end market recovery drives demand for precision machined ...

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END MARKET RECOVERY DRIVES DEMAND FOR PRECISION MACHINED COMPONENTSPRECISION MANUFACTURING INDUSTRY UPDATE | JULY 2021

TABLE OF CONTENTS

Key Industry TakeawaysIndustry OutlookKey Trends & DriversM&A OverviewQ&A: MW IndustriesNotable TransactionsSelect TransactionsPublic Company DataReport ContributorsFirm Track RecordEndnotes

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101112141617

David BenchManaging [email protected]

Ted PolkManaging [email protected]

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KEY INDUSTRY TAKEAWAYS

Capstone Partners’ Industrials Group is pleased to share its Precision Manufacturing report. Through ourongoing conversations with active industry players and analysis of trends during COVID-19, we have identifiedseveral key takeaways below, followed by an in-depth overview of trends and drivers, and an interview withMW Industries, an active buyer in the industry.

1. The Precision Manufacturing industry has continued to recover in year-to-date (YTD) 2021 afterfacing pandemic-induced challenges including supply chain disruptions, volatile raw material prices,and depressed demand in downstream markets.

2. A normalization in demand and technological innovations in end markets are expected to drivedemand for precision manufacturing services in 2021.

3. As manufacturers begin to operate closer to full capacity, the Industrial Production Index recorded a17.5% year-over-year (YOY) uptick in activity after falling to 84.2 in April 2020, according to Board ofGovernors of the Federal Reserve System data.1

4. Deal activity has continued at a rapid pace in 2021 YTD with 67 deals announced or completedthrough May 24, compared to 61 deals in the same period in 2020.

5. Financial buyers have driven merger and acquisition (M&A) activity, accounting for 56.7% of 2021 YTDtransactions as private equity firms have pursued well-positioned acquisition targets servingattractive end markets.

6. M&A activity continues to favor entities that support mission-critical functions with proprietarycapabilities. We see this across a variety of end markets.

Capstone Partners has developed a full suite of corporate finance solutions, including M&A advisory, debtadvisory, financial advisory, and equity capital financing to help privately owned businesses and private equityfirms through each stage of the company’s lifecycle, ranging from growth to an ultimate exit transaction.

To learn more about Capstone’s wide range of advisory services and Precision Manufacturing industryexpertise, please contact David Bench or Ted Polk.

Precision Manufacturing IndustryEnd Market Recovery Drives Demand

4

https://www.capstonepartners.com/advisors/david-bench/#:%7E:text=David%20is%20a%20Managing%20Director,recaps%20with%20private%20equity%20sponsors.

https://capstoneheadwaters.com/team/theodore-polk

INDUSTRY OUTLOOK

The Precision Manufacturing industry has continued to recover after enduring unprecedented supply chaindisruptions, volatile raw material prices, and depressed demand associated with instability in downstreammarkets due to the COVID-19 pandemic. The unemployment rate reached its highest level since the GreatDepression at 14.7% in April 2020 (U.S. Bureau of Labor Statistics)2 as companies laid off large numbers ofemployees to reduce costs. In addition, social distancing protocols forced manufacturing facilities to shutdown or operate below capacity, resulting in a decline in demand for precision components and precisionmanufacturing services. As the economy continues to reopen and manufacturers begin to operate closer tofull capacity, the demand for steel has surged, with United States Steel Corporation’s (NYSE:X) share priceincreasing 382.4% from $4.90 on March 18, 2020, to reach $23.6 on June 25, 2021. Elevated steel prices areexpected to challenge precision manufacturers in the near-term with higher input costs dampening profitmargins. However, steel prices are forecasted to normalize in the long-run with supply outpacing demand asproducers scale-up to meet the current elevated demand, according to The Fabricator.3

At the height of the pandemic, downstream demand for precision components decreased as companies inend-markets that were adversely impacted by consumer uncertainty deferred inventory purchases. However,demand has accelerated in 2021 YTD evidenced by a normalization in the Industrial Production Index, ameasure of real output for all facilities in the U.S. involved in manufacturing, mining, and electric, and gasutilities (shown below), which reached 99.0 on April 1, 2021, after falling to 84.2 on April 1, 2020. The 17.5%uptick YOY in the Industrial Production Index indicates the recovery of industrial manufacturing acrosssubsectors. Precision manufacturing companies are forecast to capture heightened demand for engineeredcomponents driven by technological innovation in advanced end markets such as Medical Devices,Aerospace & Defense, and Automotive.

Publicly traded diversified manufacturing companies reported solid demand momentum in Q1, lending to afavorable outlook for the industry. Of note, Illinois Tool Works (NYSE:ITW) recorded 10% revenue growth in Q1with demand continuing to gain strength across the company’s broad business portfolio, according to thecompany’s Q1 earnings call.4 Likewise, Lincoln Electric Holdings (Nasdaq:LECO) achieved 7.8% growth in Q1sales, citing demand in growing end markets as a catalyst. Christopher Mapes, CEO of Lincoln ElectricHoldings, commented in the company’s Q1 earnings call, “80% of our first quarter revenue was exposed togrowing end markets, led by mid-teens percent organic sales growth in automotive and heavy industrieswhere mining, agriculture, and construction equipment demand increased above expectations.”5 Precisionmanufacturers that have demonstrated resilience throughout COVID-19 are expected to benefit fromgalvanized demand as the pandemic continues to subside.

