M&A Market Analysis H2 2015

Asia Pacific Outbound M&A Trends Unlocking the Asian Buyer Universe in North American and European Sale Processes

Christopher McMahon Brian McDonagh David Silver John Fordham Head of Global M&A Co-Head of Global Investment Banking Head of European Investment Banking Chairman of Baird International [email protected] [email protected] [email protected] [email protected] +1.312.609.4983 +1.704.553.6611 +44.20.7667.8216 +44.20.7667.8438 Anthony Siu Brian Doyal Nicholas Sealy Thomas Fetzer Head of Asia Investment Banking Co-Head of Global Investment Banking Co-Head of European Investment Banking Head of DACH Investment Banking [email protected] [email protected] [email protected] [email protected] +86.21.6182.0980 +1.312.609.4916 +44.20.7667.8370 +49.69.130.149.20 Satoshi Matsumoto Christopher Coetzee Vinay Ghai Tahseen Siddique Director of Japan M&A Head of Global Financial Sponsor Coverage European Financial Sponsor Coverage M&A Research [email protected] [email protected] [email protected] [email protected] +1.646.557.3201 +1.312.609.4913 +44.20.7667.8225 +44.20.7667.8402 Peter Kies Joel Cohen Joe Packee David Cumberland Head of Global Technology & Services Investment Banking Co-Head of Global Industrial Investment Banking Co-Head of Global Industrial Investment Banking M&A Research [email protected] [email protected] [email protected] [email protected] +1.414.765.7262 +1.312.609.4924 +1.414.298.7644 +1.312.609.5429 Baird’s Global Investment Banking Practice

Baird is a leading $152 billion in client assets, independent, employee-owned $1.2 billion in revenue and more than middle-market Baird is a leading independent, employee-owned investment bankmiddle -market investment3,100 employees bank in over headquartered in the US headquartered in the100 United offices States globally

Baird’s Global Investment Banking department has over 5 Businesses: Private Wealth Management, Equity Capital Markets, professionals across the US, Europe and Asia Baird’s260 Global Investment Banking department Baird5 Capital,Businesses: Fixed Income and Asset Management has offices across North America, Europe and Asia Private Wealth Management, Equity Capital Markets, Baird Capital, Fixed Income and Asset Management

$152 billion in client assets

$1.2 billion in revenue

and more than 3,100 employees in over 100 offices globally Table of Contents

1. Asia Pacific Outbound M&A 3. Unlocking the Asian Buyer Universe

1.1 Executive summary 5 3.1 Valuation 33 Asian companies are changing the global buyer landscape Are Asian buyers competitive in M&A processes?

1.2 M&A activity 7 3.2 Considerations for Western sellers 35 Asia Pacific outbound deal value and count; buyer and target regions Implications of including Asian buyers in sale processes

1.3 Outbound deal drivers 9 3.3 Considerations for Asian buyers 39 Why we expect Asia Pacific outbound M&A activity to increase Specific considerations affecting outbound M&A for Asian buyers

1.4 Inbound deal drivers 15 3.4 Private equity and sovereign wealth funds 43 Why are North American and European targets attractive? Outbound Asian sponsors building global businesses

1.5 Select targets and acquirers 17 3.5 Select strategic acquirers 45 A decade worth of brands and companies acquired by Asian buyers M&A is integral to corporate strategy for these serial Asian acquirers

2. Sector Focus 4. Baird Global Investment Banking

2.1 Baird M&A analysis 21 4.1 Baird’s global investment banking coverage 49 A detailed look at 350 transactions in four selected sectors 4.2 Deep sector expertise 50 2.2 Industrial 23 Accessing technology, IP and manufacturing capabilities 4.3 Selected Baird Asia Pacific M&A transactions 51

2.3 Technology & Services 25 4.4 Selected Baird team members 52 Acquiring tech-enabled business models to move up the value chain

2.4 Consumer 27 Acquiring established Western brands to accelerate growth in Asia

2.5 Healthcare 29 Japan’s appetite for pharmaceuticals and medical technology

- 2 - - 3 - 1. Asia Pacific Outbound M&A  Asia Pacific outbound M&A activity is on a steep growth path with over $275bn of deal value in the last 18 months BAIRD M&A ANALYSIS (1)  China is catching up with Japan as an outbound acquiring nation in North America and Europe  Asian buyers prefer targets with an Asian growth story or a platform to enter attractive Western sectors 1.1  Deal count by target region Asian buyer risk appetite has increased and corporates are keen to accelerate growth through outbound M&A Executive  More Asian corporates have participated in recent Western sale processes and gained relevant M&A experience North America Europe  Majority of outbound private equity (PE) activity is from a handful of firms in China, Australasia and Singapore

Summary  Outbound activity from cash-rich and sophisticated Asian buyers is expected to increase across all deal sizes 110

(1) BAIRD M&A ANALYSIS – 350 SELECTED ASIA OUTBOUND DEALS – DEAL COUNT BY BUYER / TARGET REGION 58 Asian 120 62 companies are 94 2005 - 2009 2010 - Aug 2015 changing the global buyer 24 23 21 Deal count by buyer region landscape 17 14 14 15 Japan 44%

China 21%

US UK DACH Rest of US UK DACH Rest of India 12% Europe Europe Australasia 12%

Rest of Asia 11%

24 Deal count by sector 17 10 10 5 8 7 Industrial 45% 2 Tech & Services 26% US UK DACH Rest of US UK DACH Rest of Europe Europe Consumer 14%

Healthcare 15%

 “Go Global” strategy of Asian corporates to elevate themselves from national to global champions via outbound M&A  Analysis of 350 deals shows Japan is the most active in industrial, technology & services, consumer and healthcare sectors Avg deal size by buyer region  Japan’s outbound M&A across sectors is driven by limited domestic growth with its shrinking, ageing population ($ in millions)  China is acquiring overseas to procure industrial technology and to supply branded Western products domestically $670  Indian corporates acquire overseas to move up the value chain, especially in business process outsourcing (BPO) / IT $610 $495  Australasia is acquiring abroad to access developed markets and larger economies outside Australia / New Zealand Chris McMahon  Private equity exits in North America and Europe increase the opportunity for Asian firms to acquire overseas $265 Managing Director

Head of Global M&A (1) Baird selected 350 deals since 2005 in four sectors (industrial, technology & services, consumer, healthcare) focusing on large and mid-market deals. Rest of Europe comprises European countries excluding the UK and DACH (Germany, Austria, Switzerland) region. Canada accounts for 1% of transactions. Japan China India Australasia - 5 - Select landmark deals

BAIRD M&A ANALYSIS – VALUATION TRENDS NORTH AMERICA

EV / EV / EBITDA by year <10x EBITDA >10x EBITDA Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector 2015 Polypore Energy Storage Asahi Kasei $2,200 16.0x Filtration 100% 2014 Avanir Pharmaceuticals Otsuka Pharmaceutical $3,038 26.4x rev. Pharma 80% 2014 Motorola Mobility Lenovo $2,910 N/A Smartphones 60% 2014 Unilever’s Ragu and Bertolli Mizkan Group $2,150 15.8x Food & Bev

40% 2014 Beam Suntory $15,421 20.4x Food & Bev 2013 Smithfield Foods Shuanghui International $6,939 7.2x Food & Bev 20% 2013 Gavilon’s Grains & Fertiliser Marubeni $4,300 N/A Agriculture 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD-15 2012 Goodman Global Daikin Industries $3,700 10.6x HVAC 2011 Graham Packaging Co Reynolds (Rank Group) $4,843 9.0x Packaging  Asian buyers pay premium valuations for quality Western businesses and 2010 OSI Pharmaceuticals Astellas Pharma $3,324 19.0x Pharma ‘trophy assets’ as well as take a long-term view and invest significantly in challenged companies post-acquisition 2010 Pactiv Corp Rank Group $6,574 9.2x Packaging 2008 Millennium Pharmaceuticals Takeda Pharmaceutical $8,401 15.2x rev. Pharma  Asian buyers often have lower realisable cost synergies compared to Western acquirers already operating in the target’s sector and geography. However, 2007 BobCat, Ingersoll Utility & Att. Doosan Infracore $4,900 12.2x Construction Equip. Asian buyers may have a unique angle to drive the target’s growth in Asia 2007 Solectron Corp Flextronics $3,128 9.7x Electrical Equipment

INCREASING M&A EXPERIENCE FOR ASIAN BUYERS EUROPE

EV /  Many Japanese corporates have gained significant M&A experience in recent Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector years, leveraging in-house corporate development teams and external advisors 2015 Avolon Bohai Leasing (HNA) $7,600 12.1x Aircraft Leasing  Both state-owned enterprises and privately-owned enterprises in China are 2015 Swissport International HNA Group Co €2,579 9.9x Industrial Services targeting strategic acquisitions where they can accelerate growth in China / Asia 2015 FT (Financial Times) Group Nikkei £844 35.2x Media  Less experienced Asian buyers may need more time to assess an acquisition 2015 Pirelli China National Chem. €8,626 7.4x Auto Supply opportunity and conduct due diligence relative to experienced acquirers 2014 Pizza Express Hony Capital £900 10.0x Food & Bev  Serial Asian acquirers and Asian private equity firms are able to conduct M&A 2014 RAC GIC £2,000 13.8x Auto Services transactions efficiently and competitively in structured Western sale processes 2013 Grohe Group LIXIL / Dev Bank Japan €3,060 10.7x Building Products  Baird believes that relevant Asian buyers should be included in every North American or European sale process to optimise potential outcomes for sellers 2012 Aegis Group Dentsu £3,290 11.8x Media 2012 Weetabix Food Co. Bright Food Group £1,200 9.8x Food & Bev 2011 Nycomed Takeda Pharmaceutical €8,974 10.6x Pharma 2010 Volvo Car Corp Zhejiang Geely €1,364 N/M Auto OEM 2008 Jaguar Land Rover Tata Motors £1,288 N/M Auto OEM 2006 Corus Group Tata Steel £6,200 9.1x Metals 2006 Pilkington Nippon Sheet Glass £3,750 10.2x Building Products Asia Pacific outbound M&A deal value is on a steep growth before the economic downturn – Jaguar Land Rover and GLOBAL M&A ACTIVITY path, increasing 65% in H1 2015 compared to H1 2014. Corus Group – making Tata Group the largest industrial manufacturer in the UK. The former has proven to be a 1.2 The US and Europe still account for over 75% of global huge success whilst the latter is still struggling. Global deal value ($ trillion) M&A. Asia Pacific accounted for less than 20% of total M&A global deal value in H1 2015. However, there was Outbound deal count from Australia and New Zealand was $3.5 substantial Asia Pacific outbound M&A activity with over strong prior to the economic downturn and has remained $3.0 480 deals in H1 2015. Furthermore, outbound M&A relatively steady since. The larger deals however have only Activity activity from Asia has been higher than inbound M&A into been from a handful of Australasian buyers. $2.5

Asia in recent years, a trend that we expect to continue. $2.0 Asia Pacific Outbound M&A from the rest of Asia, accounting for 20% outbound deal Over 85% of Asia outbound deal count is directed towards of Asia outbound value, has been constant, primarily driven $1.5 North American and European targets with Chinese by Singapore and South Korea. $1.0 value and count; (including Hong Kong and Taiwan), Japanese, Indian and buyer and Australasian buyers accounting for 80% of deal value. The underlying drivers for global M&A activity remain in $0.5 place in 2015: $0.0 target regions Outbound M&A activity is increasing, especially from China,

 Lower economic growth; corporates using cash on their

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

which surpassed Japan’s outbound deal value in 2013. H1-15 balance sheets for M&A to complement organic growth During China’s strong growth over the last decade, price ASIA OUTBOUND fluctuations for coal and iron ore impacted Chinese  Private equity under pressure to deploy over $1 trillion Deal value by region (H1 2015) DEAL VALUE production costs. To increase control, China acquired of unused capital from investors, supported by liquidity (Dealogic data for 8,400 deals) overseas mines in regions such as Australia and Africa in the debt markets North America 53% Japan → N America 21% Europe 23% China → Europe 14% rather than purchasing the raw materials.  Globalisation and the increasing demands of a global China 12% Australasia → N America 14% customer base, further driving cross-border M&A Japan 3% Japan → Europe 12% Previously, the largest Chinese outbound deals were by Rest of Asia 4% Other 5% Australasia → Europe 11% state-owned enterprises to secure natural resources. Now, North American and European acquirers will continue to China → N America 8% high value-added businesses are the main target, with 40% India → Europe 4% be very active in the M&A market and we expect India → N America 3% of deal value from privately-owned enterprises in China. competition for quality targets to remain high. We also Other 13% expect that more successful outbound acquirers from Asia Like Japan in the 1980s, China is cash-rich and willing to pay Pacific will emerge as they are increasingly ready to substantial amounts for Western assets when they have a compete against North American and European bidders in unique strategic angle. The €8.6bn China National M&A auction processes. Chemical Corporation (CNCC) / Pirelli deal made China Italy’s biggest source of foreign investment in 2014. Outbound deal count (H1 2015) Japanese outbound M&A activity, supported by strong corporate balance sheets, peaked in 2012. However, 1,000 Baird’s M&A analysis shows that Japan is still the most 900 active and experienced outbound acquirer in the industrial, 800 technology & services, consumer and healthcare sectors. 700 We expect strong M&A appetite from Japanese corporates 600 to continue as they seek growth outside of their sluggish 500 domestic economy. 400 Anthony Siu 300 India’s outbound M&A activity has been weak in recent 200 Managing Director years due to a combination of political uncertainty, a weak 100 Head of Asia currency and mixed results from the integration of prior 0 Investment Banking acquisitions. Tata Group made two large acquisitions US Europe Asia Pacific - 7 - Outbound deals by buyer region

