TEST & MEASUREMENT I U NDUSTRY · PDF fileThe Test & Measurement segment offers essential test, calibration and metrology equipment, ... Our business unit and corporate teams remain

TEST & MEASUREMENT INDUSTRY UPDATE – Q3 2016

TEST & MEASUREMENT M&A, INDUSTRY AND CAPITAL MARKETS REVIEW – Q3 2016

As part of our Industrial Technology sub-sector research, Delancey Street Partners is pleased to present our Test & Measurement Industry Update for Q3 2016. The Test & Measurement segment offers essential test, calibration and metrology equipment, instruments, software and services used to create actionable intelligence by measuring and monitoring a wide range of parameters in industrial, energy, technology, pharmaceutical and nanotechnology applications, including mass, product yield, product quality and safety, electrical current, radio frequency signals, distance, pressure and temperature. Companies in the Test & Measurement industry differentiate through the development of products and services that address increasingly complex engineering requirements by investing substantially in research, development and application engineering. T&M focus categories in this analysis include:

Safety T&M Products

Quality Assurance T&M

Metrology & Calibration Services

Network Comm. / Electronics T&M

Sensors & Controls

Laboratory Instruments

T&M Industry Attributes

High margins driven by IP and technical nature of sale

Increasing regulatory environment and strict compliance standards drive T&M

Significant barriers to entry

Fragmented industry landscape; attractive M&A opportunities

Strong public market valuations

SUMMARY MARKET STATISTICS (as of September 21, 2016)

U.S. Equity Markets 1 Mo.

% Chg. 1 Yr.

% Chg. Debt Capital Markets

(Sources: St. Louis Fed, S&P) Current

1 Year Ago

International Equity Markets

1 Mo. % Chg.

1 Yr. % Chg.

DJIA (1.4%) 10.8% BAML BBB Effective Yield 3.29% 4.05% FTSE (0.4%) 11.9%

S&P 500 Index (1.0%) 10.0% BAML BB Effective Yield 4.66% 5.58% DAX (Germany) (1.0%) 4.9%

Nasdaq Composite Index 1.1% 9.7% BAML B Effective Yield 6.46% 7.60% Nikkei 225 1.6% (7.0%)

Russell 2000 Index 0.7% 7.2% YTD Leveraged Loan Volume $257.5B $297.7B Shanghai (2.6%) (4.1%)

Phil. Semi Index (SOX) 1.7% 33.2% YTD High Yield Volume $133.8B $195.6B TWSE (Taiwan) 2.1% 11.1%

DELANCEY STREET PARTNERS Delancey Street Partners is an independent, industry-focused investment bank. We serve CEOs, Entrepreneurs, Shareholders and Boards of Directors of high growth and middle market private and public companies. Our services include strategic advisory, capital raising and independent board advice. We advise on sell-side and buy-side M&A, growth capital financings and recapitalizations. Our focus sectors include Business & Technology Services, Industrial & Industrial Technology, Downstream Energy & Logistics, Financial Technology, Healthcare Services and Consumer.

INDUSTRIAL TECHNOLOGY SENIOR LEADERSHIP Patrick Dolan

Managing Director 484.533.6311

[email protected]

Andrew Schmucker Managing Partner

484.533.6313 [email protected]

David Allebach Director

484.533.6315 [email protected]

Es1

TEST & MEASUREMENT UPDATE Q3 2016

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Featured Recent Delancey Street T&M Transaction: Troemner Sale to Mettler-Toledo

Delancey Street Partners served as financial advisor to Henry Troemner, LLC (“Troemner” or “the Company”), a leader in commercial mass metrology, in its sale to Mettler-Toledo International Inc. (“Mettler Toledo”). Delancey Street partnered with Troemner to assess, evaluate and explore strategic alternatives; managed a competitive sell-side M&A process; and negotiated the terms of the transaction.

About Henry Troemner, LLC

Troemner is a leading provider of precision weights and mass calibration standards, laboratory equipment and calibration services. With a 175-year history, the Company combines metrology expertise, world-class laboratories, a scalable technology infrastructure, manufacturing and industrial design excellence and a multi-channel sales and marketing platform to provide customers in a variety of end markets with

high quality, reliable products and services.

About Mettler-Toledo International Inc. (NYSE: MTD)

Mettler Toledo is a leading global manufacturer of precision instruments and services for use in laboratories and manufacturing. Mettler Toledo offers weighing, analytical

and inspection solutions along its customers’ value chain to help them streamline processes, enhance productivity, reach compliance with regulatory requirements or optimize cost. Mettler Toledo’s products include industrial scales, Mettler-Toledo Rainin pipettes and process analytics equipment. It is the largest provider of weighing instruments for use in

laboratory, industrial and food retailing applications.

Summary Public Company Valuation Data and Operating Metrics

Median EV / EBITDA by Sub-Sector Median EBITDA and Gross Margins by Sub-Sector

Note: Please see comparable company analyses for companies comprising each sub-sector. All public company, commodity and currency data sourced from Capital IQ.