Precision Manufacturing | July 2021

-20%

0%

20%

40%

60%

80%

Precision ManufacturingS&P 500 Industrials

Capstone Precision Manufacturing Index Demonstrates Continued Recovery in LTM

Stoc

k Pr

ice

% C

hang

e In

dex

(Ju

ne 11

= 0

)

Index includes: AME, ATCO A, CFX, CLS, CMI, GWW, ITW, LECO, SAND Source: Capital IQ and Capstone Research

84.20

99.01

80

85

90

95

100

105

Industrial Production Index Improves in April, Increasing 17.5% Year-over-Year

Ind

ex (

2017

= 10

0),

Seas

onal

ly

Ad

just

ed

Source: Board of Governors of the Federal Reserve System (US)

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KEY TRENDS & DRIVERS

Supply Chain Visibility, Reshoring, and the Proliferation of IoT in Manufacturing

Pandemic-induced disruptions brought attentionto weaknesses in global supply chains, acceleratingreshoring efforts and the adoption of Internet ofThings (IoT)-enabled technology in the PrecisionManufacturing industry. Before the pandemic,manufacturers considered the opportunity cost oflogistic convenience associated with domesticmanufacturing versus the potential cost-reductionof offshoring production to developing countries.Over the past decade, rising wages in developingcountries, international trade policies,transportation costs, and quicker inventory turnshave supported the reshoring of Americanproduction with 749,000 jobs brought back to theU.S. between 2010 and 2018, according to SupplyChain Management Review.6 Supply chainchallenges attributed to COVID-19 have exposedthe breadth of U.S. dependency on offshoremanufacturing, prompting a renewed effort toreshore the production of American goods.

As the pandemic subsides, manufacturers areexpected to fortify supply chains through theintegration of IoT technology. IoT-enabled devicesallow manufacturers to monitor equipmentperformance remotely and identify potentialissues before they arise, allowing technicians toarrive at a solution before the issue occurs.

Recovery in Advanced End Markets to Drive Precision Manufacturing Demand

Capstone expects the continued recovery inadvanced end-markets such as Medical Devices,Aerospace & Defense, and Automotive to heightendemand for precision machined parts. Continuedinvestment in the development of technology in theAutomotive and Aerospace & Defense industries isanticipated to further augment demand for highly-precise engineered components.

Following an estimated decline of 3.2% in 2020, theGlobal Medical Devices market is expected torecord a 6.1% compound annual growth rate (CAGR)between 2021 and 2023 to reach $603.5 billion,according to Wolters Kluwer.7 With an aging U.S.population forecast to supplement demand formedical devices, precision manufacturingcompanies serving the Medical Devices markethave attracted heightened buyer interest,evidenced by increased M&A activity in the space.Notably, EPTAM Precision Solutions acquiredMendell Machine and Manufacturing in May(undisclosed). Mendell is a medical devicemanufacturer specializing in precision computernumerical control (CNC) micro-machining ofimplantable devices. Through the transaction,EPTAM has expanded its implant manufacturingoffering and added Mendell’s micro-machining andautomation expertise, according to a press release.8

Source: Kearney

49% of executives agreed that the benefits of onshore production far outweigh the higher labor costs.

Reshoring Statistics

A survey performed by Kearney of 120 U.S. Manufacturing Executives and 100 Plant Managers in the U.S. identified the following statistics, evidencing that U.S. reshoring efforts are already underway.

52% of executives reported that when COVID-19 disrupted global supply chains, their company increased domestic manufacturing or sourcing of products.

80% of plant managers reported productivity gains over the past three years.

41% of executives said they will specifically strive to reduce dependence on China for manufacturing.

47% of executives said their company will strive to diversify its supply chain over the next three years to reduce dependence on a single country source or manufacturing location.

48% of executives agreed that current domestic and international trade policies sufficiently encourage reshoring and investment in domestic facilities.


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M&A OVERVIEW

M&A activity has continued at a rapid pace in 2021YTD with 67 deals announced or completedthrough May 24, compared to 61 deals in the sameperiod in 2020. Strategic buyers have composed43.3% of transaction volume in the YTD, with bothpublic and private companies utilizing M&A toexpand service offerings, improve marketpositioning, and diversify customer bases.Heightened deal activity is also attributed tobusiness owners expediting exit plans ahead of thepotential increases in capital gains tax under theBiden administration.

Amid the pandemic, M&A activity in the PrecisionManufacturing industry accelerated, increasing43.8% in 2020 YOY as strategics consolidatedcompetitors to strengthen supply chains andprivate equity firms sought attractive growthopportunities in pandemic-resistant businesses.

Financial buyers remain the most active acquirers,accounting for 56.7% of YTD transactions asprivate equity (PE) firms have pursued well-positioned acquisition targets serving end marketswith strong growth dynamics through platform andadd-on acquisitions. Of note, American Securities-backed MW Industries, a leading manufacturer ofprecision components, acquired NN Life Sciencesin August and Duer Carolina Coil in March. Terms ofboth transactions were undisclosed. Theacquisitions have expanded MW’s Life Sciencesand Hot Wound Coil businesses. To learn moreabout MW’s acquisition strategy, read an exclusiveinterview with Kyle O’Meara, Vice President ofCorporate Development at MW Industries, on thefollowing pages.

Ted Polk, Managing Director“Companies that have proprietary capabilities and provide critical roles withintheir client’s supply chains remain in strong demand and are likely to commandpremium valuations. End market outlook is also critical and for many it wastemporarily masked in 2020.”

