Industrial Tech 2015 04

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Sector UpdateApril 2015

Industrial Technology

In this Issue:

Industrial Technology Sector Update

Global Industrial Technology M&A Market Industrial Technology Public Comparables Overall U.S. M&A Market U.S. Debt Capital Markets

Industrial Technology

Investment Banking

Corey [email protected]+1 312 364 8619

Philipp [email protected]+49 69 509527 610


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William Blair & Company

Industrial Technology Investment BankingTable of Contents

Table of Contents

Executive Summary Industrial Technology ................................................................................................................................................................................... 1

William Blair Spotlight Recent Industrial Technology Transactions ................................................................................................................................. 9

Select William Blair Industrial Technology Transactions ........................................................................................................................................................ 10

William Blairs Industrial Technology Contacts............................................................................................................................................................................ 11

Industrial Technology Macroeconomic Drivers............................................................................................................................................................................ 12

Global Industrial Technology M&A Activity ................................................................................................................................................................................... 14

Annual M&A Trends .............................................................................................................................................................................................................................. 14

Participant Trends.................................................................................................................................................................................................................................. 15

Notable 2014 Industrial Technology Transactions ................................................................................................................................................................ 16

Industrial Technology Public Comparable Performance & Trends ..................................................................................................................................... 18

Overall Industrial Technology .......................................................................................................................................................................................................... 18

Diversified Industrial Technology .................................................................................................................................................................................................. 19

Industrial Controls and Communications ................................................................................................................................................................................... 20

Test, Measurement, and Instrumentation .................................................................................................................................................................................. 21

Electrical Components and Equipment ........................................................................................................................................................................................ 22

Power Transmission, Actuation, and Mechanical ................................................................................................................................................................... 23

Machinery, Integrated Systems, and Other ................................................................................................................................................................................ 24

Diversified Industrials Index ............................................................................................................................................................................................................. 25

U.S. M&A Market Update .......................................................................................................................................................................................................................... 26

U.S. Equity Capital Markets Summary ............................................................................................................................................................................................... 28

U.S. Leveraged Finance Market Update ............................................................................................................................................................................................. 29

Disclosures ...................................................................................................................................................................................................................................................... 30


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Industrial Technology Investment BankingExecutive Summary Industrial Technology 1

Executive Summary Industrial Technology

Shift to Next-Generation Manufacturing Drives M&A Activity and Valuations

Next-generation manufacturing. Smart manufacturing. Manufacturing 4.0. Whatever you call it, the industrial world is in themidst of a shift from traditional, older-economy, capital-intensive manufacturing, to a faster, more efficient, data-driven, global, andconnected manufacturing world.

As industrial companies look to evolve to meet the demands of these new manufacturing ecosystems, it has created intensecompetition and strong valuations for companies that display the operational, product and service, financial, and technologicalcharacteristics of an industrial technology business. In this report, we explore the qualities that distinguish industrial technologycompanies from traditional, diversified industrial companies and examine the trends that are driving M&A activity and the valuationsin the industrial technology space.

Defining Industrial Technology

To properly understand the value drivers and trends that areshaping the deal-making landscape, it is important to first definewhat an industrial technology company is and how it differs fromdiversified industrial companies.

Industrial technology companies can be characterized across twokey dimensions: (i) the strong value proposition provided to

customers through high-tech, highly engineered products andservices that alleviate many of the challenges facing manufacturerstoday, which in turn generates (ii) financial characteristics andoperational metrics that are significantly superior to those ofdiversified industrial companies and share several characteristicsof technology companies.

Todays manufacturers are facing numerous challenges that arebest being overcome through the use of technology. Below arethese challenges:

1. Increasingly tight timelines Customers, both consumers and businesses, are demanding that products (including thosethat are highly customized) get to market faster, which is putting tremendous pressure on manufacturing and supplychains. As prior latencies and slack across a companys supply chain, manufacturing operations, and distribution networkare being dramatically tightened, manufacturers must operate more efficiently to profitably meet these demands. In this

new environment, production errors are highly magnified and much more costly than in the past because there simply isless slack in the system to absorb these issues. The cost of delay or failure has never been higher.

2. Higher quality standards Customers are demanding higher quality standards that are becoming increasingly difficult formanufacturers to meet unless they turn to technology and automation.

3. Rising wage rates Rising wage rates in many developing countries, particularly China, are rapidly eroding the costadvantage these regions historically had with respect to manufacturing. The use of technology, particularly automation, isthe most effective way for manufacturers to offset the rise in labor costs and remain competitive. This is evidenced by thefact that the worlds greatest users of automation are the United States, Western Europe, and Japanall countries/regionswith expensive labor rates.

4. Globalization Customers across nearly all end-markets are increasingly global in their footprints, which requiresmanufacturers to supply their products and services globally. Manufacturers now must be highly coordinated across largegeographic areas and maintain high levels of operational coordination and control. Again, the most effective solution is toturn to technology.

5. Increased competition As globalization continues to increase, traditional borders are being broken down and so are thebarriers that have historically protected certain manufacturers and geographies. Todays manufacturers can expectcompetition from global competitors with varying levels of sophistication and labor costs. This puts tremendous pressureon manufacturers to be more cost effective, increase quality, and decrease time to market.

Industrial technology companies help manufacturers solve these challenges by automating processes, increasing efficiency andproductivity, enabling better monitoring and data gathering to improve decision making, improving quality through superiorreliability, and providing software and services to enhance coordination across manufacturing life cycles.

We have categorized the products and services generally provided by industrial technology companies into six subsectors that areoutlined in the box above. While there are numerous diversified industrial businesses that provide similar products to those outlined

Industrial Technology SubsectorsIndustrial technology companies provide high-tech,engineered productsand increasingly software,services, and data analyticsthat enable automation andenhance efficiency through the following subsectors:

Diversified Industrial Technology

Industrial Controls and Communications

Test, Measurement, and Instrumentation

Electrical Components and Equipment

Power Transmission, Actuation, and Mechanical

Machinery, Integrated Systems, and Other


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Industrial Technology Investment Banking2 Executive Summary Industrial Technology

in these subsectors, there are several major, stand-alone traits of industrial technology companies that distinguish them. These traitsare as follows:

1. Strong intellectual property Whether it is a portfolio of valuable patents or deep application know-how, industrialtechnology companies have significant intellectual property.

2. Differentiated product offering Industrial technology companies seldom have what can be described as me too orcommodity-like products. There is generally a high level of differentiation in their product portfolios that is difficult to

replicate and creates significant barriers to entry.

3. Culture of innovation Technological change typically moves quickly and requires a strong culture of R&D and innovationto create a sustainable long-term competitive advantage. A hallmark of an industrial technology company is the ability tostay in front of the technology curve and effectively adapt to the changing demand of customers.

The combination of these traits and the value proposition to the customer are what drive valuation multiples significantly abovethose of diversified industrial companies. From a high-level financial perspective, our analysis shows that industrial technologycompanies can often be identified quickly by using the 40/20 guideline: 40%-plus gross margins (under GAAP) and 20%-plusEBITDA margins. The gross margin is particularly telling because it is a sign that the company is selling differentiated technologywith high barriers to entry and, therefore, has some pricing power. This pricing power also helps industrial technology companieslimit the volatility that is characteristic of diversified industrial companies, whose products are often more commoditized and forwhom demand is more elastic. EBITDA margins are also significantly higher because industrial technology companies tend to be a lotless asset and overhead intensive, which is reflected in the EBITDA margin.

As a result of these financial characteristics and generally lower capital intensity, industrial technology companies also tend to

generate higher equity returns. They typically generate returns on invested capital (ROIC) in the teens or higher and high-single-digitrevenue growth. To be a true industrial technology company, innovation also has to be part of the companys DNA, as reflected in itsongoing investment in R&D and engineering personnel. Therefore, they typically invest 3% to 5%-plus of revenue on research anddevelopment and have a material amount of engineering talent as part of their operational expense.

Financial Profile of Industrial Technology Companies

Source: William Blair & Company market analysis.

Industrial technology companies are distinct from other diversified industrial companies across these financial metrics and in manycases significantly different. These metrics are also the key financial indicators that drive valuation multiples for industrialcompanies. As the analysis on the following page indicates, there is a clear correlation in the public markets between these metricsand EV/ LTM EBITDA trading multiples.

