2017 Aerospace IndustryMid-Year M&A Review

INDUSTRY EXPERTISE | GLOBAL PERSPECTIVE

Investment Bank for the Manufacturing Sector SM

2

Aerospace Merger & Acquisition Activity

Quarterly Transaction Data

› While still high relative to historical levels, aerospace merger and acquisitionactivity declined in the first half of 2017, largely due to Q2, which generated thefewest number of transactions of the last 14 quarters

August 2017

63

80 79

7269

60

77 79

7073

66 6764

48

0

10

20

30

40

50

60

70

80

90

100

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2014 2015 2016 2017

Number of Aerospace Transactions

Source: S&P Capital IQ

› Q1 activity was in line with the prior two quarters, but declined 8.6% on a year-over-year basis

› Q2 declined 34.2% from the same period in 2016, with the largest drop offcoming from the Support Services & Equipment segment of the industry

› For the first half of the year, total transactions declined 15.8% relative to theprior six months and 21.7% relative to the same period last year

› Cross border transaction activity was volatile in the first half of 2017; there was ahigh degree of activity in Q1—accounting for 41% of total transactions, thegreatest proportion of any quarter in the last 14—and relatively light activity inQ2—comprising only 25% of total transactions, the smallest percentage in thelast 14 quarters

3

Number of Cross Border Transactions

Source: InterOcean analysis of public information and transactions reported by Capital IQ

Key Transaction Data

Transactions by Category

Acquirer Type

Transactions in the first half of 2017

August 2017

Strategic = 80%

Financial = 17%

Private

Company, 49%

Publ ic

Company,

32%

Publ ic Investment

Fi rm, 1%

Private

Investment

Fi rm, 16%

Undisclosed,

3%

4

1311

74 4

84

4

66

2 74

5

3

8

1917

911

8

13

7

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2015 2016 2017

US Targets US Acquirers

20

5

32

23

3

45

5

17

6

29

18

4

26

12

Aircraft &Structural

Cabin &Interior

Electronics,Communications

& Avionics

Propulsion,Landing & Other

Mechanical

Satellites &Space Vehicles

Support Services& Equipment

Other

H2 2016 H1 2017

4

The precision component segment of the industry is ripe for significant consolidation

Smaller players in the aerospaceprecision component supply chain facesome distinct challenges in theforeseeable future. As OEMsimplement plans to enhancemargins—which often materially trailthose of their supply chain partners—and gain greater control of after-market revenue streams, sub-OEMcompanies are increasingly beingasked to improve efficiency, increaseproduction volumes and, ultimately,reduce prices.

This dynamic places Tier 2 and Tier 3suppliers in a challenging position,facing: increasing capital requirementsfor investment in new technologies forboth manufacturing and automation;greater competition for programs asOEMs and Tier 1 suppliers seek torationalize the supply base; andenhanced cost pressures fromcustomers. For many such companies,the answer is to focus on growth, bothto achieve economies of scale and toaccrue greater negotiating leveragewithin the supply chain.

These factors are very evident in theprecision component segment of theindustry, which appears ripe forsignificant consolidation. This segmentremains highly fragmented, with agreat number of relatively smallparticipants that do not appear well-positioned to achieve the necessarygrowth and efficiencies, whether dueto lack of size/resources, reliance on alimited number of major customersand/or programs, or unwillingness toinvest in significant capital programs—particularly for owners approachingretirement age. For these and otherreasons, InterOcean Advisors expectsa significant increase in M&A activityin this segment in the near term. Andbased on investor activity, we are notthe only ones. In recent years multipleprivate equity groups have eithermade new platform investments orcreated investment vehicles—often inpartnership with an industryexecutive—with the express purposeof aggressively pursuing acquisitiontargets in the precision componentsegment of the industry.

