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Automotive trends and transactions in Canada

November 2016 kpmg.ca/automotive

Canadian automotive M&A activity US $269.3 billion, is the only major auto maker to incur a net Since our last report, the has continued to loss which was largely a result of the diesel emissions recall.* perform strongly. Rationalization of supply, steady production, Production growth and robust innovation and low interest rates have created a sea of black. A boon for OEMs and suppliers has been the steady increase Strong performance in production/sales volumes over the last three years. Every major automotive original equipment manufacturer Production has gone from 16.6 million units during (OEM) has reported strong EBITDA performance on a the 12 months to August 2014, to 17.3 million and 17.8 million trailing twelve month basis. The industry is awash in strong for the subsequent 12 month periods to August 2016. profitability with Ford, GM, and Fiat/Chrysler combining for “The aging car park, technological changes, light weighting, EBITDA of US $43.3 billion. tops the list with EBITDA of and alternate drivetrains are expected to continue to spur US $42 billion, for the twelve months to June 30, 2016. General production as OEMs enjoy one of the most robust periods Motors and Ford ranked third in EBITDA margin performance of automotive innovation over the last three decades,” offers of 11.1 percent behind Toyota at 15.6 percent, and BMW at Peter Hatges, National Sector Leader, Automotive, KPMG. 13.9 percent. VW, the world’s second largest car company “As such, earnings multiples generally reflect this new age by sales volume at US $233.6 billion, next to only Toyota at of automotive production.“ *Source: Capital IQ, as of June 30, 2016.

Monthly production volumes – North America, 2013–2016

2,000 1,800 1,600 1,400 1,200 1,000 800

Production 000s 600 400 200 0 Jun-15 Jun-16 Jun-14 Sep-13 Sep-14 Sep-15 Sep-16 Mar-15 Mar-16 Mar-14 Dec-13 Dec-14 Dec-15 Source: Capital IQ, as of September 30, 2016.

© 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Public comparable companies ($CAD millions)

Capitalization LTM multiples NTM multiples Market Enterprise EV/ EV/ EV/ Company Country cap. Value (“EV”) Revenue EBITDA P/E EBITDA EV/EBIT P/E Johnson Controls International plc 55,121 66,432 15.3x 20.8x n.m. 10.5x 13.9x 13.7x Company United States 64,085 52,562 2.3x 4.4x 4.0x 2.4x 3.4x 5.6x Ford Motor Co. United States 64,783 46,571 2.1x 3.9x 5.8x 3.0x 5.6x 7.4x Tesla Motors, Inc. United States 40,381 40,924 n.m. n.m. n.m. 27.9x n.m. n.m. Magna International Inc. Canada 21,876 26,008 5.7x 8.1x 7.7x 5.2x 7.4x 7.2x The Goodyear Tire & Rubber Company United States 11,250 18,160 5.9x 8.3x n.m. 4.9x 6.8x 7.6x BorgWarner Inc. United States 9,884 12,758 6.8x 9.0x 12.7x 6.4x 8.6x 10.3x Harley-Davidson, Inc. United States 12,325 12,700 7.6x 9.0x 14.0x 7.4x 8.7x 13.0x Lear Corp. United States 11,094 11,963 5.0x 6.2x 9.4x 4.9x 6.1x 8.6x Gentex Corp. United States 6,605 6,043 8.1x 9.5x 15.4x 7.2x 8.6x 13.8x Federal-Mogul Holdings Corporation United States 2,130 5,949 7.3x 17.0x n.m. 5.9x 14.7x 8.5x Tenneco Inc. United States 4,272 5,741 5.5x 7.1x 12.7x 4.9x 6.6x 9.0x Thor Industries Inc. United States 5,490 5,179 10.1x 11.3x 18.2x 7.8x 9.0x 14.6x Nexteer Automotive Group Limited United States 4,669 5,041 8.2x 10.1x 14.0x 6.3x 8.8x 12.2x Linamar Corp. Canada 3,420 4,764 5.0x 7.3x 7.0x 4.4x 6.7x 6.5x Dana Incorporated United States 2,858 3,967 5.2x 7.4x 17.3x 4.6x 6.5x 8.4x Metaldyne Performance Group Inc. United States 1,406 3,599 5.7x 10.6x 10.0x 5.3x 9.8x 9.0x Drew Industries Incorporated United States 3,058 3,021 10.8x 13.5x 22.0x 9.2x 11.0x 17.1x American Axle & Manufacturing United States 1,666 2,987 3.9x 5.9x 5.2x 3.7x 5.9x 5.2x Holdings Inc. Cooper-Standard Holdings Inc. United States 2,320 2,907 5.7x 8.1x 14.4x 5.1x 7.8x 9.6x Visteon Corporation United States 3,229 2,806 7.5x 10.0x n.m. 6.3x 8.7x 16.8x Dorman Products, Inc. United States 2,896 2,782 12.4x 13.8x 23.1x 11.4x 12.4x 20.5x Cooper Tire & Rubber Co. United States 2,503 2,405 3.2x 4.1x 8.2x 4.0x 5.4x 9.0x Gentherm Incorporated United States 1,479 1,492 7.3x 9.2x 13.1x 7.3x 9.4x 12.5x Martinrea International Inc. Canada ,688 1,372 4.2x 7.1x 9.1x 3.7x 6.0x 4.6x Valuation multiples summary Group average 6.7x 9.2x 12.2x 6.8x 8.2x 10.4x Group median 5.8x 8.7x 12.7x 5.3x 8.2x 9.0x Group maximum 15.3x 20.8x 23.1x 27.9x 14.7x 20.5x Group minimum 2.1x 3.9x 4.0x 2.4x 3.4x 4.6x

Source: Capital IQ, as of September 30, 2016.