Industrial Test & Measurement, Inspection Sensors & Controls Network and Electronics Lab Equipment & Instruments

EV / LTM EBITDA 13.3x EV / LTM EBITDA 12.0x EV / LTM EBITDA 11.4x EV / LTM EBITDA 16.0x

EV / 2016E EBITDA 12.2x EV / 2016E EBITDA 11.4x EV / 2016E EBITDA 10.0x EV / 2016E EBITDA 15.4x

2016E P/E 22.6x 2016E P/E 17.5x 2016E P/E 20.4x 2016E P/E 19.9x

EV / LTM Revenues 2.22x EV / LTM Revenues 2.46x EV / LTM Revenues 2.01x EV / LTM Revenues 3.02x

3-Yr. Revs CAGR 3.9% 3-Yr. Revs CAGR 4.6% 3-Yr. Revs CAGR 1.4% 3-Yr. Revs CAGR 4.8%

Est. 5-Yr. EPS Growth 13.2% Est. 5-Yr. EPS Growth 13.3% Est. 5-Yr. EPS Growth 12.5% Est. 5-Yr. EPS Growth 13.4%

Gross Margin 46.8% Gross Margin 34.1% Gross Margin 58.5% Gross Margin 52.5%

EBITDA Margin 18.2% EBITDA Margin 20.6% EBITDA Margin 18.0% EBITDA Margin 23.3%

YTD Stock Price Change 14.0% YTD Stock Price Change 6.2% YTD Stock Price Change (0.4%) YTD Stock Price Change 11.4%

30 Day Stock Price Change 2.9% 30 Day Stock Price Change 0.9% 30 Day Stock Price Change 1.1% 30 Day Stock Price Change 0.7%

Note: Median statistics for respective metrics. As of close on September 22, 2016. Source for all public company data is Capital IQ.

13.3x

12.0x 11.4x

16.0x

12.2x 11.4x

10.0x

15.4x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

Industrial Test &Measurement,

Inspection

Sensors & Controls Network andElectronics

Lab Equipment &Instruments

EV / LTM EBITDA EV / 2016E EBITDA

46.8%

34.1%

58.5%

52.5%

18.2% 20.6%

18.0%

23.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Industrial Test &Measurement,

Inspection

Sensors & Controls Network andElectronics

Lab Equipment &Instruments

Gross Margin EBITDA Margin


3

Recent M&A and Strategic Commentary from Select T&M Executives

“With these 2 acquisitions (HS Foils and Nu Instruments), we have now deployed approximately $360 million in capital and acquired over $150 million in revenue on 4 acquisitions so far in 2016. Our business unit and corporate teams remain active in identifying and pursuing acquisition opportunities, and we remain encouraged with the acquisition pipeline. The highest priority for capital deployment remains acquisitions.” (David Zapico, CEO, 8/4/16)

“We have been looking to grow and expand into the test services area across a number of our businesses. Millbrook (recent acquisition) is one of Europe's leading test and engineering services providers, mainly for the automotive industry but also more generally into transportation tire, petrochemical and the security and defense markets…. customers are more interested and more keenly looking for partners they can work with to outsource some of their R&D training. And clearly, Millbrook is benefiting from that trend.” (John O’Higgins, CEO, 9/2/16)

“If you look over the years of our acquisitions that we've done that tended to be small, they are almost always from a technology standpoint, where we are looking for IP and the developers behind that IP that we can leverage into our platform. So for example, I think over the last 5 years, 4 of the 5 acquisitions we've done have actually been targeted in the RF wireless communications space.” (John Graff, VP, 9/14/16)

“…Some context to our recent acquisition of Troemner. Troemner is the U.S. market leader for weights and weight calibration and a great strategic fit to our leadership position in Europe. Together, we are now the global leader in this niche market. Weights and weight recalibration services is an attractive market. It has strong barriers to entry as it requires very specialized know-how and expertise. We have 14 calibration labs worldwide, and the acquisition of Troemner firmly positions us as the U.S. market leader. Troemner is a very strong brand in the U.S. based on its word class metrology competence and solid infrastructure.” (Olivier Filliol, CEO, 7/28/16)

“We are still on a relative basis, from a market share, the overall broad market for sensors, we still just have a very small position. And that's also exciting because it gives me great confidence that we can expand long term both organically as well as through our robust acquisition program.” (Richard Norwitt, CEO, 7/20/16)

“We have 6 good, strategic platforms, and I think within that, there is a mix of bolt-ons and adjacent deals that would help those businesses build over time. We talk about building the strategic flywheel and adding M&A as part of looking at the strategic plan of a business over the next 3 to 5 years and then trying to accelerate strategy through M&A, which not only gives some good inorganic growth in 1 year, but it accelerates and improves the organic growth rate of the business over time.” (James Lico, CEO, 9/15/16)