Competitive Dynamics Drive Consolidation

Segment Spotlight: Precision Component M&A Trends

August 2017

5

Financial Sponsor Investment Strategy / Focus Notable Investments

(Boca Raton, FL)

Highly technical manufacturers of aircraft engine components, including OEM and replacement parts

› Moeller Aerospace Technology, Inc. (2016)› AC&A, LLC (2016)

(Chicago, IL)

Companies that specialize in complex, multi-contoured parts and multi-axis machined components for both interior and exterior applications

› Gamma Aerospace LLC (2017)

(Southlake, TX)

Precision contract machining, fabrication, assembly, and 3D metal printing services

› McSwain Manufacturing Corporation (2015) › CalRAM Inc. (2014)› Midstate Berkshire (2014)› Precision Holding, LLC (2014)

(New York, NY)

Apply management and investment expertise plus deep operating and industry experience of operatingadvisors to help build better businesses

› ZTM, Inc. (2016)› J&M Machine (2016)› LaCroix Industries (2015)› McCann Aerospace Machining (2014)› Precise Machining & Manufacturing (2013)

(Providence, RI)

Manufacturers of precision machined components for commercial aircraft and aircraft engines

› D.L. Horton Enterprises, Inc., d/b/a Warmelin Precision Products (2016)

› Aerostar Aerospace Manufacturing, Inc. (2015)

(Chicago, IL)

Formed Tribus Aerospace LLC in 2017 to invest in precision manufacturers of critical engine, motion control and flow control parts and assemblies

› Advanced Machining & Tooling, LLC (2017)

(Birmingham, MI)

Companies that specialize in the manufacturing of precision machined components and precision cutting tools and instruments

› Universal Aerospace Co., Inc. (2016)› Rid-Lom Precision Mfg. Corp. (2016)› Advanced Precision Inc. (2016)› Smith's Machine LLC (2015)› ARCH Global Precision LLC (2011)

August 2017

Select Middle Market Precision Component Financial Investors

Source: S&P Capital IQ, private equity sponsors

6 August 2017

Close Date

Acquirer Target Target Description

Jun2017

Sonaca SA LMI Aerospace, Inc. Provides machined and formed close-tolerance aluminum, specialty alloy and composite components and assemblies, and design engineering services to the aerospace and defense markets in the United States.

Jun2017

Chengdu Aerospace SuperalloyTechnology Co., Ltd.

Gardner GroupLimited

Machines, fabricates, and treats small to large detailed parts in soft, hard, and exotic metals; and provides kits, sub-assemblies, and major assemblies.

Jun2017

P4G Capital Management, LLC

Aero Components LLC Aerospace and defense manufacturing specializing in sheet metal fabrication and NADCAP accredited chemical processing, metal bonding, and composites.

Jun2017

P4G Capital Management, LLC

Fore Machine Company, Inc.

Aerospace and defense manufacturing specializing in CNC machining, coatings and customer-proprietary processes for complex geometries and advanced materials.

Jun2017

Elite Aerospace Group, Inc.

Halo Industries, Inc. Engages in manufacturing of precision machined components for the aerospace industry.

May2017

Harlow Aerostructures LLC

Aerospace Holdings, Inc.

Doing business as GroupAero, engages in the design, engineering, fabrication, and machining of complex, high-precision, and close-tolerance parts, assemblies, and tooling for aerospace, defense, high-tech research, and commercial sectors.

May2017

Charlesbank Capital Partners, LLC

Tecomet, Inc. Provides net shape forging, photochemical etching, precision machining, and metal joining of components and assemblies for the aerospace and defense, medical implant, and specialty commercial and industrial markets.

Apr2017

Aernnova Aerospace S.A.

Brek Manufacturing Company

Manufactures machined parts and sub-assemblies for the aerospace industry. The company offers complex structural aircraft parts and complex contoured surface parts to the mold line of aircraft.

Apr2017

Greenbriar Equity Group LLC

Whitcraft LLC Manufactures formed, machined, and fabricated sheet metal aerospace components and assemblies for multiple applications, including exhaust and combustion structures.

