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Consumer & Retail Industry Update CONSUMER AND RETAIL INDUSTRY UPDATE │ JANUARY 2017 www.harriswilliams.com Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 7078852). Harris Williams & Co. Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business. CONSUMER AND RETAIL INDUSTRY UPDATE │ JANUARY 2017 PUBLIC MARKETS OVERVIEW KEY TRADING STATISTICS (DETAIL BEGINS ON PAGE 5) Median TEV/ Median TEV/ Number of Median Enterprise Change in Stock Price Sector LTM Multiples Forward Mulitples Companies Value ($ M) 3 mos. 12 mos. Revenue EBITDA Revenue EBITDA Consumer Products & Services Apparel & Footwear 24 $2,586 (3.9%) (18.8%) 1.2x 10.5x 1.7x 10.1x Consumer Durables 6 6,249 8.9% (8.3%) 0.9x 8.3x 0.9x 9.3x Consumer Services and Retail Franchisors 7 2,271 5.1% (21.9%) 2.2x 11.2x 1.4x 7.4x Home & Office Furniture & Furnishings 10 1,770 22.6% 5.4% 0.9x 9.8x 1.1x 14.6x Household Products 5 17,586 (0.6%) 6.0% 3.7x 14.3x 3.7x 15.2x Housewares 10 2,187 6.0% 9.4% 1.0x 10.7x 1.3x 9.7x Infant & Juvenile 12 1,373 (1.6%) 8.1% 0.9x 8.6x 0.9x 11.2x Outdoor & Lifestyle 20 995 (3.3%) (0.6%) 1.3x 10.4x 1.3x 12.7x Personal Care Products 13 4,438 (3.4%) (0.6%) 1.4x 10.9x 1.5x 10.0x Pet Care 8 1,122 (0.8%) 5.4% 1.7x 13.8x 1.8x 16.0x Retail Apparel & Footwear Retail 31 1,360 (8.2%) (33.7%) 0.5x 6.2x 0.6x 5.2x Department Chains 8 5,693 (18.5%) (54.2%) 0.5x 5.9x 0.6x 4.3x Discount Stores & Mass Merchants 13 24,552 0.5% 1.7% 0.7x 10.9x 0.7x 12.0x Furniture & Furnishings Retailers 14 1,206 6.6% (38.5%) 0.7x 7.6x 0.9x 7.3x Internet Retail 12 5,687 4.0% 30.5% 2.6x 19.6x 3.1x 21.4x Specialty & Other Retail 15 2,784 5.6% (11.0%) 0.7x 8.2x 0.8x 6.3x Consumer Products & Services 115 $2,229 (0.7%) 2.4% 1.3x 10.6x 1.3x 10.6x Retail 93 $4,235 2.2% (22.3%) 0.7x 7.9x 0.7x 6.8x Consumer & Retail Index 208 $2,429 (0.1%) (0.6%) 0.9x 10.5x 1.2x 10.1x PUBLIC COMPANY SECTOR PERFORMANCE (12-MONTH % CHANGE IN STOCK PRICE) Internet Retail S&P 500 Housewares Infant & Juvenile Household Products Home & Office Furniture & Furnishings Personal Care Products Discount Stores & Mass Merchants Outdoor & Lifestyle Consumer & Retail Index Pet Care Consumer Durables Specialty & Other Retail Apparel & Footwear Consumer Services and Retail Franchisors Apparel & Footwear Retail Furniture & Furnishings Retailers Department Chains (60.0%) (50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0% 40.0% PAGE | 1 CONSUMER AND RETAIL INDUSTRY UPDATE │ JANUARY 2017 PUBLIC MARKETS OVERVIEW CONSUMER AND RETAIL INDUSTRY STOCK PERFORMANCE 250 225 200 175 Index 150 125 100 75 50 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 Dow Jones U.S. Retail Index Dow Jones U.S. Consumer Goods Index Dow Jones U.S. Consumer Services S&P 500 Index RECENT EQUITY OFFERINGS Transaction Gross Proceeds Close Date Filing Date Issuer Ticker Type ($ M) Primary Industry 07/27/16 07/27/16 Ollie's Bargain Outlet Holdings, Inc. OLLI Follow-on $303.8 Department Stores 06/22/16 06/22/16 Blue Buffalo Pet Products, Inc. BUFF Follow-on 330.0 Pet Food 05/30/16 05/30/16 Spin Master Corp. TOY Follow-on 100.0 Toys and Recreational Products 05/12/16 05/12/16 Bright Horizons Family Solutions BFAM Follow-on 138.7 Education Services 05/05/16 02/17/16 Walgreens Boots Alliance WBA Follow-on 1,200.0 Drug Retail Apparel, Accessories and Luxury 04/22/16 02/12/16 Vince Holding Corp VNCE Follow-on 63.8 Goods 04/12/16 04/12/16 Sportsman's Warehouse SPWH Follow-on 67.5 Specialty Stores 03/22/16 03/22/16 The Michaels Companies, Inc. MIK Follow-on 443.4 Specialty Stores 02/18/16 02/05/16 Ollie's Bargain Outlet Holdings OLLI Follow-on 155.5 Retail 12/14/15 12/14/15 Norwegian Cruise Line Holdings Ltd. NCLH Follow-on 596.1 Hotels, Resorts and Cruise Lines 11/23/15 11/23/15 The J. M. Smucker Company SJM Follow-on 467.3 Packaged Foods and Meats 11/19/15 10/06/15 Duluth Holdings