Deals, Dollars, and Disputes MAXIMIZING VALUE MINIMIZING RISK A Summary of Private Equity Transactions for the Quarter Ended September 30, 2014 CONTENTS Our Process and Methodology ................................................ 1 Summary of Q3 2014 PE Firm Transaction Activity ................ 2 Volume of PE Deals Announced and Completed ......................................... 2 Top 25 PE Firm Transactions by Deal Value Completed During Q3 2014 ............................................................................................... 3 Industry Sector Transaction Analyses ........................................................... 4 Purchase Price Premium for Transactions Involving Controlling Stakes ........................................................................................... 6 PE Acquisition Type Analyses ........................................................................ 7 Featured Transactions and Insights ........................................ 8 Value Creation through Industry Consolidation ........................................... 8 In Good Company with Private Equity: LuLu*s and H.I.G. ......................... 11 Introduction We are pleased to present you with our Deals, Dollars, and Disputes report for the quarter ended September 30th, 2014. Our analysis involves a study of the merger and and acquisition transactions involving private equity firms (“PE firms”) during the Our Objective recent quarter. Our objective in preparing this report is to provide a general overview of the volume and value of transactions during the quarter along with an analysis of trends when compared to prior quarters. We also hope to present useful information on select topics related to valuation concepts, notable acquisition trends, and recent acquisition disputes in our Featured Transactions and Insights section. As an independent consulting firm with financial and accounting expertise, we are committed to contributing thought leadership and relevant research regarding business and valuation matters to assist our clients in today’s fast-paced and demanding market. This report is just one example of how we intend to fulfill this commitment. We appreciate your comments and feedback and welcome requests for any additional analysis that you might find helpful. Floyd Advisory OCTOBER 2014 Deals, Dollars and Disputes | Q3 2014 | Floyd Advisory Our Process and Methodology We studied financial data for transactions involving PE firms, both as buyers and sellers, during the most recent quarter for companies headquartered in North America. As part of our review, we gathered and analyzed relevant transaction information and data such as industry sector, equity interest, and deal structure, and created a database for our further analyses. From this information, we analyzed market trends by industry, by common attributes, by valuation premiums, and by other characteristics. Applying our professional judgment to these observations, we have prepared this report. Within our Featured Transactions and Insights section, we have highlighted two transactions as recommended reading. For the purposes of this report, the transaction data we have analyzed is limited to publicly available information. Beginning with the Q4 2013 report, our third-party source has provided us with an expanded data set to include a broader set of private equity deals. Data throughout this report will be comparable to last quarter’s report, but may not be comparable to our Q3 2013 report. Page 1 Floyd Advisory | Q3 2014 | Deals, Dollars and Disputes Summary of Q3 2014 Although the reported announced deal volume decreased in Q3 compared PE Firm Transaction Activity to Q2, the number of deal completions increased and the total value of the Volume of PE Deals Announced and Completed top 25 completed deals increased by 7%. NORTH AMERICAN PE DEAL LANDSCAPE By Quarter in the 12 Months Ended 9/30/2014 800 ■ No. of Announced Deals ■ No. of Completed Deals 745 700 696 674 600 631 604 585 580 500 536 NO. OF DEALS 400 300 200 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Source: Zephyr Note: Includes data for which transaction details were reported and available. The recent general trend of an uptick in completed deals (up 4% over the prior quarter) was consistent in Q3 of 2014, although there was a break in the streak of increased deal announcements in the quarter. Over the last four quarters there has been an average of 19% more deals announced than completed. Numerous factors explain the variance between deals being announced and completed, including regulatory approval, break-ups, terminations, and other causes. The variance can also be partially explained by the difficulties surrounding the confirmation of completions involving privately-held