Jan2017

Initiative & Finance; Elige Capital

Elastotech SA Manufactures and supplies precision O-rings and rotary shaft seals, technical moldings, fluid sealing products, pneumatics, sanitary seals, and hydraulic seals for aerospace, propulsion technology and other markets.

Jan2017

Admiralty Partners, Inc.

Integral Aerospace, LLC Manufacturer of complex, hard to machine flight-critical systems, components and structures involving a broad range of materials, including carbon fiber, high-strength steel, aluminum, titanium, Inconel and other specialty alloys.

Source: S&P Capital IQ

Select Precision Component Transactions, July 2016 – June 2017

7

Close Date

Acquirer Target Target Description

Dec2016

Strength Capital Universal Aerospace Co., Inc.

Manufactures fabricated and machined aluminum alloy and stainless steel parts and precision assemblies for various aerospace applications, such as aircraft structures, cabin interiors and jet aircraft engines.

Dec2016

United Flexible, Inc. Lakes Region Tubular Products, Inc.

Manufactures and distributes tube assembly components for aircraft and aerospace industries. It offers engines, airframes, hydraulics, missiles, satellites, and military aircraft parts.

Nov2016

Hübner Schlösser & Cie

Advanced Structural Technologies, Inc.

Manufactures and markets rotary forged and flow formed products for automotive, defense, aerospace, and alternative energy markets. It offers monoblocks and centers; military wheels and wheel components; nozzles, chambers, cylinders and tubes, and fuel storage and transfer systems; and aluminum liners.

Nov2016

ESCO Technologies Inc.

Mayday Manufacturing Co.; Hi-Tech Metals Inc.

Collectively, produces precision machined components for commercial aerospace and military aircraft applications and provides plating and metal finishing services for the aerospace industry.

Nov2016

EDAC Technologies Corporation(GB Aero Engine Holding Company)

Flanagan Industries Limited Partnership

Manufactures and supplies aerospace and land-based gas turbine components to customers in the aerospace market in the United States and internationally. It specializes in the manufacture of complex cases, machined components, and assemblies, as well as turned products.

Nov2016

The HeicoCompanies, LLC

Costello/April Design, Inc.

Manufactures heat exchangers and avionics enclosures for aerospace customers. It offers tube design, fuel cooled chassis, cold plates, screwed and bonded assemblies, CNC machined components, heat sinks, and oil coolers, as well as cross flow, plate, and fin heat exchangers.

Oct2016

Porter's Group, LLC

Karlee Company Inc. Contract manufacturer of precision sheet metal and machined components for communications, defense, aerospace, commercial goods, and medical equipment industries. It offers enclosures, racks, chassis, ordnance guidance systems, small defense systems, night vision scopes, communication bays, and interior components.

Oct2016

Precision Castparts Corp.

Atlantic Precision Inc. Offers direct metal laser sintering services, including sheet metal fabrication; plasma, fusion, resistance, and stud welding; EDM; CNC machining services; 3D printing metals and prototyping services; grinding; FPI inspection; CMM and metallurgical/ calibration; laboratory tool design/manufacturing and inspection services.

Jul2016

United Flexible, Inc. Kreisler Manufacturing Corp.

Manufactures and sells precision metal components and assemblies primarily for use in military and commercial aircraft engines, and industrial gas turbines. Key products include tube assemblies, fuel manifolds, cooling baffles, de-icing lines, fuel tank and transfer lines, air ducting products, hydraulic actuation systems, environmental control lines, and APU service lines.

August 2017

Select Precision Component Transactions, July 2016 – June 2017

Source: S&P Capital IQ

8

Impact of Additive Manufacturing

August 2017

Sources: S&P Capital IQ, press releases

An additional complicating factor—and likelydisruptive force—in the already challengingcompetitive landscape for precision componentsuppliers is the advancement of 3D printing, oradditive manufacturing, capabilities.

