Brenen Sieber,Partner with Baker Tilly Virchow Krause, LLP and Managing Director with Baker Tilly Capital, LLC, spoke at our November Chapter Meeting on the Current State of the M&A Market.

1. 1
Baker Tilly Capital, LLC
©Baker Tilly Virchow Krause, LLP
M&A Presentation
11/07/14

2. 2
Introduction

3. 3
Table of Contents
3
I. Overview of Baker Tilly Capital............................................................... 4
II. Current Market & Trends......................................................................... 8
III. Valuation Considerations........................................................................ 17
IV. Sale Process & Timeline......................................................................... 21

4. 4
4
Overview of Baker Tilly Capital

5. 5
Overview of Baker Tilly Capital
Subsidiary of Baker Tilly
› Baker Tilly is the full service accounting
and advisory firm
› Ranked as one of the twenty largest
certified public accounting firms in the
U.S. according to Accounting Today’s
“Top 100” list
5
Baker Tilly Capital
› Boutique investment bank
› Specializing in merger and acquisition,
transaction, and corporate finance services.
› Completed hundreds of transactions
representing billions of dollars
› Clients include public companies, privately
held companies, and private equity groups
We speak your language and identify with your goals
to consistently deliver solutions that are just right for you

6. 6
Overview of Baker Tilly Capital
Independent member of Baker Tilly International
› World’s 8th largest accounting and business services network.
› Represented by 161 firms in 137 countries with more than 26,000 people in 738 offices.
› Integrated teams with in-country operations for: Canada, China, Mexico, and UK.
Blue shading represents the Baker
Tilly International global network.

7. 7
Baker Tilly Advantages
Compliance
Services
Tax Strategy
Services
People
Services
Consulting
Services
Transaction
Services
Employee
Benefits
Services
International
Trade
Investment
Advisor
Services
˃ Audits, Reviews,
Compilations
˃ Specialized
Financial Reports
˃ Budget Analysis
& Development
˃ Proforma &
Projected
Financial
Statements
˃ Accounting
System Review
˃ Internal Audit
Review
˃ Tax Planning
˃ Tax Return
Preparation
˃ Cost Segregation
Studies
˃ Estate Planning
˃ Retirement /
Pension Planning
˃ Sales / Use Tax
Consulting
˃ State Income
and
Franchise Tax
Planning
˃ Property Tax
Consulting
˃ Temporary and
Permanent
Placement
˃ Direct Hire
Placement
˃ Succession
Planning
˃ Operations
Management
˃ Customer
Management
˃ Financial
Management
˃ Technology
Management
˃ Strategic
Sourcing
˃ International
Trade –
Marketing,
Sourcing, Global
Strategies, and
Compliance
˃ Mergers and
Acquisitions
˃ Investment
Banking Services
˃ Due Diligence
˃ Valuation
Services
˃ Financial
Modeling
˃ Business Review
Services
˃ Dispute Services
˃ Health & Welfare
Employee
Benefits
Consulting
˃ Independent
Insurance
Brokerage
˃ Provider Due
Diligence
˃ Regulatory
Compliance
˃ Risk
Management &
Insurance
Program Review
˃ Market
Expansion
˃ Sourcing
˃ Global Strategies
˃ Compliance
˃ Complex Tax
Consulting
˃ Transaction
Support
˃ In-country
Support
˃ International Risk
Analysis
˃ Fiduciary Review
˃ Fee-based
Independent
Investment
Consulting
˃ Unlimited Open
Access to
Investments
˃ Leverage Plan to
Reduce Costs
˃ Fiduciary
Protection for
Plan Sponsor
˃ Employee
Education
Baker Tilly Capital can provide a greater breadth of services
than any other regional investment banking firm

