M&A Market OverviewS O U T H E AS T M & A F O R U M

O C T O B E R 2 0 1 8 | D R A F T

Table of Contents

2

Page1. Strategic Drivers to M&A 32. Public Company M&A Trends 103. CFIUS / Antitrust Concerns 184. Financing / Deal Structure 225. Private Equity M&A Trends 296. Hostile M&A / Shareholder Activism 37

Page

1. Strategic Drivers to M&A 3

2. Public Company M&A Trends 10

3. CFIUS / Antitrust Concerns 18

4. Financing / Deal Structure 22

5. Private Equity M&A Trends 29

6. Hostile M&A / Shareholder Activism 37

1. Strategic Drivers to M&A

Market Overview – Evolution of Key Themes

Record-breaking mega-deal activity (particularly in the U.S.) signals a return of corporate confidence and appetite for undertaking transformational strategic transactions

Acquisitions represent a compelling top-line expansion opportunity amid a backdrop of slow economic growth

Shareholder support for transactions (particularly those with demonstrable synergies) continues

Substantial corporate cash balances remain

Despite periods of volatility, availability of capital generally supports leverage and valuations

Monetary policies and investor demand continue to support the capital markets; concerns exist around oil prices, interest rate movements, and health of the global economy

Structural drivers, such as low defensive barriers, high support for activists and tax considerations, shape activity levels

Some headwinds in activity surface in 2016 as regulators take actions to block deals over anti-trust concerns and take steps to discourage deals intended to bypass tax regime

2014 – 20162008 & 2009

2010 – 2013 Muted return of corporate confidence due to

uncertain macroeconomic and political outlook

Improved liquidity, with “fits and starts” in the capital markets

Substantial corporate cash balances

Managements refocus on growth in selected areas

Narrower valuation gap between buyers and sellers; periodic volatility in the equity markets stems deal-making momentum

Increased activity by private equity buyers, but strategics dominate

Renewed shareholder activism

Economic crisis

Liquidity constraints and lack of confidence

Corporate focus on retrenchment rather than expansion

Sharp decline in global M&A activity

Scarce financing for transactions

Wide valuation gap between buyers and sellers

Legislative and regulatory uncertainty

Acquisitions continue to represent a compelling top-line expansion opportunity amid a backdrop of moderate economic growth

Sector consolidation and disruption continue to support transformational acquisitions and mega-deals

Companies increasingly seeking value creation through transactions that blur traditional industry lines (e.g., CVS/Aetna, Cigna/ Express Scripts, Amazon/Whole Foods)

Shareholder support for transactions continues despite high valuations

Structural drivers, such as low defensive barriers and high support for activists, continuing to shape activity levels

Substantial corporate cash balances and investor dry powder remain

Availability of capital generally supporting leverage and valuations, although targets may adjust following recent tax reform

Regulatory environment generally supportive of M&A activity following tax reform and de-regulation, but concerns around anti-trust and enforcement of CFIUS remain

Investors continuing to monitor Federal Reserve policy in view of anticipated interest rate increases

2017 & 2018 Outlook

5

M&A PerformanceDomestic M&A activity has rebounded in 2018, with transaction values on pace to reach record levels, despite a drop-off in the number of transactions relative to 2017 levels

Despite geopolitical surprises (i.e., Brexit) and sustained regulatory headwinds throughout most of 2016, M&A activity was resilient.

Uncertainty around tax and other regulatory reforms may have impacted larger transformative transactions throughout most of 2017, as the value of domestic M&A activity dropped significantly in 2017 despite the number of transactions reaching their highest levels in history.

While transaction values have rebounded sharply thus far in 2018, it remains to be seen whether the current record levels of M&A activity will continue throughout the rest of 2018 given recent market volatility.

Source: Thomson Reuters, as of 6/30/18.Note: 2018 data shown on annualized basis, based on data through 6/30/2018.

Historical Domestic M&A Activity

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0

500

1,000

1,500

2,000

2,500

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Number of Deals($ in billions)

Value of Deals Number of Deals

6

Multiple Drivers for M&A Activity

Sources: News articles and Wall Street research.