companies. Page 2 Deals, Dollars and Disputes | Q3 2014 | Floyd Advisory Top 25 PE Firm Transactions by Deal Value Completed During Q3 2014 Deal Value PE Deal Acquiring Entity Target Primary US USD Target Seller Role(s) Type* (Advisors) SIC Description (in millions) $5,995 Seller Access Midstream Partners LP Global Infrastructure Partners II MAJ Williams Companies Inc Crude petroleum and natural gas 1 Access Midstream Partners GP LLC $3,850 Seller Idenix Pharmaceuticals Inc Shareholders, Novartis Pharma AG, MAJ Merck & Company Inc Commercial physical and 2 TVM Capital GmbH biological research $3,500 Buyer First Data Holdings Inc Shareholder MIN Kohlberg Kravis Roberts & Functions related to 3 Company LP depository banking $3,000 Seller Beats Electronics LLC Access Industries Inc, MAJ Apple Inc Electronic components 4 Shareholders, Mr Jimmy Iovine, Mr Andre Romelle Young $2,700 Seller Texas Industries Inc Southeastern Asset Management Inc, MAJ Martin Marietta Materials Inc Ready-mixed concrete 5 Shareholders, NNS Holding Sarl manufacturing $2,350 Seller Sheridan Healthcare Inc Hellman & Friedman LLC MAJ Amsurg Corporation Offices and clinics of 6 health practioners $2,302 Seller Oculus VR Inc Matrix Management Corporation, MAJ Facebook Inc Commercial physical and 7 Shareholders, Spark Capital Partners biological research LLC, Andreessen Horowitz LLC, Formation 8 Partners LLC 8 $2,100 Buyer Red Lobster Seafood Restaurants Darden Restaurants Inc MAJ Golden Gate Capital LP Eating places $2,100 Seller, Petrologistics LP Lindsay Goldberg LLC, Minority MAJ Flint Hills Resources LLC Chemicals and 9 Buyer Shareholders, JGD Management chemical preparations Corporation, Mr David Lumpkins, Mr Nathan Ticatch $1,800 Buyer Ashland Water Technologies Inc Ashland Inc MAJ Clayton Dubilier & Rice LLC Chemicals and allied products, 10 not elsewhere classified wholesale dealing in $1,725 Seller, Seragon Pharmaceuticals Inc Orbimed Advisors LLC, Topspin MAJ Genentech Inc Commercial physical and 11 Buyer Partners LBO LP, Shareholders, biological research Aisling Capital LLC, Column Group LLC, The VenBio LLC 12 $1,500 Seller Warranty Group Inc Onex Corporation MAJ TPG Capital LP Insurance carriers $1,300 Buyer Venari Resources LLC Shareholder MIN Management, Warburg Pincus Crude petroleum and natural gas 13 LLC, Existing Investors, Jordan Company LP, The, Temasek Holdings Pte LTD, Kelso & Company LP, Blackrock Inc, GIC Pte LTD $1,275 Seller East Resources Inc. and Unnamed Unnamed Private Company, MAJ American Energy Oil and gas field exploration services 14 Private Company’s Producing Assets East Resources Inc Marcellus LLC In West Virginia $1,200 Seller ViaWest Inc Other Shareholders, Oak Hill Capital MAJ Shaw Communications Inc Computer processing and data 15 Partners Inc, Global Innovation preparation and processing services Partners, Ms Nancy Phillips, Mr Roy Dimoff $1,075 Seller Envision Healthcare Holdings Inc Clayton Dubilier & Rice LLC, MIN Shareholder Offices and clinics of doctors of 16 Employees, Directors, medicine Executive Officers 17 $1,000 Seller ValleyCrest Companies Inc MSD Capital LP MAJ Brickman Group LTD LLC, The Landscape counseling and planning $975 Buyer, Ipreo Holdings LLC Kohlberg Kravis Roberts & MAJ Goldman Sachs Group Inc, Computer processing and data 18 Seller Company LP Blackstone Group LP preparation and processing services $910 Buyer, Healogics Holding Corporation Morgan Stanley Venture Partners, MAJ Clayton Dubilier & Rice Inc Management consulting services 19 Seller Shareholders, Metalmark Capital Holdings LLC, Scale Venture Partners $900 Buyer TGI Friday’s Inc Carlson Inc MAJ Sentinel Capital Partners LLC, Eating places 20 Triartisan Capital Partners LLC $860 Seller Flagstone Foods Inc Shareholders, Gryphon Investors Inc MAJ Snacks Parent Corporation Dried and dehydrated fruits, 21 vegetables and soup mixes manufacturing $825 Seller Labrys Biologics Inc InterWest Management Partners, MAJ Teva Pharmaceutical Commercial physical and 22 Sofinnova Ventures Inc, Canaan Industries LTD biological research Management Inc, Shareholders, Venbio LLC 23 $775 Seller Brixmor Property Group Inc Blackstone Group LP MIN Shareholder Real estate investment trusts $750 Seller INSIGHT Pharmaceuticals Ontario Teachers’ Pension Plan MAJ Medtech Products Inc Perfumes, cosmetics and other toilet 24 Corporation preparations manufacturing 25 $750 Seller Jacobson Companies Inc Oak Hill Capital Management Inc MAJ Norbert Dentressangle SA General warehousing and storage Source: Zephyr Deal types: MAJ = Majority Stake Aquisition, MIN = Minority Stake Acquisition, IPO = Initial Public Offering Page 3 Floyd Advisory | Q3 2014 | Deals, Dollars and Disputes Industry Sector Transaction Analyses FLOW OF PE FUNDS BY INDUSTRY Between $50MM and $6B for Q3