1H 2018 PE Deal

DATA AS O F J U N E 3 0 T H , 2 0 1 8

1H 1H 2018 2018

THIS INFOGRAPHIC REPORT AND ALL ASSOCIATED CHARTS, PREPARED BY CASSEL SALPETER & CO. WITH DATA FROM PITCHBOOK AS OF JUNE 30TH, 2018, PROVIDES A TOP-LEVEL EXAMINATION OF PRIVATE EQUITY ACTIVITY IN FLORIDA. IT OFFERS IN-DEPTH INSIGHT AND DATA-DRIVEN ANALYSIS OF THE STATE’S PE TRENDS, WITH A FOCUS ON DEAL FLOW ACTIVITY. THIS REPORT INCLUDES ALL PE INVESTMENTS (INCLUDING BUYOUT, ADD-ON, GROWTH AND RECAPITALIZATION), EXCLUDING REAL ESTATE INVESTMENTS, MADE INTO TARGET COMPANIES WITH HEADQUARTERS IN FLORIDA.

Florida PE Deal Flow by Year 2008

157

2009

131

20 10

172

201 1

181

2012

242

2013

209

2014

261

2015

273

2016

262

2017

281

1H 2018

118 0

50

100

150

200

250

300

As we have noted in prior reports, all 1H data is preliminary as data reporting generally lags behind actual activity. After a record 2017, the first half of 2018 remained strong with 118 total Florida PE deals completed. This surpasses the previous initially reported record set in 1H 2017, which saw 109 deals completed (note, the final reported number for 1H 2017 as seen in the Florida PE Deal Flow

by Quarter chart is 145 deals completed; further exemplifying the underreporting of initial reported data). This increase is not surprising as recent years have seen increasing amounts of fundraising, and thus, greater availability of capital.

Florida PE Deal Flow by Region

100%

TA M PA B AY

90% 80%

SOUTHWEST

70%

SOUTHEAST

60% 50%

PA N H A N D L E

40% 30%

NORTHEAST

20%

CENTRAL

10% 0% 2008

2009

2010

2011

2012

2013

2014

2015

2016 2017

1H 2018

The Southeast has consistently remained the region with the most Florida PE deal flow, accounting for approximately 36.4%, down from approximately 42.7% of total 2017 Florida PE deals. Still the Southeast region more than doubled any other region in Florida. The Central, Tampa Bay, Southwest, and Northeast followed with approximately 18.6%, 17.8%, 15.3%, and 10.2%, respectively.

The panhandle trailed the group with approximately 1.7% of total Florida PE deals.

Florida PE Deal Flow by Quarter

90

85

80

81

77

76

60

62

61 52

52

50

45

41

40

40 30

56

57

33

31

32 24

36

53

48

42

39

59

57 59

74 69

68 68

70

76

65 59

63 59

64

62

65 53

49 39

30

26

20 10 0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018 started out strong with 65 Florida PE deals completed in 1Q, consistent with the 62 deals completed in 4Q 2017. While 2Q 2018 seems to have slowed down somewhat in terms of completed deals, these numbers may be underreported as previously indicated by 1H 2017 initial reported data having a total of 109 deals completed, and now show a total of 145 deals completed.

2018

Q&A Q // How do you see the recent developments regarding the U.S.-China trade war affecting Florida PE firms and their portfolio companies in Florida?

SCOTT SALPETER & JAMES CASSEL

A // Portfolio companies relying on raw materials or other components and products from China may see an adverse impact on costs affecting margins and profits due to U.S. tariffs.

Therefore, valuations for existing portfolio companies may be negatively affected by the reduced profits if they cannot increase prices.

Q // How do you believe PE strategy will evolve as a result of large strategic players beginning to consolidate across multiple industries?

A // Amazon closed its acquisition of Whole Foods, CVS Health announced its acquisition of Aetna, and Cigna announced its acquisition of Express Scripts; all three deals are recent examples of cross-sector M&A. PE firms may try to follow this lead and use cross-sector add-on’s to diversify their existing portfolio companies.

Florida PE Deal Flow by Type

100%

P L AT F O R M C R E AT I O N

90%

G R O W T H / E X PA N S I O N

80% 70%

RECAP

60% 50%

ADD-ON

40%

BUYOUT/LBO

30% 20% 10% 0% 2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

1H 2018

Add-on’s remained dominant as the largest type of Florida PE deals, accounting for approximately 61.0% of total Florida PE deals in 1H 2018. Buyout/LBO and Growth/Expansion (i.e. minority) accounted for approximately 22.0% and 15.3%, respectively. Platform Creation and Recap each accounted for approximately 0.8% of total Florida PE deals in 1H 2018.

Florida PE Deal Flow by Sector

100% M AT E R I A L S & R E S O U R C E S

90% 80%

IT

70% H E A LT H C A R E

60% 50%

FINANCIAL SERVICES

40%

ENERGY

30% B2C

20% 10%

B2B

0% 2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

1H 2018

B2B remained dominant as the largest sector of Florida PE deal activity in 1H 2018, accounting for approximately 33.9%.