Positive Drivers Negative Drivers

Economic / Strategic

Need for top-line growth vs. cost-cutting

Global diversification

Economic stability and confidence in most global regions

Technology-driven industry convergence

Continued geopolitical uncertainty and ambiguity around certain Trump administration policies

Significant reduction in outbound China M&A

Liquidity Historically low borrowing costs

Cash build-up around all-time highs (approximately $2 trillion)

Public companies able to use stock as currency as equity market valuations remain strong

Expected increase in interest rates may impact lending activity

Limitations on tax deductibility of interest may reset leverage levels

Structural Changes to U.S. tax policy expected to increase corporate earnings and deployable cash

Continued de-regulation may trigger increased activity in certain sectors (i.e., energy, financial institutions)

Defensive barriers low / activist support high

Regulatory uncertainty in certain industries (e.g., healthcare)

Uncertainty around anti-trust scrutiny given review of AT&T / Time Warner deal

Potential for increased regulatory scrutiny on cross-border transactions (particularly transactions with Chinese buyers)

Activists increasingly attempting to block deals

7

M&A Activity by RegionGlobal M&A volumes (by number of deals) were spread relatively equally across geographies during 1H ‘18, although activity in the Americas accounted for nearly 50% of global M&A activity by transaction value

Number of Transactions by Region Transactions Values by Region

Source: Thomson Reuters, as of 6/30/18.Notes: For purposes of the above charts, Europe includes Russia, and Asia includes Australia and India.

Americas49%

Europe31%

Asia, Africa & Middle East

20%Americas36%

Europe29%

Asia, Africa & Middle East

35%

8

M&A Activity by IndustryThe Energy & Power and Healthcare sectors led U.S. M&A activity in 1H ‘18 in terms of transaction values, but the Technology sector was the most active, accounting for more than 20% of M&A activity in terms of number of deals

Source: Thomson Reuters, as of 6/30/18.Note: Excludes minority transactions.

Top Industries by Number of Transactions (U.S.) Top Industries by Transaction Values (U.S.)

Technology21%

Consumer Products

13%

Financials11%Industrials

10%

Healthcare10%

Media and Entertainment

8%

Real Estate8%

Other19%

Energy and Power18%

Healthcare17%

Media and Entertainment

15%Technology

12%

Real Estate9%

Telecom7%

Financials7%

Other15%

9

Cross-Border Transactions

Number of U.S.-Related Inbound and Outbound Cross-Border Transactions

Inbound cross-border activity increased substantially in 2017, despite a significant decline in inbound activity from China, as the U.S. Dollar generally weakened relative to most global currencies throughout the year, with Canadian and European buyers accounting for most of the uptick. While inbound cross-border activity has declined slightly thus far in 2018, it remains above prior year level

Source: Thomson Reuters, as of 6/30/18.

Outbound cross-border activity also increased in 2017 as U.S. companies continue to look for growth in new regions that provide exposure to different economic markets and consumer dynamics

1,294

1,0081,112

1,1801,079

957

1,212

1,357 1,413

1,723

431 452 424 416 418 391

1,933

1,375

1,756 1,8091,737

1,633

1,960 2,0041,891

1,981

512 496 502 471 477 494

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18

Transactions with Domestic Targets / International Buyers Transactions with International Targets / Domestic Buyers

10

2. Public Company M&A Trends

Quarterly Domestic M&A ActivityDomestic transaction values continued to increase in Q2 ’18, reaching their highest quarterly level since Q4 ’16, despite a substantial decline in the number of transactions relative to recent quarterly levels

Quarterly U.S. M&A Activity

Source: Thomson Reuters, as of 6/30/18.Notes: Includes minority equity deals, equity carve-outs, exchange offers, open market repurchases, and deals with undisclosed transaction values.

$141

$180

$218

$272

$219 $218

$332

$267 $259

$387

$487

$352

$385

$425

$522

$491

$280

$425

$323

$617

$267

$302$328

$419

$456

$538

1,997 1,9842,053

2,775

2,0982,044

2,4552,523

2,4692,536 2,533

2,6602,767

2,829

2,6402,528

2,676

2,9002,786

3,106

3,619

3,4603,367

3,033

3,525

2,664

Transaction Value ($ in billions) Number of Transactions

12

Average Domestic Transaction SizeAverage transaction values have increased thus far in 2018 to their highest levels in the last decade

Average Size of Announced Domestic M&A Transactions

Source: Thomson Reuters, as of 6/30/18.Notes: Includes transactions with estimated values.

Excludes terminated transactions. Future terminations of pending transactions will reduce totals shown.Excludes minority stake acquisitions and most minority capital infusions into major financial institutions.

$291 $285 $290

$350

$266

$369

$458

$649

$583

$428

$737

10-year median: $360

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H '18

($ in millions)($ in millions)

13

Mega-Transactions Drive M&A ActivityThe 10 largest transactions announced in 2018 have accounted for approximately 35% of the overall value of domestic M&A activity

Source: Thomson Reuters, as of 6/30/18.1. Reflects a spin-off to shareholders of Altice N.V.2. A consortium of investors jointly led by The Blackstone Group LP, Canada Pension Plan Investment Board and GIC Pte. Ltd.* Transactions are pending as of 6/30/18.

