In years past, the start of the calendar year was dominated by prognostications related to the potential for changes in monetary policy by the Bank of Canada and the Fed as a means to spur economic growth and manage inflation. As we start 2018, all eyes are on politics and the ongoing trilateral negotation of NAFTA. Will it survive? If so, what changes will be made and who will come out on top? If not, what industries will be the most impacted and how will sectors, business owners and investors react? These are just some of the questions dominating headlines and swarming around corporate boardrooms as business leaders continue to seek out growth in a low-growth setting amid these and other economic uncertainties.

2017 marked a notable year from a transaction perspective, surpassing 2016 deal volume by 35 transactions (9.8%) to 394 closed transactions. Looking back on the year’s memorable transactions, we witnessed the acquisition of MTS Inc. by BCE Inc., the acquisition of Circle K Stores Inc. by Alimentation Couche-Tard Inc., the sale of Luxury Retreats International Inc. to Airbnb Inc. along with the going-private transactions of Canam Group Inc. and Lumenpulse Group, just to name a few.

A total of 106 transactions closed during Q4-2017, up from 95 closed in Q3 and the 86 closed in Q4-2016. Only 6 of the deals closed in Q4-2017 involved a financial buyer, the lowest tally since Q4-2016. The increase in volume did not however translate into higher reported values. Q4-2017 saw reported deal values amounting to $5.8 billion, the lowest quarterly total in 2017.

In this edition, you will read about EY’s most recently closed transaction in Quebec, the divestiture of Joseph Ribkoff Inc., a leading Quebec-based womenswear designer, manufacturer and international wholesaler to a purchaser group led by NOVACAP Industries. We also showcase the results from EY's 17th Capital Confidence Barometer survey and introduce how EY’s Restructuring practice can help address various business pressures such as financial and commercial market pressures, stakeholder expectations and cash and/or capital constraints.

I hope you enjoy this edition and those that follow.

Todd Caluori, CPA, CA, CBV Editor and Senior Vice President M&A Lead Advisory

Fourth quarter 2017

Quebec Transaction Snapshot

Politics trump monetary policy

2 | Quebec Transaction Snapshot

Financial and commercial market pressures, stakeholder expectations and cash and/or capital constraints are just a few of the threats that can place immense pressure on your business.In the face of financial stress, early actions can help stem business losses and may even accelerate the return to financial viability. Perhaps your business has had profit warnings or breached debt covenants. Business performance may be deteriorating or you may be concerned about your exposure to a particular corporation or group.We also work with solvent businesses that may be affected by distressed suppliers, or that may simply be seeking to improve cash flow and capital efficiencies to increase financial flexibility.However, there are times when businesses are left with few options but to seek court protection to continue operating.As the leading restructuring firm in Canada, EY can help you evaluate options, create an effective restructuring plan and achieve your strategic goals. We deploy our trademark through a collaborative, responsive approach to develop a plan that is tailored to your short- and long-term needs and objectives.

Wherever you are, we draw on our significant industry and sector knowledge, deep technical skills and extensive experience to provide insightful and practical advice. It’s how we make a difference.

To learn more about our Restructuring practice, contact:Martin Rosenthal 514 879 6549 martin.rosenthal@ca.ey.comMichel Marleau 514 874 4457 michel.marleau@ca.ey.com

EY’s Transaction Advisory ServicesThis edition’s focus: Restructuring

LeadAdvisory

TransactionAdvisoryServices

TransactionSupport

TransactionTax

OperationalTransaction

Services

Valuation &BusinessModelling

WorkingCapital

Management

Restructuring

Fourth quarter 2017 | 3

Canadian economic indicators

2017 2018

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Exchange rate (US/CDN)1 75.6 74.4 79.9 78.6 79.3 78.4 78.9 79.7 Real GDP (chain-weighted)2 3.7 4.3 1.7 2.2 2.2 1.9 2.0 2.0 Consumer spending2 3.7 5.0 4.0 2.1 2.3 1.9 1.9 1.8 Government spending2 0.0 3.2 4.6 2.8 2.6 2.5 2.4 2.3 Business investment2 10.6 8.2 3.7 3.1 2.2 2.0 2.3 2.6 Residential construction2 11.7 -3.6 -1.4 1.0 -1.0 -0.5 0.0 0.0 Exports2 2.4 6.1 -10.2 0.5 3.0 2.6 2.7 2.5 Imports2 13.7 6.6 -0.2 0.0 2.3 2.2 2.0 1.9 CPI, all items3 2.6 0.1 1.2 2.8 3.0 1.4 1.8 2.2 Overnight rate4 0.50 0.50 0.83 1.00 1.25 1.25 1.50 1.75 Three-month T-Bill4 0.47 0.54 0.81 0.92 1.15 1.20 1.45 1.65 90-day BAs4 0.94 0.91 1.31 1.43 1.60 1.55 1.85 2.00 10-year bond yield4 1.71 1.51 1.95 1.96 2.20 2.30 2.45 2.50 Unemployment rate4 6.7 6.5 6.2 5.9 5.7 5.7 5.6 5.5 Personal income3 3.6 4.1 3.7 3.5 4.2 3.8 4.1 4.0 Housing starts (’000s)5 222 207 223 230 215 209 200 198