“In Q3, Agilent signed a definitive agreement to acquire the assets of iLab. iLab is the market leader in cloud-based solutions for core laboratory management and provides services to leading universities, research hospitals and independent institutions around the world. This acquisition further expands Agilent's portfolio in the academia and government market. iLab enables Agilent to deliver broader value for our customers in this market segment. We also see an opportunity to expand the iLab business into the pharma market.” (Michael McMullen, CEO, 8/17/16)

“Another way we create value is to repeatedly identify, close and integrate acquisitions, aligned with our strategy, to win in sensing. We remain on track with integrating our recent acquisitions and are well positioned to create long-term value from DeltaTech, Schrader and CST.” (Martha Sullivan, CEO, 7/26/16)

“I'm very excited about the $5.5 billion that we've deployed on M&A this year. We bought 2 good businesses, very different businesses. Affymetrix is one that you take product through our existing channel. FEI is a tied-in adjacency. It's going to grow faster over time than the company average. It is a great growth play for the company. We have a tremendous track record of building out our presence, serving the research market, and where FEI is in the life cycle on structural biology is a great opportunity for Thermo Fisher to really penetrate that and build out a great franchise.” (Marc Casper, CEO, 9/14/16)

“We've increased our R&D spending. We're focusing that spending in several areas, like winning in wireless. And by that, we specifically mean catching the 5G inflection point when it happens, capturing the migration of value-added in test and measurement as it moves from a market that has been traditionally hardware only to one that is increasingly becoming software-centric.” (Neil Dougherty, CFO, 9/13/16)

“We're very pleased with the 3 acquisitions that we've done this year. Platforms and prospects to grow our inventory portfolio on a noncompetitive basis with our suppliers, those platform-type acquisitions remain kind of our sweet spot for M&A.” (Greg Cowan, CFO, 8/4/16)

“More recently, in the last few years, we've also expanded into the sensor world. So we are now one of the leading standalone suppliers of sensors. In a world that's increasingly connected, it's a good place to be. Large market, serving a variety of large end markets. And with this nice underlying growth trend because of the connected phenomena that will drive the markets we serve at 2 times the GDP rate.” (Thomas Lynch, CEO, 9/7/16)


4

Select Recent Test & Measurement M&A Transactions

Date Target Acquiror Target Business Description

9/12/16 Kimble Chase Life (Chase Scientific) DURAN Group (One Equity Partners) Manufacturer of laboratory and scientific glassware

9/6/16 Cepheid Danaher Corporation Molecular diagnostics integrated systems testing

9/6/16 Precise Time and Frequency The LGL Group, Inc. (Venator) Manufacturer of time and frequency instrumentation

9/2/16 TDL Sensors Ltd. Environnement S.A. Diode gas sensors for air quality, slack and combustion monitoring

8/30/16 Locus Traxx and PakSense Emerson Electric Corporation Develops and distributes real-time shipment information solutions

8/29/16 Laser Projection Technologies FARO Technologies Inc. Manufacturer of 3D laser projection and measurement systems

8/11/16 High Sierra Electronics, Inc. Logan Gayl, Inc. (OneRain Inc.) Designs and manufactures environmental monitoring systems

8/9/16 SensoCrete, Inc. GCP Applied Tech. Inc. Develops electromagnetic sensors for controlling and measuring

8/4/16 Ellab A/S IK Investment Partners Thermal validation solutions

8/4/16 Nu Instruments Limited and HS Foils Ametek Inc. Manufacturer of high performance mass spectrometers

8/3/16 Kanawha Scales & Systems, Inc. Grand Rapids Metrology Inc. Manufacturer of weighing and control solutions

8/2/16 Bosch Rexroth Monitoring Systems GmbH Weidmüller Holding Wind turbine condition-monitoring systems

8/2/16 Emerson Process Mgmt. - Karlstein Ops TS Temperatur Sensorik (WIKA) Manufacturer of thermal sensor technology

8/2/16 Clemex Tech. Inc.. (Coller Capital) Zwick Roell Diagnostics Image analysis solutions for research and quality control labs

7/29/16 Sensor Technology AS Berthold Technologies Manufacturer of nucleonic gauges

7/28/16 Henry Troemner LLC Mettler-Toledo International Inc. Manufacturer of metrology and laboratory equipment

7/28/16 Discom GmbH Brüel & Kjaer (Spectris plc.) Acoustic measurement systems for the automotive industry

7/28/16 IDEX Corporation SFC Koenig AG (HgCapital Trust) Metal to metal sealing and flow control technology

7/21/16 Implant Sciences (DMRJ Group.) Zapata Industries Sensors and systems for the security, safety and defense industries

6/30/16 Nexjen Systems, LLC (Jenkins Electric, Inc.) Averna Technologies Inc. (Tandem) Manufacturer of test, measurement and automation systems