8. 8
8
Current Market & Trends

9. 9
U.S. Financial Markets
U.S. GDP & Stock Growth U.S. GDP Growth Rate
› U.S. GDP has improved
US GDP
Date Growth Rate
30-Jun-2014 4.06%
31-Dec-2013 4.57%
31-Dec-2012 3.47%
31-Dec-2011 3.64%
31-Dec-2010 4.56%
31-Dec-2009 0.11%
31-Dec-2008 -0.92%
31-Dec-2007 4.40%
31-Dec-2006 5.12%
31-Dec-2005 6.52%
31-Dec-2004 6.31%
Source: U.S. Bureau of Economic Analysis
significantly since the recession,
increasing from essentially zero in
2008 & 2009 to 4.1% in June
2014.
› It is anticipated the 3rd quarter
2014 GDP growth rate will be
approximately 4.6%, more closely
aligning to CY 2013.
› Using the S&P 500 index as a
benchmark, the U.S. stock market
is outperforming its pre-recession
numbers.
› In Sept. 2014 the S&P 500 hit
record highs with prices above
$2,000, but since has retreated
5.2%. The fed was going to raise
interest rates, but that is currently
on hold as prices have stabilized.
U.S. Historical Stock Prices
S&P 500
Date Stock Prices % Change
10-Oct-2014 $1,906 3%
31-Dec-2013 $1,848 30%
31-Dec-2012 $1,426 13%
30-Dec-2011 $1,258 0%
31-Dec-2010 $1,258 13%
31-Dec-2009 $1,115 23%
31-Dec-2008 $903 -38%
31-Dec-2007 $1,468 4%
29-Dec-2006 $1,418 14%
30-Dec-2005 $1,248 3%
31-Dec-2004 $1,212
Source: Yahoo Finance S&P 500 Data

10. 10
Baby-boomers – Effect on M&A
Impending Retirement of the Baby-boom Generation
› We live in an aging world with birth rates down and baby boomers retiring (10,000 per day according to
Pew Research Center).
› We are now on the cusp of what is expected to be the greatest wave of business transition in U.S.
history.
› A great deal of the assets held by baby boomers (which represent a huge pool of wealth) will be up for
sale as they begin to transition from the “working” years to the “Golden” years.
› Those near retirement will seek to take some (if not all) of their chips off the table and shift their
“business” assets into more diversifiable “liquid” assets.
› Below are some compelling statistics surrounding baby boomers:
› A survey by another international accounting firm, one third (33%) of global businesses are planning
a sale in the next 2 years, and over 50% selling within the next 10 years.
› Ninety percent of all businesses with employees are family owned, and one-third of Fortune 500
firms are family controlled.
› Children of baby boomers are less likely to take over the family business as only a third of family
businesses are successfully transferred to the next generation.
› As we are currently experiencing a seller’s market in M&A, this trend could soon see a dramatic shift
as more companies are up for sale.

11. 11
M&A Available Capital
Available Capital
› American companies are sitting on trillions of
dollars worth of cash despite slightly
decreasing from 2013
› Investors have demanded a higher return on
their investment and M&A remains a key
focus to achieve such returns
› Deal flow has slowed in Q3 2014 as
valuations continue to increase in a sellers
market
› Although private equity activity is down from
Q2 2014, PE firms continue to sit on
significant amounts of dry powder which is
required to be put to use in the near future
› If Q4 2014 activity is in-line with this years
previous quarters, 2014 could still set post-crisis
highs for both deal flow and capital
invested

12. 12
M&A Market Deal Activity
U.S. Middle-Market M&A Activity
3,955 3,849 3,866
3,634 3,598
3,314
5,394
4,559
4,409
2,992
2,267 2,514
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 9/13
YTD
9/14
YTD
6,000
# of Transactions - $500M - $1B
# of Transactions - $100M - $499M
# of Transactions - <$100M
Deal Value
5,000
4,000
3,000
2,000
1,000
0
# of Deals
# of Transactions - $500M - $1B 134 143 178 225 120 78 173 151 168 171 120 137
# of Transactions - $100M - $499M 781 795 862 852 598 427 688 760 717 711 511 633
# of Transactions - <$100M 3,040 2,911 2,826 2,557 2,880 2,809 4,533 3,648 3,524 2,110 1,636 1,744
# of Transactions - Middle Market 3,955 3,849 3,866 3,634 3,598 3,314 5,394 4,559 4,409 2,992 2,267 2,514
Deal Value $338 $350 $400 $421 $277 $194 $341 $346 $343 $329 $233 $281
$600
$500
$400
$300
$200
$100
$0
Deal Value
Source: Dealogic and Robert W. Baird
▪ Although it was a slow start to 2014 for M&A, deal volume YTD 2014 is up compared to 2013.
▪ Average number of transactions <$100M from 2004–2012 was 3,192 which was down 33.9% in 2013 to 2,110 deals.
▪ Assuming the current run rate of YTD 9/14 transactions <$100M for CY 2014 will be increase 10.2% compared to CY 2013.