Largest Announced Domestic M&A Transactions – 2018

Date Announced Acquirer Target

Value ($ in billions) Industry

6/13/2018 Comcast Corp. Twenty-First Century Fox, Inc. $77.5* Media and Entertainment

3/8/2018 Cigna Corp. Express Scripts $68.5* Healthcare

4/29/2018 T-Mobile US Inc. Sprint Corp. $58.7* Telecommunications

1/8/2018 Shareholders1 Altice USA, Inc. $32.1 Media and Entertainment

4/30/2018 Marathon Petroleum Corp. Andeavor Corp. $31.3* Energy and Power

1/29/2018 Keurig Green Mountain, Inc. Dr. Pepper Snapple Group, Inc. $23.0* Consumer Staples

1/29/2018 Investor Group2 Thomson Reuters Corp. –Financial and Risk Business $17.0* Technology

1/3/2018 Dominion Energy, Inc. SCANA Corp. $14.2* Energy and Power

4/26/2018 Two Harbors Investment Corp. CYS Investments, Inc. $11.6* Real Estate

5/21/2018 Westinghouse Air Brake Technologies Corp.

General Electric Company –Transportation Business $11.1* Industrials

14

Transaction Size DistributionDeals with transaction values above $1 billion were up substantially in 1H ‘18 relative to 1H ‘17

Size Distribution of Announced U.S. M&A Transactions

Source: Thomson Reuters, as of 6/30/18.Notes: The figures in parentheses represent the number of deals in each size distribution.Includes share repurchase transactions and transactions with estimated values.Excludes terminated transactions. Future terminations of pending transactions will reduce totals shown.

$81$61

$307

$84$76 $66

$418$404

(376) (90) (119) (5)(346) (97) (134) (15)

$0.1-0.5 billion $0.5-1.0 billion $1.0-10.0 billion > $10.0 billion

1H '17 1H '18

($ in billions)

15

Mega Deals Influence Value, but Smaller Deals Drive VolumeTransactions in excess of $1 billion constitute roughly 75% of the aggregate value of M&A activity but account for less than 10% of total transactions

Source: Thomson Reuters, as of 6/30/18.

Deal Size: Below $1 Billion Deal Size: $1 Billion – $10 Billion Deal Size: Above $10 Billion

93.9% 91.8%

28.1%

17.3%

2017 1H '18

% of All Deals % of Deal Values

5.7% 7.4%

43.5% 42.1%

2017 1H '18

% of All Deals % of Deal Values

0.4% 0.8%

28.4%

40.6%

2017 1H '18

% of All Deals % of Deal Values

16

Transaction Multiples Remain HighTransaction multiples have decreased slightly thus far in 2018 relative to 2017 but remain above historical levels

Median EV/EBITDA Multiples

Source: Thomson Reuters, as of 6/30/18.Notes: Based on U.S. deals and excludes multiples below 0.0x and above 25.0x.

10.1x

8.3x

9.7x9.3x

9.9x9.5x

12.0x12.8x

12.2x12.8x

12.3x10-year median: 10.0x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H '18

17

Multiples by Transaction SizeLarger transactions generally command higher multiples

Median EV/EBITDA Multiples

Source: Thomson Reuters, as of 6/30/18.Notes: Based on U.S. deals and excludes multiples below 0.0x and above 25.0x.

9.9

7.6

9.89.2

9.6

10.4

12.813.1

12.611.9

9.2

11.1

9.99.6 9.5 9.7

8.8

10.9 10.9

10.2

14.4

9.5

10.810.4

9.59.2

10.3

8.8

12.0 12.2

10.9

12.9

13.7

8.6

6.4

9.3

10.3 10.1 10.3

13.213.7

15.8

14.7

11.8

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H '18

Under $500 million $500 million to $1 billion $1 billion to $10 billion Over $10 billion

18

3. CFIUS / Antitrust Concerns

Emerging Markets Activity

M&A Volume with Emerging Markets Targets

M&A Volume with Emerging Markets Acquirers

Emerging markets M&A activity was up in 1H ‘18 relative to 1H ’17 in terms of transaction values, despite a decline in the number of transactions over the same time period

Source: Thomson Reuters, as of 6/30/18.Notes: Excludes cancelled deals, recapitalizations, share buybacks/repurchases, and exchange offers.