9.0%

34.3%

19.4%

37.3%

STRATEGIC

PublicPrivate

FINANCIAL

PlatformAdd-on

Year-To-Date Buyer Breakdown

Note: Year-to-date ended May 24Source: Capital IQ, PitchBook, FactSet, and Capstone Research

Precision Manufacturing M&A Volume

Num

ber

of

Tran

sact

ions

106 112

161

61 67

0

50

100

150

200

250

2018 2019 2020 YTD '20 YTD '21


7

8

Capstone spoke with Kyle O’Meara, Vice President of Corporate Development at MW Industries, to learn more about MW’srecent acquisitions and discuss how COVID-19 has impacted its business strategy.

MW Industries operates two divisions, MW Components and MW Life Sciences. MW Components is a leading manufacturerof industrial springs and fasteners, bellows, shims, and precision-machined parts. In May, MW rebranded the division. Inaddition to unifying the business, the rebranding is part of an effort to help manufacturers accelerate and simplify theprocess of creating, buying, and managing the often-complex task of getting the precision parts they need.

The MW Life Sciences division is largely made up of the October 2020 acquisition of 11 subsidiaries from NN Life Sciences, amanufacturer of surgical instruments, implants, and precision medical components, for an enterprise value of $825 million.The acquisition builds upon MW’s robust presence in the medical sector served by LaVezzi Precision, Marox, and EconomySpring.

MW is an active buyer in the Precision Manufacturing industry, using strategic acquisitions to expand its extensive productportfolio. In March, MW bolstered its precision spring capabilities through the acquisition of Duer Carolina Coil, a leadingmanufacturer of hot and cold wound springs.

What do you attribute to MW’s success andwhat differentiates it from other companies inthe Precision Manufacturing industry? MW has along history of working with our customers to deliverthe products that they need, where they need them.We're focused on providing a great customerexperience and doing whatever it takes to help ourcustomers manage specialized components andsystems to present a unified face in the market.There are three pieces that differentiate us from ourcompetitors: product portfolio (and really thebreadth of it), engineering expertise (there areengineers across MW that can help whether it's aspring or a fastener, our customers customizewhatever they need for their project), and lastly,customer experience (when the phone rings, thereare MW employees to pick up the phone,understand the problem, and help them solve it).

How has the pandemic influenced your businessstrategy? MW made the largest acquisition of itshistory during the pandemic. In that respect, thebusiness’ momentum didn’t really slow down. Ourbiggest takeaway from the pandemic, is theimportance of being accessible to our customersand providing great service. During COVID, MW hasbeen proactive in its outreach to large and smallcustomers to see what we can do to help.

What are the key criteria that you look for inacquisition targets? When we talk aboutacquisitions internally it's not just to acquire EBITDA.We're fond of saying “there's plenty of opportunitiesin the space, it's about finding the right ones that aregoing to fit with our portfolio and help us betterserve our customers.” It's strategy first, and thenwe're leveraging M&A as a tool to really drive thatstrategy ahead more rapidly.

To that end, there's really four things that we look forto evaluate acquisition opportunities. First, these arelargely niche businesses that we participate in. So,we're cognizant of market sizes and if we would beable to attain a number one or number two positionin that market vertical. The second is our customers,we look for opportunities to grow scale by eitherbuilding out our portfolio with existing customers oradding target customers in new market verticals andsegments we find attractive. The third is adding newmanufacturing capabilities. Again, that's really withan eye towards our customer and how can wedeliver a larger portfolio to solve their precisioncomponent problems. The last is new geographies,and that's around being close to our customers. Weserve customers in innovative spaces, and we findthat the closer that we can get to them, the moreeasily we can help them solve their problems.

Founded: 1929Ownership: Private, PE-BackedHeadquartered: Charlotte, North CarolinaEmployees: ~3,350

Q&A: MW Industries


Could you speak about your recent acquisitionsand the motivations behind them? We've donetwo deals in the last 12 months. In October of 2020,we closed the acquisition of NN Life Sciencesdivision, which is now MW Life Sciences. This is areally nice fit with our strategy to grow the LifeScience business overall. The acquisition providedus with a great team and a beachhead inorthopedics, including, implants, cases, trays,surgical instruments, and enhanced manufacturingcapabilities that help us to better serve ourcustomers in the Minimally Invasive Surgical market.The division has been a part of the MW family nowfor nine months. Integration has gone really well, andthe team is doing a great job.

The second, and more recent acquisition, was DuerCarolina Coil, which was in March of 2021. This is agreat team that we acquired from a strategicrationale to enhance our Hot Wound Coil business.We already had two sites with similar manufacturingcapabilities. Their strength is really on high mix, lowvolume, which fit nicely with our portfolio. In addition,the acquisition provides an opportunity to betterserve our Automotive Aftermarket and Industrialcustomers.

Are there any areas of acquisition interest toMW today? We have a strong funnel and spend alot of time identifying potential opportunities acrossboth our Components and Life Sciences businesses.We're very deliberate in terms of how we screenopportunities that are coming inbound, but we alsothink about our competitive set and looking out atthe market to find competitors or other businessesthat would be a good fit for MW. We see a lot ofopportunities that might be great businesses, butwe always ask ourselves “is it a great fit for MW?”