~20%+

40-50%+

Gross Margin

~10%+

~20%

EBITDA Margin

~3%+

~7-10%+

Long-Term Growth Rate

~10% ~15%+

ROIC

Diversified Industrials Industrial Technology


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Industrial Technology and Diversified Industrials Correlation Analysis 2014

LTM Gross Margin to EV / LTM EBITDA LTM EBITDA Margin to EV / LTM EBITDA

2014-2016 Revenue CAGR to EV / LTM EBITDA ROIC to EV / LTM EBITDA

Source: Dealogic, Capital IQ, William Blair & Company market analysis.

The combined result of having products with a greater value proposition to customers and a financial profile more aligned with atechnology company is that industrial technology companies tend to trade at a significant premium to diversified industrialcompanies, and it appears this gap is only widening. Since 2004, the EV/LTM EBITDA trading multiple premiums (in turns) forindustrial technology companies has been about 2.3x, but over the last year the average is significantly higher at 3.3x.

Industrial Technology and Diversified Industrials Trading Multiples EV / LTM EBITDA


0.0%10.0%20.0%30.0%

40.0%50.0%60.0%70.0%80.0%

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x

Diversified Industrial Companies Industrial Technology Companies

LTM Gross Margin

EV / LTM EBITDA

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x


LTM EBITDA Margin

EV / LTM EBITDA

(15.0%)(10.0%)

(5.0%)0.0%5.0%

10.0%15.0%20.0%25.0%

30.0%

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x


2014-2016 Revenue CAGR

EV / LTM EBITDA

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x


ROIC

EV / LTM EBITDA

8.3x 8.2x 8.9x 8.5x

6.2x7.3x

10.6x

8.1x7.3x

8.8x 8.8x

11.3x 10.7x 11.2x 11.5x

8.5x 8.0x

12.5x

10.4x9.4x

11.8x 12.1x

0.0x

3.0x

6.0x

9.0x

12.0x

15.0x

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Diversified Industrials Industrial Technology

Median Premium: 2.3x

Current Premium: 3.3x


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Case Studies

To help illustrate the power of the industrial technology platform, the following three case studies of publicly traded companies thatare in various stages of industrial technology transformation and/or are leaders in the industry.

Belden Inc.

Belden is a good example of a company that has successfully used acquisitions and other strategies to move its product and solutions

portfolio up the technology stack to become more of an industrial technology player. Since 2010, the St. Louis-based company hascompleted 10 acquisitions, which have transformed Belden from a largely wire and cable company into a higher-tech engineeredproducts company. Belden can now be better described as an innovative signal transmission solution business providingcomprehensive, mission-critical solutions for the transmission of data, sound, and video.

As a result, Belden has seen a significant market and financial performance improvement over the last five years, including:

Stock price increase of 260%, significantly outpacing the broader market increase of 71%

EV-to-EBITDA multiple growth from 8.3x to 13.1x, a 57% increase, while the broader market grew only 13% from 9.9x to 11.2x

Gross margin expansion from 29% to 37%

Belden Historical Stock and Financial Performance

Indexed Stock Performance Last 5 Years 2010-2014 Revenue & Gross Margin(1)

($ in millions)

(1) Historical financial results shown have not been adjusted for acquisitions.


50.0%

150.0%

250.0%

350.0%

450.0%

Belden +260% DJIA +71%

$1,543$1,882 $1,841

$2,069$2,308

29% 29% 32%

35% 37%

0%

10%

20%

30%

40%

50%

60%

$0

$500

$1,000

$1,500

$2,000

$2,500

2010 2011 2012 2013 2014

Revenue Gross Margin %


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Danaher Corporation

Danaher is an example of a company that has successfully completed the journey to becoming a global, industrial technology leader.In the mid-1990s, Danahers primary focus was on its tools and components and process/environmental controls segments, whichwere both lower-margin, more cyclical, and more U.S.-focused. Over time, Danaher evolved into a high-growth, high-margin, globalbusiness focused on strong technology and recurring revenue. Today, Danahers life science and diagnostics and test andenvironmental segments are the majority of the business and both are higher-tech, lower-cyclicality segments with aftermarket and

services sales comprising roughly 40% of total sales. In 1994, Danaher had sales of $1.1 billion and gross margins of 29%, and overthe last 20 years, it has grown sales to $19.9 billion and expanded gross margins to 53%. The test and measurement segment wasfounded primarily through M&A (a core growth strategy for Danaher). In 1998, Danaher acquired Fluke Corporation, and thencontinued to expand the segment primarily through acquisitions, including acquiring Tektronix in 2007 and Keithley Instruments in2010. Danaher also moved into the medical / healthcare end markets for the same reason companies are moving into industrialtechnology (i.e., increased margins, higher growth, less volatility, etc.).

Danaher Historical Stock and Financial Performance


($ in millions)

(1) Historical financial results shown have not been adjusted for acquisitions.Source: Dealogic, Capital IQ, William Blair & Company market analysis.

0.0%

1,000.0%

2,000.0%

3,000.0%

4,000.0%Danaher +3,497.0% DJIA +374.8%

$1,114 $3,047 $4,577

$9,466

$12,550

$19,914

29%

38% 39%44%

52%

53%

0%

10%

20%

30%

40%

50%

60%

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

1994 1998 2002 2006 2010 2014



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Roper Industries, Inc.

Roper Industries is one of the foremost examples of the industrial technology model and convergence trends, as shown by its strongmix of both hardware and software offerings, with its software and network-centric businesses accounting for roughly 40% ofearnings. Roper has been a leading industrial technology business for some time, which is largely due to its proven, highlydifferentiated business model that focuses on asset-light, high cash flow businesses that generate leading margins and cashconversion. Since 2002, Roper has grown from $500 million in sales through a mix of organic growth and acquisitions (about 50

completed transactions since 2002) to a $3.6 billion, 59% gross margin industrial technology leader. Ropers operationalperformance and acquisition history has enabled it to build a sector-leading financial profile50% recurring revenue, 59% grossmargin, 34% EBITDA margin, 33% OCF, and 32% ROIC. In turn, the market has rewarded Roper with strong valuation multiples4.9x EV-to-Revenue and 14.6x EV-to-EBITDAmultiples typically seen more often from a technology company, not a classicindustrial company.

Roper Historical Stock and Financial Performance


($ in millions)

(1) Historical financial results shown have not been adjusted for acquisitions.Source: Dealogic, Capital IQ, William Blair & Company market analysis.

40.0%

140.0%

240.0%

340.0%

440.0%

540.0%

640.0%

Roper +631.7% Industrial Technology Index +312.4%

$503$970

$1,701

$2,306 $2,386$2,993

$3,549

50%

50%51%

52%

53%

56%

59%

48%

52%

56%

60%

64%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2002 2004 2006 2008 2010 2012 2014



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Trends Driving Industrial Technology M&A

Industrial technology M&A activity is being driven by several underlying trends, which are as follows:

Moving product portfolio up the technology stack:Across the manufacturing ecosystem, industrial companies are looking forways to transform their product offerings from traditional lower-margin, less-differentiated products, to a portfolio that is moredifferentiated in the market and generally defined by higher technological content. Investors are paying close attention to thistrend. Public companies that have successfully made this transformation have been rewarded with significant multiple

expansion.

Convergence: One of the greatest drivers shaping M&A behavior is the convergence of software, services, and dataanalytics/connectivitycore elements of pure technology companiesinto the industrial space. Industrial companies areincreasingly focused on shifting their business models from selling products to selling solutions, which provide higher marginsand generate stronger, longer-lasting relationships with customers. Thus, buyers are aggressively looking to acquire the piecesnecessary to achieve this integrated solution-based model.

A large percentage of public company CEOs we talk to in industrial technology call out adding software capability as a priority.Providing the software component of the solution provides powerful benefits because it makes it much easier to sell adjacentproducts and services both upstream and downstream.

Adding services capabilities also tops the list of M&A priorities. As latencies within manufacturing processes shrink, the cost ofdowntime and failure increases dramatically. Companies that provide value-added servicessuch as preventative andpredictive maintenanceare able to command higher margins given the huge value proposition opportunity it affords tocustomers. Furthermore, the annuity-like payment models of service contracts provide important recurring revenue that

reduces volatility.The final convergence trend is data analytics/connectivity (often referred to as the Internet of Things). The Internet of Things isaffecting all industries because the positive implications generated from real-time monitoring and data analysis are enormous.The ability to create a real-time, integrated manufacturing ecosystem where all of the pieces of the manufacturing, supply chain,and distribution process are sharing information and improving decision making has vast positive financial and competitiveimplications for manufacturers.