BY DEAL VALUE Breakdown (2014 & H1-15) Japan’s outbound M&A peaked with ($ in billions, Dealogic data for 14,000 deals, including cross-border deals within Asia) 19% $84bn of deal value in 2012 Japan $200 30% China $150 11% China increasingly active with $50bn India $100 $50 1% of outbound deal value in H1 2015 Australasia $0 Rest of Asia 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1-15 39% India’s outbound M&A deal value has BY DEAL COUNT been less than $10bn annually since 2011 (Deal count, Dealogic data for 14,000 deals, including cross-border deals within Asia)

Japan Australasia not yet at pre-downturn 200 27% 28% China 150 outbound M&A levels with $17bn India 100 of disclosed deal value in 2014 Australasia 50 14% 0 23% Rest of Asia 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1-15 8% Outbound deals by target region

BY DEAL VALUE ($ in billions, Dealogic data for 8,400 deals, excluding cross-border deals within Asia) North America and 7% Europe have accounted for over 90% $150 North America $100 of Asia Pacific outbound deal value since 2005 Europe 49% 44% Rest of World $50 North America and Europe have each seen $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1-15 over 300 inbound deals from

Asia Pacific annually since 2010 BY DEAL COUNT (Deal count, Dealogic data for 8,400 deals, excluding cross-border deals within Asia) 13% Europe overtook North 1,000 North America America in terms of deal count in 2011 750 42% Europe 500 Rest of World 250 45% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1-15 - 8 - Outbound M&A is often the better option to greenfield the lack of share buybacks have allowed Japanese REAL GDP GROWTH development in a foreign country for Asian firms looking corporates to build up their cash balances. Serial Japanese (figures from IMF, World Bank, EIU) overseas for growth and diversification. acquirers continue to buy US and European companies to 1.3 increase exposure to higher growth, developed economies. Japan Potential buyers from different countries often have different motivations to acquire overseas. While a large The Indian economy, though growing quickly, has been 6% Outbound Japanese corporate that already operates internationally constrained. The country’s poor infrastructure has may use outbound M&A to consolidate its global position in impacted its competitiveness against China for a variety of 4% Deal its own subsector, a domestic Chinese company may enter manufactured goods. India’s global strength lies in business 2% Drivers a new region in a complementary subsector to its own. process outsourcing (BPO) and IT services. India’s BPO / IT providers continue to acquire internationally with mid- 0% The macro factors driving outbound M&A for Asia include: market deals up to $500m. (2%)  “Go Global” strategy to address more global markets, Inbound M&A activity into Australia has been driven by 2010 2011 2012 2013 2014 2015 2016 Why we expect new opportunities and increased competition China’s need for natural resources. Much of Australasia’s China Asia Pacific  Slower domestic economic growth, driving Asian firms outbound M&A however has been directed to the US and to look outside to maintain their overall growth rates outbound M&A UK, reflecting similarities in language and business culture. 12% Key acquirers include Macquarie and Rank Group, financial activity to  Political factors such as looser domestic regulation 10% and continued government financing for outbound M&A investors seeking stable cash generative Western businesses. increase 8% Chinese companies are successfully competing against Cost synergies tend to be a key feature of value positioning 6% Japanese, South Korean and Western companies to become in M&A deals by North American or European corporates. 4% DEAL COUNT a dominant force in household appliances, consumer However, revenue opportunities / synergies are typically 2% BY BUYER TYPE more important for Asian corporates, particularly domestic electronics and internet software through their own 0% (Baird M&A analysis of 350 deals) innovation. For example, Alibaba was founded as a leaders, that do not have an existing international footprint. 2010 2011 2012 2013 2014 2015 2016 Strategic 91% business-to-business online portal to connect Chinese Private Equity 9% manufacturers with overseas buyers, and is continually As regulations loosen and the M&A execution learning India expanding its offering. Outbound M&A from China is used process continues, outbound activity from both Asian 12% to accelerate development and innovation by acquiring corporates and private equity firms is expected to increase. R&D expertise in mature markets. 10% 8% The Chinese government’s five-year plan in 2011 called 6% for $500bn of outward direct investment through 2016, 4% driven by the need to secure natural resources required for 2% the country’s sustained economic growth and the desire to 0% acquire technology, intellectual property and management 2010 2011 2012 2013 2014 2015 2016 know-how from European and North American companies. Australia China’s economy will continue to grow strongly, though at a lower growth rate than recent years. Chinese corporates 5%

and private equity firms alike are keen to leverage Western 4% brands to exploit opportunities and changing consumer preferences in their growing domestic market. 3% Satoshi Matsumoto 2% Managing Director Japan’s economy has been suffering from a declining workforce, deflationary pressure and a recent trade deficit. 1% Director of Japan M&A However, the limited number of domestic acquisitions and 0% 2010 2011 2012 2013 2014 2015 2016 - 9 - Outbound deal drivers – Japan 26% 20 years $2 trillion of Japan’s population is over 65 years old of low or negative economic growth of cash on corporate balance sheets

 Ageing population and shrinking domestic workforce continue to suppress economic growth in Japan DESTINATION BREAKDOWN

US UK DACH Rest of Europe  Greater opportunities when acquiring in higher growth regions outside of Japan 14%  Acquiring technology / intellectual property (IP) to keep competitive in an increasingly global market 15% 61%  Access to additional regions and customers through foreign sales and distribution network

10%  M&A focus on industrial, technology & services and healthcare sectors

 Enhance automation and environmentally-friendly technologies SECTOR BREAKDOWN

 Cash-rich Japanese corporates aiming to increase their global Industrial Tech & Services market share and improve return on equity (ROE) Consumer Healthcare

 Increasing ROE is one of Shinzō Abe’s (Japanese 21% prime minister) key targets from structural reforms GDP STATISTICS 47% 10%  Changing company strategies after the  3rd highest in the world Japanese government’s new corporate 22% governance code  $4.6 trillion

Note: Charts based on deal count from Baird  Outbound acquisitions diversify currency  $36k per capita M&A analysis of 350 deals exposure (reduces reliance on Yen for exports) - 10 -

Outbound deal drivers – China

43% DESTINATION BREAKDOWN of China’s GDP from US UK DACH Rest of Europe its industrial sector  Acquiring established brands in developed markets in industrial, technology & services and consumer sectors 25% 35%  Acquiring technology / IP / management know-how that would otherwise be difficult to develop in-house 20%

 Leverage foreign brand and technology to take 20% 1.364 billion advantage of the growing Chinese domestic market people living in China SECTOR BREAKDOWN  Enter new complementary / strategic markets, Industrial Tech & Services including infrastructure related sectors Consumer Healthcare

 Access to new regions and customers through 6%

foreign sales and distribution network 16%

 Government support / financing for M&A; 54% Largest the largest deals in recent years have been manufacturer and exporter by state-owned enterprises 24% of goods in the world

 Cash-rich Chinese privately-owned enterprises Note: Charts based on deal count from Baird after period of sustained high GDP growth and a M&A analysis of 350 deals number of successful IPOs in recent years

 Privately-owned enterprises increasingly participate GDP STATISTICS in outbound M&A as they seek to globalise and reposition themselves along the value chain  2nd highest in the world

 Private equity / sovereign wealth fund activity, including  $10.4 trillion supporting corporate acquirers as a co-investor  $8k per capita  Regulatory approval threshold for outbound M&A raised from $100m to $1bn (deal value), making mid-market deals easier

- 11 - Outbound deal drivers – India

DESTINATION BREAKDOWN 57% US UK DACH Rest of Europe of India’s GDP from  Acquiring new capabilities and client its services sector 24% relationships, especially in the technology 40% & services / BPO sector

12%  Publicly listed Indian firms now raising more equity, increasing funds available 24% for outbound M&A 1.267 billion people living in India SECTOR BREAKDOWN  Acquiring technology / IP / management know-how that would otherwise be Industrial Tech & Services difficult to develop in-house Consumer Healthcare  Access to new regions and customers through foreign 21% 23% sales and distribution network, particularly in pharmaceuticals  Preference for smaller deals, below $100m or mid-market Fastest 14% deals, which are easier to integrate growing G20 economy

42%  Many Indian industrial acquirers are opportunistic, seeking Western targets with low valuation / financial risk Note: Charts based on deal count from Baird M&A analysis of 350 deals  Difficult to set up large greenfield manufacturing facilities of an efficient scale in India, driving outbound industrial M&A GDP STATISTICS

 9th highest in the world

 $2.1 trillion

 $2k per capita

- 12 - Outbound deal drivers – Australasia

DESTINATION BREAKDOWN SECTOR BREAKDOWN  Slowing of recent mining / resources boom in Australia; lower domestic economic growth forecasts US UK DACH Rest of Europe Industrial Tech & Services Consumer Healthcare  Access to new regions and customers through 10% 17% foreign sales and distribution network 7% 5% 43%  59% Conservative nature of Australian corporate boardrooms is changing with increased globalisation 19% 40%  Healthy banking sector post economic downturn providing debt / liquidity to corporates for M&A Note: Charts based on deal count from Baird TATISTICS M&A analysis of 350 deals GDP S  Private equity interest in the US and UK for industrial  12th highest in the world and technology & services sectors respectively

 $1.6 trillion  Cultural similarities when seeking English- speaking targets in North America and the UK  $59k per capita

$250bn 36.5 million 55% of exports from Australasia people living in Australia of New Zealand’s exports and New Zealand made up of food products

- 13 - - 14 - North American and European targets are the most PE firms, have been growing rapidly and represent prized REAL GDP GROWTH attractive to Asian buyers, representing over 90% of Asia assets for many buyers, regardless of location. (figures from IMF, World Bank, EIU) outbound deal value since 2005. Targets that represent 1.4 global or regional platforms are favoured by Asian buyers. The downturn has been difficult for many European US economies that have not recovered like the US economy. It is the quality of the underlying businesses, skilled A number of companies, such as Volvo and Ferretti, have 5% Inbound employees and longstanding customer bases as well as the been struggling or are burdened with debt. Such 4% attractive regulatory, legal and tax frameworks that make companies are prime targets for Asian acquirers that may Deal Western targets so appealing. Asian buyers have been be best placed to implement an Asian growth strategy and / 3% Drivers active in North America and Europe acquiring: or take a long-term view to invest in the business. 2%  Large public takeovers The US healthcare industry accounts for 17% of GDP, the 1%  Corporate carve-outs highest of any country. There are thousands of companies 0% operating in or supplying this privatised sector. Japanese 2010 2011 2012 2013 2014 2015 2016 Why are North  Growing middle-market companies from PE firms corporates, such as Takeda Pharmaceutical, acquire US American and UK  Financially challenged European firms targets for their innovation, pipeline of emerging drugs and European sales network into the world’s largest healthcare market. 5% targets Western corporates have been focused on portfolio clarity since the downturn, divesting any non-core divisions With such a variety of quality businesses operating in North 4% and streamlining their existing operations. US corporate attractive? America and Europe, buyers from Asia Pacific have chased 3% carve-outs have been attractive for Japanese acquirers with targets that strategically fit. We therefore expect to see such deals accounting for 20% of deal value between increasing activity from both Asian corporates and private 2% DEAL COUNT BY the two countries in Baird’s analysis of 350 transactions. equity firms, especially in the middle-market. 1% SELLER TYPE The DACH region is famous for its Mittelstand companies. 0% (Baird M&A analysis of 350 deals) 2010 2011 2012 2013 2014 2015 2016 They tend to have innovative business models or Private equity 33% Corporate carve-out 27% intellectual property and hold leading worldwide positions Germany Publicly listed 22% within their niche markets. There is often the scope to Private 18% further globalise such companies by setting up additional 5% facilities or sales offices outside their home country, for 4% example in Asia. These mid-market champions are desired by both the world’s existing and rising manufacturing 3% powerhouses, Japan and China. 2%

Changing business culture in Europe is also benefitting 1% Asian buyers. The trend for national ownership in France 0% and Italy has been eroded by a need for foreign investment. 2010 2011 2012 2013 2014 2015 2016

The maturity of the private equity industry in North Eurozone America and Europe has increased the frequency of 4% ownership changes and the opportunity for Asian firms to acquire. There are almost 14,000 PE portfolio companies 3% worldwide, most of which are in the US or Europe. 2% 1% John Fordham The UK private equity industry, through its portfolio 0% Managing Director companies, employs over 20% of the country’s private (1%) Chairman, Baird sector workforce. Business services companies and more (2%) International recently technology-enabled service providers, owned by 2010 2011 2012 2013 2014 2015 2016 - 15 - Inbound deal drivers