Inc. DLTH IPO 80.0 Internet Retail PAGE | 2 CONSUMER AND RETAIL INDUSTRY UPDATE │ JANUARY 2017 M&A OVERVIEW ANNOUNCED CONSUMER AND RETAIL M&A Quarterly Consumer M&A Activity Last 10 Deals Announced Announced Target Buyer 120 9/28/2016 Lafayette Puzzle Factory LLC Cra-Z-Art LLC 9/23/2016 Fanlogic LLC HeadsUp Entertainment 16 100 9/21/2016 Corby LLC US Lighting Group, Inc. 26 25 9/21/2016 Frio Ice Chest Co. Visual Promotions LLC 9/13/2016 Dav id Michael & Co., Inc. International Flav ors & Fragrances 80 21 12 9/13/2016 SalonQuest LLC Conair Corp. 5 12 14 13 9/12/2016 CID Entertainment LLC Clearlake Capital Group LP 60 34 10 9/9/2016 SRP Companies Aurora Capital Partners 9/6/2016 SharpShooter Imaging LLC Magic Memories Group Holdings Ltd. 95 18 13 9/1/2016 L.O.P. Enterprises, Inc. Vista Outdoor, Inc. 40 83 77 71 66 68 66 64 67 57 LTM Deal Statistics Number of Transactions 43 20 35 39 Aggregate Number Transaction Multiples Value ($bn) of Deals EV / Revenue EV / EBITDA 0 3Q134Q131Q142Q143Q144Q141Q152Q153Q154Q151Q162Q163Q16 $110.9 216 1.20x 12.1x Strategic Buyer PEG Acquirer Note: Transactions based on publicly available information CONSUMER AND RETAIL M&A TRENDS Median Consumer Transaction Multiples Announced Consumer Transactions 20.0x 1.40x $105 450 $92 400 1.20x EV / LTMSales Multiple $90 Number of Transactions 16.0x 350 1.00x $75 12.4x 300 11.4x 12.0x 10.7x 10.8x $55.4 10.0x 0.80x $60 250 9.8x 8.4x 0.60x $45 $40 $38 200 8.0x ($ ($ in billions) $30 $27 $28 150 $30 0.40x 100 4.0x $15 EV / LTMEBITDA Multiple 0.20x Average TransactionValue 50 $0 0 0.0x 0.00x 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016 YTD YTD EBITDA Mult Rev Mult Aggregate Transaction Value # of Deals TRADING MULTIPLES AND ANNOUNCED PRIVATE EQUITY M&A ACTIVITY Consumer Private Equity Investments and Exits Median LTM Trading Multiples 100 14.0x 12.4x 12.3x 11.8x 90 86 11.7x 11.7x 12.2x 11.9x 11.6x 11.7x 84 12.0x 11.4x 11.3x 11.4x 11.5x 10.0x 10.4x 80 76 10.2x 10.0x 10.0x 10.2x 10.0x 72 73 10.0x 9.5x 9.1x 68 70 66 8.5x 8.5x 8.2x 7.9x 59 8.0x 60 57 57 53 53 48 6.0x 50 37 37 MedianMultiples Trading 40 4.0x 31 28 28 30 2.0x Number of Transactions 20 0.0x 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD Consumer Products & Services Retail Number of Investments Number of Exits PAGE | 3 CONSUMER AND RETAIL INDUSTRY UPDATE │ JANUARY 2017 DEBT MARKET OVERVIEW KEY RETAIL CREDIT STATISTICS QuarterlyQuarterly Retail Loan Loan Volume Volume Average Spread on Retail Loans 14.00 14 L + 700 12.0012 L + 600 10.0010 L + 500 8 8.00 L + 400 6 6.00 L + 300 4 4.00 L + 200 2 Average Spread Over LIBOR L + 100 Loan Volume by Quarter ($ in by($billions)Volume Quarter Loan 2.00 Loan Volume byQuarter ($ inbillions) 0 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 L + 0 0.00 2007 2008 2009 2010 2011 2012 2013 2014 2015 4Q15 4Q09 2Q10 4Q10 2Q11Institutional4Q11 2Q12 4Q12Pro2Q13 Rata4Q13 2Q14 4Q14 2Q15 4Q15 Revolving Credit / Term Loan A Weighted-Average Institutional Institutional Pro Rata Credit Statistics Average Secondary Spread 6.0x L + 2500 5.0x L + 2000 4.0x L + 1500 3.0x EBITDA MultipleEBITDA 2.0x L + 1000 1.0x Average Spread Over LIBORSpread Average L + 500 0.0x Debt/EBITDA Senior Debt/EBITDA EBITDA/Cash EBITDA - Interest Capex/Cash L + 0 Interest 2010 2011 2012 2013 2014 2015 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 COMMENTARY ON RECENT CONSUMER AND RETAIL DEBT TRANSACTIONS1 • Underwriters are currently marketing a $180 million add-on B term loan for Mister Car Wash. Proceeds from the add- on will repay revolver debt and fund a distribution to sponsor Leonard Green & Partners. Price talk is L+450, with a 1% LIBOR floor, offered at 99. The existing $196 million tranche will increase to the same level; additionally, a $40 million delayed-draw term loan will be available for on year.
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