13. 13
M&A Market Deal Valuation
LTM Sep
U.S. Middle Market Enterprise Value to Median EBITDA, EBIT, and Revenue Multiples
Transaction Size 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
EV/EBITDA
<$100M 7.6x 9.2x 8.1x 8.5x 7.8x 7.0x 7.0x 8.3x 7.1x 6.8x 7.8x
$100M - $499M 9.0x 9.9x 9.2x 11.2x 11.1x 8.1x 10.1x 9.3x 9.1x 9.5x 9.9x
$500M - $1B 10.3x 10.1x 12.0x 10.8x 10.6x 7.8x 9.0x 9.9x 8.7x 8.4x 8.6x
Middle Market 8.6x 9.7x 9.2x 9.9x 9.5x 7.6x 8.6x 9.2x 8.1x 8.4x 8.8x
EV/EBIT
<$100M 9.6x 10.8x 10.0x 10.8x 10.1x 7.8x 10.3x 11.3x 10.3x 12.5x 11.3x
$100M - $499M 11.7x 13.5x 13.3x 14.5x 13.7x 11.0x 12.2x 12.8x 13.0x 13.7x 13.8x
$500M - $1B 14.0x 13.8x 17.0x 16.1x 13.7x 13.6x 13.4x 12.9x 13.8x 13.6x 11.7x
Middle Market 11.2x 12.4x 12.5x 12.8x 11.6x 9.7x 11.3x 12.1x 11.9x 12.5x 12.5x
EV/Revenue
<$100M 0.95x 0.95x 0.96x 0.92x 0.91x 0.80x 0.94x 1.00x 0.81x 0.83x 0.82x
$100M - $499M 1.34x 1.31x 1.24x 1.27x 1.30x 1.22x 1.24x 1.39x 1.36x 1.43x 1.43x
$500M - $1B 1.33x 1.55x 1.69x 1.51x 1.42x 1.46x 1.56x 1.04x 1.23x 1.36x 1.64x
Middle Market 1.11x 1.10x 1.08x 1.01x 1.00x 0.90x 1.07x 1.14x 1.00x 1.01x 1.09x
Source: Capital IQ and Robert W. Baird & Co.
▪ Deal multiples of EBITDA have remained stable for lower middle market companies and are starting to see a slight
uptick in 2014
▪ Multiples of companies less than $25 million transaction value typically realize a lower multiple range

14. 14
M&A Market Deal Financing
0.9x
3.0x
Middle Market - Debt Multiples
1.0x 1.0x 0.8x 1.1x
2.4x 2.4x 2.6x 2.7x
Equity and Debt Contributions
35.5% 37.0% 37.0% 38.4% 40.3%
13.9% 15.0% 16.1% 12.3% 16.9%
100.0%
80.0%
60.0%
40.0%
20.0%
▪ Middle market debt markets have stabilized, with capital markets and banks showing an appetite for risk with
quality deal attributes
5.0x
4.0x
3.0x
2.0x
1.0x
0.0x
2010 2011 2012 2013 2014 YTD
Sr Debt/EBITDA Sub Debt/ EBITDA
50.7% 48.0% 46.8% 49.3% 42.7%
0.0%
2010 2011 2012 2013 2014 YTD
Equity Sub Debt Senior Debt

15. 15
M&A Current Trends
M&A Current Status
› Deal activity rebounded strongly in Q2 2014 and the uptick is expected to continue
throughout the second half of 2014
› High level of capital in the market place ready to be put to use for both strategic and
financial buyers
› Aggressive financing markets with interest rates at historical lows
› Strong macro-economic conditions has helped renew market confidence
› Low supply and strong demand for quality companies have continued to push multiples
upward
› High competition for sell-side engagements due to limited supply
› Potential success in receiving mandate can be challenging without prior
relationship

16. 16
M&A Future Trends
M&A Future Outlook
› Previously challenging environment starting to pick up again based on recent data.
› Strategic and financial buyers have large cash reserves and excess capital.
› Credit on favorable terms is readily available.
› Demographics point toward greater sell-side transactions, transfers of wealth from the
baby boomer group as they move into retirement age.
› Opportunities in emerging markets.
› CEO confidence seems to be on the rise.
› Increasing valuations.
› China should continue to be a buyer of resources and intellectual property.
› Weaker yen means Japan could be a strong acquirer on international growth.
› Increased deal activity expected in the following sectors:
› Industrial/Manufacturing
› Food & Beverage
› Health Care
› Energy

17. 17
17
Valuation Considerations

18. 18
Determining Value
What is a company’s value?
› Traditional seller value expectations
› Country club value (two companies are never identical)
› A number ($5 million for each of four children or what the seller needs to retire)
› Logical (see valuation chart on next page)
› Discounted cash flow model based on projections
› Multiple of EBITDA, revenues, cash flow
› Asset value
› Most logical
› What a buyer will pay for a business, combined with a strategic process to drive
value by maximizing negotiating leverage and competition among buyers
The market will determine value – just like in real estate. A business can be
cleaned up by understanding attributes that drive interest and value.

