Lincoln International’s Mid-Market Financing Survey...

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Lincoln International’s Mid-Market Financing Survey Germany

Q2/2015

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Contents

Section 1 Introduction to Lincoln International 1

Section 2 Summary of the Mid-Market Financing Survey 9

Section 3 Results overview 11

APPENDICES

Contact Information

Introduction to Lincoln International

Section 1

Lincoln International at a glance

Leading and highly focused M&A investment bank with global footprint

New York

Chicago

Los Angeles

Madrid

Vienna

London

Frankfurt

Paris

Mumbai

Shanghai Tokyo

Amsterdam

Moscow

São Paulo

Beijing

Milan

Global, integrated investment bank with international project and industry teams

Focus on mid-sized M&A transactions in the Euro 25 – 500 million value range

Advisory on cross-border transactions as core competency

Share capital of Lincoln International is exclusively held by senior management team

Global

Mid-Cap

Cross-Border

Independent

Zurich

Section 1: Introduction to Lincoln International 2

Key facts about Lincoln International

Overview of key figures

Amsterdam | Beijing | Chicago | Frankfurt | London | Los Angeles | Madrid | Milan | Moscow | Mumbai | New York | Paris | São Paulo | Shanghai | Tokyo | Vienna | Zurich

Globally integrated company

with joint management

380

professionals globally for M&A

and Debt Advisory

17

own offices in the 10 major

world economies

> 135

successful transactions in

2014 worldwide

26

successful transactions in

DACH region in 2014

50

professionals in the Frankfurt

office

12

global, specialized sector

teams for selected industries

No. 1

globally as financial advisor to

Private Equity on exits

No. 1

in German M&A sell-side

league tables for 2014


Lincoln International’s business model

Integrated investment banking firm focusing on mid-sized M&A transactions between Euro 25 and 250 million

Transaction expertise

Core competencies:

Exclusive Sales / Divestitures

Debt Advisory

Other services:

Acquisitions

Mergers

Company valuations

Fairness Opinions

Exit Opinions

Special Situations

Capital Raising & Advisory

Sector focus +

Aerospace & Defense Automotive / Truck Building

Chemicals Business Services Cleantech

Financial Institutions Healthcare Industrials

Consumer / Retail Technology Transportation / Logistics


Leading M&A sell-side advisor (deals up to USD 500 million)

Global sell-side league tables

Source: mergermarket

Notes: (1) Sell-side advisors to targets on a global basis with a transaction size up to USD 500 million

(2) Excluding Big-4s

German sell-side league tables

Source: mergermarket

Notes: (1) Sell-side advisors to German targets with a transaction size up to USD 500 million

(2) Excluding Big-4s and insolvency advisor Perspektiv

Lincoln International’s leading market position in the M&A middle market is continuously reflected in mergermarket’s league tables

2013 2014 2013 2014

Global M&A (Sell-side)

Ranking Deal

2013 Company Name Count

1 M&A International 111

2 Rothschild 102

3 Lazard 98

4 Goldman Sachs 89

5 Lincoln International 78

6 Houlihan Lokey 76

7 JPMorgan 68

8 Morgan Stanley 64

9 Jefferies 61

10 Citi 57

11 Credit Suisse 53

12 UBS Investment Bank 53

13 BoA Merril l Lynch 51

14 Will iam Blair 50

15 RBC Capital Markets 50

Global M&A (Sell-side)

Ranking Deal


1 Rothschild 125

2 Houlihan Lokey 101

3 Lazard 96


5 Goldman Sachs 91


7 Will iam Blair 74

8 Raymond James 71

9 Morgan Stanley 70

10 Citi 68

11 Evercore Partners 64

12 Jefferies 61

13 Moelis & Company 61

14 JPMorgan 59

15 RBC Capital Markets 58

German M&A (Sell-side)

Ranking Deal



2 Rothschild 10

3 Globalscope Partners 10

4 Mummert & Company 9

5 Goldman Sachs 8


7 Sigma Corporate Finance 7

8 DC Advisory 6

9 Commerzbank 6

10 UniCredit Group 6

11 Network Corporate Finance 6

12 Altium Capital 6

13 Clairfield International 6

14 Saxenhammer & Co. 6

15 Lazard 5

German M&A (Sell-side)

Ranking Deal



2 Rothschild 16

3 Concentro Management 16

4 Altium Capital 11

5 Globalscope Partners 11

6 Mummert & Company 11

7 VR Corporate Finance 10

8 goetzpartners 9

9 Macquarie Group 8

10 UniCredit Group 7

11 Lazard 7

12 Commerzbank 7

13 Saxenhammer & Co. 7

14 Goldman Sachs 6

15 Deutsche Bank 6


Transactions in the financial year 2014

Selected German M&A transactions

Sale

WERU (D) from Triton (D)

to H.I.G. European Capital (D)

January 2014

Sale

Garpa (D) from the founding family (D) to DK Premium Brands (CH)