1 Quarter average2 Quarter over quarter % change, annual rate3 Year over year % change4 Quarter average in %5 Quarter average, annual rate

Estimates

Source: BMO Capital Markets Economics as at 12 January 2018

,

4 | Quebec Transaction Snapshot

Illustrative Quebec transactions*

• 2 October 2017: Quebec City-based EXFO Inc. acquired Yenista Optics S.A.S (“Yenista”), a privately held company based in Lannion, France, which supplies advanced optical test equipment for the R&D and manufacturing markets. Yenista owns more than 20 patents protecting its proprietary technologies on measurement techniques, optical filters and external cavity lasers. Yenista’s additional revenue raises EXFO to the No. 1 position in the global fibre-optic test equipment market. EXFO closed the acquisition in an all-cash transaction valued at US$11.1 million.

• 4 October 2017: Montreal-based Transat A.T. Inc. sold its 35% minority interest in Ocean Hotels to Spain-based Corporación H10 Hotels for a total cash consideration of US$150.5 million. Transat A.T. remains fully committed to becoming a full-fledged hotel operator and is selling its minority interest in Ocean Hotels in order to accelerate the development of its own hotel chain in the South.

• 21 October 2017: Laval-based IRIS, the Visual Group Inc. (“IRIS”) was acquired by Montreal-based New Look Vision Group Inc. (“New Look”) for total consideration of $120.0 million on a cash-free and debt-free basis. The addition of IRIS to New Look will permit the combined entity to take advantage of economies of scale and share resources and knowledge that will benefit their customers at a time of growing demand for eye care in Canada. With this acquisition, New Look will become the largest Canadian integrated optical retailer in a fragmented optical retail industry.

• 23 October 2017: Montreal-based Birks Group completed the sale of its subsidiary, Mayor’s Jewelers, to Aurum Group USA, Inc., a subsidiary of Aurum Holdings Ltd., the largest fine watch and jewelry retailer in the UK for total consideration of approximately US$108.0 million. The completion of the transaction positions Birks on the right path for future growth along with its recent launch of the Birks jewelry brand in the UK on 9 October 2017.

• 27 October 2017: Montreal-based Hewitt Equipment Ltd. (“Hewitt”) was acquired by Ontario-based Toromont Industries Ltd. (“Toromont”) for a total consideration of $1.0 billion; $917.7 million cash plus the issuance of 2.25 million Toromont shares. Hewitt is the authorized Caterpillar dealer for the province of Quebec, Western Labrador and the Maritimes, as well as the Caterpillar lift truck dealer for most of Ontario. Acquiring Hewitt marks a very important milestone for Toromont and will be beneficial to its customers, employees and shareholders on many levels. The acquisition delivers an opportunity for Toromont to strengthen its expertise in mining, construction, power systems and forestry sectors.

• 30 October 2017: Montreal-based SNC-Lavalin Group Inc. completed the acquisition of Florida-based Data Transfer Solutions LLC (“DTS”) for total consideration of US$45.0 million. The acquisition will add to the capabilities of SNC-Lavalin’s Atkins sector and will enhance service offerings in digital asset management for clients. DTS is a leader in asset management and geographic information systems within the North American market. DTS provides state-of-the-art tools and solutions to clients with large, complex infrastructure assets. The acquisition is aligned with SNC-Lavalin’s global digital strategy and recognizes the pace of technological change in the engineering and construction industry and the need to support client needs with robust digital solutions.

• 1 November 2017: Montreal-based Transcontinental Inc. acquired Flexipak Industries Inc. (“Flexipak”), a Montreal-based flexible packaging supplier. Flexipak is a converter specialized in flexographic printing, lamination, as well as bag and pouch making, and has other value-added capabilities. The transaction extends Transcontinental’s footprint to Eastern Canada by adding a Montreal-based facility equipped with a state-of-the-art platform, and gives the company the opportunity to further develop its existing business relationships with retailers in the country. Terms of the transaction were not disclosed.