 Global / international platform  Focus on revenue growth rather than cost reduction

 Established Western brands  New products / services / capabilities

 Defensible market leading positions  New markets and longstanding customers

 High quality / engineered products  Leverageable sales and distribution and services network

 Technology / intellectual property  Economies of scale / operating leverage / sourcing efficiencies  High level of automation / efficiency  Entrenched / high margin  Management know-how aftermarket business and business processes  Sell foreign target’s products  Governance, risk and / services in Asia compliance standards  Manufacture target’s products  Opportunity – underdeveloped at a lower cost in Asia position in Asia  Opportunity – potential revenue and cost synergies

The alternative to outbound M&A  Western corporates increasingly is greenfield development in North focused on core business and divesting America and Europe: non-core or underinvested divisions, which are often sizeable / attractive for  Greenfield entrance into Asian strategic buyers highly developed, mature lower growth markets is challenging  Maturity of private equity industry in North America and Europe has increased the  Time consuming with significant upfront availability of mid-market companies, which are costs; may take years for a return on often targeted by Asian corporates and private greenfield investment equity buyers  High barriers to entry in many Western markets make  Economic downturn created opportunities to acquire it difficult for Asian firms to win new customers financially challenged Western companies, particularly for Asian  Difficult to attract high quality Western management buyers who may be more interested in the target’s brand, technology teams / employees to start-up subsidiaries and customer relationships than recent profitability  Uncertainty of success; sunk costs may outweigh potential benefits if operation fails to gain scale - 16 - 1.5 Select North American and European targets Select Targets and Acquirers

Information Management Canned Fruit, Juice A decade Consumer business and Asia Fresh worth of brands and companies Light Emitting Polymers Glass Laminating / Vinyls acquired by

Asian buyers Motors & Controls

Automotive Consumer Products PC & Other

Linkage & Suspension

David Cumberland Director M&A Research Global Investment Banking

- 17 - Select Asian acquirers

- 18 - - 19 - 2. Sector Focus Baird selected 350 Asia outbound deals in four key sectors: While it is too early to predict the impact from the relative DEAL COUNT BY SECTOR slowdown in China’s economic growth and the recent  Industrial volatility in its equity markets, Baird expects outbound Japan 2.1  Technology & Services M&A drivers for most Chinese acquirers to remain in place.  Consumer Indian corporates have not generally been active in large Industrial 47% Baird  Healthcare multi-billion dollar deals, but have focused on the middle- Tech & Services 22% market and smaller deals where there is lower financial and Consumer 10% focusing on large and mid-market deals. This sample M&A / or integration risk. The rationale for these deals has been Healthcare 21% represents 35% of disclosed value and 5% of deal count specific, such as adding a service offering or new customers. Analysis since 2005. We assessed the countries involved, type of buyer / seller, target subsector and valuation. Like India, there are relatively few Australasian corporates engaging in outbound M&A. Unlike India, Australasian firms China A detailed The deals related to resources (oil & gas / mining assets) are are willing to do larger deals, especially Macquarie and Rank not included in Baird’s analysis. This has stripped out many Group, two very active financial investors. look at 350 of China’s largest deals in recent years. Japan represented Industrial 54% transactions in almost half of the selected deals in the above four sectors. The importance of Asian buyers in North American and Tech & Services 24% European sale processes is increasing, especially where Consumer 16% four selected Our observations included: there is a relevant Asian growth story or where the target Healthcare 6% sectors  Japanese corporates acquiring in each sector, often represents a platform to enter attractive Western sectors. multi-billion dollar deals to increase their market share India DEAL COUNT BY  Chinese corporates (private and state-owned) and PE BUYER REGION firms active in industrial and increasingly other sectors (Baird M&A analysis of 350 deals)  Indian corporates acquiring primarily in the technology Industrial 23% Japan 44% & services sector, particularly in BPO and IT services Tech & Services 42% China 21% Consumer 14% India 12%  Australasian corporates and PE firms acquiring in both Australasia 12% Healthcare 21% Rest of Asia 11% industrial and technology & services sectors Over a quarter of the deals in our analysis were Japanese corporates acquiring in the US. Accounting for over 25% Australasia of world GDP, the US is the world’s largest market. No company can say it is truly global if it does not have a strong presence in the US. Tesco attempted unsuccessfully to Industrial 43% enter the US organically with its Fresh & Easy chain. Tech & Services 40% Japanese corporates, with a global strategy, do not wish to Consumer 7% suffer the same fate. M&A, though expensive, is often the Healthcare 10% best way to penetrate the US market.

The rationale for many Chinese outbound deals in the industrial and consumer sectors was to leverage the Rest of Asia Western target’s brand to increase sales in Asia. Chinese corporates and private equity firms alike have used this Industrial 49% Tahs Siddique strategy. There has also been a trend for Chinese private Tech & Services 13% Vice President equity firms to partner with Chinese corporates or Consumer 27% M&A Research Western private equity firms for outbound M&A. Healthcare 11% Global Investment Banking - 21 - All deals summary (8,400 deals)

DEAL VALUE BY SECTOR DEAL COUNT BY SECTOR DEAL VALUE BY SIZE

Oil & Gas 15% Oil & Gas 6% Large (>$1bn) 3% Healthcare 9% Healthcare 9% Medium ($100m – $1bn) 13% Telecoms 8% Professional Services 9% Small (<$100m) 37% Real Estate 8% Real Estate 4% Undisclosed 47% Utilities 8% Utilities 3% Electronics 6% Electronics 19% Food & Bev 5% Mining 5% Metals 4% Consumer 4% Other 37% Other 41%

Baird M&A analysis (350 deals)

DEAL VALUE BY TARGET REGION DEAL COUNT BY SECTOR DEAL VALUE BY SIZE

US 65% Industrial 46% Large (>$1bn) 26% UK 13% Tech & Services 27% Medium ($100m – $1bn) 63% DACH 6% Consumer 13% Small (<$100m) 6% Other Europe 15% Healthcare 14% Undisclosed 5%

DEAL COUNT BY TARGET REGION Baird M&A analysis by top buyer / target regions North America Europe Deal Deal value 230 Rank Outbound Inbound count ($bn) Most popular sectors (first / second) 1) Japan US 94 $102 Industrial Healthcare 2) China US 24 $21 Tech & Services Industrial 3) Japan DACH 23 $25 Industrial Healthcare 110 4) Australasia US 23 $25 Industrial Tech & Services 5) Japan Rest of Europe 21 $18 Industrial Tech & Services 120 6) China Rest of Europe 17 $23 Industrial Consumer 7) India US 17 $10 Tech & Services Healthcare 58 8) Japan UK 15 $42 Industrial Consumer 120 9) Rest of Asia US 15 $15 Industrial Consumer 10) China UK 14 $11 Consumer Industrial 62 11) China DACH 14 $10 Industrial Tech & Services 12) India Rest of Europe 10 $2 Industrial Healthcare 2005 - 2009 2010 - Aug 2015 13) India UK 10 $18 Tech & Services Consumer 14) Australasia UK 9 $8 Tech & Services Industrial 15) Australasia Rest of Europe 7 $7 Tech & Services Healthcare Industrial has been the most active out of the four sectors The US is a challenging market for firms from Europe or M&A ANALYSIS analysed, reflecting the global nature of many industrial Asia to enter on a greenfield basis. Daikin, the world’s businesses from their supply chain to their customer base. largest air-conditioning manufacturer, trebled its US 2.2 revenue by acquiring Goodman Global for $3.7bn in 2012, Summary Automotive accounted for a fifth of industrial deals in supporting its goal to be #1 in the US, the largest HVAC  156 transactions Baird’s analysis with acquirers from Japan, China and India. (heating, ventilation and air-conditioning) market.  $160bn disclosed Industrial Automotive OEMs (original equipment manufacturers) are  Average 9.9x EBITDA supported by thousands of tier 1 and tier 2 suppliers that As emerging economies develop and wages rise, domestic have to innovate and manufacture efficiently to survive. companies cannot compete on lower costs alone. Asian Accessing industrial companies are under pressure to acquire best-in- For example, tyre technology has rapidly progressed, class manufacturing skills to manage costs, ensure quality technology, offering increased grip and safety levels. China National and implement processes for continuous improvement. intellectual Chemical Corp (CNCC), which owns China National Tire Deal Count by Buyer Region & Rubber Co (CNTR), the twentieth largest tyre Nidec, an electric motor manufacturer, was one of the first Japan 45% property and manufacturer in the world, acquired Pirelli, the fifth largest. Japanese corporates to establish low cost production China 25% CNTR can leverage Pirelli’s tyre technology to supply facilities in China. It has since made acquisitions in North manufacturing India 6% China’s growing new car and truck markets as well as America and Europe to broaden its solutions offering, capabilities Australasia 12% replacement demand from the aftermarket. diversify its customer base, adding blue-chip OEMs such as Rest of Asia 12% Whirlpool and Electrolux, and accelerate growth. DEAL COUNT BY Western industrial technology targets that increase SUBSECTOR automation, productivity and safety for customers are Asian buyers acquire engineering and R&D led companies (Baird M&A analysis) sought after by industrial acquirers. Ever-increasing to advance their industrial technologies, increase their Deal Value by Buyer Region Automotive / Supply 20% automation in developed countries and low levels of global customer base and inherit state-of-the-art facilities. Electrical Equipment 16% penetration in emerging markets are driving demand for Japan 39% Process Controls 12% advanced machinery. Japanese corporates, such as Toyota China 19% Packaging 10% India 14% HVAC / Building Products 7% Industries, have acquired machinery manufacturers in the Machinery 6% US and Germany to further enhance their global position. Australasia 7% Test & Measurement 6% Rest of Asia 21% Other 23% Many industrial companies in Europe, which is the world’s largest export market, have developed a footprint in emerging markets earlier than some of their US competitors. Asian buyers are attracted to well-managed Deal Count by Target Region

European companies that represent a platform for US 43% development of their own domestic and international UK 11% business as well as bringing key customers, technology and DACH 24% process know-how. Benelux 7% Other Europe 15% Successful examples of this strategy include:  Geely’s acquisition of Volvo in 2010, followed by rising sales where Volvo hit a record 465,900 cars in 2014  Zoomlion’s acquisition of CIFA, an Italian manufacturer of concrete machinery, led to winning sizeable Joel Cohen construction contracts in China and the rest of Asia Managing Director  Tata’s acquisition of Jaguar Land Rover where China Co-Head of Global overtook the UK as the firm’s biggest market, led by Industrial Investment new model ranges such as the Range Rover Evoque Banking - 23 - Selected Industrial M&A activity NORTH AMERICA EUROPE