Rising Wage Rates: Developing economies, especially China, that are the hubs of global industrial manufacturing areexperiencing headwinds that have significant ramifications to the industrial technology sector. The wage rates in theseeconomies have been rising sharply in recent years as the middle class is becoming an increasingly large percentage of thepopulation. As the middle class grows, the pool of available and inexpensive factory labor shrinks dramatically. The only way, inresponse, for companies in these regions to compete and improve productivity is through the use of technology and automation.

Rising Wages Drive Automation

(CNY)

YoY Growth (%) 12.3% 12.3% 14.0% 16.2% 15.8% 9.2% 15.4% 19.4% 13.6% 11.5%

Source: www.tradingeconomics.com, National Bureau of Statistics of China.

12,496 14,033 15,757

17,966 20,884

24,192 26,599

30,700

36,66541,650

46,431

0

10,000

20,000

30,000

40,000

50,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

China Average Annual Wages


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Leading Industrial Technology Buyers

Per William Blair & Company analysis detailed on page 15, overthe last 10 years, more than 75%, on average, of all industrialtechnology deals were consummated by strategic buyers. Overthat same time, roughly 50% of these transactions were cross-border. As illustrated in the chart to the left, the top fiveacquirers of industrial technology companies were globalstrategic companies. A likely reason that the industrialtechnology sector is strategic-buyer dominated is that the largerglobal strategic buyers are actively looking to add/improve theirproduct portfolios and grow revenue by pushing these productsthrough their sales network and cross-selling opportunities.

Another reason is that just a few years ago, there were a limitednumber of private equity firms that had a focused effort on industrial technology. Today there are numerous private equity firms inthe middle market alone that have a focus on industrial technology. While we believe this sector will continue to be majorityrepresented by strategic buyers in the near term, we anticipate that private equity firms will represent a much larger percentage ofthe buyer universe than currently exists today.

We are continually monitoring the trends in the industrial technology industry, its M&A activity, and valuation multiples. To learn more

about these and other insight we have gathered from recent conversations with strategic acquirers and financial sponsors in the space,

please contact us.

Corey RyanHead of Industrial Technology+1 312 364 8619

[email protected]

Top 5 Industrial Technology Buyers (2004-2014)(1)

Buyer # of Deals

Ametek Inc. 30

Danaher Corp. 28

Schneider Electric SE 26

Emerson Electric Co. 24

Dover Corporation 20

(1) Represents transactions involving industrial technology companies as targets.Source: Dealogic, Capital IQ, William Blair & Company market analysis.


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Industrial Technology Investment BankingWilliam Blair Spotlight Recent Industrial Technology Transactions 9

William Blair Spotlight Recent Industrial Technology Transactions

William Blair & Company acted as the exclusive financial advisor to Camstar Systems, Inc. (Camstar) inconnection with the sale of Camstar to Siemens AG.

Camstar is a leading provider of on-premise and cloud-based software solutions that improve control,visibility, and collaboration across multi-enterprise manufacturing environments and the extended

supply chain.

Siemens AG is a global technology powerhouse that has stood for engineering excellence, innovation,quality, reliability, and internationality for more than 165 years. The company is active in more than200 countries, focusing on the areas of electrification, automation, and digitalization.

William Blair & Company acted as exclusive financial advisor to CoActive Technologies, a portfoliocompany of Littlejohn & Co. and CITIC Capital Partners, in connection with the sale of CoActiveTechnologies business unit DeltaTech Controls, to Sensata Technologies Holding N.V.

DeltaTech Controls is a global leader for advanced operator controls and integrated systems inconstruction, agriculture, material handling, aerial work platform, motorbike, medical, materialhandling, and other end-market segments.

Sensata Technologies is one of the world's leading suppliers of sensing, electrical protection, control,

and power management solutions with operations and business centers in 11 countries.

William Blair & Company acted as exclusive financial advisor to Hobr Instruments, a portfoliocompany of Parcom Capital, in connection with its sale to AAC Capital Benelux.

Hobr Instruments is a leading provider of online analyzers, sample systems, and complete turnkeysystems and solutions to the oil and gas and process industries. The company is based in theNetherlands and currently employs 90 people in both the Netherlands and Hungary.

AAC is a leading mid-market buy-out firm, which has to date completed more than 27 managementbuyouts, of which 20 have been realized. It targets opportunities for majority stakes in profitable, cash-generative companies based in the Benelux.

William Blair & Company acted as joint lead financial advisor to Molex Incorporated in connection withits acquisition by Koch Industries, Inc. This advisory was William Blairs 10th assignment for Molexsince its 1972 IPO.

Based in Lisle, Illinois, Molex is a 75-year-old global manufacturer of electronic, electrical, and fiberoptic interconnection systems.

Koch Industries, based in Wichita, Kansas, is one of the largest private companies in the United Stateswith diversified holdings across 60 countries, employing more than 100,000 people worldwide.

William Blair & Company acted as financial advisor to BARTEC GmbH (BARTEC), a portfolio companyof CapVis Equity Partners AG, in connection with the sale of BARTEC to Charterhouse Capital PartnersLLP.

Based in Germany, BARTEC is a leading global provider of explosion proof products, systems andtailored engineered solutions to the growing oil and gas, chemical, pharmaceutical, mining and powerend-markets.

Charterhouse is one of Europes leading private equity firms, currently investing its ninth fund of 4billion. It has invested in large buy-outs since the mid-1980s, and has completed more than 135transactions in excess of 50 billion in value.

Not Disclosed

has been acquired by

Siemens AG

November 2014

$190,000,000


Sensata Technologies

August 2014

Not Disclosed


AAC Capital Benelux

June 2014

$7,200,000,000


Koch Industries, Inc.

December 2013

Not Disclosed


Charterhouse Capital

Partners LLP

September 2012


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Industrial Technology Investment Banking10 Select William Blair Industrial Technology Transactions

Select William Blair Industrial Technology Transactions

$130,000,000


ORBCOMM Inc.

January 2015

$178,229,986


Omnitracs, LLC

October 2014

86,900,000


Minebea Co., Ltd.

February 2015

Not Disclosed


KORE Wireless Group

December 2014

Not Disclosed


Siemens AG

November 2014

240,000,000


Investcorp

August 2014

$190,000,000


Sensata Technologies

August 2014

$400,000,000


Castle Harlan

July 2014

Not Disclosed


AAC Capital Benelux

June 2014

$155,000,000


The Babcock &

Wilcox Company

June 2014

$7,200,000,000


Koch Industries, Inc.

December 2013

585,000,000


Bridgepoint

Capital Ltd.

November 2013

$207,300,000


CECO Environmental

Corporation

August 2013

Not Disclosed


Sumitomo Corporation

March 2013

$128,340,000

Follow-on Offering

November 2012

Not Disclosed


Nova Capital

Management

September 2012

$253,000,000

Follow-on Offering

September 2012

Not Disclosed


Charterhouse Capital

Partners LLP

September 2012

Not Disclosed

has been recapitalized by

KRG Capital

August 2012

$79,120,000

Initial Public Offering

February 2012

$135,500,000

Subsidiaries of Contex Group A/S

have been acquired by

3D Systems Corporation

January 2012

Not Disclosed


HCI Equity Partners

December 2011

$127,800,000


May 2011

Not Disclosed

a division ofTuthill Corporation


November 2010

$269,107,000


February 2010

GENERAC

$107,010,000

Follow-on Offering

May 2008

Not Disclosed


Wynnchurch Capital

August 2007

$256,000,000

has acquired

Woodhead Industries

August 2006

Not Disclosed


Rockwell

Automation, Inc.