6/30/16 CHOPIN Technologies KPM Analytics (Union Park Capital) Cereal, flour and their by-products quality control

6/24/16 Cascade Microtech Inc. FormFactor Inc. Electrical testing of high performance semiconductor devices

6/21/16 Lathrop Engineering, Inc. Paramit Corp. (Altaris Capital Partners) Diagnostic and analytical instrumentation for healthcare industry

6/21/16 PSG Plastic Service GmbH Meusburger Georg Hot runner systems, temperature control systems

6/21/16 American Science & Engineering Inc. OSI Systems, Inc. Manufacturer of detection products for defense applications

6/17/16 Electro Optical Indus. (Blue Wolf Capital) HGH Systèmes Infrarouges (Siparex) Infrared light and visible light spectrum test equipment

6/17/16 Bureau De Wit Eurofins Scientific Food and water safety testing

6/13/16 Gazomat (T. D. Williamson, Inc.) ECOTEC Solutions, Inc. Electronic detection equipment for gas distribution networks

6/13/16 Proliphix, Inc. Yardi Systems, Inc. Energy monitoring and control for light commercial markets

6/9/16 Rikola Ltd. Senop (Millog) Manufacturer of miniature spectral measurement tools

6/3/16 Omega Calibration Laboratories CET Structures Metrology calibration services

6/2/16 Avantes Holding m-u-t AG Manufacturer of spectrometers and light sources

6/2/16 Signadyne Spain (Caixa Capital) Keysight Technologies, Inc. Modular equipment for electronic control, test and measurement

6/1/16 Agro-Analyses Eurofins Scientific Microbiology food safety testing

5/27/16 FEI Company Thermo Fisher Scientific Scientific instruments and services for nanoscale applications

5/27/16 Silverwing Ltd. (Northern Venture Trust) Eddyfi NDT Inc. Non-destructive testing for energy industry

5/26/16 Eco Physics Bachtel Group Measurement services for environment, health and process control

5/12/16 SCHATZ Kistler Instrumente Measurement systems for torque, angle and clamping force

4/21/16 Morpho Detection, Inc. (Safran SA) Smiths Group Detection systems for defense applications

4/18/16 Danish Electronics, Light & Acoustics Force Technology A/S Light and acoustic test and certification

4/15/16 Tensitron Inc. Main Line Equity Partners, LLC Manufacturer of electronic tension measuring instrumentation

4/6/16 PCB Group, Inc. MTS Systems Corporation Manufacturer of measurement sensors and instrumentation

4/5/16 LEAP Technologies Trajan Scientific & Medical Laboratory sample prep automation equipment

4/1/16 Dia-Stron Limited Judges Scientific Fiber and sheet material test and measurement

4/1/16 CPT Engineering Srl Tesmec Measurement, control and industrial automation systems

3/29/16 Fire Instrumentation & Research Equipment Fire Testing Technology Ltd. Instrumentation and equipment for fire testing applications

3/25/16 Cascade Technical Services Element Materials Technology Holding Forced-air laboratory and vacuum ovens

3/18/16 Senmatic (Micro Matic) Indutrade Sensors for measurement of temperature, humidity and gases

3/17/16 DOP Solutions Limited Air Techniques Int'l (Hamilton Assoc.) Manufacturer of aerosol filter testing systems

3/17/16 BINDER GmbH Bregal Unternehmerkapital Measurement and control instruments

3/14/16 Test & Measurement Solutions NV Averna Technologies Inc. (Tandem) Test, measurement and precision assembly solutions

12/9/15 SP Industries, Inc. (Graham Partners) Harbour Group Manufacturer of laboratory equipment

10/21/15 KLA-Tencor Corporation Lam Research Corporation Manufacturer of process control and semiconductor yield management solutions


5

T&M Sub-Sector Review: Sensors & Controls

Sensors & Controls: Sub-Sector Highlights

Large, Fast Growing Market – BCC Research estimates the global sensor market at $101.9 billion, growing to $190.6 billion by 2021; CAGR of 11.0%.

Strong Secular Drivers – safety, automation, control, efficiency, environmental and regulatory requirements.

Numerous End Market Applications – transportation, energy, industrial, military & aerospace, medical, data / telecom, electronics, semiconductor, mobile power, among others.

Significant Breadth of Product Opportunity – pressure, temperature, speed, position, thermal, motor protectors, switches.

IIoT / M2M – Industrial Internet of Things driving “smart factories” which require more sensors and advanced connectivity.

Significant Content Growth – growing global proliferation of electronics (industrial and consumer).

Highly Engineered Products – often sole-sourced; IP creates barrier to entry.

Mission Critical, High Performance Solutions – embedded into complex systems; “zero tolerance” for failure.

Low % of Overall System Cost – drives high switching costs, particularly in high reliability applications.

Significant Customization Opportunities – thousands of variants to product lines.

Technical Nature of Sale – often engineer to engineer sale.

