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M & A 2016 M I N N E A P O L I S ▼ N O V E M B E R 1 6 CONFERENCE

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All in the Family: How Family Offices Are Changing the M&A Landscape Carl Genberg, Wells Fargo Securities Jann Ozzello Wilcox, Pohlad Companies John Rompon, McNally Capital Moderator: Bruce Engler, Faegre Baker Daniels

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Long Time Horizon Investors Universe Dominates Sources of Equity Capital

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Source: Preqin, World Bank and Industry Research

Confidential – For Discussion & General Information Purposes Only

Long Time Horizon Investors are an increasingly concentrated group of capital suppliers characterized by the evergreen nature of their funds

$2.9 $1.3 $4.2

$7.2

$21.1

$35.4

$0.0

$10.0

$20.0

$30.0

$40.0

Global Private Equity Global Sovereign Wealth Funds Global Family Offices Global Pension Funds

Relative Size of Capital Pools ($ in Trillions)

Invested Capital

Dry Powder

By comparison, Global Public Equity Markets valued at $61.8 trillion

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Recent Wells Fargo Family Office Control Investment Transactions

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Confidential – For Discussion & General Information Purposes Only

Unsolicited public takeover approach from Reinmann family vehicle

Rationale driven by portfolio strategy synergies that include leveraging Green Mountain, Egberts, Peet’s, Caribou, Einstein's and Espresso House investments

Sloan family industry expertise in auto aftermarket key to being “right” buyer

Trail Creek liquidity to fund deal generated by earlier family M&A exit

Approached seller after broken auction

Used buyside advisor for valuation, modeling, financing as well as sector expertise to buttress family office capabilities

Sale from one family office to two others that partnered on transaction

Transaction followed earlier minority equity recap of Truck-Lite by Penske with a private equity firm (Kelso)

has been acquired by

August 2016 •

Sellside Advisor

JAB Beech

a portfolio company of

has been acquired by

November 2015

• Sellside Advisor

Acquisition of

August 2016 •

Buyside Advisor

has received an investment from

October 2016 •

Sellside Advisor

The following transactions display an increasingly broad range of strategies, sophistications and approaches to family office control investing

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Family Office Investment Spectrum Is Wide

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Source: Preqin Sovereign Wealth Fund Review, 2015

Confidential – For Discussion & General Information Purposes Only

7.0%

20.0%

41.0%

31.0%

21.0%

0.0%

12.5%

25.0%

37.5%

50.0%

Fund Lead Only Lead or Minority 2nd Chair Partner Minority

50.0%

75.0% 66.0%

58.0%

38.0%

17.0%

0.0%

20.0%

40.0%

60.0%

80.0%

<$1MM >$1-$5MM >$5-$10MM >$10-$25MM >$25-$50MM >$50-$100MM

Average Family Office Equity Check Size

Preferred Family Office Role in Direct-Investment Transaction

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Disclaimer

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Family Offices in the Private Equity Marketplace

►John Rompon, Managing Partner at McNally Capital

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PROPRIETARY AND CONFIDENTIAL

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Private Equity Industry Overview

► Private equity is a term describing a class of investors that provide capital and expertise to private companies (or to public companies with the goal of making them private).

► Such capital is typically collected in a fund structure in which the fund managers (“General Partner”) are given discretion over the capital and the fund investors (“Limited Partners”) are passive participants expecting a return on their investment

► As of June 30, 2015, total private equity assets under professional management by private equity funds reached a new high of $2.4 trillion

► Family offices and investment companies contributed 9% of capital invested in private equity during 2001 – 2011

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29%

14% 19%

17%

9%

9% 3%

Private Equity Investors by Capital Invested Public Pension Funds

Private Pension Funds

Foundations & Endowments

Banks & Insurance Companies

Sovereign Wealth Funds &Government AgenciesFamily Offices & InvestmentCompaniesOther

Sources: Private Equity Growth Capital Council based on data from Preqin and Preqin’s 2016 Global Private Equity and Venture Capital Report.