Healthcare remained ahead of B2C for the third time in our semi-annual report, while IT surpassed B2C for the first time, accounting for approximately 27.1% and 17.8%, respectively. The difference between the Healthcare and B2B sectors is the tightest gap between B2B and another sector we have seen since we began running this report. B2C accounted for approximately 13.6% of Florida PE deal activity in 1H 2018, the lowest percentage we have seen for this sector.

Florida Buyouts vs. Add-ons

73.5%

250

68.7%

59.5% 61.4%

200

65.1%

70.5%

56.7%

80%

68.4%

67.0%

70%

62.4%

60%

53.9%

150

126

134

116

95

80

72

10%

0

2008

2009

2010

2011

BUYOUT/LBO

2012

2013

ADD-ON

2014

2015

2016

2017

20%

26

70

76

69

56

51

79

61

51

31

59

50

40% 30%

68

81

69

100

140

50% 150

1H 2018

0%

ADD-ON %

In 1H 2018, Add-ons accounted for approximately 73.5% of all control investments, a slight increase over recent years, illustrating a consistent trend that PE firms have been focused on building out platforms in their portfolio.

PE-Backed Florida Companies

449

450

424

400

362 378

350

329

396

343

298

300

276 247

250

253

YEAR OF INVESTMENT

219

200

2012-1H 2018

171

150

123

100

85

97

141

2006-2011

109

2000-2005

73

PRE-2000

50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

2012 2013 2014 2015

2016 2017

1H 2018

PE-backed Florida company inventory grew slightly in 1H 2018, with an additional 4.4% growth from year-end 2017.

While the aging company inventory acquired between 2006 and 2011 is still hefty at approximately 19.4% of the total PE-backed Florida company inventory, the increase in new PE-backed Florida company inventory acquired between 2012 and 2018, accounting for approximately 78.0%, illustrates the use of capital available to PE firms.

Florida PE Exits by Type 90 80

42

70

37

60

29

19

25

30

40

44 29

2013

34

31

2012

13

17

13 12

2011

22

10

20

20

16

30

15

40

27

20

26

50

0 2008

2009

2010

Corporate Acquisitions

2014

2015

2016

2017

1H 2018

Secondary Buyouts

After being surpassed by Secondary Buyouts in 2017 for the first time since we began tracking Florida PE deal activity, Corporate acquisitions has regained its title as the primary exit route for Florida PE deals in 1H 2018, representing approximately 59.4% of total 1H 2018 Florida PE exits.

Florida PE Investments vs. Exits

140

3.0x

120

2.5x

100

2.5x

2.3x

1.9x

1.5x

1.5x

40

2.4x

1.0x 1.7x

2.3x

2.5x

60

2.6x

80

2.1x

2.0x

2016

2017

0.5x 1.4x

20 0

0.0x 2008

2009

2010

Investments/Exits

2011

2012

2013

2014

2015

# of Investments (excl. add-ons)

1H 2018

# of Exits

The Florida PE investment-to-exit multiple decreased in 1H 2018 from 2.4x at year-end 2017 to 1.4x in 1H 2018. The drop in number of investments in 1H 2018 is likely attributed to the numbers being underreported as previously indicated.

Florida-Based PE Firms

70

68 60

56 50

47 40

41 37

30

27

30

32

34

20

10

0

2010

2011

2012

2013

2014

2015

2016

2017

1H 2018

The number of PE firms with headquarters in Florida continues to grow, with 1H 2018 seeing an additional 12 Florida-based PE firms since year-end 2017 and a CAGR of approximately 13.1% from 2010 through 1H 2018. This is the largest increase we have seen to date since we began tracking Florida PE firms, including increases in year-over-year, let alone half year. It will be interesting to see the final number of PE firms with headquarters in Florida at year-end 2018.

METHODOLOGY

PRIVATE EQUITY DEALS This report includes all PE investments (buyout, growth, PIPE, recapitalization, and add-on), excluding real estate investments, made into target companies, with headquarters in Florida.

Only investments made directly by private equity firms or their portfolio companies are counted. Buyout deals are defined as transactions in which the PE investors receive controlling ownership stakes in the target companies. Growth deals are defined as minority investments in target companies.

Add-on deals are defined as acquisitions by companies with private equity backing.

FLORIDA-BASED PRIVATE EQUITY FIRMS

PE-BACKED FLORIDA-BASED COMPANIES

This report includes PE firms with headquarters in Florida that were either actively investing or raising funds during the reported periods.

This report includes companies headquartered in Florida that are in part or in whole backed

by PE firms.

Cassel Salpeter & Co. is a boutique investment banking firm focused on providing independent and objective advice to middle market and emerging growth companies.

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