Representative Companies: Sensors & Controls

T&M Sub-Sector Review: Safety & Quality Assurance

Safety & Quality Assurance: Sub-Sector Highlights

Broad, Growing Addressable Market – numerous applications: i) product and/or service safety; ii) structural integrity and reliability; iii) infrastructure safety; iv) mechanical integrity; v) non-destructive testing (NDT); vi) destructive testing (DT); vii) predictive maintenance services; viii) health and food safety; ix) enterprise technology inspection.

Increasing Regulation Drives Testing – intense focus on compliance and safety.

Mission-critical Applications Across Industries – critical role in ensuring safety and compliance.

Numerous End Market Opportunities – i) process industries (food & beverage processing, water, chemicals, pharma, metals and mining, paper and pulp); ii) energy; iii) power generation and transmission; iv) public infrastructure; v) aerospace and defense; and vi) industrial.

Highly Publicized Accidents and Catastrophes Intensify Scrutiny on Safety – i) food quality outbreaks; ii) oil spills; iii) water quality issues; iv) infrastructure failures; and v) automotive/transportation/aviation accidents and recalls.

Products and Services Increasingly Outsourced – safety and QA T&M products are not core competencies of OEMs.

Desire by Companies to Extend Useful Life of Assets – reduce the significant cost and capex associated with constructing new manufacturing facilities; companies focus on maintenance and safety of existing facilities.

Aging Infrastructure - aging infrastructure requires relatively higher levels of maintenance and repair in comparison to new infrastructure, as well as more frequent, extensive and ongoing testing.

Powerful Regulatory Authorities and Associated Legislation: FDA, OSHA, EPA, CPSC, FAA; legislation examples: Food Safety and Modernization Act (FSMA); Safe Drinking Water Act (SDWA); Consumer Product Safety Act (CPSA)

Fragmented Industry – significant number of small vendors providing testing and inspection services to divisions of companies or local governments situated in close proximity to the vendor’s field inspection engineers and technicians.

Representative Companies: T&M Safety and Quality Assurance


6

T&M Sub-Sector Review: Electronics and Network Communications

Electronics and Network Comm. T&M: Sub-Sector Highlights

Technology Leadership is a Competitive Differentiator – in an ever-changing technology market, IP rules the day.

Numerous Growth Drivers – i) evolving technology standards (4G, 5G); ii) IoT; iii) all data, all the time; iv) defense modernization; v) the “connected” car; vi) consumer electronics demand; vii) evolving semiconductor manufacturing and testing technologies (linewidths, materials, wafer size, etc.).

Networks and Data Centers Continuously Improving Drives Testing – need to accommodate the plethora of applications for personal and work use.

Critical Need – need to optimize network performance, harden security and increase the scalability of networks.

System Solution Sales Opportunities – integrated software and hardware system designs; flexibility, functionality and ease-of-use associated with system sales often drives additional software and hardware sales.

Technology Convergence Requires Advanced Testing – shift from hardware-centric approach to software-centric approach requires sophisticated network monitoring and assurance of quality of the overall network.

Multiple Applications – measure and control electrical signals, such as voltage, current and power, as well as temperature, pressure, speed, flow, volume, torque, and vibration.

Broad Product Opportunities, both “Off-the-Shelf” and Application Specific – representative products include i) voltmeters, signal generators, oscilloscopes, data loggers; ii) metrology, process control and yield management equipment; iii) spectrum analyzers, cameras, and temperature and pressure monitors and controllers; iv) programmable logic controllers (PLCs) and proprietary systems suitable for specific applications.

Representative Companies: Electronics and Network Communications T&M

T&M Sub-Sector Review: Metrology and Calibration Services

Metrology and Calibration Services: Sub-Sector Highlights

Broad Applications – “the science of measurement” applies to multiple industries in a variety of applications; with an increased focus on the “smart factory” and more complex manufacturing environments, advanced metrology plays a key role in yield management and process improvement, from semiconductor device through large field equipment.

Required Services Through Full Manufacturing Cycle – with increasing automation, the need to measure and process data instantaneously is important, from prototype through in-line manufacturing to final test.

Recurring Need for Calibration Services for a Variety of Products – the proper calibration of precision instruments, balances and scales at regular intervals across industries is critical, and often an industry requirement.

Critical to Quality Manufacturing Process - traceability, accuracy, precision and measurement uncertainty are all important aspects of quality assurance management.

A High Level of Required Accreditations and Certifications – accreditations are often required for laboratories where calibration services are performed.

Significant Barriers to Entry – accreditations, and the ability to issue traceable certificates of calibration, serve as significant barriers to entry.

High Number of Accreditation Bodies and Related Agencies – NIST (National Institute of Standards and Technology; NVLAP (National Voluntary Laboratory Accreditation); ASTM International; ILAC (International Laboratory Accreditation Cooperation.