What factors do you see affecting the PrecisionManufacturing industry in 2021? We’re seeing alot of strength across our diverse end markets.We’ve put an emphasis on working in partnershipwith our customers to deliver the components whenand where they need them. Supply chains are tightright now, material costs are rising. So, it’s crucial tofocus on connectivity and being there for ourcustomers.

What will be the key drivers behind M&A in thePrecision Manufacturing Industry in 2021? For us,we’re going to continue to invest in great businessesand look for teams that align with our strategy. It

seems like companies in the PrecisionManufacturing industry are getting back out thereand seeing strong growth.

Would you like to add anything else? MWrecently rebranded the two divisions and the holdingcompany. The purpose of that is to unify ouremployees, further bringing value to our customers.Whether we’re providing springs, fasteners, orbellows, on the components side; or servingorthopedic and med search customers on the lifesciences side, the rebranding is about us comingtogether as a team to better service our customers.

Since 2018, Kyle O’Meara has beenthe Vice President of CorporateDevelopment at MW Industrieswhere he focuses on achieving the

Kyle O’MearaVP, Corporate Development

company’s strategic goals through acquisitionopportunities. In addition, Mr. O’Meara works withMW on the markets it serves, points of difference,and customer experience. Having worked in theIndustrials industry for most of his career withcompanies such as Atkore, Baird, and HoulihanLokey, Mr. O’Meara has an enduring passion fortechnical innovation.

He has an MBA in Finance, Accounting, &Entrepreneurship from the University of ChicagoBooth School of Business and a BS in Finance &Economics from Marquette University.

Learn more about MW at www.mw-ind.com

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Q&A: MW Industries (CONTINUED)


Crawford United Corporation (OTCPK:CRAW.A)acquired Global-Tek Manufacturing and MachiningTechnology in March for ~$4.9 million in cash andrepayment of outstanding debt and transactioncosts totaling ~$1.58 million. Global-Tek offersmanufacturing services including CNC milling, diecasting, and laser marking to Defense, Aerospace,and Medical Device markets. Crawford United hasbolstered its presence in the Aerospace andDefense markets with this strategic acquisition,according to a press release.14

In February, Essex Industries acquired StevensManufacturing Company, Inc., a J.H. WhitneyCapital Partners LLC portfolio company, for anundisclosed sum. Based in Milford, Connecticut,Stevens Manufacturing provides precisionmachined OEM parts and sub-assemblies toaerospace and defense companies. “Essex andStevens Manufacturing share common markets,manufacturing expertise and values. Workingtogether, we will be able to offer a broader range ofproducts and enhanced service for ourcustomers,” said Essex CEO, Evan Waldman, in apress release.11

Greenbriar Equity Group, L.P. acquired PCXAerosystems in April for an undisclosed sum. Thisinvestment has allowed PCX to provide missioncritical components to aerospace manufacturers.PCX has been a trusted manufacturer since 1900,supplying aerospace giants like The BoeingCompany (NYSE:BA), Bell Aircraft Corporation, andGeneral Electric Company (NYSE:GE), according toa press release.12 Greenbriar has acquired 35platform companies and completed over 80 add-on deals since its inception in 1999, according toGreenbriar’s website.13

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ARCH Global Precision and its majority shareholder,The Jordan Company, L.P., reached a definitiveagreement in April to sell ARCH PrecisionComponents (ARCH PC) to Madison DearbornPartners. Terms of the transaction were notdisclosed. ARCH PC supplies precision-machinedcomponents to world-class manufacturers in theDefense, Aerospace, and Technology industries.Madison will utilize its investment expertise tosupport ARCH PC’s upward trajectory as thecompany becomes a standalone entity, accordingto a press release.10

Precision Components Corp.

J&E Precision Tool, a portfolio company of LFMCapital, acquired Alloy Specialties Inc. in April foran undisclosed sum. Based in Manchester,Connecticut, Alloy is a manufacturer of enginecomponents for defense and commercial air andground applications. The company providesmachined parts and assemblies for leadingaerospace and defense OEMs such as HoneywellInternational Inc. (Nasdaq:HON) and SikorskyAircraft Corporation, according to Alloy’s website.9The acquisition will allow J&E to expand its nationalfootprint and broaden its capabilities, productofferings, and customer base.

The Partner Companies (TPC) acquired L&TPrecision in December for an undisclosed sum.L&T Precision is a woman/minority-owned smallbusiness that provides custom manufacturingservices to the Aerospace, Defense,Healthcare/Medical Device, and Commercialindustries. TPC is planning further investment toexpand L&T Precision’s operations to meet theever-evolving requirements of customers,according to a press release.15 The addition of L&TPrecision will help bolster TPC’s existingcompanies’ services such as electroforming,plating, polishing, and machining.

