-based Abertis Infraestructuras, S.A. (BME:ABE) in a transaction valued, with assumed debt, at over $35 billion.

TOP M&A DEALS FOR CONSUMER DISCRETIONARY – Q2 2017 Top M&A Deals for Consumer Discretionary – Q2 2017

Announced Target/Issuer Transactions Headquarters - Buyers/Investors EV / EV / NI Date Value Country EBITDA [$USDmm] [Target/Issuer]

Christian Dior SE 4/25/2017 (ENXTPA:CDI) 10,598 France Semyrhamis SA 6.90 22.16

Staples, Inc. 6/28/2017 (NasdaqGS:SPLS) 7,845 United States Sycamore Partners 5.22 -

Panera Bread Company 4/5/2017 (NasdaqGS:PNRA) 7,748 United States Rye Parent Corp. 17.93 47.40 Tribune Media Company Sinclair Broadcast Group, 5/8/2017 (NYSE:TRCO) 6,917 United States Inc. (NasdaqGS:SBGI) 11.67 - Belle International Holdings CDH Investments; Hillhouse 4/28/2017 Limited (SEHK:1880) 5,847 Hong Kong Capital Management, Ltd. 6.59 19.59

Worldwide consumer discretionary M&A deal value topped $183 billion in the second quarter 2017. That ranks as the top sector for announced worldwide M&A during the past quarter exceeding $157 billion in deals from the real estate sector and $108 billion in industrial sector M&A. The top deal for the quarter was Semyrhamis SA making an offer to acquire an additional 25.7% stake in Christian Dior SE (ENXTPA:CDI) for approximately €12.1 billion on April 24, 2017. That as followed by private equity firm Sycamore Partners entering into a merger agreement to acquire specialty retailer Staples, Inc. (NasdaqGS:SPLS) for $6.8 billion on June 28, 2017. The past quarter’s third largest M&A deal in the consumer discretionary sector was Germany’s JAB Holdings B.V. entering into a definitive merger agreement to acquire restaurant firm Panera Bread Company (NasdaqGS:PNRA) for $7.2 billion in cash on April 4, 2017. That deal follows JAB Holdings’ previous acquisitions of D.E. Master Blenders for $10.4 billion in 2013 and Peet’s Coffee & Tea for $1 billion in 2012.

For the quarter, the average deal size for consumer discretionary M&A was $244 million. As for valuations, a typical deal was priced at 4.9x revenue and 21.0x EBITDA.

TRANSACTION ACTIVITY BY TRANSACTION TYPE – Q2 2017 Transaction Activity by Transaction Type – Q2 2017

16,000 13,105 12,000 7,582 8,496 8,000

# of Deals # 4,000 1,344 138 738 63 478 24 0

# of Deals

Public offerings accounted for over $1.05 trillion, or 34%, of the nearly $3.09 trillion in global transactions occurring in the second quarter 2017 according to S&P Global Market Intelligence. That was followed by $750 billion in worldwide M&A transactions and $636 billon in shelf registration. LCD bank loans totaled $299.7 billion in the second quarter, good for fourth-place for transaction activity in the second quarter.

As for financial activity based on deal count for transactions in the second quarter 2017, M&A saw 13,105 deals or 41% of the nearly 32,000 individual transactions occurring in the past quarter. That was followed by 8,496 public offerings and 7,582 individual private placement offerings.

About Market Observations

Market Observations is a quarterly compilation of high-level perspectives on M&A, public equity, private capital, and the capital markets. The content is primarily derived from the S&P Capital IQ Platform and includes commentary on S&P Global Market Intelligence’s public company, private company and private equity information.

At S&P Global Market Intelligence, we integrate financial and industry data, research and news into tools that help track performance, generate alpha, identify investment ideas, understand competitive and industry dynamics, perform valuation and assess credit risk. Investment professionals, government agencies, corporations and universities globally can gain the intelligence essential to making business and financial decisions with conviction.

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