• 10 November 2017: Valeant Pharmaceuticals International Inc. (“Valeant”), completed the sale of its American Obagi Medical Products business for total consideration of $190.0 million in cash to Hong Kong-based Haitong International Zhonghua Finance Acquisition Fund I, L.P. Valeant also sold its Californian affiliate Obagi Cosmeceuticals LLC. Limited partners of the acquirer include industry veterans in other geographic markets, such as China Regenerative Medicine International Limited (“CRMI”). CRMI is engaged in the research, development, commercialization of innovative bio-medical, healthcare products and medical techniques.

• 20 November 2017: Montreal-based Tembec, Inc. was acquired by Florida-based Rayonier Advanced Materials Inc. (“Rayonier”), combining two complementary high purity cellulose businesses and diversifying Rayonier’s product offerings with integrated forest products, paper, paperboard and newsprint businesses. The combined company, which will operate under the name Rayonier Advanced Materials, will be a stronger, more diversified global leader in its core businesses with an expanded international footprint. Terms of the acquisition were not disclosed.

• 20 November 2017: Lévis-based Rogers Sugar Inc. acquired through its Granby-based L.B. Maple Treat Corporation (“L.B. Maple”) subsidiary, Decacer located in Quebec for total consideration of $40.0 million. The transaction is an important step in L.B. Maple’s strategic growth initiatives to reinforce its leadership position in the growing maple syrup industry. L.B. Maple will broaden its maple syrup operations and expand its product offering, including a unique maple sugar dehydration technology, which provides L.B. Maple with a line extension to its current sugar portfolio for consumer and food processor customers.

• 21 November 2017: Montreal-based CAE Inc. acquired AirAsia Group’s share of the Asian Aviation Centre of Excellence (“AACE”) for US$100.0 million (including earn-out). The acquisition allows CAE to expand its footprint in the fast-growing Asia Pacific aviation market, and further reinforces its position as the global training partner of choice. CAE remains AirAsia’s exclusive training partner of choice and will continue to offer training for pilots, cabin crew, maintenance engineering, technicians and ground services personnel to the airline and its affiliates.

• 23 November 2017: Rouyn-Noranda-based Richmont Mines Inc. (“Richmont”) was acquired by Toronto-based Alamos Gold Inc. (“Alamos”). All Richmont issued and outstanding common shares were exchanged on the basis of 1.385 Alamos common shares. With the completion of the acquisition, Alamos has greatly strengthened its asset base, cash flow generation and profitability. Alamos also has solidified its positioning as a leading intermediate gold producer and is poised to deliver long-term shareholder value.

* All amounts are in Canadian dollars unless otherwise indicated. Sources: S&P Capital IQ and company press releases.

,

Fourth quarter 2017 | 5

• 27 November 2017: Montreal-based WSP Global Inc. (“WSP”) acquiredNew Zealand-based Opus International Consultants Ltd. (“Opus”). Opus is a highly respected professional services firm that is mainly active in the infrastructure and buildings sectors. It also has some activities in the resource sector, mainly in Canada. With the acquisition of Opus, WSP will continue to deliver on its strategic ambition of enhancing its activities in the Australia/New Zealand region. The acquisition will also increase WSP’s ability to deliver superior value to its clients, shareholders and employees. Terms of the transaction were not disclosed.

• 1 December 2017: Montreal-based Transat A.T. Inc sold its Jonview Canada business unit, the country’s leading incoming tour operator, to Japan-based multinational H.I.S Co. Ltd. for $44.0 million. With this transaction, Transat A.T. has carried out the implementation of its strategic refocusing around its leisure travel operations in Canada and development of its hotel division.

• 1 December 2017: Montreal-based MTY Food Group Inc. (“MTY”)acquired all of the limited liability company interests in CB Franchise Systems LLC (“Counter”), Built Franchise Systems LLC (“Built”) and certain of their affiliates located in California. MTY has been seeking potential additions to its strong portfolio of brands, Counter and Built fit that perfectly, offering trendy hamburgers and other craveable foods to uncompromising customers, focusing on superior quality and spot-on execution, creating memorable experiences for its guests. The terms of the transaction were not disclosed.