NOTABLE TRANSACTIONS


SELECT TRANSACTIONS

Buyer TypeDate Target Acquirer Target Business Description

05/24/21 Precision Die Cutting Team Technologies Offers rotary die-cutting, precision stamping, laser

cutting, packaging and assembly services. PE Add-On

05/19/21 Mendell Machine and Manufacturing Eptam Plastics Manufactures medical devices offering precision CNC

machining of implantable devices. PE Add-On

05/11/21 Wilbert Alleghany (NYSE:Y)

Provides injection molded and thermoformed parts and multi-component assemblies. Public Strategic

04/30/21 Beranek J&E Precision Tool Manufactures precision-machined components for Aerospace, Defense, and Commercial industries. PE Add-On

04/30/21 Alloy Specialties J&E Precision Tool Manufactures precision components for the Aerospace and Defense industry. PE Add-On

04/29/21 QCC Capital Concepts

Provides manufacturing services such as precision machining, assembling, and testing. Platform Investment

04/26/21 PCX Aerosystems GreenbriarEquity Group

Manufactures airframe assemblies, including wing, fuselage, and engine components. Platform Investment

04/19/21 ARCH Precision Components Madison Dearborn Manufactures precision-machined components. Platform Investment

04/12/21 Firstar Precision Empowered Ventures

Manufactures components for Medical, Aerospace, Food Processing, Industrial Assembly, and Hydraulics. Private Strategic

03/29/21 Certified Tool & Grinding

Dayton Coating Technologies

Manufactures cutting tools and offers precision original equipment manufacturer regrinding services. Private Company

03/29/21 Tier One ARCH Medical Solutions

Provides machining and assembly solutions for engineered parts and assemblies. PE Add-On

03/10/21 Walerko Tool and Engineering Mno-DREK Manufactures precision piece parts, tools, fixtures,

gauges, and special machines. Private Strategic

03/09/21 The Young Engineers

Novaria Holdings; KKR (NYSE:KKR)

Manufactures precision metallic and non-metallic components and specialty fastening products. Public Strategic

03/05/21 Senior Aerospace Connecticut PCX Aerosystems Manufacturer of precision metallic parts for the

Aerospace industry. PE Add-On

03/02/21 Global-Tek Crawford United (OTCPK:CRAW.A)

Provides engineered manufacturing solutions for Defense, Aerospace, and Medical Device markets. Public Strategic

03/01/21 Altaflo Pexco Manufacturer of fluoropolymer and fluoroplastic pipes and tubes. Private Strategic

02/17/21 American Products Stratford Group Manufacturer of CNC machined assemblies and parts. Private Strategic

02/16/21 Stevens Manufacturing Essex Industries Manufactures products and parts for the

Aerospace industry. PE Add-On

02/08/21 Supreme Screw Products Schivo Medical Manufactures screw machine products. PE Add-On

01/19/21 Built-Rite Tool & Die

Beacon Manufacturing

Manufactures custom plastic and rubber injection molded parts and machined components. PE Add-On

01/07/21 Taurus Tool & Engineering GWS Tool Group Manufactures cutting tools for Aerospace,

Automotive, Heavy Equipment, and Hydraulics. PE Add-On

01/07/21 L&T Precision The Partner Companies

Offers machining and sheet metal fabrication services. Private Strategic

01/04/21 Impresa Aerospace

Crestview Aerospace

Manufacturer of precision crafted sheet metal, and machined components for the Aerospace industry. PE Add-On

Source: Capital IQ, PitchBook, FactSet, and Capstone Research

11


PUBLIC COMPANY DATA: AEROSPACE COMPONENTS

Price % 52 Wk Market Enterprise LTM EV / LTM

Company 06/25/21 High Cap Value Revenue EBITDA Margin Revenue EBITDA

Barnes Group Inc. $52.09 90.4% $2,638.5 $3,227.2 $1,095.3 $227.2 20.7% 2.9x 14.2x

Curtiss-Wright Corporation $122.08 91.5% $4,997.7 $6,035.0 $2,387.2 $545.8 22.9% 2.5x 11.1x

HEICO Corporation $142.77 95.9% $18,148.4 $18,602.7 $1,697.1 $425.7 25.1% NM NM

Howmet Aerospace Inc. $34.84 96.7% $14,961.2 $18,622.2 $4,834.0 $1,068.0 22.1% 3.9x 17.4x

Magellan Aerospace Corporation $8.75 91.6% $504.9 $533.5 $542.1 $44.7 8.2% 1.0x 11.9x

Spirit AeroSystems Holdings, Inc. $49.80 92.9% $5,249.9 $7,528.6 $3,228.3 NM NA 2.3x NM

TransDigm Group Incorporated $673.22 97.8% $36,954.5 $53,337.5 $4,496.0 $1,733.0 38.5% NM NM

Woodward, Inc. $123.72 94.6% $7,799.8 $8,345.5 $2,174.0 $372.7 17.1% 3.8x 22.4x

Mean 22.1% 2.7x 15.4x

Median 22.1% 2.7x 14.2x

Harmonic Mean 18.3% 2.2x 14.4x

EV = enterprise value; LTM = last twelve months$ in millions, except per share dataNM = Not Meaningful

Source: Capital IQ as of June 25, 2021

PUBLIC COMPANY DATA: CONTRACT MANUFACTURING



Benchmark Electronics, Inc. $28.86 88.6% $1,033.7 $871.0 $2,043.9 $107.9 5.3% 0.4x 8.1x

Celestica Inc. $8.12 83.2% $1,042.7 $1,162.8 $5,664.4 $247.9 4.4% 0.2x 4.7x

Flex Ltd. $17.99 89.8% $8,794.9 $10,644.5 $24,124.0 $1,594.6 6.6% 0.4x 6.7x

Jabil Inc. $57.45 97.5% $8,548.4 $10,652.3 $29,175.7 $2,040.3 7.0% 0.4x 5.2x

Plexus Corp. $91.10 90.0% $2,604.9 $2,593.6 $3,481.9 $270.8 7.8% 0.7x 9.6x

Mean 6.2% 0.4x 6.8x

Median 6.6% 0.4x 6.7x


12


PUBLIC COMPANY DATA: DIVERSIFIED INDUSTRIALS



AMETEK, Inc. $133.63 96.1% $30,857.7 $32,258.0 $4,553.6 $1,373.3 30.2% 7.1x 23.5x