Automotive EV/LTM EBITDA, 2013–2016

20.0x

18.0

16.0

14.0 A D T

I 12.0 B E 10.0 M T

L 8.0 / V

E 6.0

4.0

2.0

0.0 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

GM Magna Johnson Controls Ford Harley-Davidson Source: Capital IQ, as of September 30, 2016.

© 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Precedent transactions

$CAD millions Valuation multiples Country Closed EV/LTM EV/LTM Target Acquirer of target date EV sales EBITDA 2016: Top 10 transactions Daihatsu Motor Co. Ltd. Toyota Motor Corporation 27-Jul-16 9,569 0.5x 4.0x GETRAG Getriebe-und Zahnradfabrik Magna International Inc. 4-Jan-16 3,455 1.4x – Hermann Hagenmeyer GmbH & Cie KG Affinia Group Holdings Inc. Mann + Hummel Holding GmbH United States 4-May-16 1,749 – – Key Safety Systems, Inc. Ningbo Joyson Electronic Corp. United States 2-Jun-16 1,291 – – Montupet SA Linamar Corp. France 18-Jan-16 1,233 1.7x 9.1x AFX Industries L.L.C. Exco Technologies Limited United States 5-Apr-16 107 – – General Cable Corporation, Standard Motor Products Inc. United States 27-May-16 93 0.7x – Automotive Ignition Wire Business Westport Innovations Inc. Fuel Systems Solutions, Inc. United States 1-Jun-16 68 0.2x (6.1)x (nka: Westport Fuel Systems Inc.) Caisse de dépôt et placement du Spectra Premium Industries Inc. Canada 19-Apr-16 55 – – Québec; Fondaction Laydon Composites Ltd. WABCO Holdings Inc. Canada 15-Apr-16 40 1.6x – 2015: Top 10 transactions ZF TRW Automotive Holdings Corp. ZF Friedrichshafen AG United States 15-May-15 14,472 0.8x 7.3x Veyance Technologies, Inc. ContiTech AG United States 30-Jan-15 2,110 0.9x 7.1x Johnson Electric International (UK) Limited; JE International Stackpole International Inc. Engineered Products Canada Limited; Canada 27-Oct-15 867 1.8x 10.6x JE International Powder Metal Canada Limited iBiquity Digital Corporation DTS Inc. United States 1-Oct-15 814 12.7x 73.1x Magna Interiors Inc. Grupo Antolín Irausa, S.A. Canada 31-Aug-15 641 0.2x – Motor Coach Industries New Flyer Industries Inc. United States 18-Dec-15 604 0.7x – International, Inc. Western Lithium USA Corporation Lithium Americas Corp. Canada 4-Sep-15 77 – (15.0)x (nka: Lithium Americas Corp.) SpectAL Industries, Inc. Lippert Components, Inc. Canada 24-Apr-15 27 0.9x – Garlock of Canada Ltd.; Stemco Kaiser Veyance North-American Air Spring Incorporated; EnPro Luxembourg United States 1-Jul-15 22 – – Business Unit Holding Company S.a.r.l. INT America LLC CCL Industries Inc. United States 6-Feb-15 5 0.3x – 2014: Top 10 transactions Scania AB (publ) Volkswagen AG Sweden 9-Jun-14 33,181 2.2x 17.6x BSH Bosch und Siemens Hausgeräte Robert Bosch GmbH Germany 4-Dec-14 9,273 0.6x 7.9x GmbH (nka: BSH Hausgeräte GmbH) Pinafore Holdings B.V. The Blackstone Group L.P. Netherlands 3-Jul-14 7,708 2.4x 12.6x Johnson Controls Inc. Air Distribution Technologies, Inc. United States 16-Jun-14 1,763 – – (nka: Johnson Controls International plc) Martinrea Honsel Germany GmbH Martinrea International Inc. Germany 7-Aug-14 518 – – 2.4 Million Square Feet of Mexican Magna International Inc. 26-Jun-14 109 – – Property Portfolio Race Face Performance Products, Inc. Fox Factory Holding Corp Canada 12-Dec-14 53 2.0x 11.0x Global Thermoelectric Inc. (nka: Gentherm Global Power Gentherm Incorporated Canada 1-Apr-14 34 0.9x – Technologies) Techform Products Limited Magna Closures Inc. Canada 3-Oct-14 26 – – Automotive Leather Company Exco Technologies Limited South Africa 1-Mar-14 25 0.3x – Group (Pty) Ltd.

Source: Capital IQ, as of September 30, 2016.

© 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Recent transactions

KPMG advised on the following recent transactions:

KPMG Corporate inance KPMG Corporate inance acted as financial advisor to acted as financial advisor to IMT Group on its sale of Fleetwood Metal Industries on Nitrex Metal Technologies its sale to Milestone Partners. to Bodycote plc.

September 2016 August 2016

Contact us

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

Toronto/Vaughan Southwestern Ontario Peter Hatges Doug Dawdy National Sector Leader, Partner, Deal Advisory Automotive T: 519-747-8807 T: 416-777-3614 E: [email protected] E: [email protected]

Bob Jolicoeur National Industry Leader, Industrial Markets T: 416-777-3733 E: [email protected]

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

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