• 4 December 2017: Cascades Inc. increased its stake in Greenpac for the second time this year and expanded its presence in Ontario through the acquisition of four plants owned by the Coyle family, which specialize in the manufacturing of boxes and specialty products offering strong growth potential: McLeish Corr-a-Box Packaging & Design, Brown Packaging, Coyle Corrugated Containers Inc., and Coyle Packaging (Peterborough) Ltd. This transaction will allow Cascades to increase its production facility by 500 million square feet per year and to strengthen its ability to serve customers in this region. Cascades has also acquired the Coyle’s family 33% stake in Ontario-based Tencorr, a company specialized in the manufacturing of sheet stock for box producers. The total cost of the transaction amounts to $49.0 million, of which $21.0 million is related to the increased stake in Greenpac and its new position in Tencorr. The four plants were acquired for a consideration of $28.0 million, including an assumed debt of $4.0 million.

• 5 December 2017: Quebec-based H2 Biopharma Inc. (“H2”), a late-stage ACMPR applicant, was acquired by Vancouver-based Aurora Cannabis Inc. (“Aurora”). H2 Biopharma is currently completing a state-of-the-art, purpose-built 48,000 square foot cannabis production facility, less than an hour from Montreal, which, upon completion, is projected to produce approximately 4,500 kilograms of high-quality cannabis per annum, with significant expansion potential on 46 acres of land, which H2 has the right to acquire. Aurora has issued 4,789,273 common shares of Aurora to the H2 vendors, at a price of $5.22 per share.

• 6 December 2017: Joseph Ribkoff Inc., one of Canada’s leading fashion designers, present in more than 64 international markets, was acquired by Longueil-based NOVACAP Industries (“NOVACAP”), a Canadian leader in private equity. This new investment represents NOVACAP’s first foray into the women’s ready-to-wear sector. Joseph Ribkoff has experienced strong growth in recent years and NOVACAP’s intention is to provide the necessary financial support in order to accelerate the company’s growth and expansion into new markets. The transaction was financed by the NOVACAP Industries IV Fund, in partnership with the Fonds de solidarité FTQ, founder Joseph Ribkoff and company executives. The terms of the transaction were not disclosed. EY acted as the exclusive financial advisor to Joseph Ribkoff.

• 12 December 2017: Montreal-based Saputo Inc. acquired Wisconsin-based Betin Inc. Betin manufactures, markets and distributes goat cheese in the United States, mainly under the Montchevre brand. The purchase price of US$265.0 million, on a debt-free basis, was paid in cash at closing from cash on hand and available credit lines. This transaction will enable the Cheese Division (USA) of Saputo to broaden its presence in specialty cheese in the United States.

• 18 December 2017: Boucherville-based Uni-Select Inc. acquiredsubstantially all the assets of T-W Pike Sales Ltd., doing business as Spectrum Coatings, by FinishMaster Canada Inc., a subsidiary of Uni-Select. Founded in 1976, Spectrum is a distributor of automotive and industrial paint operating out of Manitoba, active in three locations and a training centre. The acquisition of Spectrum represents a nice addition to FinishMaster’s growing corporate store network in Canada and represents an opportunity to expand the brand’s presence nationally and grow in a key market.

• 22 December 2017: Alimentation Couche-Tard Inc. (“Couche-Tard”)acquired all of the issued and outstanding equity interest of US-based Holiday Stationstores. Holiday's main assets consist of 522 company-operated and franchise locations in 10 US states, two food commissaries, and a fuel terminal. Holiday, a privately owned company, is an important player in the US Midwest region, and has top quartile convenience and fuel volumes under the Holiday brand. The Holiday assets are a strong strategicfit for Couche-Tard and expands its reach to 48 of the 50 US states. Adding the Holiday stores, commissaries and fuel terminal as well as its highly successful programs and employees pushes Couche-Tard to further its journey to become the world’s preferred destination for convenience and fuel. Terms of the transaction were not disclosed.

• 28 December 2017: Montreal-based Laces Group Inc. was acquiredby Toronto-based Onex Corporation, in partnership with the existing management team. Laces Group is a leading designer, manufacturer and marketer of bath accessories and home fashion products. The investment was made by ONCAP IV, Onex Corporation’s $1.1 billion fund. The terms of the transaction were not disclosed.

• 29 December 2017: Don Wall, President and CEO of Quebec-based HNZ Group Inc., acquired through a wholly owned acquisition company and together with US-based PHI, Inc., all of the issued and outstanding common and variable voting shares of HNZ Group for total consideration of approximately $232.6 million. As part of the arrangement, PHI will acquire from the acquisition company the portion of the Corporation’s offshore business conducted in New Zealand, Australia, the Philippines and Papua New Guinea.