December 2005

$156,250,000


July 2004


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Industrial Technology Investment BankingWilliam Blairs Industrial Technology Contacts 11

William Blairs Industrial Technology Contacts

Global Team

Corey Ryan

Head of Industrial TechnologyEducation: Chicago (MBA), Illinois (BS)

Location: Chicago

Contact Info: [email protected]+1 312 364 8619

Philipp Mohr

Global Head of IndustrialsEducation: Hamburg (PhD), Cambridge

(MPhil), Hamburg (BA)

Location: Frankfurt

Contact Info: [email protected]+49 69 509527 610

Industrial Technology Segment Focus

Industrial Controls andCommunications

Test, Measurement, andInstrumentation

Electrical Componentsand Equipment

Industrial internet/IoT Continuous and discrete control

I/O systems

Operator interfaces/industrialcomputing

Motion control

Data analytics/software/predictiveservices

Smart sensors Flow, pressure, level and

measurement

Temperature and humidity

Position and force

Optical and acoustic

Analytical instrumentation

Metrology, test & inspection

Electric motors and drives Connectors and cabling

Miscellaneous electrical componentsand products

Power Transmission,Actuation, and Mechanical

Machinery, IntegratedSystems, and Other

Gearing and gearboxes

Activators

Valves and valve control

Bearing and other mechanicalsystems

Hydraulic and pneumatic systems

Integration machines and systems

Robotics and other automaticmachinery

Rapid prototyping/3-D printing

Thermal management

Note: The Diversified Industrial Technology segment discussed later in this report typically includes a combination of the five sub verticals.


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IndustrialTechnologyMacroeconomicDrivers


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Industrial Technology Investment Banking12 Industrial Technology Macroeconomic Drivers

Industrial Technology Macroeconomic Drivers

Industrial technology expansion can be primarily traced to two specific macro trends: i) the macro-economic recovery and ii) China wage growth

The post-recession increase in demand for industrial products and services has provided lift to industrial technology companies

revenues. Following the 2008/2009 recession, industrial technology companies experienced significant revenue growth, starting in2010. Thereafter, industrial technology companies continue to average low-double-digit annual growth rates.

Industrial Technology Revenue vs. Purchasing Managers Index (PMI)

Source: Capital IQ, ISM/Haver

Demand for the technology enabled solutions that industrial technology companies provide is driving industrial technology revenuegrowth in excess of GDP growth across all regions.

Gross Domestic Product (GDP) Growth by Region

Source: United Nations country data constant dollar basis.

(20.0%)

(10.0%)

0.0%

10.0%

20.0%

30.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014

% Change Industrial Technology Revenue PMI

(20.0%)

(10.0%)

0.0%

10.0%

20.0%

30.0%

(6.0%)

(4.0%)

(2.0%)

0.0%

2.0%

4.0%

6.0%8.0%

10.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Industrial TechnologyRevenue Index (2004 = 100)

GDP Index (2004 = 100)

U.S. GDP Growth Europe GDP Growth Asia GDP Growth ROW GDP Growth Industrial Technology Revenue


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Industrial Technology Investment BankingIndustrial Technology Macroeconomic Drivers 13

Chinas wage rate continues to see significant growth due to a number of factors, including a change in public sentiment regardingmanufacturing and a shift in demographics. Chinas government is pushing for pay increases to retain public support and toaccelerate the nations shift away from polluting and capital-intensive manufacturing to a more services-driven economy. In addition,historically dense rural areas where the majority of low-cost manufacturing is located are seeing younger generations move intocities to seek higher education and higher paying jobs, and the one-child policy enacted in 1979 has created a demographic shift to amore aged population. The significant increase in China wage rates is resulting in low-end manufacturing bases moving westward tolower-cost Southeast Asia countries and is driving demand for industrial automation solutions. At the same time, industrial

technology companies are seeing robust revenue growth. This can be attributed to the demand for automation solutions used toreplace jobs historically filled by low-cost workers.

Industrial Technology Revenue Growth versus China Wage Rate Growth

Source: Capital IQ, Ministry of Labor and Social Security (China).

Another metric to assess automation demand, strength, and penetration is the ratio of the robot population to manufacturingemployees. The need to be more efficient coupled with the rising ROI on automation equipment has led manufacturing to rely onrobots as an alternative to low-cost workers. Emerging markets, such as Brazil, Russia, India, and China (BRIC), continue tosignificantly lag behind the rest of the world regarding technologically advanced manufacturing and thus these regions are stronglong-term markets that will drive demand for products and services provided by industrial technology companies.

Robots / 10,000 Manufacturing Employees

Source: International Federation of Robotics, World Bank.

0%50%

100%

150%

200%

250%

300%

350%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Index (2004 = 100) Industrial Technology Revenue +97.7% China Wages +223.4%

Global Recession

310

285

240

175

140 135 135 135

60 55 55

265 1 1

0

50

100

150

200

250

300

350

Robot Density (Proxy for Automation) Global Average

U.S. penetrationonly 50% of leadingcountries

BRIC countries aresignificantlyunderpenetrated


17/37

Global IndustrialTechnologyM&A Activity


18/37


Industrial Technology Investment Banking14 Global Industrial Technology M&A Activity

Global Industrial Technology M&A Activity

Annual M&A Trends

M&A activity in the industrial technology sector increased substantially in 2014 to an all-time high of 66 transactions, a 53% increasecompared with 2013. In addition, M&A valuation multiples continue to increase with EV/revenue multiples at a three-year high of

1.97x and EV/EBITDA multiples at a four-year high of 17.5x.

Industrial Technology Transaction Volume & Value

Avg. Deal Value($ in millions)

$340 $191 $517 $298 $219 $127 $434 $326 $622 $563 $285


Average Revenue Multiples

Average EBITDA Multiples

Note: Data represents global transactions announced publicly.Note: Transactions with multiples that are not meaningful are categorized as undisclosed.Data as of December 31, 2014.Sources: Capital IQ, Dealogic and William Blair & Company market analysis.

3338

36

46

55

42

34

44

3543

66

$0

$100

$200

$300

$400

$500

$600

$700

0

10

20

30

40

50

60

70

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

# of Deals # of Deals Avg. Deal Value Average Deal Value($ in millions)

2.42x

1.75x 1.59x

1.21x

NMF

1.90x

2.57x

1.83x 1.95x 1.97x

0.00x

0.50x

1.00x1.50x

2.00x

2.50x

3.00x

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EV/LTM Revenue Multiple Average: 1.86x

15.0x 14.1x

18.1x 18.6x

NMF

17.2x

10.8x

14.5x 16.0x 17.5x

NMF

5.0x

10.0x

15.0x

20.0x

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EV/LTM EBITDA Multiple Average: 15.5x


19/37


Industrial Technology Investment BankingGlobal Industrial Technology M&A Activity 15

Participant Trends

As a percentage of total industrial technology transactions, financial sponsor buyers have historically accounted for roughly 20%-30% of all transactions, however this sector has been dominated historically by strategic acquirers. In 2014, financial sponsor buyersaccounted for 20% of transactions, versus 21% in 2013. We expect financial sponsors to become increasingly active in this sector andincrease the percentage of deals done as more private equity firms are on focusing on industrial technology within their firms.

Breakdown of Acquirers by Type

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Strategic 73% 63% 75% 74% 78% 79% 79% 77% 83% 79% 80%

Sponsor 27% 37% 25% 26% 22% 21% 21% 23% 17% 21% 20%

Data as of December 31, 2014.Sources: Capital IQ and William Blair & Company market analysis.

Domestic industrial technology transactions, as a percentage of total transactions, have increased from a low of 32% in 2011 to 79%in 2014. We expect the level of cross-border activity to be strong in 2015, as 2014 was a particularly strong year for domestic M&A inindustrial technology.

Breakdown of Acquirers by Location

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Domestic 67% 55% 64% 65% 44% 50% 53% 23% 46% 49% 71%

Cross-Border 33% 45% 36% 35% 56% 50% 47% 77% 54% 51% 29%

Data as of December 31, 2014.Sources: Capital IQ, and William Blair & Company market analysis.Domestic defined as seller and buyer in same country.Cross Border defined as seller and buyer in different countries.

Strategic % Sponsor %

0%

20%

40%

60%

80%

100%Percent of Deals

Domestic % Cross Border %

0%

20%

40%

60%

80%

100%Percent of Deals


20/37


Industrial Technology Investment Banking16 Global Industrial Technology M&A Activity

Notable 2014 Industrial Technology Transactions

Announced: December 2014 Observations / Rationale:

Closed: February 2015 In December 2014, Regal Beloit Corporation (NYSE: RBC) entered into an asset andstock purchase agreement to acquire domestic and foreign subsidiaries related toEmerson Electric Co.s (NYSE: EMR) Power Transmission Solutions business, including:

Power Transmission Solutions Inc.

Kop-Flex, Inc.

System Plast, LLC

Emerson Power Transmission (Zhangzhou) Co. Ltd

System Plast Srl

Jaure, S.A.

Motoreductores U.S., S.A. de C.V.

Transmisiones de Potencia Emerson, S.A. de C.V.

RBC designs, manufactures and sells electric generators and controls, as well as lowand medium-voltage drives and mechanical motion control products.

The acquisition provides RBC with sizable market share and increased penetration ofthe power transmission end-market.

RBC also gained further geographic diversification.

Target:

Power Transmission Solutions Business Unit

St. Louis, MO

Acquirer:

Beloit, WI

Key Metrics (Announced):Implied Enterprise Value ($MM):EV / LTM Revenue:EV / LTM EBITDA:

$1,4002.4xN/A

Announced: November 2014 Observations / Rationale:

Closed: April 2015 Charterhouse Capital Partners LLP (Charterhouse) is a private equity and venturecapital firm specializing in buyout investments, growth capital, and turnarounds.Charterhouse acquired Mirion Technologies, Inc. (Mirion) for $750 million in April2015.

Mirion provides nuclear detection, measurement, analysis and monitoring productsthat enable its customers to meet rigorous safety, security and environmentalrequirements and regulations. It has a diversified blue chip client base across sectorsincluding nuclear power, healthcare, military and homeland security, hospitals,universities and other specialist industries.

Target:

San Ramon, CA

Acquirer:

London, UK

Key Metrics (Announced):Implied Enterprise Value ($MM):

EV / LTM Revenue:EV / LTM EBITDA:

$750

N/AN/A

Announced: June 2014 Observations / Rationale:

Closed: October 2014 On October 9, 2014, TE Connectivity Ltd. (NYSE: TEL) completed the acquisition ofMeasurement Specialties Inc. (Measurement Specialties) for roughly $1.4 billion. Theacquisition provides TEL a strong growth platform and penetration of the highlyattractive sensor market.

Measurement Specialties is a leading global designer and manufacturer of sensors andsensor-based systems. The companys product portfolio includes a broad array ofsensor technologies. Applications include pressure, vibration, force, and temperaturesensing.

The acquisition meaningfully expands TELs sensor business, and provides arobust platform testing in harsh environments.

Measurement Specialties will be organized within TELs Transportation Solutionssegment.

TEL is a global leader in connectivity and sensing solutions, and generated roughly$14.1 billion in 2014.

Target:

Hampton, Virginia

Acquirer:

Berwyn, PennsylvaniaKey Metrics (Announced):Implied Enterprise Value ($MM):EV / LTM Revenue:EV / LTM EBITDA:

$1,4273.9x

22.3x
http://www.te.com/en/home.htmlhttp://www.meas-spec.com/default.aspx


21/37


Industrial Technology Investment BankingGlobal Industrial Technology M&A Activity 17

Announced: July 2014 Observations / Rationale:

Closed: August 2014 In August 2014, Sensata Technologies, Inc. acquired DeltaTech Controls Gmbh, aportfolio company of LittleJohn & Co., for $190 million.

DeltaTech is a global leader in the design and manufacture of highly technicalcustomized operator controls.

DeltaTech supplies products for blue chip customers and operates a global

platform with advanced engineering centers and low-cost manufacturinglocations.

The transaction was a highly strategic, as DeltaTech is well-aligned with Sensatascore business and uniquely expands Sensata's ability to grow content beyondautomotive through key new and existing customers in the heavy vehicle and off-road market.

William Blair & Company acted as exclusive financial advisor to its client, CoActiveTechnologies, a portfolio company of Littlejohn & Co. and CITIC Capital Partners,in connection with the sale of CoActive Technologies business unit DeltaTechControls.

Sensata Technologies is one of the world's leading suppliers of sensing, electricalprotection, control, and power management solutions with operations and businesscenters in 11 countries.

Target:

Minneapolis, MN

Acquirer:

Attleboro, MA

Key Metrics (Announced):Implied Enterprise Value ($MM):EV / LTM Revenue:EV / LTM EBITDA:

$190N/AN/A

Announced: April 2014 Observations / Rationale:

Closed: June 2014 In June 2014, Ametek Inc. (NYSE:AME) acquired Zygo Corporation (Zygo) for $375million.

Zygo Corporation designs, develops, manufactures, and sells ultra-high precisionmeasurement solutions, and optical sub-systems and components for originalequipment manufacturers and end-user applications worldwide.

Zygos leading market position in the non-contact optical metrology solutionsmarket was a key driver of the transaction.

Zygo was delisted from the NASDAQ following the transaction.

AME is manufacturer of electronic instruments and electromechanical devices globally,and generated $4.0 billion of revenue in 2014.

Target:

Middlefield, CT

Acquirer:

Berwyn, PA

Key Metrics (Announced):Implied Enterprise Value ($MM):

EV / LTM Revenue:EV / LTM EBITDA:

$375

1.7x10.7x

A Portfolio Company of
http://www.ametek.com/index.aspxhttp://www.zygo.com/


22/37

IndustrialTechnologyPublicComparables


23/37


Industrial Technology Investment Banking18 Industrial Technology Public Comparable Performance & Trends

Industrial Technology Public Comparable Performance & Trends

Overall Industrial Technology

Over the last five years, the Industrial Technology Index has outperformed the Dow Jones Industrial Average (DJIA) by 14.2%.Further, 2014 EV/ EBITDA trading multiples saw a four-year high of 12.1x, compared with the historical median of 11.2x.

Indexed Stock Performance Last 5 Years Indexed Stock Performance Last 12 Months

Source: Capital IQ as of December 31, 2014. Source: Capital IQ as of December 31, 2014.

Valuation Multiples EV / LTM EBITDA

Source: Capital IQ as of December 31, 2014 and William Blair & Company market analysis.

80%

100%

120%

140%

160%

180%

200%

220%

Industrial Technology Index

DJIA

(Indexed Price)

80%

90%

100%

110%

120%

Industrial Technology Index

DJIA

(Indexed Price)

11.3x 10.7x 11.2x 11.5x

8.5x 8.0x

12.5x10.4x 9.4x

11.8x 12.1x

0.0x

5.0x

10.0x

15.0x

20.0x

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Median: 11.2x


24/37


Industrial Technology Investment BankingIndustrial Technology Public Comparable Performance & Trends 19

Diversified Industrial Technology

Diversified industrial technology companies do not generally fit in a specific subcategory of industrial technology because theyprovide products and services across various industrial technology segments. These companies tend to operate in some combination,or in all, of the five industrial technology segments. The selected comparable companies below are highly global in their footprint andoften provide a broad mix of hardware and systems, software, and services to various end-markets, including manufacturing,healthcare, and energy, to name a few.

Select Comparable Public Company Metrics

($ in millions) Stock PriceChangeSince12/31/13

LTM Financials LTM Margins

ROIC

3-YearHistoricalRevenueCAGR

Valuation

Company Revenue EBITDAGrossProfit EBITDA

OCFMargin(1)

EnterpriseValue

EV / LTMRevenue

EV / LTMEBITDA

Net Debt /EBITDA

Danaher Corp. 11.0% $19,914 $4,541 52.7% 22.8% 19.8% 27.1% 7.3% $59,308 2.98x 13.1x 0.1x

Dover Corporation (25.7%) 7,753 1,571 38.6% 20.3% 18.1% 21.9% 1.7% 13,877 1.79x 8.8x 1.5x

Honeywell International Inc. 9.4% 40,306 6,755 28.2% 16.8% 14.0% 31.2% 3.3% 78,708 1.95x 11.7x (0.1x)

Roper Industries Inc. 12.7% 3,549 1,200 59.2% 33.8% 32.7% 32.1% 8.3% 17,465 4.92x 14.6x 1.3x

Siemens Aktiengesellschaft (5.5%) 97,967 10,702 28.8% 10.9% 8.4% 10.8% (0.2%) 108,859 1.22x 11.2x 1.4x

Mean 0.4% $33,898 $4,954 41.5% 20.9% 18.6% 24.6% 4.1% $55,644 2.57x 11.9x 0.9x

Median 9.4% $19,914 $4,541 38.6% 20.3% 18.1% 27.1% 3.3% $59,308 1.95x 11.7x 1.3x

(1) Operating cash flow (OCF) calculated as EBITDA less capital expenditures.Source: Capital IQ as of December 31, 2014.





80%

100%

120%

140%

160%

180%

200%

Diversified IndustrialTechnology Index

DJIA(Indexed Price)

80%

90%

100%

110%

120%

Diversified IndustrialTechnology Index

DJIA(Indexed Price)

13.4x

11.1x 11.2x 11.9x

8.9x 8.3x

9.7x 10.3x 10.8x 11.5x 11.7x

0.0x

5.0x

10.0x

15.0x

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Median: 11.1x


25/37



Industrial Controls and Communications

Industrial controls and communications companies provide solutions focused on a broad set of applications, including industrialInternet/Internet of Things, continuous and discrete control, I/O systems, operator interfaces/industrial computing, motion control,data analytics, and predictive services.




ROIC


Valuation


OCFMargin(1)

EnterpriseValue

EV / LTMRevenue

EV / LTMEBITDA

Net Debt /EBITDA

Advantech Co. Ltd. 24.9% $1,161 $198 40.6% 17.1% 12.5% 22.9% 11.3% $4,513 4.12x 24.1x (0.7x)

Beijer Electronics AB (23.0%) 215 17 46.0% 8.0% 8.0% 15.5% (0.4%) 111 0.62x 7.8x (1.4x)

Digi International Inc. (23.3%) 194 5 46.1% 2.4% 0.4% 0.8% (1.8%) 144 0.74x NMF (16.5x)

HMS Networks AB (publ) 9.2% 90 17 62.3% 19.2% 18.1% 25.3% 14.1% 245 3.25x 17.0x 2.0x

HollySys Automation Technologies, Ltd. 29.1% 526 120 36.1% 22.8% 21.8% 17.9% 21.7% 1,264 2.40x 10.6x (1.4x)

OMRON Corporation 17.3% 8,551 1,126 39.2% 13.2% 9.0% 12.1% 10.3% 8,583 1.23x 9.4x (0.8x)

Rockwell Automation Inc. (5.9%) 6,606 1,345 42.0% 20.4% 18.2% 30.6% 2.6% 14,494 2.19x 10.8x (0.4x)

Mean 4.0% $2,478 $404 44.6% 14.7% 12.6% 17.9% 8.3% $4,193 2.08x 13.3x (2.7x)

Median 9.2% $526 $120 42.0% 17.1% 12.5% 17.9% 10.3% $1,264 2.19x 10.7x (0.8x)

(1) Operating cash flow (OCF) calculated as EBITDA less capital expenditures.Source: Capital IQ as of Decembe r 31, 2014.





80%

130%

180%

230%

280%

Industrial Controlsand Communications

DJIA(Indexed Price)

80%

90%

100%

110%

120%

Industrial Controlsand Communications

DJIA(Indexed Price)

10.3x 9.8x 10.2x 9.8x

6.9x

8.7x

14.3x

10.0x

6.9x

11.4x10.7x

0.0x

2.0x

4.0x6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Median: 10.0x


26/37



Test, Measurement, and Instrumentation

Test, measurement, and instrumentation companies provide solutions focused on a broad set of applications, including smartsensors, flow, pressure, level and measurement, temperature and humidity, position and force, optical and acoustic, analyticalinstrumentation, and metrology, test, and inspection.




ROIC


Valuation


OCFMargin(1)

EnterpriseValue

EV / LTMRevenue

EV / LTMEBITDA

Net Debt /EBITDA

Ametek Inc. (0.1%) $4,022 $1,037 35.4% 25.8% 24.0% 29.1% 5.7% $14,211 3.53x 13.7x 1.3x

Cognex Corporation 8.3% 486 156 75.1% 32.1% 27.8% 19.5% 14.7% 3,510 NMF 22.5x (0.9x)

Mettler-Toledo International Inc. 24.7% 2,486 518 54.7% 20.8% 17.2% 47.8% 2.5% 8,997 3.62x 17.4x 0.7x

Sensata Technologies Holding NV 35.2% 2,410 606 34.8% 25.1% 19.2% 42.5% 9.5% 10,526 4.37x 17.4x 4.3x

Spectris plc (17.9%) 1,835 338 57.6% 18.4% 16.1% 27.2% 1.8% 4,063 2.22x 12.1x 0.6x

Mean 10.0% $2,248 $531 51.5% 24.5% 20.9% 33.2% 6.9% $8,261 3.44x 16.6x 1.2x

Median 8.3% $2,410 $518 54.7% 25.1% 19.2% 29.1% 5.7% $8,997 3.58x 17.4x 0.7x






80%

130%

180%

230%

280%

330%

Test, Measurementand, Instrumentation

DJIA(Indexed Price)

80%

90%

100%

110%

120%

Test, Measurementand, Instrumentation

DJIA(Indexed Price)

11.3x 10.9x 11.8x 12.6x 11.5x

8.9x

12.5x 12.6x 12.7x14.2x

17.4x

0.0x

5.0x

10.0x

15.0x

20.0x

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Median: 12.5x


27/37



Electrical Components and Equipment

Electrical components companies provide solutions focused on a broad set of applications and products. The products and solutionsthey provide are typically very large in SKU size and may include, but are not limited to, electric motors and drives, connectors andcabling, and other miscellaneous electrical components. The electrical product offering of these companies also tend to be moreactive and less passive and commodity-like in nature. For example, motor drives versus resistors or other passive, commoditycomponents.




ROIC


Valuation


OCFMargin(1)

EnterpriseValue

EV / LTMRevenue

EV / LTMEBITDA

Net Debt /EBITDA

Amphenol Corporation 20.7% $5,346 $1,217 31.7% 22.8% 18.9% 27.1% 10.3% $18,053 3.38x 14.8x 1.1x

Belden Inc. 11.9% 2,308 341 36.8% 14.8% 12.8% 18.5% 7.0% 4,464 1.93x 13.1x 3.0x

Emerson Electric Co. (12.0%) 24,518 4,988 41.5% 20.3% 17.3% 37.4% 0.7% 45,655 1.86x 9.2x 0.7x

Schneider Electric SE (4.4%) 33,106 4,946 37.7% 14.9% 13.0% 20.0% 3.6% 50,607 1.68x 11.2x 1.3x

TE Connectivity Ltd. 14.8% 14,052 2,851 34.0% 20.3% 15.4% 29.6% 0.6% 27,219 1.94x 9.5x 1.2x

Weg SA 27.7% 3,631 609 31.7% 16.8% 11.3% 9.9% 14.7% 9,430 3.31x 19.4x 2.2x

Mean 9.8% $13,827 $2,492 35.6% 18.3% 14.8% 23.8% 6.2% $25,905 2.35x 12.9x 1.6x

Median 13.3% $9,699 $2,034 35.4% 18.5% 14.2% 23.6% 5.3% $22,636 1.94x 12.2x 1.3x






80%

100%

120%

140%

160%

180%

200%


DJIA(Indexed Price)

80%

90%

100%

110%

120%


DJIA(Indexed Price)

11.9x10.7x 10.3x 10.7x

7.2x6.5x

10.1x 9.0x

8.3x

9.6x

12.2x

0.0x

2.0x

4.0x

6.0x8.0x

10.0x

12.0x

14.0x

16.0x

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Median: 10.1x


28/37



Power Transmission, Actuation, and Mechanical

Power transmission, actuation, and mechanical companies provide solutions focused on a broad set of applications, including gearingand gearboxes, activators, valves and valve control, bearing and other mechanical systems, and hydraulic and pneumatic systems.There are numerous public gearing, actuation, and mechanical companies not included on this list because the products thecompanies below produce on the higher-precision end of the spectrum and have higher technological content.




ROIC


Valuation


OCFMargin(1)

EnterpriseValue

EV / LTMRevenue

EV / LTMEBITDA

Net Debt /EBITDA

Actuant Corporation (25.7%) $1,402 $245 39.1% 17.5% 14.7% 20.6% (3.0%) $2,196 1.57x 9.0x 1.7x

IMI plc (27.5%) 2,645 530 45.7% 20.0% 15.9% 32.4% (7.4%) 5,752 2.18x 10.9x 0.5x

RBC Bearings Inc. (8.8%) 446 112 39.1% 25.1% 20.2% 14.3% 5.9% 1,407 3.16x 12.6x (1.0x)

Rotork plc (19.0%) 930 257 48.0% 27.7% 24.7% 40.6% 7.3% 3,122 3.37x 12.2x (0.2x)

Mean (20.2%) $1,355 $286 42.9% 22.6% 18.9% 27.0% 0.7% $3,119 2.57x 11.1x 0.3x

Median (22.3%) $1,166 $251 42.4% 22.6% 18.0% 26.5% 1.5% $2,659 2.67x 11.5x 0.2x

(1) Operating cash flow (OCF) calculated as EBITDA less capital expenditures.Source: Capital IQ as of December 31, 2014.





80%

130%

180%

230%

280%

Power Transmission,Actuation and, Mechanical

DJIA(Indexed Price)

60%

70%

80%

90%

100%

110%

120%

Power Transmission,Actuation and, Mechanical

DJIA(Indexed Price)

9.1x

11.4x 11.2x 11.3x

9.0x7.1x

11.5x 10.4x 9.5x 11.2x 11.5x

0.0x

5.0x

10.0x

15.0x

20.0x

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Median: 11.2x


29/37



Machinery, Integrated Systems, and Other

Machinery and systems companies provide solutions focused on a broad set of applications, including integration of machines andsystems, robotics, automatic machinery, rapid prototyping/3-D printing, and thermal management. What differentiates thecomparables in the below list from other public companies that are similar is the type of applications offered (much highercomplexity and sophistication) and end-markets served (higher growth and less cyclical).




ROIC


Valuation


OCFMargin(1)

EnterpriseValue

EV / LTMRevenue

EV / LTMEBITDA

Net Debt /EBITDA

Fanuc Corporation 3.6% $6,660 $2,874 51.6% 43.1% 43.1% 13.1% 7.3% $25,278 4.66x 10.8x (3.3x)

KUKA Aktiengesellschaft 72.8% 2,782 243 25.1% 8.7% 5.0% 15.3% 13.4% 2,200 0.87x 9.9x (0.3x)

MTS Systems Corporation 5.6% 569 81 39.9% 14.3% 10.8% 17.9% 5.0% 1,131 1.99x 13.9x 0.1x

Proto Labs, Inc. (5.6%) 210 72 61.3% 34.1% 13.4% 18.6% 28.1% 1,676 NMF 23.4x (1.0x)

Stratasys Ltd. (38.3%) 750 102 50.4% 13.6% 5.5% 0.1% 39.8% 3,822 5.09x NMF (3.9x)

Mean 7.6% $2,194 $674 45.7% 22.8% 15.6% 13.0% 18.7% $6,821 3.15x 14.5x (1.7x)

Median 3.6% $750 $102 50.4% 14.3% 10.8% 15.3% 13.4% $2,200 3.32x 12.4x (1.0x)






80%

120%

160%

200%

240%

Machinery, Integrated

Systems and, Other

DJIA(Indexed Price)

80%

90%

100%

110%

120%

Machinery, IntegratedSystems and Other

DJIA(Indexed Price)

10.4x 9.8x 12.0x 11.8x

7.1x9.5x

19.0x

15.0x

12.0x14.0x

12.4x

0.0x

5.0x

10.0x

15.0x

20.0x

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Median: 12.0x


30/37



Diversified Industrials Index


($ in millions) Stock PriceChange

Since12/31/13


ROIC

3-YearHistorical

RevenueCAGR

Valuation

Company Revenue EBITDA GrossProfit EBITDA OCFMargin(1) EnterpriseValue EV / LTMRevenue EV / LTMEBITDA Net Debt /EBITDA

AGCO Corporation (23.6%) $9,724 $973 21.3% 10.0% 6.9% 13.8% 3.2% $5,291 0.54x 5.4x 0.7x

Ampco-Pittsburgh Corp. (9.3%) 273 17 19.9% 6.3% 6.3% 1.3% (7.5%) 122 0.45x 7.1x 0.0x

Blount International Inc. 21.4% 945 133 29.1% 14.0% 10.1% 13.5% 3.6% 1,221 1.29x 9.2x 2.7x

Carlisle Companies Incorporated 16.9% 3,204 521 25.7% 16.2% 12.5% 14.6% 8.7% 5,737 1.79x 11.0x 0.0x

Chart Industries Inc. (64.2%) 1,193 181 30.0% 15.2% 10.0% 15.8% 13.4% 1,184 0.99x 6.5x 0.6x

CIRCOR International, Inc. (25.4%) 841 106 31.5% 12.6% 11.0% 16.5% 0.8% 985 1.17x 9.3x (1.0x)

Columbus McKinnon Corporation (5.0%) 591 70 31.5% 11.9% 8.7% 13.8% 0.9% 596 1.01x 8.5x 0.8x

Dana Holding Corporation 13.2% 6,617 705 14.3% 10.7% 7.1% 12.2% (4.3%) 4,096 0.62x 5.8x 0.6x

Georg Fischer AG 0.2% 4,119 417 36.8% 10.1% 6.2% 10.3% 2.8% 3,061 0.80x 7.9x 0.9x

Gibraltar Industries, Inc. (16.2%) 862 63 16.4% 7.3% 4.6% 6.9% 3.7% 613 0.71x 9.7x 1.6x

Hardinge Inc. (17.6%) 312 15 27.9% 4.9% 3.9% 2.1% (3.6%) 155 0.50x 10.1x (0.0x)

Harsco Corporation (32.6%) 2,066 246 20.3% 11.9% 1.8% 9.0% (14.4%) 2,326 1.13x 9.5x 3.3x

Kawasaki Heavy Industries Ltd. 25.4% 15,171 1,194 17.8% 7.9% 7.9% 7.4% 4.7% 11,197 0.91x 11.5x 3.6x

Mitsubishi Heavy Industries Ltd. 2.9% 38,619 4,128 20.2% 10.7% 10.7% 6.6% 10.9% 26,797 0.85x 8.0x 2.0x

Moog Inc. 9.0% 2,648 364 30.1% 13.7% 10.8% 12.8% 3.7% 3,710 1.40x 10.2x 1.8x

Mueller Industries Inc. 8.4% 2,364 189 13.6% 8.0% 6.3% 11.9% 0.4% 1,958 0.83x 10.4x (0.6x)

NSK Ltd. 10.2% 9,689 1,310 22.9% 13.5% 9.3% 8.1% 9.6% 8,005 1.01x 7.5x 1.2x

Stoneridge Inc. (5.3%) 661 57 28.9% 8.6% 4.9% 5.8% (2.3%) 537 0.81x 9.4x 1.5x

Sumitomo Corporation (6.0%) 37,071 2,982 25.7% 8.0% 0.7% 2.2% 37.6% 41,667 1.38x 17.1x 11.8x

Terex Corporation (33.6%) 7,309 602 20.1% 8.2% 7.1% 14.2% 6.2% 4,560 0.62x 7.6x 2.2x

The L.S. Starrett Company 36.8% 252 23 33.5% 9.1% 6.3% 5.2% (0.7%) 131 0.52x 5.7x (0.1x)

The Timken Company (22.5%) 3,076 493 29.2% 16.0% 11.9% 13.8% (15.8%) 4,092 1.33x 8.3x 0.5x

Valmont Industries, Inc. (14.8%) 3,123 447 25.9% 14.3% 12.0% 15.2% 5.7% 3,508 1.12x 7.8x 0.9x

Worthington Industries, Inc. (28.5%) 3,398 282 14.8% 8.3% 5.7% 11.1% 12.1% 2,748 0.81x 9.8x 2.1x

Mean (6.7%) $6,422 $647 24.5% 10.7% 7.6% 10.2% 3.3% $5,596 0.94x 8.9x 1.5x

Median (5.7%) $2,862 $323 25.7% 10.4% 7.1% 11.5% 3.4% $2,904 0.88x 8.8x 0.9x

(1) Capital IQ as of December 31, 2014 and William Blair & Company market analysis.


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Overall U.S.Market Update


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Industrial Technology Investment Banking26 U.S. M&A Market Update

U.S. M&A Market Update

U.S. Activity Trends

M&A Activity

Number of Deals

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

>$750M 147 233 281 362 460 228 156 287 262 301 310 372

Middle Market 4,239 4,527 4,453 4,548 4,537 4,766 4,144 6,224 5,360 5,153 4,258 3,880

Undisclosed 4,406 5,174 5,353 7,510 8,343 6,494 5,075 6,238 7,775 9,189 7,630 8,461

Deal Value $688 $992 $1,297 $1,647 $1,750 $1,075 $886 $1,048 $1,174 $1,080 $1,242 $1,806

Middle-Market M&A Activity

Number of Deals

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$250M-$750M 314 402 424 536 627 417 269 457 475 463 523 504

$50M-$250M 1,065 1,218 1,265 1,294 1,333 1,195 791 1,138 1,148 1,148 1,094 1,137$750M 33 61 84 106 149 64 34 94 88 92 93 115

Middle Market 626 906 859 998 826 788 742 869 698 688 557 534

Undisclosed 541 679 869 1,143 1,341 969 686 1,013 1,249 1,384 1,238 1,507

Deal Value $120 $225 $288 $524 $644 $244 $149 $272 $269 $262 $308 $383

Note: Year-to-date as of December 31, 2014Sources: Dealogic and William Blair & Company market analysis. Data represents announced deals only.

8,792 9,934 10,087 12,420 13,340 11,488

9,37512,749 13,397 14,643 12,198 12,713

$0

$600

$1,200

$1,800

0

6,000

12,000

18,000

Deal Value($ in billions)

Number of Deals Undisclosed Mid-Cap >$750M Deal Value

4,239 4,527 4,453 4,548

4,537 4,7664,144

6,224 5,360 5,153 4,258 3,880

$0

$200

$400

$600

0

3,000

6,000

9,000

Deal Value($ in millions)

Number of Deals $750M Deal Value


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Industrial Technology Investment BankingU.S. M&A Market Update 27

U.S. Valuation Trends

Median EV / LTM EBITDA Multiples

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2104

Middle Market 7.5x 7.4x 8.7x 10.1x 10.0x 9.5x 7.9x 6.4x 9.3x 10.0x 9.1x 9.9x 10.2x

Overall Market 7.9x 8.0x 9.1x 10.3x 11.0x 11.2x 9.0x 7.4x 9.9x 10.8x 9.6x 10.0x 11.2x

Median EV / LTM EBITDA Middle-Market Multiples

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

< $50M 4.1x 7.1x 6.4x 7.2x 10.2x 7.8x 4.9x 3.9x 8.8x 9.0x 6.8x 8.1x 7.7x

$50M-$250M 7.5x 6.9x 8.7x 11.3x 9.5x 10.4x 9.1x 7.1x 9.3x 10.0x 9.2x 11.3x 10.1x

$250M-$750M 9.7x 9.2x 9.1x 10.0x 11.0x 9.4x 8.3x 7.9x 9.7x 10.7x 10.2x 12.9x 10.5x

Sources: Dealogic and William Blair & Company market analysis. Data represents announced deals only.

3.0x

6.0x

9.0x

12.0x

15.0x

Mid-Cap Overall Market

0.0x

4.0x

8.0x

12.0x

16.0x< $50M $50M-$250M $250M-$750M


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Industrial Technology Investment Banking28 U.S. Equity Capital Markets Summary

U.S. Equity Capital Markets Summary

Historical IPO Issuance

Historical Follow-on Issuance

Note: Excludes follow-on offerings for CL EFs, REITs, and SPACs

IPO Pricings by Sector Last 4 Quarters:243 Total Deals Follow-on Pricings by Sector Last 4 Quarters:612 Total Deals

Sources: Dealogic and William Blair & Company market analysis.

54

139

95 105

175

243

28 3513 19

3925 20 21 21

50 48 56 63 70 54 56

0

50

100

150

200

250

2009 2010 2011 2012 2013 2014 1Q 11 2Q 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

564506

399470

657612

135 12850

86 130

98 115 127 152 139

173 193 198 183120 111

0

100

200

300

400

500

600

700

2009 2010 2011 2012 2013 2014 1Q 11 2Q 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

1116

31

100

26

59Business Services

Consumer

Financial

Healthcare

Industrial

Technology

60

48

58

162

177

107 Business Services

Consumer

Financial

Healthcare

Industrial

Technology


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Industrial Technology Investment BankingU.S. Leveraged Finance Market Update 29

U.S. Leveraged Finance Market Update

Leveraged loan volume in 1Q15 was $89 billion, down nearly 50% from 1Q14. The decline in volume was driven almost entirelyby lower repricing activity, which was virtually non-existent in the 1Q15 as rates increased throughout 2014 and into 2015.

Despite the YoY decline, the financing markets are open and available to borrowers, however lenders have required morelender-friendly terms and placed a higher emphasis on credit quality.

Recapitalization volume was light during 1Q2015 as borrowers were more hesitant to take on new debt at a higher cost ofcapital. That being said, lenders remain open to dividend recapitalization albeit at slightly lower leverage levels and higher costof capital.

The average leverage for large corporate LBOs for 1Q15 was 5.6x, down slightly from 5.8x seen during all of 2014, but in linewith leverage levels in 4Q14. The modestly lower leverage level in 1Q15 is still at the upper end of the range of levels seen sincethe recession.

Debt multiples for middle market LBOs have followed a similar trend, averaging 4.9x in 1Q15, compared to 5.3x for all of 2014.While leverage levels are down slightly from last year, they remain meaningfully higher than levels seen in 2009-2012.

Pricing spreads for institutional single-B first-lien leveraged loans through February 2015 were up approximately 100bps overthe prior year. In March 2015, spreads came down by 25-50 bps, suggesting lenders have recently become more aggressive inthe face of lighter transaction volume.

Large Corporate Leveraged Loan Volume Recapitalization Loan Volume

Source: S&P LCD.

LBO Leverage Multiples B+/B Rated Institutional Loan LIBOR Spreads

Source: S&P LCD.

$506

$149$71

$225$362

$455$594

$513

$166$89

2007 2008 2009 2010 2011 2012 2013 2014 1Q14 1Q15

Institutional Pro Rata

$49

$3 $1

$38 $36

$56$70

$53

$17$6

2007 2008 2009 2010 2011 2012 2013 2014 1Q14 1Q15

Institutional Pro Rata

6.2x4.9x

4.0x 4.7x 5.2x 5.3x 5.4x

5.8x 5.5x 5.6x5.6x

4.5x3.3x 4.2x

4.3x 4.5x 4.8x 5.3x 4.9x 4.9x

2007 2008 2009 2010 2011 2012 2013 2014 1Q14 1Q15

Large Corporate Middle Market

408

Apr-07

Sep-07

Feb-08

Jul-08

Dec-08

May-09

Oct-09

Mar-10

Aug-10

Jan-11

Jun-11

Nov-11

Apr-12

Sep-12

Feb-13

Jul-13

Dec-13

May-14

Oct-14

Mar-15

NA


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William Blair is a trade name for William Blair & Company, L.L.C. and William Blair International, Limited. William Blair & Company, L.L.C., is a Delaware company and is regulated by the Securities andExchange Commission, The Financial Industry Regulatory Authority, and other principal exchanges. William Blair I nternational Limited is authorised and regulated by the Financial Conduct Authority("FCA") in the United Kingdom. William Blair & Company only offers products and services where it is permitted to do so. Some of these products and services are only offered to persons orinstitutions situated within the United States and are not offered to persons or institutions outside of the United States.

This material has been approved for distribution in the United Kingdom by William Blair International Limited, Regulated by t he Financial Conduct Authority (FCA), and is directed only at, and is onlymade available to, persons falling within COB 3.5 and 3.6 of the FCA Handbook (being Eligible Counterparties and Professional Clients). This Document is not to be distributed or passed on to anyRetail Clients. No persons other than persons to whom this document is directed should rely on it or its contents or use it as the basis to make an investment decision.

William Blair & Company | 222 West Adams Street | Chicago, Illinois 60606 | +1 312 236 1600 | williamblair.comApril 20, 2015

Industrial Technology Investment Banking30 Disclosures

Disclosures


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William Blairs investment banking group combines signiicant transaction experience,

rich industry knowledge, and deep relationships to deliver successful advisory and

inancing solutions to our global base of corporate clients. We serve both publicly traded

and privately held companies, executing mergers and acquisitions, growth inancing,

inancial restructuring, and general advisory projects. This comprehensive suite of

services allows us to be a long-term partner to our clients as they grow and evolve.

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