Atlas Copco AB $61.77 93.4% $71,775.0 $72,827.9 $11,547.1 $2,845.6 24.6% 6.3x 25.6x

Colfax Corporation $45.75 91.0% $6,203.6 $7,868.9 $3,133.6 $513.4 16.4% 2.5x 15.3x

ESCO Technologies Inc. $91.59 79.1% $2,385.1 $2,410.2 $710.3 $139.4 19.6% 3.4x 17.3x

Illinois Tool Works Inc. $222.56 91.9% $70,302.9 $75,769.9 $12,890.0 $3,513.0 27.3% 5.9x 21.6x

Lincoln Electric Holdings, Inc. $131.99 97.0% $7,858.4 $8,376.9 $2,710.4 $416.4 15.4% 3.1x 20.1x

Melrose Industries PLC $2.15 81.4% $10,444.7 $15,242.2 $11,973.7 $976.2 8.2% 1.3x 15.6x

NN, Inc. $7.62 79.2% $328.2 $549.5 $438.1 $50.7 11.6% 1.3x 10.8x

RBC Bearings Incorporated $204.23 98.1% $5,101.5 $4,912.0 $609.0 $161.2 26.5% 8.1x NM

Sandvik AB (publ) $25.53 88.5% $32,018.6 $31,977.0 $9,685.7 $2,161.5 22.3% 3.3x 14.8x

TriMas Corporation $30.77 84.0% $1,328.1 $1,634.1 $793.9 $139.2 17.5% 2.1x 11.7x

Mean 20.0% 4.0x 17.6x

Median 19.6% 3.3x 16.4x


Source: Capital IQ as of June 25, 2021

EV = enterprise value; LTM = last twelve months$ in millions, except per share dataNM = Not Meaningful

PUBLIC COMPANY DATA: SPECIALTY INDUSTRIALS


Company 06/25/21 High Cap Value Revenue EBITDA Margin Revenue EBITDAAllegheny Technologies Incorporated $21.02 84.0% $2,673.8 $3,875.3 $2,719.1 $160.6 5.9% 1.4x 24.1x

Carpenter Technology Corporation $40.44 82.2% $1,942.4 $2,439.0 $1,491.3 NM NA 1.6x NM

MSC Industrial Direct Co., Inc. $89.96 93.5% $5,033.3 $5,761.5 $3,128.6 $455.7 14.6% 1.8x 12.6x

Park-Ohio Holdings Corp. $33.34 79.8% $393.6 $947.3 $1,288.5 $83.8 6.5% 0.7x 11.3x

Standex International Corporation $94.58 87.4% $1,159.7 $1,283.8 $619.2 $110.9 17.9% 2.1x 11.6x

Worthington Industries, Inc. $60.19 79.8% $3,089.6 $3,350.6 $3,171.4 $514.5 16.2% 1.1x 6.5x

Mean 12.2% 1.5x 13.2x

Median 14.6% 1.5x 11.6x


13


PRECISION MANUFACTURING REPORT CONTRIBUTORS

Ted PolkManaging [email protected] | 708-921-8961

Ted is a Managing Director at Capstone Partners. Prior to joining Capstone Partners, Tedran the corporate finance practice in the Central region for Morgan Stanley SmithBarney’s Capital Strategies Group and its predecessor, Citi Capital Strategies. He hasover 20 years of experience working with businesses across a variety of industries andhas focused interest working with businesses providing precision-related products andservices to industrial, government-related and other markets. Ted is an active publicspeaker on the topic of business exits and recapitalizations of privately ownedbusinesses.

Ted was recognized by The M&A Advisor for his participation in the ProfessionalServices deal of the year for 2015 and was previously recognized for his role ontransactions awarded the Middle-Market M&A deal of the Year, the Middle-Market M&AFinancing Deal of the Year, Cross-Border Middle-Market Deal of the Year and Aerospaceand Defense Deal of the Year. Early in his career, Ted worked at Valuemetrics, Inc. and inthe Corporate Banking Group at The Bank of New York.

Tracy [email protected] | 949-220-0540

Tracy is a Director in the Orange County office. She possesses 17 years of experience in middle market investment banking, working on both domestic and cross-border transactions, focusing on the Personal Care industry and other Manufacturing and Industrial targets. Prior to Capstone Partners, Tracy worked as a senior banking professional in Morgan Stanley Smith Barney’s Capital Strategies Group and its predecessor, Citi Capital Strategies. She also worked in the hedge fund industry with Collins/Bay Island Securities LLC and Talisman Capital. Prior to that, Tracy worked with institutional fixed income sales at both Vining Sparks IBG, LP and Robert Thomas Securities, Inc. She also enjoyed tenure in management at The Disney Company.

David BenchManaging [email protected] | 949-734-7888

David is a Managing Director based out of Orange County, CA. Prior to CapstonePartners, David managed the Western region for Morgan Stanley Smith Barney’s CapitalStrategies Group and its predecessor, Citi Capital Strategies. David has focused onmiddle market investment banking for 30+ years and has been the lead banker in over250 M&A transactions involving both domestic and foreign corporate buyers, as well asleveraged recaps with private equity sponsors. His areas of focus include manufacturingand industrials (products and services) and business services. His achievements in theinvestment banking industry have gained him national recognition by the M&A Advisor.