EY* is pleased to announce the acquisition of Joseph Ribkoff Inc. (“JRI” or “the Company”) by a purchaser group (the “Purchaser”) lead by NOVACAP Industries (“NOVACAP”), on which EY acted as the exclusive financial advisor to JRI and its shareholders. The transaction was financed by the NOVACAP Industries IV Fund, in partnership with Fonds de solidarité FTQ, founder Joseph Ribkoff and the Company’s senior executives.

About Joseph Ribkoff Inc. Joseph Ribkoff Inc. is a leading Quebec-based womenswear designer, manufacturer and international wholesaler. In operation for over 60 years, the Company employs over 440 individuals, most of whom are in Canada, and sells in over 64 international markets.

Joseph Ribkoff Inc. has developed a reputation and brand name for quality and style across the globe. It offers apparel for various occasions designed to have global appeal, both for retailers and end consumers at a higher-end yet affordable price. The Company’s designs reflect an in-depth understanding of the fashion trends and consumer preferences in key markets all over the world.

The transactionAfter supporting JRI’s growth for many years, the Company’s shareholder group made a decision to monetize its investment and provide Management, including the Company’s founder who will remain a significant shareholder, with a strategic partner to help drive the next stage of growth.

In NOVACAP, JRI has found a partner that plans to optimize operations and aid with the continued expansion of the Company’s global reach.

Project Montrose: Transaction Snapshot

6 | Quebec Transaction Snapshot

has been acquired by

EY* acted as the exclusive advisor to the seller and its shareholders.

*Ernst & Young Orenda Corporate Finance Inc.

Fourth quarter 2017 | 7

The win–win“We are operating in a highly competitive market, and while our growth has been strong over the past five years, we will benefit from NOVACAP’s financial backing, expertise and network to continue to grow and consolidate our leadership position,” said company founder Joseph Ribkoff.

This new investment represents NOVACAP’s first foray into the women’s ready-to-wear sector. “Joseph Ribkoff is a Quebec-based company that has experienced strong growth in recent years and is present in several international markets,” said NOVACAP senior partner and Joseph Ribkoff’s new chairman of the board, Domenic Mancini. “We are convinced of Joseph Ribkoff’s potential at the national and international levels. The company is ready to move up to a new level and, as we have done many times in the past, our intention is to provide the necessary financial support in order to accelerate the company’s growth and expansion into new markets.”

Within the context of a complex shareholder dynamic, EY* advised on a transaction that led to a successful outcome for all stakeholders. Our ability to assist in reconciling the various stakeholders’ expectations and interests proved critical to bring this transaction to fruition.

EY* was able to design a transaction process that led to a successful outcome for all stakeholders through our vast transaction experience, our understanding of their key objectives and our creative approach to deal structuring.

About usErnst & Young Orenda Corporate Finance Inc. is one of Canada’s largest corporate finance firms focused on mid-market transactions. With approximately 90 professionals in 10 cities across Canada, we offer significant industry and regional depth. As part of EY’s Transaction Advisory Services practice, Ernst & Young Orenda Corporate Finance Inc. delivers a fully integrated approach to transaction services, including:

Mergers and acquisitions lead advisory

• Divestitures • Mergers and acquisitions • Management and leveraged buyouts • Recapitalizations

Structured finance

• Structure and arrangement of debt and equity • Project finance and infrastructure advisory services

Financial advisory services

Transaction real estate

To learn moreFrançois Tellier 514 874 4351 francois.tellier@ca.ey.com

Todd Caluori 514 879 2793 todd.caluori@ca.ey.com

Amine Hajji 780 441 4682 amine.hajji@ca.ey.com

Adam Forlini 514 874 4634 adam.forlini@ca.ey.com

8 | Quebec Transaction Snapshot

All values reported in Canadian dollars unless otherwise stated 1 Closed transactions only. Due to the existence of private transactions, not all deals have reported values.

Historical M&A activity(Source: S&P Capital IQ)

In terms of transaction mix for Q4-2017:• There were a total of 106 closed transactions involving Quebec-based companies during the quarter ended 31 December 2017. This is higher than the 95 transactions closed during the previous quarter, and above the Q4-2016 level of 86 transactions. In addition, the total is greater than the rolling eight-quarter average of approximately 94 transactions. Note, however, that past experience has shown that the number of identified transactions at quarter-end tends to underestimate the actual number of deals closed during the quarter, as announcements are sometimes deferred.

• There were a total of 6 acquisitions completed by a financial sponsor in Q4-2017, representing a ratio of 1 to 17 for transactions completed by financial buyers versus strategic buyers, which is below the 1 to 10 ratio recorded for the last eight quarters.