Highly Fragmented Market – composed of companies ranging from internationally recognized and accredited corporations to non-accredited, sole proprietors as well as companies that perform their own measurements or calibrations in-house, resulting in a tremendous range of service levels and capabilities.

Representative Companies: Metrology and Calibration Services

s


7

T&M Sub-Sector Review: Laboratory Equipment and Instruments

Laboratory Equipment and Instruments: Sub-Sector Highlights

Large Market – $15.4 billion market in the U.S. (Frost & Sullivan); in excess of $30.0 billion globally.

Compelling Dynamics – investment in lab equipment and instruments driven by R&D and healthcare spending.

Positive R&D Trends – global investment in R&D is forecast to be $2.0 trillion in 2016 (R&D Magazine); growth is driven by countries in Asia (China, Japan, India, S. Korea) which account for 40% of global R&D spend.

End Markets Increasingly Subject to Heightened Regulation and Public Scrutiny – there is significant regulatory focus on quality control around manufacturing operations and additional safety, testing and reporting measures; this requires advanced test equipment and instrumentation on-site in manufacturing facilities and laboratories.

Attractive Opportunities for Recurring Laboratory Consumable Product Sales – consumable sales are recurring in nature, form a base of repeat business and customers have ongoing demand these products for on-site testing applications.

Significant Opportunities for Product and Service Differentiation – product quality, brand reputation and the ability to provide rapid delivery are differentiating factors for consumable products; R&D investment and product innovation provide competitive advantage for highly engineered instrumentation and equipment.

Broad End Market Applications – academic, government, biopharmaceutical, industrial, and healthcare/patient care.

Unique Trends in Life Sciences – chemicals, reagents and life sciences kits are necessary for daily work; long-term trend of researchers opting for outsourced complete kits over error-prone “homebrew” methods (Frost & Sullivan).

Highly Fragmented Market – two large participants, VWR and Thermo Fisher Scientific, account for 25% of the market; there is a significant number of other specialty or regional manufacturers or distributors.

Representative Companies: Laboratory Equipment and Instruments

Gross Margins of Select Public Test & Measurement Companies

78.7% 76.4% 74.2%70.4%

67.7%64.9% 64.5% 62.6% 61.5% 61.2% 61.2% 58.7% 56.8% 55.7% 55.0% 54.2% 53.7% 53.5% 53.1% 51.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%


8

EBITDA Margins of Select Public Test & Measurement Companies

EV / LTM EBITDA of Select Public Test & Measurement Companies

DSP Test & Measurement Index Philadelphia Semiconductor Index (SOX)

(1) DSP T&M Index includes all comparable public test & measurement companies (market cap weighted) Source Data: S&P Capital IQ

35.3% 34.4%32.6%

28.4%26.9% 26.7%

24.8% 24.5% 24.5% 24.4% 23.6% 23.1% 23.0% 22.8%21.6% 20.8% 20.5% 20.4% 20.3%

18.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

18.3x17.6x 17.6x 17.3x

16.6x 16.5x 16.0x 15.8x 15.6x 15.1x 14.9x 14.4x13.3x 12.8x 12.6x 12.5x 12.2x 12.2x 12.1x 12.1x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Mar

-16

May

-16

Jul-

16

DSP T&M Index S&P 500 NASDAQ

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Mar

-16

May

-16

Jul-

16

USD at 8-Year High on JPY


9

Comparable Company Analysis: Industrial Test & Measurement, Inspection

Comparable Company Analysis: Sensors & Controls

Note: Data marked with “*” is excluded from summary calculations.

COMPANY STOCK PERFORMANCE AND COMPANY DATA MARGINS GROWTH

Market Enterprise Gross EBITDA 5-Year 3-Year EV / EV /

30 Day YTD Value Value Profit LTM EPS Revs Revs EBITDA

Company 9/22/2016 % Change % Change ($mm) ($mm) % Margin % Margin % Growth CAGR LTM LTM 2016 2016

Ametek Inc. (AME) $48.11 (2.4%) (10.2%) $11,181.7 $12,867.6 36.4% 26.9% 13.3% 2.4% 3.29x 12.2x 12.9x 20.9x

Badger Meter Inc. (BMI) 34.24 0.4% 16.9% 996.3 1,042.5 37.3% 18.2% 12.0% 7.4% 2.61x 14.4x 15.1x 29.1x

Bruker Corporation (BRKR) 22.55 1.9% (7.1%) 3,642.0 3,571.7 45.7% 14.8% 13.4% (4.1%) 2.20x 14.9x 13.5x 22.6x

Cognex Corporation (CGNX) 51.79 3.2% 53.4% 4,407.8 4,058.3 76.4% 26.7% N.A. 17.5% 9.04x * 33.8x * 24.9x * 37.9x *

ESCO Technologies Inc. (ESE) 47.05 3.8% 30.2% 1,210.0 1,255.9 37.4% 16.7% 13.5% 5.4% 2.22x 13.3x 12.2x 23.0x