For purposes of the above charts, Emerging Markets include Brazil, Chile, China, Czech Republic, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

$459$350

$659

$481$520 $547

$658

$1,087

$828 $788

$345$415

11,22511,989

13,79113,066

11,60010,704

12,038

14,071 13,726 13,268

6,202 6,044

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H '17 1H '18

($ in billions)

$396 $346

$582

$420$471 $501

$574

$977$860 $787

$342 $373

8,9909,785

10,985 10,3579,210 8,670

9,988

12,121 12,093 11,583

5,432 5,280

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H '17 1H '18

($ in billions)

20

$260

$63

$30

$10

$10

China

India

Brazil

Thailand

Russia

$262

$35

$29

$10

$7

China

India

Brazil

Thailand

Taiwan

Growing Role of Emerging MarketsEmerging markets transactions continue to represent a significant portion of global M&A activity, with China, despite increased governmental constraints, being by far the most significant contributor to 2018 activity

2018 Leading Emerging Market Targets ($ in billions) 2018 Leading Emerging Market Acquirers ($ in billions)

Total Deal Value = $373 billionTotal Deal Value = $415 billion

Source: Thomson Reuters, as of 6/30/18.Notes: Excludes cancelled deals, recapitalizations, share buybacks/repurchases, and exchange offers.

For purposes of the above charts, Emerging Markets include Brazil, Chile, China, Czech Republic, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

Emerging Markets Contributions to Number of Deals (by Target)

Emerging Markets Contributions to Number of Deals (by Acquirer)

71% 72% 71% 69% 71% 74% 74%

29% 28% 29% 31% 29% 26% 26%

2012 2013 2014 2015 2016 2017 1H '18

Developed Emerging

76% 76% 75% 72% 73% 76% 76%

24% 24% 25% 28% 27% 24% 24%

2012 2013 2014 2015 2016 2017 1H '18

Developed Emerging

21

Acquisition Targets

U.S. M&A Activity (By Number of Transactions)

Source: Thomson Reuters, as of 6/30/18.

The vast majority of domestic M&A transactions involve private company targets

91% 89%93% 94% 94% 95% 95% 96% 96% 96% 96%

9% 11%7% 6% 6% 5% 5% 4% 4% 4% 4%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H '18

Private Targets Public Targets

22

4. Financing / Deal Structure

Overall Leverage Levels Remain ElevatedLeverage levels increased slightly in 1H ’18 relative to 2017 levels

Average Debt Multiples of Highly Leveraged Loans

3.8x4.0x 3.9x

4.3x4.5x

4.7x4.9x

4.7x5.0x 5.0x 5.1x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H '18

First Lien/EBITDA Second Lien/EBITDA Other Sr Debt/EBITDA Sub Debt/EBITDA

10-Year Median: 4.6x

Source: S&P LCD. 24

Leverage Multiples by Transaction TypeLeverage levels declined slightly across most transaction types during Q2 ’18 relative to Q1 ’18 and 2017

Large Corporate(1) Large LBO(1)

Middle-Market Corporate(2) Middle-Market LBO(2)

Source: S&P LCD.(1) More than $50 million EBITDA.(2) $50 million EBITDA or less.

3.2x 3.7x 3.6x 4.1x 4.4x 4.5x 4.8x 4.6x 4.9x 4.9x 5.0x 5.0x

3.7x4.1x 3.9x

4.4x 4.6x 4.7x 4.9x 4.7x 5.0x 5.0x 5.0x 5.0x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 '18 Q2 '18

Senior Leverage Subordinated Leverage

4.1x 3.7x4.4x

5.1x 5.1x 5.3x 5.8x 5.6x 5.5x 5.8x 5.9x 5.5x

4.9x

4.0x4.7x

5.2x 5.3x 5.4x5.8x 5.7x 5.5x 5.8x 5.9x

5.5x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 '18 Q2 '18

Senior Leverage Subordinated Leverage

3.6x2.9x 3.2x

3.9x 3.9x4.7x 4.9x 4.7x 4.9x 5.4x 5.5x 5.1x

4.3x

3.4x 3.7x4.2x 4.3x

4.8x 5.0x 4.9x 5.1x 5.4x 5.5x5.1x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 '18 Q2 '18

Senior Leverage Subordinated Leverage

3.7x2.5x

3.4x 3.8x 3.8x4.6x 5.1x 5.1x 4.9x 5.4x 5.4x

4.5x

3.3x

4.2x 4.3x 4.5x 4.8x5.3x 5.3x 5.2x 5.4x 5.4x

N/A

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 '18 Q2 '18

Senior Leverage Subordinated Leverage

25

$156.8

$76.7

$236.1

$376.8

$465.5

$607.1

$528.1

$423.3

$480.5

$649.8

$370.7

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H '18

Highly Leveraged Loan IssuancesLeveraged loan issuances remained strong in 1H ’18, on pace to exceed 2017 levels

Source: S&P LCD.

Highly Leveraged Loan New Issuance Volume($ in billions)

Refinancing and M&A activity accounted for 36.8% and 52.2% of new issuance activity through Q2 ’18, respectively

26

Second Lien Market ActivitySecond-lien loans reached record issuances of $36.0 billion in 2014 before significantly declining to $10.1 billion in 2016, the lowest level seen since 2011. New issuances rebounded in 2017 and have remained strong in 1H ’18, totaling $16.5 billion

Volume of Second-Lien Loans Average Spread of Second-Lien Loans

Source: S&P LCD.