• In terms of transaction size, total reported value was $5.8 billion, below the $12.5 billion recorded in the previous quarter, and below the average of $7.5 billion for the last eight quarters. From a total of 54 deals with reported values, there were three deals in excess of $500 million and nine between $100 and $500 million. The number of transactions below $100 million stood at 42, above the eight-quarter average of 28.

• There was 1 mega-transaction, with valuation in excess of $1.0 billion, completed during the quarter which was the acquisition of Hewitt Equipment Ltd by Toromont Industries Ltd for a total of $1.0 billion.

• The average transaction size based on deals with reported values (excluding mega-deals) decreased from approximately $88.7 million to $67.4 million, and is below the rolling eight-quarter average of $74.1 million.

• The most active sectors in terms of deal volume in Q4-2017were Metals & Mining, IT Products and Services, and Real Estate. Over the last eight quarters, Metals and Mining, IT Products and Services, and Commercial & Professional Services were the most active sectors.

• In terms of targets, out of 67 acquisitions closed by Quebec-based companies during the quarter, 11 targets were based in Quebec (16.4%), below the eight-quarter average of 29.7%. 50 targets were based in the rest of Canada, three in the US and three in the rest of the world.

• In terms of acquirers, out of the 39 Quebec-based companiesacquired during the quarter, 11 were acquired by Quebec-based acquirers (28.2%), below the eight-quarter average of 40.5%. 10 acquirers were based in the rest of Canada, 8 in the US and 10 in the rest of the world.

Transactions involving Quebec-based companies over the last eight quarters1

Q1-2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017 Q3-2017 Q4-2017

150

100

50

0

# of transactions by a financial sponsor

# of transactions by a strategic buyer

Reported values (C$, millions)

# of

tran

sact

ions

C$, m

illio

ns

$20,000

$15,000

$10,000

$5,000

$0

106

100

6

92

83

9

92

81

11

89

81

8

86

81

5

86

74

12

107

96

11

95

86

9

Counterparty mix over the last eight quarters

Counterparty mix over the last quarterCounterparty mix over the last

eight quartersCounterparty mix over the last quarter

Quebec with USQuebec with rest of world

Quebec with Quebec Quebec with rest of Canada

151

292163

14711

5321

21

Transactions involving Quebec-based companies over the last eight quarters, by deal size (in C$, millions)

100

50

0Q1-2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017 Q3-2017 Q4-2017

# of

tran

sact

ions

Undisclosed value $0-$20 million $20-$100 million $100 - $500 million $500 - $1,000 million >$1,000 million

92

50

9

16

60

2

9289 86 86

107

95

15

3

63

7

2

6

15

78

3

8

20

1

14

16

51 51

04

25

54

1

8

25

56

02 2 4 2 2 1

3

24 1 6

106

291

17

25

52

Number of Quebec transactions by industry over the last eight quarters

Constr

uctio

n & Eng

ineeri

ng

Consu

mer Goo

ds

Energy

& Utilitie

s

Finan

cials

Food

& Bevera

ge

Health

Care

Indus

trials

IT prod

ucts

& Service

s

Materia

ls

Media

&

Teleco

mmunica

tions

Metals &

Mini

ng

Real E

state

Retail &

Distrib

ution

Transp

ort

Commerc

ial &

Profes

siona

l Serv

ices

120

100

80

60

40

20

0

46

20

37425258

76

31 27

115

91

50

25

64

18

Number of Quebec transactions by industry over the last quarter

Constr

uctio

n & Eng

ineeri

ng

Consu

mer Goo

ds

Energy

& Utilitie

s

Finan

cials

Food

& Bevera

ge

Health

Care

Indus

trials

IT Produc

ts & Serv

ices

Materia

ls

Media

&

Teleco

mmunica

tions

Metals &

Mini

ng

Real E

state

Retail &

Distrib

ution

Transp

ort

Commerc

ial &

Profes

siona

l Serv

ices

18

16

14

12

10

8

6

4

2

0

56

7

4

18

2

4

12

5

8

01

9

15

9

Fourth quarter 2017 | 9

EY’s Quebec public company review1

(Source: S&P Capital IQ)

1. Ernst & Young Orenda’s Quebec public company indices are capitalization-weighted, while multiples by industry are based on an arithmetic average. Indices and trading multiples are updated periodically to reflect new entrants/exits. Current data may not correspond with those shown in previous editions.

2. For the purposes of this analysis, small caps include companies with a market capitalization between $5 and $250 million, mid-caps include companies between $250 and $2.5 billion, and large caps include companies with a market capitalization above $2.5 billion.