FARO Technologies Inc. (FARO) 36.35 15.0% 23.1% 606.1 429.6 53.5% 8.6% N.A. 3.9% 1.35x 15.8x 12.0x 35.6x

FLIR Systems, Inc. (FLIR) 31.51 2.9% 12.3% 4,325.7 4,193.4 46.8% 21.6% 15.0% 3.1% 2.62x 12.1x 11.3x 19.6x

Intertek Group plc (LSE:ITRK) 46.69 (2.2%) 14.0% 7,510.7 8,741.5 64.9% 18.3% 8.2% (3.2%) 2.85x 15.6x 13.6x 22.4x

Mistras Group, Inc. (MG) 24.87 3.8% 30.3% 723.7 807.4 31.2% 11.1% 23.5% 7.8% 1.12x 10.2x 9.2x 32.1x

Hexagon AB (HEXA B) 44.05 7.4% 18.1% 15,877.5 17,742.9 64.5% 28.4% 8.8% 2.1% 5.19x * 18.3x * 16.4x * 24.2x *

MTS Systems Corporation (MTSC) 46.40 (7.2%) (26.8%) 773.7 627.4 36.1% 11.3% 13.0% 6.9% 1.08x 9.6x 7.4x 20.0x

Oxford Instruments plc (OXIG) 8.62 (14.4%) (23.8%) 492.5 677.1 61.5% 13.1% N.A. (6.4%) 1.30x 9.9x 9.2x 13.1x

Roper Technologies, Inc. (ROP) 182.13 2.9% (4.0%) 18,457.1 20,927.0 61.2% 34.4% 12.5% 5.5% 5.72x 16.6x 15.9x 27.6x

Spectris plc (SXS) 26.21 2.5% (1.4%) 3,122.9 3,260.5 67.7% 16.7% N.A. (5.7%) 2.03x 12.2x 11.7x 17.0x

Teledyne Technologies Inc. (TDY) 110.56 2.6% 24.6% 3,831.7 4,451.7 38.0% 16.0% 7.5% (2.0%) 2.00x 12.5x 12.7x 21.5x

Waters Corporation (WAT) 157.82 (2.5%) 17.3% 12,716.2 11,873.4 58.7% 32.6% 10.4% 4.5% 5.66x 17.3x 16.2x 24.0x

Overall Group Mean 1.2% 9.7% $5,400.4 $5,918.6 50.2% 19.2% 13.3% 3.7% 2.40x 13.1x 12.0x 24.2x

Overall Group Median 2.9% 14.0% 3,642.0 3,571.7 46.8% 18.2% 13.2% 3.9% 2.22x 13.3x 12.2x 22.6x

Overall Group Max 15.0% 53.4% 18,457.1 20,927.0 76.4% 34.4% 23.5% 17.5% 5.72x 16.6x 15.9x 35.6x

Overall Group Min (14.4%) (26.8%) 492.5 429.6 31.2% 8.6% 8.2% (6.4%) 1.08x 9.6x 7.4x 13.1x

VALUATION DATA

P / E





Amphenol Corporation (APH) $65.68 6.8% 25.8% $20,277.0 $22,326.5 31.9% 23.0% 8.5% 10.2% 3.79x 16.5x 15.8x 24.9x

Honeywell International Inc. (HON) 116.83 (0.2%) 12.8% 88,893.0 96,131.0 31.1% 20.4% 9.7% 1.0% 2.46x 12.0x 11.4x 17.5x

InvenSense, Inc. (INVN) 7.61 (2.3%) (25.6%) 713.0 598.2 41.3% 3.4% 18.3% 8.2% 1.60x * 47.7x * 23.6x * 82.1x *

Sensata Technologies Holding NV (ST) 38.92 - (15.5%) 6,648.8 9,776.3 35.3% 24.8% 13.5% 17.5% 3.18x 12.8x 11.8x 13.5x

TE Connectivity Ltd. (TEL) 64.41 1.8% (0.3%) 22,901.0 26,243.0 32.9% 20.8% 13.0% (1.4%) 2.21x 10.6x 10.2x 15.5x

Vishay Precision Group, Inc. (VPG) 15.85 3.9% 40.0% 209.1 194.3 36.5% 10.4% 18.0% (0.8%) 0.84x 8.1x 7.5x 25.2x




Overall Group Min (2.3%) (25.6%) 209.1 194.3 31.1% 3.4% 8.5% (1.4%) 0.84x 8.1x 7.5x 13.5x

VALUATION DATA

P / E


10

Comparable Company Analysis: Network and Electronics

Comparable Company Analysis: Lab Equipment & Instruments

Note: Data marked with “*” is excluded from summary calculations.