PROPRIETARY AND CONFIDENTIAL

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High Net Worth Individuals (“HNWIs”) In The U.S. Represent $4.4 Trillion In Possible Private Equity Commitments

►As of 2014, there are 4.4 million HNWIs in the United States with $15.2 trillion in investable wealth. This represents an 8.6% and 9.4% increase since 2013, respectively.1

► In the last 5 years, family offices and HNWIs with more than $10 million in investable assets increased their average allocation to private equity from 19% to 29% of their portfolio assets.2

►An average 29% allocation to private equity for the $15.2 trillion in investable assets managed by HNWIs in the U.S. yields over $4.4 trillion in possible private equity commitments.

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1Capgemini United States Wealth Report – 2015. HNWIs are defined as those having investable assets of US$1 million or more, excluding primary residence, collectibles, consumables, and consumer durables. 2Palico via Forbes, July 2015

PROPRIETARY AND CONFIDENTIAL

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Trends In Family Office PE Investing Have Shifted Over The Years

1. Increasing interest in direct, versus fund, investing

2. Interest in investing with other family offices

3. Preference for a longer hold period than typical PE funds provide

4. Ill-equipped to effectively execute on a robust PE investing strategy

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The statistics on the following slides are based on a McNally Capital survey conducted in 2014 to 100 family offices

PROPRIETARY AND CONFIDENTIAL

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1. Increasing Interest In Direct - Versus Fund-Investing

► Direct investing continues to be a key focus for family offices. As of 2014, 88% of family office respondents had invested in a private company in the last 24 months, and 84% had plans to make a direct investment in a private company in the next 24 months.

► 48% of families’ private equity allocation was dedicated to direct investments. ► There was not a single family office respondent who was planning to decrease their

level of direct investments over the next 24 months. 46% had plans to increase their level of direct investments in the next 24 months.

► In fact, families’ preference for investing directly vs. through funds has grown dramatically since 2010 ► In 2010, 59% of respondents preferred direct deals over PE funds ► In 2014, 77% of respondents prefer direct deals over PE funds

► 52% of families are targeting to complete at least 2 direct investments each year

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*Statistics are taken from a McNally Capital survey conducted in 2014 to 100 family offices

PROPRIETARY AND CONFIDENTIAL

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2. Interest In Investing With Other Family Offices

►Families who participate in non-control deals prefer to invest alongside other families or owner-entrepreneurs vs. third party financial sponsors

►69% of families would also be willing to pay a promote for a co-investment alongside a lead investor

►This is matched by a willingness for families making control investments to accept other family office co-investors ► 89% of families making control investments would accept co-investments

from other families ► 50% would accept co-investments from institutions ► 11% don’t accept co-investments

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*Statistics are taken from a McNally Capital survey conducted in 2014 to 100 family offices

PROPRIETARY AND CONFIDENTIAL

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3. Preference For A Longer Hold Period Than Typical PE Funds Provide

43% of families had a targeted hold period of 5-10 years for direct investments, while 33% did not have a targeted hold period

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*Statistics are taken from a McNally Capital survey conducted in 2014 to 100 family offices

0-5 years

5-10 years

10-15 years

15+ years

No preference

0.0% 50.0% 100.0%

What is your preferred hold period for a direct investment?

PROPRIETARY AND CONFIDENTIAL

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4. Ill-equipped To Effectively Execute On A Robust PE Investing Strategy

Most families don’t have a written strategy in place to guide direct PE activity, but they do have a governance process defined

More families know how they’ll decide what they are going to do – but less certain about what they actually will do

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Strategy 55% do NOT have a written investment

strategy in place

Governance 62% have a governance process in place regarding direct investment

decision-making

*Statistics are taken from a McNally Capital survey conducted in 2014 to 100 family offices

PROPRIETARY AND CONFIDENTIAL

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Every Family Has Their Own Reasons For Investing Directly – But Some Themes Are More Common Than Others

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1. