Arjen Kostelijk, Oaklins' Testing, Inspection & Certi-fication (TIC) specialist, is proud to share some high- level industry intelligence in this edition of Spot On.

“Oaklins has advised on numerous mergers and acquisitions in the TIC sector in the last 15 years. Recent examples include the sale of Omegam Laboratoria to Eurofins, the sale of Roos+Bijl to SGS and the sale of KOAC-NPC to Kiwa. Consolidation is one of the key drivers in the global TIC market. We expect the large TIC players to continue the

consolidation play that is fuelling the industry’s M&A activity. Furthermore, mid-sized companies are becoming increasingly acquisitive in order to gain a greater market share and critical mass. In addition, the TIC market’s attractive dynamics are prompting private equity investors to look for platform companies to join the consolidation game.

"This Spot On edition presents some high-level industry intelligence covering the subjects below.”

TESTING, INSPECTION & CERTIFICATION

SPOT ON

Page 4

SECTOR VIEW

Paul Hesselink

CEO of Kiwa

Page 3

SPOTLIGHTMARKET TRENDS

Page 2

Page 6

VALUATION TRENDS

Total TIC market US$142.0bnOutsourced TIC market

US$61.0bnTop 10 players US$31.9bn

5x

8x

11x

14x

17x

SGS SA Bureau Veritas SA Intertek Group plc Applus Services SA Eurofins Scientific Societe Europeenne ALS Ltd.

Jun-

12

Aug-

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Dec

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Feb-

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Jun-

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Oct

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Feb-

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Apr-

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Jun-

14

Aug-

14

Oct

-14

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-14

Feb-

15

Apr-

15

Jun-

15

Aug-

15

Oct

-16

Dec

-15

Feb-

16

Apr-

16

Jun-

16

Aug-

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Oct

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Dec

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Apr-

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Jun-

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2Spot On · Testing, Inspection & Certification · 1st edition 2017

The global TIC market (including both in-house and outsourced TIC) is valued at US$142bn, of which the outsourced TIC market accounts for circa 43%. The top 10 companies in the TIC market have a combined market share of circa 22.5%. This still significantly fragmented industry clearly supports further market consolidation.

The overall global TIC market is expected to experien-ce continuous growth in the coming years, with circa 6% per annum to approximately US$214bn in 2022.

1. Regulations and standards There has been a clear shift towards stricter and more complex regulations and standards (often government-driven) to ensure health and safety compliance across a variety of industries, such as food, textiles, toys and electrical goods. This is creating new growth opportunities for TIC companies.

2. Outsourcing Large corporates and state-owned organizations are increasingly outsourcing TIC activities to external experts to reduce in-house costs and to pass on the responsibility for complex compliance issues to third parties.

3. Globalization This is leading to increasing trade. Imports from developing countries in particular are required to pass stringent tests to comply with international standards. In the developed world, companies tend to want to control the entire value chain, with most inspections being conducted pre-shipping.

4. Product variety and short life cycles These trends result in more frequent testing and certification applications as well as a higher services volume.

5. Safety and quality control The prevalence of social media and the risk of reputation loss escalate the need for quality requirements.

6. Growing income With rising disposable incomes, the use of consumer goods is expected to increase. This will lead to high demand for the testing of these goods, especially in countries such as China and India.

Total TIC market US$142.0bnOutsourced TIC market

US$61.0bn

Top 10 players US$31.9bn

0

50

100

150

200

250214

142

+6%

2015 2022

Market trends

Market size

Market growth

Strong fundamental growth drivers

3Spot On · Testing, Inspection & Certification · 1st edition 2017

Eurofins is one of the most active consolidators in the global TIC market

Eurofins Scientific’s M&A profile

With US$2.8bn in annual revenues and over 28,000 employees in around 310 sites in 39 countries, Eurofins Scientific is a leading international group of laboratories providing a unique range of analytical testing services to the pharmaceutical, food, environmental and consumer products industries and to governments.

Eurofins Scientific has been very active in the TIC M&A market, with between 10 and 27 deals per year from 2012 to 2017YTD. With acquisitions across different segments, Eurofins Scientific is further strengthening its overall presence in the global TIC market.

In 2014, Oaklins’ Dutch team advised on the sale of Omegam Laboratories to Eurofins Scientific. The acquisition reinforced Eurofins Scientific’s leadership in the environmental testing market in the Benelux and bolstered the company’s service offering to cover the full spectrum of water analysis.

The strategic rationale behind the most recent transactions is centered on increasing the company’s current global footprint and further consolidating the markets in which Eurofins is already active.

Year Target News Transaction rationale

2017Eurofins Scientific acquires Alphora Research, a Canada-based provider of active pharmaceutical ingredient technology development services

Strengthens Eurofins’ footprint in the rapidly-growing biopharmaceutical testing market

2017Eurofins Scientific acquires GATC Biotech, the Germany-based provider of DNA and RNA sequencing and bioinformatics services

Bolsters Eurofins’ footprint in DNA sequencing and its platform supporting genetic testing innovations

2017 Eurofins Scientific acquires Ahma ymparisto, a Finland-based environmental testing laboratory

The geographical footprint and test portfolio complements Eurofins' strong presence in southern Finland

2016 Eurofins Scientific acquires Megalab, the Spain-based operator of a clinical diagnostic laboratory

Enables Eurofins to enter the clinical diagnostic testing market in Spain

2016Eurofins Scientific acquires Agro-Analyses, a France-based analytical service provider supporting the food retail and catering sectors

Reinforces Eurofins’ leadership in the French food testing market and accelerates Eurofins' capabilities in microbiology

2015 North Malaya Laboratory

Eurofins Scientific acquires North Malaya Laboratory, a Malaysia-based operator of laboratories providing analytical analyses for food and environmental testing, as well as for rubber testing

The acquisition will act as a platform for Eurofins to develop a wide range of services and increase its presence in Malaysia

2014Eurofins Scientific acquires Omegam, the Netherlands-based company operating as an environmental and water testing laboratory

Extends Eurofins’ leadership in the environmental testing market in the Benelux and the company’s service offering to cover the full spectrum of water analysis

Spotlight

A chronology of selected recent M&A activity

4Spot On · Testing, Inspection & Certification · 1st edition 2017

The start

“When I joined Kiwa in 2003, it had been owned by the Dutch public drinking water utilities since 1948 as their joint quality assurance institute. At the time we decided to remain autonomous. This required transforming the organization into a market-driven TIC service supplier that would grow by diversifying and entering the international market. As larger TIC companies were already dominating many of the bigger markets overseas, we chose to focus on the highly fragmented market of product certification, testing and inspection. This is a niche market so we had to position ourselves as the leader in these areas to be of relevance and value to our customers. Consequently, we entered new markets, such as energy appliances, agro-food, mobility, and safety and security. The first acquisitions were done to build up existing greenfield startups in Germany, the United Kingdom, Italy and Belgium. We had just gained traction when a regulatory change made the utilities split Kiwa into two. In 2006, the TIC part, with a turnover of US$60–65m, was sold to ABN AMRO Participaties (AAP), the private equity firm of ABN AMRO. In 2011, another Dutch private equity firm, NPM Capital, became the major investor in Kiwa. Since then, our revenue has more than tripled from US$155m to US$525m. We now employ 4,500 TIC experts and have offices in over 30 countries.

Growing internationally

“Along with organic growth, some 20-plus acquisitions — notably Shield in 2009 and Inspecta in 2015 — have accelerated Kiwa's development considerably. These acquisitions helped Kiwa diversify faster and fill in the gaps in our strategy, while gaining access to new geographies. Not much has changed between AAP or NPM Capital being the main investor apart from the wider reach and larger scale of acquisitions with NPM Capital. Both investors have operated at arm’s length but with strong interest and support. They truly let management lead the company, which we greatly appreciate.

M&A in the TIC market

“The TIC market is sizeable and fragmented. Alongside the 20 larger organizations that occupy circa 30% of the total market, there are hundreds of small and medium-sized specialty firms. For all of them, consolidation has been a major growth mechanism over the last 30 years. This is likely to continue. Meanwhile, Kiwa has grown from a small to a mid-to-large TIC specialist that ranks around 20th among the global TIC organizations. We want to develop further as our markets keep evolving. After we’ve harmonized and integrated our previous acquisitions up to mid-2017, we

Sector view: Kiwa — king of the niches

4

Paul Hesselink

After obtaining his PhD in Chemistry and Biotechnology in 1988, Paul Hesselink began his career as a researcher with TNO. In 1998, he joined SGS, the world’s largest TIC organization, to become the Chief Executive of SGS Netherlands. Since 2003, he has been CEO of Kiwa, expanding it from a local TIC institute into a strong global player in product certification, and asset and installation inspection.

4

We entered new markets, such as energy appliances, agro-food, mobility, and safety and security

Kiwa has grown from a small to a mid-to-large TIC specialist

5Spot On · Testing, Inspection & Certification · 1st edition 2017

will start to look around again for new growth opportunities. Heightened regulation, outsourcing, to independent accredited TIC organizations, and public concern over product quality, safety and sustainability have kept the TIC market growing 1–3% above GDP. So there should be enough opportunity to grow organically, via partnerships or through acquisitions.

Kiwa in 5 years

“Five years from now, we hope to have achieved our 2003 vision of becoming an independent TIC company with a global footprint. This will require Kiwa to become a reputable leader in even more markets and to increase our visibility in specific countries in Europe, Asia Pacific, Latin and North America, with total revenues of between US$850m and US$1bn. Whether through acquisitions or partnerships, this would be a good goal to strive for: to become a larger king in many niche markets in more countries."

Sector view: Kiwa — king of the niches

There should be enough opportunity to grow organically, via partnerships or through acquisitions

Hazardous Materials

Metals & Mining

Transport & Mobility

Government

Water

Manufacturing Industries

Maritime & Offshore

Healthcare &Medical

Sports & Leisure

Real Estate

Oil, Gas & Chemicals

Fire Safety & Security

CSR

Infrastructure &Construction

Energy &Power

Food, Feed, Farm

Education

Kiwa's presence worldwide

Source: www.1kiwa.com/uploadedFiles/Kiwa_in_2017_infographic.pdf

Kiwa's markets

6Spot On · Testing, Inspection & Certification · 1st edition 2017

Arjen Kostelijk, TIC Specialist, Oaklins

The outsourced TIC market is highly fragmented, with the top 10 companies sharing a combined market share of circa 52%. Mid-sized companies are becoming increasingly acquisitive in order to acquire a greater market share and critical mass. Consequently, buy-side demand is especially high, as are valuations.

TIC players are highly acquisitive, with between 150 and 200 deals completed annually. Almost 50% of all transactions are carried out in Europe, mainly because the market is more mature and therefore larger, but also because it has a higher level of regulation and complexity across the different domestic zones.

We expect M&A activity — supported by the ample availability of funds — to continue at current levels, both in terms of volume and valuation multiples, for the next few years. On top of strategic buyers, that need to generate growth to accompany the large dominant players on a global basis, the market will also face further consolidation driven by financial investors being attracted by the fundamentals of this growing market.

5x

8x

11x

14x

17x

SGS SA Bureau Veritas SA Intertek Group plc Applus Services SA Eurofins Scientific Societe Europeenne ALS Ltd.

Jun-

12

Aug-

12

Sep-

12

Dec

-12

Feb-

13

Apr-

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Jun-

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Aug-

13

Oct

-13

Dec

-13

Feb-

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Apr-

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Jun-

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Aug-

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Oct

-14

Dec

-14

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There are several listed companies that are active in the TIC market, of which a selection are shown in the graph above. Since the beginning of this year, valuations of these selected companies have gone up by 11.1% (compared to the STOXX Global 1800’s 2.9%), partially

driven by the ongoing consolidation in the market and overall favorable market trends.

The median EV/EBITDA multiple of the selected peer group is 12.9x (as of 1 June 2017).