Not only will this technology enable the designand production of more complex components indirect competition with more traditionalmanufacturing processes, but the supply chainitself will almost assuredly experience some levelof upset. OEMs and large Tier 1s have alreadybegun to bring select manufacturing functions—including many additive manufacturingoperations—back in-house in an effort to enhancemargins and retain control of critical componentsand technologies. As more advanced materialsare developed, it is likely these highly technicaland sophisticated processes will be retained in-house.

GE Aviation has already determined that additivemanufacturing will play a critical role in itsstrategic plans. Some 3D-printed components areused on the LEAP engine (developed by CFMInternational, a joint venture between GE and

Safran Aircraft Engines), but a much greaternumber is being planned for the GE9X jet enginebeing developing for Boeing’s next-generationwide-body passenger jet scheduled to enterservice around 2020.

To meet production needs for the GE9X, andother future products, GE is investing heavily inadditive manufacturing. In addition to creatingcenters for additive manufacturing—such as itsflagship Center for Additive TechnologyAdvancement located near Pittsburgh, PA—GEhas pursued a number of acquisitions ofcompanies with desirable additive manufacturingtechnologies. GE expects the new additivemanufacturing business to generate $1 billion insales by 2020 and cost reductions of $3-5 billionacross the company over the next 10 years.

GE’s view on the potential for additivemanufacturing is summed up by Chairman andCEO Jeff Immelt: “Additive manufacturing willdrive new levels of productivity for GE, ourcustomers, including a wide array of additivemanufacturing customers, and for the industrialworld.”

Close Date

Target Target DescriptionSize

($mil)Employees

Dec2016

Concept Laser Manufactures complex 3D-printed parts from titanium, nickel alloys, precious metal alloys, steels, aluminum and cobalt-chromium.

$599 200

Nov2016

Arcam AB Provides additive manufacturing solutions for the production of metal components, including turbine blades and structural airframe components, and processes materials that require elevated process temperatures, such as titanium aluminide and inconel.

$311 285

Nov2012

Morris Technologies, Inc. and Rapid Quality Manufacturing, Inc.

Manufactures and markets precision metal components specializing in additive manufacturing techniques and provides product design, development, machining and testing services.

n/a 130

GE Aviation Additive Manufacturing Acquisitions

9

Median Public Company Valuation Multiples by Segment

Source: S&P Capital IQ

Public Company Data

Public Company Valuations & Performance

Enterprise value multiples (TEV/EBITDA) for public companies in the aerospaceindustry have enjoyed material appreciation over the course of the last 12 months,during which the industry-wide median multiple increased by 17.4%. By sector:

› Aircraft & Structural: The median multiple improved significantly (29%) in thelast half of 2016, but remained relatively flat over the first six months of 2017.

› Diversified Systems & Components: On the strength of an almost two-year run,the median multiple ended June 2017 just shy of its three-year peak followingan increase of 24% over the last twelve months.

› Engines & Engine Systems: The median multiple declined in Q4 2016, reachinga low of 7.2x, but recovered to reach 11.3x towards the end of Q1 2017, basedlargely on dramatic improvement in the multiple for Rolls Royce.

› Machined & Cast Parts: The median multiple ended the first six months of2017 at 11.5x, near the top of its three-year range. This segment’s multiplelargely moved in concert with the median multiple for Engines & EngineSystems, largely due to the amount of content sold into those applications.

Note: Constituent companies detailed on the following pages

August 2017

14.0x

11.3x10.7x

11.5x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

15.0x

Sep

Dec

Mar

Jun

Sep

Dec

Mar

Jun

Sep

Dec

Mar

Jun

2014 2015 2016 2017

Aircraft & Structural Engines & Engine Systems Machined & Cast Parts Diversified Systems & Components

Total enterprise value multiples have appreciated materially over the last 12 months

10

IAI Constituent Company Financial Performance Data

August 2017

Source: S&P Capital IQ as of 6/30/2017

($ in millions)