Ametek Inc. (AME) $48.11 (2.4%) (10.2%) $11,181.7 $12,867.6 36.4% 26.9% 13.3% 2.4% 3.29x 12.2x 12.9x 20.9x

Cobham plc (LSE:COB) 2.21 4.0% (47.0%) 3,747.3 4,915.0 48.1% 17.4% -8.8% (4.7%) 1.91x 10.9x 10.0x 13.3x

Ixia (XXIA) 12.18 3.5% (2.0%) 990.3 924.9 78.7% 15.8% 8.5% 1.0% 1.86x 11.8x 10.6x 22.0x

Keysight Technologies, Inc. (KEYS) 31.64 4.5% 11.7% 5,376.8 5,812.8 55.7% 20.3% N.A. 0.8% 1.99x 9.8x 8.9x 12.9x

National Instruments Corporation (NATI) 28.40 0.1% (1.0%) 3,652.4 3,352.1 74.2% 15.0% N.A. 1.8% 2.73x 18.3x 15.2x 27.7x

Spirent Communications Plc. (LSE:SPT) 1.04 (9.5%) (1.8%) 632.1 536.0 70.4% 15.0% 10.0% 3.9% 1.14x 7.6x 8.1x 19.8x

Viavi Solutions Inc. (VIAV) 7.50 (4.2%) 23.2% 1,742.2 1,391.6 62.6% 10.2% 12.5% (20.3%) 1.54x 15.1x 9.7x 21.9x

KLA-Tencor Corporation (KLAC) 69.51 2.1% 0.2% 10,843.2 11,409.9 61.2% 35.3% 17.5% 3.7% 3.82x 10.8x 10.1x 13.5x

Rudolph Technologies Inc. (RTEC) 17.87 (0.2%) 25.7% 562.6 459.3 53.7% 18.7% 12.5% 10.4% 2.03x 10.9x 8.3x 17.1x

Overall Group Mean 0.9% 0.1% $4,762.1 $5,141.7 58.8% 19.9% 9.3% (0.6%) 2.40x 12.5x 10.7x 19.0x

Overall Group Median 1.1% (0.4%) 3,699.9 4,133.5 58.5% 18.0% 12.5% 1.4% 2.01x 11.4x 10.0x 20.4x


Overall Group Min (4.2%) (47.0%) 562.6 459.3 36.4% 10.2% (8.8%) (20.3%) 1.54x 9.8x 8.3x 12.9x

VALUATION DATA

P / E


NOTE: VWR is a Distributor Market Enterprise Gross EBITDA 5-Year 3-Year EV / EV /



Agilent Technologies, Inc. (A) $46.67 (2.4%) 11.6% $15,139.0 $14,844.0 51.9% 20.5% 11.7% (11.6%) 3.60x 17.6x 15.4x 23.6x

Corning Incorporated (GLW) $23.11 1.2% 26.4% $23,962.2 $23,378.2 38.9% 24.5% 5.2% 7.2% 2.62x 10.7x 7.9x 15.5x

Danaher Corp. (DHR) 77.67 (4.1%) (16.4%) 53,634.1 64,263.9 53.1% 23.1% 15.0% (2.4%) 2.91x 12.6x 16.1x 21.8x

IDEXX Laboratories, Inc. (IDXX) 113.09 2.2% 55.1% 10,126.1 10,912.0 55.0% 23.6% 14.0% 8.7% 6.46x * 27.3x * 26.4x * 47.9x *

Mettler-Toledo International Inc. (MTD) 411.17 0.1% 21.2% 10,891.7 11,491.3 56.8% 22.8% 12.8% 1.3% 4.74x * 20.7x * 18.8x * 28.5x *

PerkinElmer Inc. (PKI) 55.61 (0.6%) 3.8% 6,083.8 6,893.8 46.1% 18.9% 12.3% 2.4% 3.02x 16.0x 15.1x 19.9x

Sartorius AG (DB:SRT) 82.04 3.2% (2.9%) 5,610.3 6,280.3 54.2% 24.5% 22.4% 10.3% 4.69x * 19.1x * 17.3x * 40.2x *

Thermo Fisher Scientific, Inc. (TMO) 157.66 2.0% 11.1% 62,159.5 75,644.2 45.8% 24.4% 14.2% 11.2% 4.30x 17.6x 16.6x 19.3x

VWR Corporation (VWR) 28.34 (0.4%) 0.1% 3,726.1 5,638.1 27.9% * 10.5% * 9.6% 2.9% 1.27x 12.1x 11.8x 16.5x

Waters Corporation (WAT) 157.82 (2.5%) 17.3% 12,716.2 11,873.4 58.7% 32.6% 10.4% 4.5% 5.66x 17.3x 16.2x 24.0x




Overall Group Min (4.1%) (16.4%) 5,610.3 6,280.3 38.9% 18.9% 5.2% (11.6%) 2.62x 10.7x 7.9x 15.5x

VALUATION DATA

P / E


11

M&A Advisory Growth Capital Recapitalizations Board Advisory Strategic Evaluations

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