EV / EV / Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector 2015 Stackpole International Johnson Electric $608 9.8x Auto Supply 2015 DeLclima Mitsubishi Electric €664 16.2x HVAC 2015 TRW Linkage & Suspension THK $400 N/A Auto Supply 2015 Motovario TECO Electric & Machinery €187 10.1x Process Controls 2015 Digi-Star Topcon $133 10.4x Test & Measurement 2015 AR Metallizing Nissha Printing €136 8.5x Packaging 2015 OmniVision Technologies Hua Capital / CITIC $1,375 12.4x Electrical Equipment 2015 Mirror Controls International Flextronics €457 N/A Auto Supply 2015 Polypore Energy Storage Asahi Kasei $2,200 16.0x Filtration 2015 Pirelli China National Chem €8,626 7.4x Auto Supply 2015 Radiant Vision Konica Minolta $242 N/A Test & Measurement 2015 Ansaldo STS Hitachi €1,802 12.1x Machinery 2014 Waupaca Foundry Hitachi Metals $1,300 5.7x Metals / Auto Supply 2015 SMD (Specialist Machine Dev) Zhuzhou CSR Times Electric £120 N/A Oilfield Equipment 2014 Fisker Automotive Wanxiang Group $149 N/M Auto OEM 2015 Eltek Delta Electronics €501 16.3x Electrical Equipment 2013 A123 Systems Wanxiang Group $257 N/M Auto Supply 2014 Hilite International AVIC Electromechanical €473 9.8x Auto Supply 2013 Engineered Controls Intl (ECI) Windjammer / CITIC N/A N/A Process Controls 2014 Koninklijke Nedschroef Prime Machinery Co (PMC) €325 N/A Auto Supply 2013 Edgen Group Sumitomo $1,103 11.5x Distribution 2014 Ansaldo Energia Shanghai Electric €1,000 7.4x Process Controls 2013 ASD (American Standard) LIXIL $542 18.3x Building Products 2013 Grohe Group LIXIL / Dev Bank of Japan €3,060 10.7x Building Products 2012 Cascade Corp Toyota Industries $759 8.7x Material Handling 2013 Novaled Cheil Industries / Samsung €260 11.3x rev. Electrical Equipment 2012 Kinetek + Avtron Industrial Nidec N/A N/A Process Controls 2013 Sunseeker Dalian Wanda £320 10.6x Marine 2012 Goodman Global Daikin Industries $3,700 10.6x HVAC 2012 Linde Hydraulics Weichai Power €387 N/A Process Controls 2011 Stolle Machinery Co Toyo Seikan Kaisha $775 N/A Packaging Machinery 2012 Ansaldo Sistemi Industriali Nidec >€300 N/A Machinery 2011 Graham Packaging Co Reynolds (Rank Group) $4,843 9.0x Packaging 2012 Putzmeister SANY Heavy Industry / CITIC €500 9.4x Process Controls 2011 Dopaco Rank Group $398 7.1x Packaging 2012 Uster Technologies Toyota Industries €337 7.1x Test & Measurement 2011 Verigy Advantest $699 10.1x Test & Measurement 2012 Ferretti Shandong Heavy Industries €499 N/M Marine 2011 Honeywell Consumer Products Rank Group $950 5.9x Auto Supply 2011 KSM Casting Group CITIC Dicastal €300 5.1x Metals / Auto Supply 2011 UCI International Rank Group $980 6.3x Auto Supply 2011 Landis+Gyr Toshiba / INCJ €1,598 10.7x Test & Measurement 2010 Emerson Motors & Controls Nidec N/A N/A Process Controls 2011 Hyva Unitas Capital / NWS €525 8.7x Auto Supply 2010 Pactiv Corp Rank Group $6,574 9.2x Packaging 2011 Peguform Motherson Sumi €142 2.1x Auto Supply 2010 Nextsteer Automotive Pacific Century Motors $450 N/A Auto Supply 2010 Volvo Car Corp Zhejiang Geely €1,364 N/M Auto OEM 2009 Timken Needle Roller JTEKT $300 6.1x Process Controls 2009 Alcan Packaging (excl. US) Amcor €1,396 5.1x Packaging 2008 Superior Essex LS Cable $1,196 6.7x Electrical Equipment 2008 CIFA Zoomlion / Hony / Mandarin €511 22.1x Machinery 2007 Alcoa Packaging & Consumer Rank Group $2,700 9.3x Packaging 2008 Jaguar Land Rover Tata Motors £1,228 N/M Auto OEM 2007 Excel Mining Systems Orica $670 9.9x Mining Products 2007 REpower Systems Suzlon Energy €905 N/M Clean Technology 2007 BobCat, Ingersoll Utility & Att. Doosan Infracore $4,900 12.2x Construction Equip. 2007 SLI Sylvania Havells India €224 N/A Electrical Equipment 2007 Solectron Corp Flextronics $3,128 9.7x Electrical Equipment 2006 SIG Rank Group €1,736 6.3x Packaging Machinery 2006 Bandag Bridgestone $994 10.8x Auto Supply 2006 Corus Group Tata Steel £6,200 9.1x Metals 2006 International DisplayWorks Flextronics $263 N/M Electrical Equipment 2006 Minova International Orica £350 8.9x Specialty Chemical 2006 Metaldyne Corp Asahi Tec $1,200 7.7x Auto Supply 2006 Hansen Transmissions Suzlon Energy €465 N/A Process Controls 2006 Westinghouse Toshiba $5,400 N/M Nuclear 2006 Pilkington Nippon Sheet Glass £3,750 10.2x Building Products 2005 TBC Corp Sumitomo $1,033 8.9x Auto Supply 2005 Dyno Nobel Macquarie €1,399 N/M Specialty Chemical The technology & services sector has been the second Consumer technology evolves rapidly. Some Western M&A ANALYSIS most active of the four sectors driven by: leaders have lost market share to Asian rivals, including Blackberry to Samsung and Dell to Asus. The recent  Evolution and globalisation of the business process success of Taiwanese Acer and Chinese Lenovo has partly 2.3 outsourcing (BPO) subsector where high value-added Summary been down to their acquisitions of declining Western services are increasingly required  92 transactions personal computer brands like Gateway and IBM. Their  $60bn disclosed Technology  Acquiring first movers in certain software niches that value-add has been their ability to sell these products in the  Average 12.8x EBITDA & Services have an established Western customer base domestic Asian market.  Technology hardware often underutilised by current Western owners; emerging market opportunity better Changes in technology and consumer preferences have also realised by Asian buyers driven a number of corporate carve-outs in the US, Acquiring including multiple divestitures by IBM and the sale of Deal Count by Buyer Region tech-enabled The big wave of outsourcing to India is behind us. Motorola Mobility by Google. In the UK, Pearson has been Customers increasingly want their BPO providers to have a divesting its media assets, including the FT (Financial Times) Japan 36% business models presence onshore or near-shore as well as offshore. India Group to Nikkei in Japan, to focus solely on education. China 20% to move up the needs to continue innovating its offering as Eastern Europe, India 20% Buy-and-build platforms are common in the tech & services China and the Philippines are fast ramping up their Australasia 19% value chain sector. Nord Anglia, a provider of private school education outsourcing industries. As a result, Indian BPO / ITO Rest of Asia 5% listed on the Hong Kong stock exchange, continues to (information technology outsourcing) providers are moving acquire globally to capitalise on the growing number of up the value chain by acquiring professional service DEAL COUNT BY households willing to invest in their children’s education. providers in the US and Europe. SUBSECTOR Deal Value by Buyer Region Like the industrial sector, the technology & services sector (Baird M&A analysis) Infosys is a prime example with a medium-term strategy is globalising, driving Asian outbound M&A. Japan 39% BPO 33% to move into cloud computing and artificial intelligence. It China 13% Software / Cloud / Network 23% spent $200m of its $4.4bn cash pile acquiring Panaya, Industrial Services 15% India 9% which automates software updates across large Education 10% Australasia 20% Human Capital 5% corporations. Recent Indian deals have tended to be in Rest of Asia 19% Other 14% the lower mid-market. The largest Indian outbound deal into the US in 2014 was IT player Tech Mahindra’s $240m acquisition of Lightbridge Communications, a service

provider for wireless operators. Deal Count by Target Region

Tata Communications provides cloud, network and / or US 63% data centre services to over 300 of the Fortune 500. It has UK 21% been less acquisitive since 2010 having already acquired DACH 7% Teleglobe for $239m and Tyco Global Network for $130m, Benelux 3% giving Tata a cable network of 60,000km worldwide. Other Europe 6%

Many US technology start-ups have grown rapidly in recent years and Japanese corporates have been keen to acquire tech platforms as the combination of software, channel delivery and employee know-how is usually difficult to replicate organically. As cloud services and SaaS (software Peter Kies as a service) continue to develop, we expect high valuations Managing Director for Western targets. Recruit acquired Quandoo, an online Head of Global reservations system for restaurants, to help it become a Technology & Services “global matching platform”. Investment Banking - 25 - Selected Technology & Services M&A activity

NORTH AMERICA EUROPE

EV / EV / Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector 2015 Meritas Nord Anglia Education $559 N/A Education 2015 Swissport International HNA Group Co €2,579 9.9x Industrial Services 2015 OverDrive Rakuten $410 16.4x Edtech 2015 FT (Financial Times) Group Nikkei £844 35.2x Media 2015 Snapchat Alibaba $200 (1) N/M Software 2015 Orangefield Group Baring Private Equity Asia ~€300 ~13.0x BPO – F&A 2015 Panaya Infosys $200 N/A Cloud Services 2015 Quindell Professional Services Slater + Gordon £637 7.4x Professional Serv. 2015 TangoMe Alibaba $283 (1) N/A Software 2015 Quandoo Recruit €214 ~50x rev. Software 2015 Pentaho Hitachi $500 N/A BPO 2015 Infront Sports & Media Dalian Wanda €1,050 N/A Marketing & Info. 2014 Lightbridge Communications Tech Mahindra $240 N/A BPO 2015 Eversholt Rail CK Investments £2,500 9.4x Transport & Logist. 2014 Ebates Rakuten $981 5.9x rev. E-Commerce 2015 Promethean World NetDragon Websoft £90 N/M Education 2014 ATCO I-Tek Wipro $195 N/A BPO – ITO 2014 RAC GIC £2,000 13.8x Auto Services 2014 Motorola Mobility Lenovo $2,910 N/A Smartphones 2014 Viber Media Rakuten €650 ~600x rev. Software 2014 IBM x86 Server business Lenovo $2,100 N/A Network Technology 2013 Everis Participaciones NTT Corp €560 N/M Professional Serv. 2013 Virtela Technology Services NTT Corp $525 N/A Cloud Services 2013 Alti Tata Group €75 7.0x BPO – ITO 2013 RagingWire Enterprise NTT Corp $438 5.1x rev. Network Technology 2013 Avelo FS IRESS £210 13.7x Software 2013 TIMCO Aviation Services HK Aircraft Engineering $389 13.3x MRO Services 2013 World Class Learning (WCL) Nord Anglia Education £153 13.6x Education 2012 Indeed Recruit $750 N/A Human Capital 2013 Bergen Group Rosenberg WorleyParsons €145 N/A Oilfield Services 2012 Gaikai Sony Corp $380 N/A Cloud Services 2012 Lodestone Holding Infosys €273 N/A BPO – ITO 2012 Convergys Info Mgmt business NEC Corp $449 N/A BPO 2012 Aegis Group Dentsu £2,556 12.9x Marketing & Info. 2011 Staffmark Recruit $295 11.8x Human Capital 2011 Permasteelisa LIXIL €573 7.4x Industrial Services 2011 BlueArc Corp Hitachi $687 8.0x rev. Network Technology 2011 Stewart Group Campbell Brothers £146 10.0x TICC 2011 iGware Acer $395 N/A Cloud Services 2011 Holidaybreak plc Cox & Kings £450 10.2x Professional Serv. 2011 S3 Graphics HTC Corp $300 N/A Software 2010 Oce Canon €1,273 12.0x BPO 2011 Headstrong Genpact $550 N/A BPO – ITO 2010 IFCO Systems Brambles €923 8.7x Industrial Services 2010 Integrity Interactive SAI Global $170 11.8x BPO – GRC 2009 Busy Bees Group Knowledge Universe N/A N/A Education 2008 IKON Office Solutions Ricoh $2,337 8.4x BPO 2008 AXON Group plc HCL Technologies £416 10.4x BPO – ITO 2008 PeopleSupport Essar Group $159 11.4x BPO 2008 Cirquent NTT Data N/A N/A BPO 2007 Goodrich Aviation Tech. Serv. Macquarie N/A N/A Industrial Services 2008 Busy Bees Group Vouchers Computershare £90 16.7x BPO 2007 Gateway Acer $785 N/M Personal Computers 2008 Nord Anglia Education Baring Private Equity Asia £170 13.4x Education 2007 Infocrossing Wipro $543 12.9x BPO – ITO 2007 Airwave O2 Macquarie £1,932 21.8x Telecommunications 2007 Yipes Enterprise Services Reliance Comm. $300 N/A Network Technology 2007 INCAT International Tata Group £51 N/M Industrial Services 2007 UNICCO Services United Group $408 11.5x Facility Services 2007 Itelligence NTT Corp €141 9.1x BPO – ITO 2007 Colt Companies WorleyParsons $884 9.7x Oilfield Services 2007 NCP Off-Street Business Macquarie Infrastructure £790 N/A Auto Services 2006 La Petite Academy ABC Learning Centres $330 N/A Education 2007 Kwik-Fit Group ITOCHU £637 8.5x Auto Services 2005 PalmSource Access Co $271 3.8x rev. Software 2006 TKS – Tecknosoft Tata Group €86 N/A BPO

(1) Represents the minority equity investment. Most famous brands have been built over decades based on Executing an Asian growth strategy is rarely easy. Bare M&A ANALYSIS the quality of the underlying product as well as the success Escentuals, the high-end mineral make-up company, was of its marketing. Asian outbound consumer M&A has Shiseido’s largest acquisition. Acquired in 2010, Shiseido 2.4 focused on acquiring established Western brands that still aims to transform Bare Escentuals from a US-centric Summary would otherwise be impossible or time consuming to build player to a global leader by leveraging its existing sales and  48 transactions themselves. The rationale for Asian buyers has included: distribution network in Asia. Consumer  $76bn disclosed  Supplying the rapidly growing middle class in Asia and  Average 10.6x EBITDA Tomy’s acquisition of RC2 created a truly global platform addressing changing consumer preferences from R&D, sourcing and manufacturing to further accessing Acquiring  Leveraging the buyer’s domestic knowledge to Japan and the US, two of the world’s largest toy and accelerate the target’s growth in Asia juvenile product markets. established  Lowering costs by increasing the target’s manufacturing Stokke, the Scandinavian manufacturer of Tripp Trapp Deal Count by Buyer Region Western brands or sourcing capabilities in Asia highchairs, was acquired by NXC, the holding company for Japan 34% to accelerate South Korean entrepreneur Kim Jung-Ju. There is The world economy was transformed by the emergence of China 26% significant potential for Stokke to expand outside Europe, growth in Asia the American consumer in the 1950s and now it is being India 13% particularly in China after it eased its one-child policy. transformed by China. China continues to pivot from a low Australasia 6% cost, high growth export driven manufacturing centre to Asian consumer companies’ global ambitions ultimately Rest of Asia 21% the world’s second largest consumer economy with over require established brands, many of which reside in North DEAL COUNT BY 1.3 billion people. Chinese coal production fell 2.5% in America and Europe. SUBSECTOR 2014, while consumer spending increased by 10%. Deal Value by Buyer Region (Baird M&A analysis) Chinese consumers hold foreign brands in high esteem, Japan 63% Food & Bev 55% unlike in Japan, where consumers heavily favour local Apparel & Footwear 11% China 10% brands. Whereas Japanese corporates acquire targets in Retail 9% India 3% Personal Care 7% North America and Europe to penetrate Western markets, Australasia 1% Other 18% Chinese companies acquire Western brands to supply their Rest of Asia 23% own domestic market. In particular, the “made in Britain” label goes a long way in China.