Market TEV/

Company Name Cap Revenues $ % $ % TEV EBITDA

Aircraft & Structural

Airbus 63,601$ 75,910$ 5,909$ 7.8% 1,797$ 2.4% 61,859$ 30.1x

Boeing 119,358 90,899 15,879 17.5% 10,735 11.8% 121,012 13.6x

Bombardier 3,994 15,784 1,667 10.6% 404 2.6% 12,013 19.8x

CPI Aerostructures 83 89 20 23.1% 13 14.7% 118 9.0x

Embraer 3,364 6,206 1,141 18.4% 710 11.4% 4,957 13.2x

FACC 430 828 331 40.0% 53 6.5% 654 14.9x

GKN 7,271 12,291 7,379 60.0% 1,351 11.0% 8,231 6.1x

Hexcel 4,797 1,954 545 27.9% 442 22.6% 5,556 12.3x

Kaman 1,356 1,771 527 29.8% 161 9.1% 1,762 10.7x

Leonardo 9,535 13,594 5,276 38.8% 1,735 12.8% 13,560 6.6x

Magellan 907 739 130 17.6% 116 15.7% 1,013 8.5x

Spirit AeroSystems 6,989 6,802 779 11.5% 752 11.1% 7,408 8.1x

Textron 12,608 13,680 2,386 17.4% 1,527 11.2% 15,865 10.4x

MEDIAN 4,797$ 6,802$ 1,141$ 18.4% 710$ 11.2% 7,408$ 10.7x

Engines & Engine Systems

General Electric 234,554$ 118,846$ 26,186$ 22.0% 17,916$ 15.1% 360,219$ 20.4x

MTU Aero Engines 7,236 5,683 870 15.3% 726 12.8% 6,816 9.5x

Rolls-Royce 21,278 20,856 4,457 21.4% 1,077 5.2% 22,082 21.6x

Safran 38,058 19,053 9,153 48.0% 4,130 21.7% 40,626 9.5x

UTC 97,838 58,108 16,103 27.7% 10,145 17.5% 117,249 11.3x

MEDIAN 38,058$ 20,856$ 9,153$ 22.0% 4,130$ 15.1% 40,626$ 11.3x

Machined & Cast Parts

Arconic 9,985$ 12,558$ 2,605$ 20.7% 1,386$ 11.0% 15,596$ 10.0x

ATI 1,851 3,313 384 11.6% 296 8.9% 3,732 15.4x

Barnes 3,144 1,342 479 35.7% 305 22.8% 3,555 12.2x

Lisi 2,518 1,898 1,015 53.5% 294 15.5% 2,772 10.2x

NN 754 859 222 25.8% 139 16.2% 1,555 10.8x

Standex 1,156 732 247 33.7% 95 13.0% 1,284 13.5x

Senior 1,273 1,268 249 19.7% 145 11.4% 1,530 10.0x

SIFCO 37 126 15 11.6% 4 3.3% 72 17.3x

MEDIAN 1,562$ 1,305$ 317$ 23.3% 220$ 12.2% 2,164$ 11.5x

Gross Profit EBITDA

11

IAI Constituent Company Financial Performance Data (continued)

Source: S&P Capital IQ as of 6/30/2017

August 2017

($ in millions)