Listed TIC companies show relatively high valuations

EV/EBITDA 12-month forward

Valuation trends

6Spot On · Testing, Inspection & Certification · 1st edition 2017

7Spot On · Testing, Inspection & Certification · 1st edition 2017

An overview of selected M&A transactions in the TIC sector Date Target Buyer Country Rationale Valuation

EV (US$m)

EV/Sales

EV/EBITDA

EV/EBIT

19-May-2017

Broadens Synlab’s testing services portfolio, expands its

laboratory network and enables expansion into the Netherlands,

Sweden and Denmark

N/A N/A N/A N/A

19-Apr-2017

Enhances Element’s technical expertise and enables

expansion into North America, Europe and Asia

979.3 2.4x 12.3x 18.3x

21-Mar-20171

Enhances Socotec's expertise, enables expansion outside France and broadens ESG's

service portfolio

37.3 0.4x N/A N/A

09-Feb-2017

Allows Alpha to improve the quality of their medical care and

enables Unilabs to expand in Eastern Europe

395.2 N/A N/A N/A

03-Nov-2016

Enables Kiwa to broaden its services portfolio and expand

into the international food, feed and farm industries

N/A N/A N/A N/A

24-May-2016

Allows RINA to increase its geographical coverage and

improve the level of technical expertise

172.4 1.5x N/A N/A

19-May-2016

Enables Eurofins to accelerate the deployment of its

environment testing capabilities in Canada

26.3 N/A N/A N/A

12-Jan-2016Provides Gate Invest with a

platform to execute a buy-and-build strategy in the TIC market

N/A N/A N/A N/A

17-Dec-2015Provides Bridgepoint with a

platform to execute a buy-and-build strategy in the TIC market

984.1 3.4x 12.3x N/A

14-Oct-2015

Strengthens and broadens Intertek’s industry services

and enables Intertek to expand geographically

330.0 1.3x 8.3x 11.4x

02-Sep-2015Allows Inspecta Group to expand its business in the

Danish marketN/A N/A N/A N/A

06-Jul-2015

Strengthens Team’s services portfolio and enables the

company to further enhance its innovative technologies

298.6 1.8x 14.7x 23.7x

08-Apr-2015

Enables both Kiwa and Inspecta Group to further develop their

strong position in the global TIC market

304.5 1.4x 12.6x N/A

Median 1.5x 12.3x 18.3x

Valuation trends

Canada

Denmark Denmark

1 Pending

8Spot On · Testing, Inspection & Certification · 1st edition 2017

M&A activity

8

Selected Oaklins TIC transactions

9Spot On · Testing, Inspection & Certification · 1st edition 2017

MEET OAKLINS, THE WORLD’S MOST EXPERIENCED MID-MARKET M&A ADVISOR

Oaklins offers a comprehensive range of services ● M&A advisory (buy- and sell-side) ● Growth equity and equity capital markets advisory

● Debt advisory ● Corporate finance services

professionals 700

countries 40

transactions1,500

offices 60

sectors 16

Oaklins industry specialists

Testing, inspection & certification is one of our focus areas. Combining comprehensive sector knowledge with global execution has led Oaklins to become the most experienced M&A advisor in the TIC sector, with a large contact network of the most relevant market players worldwide. This results in the best possible merger, acquisition and divestment opportunities for TIC companies.

If mergers, acquisitions or divestitures of businesses or business units are part of your strategy, we would welcome the opportunity to exchange ideas with you. Please find our contact details below.

Jan P. Hatje, Managing PartnerHamburg, Germany

T: +49 40 34914175

Arjen Kostelijk, PartnerAmsterdam, Netherlands

M: +31 6 13979718

Jean-Patrick Larivière, Managing PartnerMontreal, Canada

T: +1 514-954-0070 x524

About Oaklins

Maarten Wolleswinkel, PartnerAmsterdam, Netherlands

M: +31 6 5367 9442

DisclaimerThis document is provided for information purposes only. Oaklins and its member firms make no guarantee, representation or warranty of any kind regarding the timeliness, accuracy or completeness of its content. This document is not intended to convey investment advice or solicit investments of any kind whatsoever. No investment decisions should be taken based on the content and views expressed herein. Oaklins and its member firms shall not be responsible for any loss sustained by any person who relies on this publication.

© 2017 All rights reserved. Oaklins is the collective trade name of independent member firms affiliated with Oaklins International Inc. For details of the nature of affiliation, please refer to www.oaklins.com/legal.

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