September 2017
Strictly Private & Confidential
M&A and Capital Markets Themes in the E&C Industry
Private and Confidential | 2
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Information & Limitations
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24%
15%
(10%)
(5%)
–
5%
10%
15%
20%
25%
30%
35%
Sep '16 Nov '16 Jan '17 Mar '17 May '17 Jul '17 Sep '17
E&C IndexS&P 500
What’s Going On In The Market
Note: E&C Index includes AECOM, Aegion, Argan, Chicago Bridge & Iron, Comfort Systems, Dycom, EMCOR, Fluor, Granite, Great Lakes, Jacobs, KBR, Layne, Limbach, MasTec, Matrix, McDermott, MYR, NV5, Orion, Primoris, Quanta, Stantec, Sterling, Tetra Tech, Tutor Perini and Willbros.
Sources: Company filings and Davidson institutional research.
1 year Share Price Performance
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24%
15%
(10%)
(5%)
–
5%
10%
15%
20%
25%
30%
35%
Sep '16 Nov '16 Jan '17 Mar '17 May '17 Jul '17 Sep '17
E&C IndexS&P 500
What’s Going On In The Market 1 year Share Price Performance
Broader Markets Election Geopolitics Natural Disasters Fed Unwinding
Note: E&C Index includes AECOM, Aegion, Argan, Chicago Bridge & Iron, Comfort Systems, Dycom, EMCOR, Fluor, Granite, Great Lakes, Jacobs, KBR, Layne, Limbach,
MasTec, Matrix, McDermott, MYR, NV5, Orion, Primoris, Quanta, Stantec, Sterling, Tetra Tech, Tutor Perini and Willbros. Sources: Company filings and Davidson institutional research.
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24%
15%
(10%)
(5%)
–
5%
10%
15%
20%
25%
30%
35%
Sep '16 Nov '16 Jan '17 Mar '17 May '17 Jul '17 Sep '17
E&C IndexS&P 500
What’s Going On In The Market 1 year Share Price Performance
Broader Markets Election Geopolitics Natural Disasters Fed Unwinding
E&C $1 Trillion Local Markets Energy Shifts More Mega Deals
Note: E&C Index includes AECOM, Aegion, Argan, Chicago Bridge & Iron, Comfort Systems, Dycom, EMCOR, Fluor, Granite, Great Lakes, Jacobs, KBR, Layne, Limbach,
MasTec, Matrix, McDermott, MYR, NV5, Orion, Primoris, Quanta, Stantec, Sterling, Tetra Tech, Tutor Perini and Willbros. Sources: Company filings and Davidson institutional research.
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Share Price Performance Divergence
Sources: CapitalIQ as of 9/22/2017.
129%
65%60% 56%
49%44%
37% 35% 35%24% 23% 23% 22% 22% 20% 20% 18% 18% 17%
11% 11%
(1%)(4%)(7%)(18%)
(21%)
(45%)
24%15%
(50%)
-
50%
100%
150%
STR
L
NV
EE
WG
MTZ
PR
IM
PW
R
LAY
N
AG
X
MD
R
TTEK
KB
R
AE
GN
GLD
D
FIX
GV
A
EM
E
TPC
LMB
AC
M
STN
JEC
DY
OR
N
MY
RG
MTR
X
FLR
CB
I
E&
C
S&
P
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Forward EBITDA Valuations (vs. Last Year)
Note: Diversified EPC includes AECOM, CBI, Fluor, Jacobs, KBR and McDermott. Civil & Industrial Construction includes Aegion, Granite, Great Lakes, Layne Christensen, Matrix, Orion Marine, Primoris, Sterling and Tutor Perini. Building Specialty Contractors includes Emcor, Comfort Systems and Limbach. Utility Contractors includes Dycom, MasTec, Quanta, MYR and Willbros. Design & Engineering includes Aecom, Stantec, Tetra Tech and NV5.
2016
2017E
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Growth and Margins by Sector
Growth Rates By Sector Operating Margin By Sector(1)
(1) Design/Engineering includes AECOM, Jacobs, Stantec and Tetra Tech. Contractors include Granite, Primoris and Tutor Perini. Specialty Contractors includes Comfort Systems, EMCOR, MasTec and Quanta.
Sources: ENR.com, company filings and CapitalIQ.
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Domestic Construction Trends
Sources: Census Bureau, Davidson equity research.
($ in billions) Non-Residential Construction Put in Place & E&C Backlog
E&C Backlog Put In Place
-
20
40
60
80
100
120
140
160
180
$ 200
-
50
100
150
200
250
300
350
400
$ 450
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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CEO Confidence % of Firms Reporting YoY Higher Backlog
% of Firms Reporting Increase in Domestic Hiring
Sources: ENR.
0%
20%
40%
60%
80%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Contractors Design/Engineering
0%
20%
40%
60%
80%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Contractors Design/Engineering
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-
10%
20%
30%
40%
50%
-
10
20
30
40
50
60
70
80
90
100
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2
2008 2009 2010 2011 2012 2013 2014 2015 2016 '17
# Deals % PEG
Sources: CapitalIQ and Pitchbook.
E&C M&A Trend
E&C M&A Deal Count and %PEG
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Notable Deals
Deal size: $4 bn 100% stock $134 mm estimated cost
synergies Pre/Post synergies EBITDA
multiple: 10.6x / 7.4x
$175mm Enterprise Value Estimated 7x EBITDA Integrated delivery strategy
Deal size: $793 mm 100% cash $233mm debt raised $25mm annual synergies Pre/Post synergies EBITDA
multiple: 9.5x / 7.3x Integrated design /
construction
Deal size: $2.7bn 100% cash $1.5bn debt raised $100 mm annual synergies Pre/Post synergies EBITDA
multiple: 11.7x / 9.8x
Deal size: $3.3 bn 60% cash, 40% stock $150 mm cost synergies $2.4bn in debt used to fund
transaction Pre/Post synergy EBITDA
multiple: 10.1x / 6.9x
Deal size: $600mm 100% cash 9.1x NTM EBITDA, 14.6x
LTM
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Anecdotal M&A Themes
Best of times / worst of times
Good deals
oversubscribed Peak earnings x peak
multiples? Tough sectors and
situations have hope
Private Equity a seller International interest
from Asia The SPAC is back Good capabilities &
management always in style
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