Vol. 5│Issue 2│Q2 2014

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Securities offered through GVC Capital LLC, member FINRA & SIPC.

Once again the M&A activity for the Pet industry has remained consistent for the second quarter of 2014, with nine announced transactions. Three of those transactions were major acquisitions totaling over $8 billion, including MARS Inc.’s acquisition of three major pet food brands from Proctor & Gamble; Eli Lilly’s acquisition of Novartis Animal Health; and the Harbinger Group’s potential acquisition of the Central Garden & Pet Company. In the past few years, the industry’s major players have been consolidating across all sectors from pet healthcare to distribution (with Phillips completing four acquisitions and Animal Supply completing five acquisitions in 12 months), and this trend is likely to continue for the next few years because the industry is expected to grow to $75 billion by 2017.

Pet Deal Activity Highlights

Q2 2014 Pet M&A Activities

Sniffing Out a Deal – Eli Lilly – Elanco Division

Acquisition Type: Strategic Top 5 Value Drivers: Increasing Pet Portfolio Successful Brand Robust Growth Opportunities R&D Manufacturing Capabilities Access to Key Geographies

IN THIS ISSUE

Deal Activity P. 1

Spotlight P. 2

M&A Market Overview P. 3

About SDR P. 5

Source: CapIQ

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Vol. 5│Issue 2│Q2 2014 2013

Securities offered through GVC Capital LLC, member FINRA & SIPC.

Bill Broun is Managing Director of Strategy and Business Development at Nestlé Purina PetCare Company. He is responsible for leading strategy development, acquisitions, alliances and new business pilots for the North American pet division of Nestlé. He also serves as Business Development Officer for 9 Square Ventures, a division of Nestlé Purina PetCare Company. Nestlé Purina is the largest pet food company in North America with such leading brands as: Beneful, Dog Chow, Friskies, Fancy Feast, ONE, Beggin Strips, Pro Plan and Tidy Cats. Its products are sold in grocery, mass and specialty channels. Bill joined Nestlé in 2006 as Director Business Development after holding positions in finance with The Procter & Gamble Company, equities research with A.G. Edwards & Sons, and commercial middle market banking with U.S. Bank N.A. He received a Bachelor of Science in Aerospace engineering from Parks College of St. Louis University and a Master’s of Business Administration degree from the University of Notre Dame's Mendoza College of Business.

Vol. 5│Issue 2│Q2 2014

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Securities offered through GVC Capital LLC, member FINRA & SIPC.

Pet Transactions # of Transactions by Quarter

Public Pet Segments

All Pet Companies by Region

Westcoast, 20%

Mountain, 13%

Midwest, 13%

Great Lakes, 20%

Southeast, 7%

Mid-Atlantic,

7%

Northeast, 7%

Pet Transactions by Region (YTD 2014)

N/A, 13%

Source: CapIQ *These data represent the recorded transactions, are not inclusive of completed transactions, and are meant to be representative of the industry.

Vol. 5│Issue 2│Q2 2014

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Securities offered through GVC Capital LLC, member FINRA & SIPC.

The pet industry public basket as a whole has been trailing the S&P 500 over the past 12 months; however, we believe that this is mostly due to the fact that many of the public pet companies are owned by large corporations with a variety of other divisions that are otherwise bringing down these companies’ stocks. For example Tractor Supply had solid growth in consumable products (i.e. pet food), but was offset due to poor sales of seasonal products. Nevertheless, not all pet segments are down; the pet healthcare segment has been on a steady rise since October and is poised to do even better in the second half of 2014 with a total of $28.97 billion dollars expected to be spent on pet health this year alone.

PET INDUSTRY VS. S&P 500 RUNNING 12 MONTHS

Source: CapIQ

Source: CapIQ

Vol. 5│Issue 2│Q2 2014

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Securities offered through GVC Capital LLC, member FINRA & SIPC.

Carol Frank (cfrank@sdrventures.com), Managing Director Prior to joining SDR Ventures in 2009, Carol developed three multi-million dollar pet companies in retail, manufacturing, and distribution. She successfully built and sold all three companies, and possesses the rare combination of investment banking expertise, transactional and operational experience in the pet industry. Carol began her career as a CPA with Ernst & Young and also spent three years as an executive recruiter for Robert Half International. She has a BBA in accounting from The University of Texas at Austin and an MBA from Southern Methodist University. Carol is a former board member of PIDA, PIJAC and The Pet Care Trust. As a registered investment banker, she also holds Series 79 and 63 licenses.

SDR Core Services Transaction Advisory

Capital Formation

Strategic Advisory

Unlike many traditional investment banks, SDR views each client as a relationship rather than a transaction. Our passion is helping business owners maximize value in their business. While this often takes the form of advising on acquisitions, sales, and recapitalizations, we realize that not every business is ready for such a transaction. Our advisory services are designed to add value. Advisory engagements include (but are not limited to):

Company Valuation Capital Strategy Exit Planning Shareholder Strategy

Pet Industry Sell-Side As former owners and operators, our principals have experienced the M&A world from the trenches. As investment bankers, our principals have gained the experience necessary to maximize value and facilitate a successful transaction. We know how to run an efficient and effective process, how to avoid pitfalls, how to maximize shareholder value, and how to minimize operational distractions.

Pet Industry Buy-Side Our buy-side search process has proven extremely effective at generating responses, identifying "off-the-radar" opportunities, negotiating favorable deal terms, and closing deals in a timely manner.

Placement Agent In the event that our debt solutions are not a fit for your strategic goals, SDR will act as a finder for private debt and equity capital. Our goal is to identify the right capital and the right capital provider based on your needs.