Food & beverage accounted for the majority of consumer Deal Count by Target Region deals in Baird’s M&A analysis. Driven by changing dietary habits and food safety issues in domestic markets, Chinese US 42% companies are seeking food related Western targets. UK 31% Bright Food acquired 80 year old Weetabix in the UK in DACH 3% 2012 and Shuanghui Intl acquired Smithfield Foods, the Benelux 2% largest pork producer in the US, for $7bn in 2013. Other Europe 22%

On the beverage side, Japanese Suntory acquired Lucozade & Ribena, Orangina Schweppes, Chateau Lagrange and Morrison Bowmore in Europe as well as Beam for over $15bn in the US to create a top 3 player in the world’s spirits market.

Brian McDonagh While China has acquired food & beverage producers Managing Director overseas to feed its growing domestic middle-class population, Japan has acquired abroad due to its lack of Head of Global Consumer domestic growth with its shrinking, ageing population. Investment Banking - 27 - Selected Consumer M&A activity

NORTH AMERICA EUROPE

EV / EV / Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector 2015 Cirque du Soleil TPG / Fosun Capital ~$1,500 ~9.2x Leisure 2015 Malmaison Frasers Centrepoint £363 14.0x Hotels 2014 Bumble Bee Seafoods Thai Union Group $1,510 10.4x Food & Bev 2015 Club Mediterranee Fosun International €939 9.7x Hotels 2014 Windsor Quality Holdings Ajinomoto Group $800 N/A Food & Bev 2014 Groupe Du Louvre Jon Jiang Intl Hotels Dev. €1,300 13.0x Hotels 2014 Unilever’s Ragu and Bertolli Mizkan Group $2,150 15.8x Food & Bev 2014 Cath Kidston Baring Private Equity Asia £240 9.6x Apparel & Footwear 2014 Beam Suntory $15,421 20.4x Food & Bev 2014 Pizza Express Hony Capital £900 10.0x Food & Bev 2013 Del Monte Canned Foods Del Monte Pacific $1,675 9.4x Food & Bev 2014 Whyte & Mackay Emperador £430 17.3x Food & Bev 2013 Smithfield Foods Shuanghui International $6,939 7.2x Food & Bev 2014 Highland (House of Fraser) Nanjing Xinjiekou Depart. £480 8.0x Retail 2013 K-Swiss E-Land World $169 N/M Apparel & Footwear 2013 Stokke NXC Corp €356 N/A Juvenile Products 2012 Pace International Sumitomo Chemical $87 N/A Food & Bev 2013 GSK’s Lucozade & Ribena Suntory £1,352 13.5 Food & Bev 2012 Dole Packaged Foods & Asia ITOCHU $1,685 N/A Food & Bev 2012 Gryson Japan Tobacco €475 12.3x Tobacco 2011 RC2 Corporation Tomy Corp $627 10.0x Juvenile Products 2012 Weetabix Food Co. Bright Food Group £1,200 9.8x Food & Bev 2010 Bare Escentuals Shiseido $1,741 9.9x Personal Care 2012 United Coffee UCC Holdings €487 11.5x Food & Bev 2009 Wear Me Apparel Li & Fung $402 N/A Apparel & Footwear 2012 Adelie Food India Hospitality Corp £220 N/M Food & Bev 2009 United Malt GrainCorp $655 5.7x Food & Bev 2011 La Rinascente Central Retail Corp €260 11.0x Retail 2008 Van Zeeland’s Handbags Li & Fung $495 N/A Apparel & Footwear 2011 MoveOn Shoes Tata Group N/A N/A Apparel & Footwear 2008 Del Monte Seafood business Dongwon Enterprises $359 N/A Food & Bev 2011 Premier Foods Canning bus. Mitsubishi Corp £182 5.7x Food & Bev 2007 Formica Corp Fletcher Building $750 10.0x Household 2010 British Salt Tata Group £93 5.8x Food & Bev 2006 Sleeman Breweries Sapporo Breweries $399 12.5x Food & Bev 2010 MWBrands Thai Union Frozen Products €680 8.2x Food & Bev 2006 Eight O’Clock Coffee Co Tata Group $220 8.1x Food & Bev 2010 Haglöfs Scandinavia Asics €105 13.6x Apparel & Footwear 2005 Brookstone Osim / Temasek / JW Childs $388 7.6x Retail 2009 Orangina Schweppes Suntory €1,652 11.5x Food & Bev 2005 Harper Pet Products Sumitomo Corp N/A N/A Food & Bev 2009 Suntyco Tata / EBRD N/A N/A Food & Bev 2008 Rossignol Group Macquarie €41 N/A Sporting Products 2007 Whyte & Mackay United Spirits £798 N/M Food & Bev 2006 Gallaher Group plc Japan Tobacco £9,204 13.7x Tobacco 2005 Molton Brown Kao Corp £170 10.6x Personal Care 2005 Merchant Retail Group Hutchison Whampoa £222 12.3x Retail 2005 Marionnaud Parfumeries Hutchison Whampoa €780 N/A Personal Care The global healthcare sector is seeing strong M&A activity Japanese corporates are also acquisitive in the medical M&A ANALYSIS with over $400bn of deal value in H1 2015, driven by North technology / device subsector. They are renown for R&D American, European and Japanese corporates. Japan has and are working to improve the commercialisation of their 2.5 accounted for the lion’s share of Asia outbound M&A products. US acquisitions give Japanese corporates direct Summary activity in the healthcare sector. The US has been the most access and sales channels to supply their products into the  54 transactions popular M&A target region for Japan due to: US healthcare market. Healthcare  $64bn disclosed  The US is the largest healthcare market in the world  Average 11.5x EBITDA Increasing pressure from reimbursement, commoditisation ($3 trillion / $9k per person / 17% of GDP) and the need for growth are driving M&A in the medical Japan’s  The US is a single country with one set of regulations device subsector. Medical device OEMs, focused on their (unlike the European market which is fragmented) sales & marketing operations, are increasingly outsourcing appetite for their manufacturing. The opportunity for efficient contract  Japan’s preference to invest in developed markets for Deal Count by Buyer Region pharmaceuticals healthcare rather than emerging markets manufacturing organisations is therefore growing. and medical Flextronics has grown its medical segment through M&A, Japan 61% The pharmaceutical subsector has seen the most M&A from its $3.1bn acquisition of Solectron to smaller China 8% technology activity as companies seek additional commercial sales and acquisitions such as Avail, Slomedical and RIWISA, India 17% a stronger mature pipeline. Pharma companies, dependent combining its vast electronics capabilities with the targets’ Australasia 7% on creativity, place significant value on cultural diversity and medical device experience. Rest of Asia 7% different ways of thinking, driving cross-border M&A. Outbound healthcare M&A activity is expected to broaden DEAL COUNT BY with other Asian countries joining Japan. Baird is seeing an SUBSECTOR Japan is the world’s second largest pharma market after the US and includes a handful of acquisitive corporates wishing emerging trend of Chinese companies increasingly looking Deal Value by Buyer Region (Baird M&A analysis) to fill their drug pipeline. For example, Otsuka Holdings to acquire in the healthcare sector. As the cost of Japan 86% Pharmaceutical 49% IPO’d in 2010 and has since made over 10 acquisitions, healthcare balloons in developed markets and demand for Medical Technology 21% China 3% including Avanir in the US for $3bn. Avanir’s strength in quality healthcare grows in emerging markets, cross-border Biotechnology 13% India 5% Facilities / BPO 17% neurological diseases complements Otsuka’s experience in consolidation is inevitable. Australasia 5% mental illness. Rest of Asia 1% Select Indian generic pharma companies have also been active in the US. Lupin, India’s third largest pharma company, acquired GAVIS Pharmaceuticals for $880m Deal Count by Target Region earlier this year. US targets can provide the scale necessary for future drug development programmes and accelerate US 63% FDA (Food & Drug Administration) approvals for Indian UK 6% pharma companies. Indian pharma companies have not DACH 13% been as active in Europe given mixed results from the Benelux 4% integration of prior acquisitions. Other Europe 14%

Indian BPO providers are acquiring in the healthcare sector. The healthcare services and outsourced IT markets are evolving rapidly in response to an ageing population, spiralling healthcare costs and political initiatives changing healthcare funding. Firstsource, an Indian BPO provider, Brian Doyal entered the provider segment of the US healthcare market Managing Director through its acquisition of MedAssist, a provider of revenue Head of Global Healthcare cycle management that manages claims, payment and Investment Banking revenue. - 29 - Selected Healthcare M&A activity

NORTH AMERICA EUROPE / OTHER

EV / EV / Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector Year Target / HQ Acquirer / HQ EV (m) EBITDA Subsector 2015 Cytovance Biologics Shenzhen Hepalink Pharma $206 5.2x rev. Biotech 2015 Optos plc Nikon Corp £253 15.5x Medical Tech 2015 GAVIS Pharma / Novel Labs Lupin $880 25.1x Pharma 2015 Lumenis XIO Group $456 15.5x Medical Tech 2014 Avanir Pharmaceuticals Otsuka Pharmaceutical $3,038 26.4x rev. Pharma 2015 Bayer Diabetes Care Panasonic Healthcare €1,022 N/A Medical Tech 2014 Ambit Biosciences Corp Daiichi Sankyo $355 N/M Biotech 2015 Medisupport Sonic Healthcare €263 8.0x Facilities 2014 Charleston Labs CL-10 Daiichi Sankyo $650 N/A Pharma 2014 Espirito Santo-Saude Fosun International €670 11.4x Facilities 2013 BarrierSafe Solutions Ansell $615 9.6x Medical Tech 2014 Heraeus Kulzer Mitsui Chemicals €450 13.3x Medical Tech 2013 Astex Pharmaceuticals Otsuka Pharmaceutical $886 13.0x rev. Pharma 2014 Generale de Sante Ramsay Health Care €1,571 7.1x Facilities 2013 Cytokinetics skeletal muscle Astellas Pharma $490 N/A Pharma 2013 RIWISA Flextronics N/A N/A Medical Tech 2013 Inviragen Takeda Pharmaceutical $250 N/A Pharma 2013 Alma Lasers Fosun International $221 7.6x Medical Tech 2012 DUSA Pharmaceuticals Sun Pharmaceutical Ind. $230 N/A Pharma 2013 H Lundbeck Otsuka Pharmaceutical €642 N/A Pharma 2012 Deloitte Healthcare Rev. Cycle Hinduja Global Solutions N/A N/A BPO – Healthcare 2012 Bilthoven Biologicals Serum Institute of India €80 N/A Biotech 2012 Elevation Pharmaceuticals Dainippon Sumitomo Pharma $430 N/A Pharma 2011 Acibadem Saglik Yatirimlari Integrated Healthcare €1,129 6.9x Facilities 2012 Decision Resources Group Piramal Healthcare $635 N/A BPO – Healthcare 2011 Nycomed Takeda Pharmaceutical €8,974 10.6x Pharma 2012 URL Pharma Takeda Pharmaceutical $800 N/A Pharma 2010 Medhold Sonic Healthcare €232 8.2x Biotech 2012 ZOLL Medical Corp Asahi Kasei Corp $1,977 24.4x Medical Tech 2009 Slomedical Flextronics N/A N/A Medical Tech 2012 Boston Biomedical Dainippon Sumitomo Pharma $2,630 N/A Biotech 2008 U3 Pharma Daiichi Sankyo €150 N/A Biotech 2011 Intellikine Takeda Pharmaceutical $310 N/A Pharma 2007 Gyrus Group plc Olympus Corp £1,037 N/M Medical Tech 2011 SonoSite FUJIFILM Holdings Corp $994 8.7x Medical Tech 2007 Negma Laboratories Wockhardt €195 9.7x Pharma 2011 CaridianBCT Terumo Corp $2,625 14.4x Medical Tech 2007 Terapia Ranbaxy Laboratories €256 11.6x Pharma 2011 Plexxikon Daiichi Sankyo $805 N/A Biotech 2006 Betapharm Dr. Reddy’s Laboratories €480 11.7x Pharma 2011 AVEO Pharma Tivozanib Astellas Pharma $1,480 N/A Pharma 2005 Docpharma Matrix Laboratories €194 12.9x Pharma 2010 Orexigen Therapeutics Contrave Takeda Pharmaceutical $1,050 N/A Pharma 2010 OSI Pharmaceuticals Astellas Pharma $3,324 19.0x Pharma 2009 Sepracor Dainippon Sumitomo Pharma $2,472 8.9x Pharma 2009 Noven Pharmaceuticals Hisamitsu Pharmaceutical $348 8.1x Pharma 2008 Sciele Pharma Shionogi & Co $1,262 12.1x Pharma 2008 Millennium Pharmaceuticals Takeda Pharmaceutical $8,401 15.2x rev. Pharma 2007 MGI Pharma Eisai Co $3,652 N/M Pharma 2007 Agensys Astellas Pharma $537 N/A Pharma 2007 Avail Medical Products Flextronics $282 N/A Medical Tech 2007 Zavata Apollo Hospitals Enterprise $180 N/A BPO – Healthcare 2007 MedAssist Firstsource Solutions $330 13.0x BPO – Healthcare 2007 Caris Life anatomic pathology Miraca Holdings $725 N/A Biotech 2005 Syrrx Takeda Pharmaceutical $270 N/A Pharma - 31 - 3. Unlocking the Asian Buyer Universe Asian buyers have shown that they can pay premium corporates and private equity firms alike. When Asian M&A ANALYSIS – VALUATION valuations for quality Western businesses and ‘trophy buyers are looking to acquire only a brand and technology, assets’ as well as take a long-term view and invest without placing value on the rest of the business, they 3.1 significantly in challenged companies post-acquisition. seldom win against Western corporates who may have EV / EBITDA by Sector more realisable cost / operational synergies. Asian buyers often have lower realisable cost synergies Valuation compared to Western acquirers already operating in the Some Western companies have recently been relatively 12.8x 11.5x 10.6x target’s sector and geography. However, Asian buyers may affordable, especially in Europe where privatisations, cash- 9.9x have a unique angle to drive the target’s growth in Asia. strapped owners and a weak currency have provided Are Asian buyers opportunistic targets. In Baird’s M&A analysis, 10% of competitive in The ability or willingness for buyers to pay up is driven by: European targets suffered low profitability or a debt M&A processes?  Cash available for M&A / liquidity in the debt markets burden. Asian buyers have shown that they can invest in the long-term future of these financially challenged targets,  Level of competition in an M&A sale process many of which have been in the automotive sector. Industrial Tech & Consumer Health-  Realisable synergies and / or growth opportunities Services care For example, Geely acquired Manganese Bronze Holdings,