August 2014

Sale

Railpool (D) from HSH and KfW IPEX (D)

to Oaktree Capital Mgmt. (USA

May 2014

Sale

Universum Inkasso (D) from Valovis and Merkur (D)

to BBU (D)

May 2014

Sale

Schaltex Systems (D) from Haspa BGM (D)

to Scanfil (FIN)

March 2014

Sale

entelios (D) from the shareholders (D)

to EnerNOC (USA)

February 2014

Sale

Waggonbau Niesky (D) from Deutsche Bahn (D) to Quantum Kapital (D)

July 2014

Sale

Optics Division (D) from Eschenbach Optik (D)

to BWK (D)

June 2014

Sale

Prontor (D) from VTC Partners (D) to Hittech Group (NL)

July 2014

Sale

IHLE Holding (D) from founding family (D)

to Michelin (F)

December 2014

Sale

UMS US (USA) from UMS AG (D)

to New State Capital (USA)

August 2014

Sale

J.H. Ziegler (D) from private shareholders (D)

to DPE (D)

October 2014

Sale

Rademacher (D) from NORD Holding (D)

to Cross Equity Partners (CH) and Pinova Capital (D)

September 2014

Sale

alfi (D) from WMF group (D)

to Thermos (JP) and KWI (CN)

November 2014

Sale

J&S Automotive (D) from Finatem (D) to

Brockhaus Private Equity (D)

August 2014

Sale

TimePartner (D) to Auctus Capital Partners (D)

and Management

September 2014

Sale

Dürr Automation (F) from Dürr / Schenck (D) to Quantum Kapital (D)

December 2014

Sale

Amoena (D) from Granville (D)

and Baird Capital (UK) to Halder (D)

November 2014


http://www.triton-partners.com/

http://www.prontor.de/go/home/german.html

http://www.auctus.com/

Recent and current Debt Advisory mandates Germany (1/2)

Overview of selected DACH Debt Advisory transactions

Sale

Debt Advisor to the founding family

on the sale of IHLE Holding

to Michelin

September 2014

Refinancing

Advisor to Oakley Capital

on the refinancing of

intergenia Holding

September 2014

Recapitalisation

Advisor to Quadriga Capital

on the recapitalisation

of punker

October 2014

Acquisition Financing

Advisor to the

shareholders

December 2014

Confidential


Advisor to ProXES, a portfolio

company of DBAG, on the

acquisition of FrymaKoruma Group

October 2014


Advisor to Ardian on the acquisition financing

of ADA Cosmetics

July 2014

Sale

Debt Advisor to NORD Holding

on the sale of Rademacher to

Cross Equity Partners and Pinova

September 2014

Sale

Debt Advisor to VR Equitypartner,

SüdBG and individuals on the sale

of Clean Car to Holler Foundation

October 2014

Refinancing

Advisor to a US private equity

investor on the refinancing of a

foreign portfolio company

ongoing

Ongoing


Advisor to Oakley Capital

on the acquisition financing

of PARSHIP

April 2015

7 Section 1: Introduction to Lincoln International 7

Recent and current Debt Advisory mandates Germany (2/2)

Overview of selected DACH Debt Advisory transactions

Sale

Debt Advisor to Aheim Capital

on the sale of Aqua Vital

to Halder

July 2013

Sale

Debt Advisor to Delta Equíty on the

sale of Deutsche Fachpflege

Holding to Chequers Capital

March 2013

Sale

Debt Advisor to Riverside

on the sale of arena

to Capvis

January 2014

Refinancing

Advisor to SOLCOM on

its unitranche refinancing

provided by LFPI

September 2013

Amendment

Advisor to 360T

on the amendment of its existing

Senior Loan Agreement

May 2014

Acquisition financing

Advisor to DBAG


for Stephan Machinery

April 2013


Advisor to DBAG


of Stephan Machinery

April 2013

Sale

Debt Advisor to Kings Park Capital

on the sale of IHS

to Battery Ventures

July 2013

Sale

Debt Advisor to Triton

on the sale of Weru

to H.I.G. Capital

January 2014


Advisor to Orlando

on the acquisition financing of

Vivonio Group

October 2012


Advisor to Summit Partners on its

acquisition financing of

360 Treasury Systems

June 2012

8 Section 1: Introduction to Lincoln International 8

Summary of the Mid-Market Financing Survey

Section 2

Key findings German Mid-Market Financing Market Survey

Lincoln International's German Debt Advisory team is delighted to

present the results of its latest Financing Market Survey for the

German mid-market

A total of 68 banks and funds active in the German lending mid-

market were approached

Almost 60% of the approached lenders participated in the survey

49.1% institutions participating were banks, 43.9% debt funds with

the remainder being credit opportunity funds or other (3.5% each)

Survey statistics

Source: Lincoln International AG

The amount of capital available to support mid-market financing is

considered by more than 75% of the participants as too high

55.6% expect a higher lending volume for their institutions supported

by a higher lending activity in Q1/2015 compared to Q1/2014

The highest lending activity is expected in the segment between

Euro 50-150 mio. (EV)

Most activity is expected in the sector industrials (28.3%) followed

by healthcare (21.7%) and business services (13.0%)