Quebec TEV/EBITDA trading multiples by industry31 December 201730 September 2017

Energy

and U

tilitie

s

Finan

cials

Health

Care

Mater

ials

Media

and

Teleco

mmunica

tions

Metals

and M

ining

Consu

mer G

oods

Food

and B

ever

age

Real E

state

Retail

and D

istrib

ution

Trans

port

Commer

cial a

nd

Profe

ssion

al Ser

vices

Constru

ction

and

Enginee

ring

and S

ervic

es

IT Produ

cts

Indus

trials

18.5

x

16.7

x

16.4

x

13.7

x 15.8

x

11.0

x

14.3

x

11.2

x

11.0

x

10.9

x

9.1x 10

.8x

9.6x

8.9x

6.2x

19.2

x

18.4

x

18.0

x

15.7

x

14.9

x

13.7

x

13.5

x

11.8

x

11.8

x

10.1

x

10.1

x

10.0

x

9.6x

9.1x

6.4x

160

150

140

130

120

110

100

90

80Dec Mar-16 Jun-16 Sep-16 Dec-16 Dec-17Mar-17 Jun-17 Sep-17-15

Stock price evolution over the last eight quarters2

S&P TSX Quebec large caps Quebec mid caps Quebec small caps

Quebec large caps Quebec mid caps Quebec small caps

Dec Mar-16 Jun-16 Sep-16 Dec-16 Dec-17Mar-17 Jun-17 Sep-17-15

TEV/EBITDA evolution over the last eight quarters2

14.0x

13.0x

12.0x

11.0x

10.0x

9.0x

8.0x

10 | Quebec Transaction Snapshot

fiBarometer: Canada highlightsCanadian executives are bullish on the domestic and global economies and are looking to M&A to capitalize on the transformative potential of digital disruption

The 17th edition of EY’s Global Capital Confidence Barometer fi fiand are buoyed by positive momentum in the local and global economies.

Confidence in the economyCanadian respondents have a greatly improved outlook on the local and global economies, largely sustained by accelerated growth in developed economies.

On the domestic front, 60% of Canadian respondents see the economy improving, compared with only 38% a year ago. Outlook for the global economy is also more optimistic, with 78% of Canadian respondents seeing it improving, compared with only 19% a year ago. These improvements bode well for economic growth, especially as we continue to see a stronger than expected turnaround in the eurozone and continued economic strength in the US and China.

Confidence in investments and dealmaking on the riseThe broader economic outlook is also leading to increased

fiCanadian respondents.

On the local level, 66% of Canadian respondents have fi fi

from only 17% a year ago, while 57% have greater fi

15% the same time last year.

These markers, coupled with almost 60% of Canadian respondents believing that there will be improved credit availability in the next 12 months, are supportive of a healthy M&A market.

Digital disruption: opportunity or threat? Canadian respondents believe that the impact of digital technology and the threat of digitally enabled competitors will be the most prominent item on their boardroom agenda over the next six months. Innovation and digital transformation are accelerating the pace of change across industries, and companies need to actively review their portfolios and other market opportunities to be able to capitalize on new digital trends.

fireview, with 62% reviewing their portfolio quarterly compared with only 30% of US respondents and 42% of global respondents.

To try and get ahead of the digital wave, the majority of Canadian respondents are being proactive in the face of digital technology, transformation of business models and threats from digitally enabled competition. However, the majority are also reactive in the face of sector blurring and changing customer behaviours.

Executives need to look both internally and externally fi

transform their digital capabilities. Canadian companies are prioritizing acquisitions to help improve their digital capabilities, with 41% looking to acquisitions, compared to only 32% of US and 38% of their global peers.

By contrast, 38% of global respondents and 43% of US respondents are focused on building the capabilities in-house as their top priority to improve their digital capabilities, compared to 33% of Canadian respondents. Technology heightens the need to have the right staff on hand, with the right skill set and the right employee training programs. Canadian, US and global respondents are focusing on reskilling/training their existing people, rather than looking to hire the skills externally.

Fourth quarter 2017 | 11

Robust deal pipelineCanadian respondents predict that the Canadian deal market will continue its strong performance over the next 12 months, with 61% of Canadian respondents intending to pursue acquisitions in the next year compared to 48% a year ago.

Further strengthening the deal market is Canadian respondents’ positive outlook — 51% of Canadian respondents see the local M&A market improving over the next 12 months, and 44% see the global M&A market improving.

For the third straight period, Canadian respondents expect pipelines and deal completions to increase over the next 12 months, providing further evidence of a robust M&A market. In addition, Canadian respondents believe that anticipating the full range of integration challenges and opportunities in advance is the key new factor an executive must consider when structuring an acquisition, a sure sign of a healthy and prudent deal market.