19. 19
What is the Company Worth?
Bridging Valuation
› Examine key metrics of valuation for
specific industry
› In depth analysis of quality of
customer relationships and
suppliers
› Key end markets served
› Strength of backlog and contracts
› Growth opportunities
› Geography
› Recurring service & revenue
› Analyze non-operating and non-recurring
expenses for potential
add-backs to EBITDA

20. 20
Attributes that Drive Interest and Value
Company Characteristics Increases Value Decreases Value
General Business Attributes
Market Position Industry leader in an identified niche Small player in highly competitive market
Product Differentiation Proprietary and/or branded products, registered IP Commodity products and/or contract manufacturing
Industries Served Attractive, growing, diverse industries Mature, cyclical, concentrated industries
Growth Opportunities Strong organic growth prospects and excess capacity Weak organic growth prospects and nearing full capacity
Infrastructure / Capex Up-to-date, well maintained equipment and technology Deferred maintenance with significant capex required
Financial Attributes
TTM Revenue Over $20 million in annual revenues or large for market Under $20 million in annual revenue or small for market
TTM Adjusted EBITDA Over $3 million in EBITDA or high for market Under $3 million in EBITDA or low for market
Historical Rev. & EBITDA Trends Consistent growth and profitability Declining or volatile earnings, losses or recent turnaround
Asset Base Adequate asset base to support leverage Inadequate asset base to support leverage
Capital Expenditures Low annual capital investment requirements Highly capital intensive
Customer Attributes
Customer Concentration Diverse customer base (no customer > 15% of sales) High customer concentration (customers > 30%)
Recurring Revenue High amount of recurring rev., multi-year customer contracts High customer turnover with low recurring revenue
Length of Relationship Average top customer relationship > 5 years Average top customer relationship < 5 years
Management & Workforce
Management Team Talented young team with desire to continue post sale Key management retiring / leaving after sale
Average Employee Tenure High tenure / low turnover Low tenure / high turnover
Union Non-union workforce Unionized workforce

21. 21
21
Sale Process & Timeline

22. 22
Starting the M&A Process
Seller Advantages
Motivations Buyer Motivations
• Owner succession planning
• No heirs or family transition
• Entrepreneur need of capital or shift
in focus
• Industry consolidation
• Increased geographic reach with
larger partner
• Market value
• Transition to employees
Disadvantages
• Growth through:
• Acquisitions
• Geographic expansion
• Products/Services
• Diversification
• Technological advancement
• Industry consolidation

23. 23
Sale Phases and Timeline
Phase 2
Marketing
Program
Implementation
Phase 4
Contract
Negotiations
Phase 3
Respond to
Buyers
Due Diligence
Phase 1
Education &
Document Prep
› Gather information
about your company
› Review market and
industry data
› Discuss best options
for strategy
› Create Confidential
Information
Memorandum (CIM)
› Develop database of
potential buyers
› Proactively approach
buyers
› Send out teasers and
Non-Disclosure
Agreements (NDAs)
› Manage distribution of
CIMs
› Qualify interest levels
› Respond to buyer due
diligence requests
› Convey company’s
strengths and
opportunities
› Lead pre-negotiations
› Facilitate non-binding
Letter of Intent (LOI)
› Conduct early
negotiations
› Maximize value of
transaction
› Understand and
communicate
economic and tax
considerations
› Negotiate LOI to
address buyer terms
and conditions
› Close successful
acquisition
4 Weeks 6 Weeks 5 Weeks 5 Weeks

24. 24
Sale Process and Timeline
24
# of Weeks
Strategic Planning 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Client / management discussions
Gather business & financial information
Marketing strategy development
Compile buyers list
Materials
Authoring Confidential Information Memorandum (CIM)
Authoring teaser
Create Non-Disclosure Agreement (NDA)
Prepare data room materials
Select phase II buyers
Marketing
Contact buyers
Issue teasers
Issue Confidential Information Memorandums (CIMs)
Buyer follow-ups
Negotiation and Due Diligence
Detailed analysis of buyer
Further negotiate terms and structure
Select preferred buyer
Finalize Transaction
Draft and execute definitive agreement
Conduct due diligence
Close transaction

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25
Questions