TRANSPORTATION & LOGISTICS AUTOMOTIVE AFTERMARKET SECTOR UPDATE │ APRIL 2016 www.harriswilliams.com Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business. TRANSPORTATION & LOGISTICS AUTOMOTIVE AFTERMARKET SECTOR UPDATE │ APRIL 2016 AFTERMARKET OVERVIEW CONTENTS HARRIS WILLIAMS & CO. DEAL SPOTLIGHT . M&A TRANSACTIONS . PUBLIC MARKETS OVERVIEW DYK Automotive . STOCK PRICE PERFORMANCE has merged with Harris Williams & Co. announces the merger of DYK Automotive, . OUR GROUP LLC, a nationwide distributor of automotive aftermarket products a division of and portfolio company of Dobbs Management Service, with AAHC, Inc., an operating company of Marubeni Corporation. As part of the merger, The Sterling Group will join Dobbs in a recapitalization by CONTACTS Management Service and management in the investment as the and new majority shareholder of the combined entity. Harris Williams & Co. acted as exclusive financial advisor to DYK Automotive. UNITED STATES Frank Mountcastle WHAT WE’RE READING Managing Director [email protected] +1 (804) 915-0124 THE CHANGING FACE OF PARTS RETAILING Jason Bass Managing Director Well-known components like ignition keys and analogue gauges are going the [email protected] way of cigarette lighters and hand-cranked windows. This fairly rapid +1 (804) 915-0132 transformation has traditional auto parts makers scrambling to adapt as new Joe Conner players such as Google, Sony, and other tech companies attempt to redefine the Managing Director automobile. Increased transmission of data between aftermarket retailer and [email protected] consumer, as well as consumer and vehicle will emerge as the new standard for +1 (804) 915-0151 parts retailing. Expect to see new types of retail businesses emerge to provide services to consumers using the data they are generating online. Jershon Jones Director Auto Service World [email protected] +1 (804) 932-1356 AMERICANS DROVE MORE THAN 3 TRILLION MILES LAST YEAR Jeff Burkett Director Americans renewed their long-standing love affair with the automobile in 2015, [email protected] challenging the notion that millennials and baby boomers alike are abandoning +1 (804) 932-1334 their cars for public transit, bikes and car-sharing. Last year, U.S. motorists drove more miles — 3.148 trillion — than any other year in history, according to data Jeff Kidd Vice President released by the Federal Highway Administration. And about 17 million new cars [email protected] and trucks were sold in 2015, an increase of nearly 6 percent and a level of car +1 (804) 915-0178 commerce not seen since 2000. The Detroit News James O’Malley Vice President [email protected] AAA DATA CULLING CONCERNS REPAIR SHOP OWNERS +1 (804) 915-0165 Some members of AAA Inc.’s Certified Approved Auto Repair (AAR) program are EUROPE expressing concern about AAA’s demands for customer information sharing as part of next year’s Approved Auto Repair Agreement. According to a letter sent Jeffery Perkins to AAR member shops on Jan. 15, 2016, AAA-affiliated auto clubs across the U.S. Managing Director “shall require all AAR facilities to implement an Internet-based repair portal and/or [email protected] shop management system interface to send member vehicle service transaction +49 (0) 69 3650638 00 data to AAA by Dec. 15, 2016.” Tire Business STUDY FINDS DRIVING COSTS HAVE HIT SIX-YEAR LOW Due to falling gas prices, the annual cost to own and operate a vehicle in the U.S. has fallen to a six-year low of $8,558, according to AAA’s 2016 Your Driving Costs study. This year, a driver can expect to spend 57 cents for each mile driven, approximately $713 per month, to cover the fixed and variable costs associated with owning and operating a car. In addition to lower gas prices, vehicle redesigns and improved powertrain technologies increased the average fuel economy of the sedans used in the study to 26.7 mpg. Body Shop Business www.harriswilliams.com PAGE | 1 TRANSPORTATION & LOGISTICS AUTOMOTIVE AFTERMARKET SECTOR UPDATE │ APRIL 2016 M&A TRANSACTIONS RECENT M&A TRANSACTIONS1,2 Date Target Business Description Acquirer 4/11/2016* Kovatch Mobile Equipment Designs, manufactures, and distributes customized specialty trucks, REV Group, Inc. Corporation chassis, and vehicles. 4/1/2016 DYK Automotive, LLC & AAHC, Distributes products to the automotive aftermarket throughout the The Sterling Group Inc. United States. 