1. M & A a n d C a p i t a l M a r k e t s U p d a t e – 3 Q 2 0 2 0
CONFIDENTIAL
M&AandCapitalMarketsUpdate
1
3 Q 2 0 2 0
2. M & A a n d C a p i t a l M a r k e t s U p d a t e – 3 Q 2 0 2 0
CONFIDENTIAL
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2
Jobs StartedFlowingas COVIDRestrictionsEased…
6.7x
Avg. Middle Market
EV/EBITDA Multiple(1)
86%
of Deals Closed Had an EV
Below $250 Million
$3.3 Trillion
Current Cash Balance of S&P
500 Companies
Note: (1) Middle market defined as transactions with values at or below $250 million. Source: GF Data, Capital IQ
Unemployment Continued to Decrease From Its 2020 Peak as the Economy Opened Back Up
Jan 20: 3.6%
Sep 20: 7.9%
↑119%
“The Country began to see significant easing of COVID restrictions in 3Q, leading to
businesses opening back up and ultimately driving strong job growth. Both the public and
M&A markets responded in kind with considerable growth and while the M&A market hit
the pause button in 2Q, it returned with a vengeance to prior levels.
With the election and mounting COVID concerns, 3Q’s growth, gains, and return to
normal may be short lived as many economists are expecting to see a pullback, possibly
back to 3Q levels.”
JJ Lane – Vice President
Apr 20: 14.7%
3. M & A a n d C a p i t a l M a r k e t s U p d a t e – 3 Q 2 0 2 0
CONFIDENTIAL
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
1,000
1,500
2,000
2,500
3,000
3,500
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
0.0%
1.0%
2.0%
3.0%
4.0%
2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Capital IQ, St. Louis Fed, European Central Bank, U.S. Department of the Treasury as of 9/30/2020
3
0.09%
1.5%
1.2%
0.8%
…DrivingStrongMarket& GDPGrowth
2Q 2020: 3,100
3Q 2020: 3,363
↑8.5%
S&P 500 Continues to Climb in 3Q 2020… …U.S. Real GDP Grew A Record Setting 33.1% in 3Q, but down YoY
Fed Funds Rate Sees a Slight Uptick …As Treasury Yields Remained Flat
Q2: -9.5%
Q3: -2.9%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
10 Year 20 Year 30 Year
4. M & A a n d C a p i t a l M a r k e t s U p d a t e – 3 Q 2 0 2 0
CONFIDENTIAL
$2,388 $2,394
$1,996 $2,104 $2,166 $2,189 $2,074
$2,969
$3,370 $3,347
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2018 2019 2020
SP 500 Cash Balance
…With the U.S. M&A Market Mirroring the Global IncreaseGlobal M&A Activity Rebounded in 3Q…
U.S. Middle Market Deals Picked Up in 3Q(1)… …As Cash Reserves Remained Strong Due to COVID-19 Concerns
4
($ in billions)
Note: (1) Middle market defined as transactions with values at or below $250 million. Source: GF Data, Capital IQ
($ in billions)
($ in billions)
M&AReturnedFromits Q2 COVIDHibernation…
$428 $339 $325 $411 $501 $284 $281 $154
$58
$309
1,246
1,395 1,453
1,339 1,309
1,423 1,493
1,316
650
975
0
200
400
600
800
1,000
1,200
1,400
1,600
$0
$100
$200
$300
$400
$500
$600
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2018 2019 2020
Deal Value Deal Count
919 1,041 1,089 1,045 989 1,103 1,111 1,029
543
743
199
252 262 218 220
228 254
224
80
150
128
102 102
76 100
92 128
63
27
82
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2018 2019 2020
Under $100M $100M-$500M +$500M
$999 $736 $764 $901 $938 $652 $917 $555 $302 $837
12,165 12,262 13,211 12,322 11,666
11,906
13,259
11,879
8,513
11,101
7,500
8,500
9,500
10,500
11,500
12,500
13,500
14,500
$0
$200
$400
$600
$800
$1,000
$1,200
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2018 2019 2020
Deal Value Deal Count
5. M & A a n d C a p i t a l M a r k e t s U p d a t e – 3 Q 2 0 2 0
CONFIDENTIAL
6.6x
7.1x
8.4x
9.3x
7.1x 7.0x
10.0x
6.9x 6.9x