$2.8 $1.8

$4.8 $6.8

$17.8

$29.3

$36.0

$10.8 $10.1

$25.2

$16.5

0%

2%

4%

6%

8%

10%

12%

14%

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

Volume % of Institutional Volume

1,069

1,480

1,062 1,085 1,064

928 898996 968

829 813

L+0

L+300

L+600

L+900

L+1200

L+1500

LIBOR Floor Upfront Fee Spread

($ in billions)

Total spreads for new issue second lien loans continued to decline in 1H ‘18

27

Pricing for Leveraged LoansSpreads continued their downward trend in Q2 ’18

Average Pricing of Highly Leveraged Loans

Source: S&P LCD.Notes: Assumes upfront fee is amortized evenly over an assumed three-year life; upfront fee represents original issue discount. Insufficient sample size in Q1 ‘09 and Q3 ‘09 to draw meaningful conclusion.

L+100

L+200

L+300

L+400

L+500

L+600

Straight Spread Upfront fee over three year assumed maturity LIBOR Floor Benefit

28

Payment DefaultsDefaults have increased slightly thus far in 2018 but remain low relative to historical levels

Source: S&P LCD.

Percent of Outstanding Leveraged Loans in Default or Bankruptcy

3.7%

10.7%

5.0%

2.3% 2.2%

1.2%

2.9%

3.5%

1.6%1.1% 1.3%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H '18

29

5. Private Equity M&A Trends

The competition to deploy capital among private equity firms remains as strong as ever

Scarcity of quality assets

Public companies shedding non-core assets

Financing remains robust for strong credit stories at any size range, with assertive new classes of lenders replacing traditional banks in much of the middle market

However, a potential trade war is starting to concern investors; investors are more carefully reviewing potential meaningful changes in upstream supply chain and downstream end markets

The demand for human capital is more competitive than ever, exerting negative pressure on businesses with large labor pools (trucking, wireline maintenance/repair, restaurants, etc.)

High valuations secured for quality companies motivated others to test the market

Aging private equity portfolios

Desire to return LP capital to facilitate new fundraising

Domestic growth expectations remain strong but less strong than last quarter; concern over a looming trade war is sinking in

Some sellers believe that the prolonged seller’s market may be nearing its end

Seeing private equity funds and hedge funds looking to monetize longer held post-reorg positions

Private Equity M&A Drivers

Buyside Sellside

31

Private equity funds have a record $1.1 trillion of dry powder, which should continue to drive deal activity

Recent LBO ActivityThe number and volume of LBO deals in Q2 ‘18 reverted to more normal levels off the elevated levels seen last quarter. However, capital within private equity funds has reached an all-time high and portends a future increase in dealmaking

Total U.S. Leveraged Buyout Count and Volume (2008 – Q2 ‘18)

($ in billions)

0

100

200

300

400

500

600

700

$0

$10

$20

$30

$40

$50

$60

$70

$80

Number of DealsLBO Volume

LBO Volume Number of Deals

Source: Thomson Reuters Buyouts Magazine, July 2018 issue; Preqin, July 2018. 32

Mega Private Equity TransactionsMega PE deal flow has increased in recent months and is on pace to dwarf the activity of 2017. Additionally, several recently raised mega-funds, as well as newly assertive pension funds and other long-term holders, are making their presence felt at the upper end of the market

Source: S&P Capital IQ.Note: includes only announced, closed and effective transactions in which a private investment firm is a buyer.

Announce Date Buyer Name Target Company Deal Value ($B) EV/EBITDA

Top 5 Deals 201827-Mar-2018 The Carlyle Group; GIC Pte. Ltd. Specialty Chemicals Business of Akzo Nobel

N.V.$12.5 NA

01-Feb-2018 PFA Pension; Pensionskassernes Administration A/S; ATP Pension-Service A/S; Macquarie Infrastructure and Real Assets (Europe) Limited; DK Telekommunikation ApS

TDC A/S $10.5 7.3x

07-May-2018 Blackstone Real Estate Advisors Gramercy Property Trust $7.5 17.6x07-May-2018 Elliott Management Corporation athenahealth, Inc. $6.9 32.3x27-Feb-2018 GIC Pte. Ltd.; Public Investment Fund; Colony Capital, Inc.; Crédit

Agricole Assurances S.A.; AmundiAccorInvest Group SA $5.4 12.0x

+ 25 additional transaction above $2 billion deal value

Total Count: 30 Mean $4.1 16.7xMedian $3.3 15.6x

Top 5 Deals 201714-Jul-2017 Bank Of China Group Investment Limited; Vanke Real Estate;