the manufacturer of London’s black taxis, for £11m after it Baring Private Equity Asia paid ~$1.5bn, equivalent to an estimated 13x current year EBITDA multiple, to acquire went into administration. Geely, based in China, set up a EV / EBITDA by Deal Size production line in Shanghai that supplies components for both Vistra and Orangefield in two separate competitive the final assembly in Coventry, England. auctions. Baring will combine the two corporate and trust administration service providers to create a global leader 11.2x Baird expects to see more Asian bidders winning a higher 10.4x 10.6x and leverage its expertise in Asia and Europe to drive revenue growth. proportion of Western sale processes. Asian potential buyers are increasingly willing to take risks and are often

Nikkei paid 35x EBITDA for the UK’s FT (Financial Times) best placed to implement an Asian growth strategy for

Group, reflecting the franchise value that some Asian Western companies.

buyers are willing to place upon trophy Western assets.

Nikkei will no doubt be counting on further

internationalisation and digitisation of FT products to Small Medium Large

enhance revenue growth through customer acquisition. (<$100m) ($100m - $1bn) (>$1bn)

Making generalisations about Asian bidders is difficult because the participation rates and valuation levels of Avg Deal Size by Seller Type unsuccessful bidders in M&A processes are confidential. ($ in millions) Reaching mutually acceptable valuation is the most common deal breaker between Western sellers and Asian $858 buyers. However, we are seeing Asian buyers winning more M&A auctions in recent years than a decade ago. $534 $402 $430 They are also more willing to hunt for foreign targets, allowing one-on-one due diligence and negotiations with the sellers. Asian buyers, including many Japanese corporates, are prepared to offer full valuations to pre- Private Private Corporate Publicly Vinay Ghai empt a broad sale process. Equity Carve-Out Listed Managing Director Competition for prime targets has never been higher. European Financial There is already a scarcity of quality assets relative to the Sponsor Coverage M&A demand from North American and European - 33 - BAIRD M&A ANALYSIS – VALUATION TRENDS AND DEAL SIZE

EV / EBITDA by year <10x EBITDA >10x EBITDA Average Deal Size by Buyer Region ($ in millions) 100% $670 80% $610 $495 60%

40% $265

20%

0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD-15 Japan China India Australasia

OPPORTUNISTIC DEALS (LOW PROFITABILITY / DEBT BURDENED AT TIME OF ACQUISITION) SELECTED SUBSECTOR VALUATIONS – EV / EBITDA

Business Process Outsourcing (BPO) Packaging / Packaging Machinery

11.3x 10.7x

7.2x 7.4x

Avg of Baird Database Avg of Selected Asian Avg of Baird Database Avg of Selected Asian (North American and Outbound Deals (North American and Outbound Deals European buyers) European buyers)

Process Controls  Baird has compared the valuations of outbound transactions undertaken by 9.4x Asian buyers to the valuations of 7.7x transactions by North American and European buyers in three subsectors

 In two of three subsectors, the average valuations of Asian buyers have been in line with the valuations of North American and European Avg of Baird Database Avg of Selected Asian buyers (from Baird’s databases) (North American and Outbound Deals European buyers)

- 34 - Baird believes that relevant Asian buyers should be included It is easier for all the parties involved in an M&A process if SELECT PRIVATE EQUITY in every North American or European sale process to expectations are set and managed from the outset. Formal FIRMS THAT HAVE SOLD optimise potential outcomes for sellers. process letters laying out the first round bid date, TO ASIAN BUYERS 3.2 management presentations, due diligence process (including More and more Asian corporates have participated in sale data room and Q&A) and second round bid date are Considerations processes and gained M&A experience, whether they were appreciated by less experienced buyers. Constant the winning bidder or not. Their risk appetite has increased communication, explaining each stage, keeps buyers on an for Western and they are keen to accelerate growth through outbound equal footing. Sellers M&A. It is time to dispel unhelpful misconceptions and build trust with Asian potential buyers. For sell-side auctions, Baird contacts Asian buyers at an early stage, speaks to the key decision-makers and educates Implications of It would not be right to make generalisations about certain their deal team and external advisors on the process. buyer groups. However, there are certain steps that can Through our global offices and strategic alliances in Asia, we including Asian be taken with Asian buyers to bridge any potential gaps: have made over 1,600 approaches to Asian buyers on our buyers in sale  Early contact to build familiarity with the target sell-side mandates in the last five years, using documents in processes the local language where relevant. Baird has distributed  Senior level interactions between the sellers and buyers over 250 information memoranda to Asian potential  Encouraging buyers to hire experienced M&A advisors buyers, resulting in over 60 offer letters.

Western acquirers typically know the businesses they The needs of all potential buyers, whether Asian or not, acquire before an M&A process. Whether corporates or should be accommodated as best as possible so that they private equity, Western buyers have certain acquisition start on an equal playing field. criteria or target lists that they maintain.

Asian companies that do not operate globally may not be Gilde familiar with the landscape of small or mid-market acquisition opportunities in North America and Europe. Therefore, they may need more time to assess an G S O opportunity and conduct due diligence relative to a CAPITAL PARTNERS Western buyer already familiar with the target and its relevant market. Baird advises early contact, often involving warm-up meetings and facility visits to discuss the opportunity ahead of the formal sale process launch date.

Different approaches are necessary for large corporates and for founder-led or family-owned companies:

 The hierarchy within Asian corporates needs to be understood to ensure that important communication flows to the CEO and that the potential acquisition receives strong support from the relevant division to sponsor the opportunity internally. Japanese corporates usually hire foreign M&A advisors, aiding the process David Silver  For founder-led companies, the first approach should be Managing Director made to the founder or the appropriate family member Head of European if the potential buyer is family-owned Investment Banking - 35 - Creating value in sell-side M&A

Favourable Contract Terms

Competitive Tension Throughout

Focus on Educating Buyers

Intelligent Process Design

Thorough Preparation

Criteria for assessing an acquisition opportunity

Leading Positions / Large, Growing International / Emerging High Barriers to Entry Addressable Market Market Exposure

Platform Opportunity Visible / Recurring / High, Sustainable vs. Bolt-On Aftermarket Revenues Margins

Operationally Strong Management Potential Revenue / Well Invested and Organisation Cost Synergies

- 36 - Implications of including Asian buyers in sale processes

PRICE, TERMS AND CERTAINTY

 An M&A deal is not just about price; it is about the combination of price, terms and certainty  The highest bidder is not always the winning bidder  Deal experience and efficient execution are critical for any buyer wanting to win a competitive M&A process TIMING CONSIDERATIONS  Plan the inclusion of Asian buyers before the sale process and tailor the M&A process accordingly  At Baird, we typically contact Asian buyers at an early stage in a sale process to ensure they can fully assess the  Additional government / regulatory approvals increase acquisition opportunity time and deal risk before and after signing the SPA  Asian strategic buyers could take an extended time to decide if they wish to pursue an opportunity  Reduction in the size of boards has allowed Japanese corporates to make quicker M&A decisions  Privately-owned Chinese enterprises are typically less DUE DILIGENCE bureaucratic and can move faster in their decision- making processes  Baird has observed efficient buyer due diligence when the buyer is supported by advisors (M&A, accounting, legal) with experience in the target region  Detailed financial and business plan prepared by the target management team is needed for any sale process  Vendor due diligence (VDD) is recommended for all CULTURAL / LANGUAGE DIFFERENCES structured European sale processes, and can include financial, commercial, legal and environmental  Management team and other senior employees of target  The target’s intellectual property ownership should be to assess culture fit with the Asian buyer carefully demonstrated and validated  External buy-side advisors based in the same country / region as the target quickly understand the local accounting and legal frameworks of the target  Mid-level members of Asian buyer’s M&A team may be fluent in English, but more senior managers may not understand English  Important documents and Q&A may need to be translated into the language spoken by the buyer

- 37 - VALUATION

 A multiple of Enterprise Value / EBITDA is the most used valuation metric in North America and Europe  Asian buyers often use the P/E (equity value / net income) multiple for valuation; provide these figures  Asian buyers increasingly reference the EBITDA multiple metric to ensure they are competitive  Asian buyers have shown that they can pay premium valuations for quality Western businesses and invest significantly in challenged companies post-acquisition SENIOR LEVEL ACCESS

 Without pre-approved acquisition criteria, Asian buyers may need senior level approval before responding to a Teaser and signing a confidentiality agreement  Understanding the hierarchy at board / management level of an Asian strategic buyer is important M&A PROCESS KNOWLEDGE  If the buyer is a state-owned enterprise, access to the government-affiliated decision-maker may be needed  Experience in M&A processes is the key to executing  Maintaining buyer relationships with the key decision- transactions effectively and efficiently makers is critical for any investment bank mandated  Educating less experienced buyers and / or their advisors with running a global M&A sale process on the specifics of a transaction makes the negotiation process easier and more transparent  Over-communication better than under-communication NTERNAL CQUIRER PPROVAL ROCESSES  Agreement on value (enterprise value and equity value), I A A P transaction structure (completion accounts or locked box), working capital adjustments, and key SPA items  Many Asian buyers prefer to meet the target’s such as warranty and indemnity (W&I) insurance management team and conduct a site visit before submitting a first round / indicative bid to the sellers  In Japan, presenting an acquisition opportunity to a CEO can be a formal process where significant information needs to be prepared in advance  In China, many of the active acquirers are state-owned enterprises where additional approvals are required before an SPA is negotiated and signed

- 38 - Asian buyers have to compete with Western corporates For example, the Innovation Network Corporation of Japan INDICATIVE M&A PROCESS and private equity firms, who have: (INCJ), funded by the Japanese government, provided 40% of the equity in Toshiba’s €1.6bn acquisition of Landis+Gyr  Experience in Western M&A processes / negotiation 3.3 in Switzerland. Engage with seller /  Developed in-house M&A teams and external advisors seller’s advisor / target The shareholding structure of Asian companies can appear Considerations  Potential prior relationships with the sellers and / or the management team of the target complicated, requiring careful planning and presentation to for Asian Western sellers. For example, the acquirer of Nedschroef, Asian buyers also need to determine the fit, synergies and PMC, is listed on the Hong Kong stock exchange, but is also Buyers Review any target due diligence risks of a target in the midst of the above a controlled subsidiary of state-owned Shanghai Electric, an marketing materials competitive dynamic. Baird has experienced that the €11bn industrial conglomerate in China. Specific most successful Asian buyers ensure: Certain Chinese buyers have to seek approval from their considerations  Senior internal sponsorship and decision-making government for larger deals and also obtain approval from affecting outbound  Communication with the sell-side M&A advisors the inbound country for certain sectors supposedly Attend introductory / M&A for Asian affecting national security. However, if an Asian buyer can warm-up meetings  Senior engagement with potential targets through site clearly communicate and deliver a compelling deal for the buyers visits and dialogue with the management teams sellers and a long term future for the target, it will succeed.

 Clear communication of acquisition rationale

 Support from buy-side M&A advisors with knowledge Submit indicative offer and transaction experience in the target region  Understanding of any regulatory approvals

Asian buyers frequently require governmental outbound approvals and target country approvals. Transactions that Attend management require these approvals put Asian buyers at a competitive presentation / site visit disadvantage. Inbound protectionism from Western governments has impacted a few Chinese outbound deals.