14


PRECISION MANUFACTURING REPORT CONTRIBUTORS (CONTINUED)

Lucas LaCroceResearch [email protected] | 617-619-3331

Luke serves as a Research Analyst at Capstone Partners primarily focusing on theIndustrials and Business Services industries. Prior to joining the firm’s corporateResearch Team, Luke was an intern at DLG Wealth Management, Valpey FinancialServices, and VIGILANT Capital Management where he performed financial analysis onequities, evaluated exchange traded funds and mutual funds, and determined theimpact of proposed legislation on financial planning strategies.

Christopher CardinaleVice [email protected] | 949-220-0537

Christopher is a Vice President in the Orange County office. He supports managementand clients in the Western Region. Christopher is engaged in the execution and advisoryof mergers, acquisitions and strategic capital raises. Prior to joining Capstone, he was anassociate with a boutique M&A firm focused on valuation, M&A advisory, corporatefinance, acquisition target research and exit-planning strategy, and was a researchanalyst at United Capital Financial Advisors. His industry experience includesmanufacturing, chemicals, packaging, safety, and industrial distribution.

2020INVESTMENT BANKING

FIRM OF THE YEAR

2020MID-MARKET

INVESTMENT BANKING FIRM OF THE YEAR

2020MIDDLE MARKET

INVESTMENT BANKOF THE YEAR

2020CORPORATE

RESTRUCTURING FIRM OF THE YEAR

2021INVESTMENT BANKING

FIRM OF THE YEAR

15


FIRM TRACK RECORD

CORPORATE SALE(IN MARKET)

CONFIDENTIAL

Specialty Alloy Precision

Manufacturer

HAS BEEN ACQUIRED BY

backed by



a portfolio company of

HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY




HAS COMPLETED AN OWNERSHIP TRANSITION

16


HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BYHAS BEEN ACQUIRED BY

HAS ACQUIRED HAS BEEN ACQUIRED BY

a subsidiary of



a subsidiary of



http://www.eastlandshoe.com/eshop/default.asp

ENDNOTES

1. Board of Governors of the Federal Reserve System, “Industrial Production and Capacity Utilization – G.17,” https://www.federalreserve.gov/releases/g17/current/default.htm , accessed June 10, 2021.

2. U.S. Bureau of Labor Statistics, “Unemployment rate rises to record high 14.7 percent in April 2020, https://www.bls.gov/opub/ted/2020/unemployment-rate-rises-to-record-high-14-point-7-percent-in-april-2020.htm?view_full#:~:text=Unemployment%20rate%20rises%20to%20record%20high%2014.7%20percent%20in%20April%202020,-May%2013%2C%202020&text=The%20unemployment%20rate%20in%20April,available%20back%20to%20January%201948), accessed June 10, 2021.

3. The Fabricator, “Steel price increases losing steam?,” https://www.thefabricator.com/thefabricator/blog/metalsmaterials/steel-price-increases-losing-steam , accessed June 11, 2021.

4. The Motley Fool, “Illinois Tool Works Inc (ITW) Q1 2021 Earnings Call Transcript,” https://www.fool.com/earnings/call-transcripts/2021/04/30/illinois-tool-works-inc-itw-q1-2021-earnings-call/, accessed June 11, 2021.

5. The Motley Fool, “Lincoln Electric Holdings Inc (LECO) Q1 earnings Call Transcript,” https://www.fool.com/earnings/call-transcripts/2021/04/27/lincoln-electric-holdings-inc-leco-q1-2021-earning/#:~:text=First%20quarter%20diluted%20earnings%20per,share%20increased%2037%25%20to%20%241.3, accessed June 11, 2021.

6. Supply Chain Management Review, “Reshoring:COVID-19’s Impact on the Supply Chain,” https://www.scmr.com/article/reshoring_covid_19s_impact_on_the_supply_chain, accessed June 10, 2021.

7. Wolters Kluwer, “Medical device outlook for 2021 and beyond,” https://www.wolterskluwer.com/en/expert-insights/medical-device-outlook#:~:text=The%20global%20medical%20devices%20market,reach%20%24603.5%20billion%20in%202023, accessed June 8, 2021.

8. Businesswire, “EPTAM Precision and Mendell Join Forces to Better Serve Ortho, Cardio, RAS, and MIS Customers,” https://www.businesswire.com/news/home/20210519005303/en/EPTAM-Precision-and-Mendell-Join-Forces-to-Better-Serve-Ortho-Cardio-RAS-and-MIS-Customers , accessed June 10, 2021.

9. Alloy, “Welcome to Alloy Specialties,” http://alloysp.com/ , accessed June 17, 2021.10. Cision, “ARCH Global PrecisionAnnounces Sale of ARCH Precision Components Corp.,”

https://www.prweb.com/releases/arch_global_precision_announces_sale_of_arch_precision_components_corp/prweb17876353.htm , accessed June 17, 2021.

11. Essex Industries, “Essex Industries Acquires Stevens Manufacturing,” https://www.essexindustries.com/essex-industries-acquires-stevens-manufacturing/ , accessed June 17, 2021.

12. GovCon Wire, “PCX to Buy Senor Aerospace Connecticut Business,” https://www.govconwire.com/2021/03/pcx-to-buy-senior-aerospace-connecticut-business/ , accessed June 17, 2021.