Hillhouse Capital Management; HOPU Jinghua (Beijing) Investment Consultancy

Global Logistic Properties Limited $20.9 27.6x

21-Jun-2017 Seagate Technology; Bain Capital; Innovation Network Corporation of Japan; Development Bank of Japan

Toshiba Memory Corporation $17.9 NA

18-Aug-2017 CPPIB; Access Industries; Energy Capital Partners Calpine Corporation $16.0 11.0x02-Jun-2017 China Investment Corporation Logicor Europe Ltd. $13.8 NA11-May-2017 British Columbia Investment Management Corporation; The Retail

Employees Superannuation Trust; Qatar Investment Authority; Macquarie Infrastructure and Real Assets Pty Limited

Endeavour Energy $8.7 28.7x

+ 29 additional transaction above $2 billion deal value

Total Count: 34 Mean $5.5 17.7xMedian $3.9 12.6x

33

Transaction MultiplesQ2 ‘18 multiples decreased slightly, but remain in line with previous years, confirming the clear perception that we remain in a seller’s market. Importantly, the reference levels to which multiples are applied are also under review, with the market considering increasingly aggressive add-backs. Valuation levels are now consistently exceeding the peak levels of the 2006-2007 era

Average U.S. Leveraged Buyout Purchase Price as a Multiple of LTM EBITDA (2008 – Q2 ‘18)

$500 million or more $250-$499 million (1)

Source: Standard & Poor’s Q2 ‘18 Leveraged Buyout Review.(1) Data unavailable for 2009 and Q2 ‘18 for $250-$499 million due to insufficient sample size.

9.5x

7.5x

8.4x

9.1x8.7x 8.7x

9.9x 10.1x 9.9x10.5x

10.0x10.5x

10.9x

10.0x10.4x

9.8x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18

8.6x

0.0x

8.0x 8.0x7.4x

7.7x 7.7x

9.1x8.7x

7.9x

6.5x

8.9x

9.7x

7.8x 7.9x

0.0x2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18

34

Private Equity DivestituresQ2 ‘18 PE-backed exit activity increased somewhat but remains broadly in line with previous quarters. IPO exit activity increased in the quarter, up from its recent depressed levels

U.S. Buyout-Backed Exit Volume (2008 – Q2 ‘18)

Source: Thomson Reuters, as of 6/30/18.

14 32 80 37 49126 168

102 57 73 13 21 9 30 19 39

514437

702

593

742 660

879

686

624 633

146 160 162 165 162 150

528469

782

630

791 786

1,047

788

681 706

159 181 171 195 181 189

0

200

400

600

800

1,000

1,200

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18

Num

ber o

f Exi

ts

IPO M&A

35

Private Equity FundraisingFundraising activity decreased slightly in Q2 ’18, possibly a hangover effect from the recent binge of the last few years. Mega funds are continuing to drive fundraising, while credit funds and other categories adjacent to private equity continue to receive additional attention

U.S. Private Equity Fundraising (2008 – Q2 ‘18)

($ in billions)

Selected Recently Reported Fund Raises

Source: Thomson Reuters Buyouts Magazine, July 2018 issue (buyout fundraising reflects money raised by U.S. buyout shops).

($ in billions)

$264

$66 $69

$99

$161

$186$203

$228$210

$242

$51

$85

$39

$67$51

$36

$0

$50

$100

$150

$200

$250

$300

Buyout Funds Raised

As of June 30, 2018Sponsor Fund Amount

Recently ClosedAmerican Securities Partners Eighth $7.0Carlyle Asia Growth Partners Fifth 6.5Clearlake Capital Group Fifth 3.6Strategic Value Partners Fourth 2.9Petershill Group First 2.5Thoma Bravo Discover Second 2.4

Currently Being RaisedCarlyle Partners Seventh $16.3Hellman & Friedman Ninth 16.0Warburg Pincus Thirteenth 13.5TPG Capital Eighth 12.0BDT Capital Third 9.0Blackstone Tactical Opportunities Second 8.0

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Balance Sheet FinancingAverage equity contributions in Q2 ‘18 increased from last quarter yet remains below the trend of recent quarters. The debt markets remain wide open

Sources of Proceeds for U.S. LBOs

Q2 ‘18

Average Equity Contribution to U.S. LBOs

2008 – Q2 ‘18

Source: Standard & Poor’s Q2 ‘18 Leveraged Buyout Review.