7.8x 7.4x
7.9x
8.8x 8.5x
Manufacturing Business Services Health Care Consumer Distribution Media & Telecom Technology
2019 YTD 2020
Middle Market EV / EBITDA Multiples Stayed Strong with Media & Telecom Deals Experiencing the Largest Increase
5
$34.1M Historical
Average
Note: (*) 2020 annual run rate as of 9/30/2020 (1) Middle market defined as transactions with values at or below $250 million. Source: Pitchbook, GF Data, Capital IQ
5 Year Average
…WhileM&AValueRemainedRelativelySteady
Median Middle Market M&A Deal Values Retreated(1)…
($ in millions)
…But U.S. Middle Market EV / EBITDA Multiples Remained Steady
6.7x
7.2x 7.2x
7.1x
7.2x
2016 2017 2018 2019 2020*
Median Deal Value
$31.0 $30.8 $30.1 $31.0 $32.1 $35.0 $37.5 $39.9 $37.2 $36.1
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
Median Deal Value Average
6. M & A a n d C a p i t a l M a r k e t s U p d a t e – 3 Q 2 0 2 0
CONFIDENTIAL
1,394 1,611 1,534 2,019 2,122 2,223 2,434 2,947 3,029
1,585
996
1,182
950
1,174 1,280 1,204
1,310
1,461 1,397
615
58.3% 57.7% 61.8%
63.2% 62.4% 64.9% 65.0% 66.9% 68.4%
72.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
0
1,000
2,000
3,000
4,000
5,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
Add-On Non Add-On Add-On %
$76 $101 $160 $176 $154 $224 $252 $219 $316 $128
175
202
292
363 364 374
422
384
343
167
0
100
200
300
400
500
$0
$50
$100
$150
$200
$250
$300
$350
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
Capital Raised Number of Funds
4.6x 4.4x 6.1x 7.2x 5.4x 5.2x 6.2x 5.8x 5.9x 5.7x
4.6x 4.2x
4.0x
5.7x
4.4x 5.3x
5.9x 5.8x 6.8x 7.0x
9.1x 8.4x
10.0x
12.8x
10.0x
10.5x
12.2x 11.5x
12.7x 12.7x
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
Debt/EBITDA Equity/EBITDA
PE buyout multiples continue to sit near all time highs as more
software deals are getting done, elevating overall multiples
Add-on deals remained strong in 3Q 2020 as they accounted for
the highest percentage of LBOs in history
Although PE fundraising is significantly down YoY, fundraising is
looking to finish strong in 2020 as the top mega-funds look to
close their latest funds totaling $62 billion
U.S.PrivateEquityM&AEnvironment
6
($ in billions)
Note: (*) 2020 annual run rate as of 9/30/2020 Source: Pitchbook, GF Data, Capital IQ
PE Buyout Multiples Declined to 2019 Levels
PE Fundraising on Pace for Worst Year Since 2013 PE Add-On Deal Continued to Increase as a % of Total Deals
7. M & A a n d C a p i t a l M a r k e t s U p d a t e – 3 Q 2 0 2 0
CONFIDENTIAL
Debt MultiplesDebt Pricing(1)
LeverageMultiples& Pricing
Debt & Equity Contribution
7
Debt Type
Company Size /
Lender Type
2Q 2020 3Q 2020
Senior Cash Flow Debt
Bank L+ 3.8% - 4.5% L+ 3.25% - 4.25%
Non-Bank <$7.5 Million
EBITDA
L+ 7.0% - 8.5% L+ 6.5% - 8.0%
Non-Bank >$15.0 Million
EBITDA
L+ 6.5% - 8.0% L+ 5.5% - 7.5%
<$5.0 Million EBITDA L+ 9.0% - 10.5% L+ 9.0% - 10.5%
Unitranche Debt >$10.0 Million EBITDA L+ 8.0% - 9.5% L+ 7.0% - 8.5%
>$20.0 Million EBITDA L+ 7.0% - 8.0% L+ 6.5% - 7.5%
Subordinated /
Mezzanine Debt
<$5.0 Million EBITDA 13.0% - 14.5% 13.0% - 14.5%
>$10.0 Million EBITDA 11.0% - 12.5% 11.0% - 12.5%
>$20.0 Million EBITDA 10.5% - 11.5% 10.5% - 11.5%
Note: (*) 2020 annual run rate as of 9/30/2020 (1) Source: GF Data, Capital IQ LCD, SPP Capital
3.0x 3.3x 3.0x 3.2x 3.1x
0.8x
0.9x
0.8x 0.8x 0.6x
3.8x
4.2x
3.8x 4.0x
3.7x
2016 2017 2018 2019 2020*
Senior Debt / EBITDA Sub Debt / EBITDA
34.0% 35.3% 34.2% 40.8%
13.0% 9.4% 8.4%
7.1%
39.8% 41.1% 47.6% 35.4%
13.2% 14.2% 9.8% 16.7%
$10-$25mm $25-$50mm $50-$100mm $100-$250mm
Senior Debt Sub Debt Equity Rollover Equity