Assessment of current market environment in Germany


Overall leverage levels are expected to be higher in 2015 (65.4%)

with spreads in the overall market further declining (55.8%)

74% of all lenders will keep the same credit terms but 22.2% of the

lenders are prepared to loosening those

2nd lien is expected by 55.7% of the market participants to play a

more important role in financing structures

Banks are expected to offer higher leverage levels and more bullet

structures in order to compete with debt funds

Financing trends


Unitranche and all-bullet financing are expected to further expand

into the lending market

Higher competition is feared to lead to increasingly aggressive

financing structures even on weaker business models

27.4% of survey participants are contemplating to increase their hold

sizes to enhance competiveness, 19.6% contemplate to expand into

new debt products whilst the same group might increase their

underwriting

Outlook


With market liquidity considered as being to high for the amount of deals offered in the mid-market, market participants are expecting a further

increase in leverage and tightening of margins

Section 2: Summary of the Mid-Market Financing Survey 10

Results overview

Section 3

Overview of survey results (1/4)

Bank49.1%

Private Debt Fund43.9%

Credit Opportunity Fund

3.5%

Other3.5%

Select the categorisation of your lending institution

Source: Lincoln International's Mid-Market Financing Market Survey

55.6%

18.5%

25.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Higher Lower Unchanged

The current expectations for your firm's 2015 loan volume as

compared to 2014 is…

SSource: Lincoln International's Mid-Market Financing Market Survey

48.1%

31.5%

20.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Higher Lower unchanged

How did your firm's Q1 2015 loan volume compare to Q1 2014?


3.7%

22.2%

74.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Tightening credit terms Loosening credit terms Keeping the same credit terms

In 2015 compared to 2014, will your firm be:


Section 3: Results overview 12


14.8%

50.0%

18.5%16.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

up to Euro 50 mio. between Euro 50 and upto Euro 150 mio.

between Euro 150 mioand up to Euro 300 mio.

above Euro 300 mio.

Which segment will see the highest lending activity in terms of

deal size (EV)?


Healthcare22%

Consumer / Retail11%

Automotive / Truck11%

Cleantech0%

Industrials28%

Technology, Media7%

Chemicals4%

Transportation /Logistics

4%

Business Services13%

Aerospace & Defense0%

Which sector will see the highest lending activity in 2015?


65.4%

7.7%

26.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%


Do you think total leverage levels in the overall market will be:


65.4%

5.8%

28.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%


Do you think senior leverage levels in the overall market will be:



Overview of survey results (3 of 4)

150525_Lincoln International Financing Market Survey

Germany.pptx

5.8%

55.8%

38.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%


Do you think senior spreads in the overall market will be:

Source: Lincoln International's Financing Market Survey

1.9%

61.5%

36.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%


Do you think unitranche spreads in the overall market will be:


TLC14%

2nd Lien56%

Mezzanine13%

Other (Unitranche)

17%

Which debt product will play a more important role in 2015?

Source: Lincoln International's Financing Market Survey:

76.9%

17.3%

5.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Disproportionately too high In balance Unsufficient

The amount of capital available to support mid-market financings

is:




“Unitranche product taking share”

“Banks offering higher leverage to compete with unitranche”

“Heightened competition, with both banks and funds aggressively

targeting the same opportunities”

“Sanity returning after some kind of scare”

“TLB structures for small businesses“

“Loosening of covenants“

“Focus on flexibility“

“Binary financing decisions“

“Financing of weaker business models, e.g. automotive suppliers“

“Over-leverage“

“Too much competition on good transactions“

“Poor credits with unrealistic expectations trying to take advantage

of broader market conditions and advisors…“

“Oversupply of loans chasing to little demand“

“Trend leading to all-bullet structurings“

“Cheap liquidity, lower margins, higher leverage“

“Team up between banks and funds“

What do you think will be the most pervasive trend in mid-market

financings in 2015?


Better47%

Worse6%

Flat47%

As compared to 2014, do you think your portfolio companies'

2015 performance will be:


Expanding into new debt products

12%

Changing your firm's capital structure

5%

Moving down the market (doing smaller EBITDA

levels)12%

Moving up the market (doing larger EBITDA levels)

7%

Increase underwriting levels12%

Offering more back-ended structures

10%

Increase your hold size17%

We are sticking to our current strategy

25%

To maintain or enhance your firm's competitiveness in the

market in 2015, is your firm considering:



Contact Information

Dominik Spanier

Managing Director

Lincoln International AG

Phone +49 69 97105 428

Mobile +49 170 764 2263

Fax +49 69 97105 528

Email [email protected]

Christine Weis

Director


Phone +49 69 97105 474

Mobile +49 173 392 7078

Fax +49 69 97105 574


Andres Middelschulte

Director


Phone +49 69 97105 401

Mobile +49 172 434 10 12

Fax +49 69 97105 501



Ulmenstrasse 37-39

60325 Frankfurt am Main

www.lincolninternational.de

150525_Lincoln International Financing Market Survey

Germany.pptx

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