13. Greenbriar Equity Group, L.P., “Greenbriar at a Glance,” https://www.greenbriarequity.com/overview , accessed June 17, 2021.14. GlobeNewswire, “Crawford United Corporation Acquires Global-Tek Manufacturing and Machining Technology,”

https://www.globenewswire.com/news-release/2021/03/02/2185357/0/en/Crawford-United-Corporation-Acquires-Global-Tek-Manufacturing-and-Machining-Technology.html#:~:text=CLEVELAND%2C%20March%2002%2C%202021%20(,Colorado%20effective%20March%201%2C%202021 , accessed June 17, 2021.

15. The Partner Companies, “The Partner Companies Welcome L&T Precision,” https://thepartnercos.com/the-partner-companies-welcome-lt-precision/ , accessed June 17, 2021.

C o m mon G o a ls . U n c ommon R e s u l t s .

DisclosureThis report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger andacquisition activity. Information contained in this report should not be construed as a recommendation to sell or buy any security. Anyreference to or omission of any reference to any company in this report should not be construed as a recommendation to buy, sell ortake any other action with respect to any security of any such company. We are not soliciting any action with respect to any securityor company based on this report. The report is published solely for the general information of clients and friends of CapstonePartners. It does not take into account the particular investment objectives, financial situation or needs of individual recipients.Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all investors.This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should notbe relied upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that maycause actual results to vary materially. We are under no obligation to update the information contained in this report. Opinionsexpressed are our present opinions only and are subject to change without notice. Additional information is available upon request.The companies mentioned in this report may be clients of Capstone Partners. The decisions to include any company in this report isunrelated in all respects to any service that Capstone Partners may provide to such company. This report may not be copied orreproduced in any form or redistributed without the prior written consent of Capstone Partners. The information contained herein shouldnot be construed as legal advice.

17


https://www.federalreserve.gov/releases/g17/current/default.htm

https://www.bls.gov/opub/ted/2020/unemployment-rate-rises-to-record-high-14-point-7-percent-in-april-2020.htm?view_full#:%7E:text=Unemployment%20rate%20rises%20to%20record%20high%2014.7%20percent%20in%20April%202020,-May%2013%2C%202020&text=The%20unemployment%20rate%20in%20April,available%20back%20to%20January%201948)

https://www.thefabricator.com/thefabricator/blog/metalsmaterials/steel-price-increases-losing-steam

https://www.fool.com/earnings/call-transcripts/2021/04/30/illinois-tool-works-inc-itw-q1-2021-earnings-call/

https://www.fool.com/earnings/call-transcripts/2021/04/27/lincoln-electric-holdings-inc-leco-q1-2021-earning/#:%7E:text=First%20quarter%20diluted%20earnings%20per,share%20increased%2037%25%20to%20%241.3

https://www.scmr.com/article/reshoring_covid_19s_impact_on_the_supply_chain

https://www.wolterskluwer.com/en/expert-insights/medical-device-outlook#:%7E:text=The%20global%20medical%20devices%20market,reach%20%24603.5%20billion%20in%202023

https://www.businesswire.com/news/home/20210519005303/en/EPTAM-Precision-and-Mendell-Join-Forces-to-Better-Serve-Ortho-Cardio-RAS-and-MIS-Customers

http://alloysp.com/

https://www.prweb.com/releases/arch_global_precision_announces_sale_of_arch_precision_components_corp/prweb17876353.htm

https://www.essexindustries.com/essex-industries-acquires-stevens-manufacturing/

https://www.govconwire.com/2021/03/pcx-to-buy-senior-aerospace-connecticut-business/

https://www.greenbriarequity.com/overview

https://www.globenewswire.com/news-release/2021/03/02/2185357/0/en/Crawford-United-Corporation-Acquires-Global-Tek-Manufacturing-and-Machining-Technology.html:%7E:text=CLEVELAND%2C%20March%2002%2C%202021%20(,Colorado%20effective%20March%201%2C%202021

https://thepartnercos.com/the-partner-companies-welcome-lt-precision/

Market PresenceWith a long-established U.S. footprint, together with an international partnerplatform, we provide clients with broad expertise and access to key marketrelationships on a global basis. Our presence is backed by ~200 professionals in theU.S. with 450+ professionals across 43 countries.

$65.1Maverage

transaction value

51deals involving foreign

private equity firms

65%completed with a European partner

218M&A transactions

completed in 2020

30%of our deals are cross-

border

$12.5Baggregate

transaction value

6thglobally ranked for

deals under $500m

International

170+ professionals12 offices

Boston · Chicago · Dallas ·Denver Detroit · Los Angeles ·New York Orange County ·Philadelphia Richmond · San Diego · Tampa

450+ professionals60+ offices in 43 countries

Asia: China · India · Japan · ThailandAfrica: Congo · Egypt · Ghana · Ivory Coast · Mauritius · Morocco · Nigeria · Senegal · South AfricaAmericas: Toronto · Vancouver · Argentina · Brazil · Chile · Colombia · Mexico · Panama & Central America · PeruEurope: Belgium · Bosnia & Herzegovina · Croatia · Czech Republic · Finland · France · Germany ·Hungary · IrelandItaly · Netherlands · Poland · Portugal · Russia · Serbia · Slovakia · Slovenia · Spain · Sweden ·United Kingdom

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