Private equity making a comebackFinally, one of the main predictions in the M&A market this year, according to global respondents, is the return of private equity as a major acquirer of assets.

The current M&A cycle, which started in 2013, has been dominated by corporate acquirers, but private

fifichanges to their investment models (e.g., long-hold funds) to enable them to be more competitive with corporate acquirers.

Canadian respondents tend to agree, as they believe that there will be more competition for assets in the next 12 months, with private equity being the largest source of this competition. A uniquely Canadian angle to this trend is that Canadian respondents believe that

fithis private equity rebound, accounting for 30% of the increased competition, compared with only 11% from global respondents.

12 | Quebec Transaction Snapshot

fiMacroeconomic environment and M&A outlookAcceleration in developed markets underpins buoyant CPR M&A outlook, with dealmaking intentions remaining at high levels

Growth and portfolio strategyfi

fi

93%see the M&A market as improving or stable

98%see the global economy as improving or stable

61%intend to pursue acquisitions

Digital transformationExecutives look to be on the front foot in the face of disruption and building venture capital models to invest in the future.

98%expect the number of companies impacted by shareholder activism to increase or stay the same

52%of companies expect increasing competition for assets from private equity

46%anticipate the full range of integration challenges and opportunities ahead of the deal

41%are buying, forming alliances or creating JVs with digital companies, while 34% are developing digital capabilities in-house

39%take proactive measures to counter the impact of digital transformation on their business model

35%are developing corporate venture capital arms to drive better access to new capabilities and technologies

Fourth quarter 2017 | 13

Oct-17 44% 29% 27%

Apr-17 30% 34% 36%

Dealmaking intentions remain at near record levels

With global economic growth accelerating, trade flows will become more fluid

Top 10 investment destinations — Global respondents

1 US 2 China 3 UK 4 Germany 5 Australia 6 Canada 7 France 8 Brazil 9 India 10 Japan

Top 10 investment destinations — Canadian respondents

1 US 2 Canada 3 Switzerland 4 Germany 5 UK 6 Australia 7 India 8 Mexico 9 Finland 10 Netherlands

Apr Oct Apr Oct Apr Oct Apr Oct Apr Oct

2013 2014 2015 2016 2017

Canada US Global

Canada average 51%

Expectations to pursue a merger or acquisition

50%

59%56%40%

79%

42%

75%72%

24%

41%

33%

33%

73%

61%67%

48%

56%

56%

57%64%

27%

41%

30%35%

30%

29%

33%

74%

57%

56%

Asia

Africa and Middle

East

Western Europe

Eastern Europe

Latin America

US

Canada

Primary preferred destination outside their domestic market/immediate region*

Primary destination Immediate region (countries close to home)

Domestic market (home country)

Outside domestic market/immediate region

Do you expect your company to actively pursue mergers and acquisitions in the next 12 months?

Q

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

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© 2018 Ernst & Young Orenda Corporate Finance Inc. © 2018 Ernst & Young Corporate Finance (Canada) Inc.

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This publication contains information in summary form, current as of the date of publication, and is intended for general guidance only. It should not be regarded as comprehensive or a substitute for professional advice. Before taking any particular course of action, contact Ernst & Young or another professional advisor to discuss these matters in the context of your particular circumstances. We accept no responsibility for any loss or damage occasioned by your reliance on information contained in this publication.

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For more information

François Tellier, CPA, CA, CBV Canadian Strategic Growth Markets/ Middle Market Leader Transaction Advisory Services 514 874 4351 francois.tellier@ca.ey.com

Ken Brooks, MBA Senior Vice President M&A Lead Advisory Services 514 874 4412 ken.brooks@ca.ey.com

Todd Caluori, CPA, CA, CBV Senior Vice President M&A Lead Advisory Services 514 879 2793 todd.caluori@ca.ey.com

Bernard Cormier, CFA Senior Vice President M&A Lead Advisory Services 514 874 4305 bernard.cormier@ca.ey.com

Eric Cassir, CFA, CBV Vice President M&A Lead Advisory Services 514 879 8228 eric.cassir@ca.ey.com

Milad Jawabra, CFA Senior Associate M&A Lead Advisory Services 514 879 8148 milad.jawabra@ca.ey.com

Adam Forlini Associate M&A Lead Advisory Services 514 874 4634 adam.forlini@ca.ey.com

Félix Côté, CFA Associate M&A Lead Advisory Services 514 874 4682 felix.cote@ca.ey.com