By engaging with the potential target at an early stage, Conduct due diligence / Asian acquirers can better plan their due diligence review data room requirements and post-acquisition integration processes to take account of operational and cultural differences.

The Indian tax system can impose double taxation on Review contract / share acquisitions made overseas, putting Indian buyers at a purchase agreement (SPA) potential disadvantage. Indian acquirers should use specialist advisors to optimise their tax transaction structure so they can be competitive in terms of valuation.

Multi-billion dollar deals by Western corporates are often Submit binding offer financed by debt and / or equity offerings. State-owned Nick Sealy enterprises in China and government funds in Japan have helped finance large outbound acquisitions. Managing Director Co-Head of European Obtain regulatory / Investment Banking antitrust approvals - 39 - Chinese outbound regulations State-owned enterprises

RELEVANT REGULATORY BODIES SELECT M&A ACTIVITY BY STATE-OWNED ENTERPRISES

EV EV /  The National Development and Reform Commission Year Target / HQ Acquirer / HQ (m) EBITDA State Entity NDRC implements macroeconomic policies, including China’s 2015 Henniges Automotive Aviation Industry Corp of China $800 N/A AVIC strategic goals, industrial structure and energy sector 2015 Pirelli China National Chem (CNCC) €8,626 7.4x CNCC

 The Ministry of Commerce formulates policy on foreign 2015 SMD (Specialist Machine Dev) Zhuzhou CSR Times Electric £120 N/A CSR MOFCOM trade, foreign direct investments, consumer protection, 2014 REC Solar China National BlueStar Co $522 6.3x CNCC market competition and negotiating trade agreements 2014 Koninklijke Nedschroef Prime Machinery Co (PMC) €325 N/A SEC 2014 Ansaldo Energia Shanghai Electric (SEC) €1,000 7.4x SEC  The State Administration of Foreign Exchange governs SAFE foreign exchange market activities, including if outbound 2014 ZF’s Rubber & Plastics unit Times New Material Tech (TMT) €290 N/A CSR M&A requires transfer of foreign exchange outside China 2012 Weetabix Food Co Bright Food Group £1,200 9.8x Bright Food 2012 Ferretti Shandong Heavy Industries €499 N/M Shandong Heavy 2011 Landis+Gyr Toshiba / INCJ €1,598 10.7x INCJ LOOSENING OF OUTBOUND REGULATIONS (EFFECTIVE FROM 2014) 2011 SaarGummi Chongqing Light Ind. & Textile €64 N/M CQLT 2010 Teledyne Aviation Engine bus. Aviation Industry Corp of China $186 N/A AVIC  China’s outbound investment regime has been simplified, though the principle that any outbound investment must be subject to some level of prior review remains 2010 Nextsteer Automotive Pacific Century Motors (PCM) $450 N/A Beijing gov.  Replacement of a pre-approval regime with a pre-filing regime for deals <$1bn; 2009 Goss International Shanghai Electric (SEC) $875 N/A SEC regulatory approval threshold therefore raised from $100m deal value to $1bn  Power delegated from central government to provincial or municipal authorities; local filing procedures are typically quicker than central government procedures SELECT CHINESE STATE-OWNED ENTERPRISES

M&A PROCESS TIMING IMPLICATIONS

 Chinese companies may be disadvantaged in competitive M&A auctions due to the extended timeline required for Chinese authorities to review potential deals  Chinese potential buyers must submit a project information report and obtain a confirmation letter (aka ‘Road Pass’) from the NDRC before (except for publicly listed targets) making a binding offer over $300m in a competitive M&A process; the NDRC must determine whether to issue a Road Pass within 7 business days  The NDRC restricts Chinese financial institutions granting loans for outbound investments until the relevant NDRC filing or approval has been completed  For deals <$1bn, the pre-filing process (different to the Road Pass above) takes 7 business days for the NDRC and MOFCOM to review  For deals >$1bn, the pre-approval process takes 20 business days for the NDRC and MOFCOM to review; the NDRC may require a further 10 business days Specific concerns affecting outbound M&A for Asian buyers

FAMILIARITY WITH WESTERN M&A PROCESSES

 Certain Asian potential buyers are relatively unaccustomed to highly structured Western M&A processes with rigorous time constraints  A number of Asian corporates and private equity firms (see pages 44 – 46 for examples) have significant RELATIONSHIP BUILDING WITH CERTAIN SELLERS outbound deal experience and in-house M&A teams

 Takes time for potential buyers to build relationships with sellers and / or target management teams  Overcome language and cultural differences to unlock certain acquisition opportunities  Relationship building to address any potential seller concerns e.g. selling to an ‘unknown’ Asian buyer  Asian buyers should educate the target management team on their own business and communicate rationale INBOUND GOVERNMENT PROTECTIONISM for the deal at an early stage

 Governmental reviews lengthen the deal cycle and increase the risk of a deal not being signed or completed  Prohibition by US government of Huawei / 3 Leaf deal on alleged US national security grounds in 2010; Shanghui / Smithfield deal approved after significant scrutiny STATE-OWNED ENTERPRISES

 Predominantly a Chinese phenomenon; the government retains control over certain domestic sectors such as aerospace and automotive  State-ownership can complicate the review process for Western governments evaluating inbound deals  Over a third of Chinese outbound deals in Baird’s M&A analysis were by state-owned enterprises  Privately-owned Chinese enterprises are now playing a more important role in outbound M&A

- 41 - FINANCING THE ACQUISITION

 Lack of free currency convertibility limits the use of equity financing by Asian firms for outbound M&A  China and Japan outbound M&A often supported by sizeable government subsidies and credit availability  Movements in exchange rates can increase or decrease the spending power of an overseas buyer

OUTBOUND REGULATORY APPROVALS OVERHEATED CHINESE STOCK MARKET

 Potential buyers to clearly communicate required  Debt driven stock market rally from mid-2014 to mid- approvals as they can increase time and deal risk 2015 led to a fall in Chinese stock prices of 35% or before and after signing the SPA $3.7 trillion in value  For outbound acquisitions worth over $1bn, Chinese  Well capitalised Chinese companies are still trading buyers must obtain prior approval from National at premiums over Western peers, making outbound Development and Reform Commission (“NDRC”), M&A attractive Ministry of Commerce (“MOFCOM”) and State  The Chinese property market remains strong and is a Administration of Foreign Exchange (“SAFE”) more important indicator of the underlying domestic  Approval from the Reserve Bank of India (RBI), India’s economy than the Chinese stock market central bank, is needed if the outbound investment by an Indian company exceeds 400% of its net worth  Publicly listed companies in India are required to obtain prior approval from their shareholders if the value of the outbound deal exceeds 60% of their net worth or 100% of their free reserves

- 42 - The majority of outbound private equity (PE) or sovereign NWS, the listed infrastructure and service arm of Hong SELECT COMPANIES ACQUIRED wealth fund activity from Asia has been from a handful of Kong based New World Development Company. BY ASIAN PRIVATE EQUITY firms in China, Australasia and Singapore. Japanese and 3.4 Indian PE firms have been less active abroad. Macquarie, the largest investment bank and asset manager in Australia, acquired over 100 companies in the Chinese private equity firms often partner with Chinese infrastructure sector, including toll roads, airports, Private corporates, helping them to navigate the complexities in communications, renewable energy, utilities, transport, cross-border M&A processes and increase deliverability. directory services, aged care and commercial real estate. Equity and For example, CITIC Capital partnered with SANY Heavy Macquarie is Australia’s most important outbound acquirer. Industry to acquire Putzmeister in Germany. They have Sovereign also partnered with Western PE firms to leverage their Similarly, Rank Group, an investment vehicle, is New domestic expertise / business networks in Asia: Zealand’s most important outbound acquirer. The group Wealth has focused on certain industrial subsectors including  Hony Capital acquired Pizza Express, operating 436 packaging and automotive supply. Liquidity in the debt restaurants in the UK and 68 internationally, including Funds markets has allowed such firms to be competitive, even for 22 in China, to accelerate its growth in Asia multi-billion dollar deals. Asian outbound  Baring Private Equity Asia acquired a substantial stake in Cath Kidston next to incumbent sponsor TA Associates. Baird expects new Asian private equity funds to emerge sponsors building Baring will help the UK provider of modern vintage with global mandates. Tata Opportunities Fund just global businesses accessories, clothing and home furnishings expand the invested an estimated $100m in Uber to support the taxi- brand and further develop its network in Asia hailing app’s growth in India. XIO Group, a Hong Kong based private equity firm with a $3.2bn fund, was founded  CITIC Capital partnered with Windjammer Capital to last year. Expect others to follow as the private equity acquire Engineered Controls International (ECI), a US asset class continues to offer opportunity. manufacturer of LPG and LNG valves, to support ECI’s sales to China’s rapidly growing LNG vehicle industry There are also PE firms, such as Cathy Capital in France and Mandarin Capital Partners in Italy, that focus on acquiring companies, often headquartered in Europe, with a Chinese growth story. Both firms have offices in China as well as Europe and focus on mid-market deals.

Similarly, some Chinese based private equity firms often find it easier to acquire targets in North America or Europe where financial and legal transparency are higher and risks related to intellectual property are lower than in China.

CDH Investments, Goldman Sachs, Temasek and New Horizon Capital hold stakes in Shuanghui, and supported the $7bn acquisition of Smithfield Foods in the US, which was China’s largest outbound deal in the consumer sector.

Asian PE buyers are able to utilise their financing expertise. Chris Coetzee Unitas Capital used a $375m high-yield bond in its €525m Managing Director acquisition of Hyva, allowing the company to invest in Head of Global Financial further growth in Brazil, China and India, regions that Sponsor Coverage account for 70% of its revenue. Unitas partnered with - 43 - Select Asian private equity and sovereign wealth funds

 Targets companies in Asia, and  Private equity and venture  Owned by Chinese sovereign  Owned by the Japanese  Founded in 2003, sponsored those in Europe and North capital firm founded in 2002 wealth fund CIC and the state- government and funded by by the Lenovo Group as well America that are focused on that manages $7bn in assets backed conglomerate China the government as well as the as Chinese and global expanding in Asia with operations in Beijing International Trust and capital markets institutional investors Investment Corp (CITIC  Outbound deals include  Invested in large food  DBJ provides integrated  Focus on overseas consumer Group); capital from over 60 Orangefield, Cath Kidson and producers – CDH and investment (equity) and loan brands that can be exploited global institutional investors Nord Anglia (moved HQ from Goldman Sachs bought out the services at relatively low and in the Chinese market UK to Hong Kong) Chinese government’s stake  Invests globally in companies flexible interest rates  €7bn under management, in Shuanghui International which have a China growth  $4bn fund raised in February  Joint acquisition structure of latest fund of $2.4bn for $250m in 2006 angle and leverages its 2015, second only to KKR’s €3bn Grohe deal with LIXIL extensive domestic resources $6bn Asia fund raised in 2013 provides financial flexibility to and network in the industrial pursue other strategic / M&A and consumer sectors opportunities in the future

 Includes Macquarie  Private investment vehicle of  Temasek has €150bn of assets  Established in 1999 with mid-  Private equity firm, founded in Infrastructure and Real Assets Graeme Hart, focusing on under management, including sized and large buyouts and 2014, with offices in London, (MIRA), the world’s largest cash generative packaging and European listed equities growth equity; formerly JP Hong Kong and Shanghai infrastructure asset manager automotive supply subsectors Morgan Partners Asia  Owned by Singapore’s  Acquired Lumenis, an Israeli with over 50 funds totalling  Over 90% of New Zealand’s sovereign wealth fund GIC,  Focus on branded consumer, medical device company listed $105bn of assets disclosed outbound M&A which has $300bn under retail and industrial sectors on NASDAQ, for $456m  30% of Australia’s disclosed value in the last decade management and a minority  Offices in Hong Kong,  Fund of $3.2bn for global outbound disclosed M&A stake in the Carlyle Group  Acquired 14 foreign Shanghai and Seoul transactions value in the last decade companies for over $18bn  GIC acquired 50% of RAC in  Partnered with NWS to  Acquired over 145 foreign since 2005 the UK for £2bn acquire Hyva, a Dutch companies for over $70bn hydraulics manufacturer since 2005

- 44 - Many Asian corporates are already successful global Tata is India’s largest conglomerate and most important OTHER SELECT ACQUIRERS businesses. But to continue growing and maintaining outbound acquirer. It started in 2000 with Tata Tea's leadership positions in their subsectors, some Asian takeover of Tetley in the UK for $450m (twice the size of 3.5 corporates use outbound M&A regularly. The majority of Tata Tea). Tata has significant M&A experience, not just in deal value in Baird’s analysis was accounted for by serial the UK, where the British legal system is similar to that in acquirers (those acquiring multiple times). India, but also in North America and parts of EMEA. We Select wait for India’s next major outbound acquirer to emerge, Strategic Serial Asian acquirers tend to: but in the meantime there are a number of established  Use outbound M&A to further penetrate overseas Indian corporates acquiring in the middle-market. markets and establish global platforms Acquirers The majority of serial acquirers are sector focused Japanese  Seek continuous growth and margin improvement as corporates. Conversely, some Chinese conglomerates, not publicly listed companies M&A is integral restricted to certain sectors, are acquiring complementary businesses that may not deliver immediate synergies. to corporate  Acquire complementary businesses to adapt to changing market conditions strategy for For example, HNA will run Swissport, the world’s largest these serial Asian companies with a global footprint have the expertise ground and cargo handling company, as a standalone to operate in multiple countries, each of which has its own business within its group. In contrast, multi-billion dollar Asian acquirers language, tax, legal and financial regulatory environment. deals by publicly listed Western acquirers typically advertise They are therefore able to transact on acquisitions potential cost synergies to justify high valuations to its efficiently and competitively, especially when their M&A shareholders. It is these newer M&A players across Asia execution is supported by local advisors and their valuation that will add to the pool of acquisitive strategic buyers for is supported by realisable synergies. Western sale processes in years to come.