3/30/2016 Take 5 Oil Change LLC Provides oil change services for vehicles in the United States. Driven Brands, Inc. 3/24/2016* ASIMCO NVH Technologies Co., Manufactures automotive components such as bushings, body mounts, Zhengzhou Coal Mining Ltd. and engine mounts. Machinery Group Co., Ltd. 3/11/2016* Cruise Automation, Inc. Develops and manufactures autonomous vehicle technologies. General Motors Company 3/1/2016 Jiffy-tite Company Inc. Manufactures fluid hose couplers for the automotive industry. Oetiker Limited 2/29/2016* Pittsburgh Glass Works LLC Manufactures and distributes automotive glass in the United States and LKQ Corp. internationally. 2/17/2016 Texas Hydraulics, Inc. Operates as a custom manufacturer of fluid power components for Wynnchurch Capital, LLC original equipment manufacturers. 2/9/2016 Trans-Safety LOCKS GmbH Manufactures and markets anti-theft protection products for the WABCO Holdings Inc. transport industry. 2/3/2016* PurePOWER Technologies, LLC Offers research and development, engineering, and manufacturing of Smithfield Group LLP; engine control and emissions management solutions. Kensington Capital Partners, LLC 2/2/2016 UGN, Inc. Manufactures acoustic, interior trim, and thermal management Angeles Equity Partners products for the automotive industry. 2/2/2016* Key Safety Systems, Inc. Designs, develops, and manufactures automotive safety-critical Ningbo Joyson Electronic components and systems for automotive and non-automotive markets Corp. worldwide. 2/2/2016 MICO, Incorporated Manufactures and sells hydraulic components, controls, and brake WABCO Holdings Inc. systems primarily for off-road vehicles worldwide. 1/28/2016 Save-A-Load, Inc. Manufactures cargo load bars for tractor trailers, light duty/commercial Fleet Engineers, Inc. vehicles, sprinter vans, SUVs, and pick-up trucks. 1/12/2016 H&S Autoshot Manufacturing Co., Manufactures stud welders for the automotive industry. Nu-Tec Systems, LLC Ltd. 1/11/2016 Drake Automotive Group, Inc. Manufactures and markets auto parts for new and vintage American Huron Capital Partners, LLC muscle cars and recreational off-road vehicles. 1/5/2016 TowerSec Inc. Operates as an automotive cyber security vendor which develops and Harman International provides on-board cyber security software to OEMs, suppliers, and Industries, Incorporated aftermarket telematics manufacturers. 12/21/2015 Big Tex Trailer Manufacturing, Inc. Manufactures professional grade open trailers in North America. Bain Capital Private Equity *Denotes pending transactions PAGE | 2 TRANSPORTATION & LOGISTICS AUTOMOTIVE AFTERMARKET SECTOR UPDATE │ APRIL 2016 PUBLIC MARKETS OVERVIEW TEV / LTM EBITDA TEV / 2016P EBITDA Distributors and Retailers 12.1x Distributors and Retailers 11.6x Dealerships and Services Dealerships and Services 12.1x 11.3x Providers Providers Vehicle Manufacturers 8.6x Vehicle Manufacturers 8.9x Suppliers 6.6x Suppliers 6.0x AVERAGE REVENUE GROWTH (2012 – 2015E) AVERAGE REVENUE GROWTH (2015E – 2017P) Dealerships and Services Dealerships and Services 15.0% 7.7% Providers Providers Distributors and Retailers 6.6% Suppliers 4.4% Vehicle Manufacturers 4.4% Distributors and Retailers 2.8% Suppliers 0.7% Vehicle Manufacturers 2.3% AVERAGE EBITDA GROWTH (2012 – 2015E) AVERAGE EBITDA GROWTH (2015E – 2017P) Dealerships and Services 16.8% Suppliers 12.4% Providers Vehicle Manufacturers 13.6% Distributors and Retailers 7.8% Dealerships and Services 6.9% Distributors and Retailers 7.8% Providers Suppliers 2.4% Vehicle Manufacturers 2.6% PAGE | 3 TRANSPORTATION & LOGISTICS AUTOMOTIVE AFTERMARKET SECTOR UPDATE │ APRIL 2016 STOCK PRICE PERFORMANCE MEDIAN % CHANGE (1 MONTH) MEDIAN % CHANGE (12 MONTH) Distributors and S&P 500 3.0% 22.8% Retailers Suppliers 1.9% S&P 500 (0.6%) Distributors and 1.2% Retailers Suppliers (15.3%) Dealerships and (1.0%) Dealerships and Service Providers (25.6%) Service Providers Vehicle (1.6%) Vehicle Manufacturers (25.8%) Manufacturers TRAILING TWELVE MONTHS (Indexed to April 13, 2015) 40% 30% 20% 10% 0% (10%) (20%) (30%) (40%) Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Suppliers Distributors and Retailers Dealerships and Service Providers Vehicle Manufacturers S&P 500 Index PAGE | 4 TRANSPORTATION & LOGISTICS AUTOMOTIVE AFTERMARKET SECTOR UPDATE │ APRIL 2016 OUR GROUP Harris Williams & Co. is a leading advisor to the transportation and logistics M&A market. Our Transportation & Logistics Group serves companies in a broad range of attractive niches, including third-party logistics (3PL), truck, rail, marine and air transportation, transportation equipment, and the automotive and heavy duty vehicle market. RECENTLY CLOSED T&L TRANSACTIONS has merged with a portfolio company of a portfolio company of a portfolio company of a portfolio company of a division of has been acquired by has acquired has