3.8%5.1%

2.4%3.6%

1.6% 1.4% 1.5% 1.9% 2.4% 1.6% 2.1%1.1% 3.1%

0.3% 0.4% 1.7%

42.6%

50.6%

43.8%41.8%

39.7%37.1%

38.5%

42.4% 43.2% 43.5%41.3% 42.6% 43.3%

45.2%

39.5%41.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Rollover Equity Contributed Equity

Bank Debt56.8%

Secured Debt0.1%

Sr. Unsec. Debt1.6%

Preferred Equity0.0%

Common Equity39.4%

Rollover Equity1.7%

Other0.4%

Total Equity: 41.1%

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6. Hostile M&A / Shareholder Activism

Unsolicited M&A BidsUnsolicited M&A activity in 2018 is on pace to near its highest levels in the last decade in terms of transaction values, driven by a significant uptick in the number of bids

Value and Number of Domestic Unsolicited M&A Bids

* 2018 data has been annualized.Sources: FactSet Mergerstat and Thomson Reuters, as of 6/30/18.Notes: The above chart includes both unsolicited and hostile bids.

FactSet classifies unsolicited bids as offers in which there were no prior discussions between the target and the acquirer.FactSet classifies hostile bids as unsolicited bids that were rejected by the board of directors of the target.Domestic M&A includes minority equity deals, equity carve-outs, exchange offers, open market repurchases, and deals with undisclosed transaction values.

Value as a Percentage of Overall Domestic M&A Activity

25.4% 5.0% 12.0% 10.0% 6.5% 9.8% 21.3% 13.0% 13.5% 13.7% 15.9%

$234.2

$37.7

$97.9 $104.2

$52.6

$101.0

$315.6

$237.9$222.3

$179.6

$316.495

56 57 58

4034

40

4855

36

74

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*

Value ($ in billions) Number of Bids

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High-Profile Hostile M&A Bids

Source: FactSet Mergerstat, as of 6/30/18.1. Investor group comprised of Blake W. Nordstrom, Peter E. Nordstrom, Erik B. Nordstrom, James F. Nordstrom, and Anne E. Gittinger.Notes: Includes withdrawn transactions.

Disclosed transactions only.

Value of Largest Announced Hostile M&A Bids in 2017 and 2018

Date Announced Acquirer TargetValue

($ in billions) Industry

5/23/2018 Comcast Corp. Twenty-First Century Fox, Inc. $77.5 Media and Entertainment

1/16/2018 MGM Growth Properties LLC VICI Properties, Inc. $10.4 Real Estate

3/5/2018 Investor Group1 Nordstrom, Inc. $7.4 Retail

3/26/2018 Gebr. Knauf KG USG Corp. $6.1 Materials

1/16/2018 Related Fund Management LLC Ladder Capital Corp. $5.7 Real Estate

11/6/2017 Broadcom Ltd. QUALCOMM, Inc. $106.0 Technology

10/31/2017 Emerson Electric Company Rockwell Automation, Inc. $28.2 Industrials

2/21/2017 Ashford Hospitality Trust, Inc. FelCor Lodging Trust, Inc. $2.7 Real Estate

7/11/2017 Vintage Capital Management Rent-A-Center, Inc. $1.3 Consumer Products

3/13/2017 Mill Road Capital Management Lifetime Brands, Inc. $0.3 Consumer Products

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Shareholder Activism

The number of announced proxy fights rose every year from 2012 through 2016 but has since declined in 2017 and 2018

Compromise and settlement frequently reached prior to launch of proxy contest or shareholder vote may diminish the number of proxy contests ultimately initiated

Following the successive declines in activists’ success rates in recent years relative to the peak of 73% in 2014, the success rate has returned to 73% thus far in 2018

The majority of proxy fights continue to be based on board representation

Index fund complexes and other institutional investors have begun to aggressively make their views known

Number of Announced Proxy Fights Campaign Type

Success Rate

Activists are often successful

Source: SharkRepellent, as of 6/30/18.

77

90 92

105 109

7984

2012 2013 2014 2015 2016 2017 2018

58% 56% 57%

65%61%

66%61%

38% 36%31%

28%31%

24% 26%

4%8%

12%7% 8% 10%

13%

2012 2013 2014 2015 2016 2017 2018

Board Rep Board Control Other

52%

60%

73%

58%55%

52%

73%

2012 2013 2014 2015 2016 2017 2018

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Public Company Activist Fund Industry Houlihan Lokey’s Role

Elliott Management Industrials Activist Shareholder Advisor

Project Stingray Confidential Auto Activist Shareholder Advisor

Cannell Capital / Cove Street Capital Technology Company Advisor

Cornwall Capital Chemicals Company Advisor

Groveland Capital Holding Company in Diverse Industries Company Advisor

Barington Capital Casual Restaurants Activist Shareholder Advisor

Lone Star Value Management Biochemical Company Advisor

Meson Capital / Boston Avenue Medical Device Company Advisor

Clinton Group / Spear Point Capital Data Storage / Consumer Electronics Company Advisor