Japanese corporates, backed by a strong yen, recorded their highest value of outbound M&A in 2012. Though the figures came down in 2013 and 2014, Japanese corporates have accelerated their M&A efforts in 2015 with serial acquirers continuing to evaluate multi-billion dollar deals. Smaller Japanese corporates with less than $5bn of revenue are also looking overseas, particularly in the middle-market. “part of NTT DATA’s core Japanese corporates are becoming less averse to debt. strategy to accelerate its Suntory used banks, including Bank of Tokyo-Mitsubishi globalisation activities and to widen its global offering portfolio UFJ, for an $8bn bridge loan to finance its $15bn Beam deal. and presence outside of Japan” M&A and divestitures have been used by US corporates to restructure the focus / core of their business, and Japanese corporates have also been forced to do the same. Hitachi, known in the West for its consumer electronics, has had declining margins. It therefore decided to refocus on industrial infrastructure and has used M&A effectively. This “to strengthen its global year, Hitachi outbid Chinese buyers and paid €773m (12.1x platform… the combination also Joe Packee EBITDA) for a 40% stake in Finmeccanica’s rail signalling opens massive new potential markets for Viber through Managing Director business. Hitachi is also focused on expanding in the US in Rakuten Group’s roughly 200 infrastructure as well as IT services sectors. Co-Head of Global million global customers” Industrial Investment Banking - 45 - Select Asian strategic acquirers

(1)

 World’s largest HVAC player, achieved through M&A  Global Fortune 500 company based in Silicon Valley  Largest privately-owned conglomerate in China, (HQ in Singapore); world’s second largest Electronics focused on the industrial, investment, asset  Transformed itself into a major US player by acquiring Manufacturing Services (EMS) behind Foxconn management and insurance sectors McQuay in Malaysia and Goodman Global in the US  200,000 employees operating in over 30 countries  Founded in 1992, listed on the HK exchange in 2007;  Acquired 11 foreign companies for over $6bn founder Guo Guangchang likened to Warren Buffett  Acquired 24 foreign companies for over $5bn  Acquired 14 foreign companies for over $7bn

 Formerly one of Japan’s most conservative firms;  Overtook HP as the world’s largest personal computer  Global leader in hard-disk drive motors repositioned largest loss by a Japanese manufacturer in FY2008; manufacturer through M&A as well as in-house R&D itself and broadened its end markets through M&A then achieved operating profit of $5bn in FY2015  Acquired IBM's PC business in 2005; entered  Now offers electric motors of all sizes and expanded  Spun off consumer business (flat-panel TVs, mobile smartphones in 2012 and was #1 in China by 2014 its global OEM customer base significantly with 17 phones, computer parts) to refocus on industrial before acquiring Motorola Mobility in late 2014 foreign acquisitions totalling over $2bn infrastructure (power plants, railway systems), acquiring 65 foreign companies for over $6bn

 Japan’s #1 staffing agency and world’s fifth largest  Sixth largest heavy equipment player in the world,  Founded in 1919; Japan’s fourth largest general trading founded by entrepreneur Liang Wengen company with over €30bn in revenue  Acquired 20 foreign companies for $2bn, including Advantage Resourcing, Staffmark and Indeed  Subsidiary SANY Heavy Industry IPO’d in 2003  Refocus on automotive and infrastructure industries after making losses in shale oil and other resources  Proceeds from 2014 IPO supporting outbound M&A  Acquired Putzmeister, a German concrete pumps manufacturer, with the support of CITIC Capital  Acquired over 80 foreign companies for over $10bn

 Founded in 1899; world's third largest spirits maker  #1 pharma company in Asia and top 15 globally  Founded in 1868; now over $100bn in revenue and 620,000 employees under 35 publicly listed entities  Acquired 16 foreign companies for over $22bn, but still  Founded in 1781; patent expiries driving M&A activity wishes to use M&A to catch up with the top two players  Acquired over 50 foreign companies for over $18bn,  Acquired 20 companies for over $25bn, representing (Britain's Diageo and France's Pernod Ricard) representing 18% of India’s outbound M&A value over 30% of Japan’s outbound healthcare M&A value

Note: M&A figures of each acquirer described since 2005. - 46 - (1) Includes Fosun Capital, the private equity arm of Fosun International. - 47 - 4. Baird Global Investment Banking Baird is a leading independent employee-owned middle-market investment bank headquartered in Milwaukee since 1919. 4.1 We have five businesses – Private Wealth Management, Equity Capital Markets, Baird Capital, Fixed Income and Asset Management. Baird’s Baird has $152 billion in client assets, generated $1.2 billion in revenue in 2014 and has over 3,100 employees in over 100 offices. We have an award winning equity research platform (1) with over 40 sector teams covering over 725 companies. Global Baird is recognised as one of the FORTUNE 100 Best Companies to Work For (2004 – 2015), ranking No. 5 in 2015. Investment Banking Baird’s Global Investment Banking department comprises over 260 professionals across the United States, Europe Coverage and Asia. The department has 15 offices worldwide, including Milwaukee, Chicago, London, Frankfurt and Shanghai. We operate in a fully integrated manner, with one P&L globally, in order to leverage the collective strengths of our M&A advisory, equity financing and debt advisory capabilities through dedicated industry teams.

Baird has a long track record in the industry, leveraging its subsector expertise and relationships with key corporate entities and financial sponsors. Since 2010, Baird has advised on over 370 M&A transactions, representing over $92bn in value.

(1) Greenwich Associates US Equity Investors–Small-/Mid-Cap Funds, April 2015. Survey conducted with 92 small-cap and mid-cap fund managers.

STRATEGIC PARTNERS

Baird and Axis Capital, the investment banking subsidiary of Axis Bank, Baird and Gresham Partners, one of the leading independent M&A and the third largest private sector bank in India with a market cap of corporate advisory houses in Australia, have maintained a strategic co- ~$20bn, have maintained an exclusive strategic alliance since 2012 for operation agreement since 2014 for investment banking services. investment banking services. Gresham Partners has advised on over 90 transactions worth over This strategic alliance provides clients with an enhanced cross-border A$100bn in the last 5 years. M&A offering between India and Europe as well as India and North This strategic partnership provides clients with an enhanced cross- America by leveraging each bank’s strong knowledge of the M&A and border M&A offering between Europe and Australia and as well as capital markets and specific industry sectors, as well as deep corporate North America and Australia by leveraging each bank’s strong relationships within those sectors. knowledge of the M&A and capital markets and specific industry sectors, as well as deep corporate relationships within those sectors.

- 49 - Industrial Technology & Services  Automation  Business Process Outsourcing (BPO) 4.2  Automotive Supply  Cloud Services  Building Products  Distribution Deep  Electrical Equipment  Education Sector  Energy / Oilfield Equipment  Energy / Oilfield Services  Filtration  Enterprise Software Expertise  Flow & Process Control  Facility, Industrial & Rental (FIR) Services  Industrial Distribution  Human Capital  Machinery & Capital Goods  Marketing & Information Selected  Packaging  Network Technology Baird Global  Plastic / Polymer Processing  Professional Services Investment  Specialty Chemical  Software as a Service (SaaS) Banking  Test & Measurement  Testing, Inspection, Certification & Compliance (TICC) Verticals  Thermal Management / HVAC  Transportation & Logistics  Vehicle Telematics

Consumer Healthcare

 Apparel & Footwear  Biotechnology  Fitness & Sporting Goods  Contract Manufacturing  Food & Beverage  Healthcare Facilities  Hardware & Tools  Healthcare IT  Household Products  Healthcare Services / BPO  Juvenile Products  Life Sciences  Lawn & Garden  Medical Technology  Outdoor Recreation  Pharmaceuticals  Performance Sports  Revenue Cycle Management  Personal Care  Specialty Distribution  Restaurants  Tools & Diagnostics  Retail

- 50 - $133,000,000 Undisclosed Value Undisclosed Value Undisclosed Value Undisclosed Value geveke

4.3 A Portfolio Company of A Portfolio Company of A Portfolio Company of A Portfolio Company of Selected Sale to Baird Asia Sale to Sale to Sale to Sale to Pacific M&A Transactions $644,000,000 Undisclosed Value Undisclosed Value Undisclosed Value Undisclosed Value

TM A Portfolio Company of Sale of Sale of 30% of Shares COMMERCIAL AND INDUSTRIAL MOTORS Sale to APPLIANCE MOTORS AND CONTROLS Louisville Laminating to Business to Sale to Sale to CENTRE LANE PARTNERS

£87,800,000 Undisclosed Value Undisclosed Value Undisclosed Value Undisclosed Value

Sale of Sale to Diclofenac Product Franchise Sale of Sale to Sale to Flexible PCB Business Nautilus to to A Portfolio Company of A Portfolio Company of Management-led Buyout Group, including Jinghua Optical Co.

Undisclosed Value $330,000,000 Undisclosed Value $129,500,000 Undisclosed Value

sm Sale of Assets of A Portfolio Company of and Sale to Sale to Sale to to Sale to Xiamen World Gear Sports Goods Co., Ltd

Undisclosed Value Undisclosed Value Undisclosed Value Undisclosed Value Undisclosed Value

Metrotect (S.E.A) Pte Ltd

®

Sale to Acquisition of selected assets of Sale to Acquisition of Sale to

Note: Selected Baird transactions shown. Please visit www.rwbaird.com/investment-banking for a complete listing of transactions. - 51 - 4.4 Selected

CHRISTOPHER MCMAHON BRIAN MCDONAGH DAVID SILVER JOHN FORDHAM Baird Team MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR HEAD OF GLOBAL M&A CO-HEAD OF GLOBAL INVESTMENT BANKING HEAD OF EUROPEAN INVESTMENT BANKING CHAIRMAN OF BAIRD INTERNATIONAL Members T: +1.312.609.4983 T: +1.704.553.6611 T: +44.20.7667.8216 T: +44.20.7667.8438 E: [email protected] E: [email protected] E: [email protected] E: [email protected]

ANTHONY SIU BRIAN DOYAL NICHOLAS SEALY THOMAS FETZER MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR, HEAD OF ASIA INVESTMENT BANKING CO-HEAD OF GLOBAL INVESTMENT BANKING CO-HEAD OF EUROPEAN INVESTMENT BANKING HEAD OF DACH INVESTMENT BANKING T: +86.21.6182.0980 T: +1.312.609.4916 T: +44.20.7667.8370 T: +49.69.130.149.20 E: [email protected] E: [email protected] E: [email protected] E: [email protected]

SATOSHI MATSUMOTO CHRISTOPHER COETZEE VINAY GHAI TAHSEEN SIDDIQUE MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR VICE PRESIDENT DIRECTOR OF JAPAN M&A HEAD OF GLOBAL FINANCIAL SPONSOR COVERAGE EUROPEAN FINANCIAL SPONSOR COVERAGE M&A RESEARCH T: +1.646.557.3201 T: +1.312.609.4913 T: +44.20.7667.8225 T: +44.20.7667.8402 E: [email protected] E: [email protected] E: [email protected] E: [email protected]

PETER KIES JOEL COHEN JOE PACKEE DAVID CUMBERLAND MANAGING DIRECTOR MANAGING DIRECTOR MANAGING DIRECTOR DIRECTOR HEAD OF GLOBAL TECHNOLOGY & SERVICES CO-HEAD OF GLOBAL INDUSTRIAL CO-HEAD OF GLOBAL INDUSTRIAL M&A RESEARCH INVESTMENT BANKING INVESTMENT BANKING INVESTMENT BANKING T: +1.312.609.5429 T: +1.414.765.7262 T: +1.312.609.4924 T: +1.414.298.7644 E: [email protected] E: [email protected] E: [email protected] E: [email protected]

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Great outcomes. Done well.

UNITED STATES EUROPE ASIA

Robert W. Baird & Co. Robert W. Baird Group Limited Baird Investment Advisor Co., Ltd. 777 East Wisconsin Avenue Finsbury Circus House Rm 42-022, 42/F Milwaukee, Wisconsin 53202 15 Finsbury Circus Hang Seng Bank Tower +1.414.765.3500 London EC2M 7EB No.1000 Lujiazui Ring Road www.rwbaird.com +44.207.488.1212 Pudong, Shanghai 200120, China www.bairdeurope.com +86.21.6182.0980 www.bairdasia.com