Market TEV/

Company Name Cap Revenues $ % $ % TEV EBITDA

Diversified Systems and Components

AMETEK 13,938$ 3,990$ 1,352$ 33.9% 1,036$ 26.0% 15,782$ 15.5x

CIRCOR 979 585 187 31.9% 56 9.6% 1,157 20.5x

Curtiss-Wright 4,061 2,164 763 35.2% 414 19.1% 4,754 11.9x

Ducommun 356 545 104 19.1% 52 9.6% 511 9.8x

Esterline 2,823 2,028 697 34.4% 315 15.5% 3,358 10.7x

HEICO 5,562 1,431 535 37.4% 353 24.6% 6,201 17.6x

Héroux-Devtek 407 305 51 16.7% 42 13.8% 477 11.1x

Honeywell 101,612 39,359 12,371 31.4% 7,845 19.9% 108,091 13.8x

Meggitt 4,796 2,698 1,014 37.6% 704 26.1% 6,325 11.8x

Moog 2,574 2,454 729 29.7% 331 13.5% 3,224 9.7x

Parker-Hannifin 21,285 12,029 2,840 23.6% 1,742 14.5% 26,466 15.5x

Rockwell Collins 17,063 6,074 1,820 30.0% 1,346 22.2% 18,997 15.4x

Teledyne 4,504 2,186 846 38.7% 372 17.0% 5,748 15.4x

Thales 22,756 17,434 4,254 24.4% 1,865 10.7% 20,365 10.5x

TransDigm 13,988 3,360 1,903 56.6% 1,561 46.5% 24,137 15.5x

Triumph 1,568 3,421 815 23.8% 401 11.7% 2,694 6.1x

Woodward 4,141 2,083 572 27.5% 343 16.4% 4,758 14.3x

Zodiac Aerospace 7,565 5,484 2,967 54.1% 265 4.8% 9,078 32.8x

MEDIAN 4,650$ 2,576$ 831$ 31.7% 386$ 16.0% 5,974$ 14.0x

Gross Profit EBITDA

Middle Market Investment BankInterOcean Advisors LLC is one of North America’s leading specialtyinvestment banks focused on serving middle market companies inthe manufacturing sector. Through this singular focus, InterOceanhas developed deep industry expertise that time and again provesinvaluable to our clients. With extensive transaction experience inthe manufacturing sector, coupled with the practical advice ofdedicated senior advisors with relevant operating expertise, theInterOcean team can provide seasoned advice targeted to theAerospace & Defense industry and our clients’ specificcircumstances.

InterOcean advises private business owners, corporations, privateequity groups, family offices and management teams, offering thefollowing services:

▪ Mergers & Acquisitions▪ Private Capital Sourcing▪ Financial Advisory

12

About InterOcean Advisors LLC

Selected as a finalist for the M&A Advisor’s 2015 M&A Deal of the Year in the category of Industrial Goods & Basic Resources

Named to the 2017 Axial 100 list for the most referred middle market M&A advisory firms

August 2017

Global CoverageInterOcean is the sole U.S. member of the Terra Corporate FinanceAlliance, a growing international alliance of well-establishedinvestment banks with operations in North America, South America,Europe, the Middle East, Africa and Asia. Through this network,InterOcean has a platform for offering enhanced identification of,and access to, potential transaction parties around the globe.

www.terra-alliance.com

› Founded in 2002

› Consists of leading middle market M&A and corporate finance advisory firms

› 30+ offices across five continents

› An extremely effective network with a high degree of cooperation and a strong record of transaction success

› Associated firms have advised on more than 200 M&A transactions with a total value in excess of $10B

13 August 2017

Aerospace & Defense FocusInterOcean works with companies in the Aerospace & Defense industry that manufacture structural parts,interior parts, ground support equipment, and components for engines, auxiliary power units, environmentalcontrol systems, and other systems. Prior clients have possessed a wide range of production capabilities, aswell as special processes such as welding, brazing, conventional machining, non-conventional (laser)machining, heat treating, hydroforming, and non-destructive testing.

Nick Newlin

Managing Director

Aerospace & Defense Team Leader

nnewlin@ioadvisors.com

Bob LaBelleSenior Aerospace & Defense Advisor

rlabelle@ioadvisors.com

Aerospace & Defense Team Leaders

www.ioadvisors.com

Certain members of InterOcean are Registered Representatives of and securities are offered through StillPoint Capital, LLC, Member FINRA/SIPC. InterOcean Advisors LLC is not affiliated with StillPoint Capital, LLC.

This is not an offer to sell securities or the solicitation of an offer to purchase securities. Any offer of securities may only be made pursuant to a written offering memorandum.

Recipients of this document must conduct their own appraisal and due diligence procedures and should not act or refrain from acting solely in reliance on this document.