Steel Partners Chemicals Company Advisor

P. Schoenfeld Asset Management Telecommunications Activist Shareholder Advisor

Starboard Value / Crescendo Partners / DC Capital Engineering Company Advisor

OTK Associates Hotels Company Advisor

Boston Avenue / Raging Capital Telecommunications Equipment Company Advisor

Selected Recent HL Activist Shareholder Experience Across Numerous Industries

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Activism 2.0: Landscape has changed from Activism 1.0 (2004 — 2014)

Less Low Hanging Fruit: Activism 1.0 catalysts (dividends / buybacks) have diminished as drivers

Activism 2.0 has shifted towards management and operations, which often results in campaigns aimed at CEOs (as well as boards)

M&A demands by activists have increased with activists successfully pushing for previously unthinkable transactions

M&A is increasingly viewed as one of the most important value creating areas available

The successful passing of “The Tax Cuts and Jobs Act” will be a major catalyst for M&A driven activism moving forward

Ownership Concentration: Continued growth of the largest asset managers has led to increased concentration of stock ownership

Regardless of industry, performance or size, no company should consider itself safe from hedge fund activism; even respected industry leaders outperforming the market have come under attack (as recently as Apple in January 2018)

The major activist hedge funds are very experienced and sophisticated with professional analysts, traders, bankers and partners that produce detailed analysis (“white papers”) of a company’s management, capital structure, operations and strategy; these investors have showed no signs of slowing down in 2017

North American activist funds earmarked $155 billion in 2017 for activist investing

Activist investors deployed approximately $62.2 billion in 2017, accounting for more than double that deployed in all of 2016 Recent trends in equity investing (rise of index funds and ETFs), as well as a rise in computer based trading algorithms has created a more receptive market for

activism, aligning the value-driven activist investors with institutional investors

Over the last 5+ years, larger and more notable corporations have been hit by key activist campaigns Companies have more frequently succumbed to these activist investors and at times, accepted unfavorable settlement terms instead of pushing forward and

fighting through a proxy contest

The strength and sophistication of 2.0 activist investors, and increase of spending on outside resources (e.g. consultants, valuation experts, etc.) is highlighted by the settlement rate in recent campaigns

The average time to settlement, from the first campaign announcement, decreased from 146 days in 2013 to just 56 days in 2016

Sophisticated activist investors can quickly identify which companies are susceptible to an activist attack and are creating more advanced theses / attacking new areas of corporate responsibility

Activist investors will still look for more specific characteristics, including: potential for a spin-off or asset sale, cost cutting opportunities, replacement of management or Board, a restless shareholder base or any other fixable, value-oriented issue

Activism Changing Landscape Activism Changing Landscape

Activist Threat and Sophistication is Increasing

Source: Harvard Law School Forum, Forbes, FactSet

– Chris Cernich, Strategic Governance Advisors“The days when any activist could swoop in with a plan to leverage a company and pay a dividend are over.”

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By the time a 13-D is filed, the activist has already had ample time to develop a strategy and build a narrative around the company’s weaknesses It is imperative for a company to prepare before an activist launches a campaign; key preparation tactics include: Clearly communicate the company’s strategic goals via forward-looking statements Conduct a strategic alternatives review to demonstrate proactive stewardship by the Board Identify likely activist agenda and potential “asks,” including a fulsome benchmarking analysis, capital structure review and corporate governance

review Promote good shareholder relations with key institutional and individual shareholders Understand the tools to deter activists (e.g. poison pill, litigation, etc.)

Intersection of M&A and Activism Intersection between trends: Activism and M&A appears to be structural and in our view will be sustained, particularly with

mid-cap companies

That intersection provides numerous buy-side opportunities with a front-foot strategy focused on advantageous timing

Two-Pronged Company Strategy Offensive Strategy: The intersection between activism and M&A provides numerous opportunities if a buyer is on its front

foot and pursues a range of strategic alternatives, including time-sensitive acquisitions, divestitures, joint ventures, etc.

Defensive Strategy: Adopt shareholder engagement and governance practices along with cutting edge monitoring and deeper access to event-driven funds to permit customized engagement and enhance ability to be proactive and get in front of trades

Best-In-Class Advisors Houlihan Lokey is a ONE-STOP-SHOP with a leading activist practice, world renowned valuation practice, defined special

committee group and an internal strategic consulting capability that no other Wall Street firm can offer and is uniquely positioned to provide unparalleled advice to boards and senior management teams of middle market companies in activist situations

Activism Changing Landscape (cont.)Houlihan is able to develop a strategy tailored to company and industry-specific insights based on our unique capabilities and best-in-class advisors

Preparedness is the Best Offense

Where We (Houlihan Lokey) Come In…

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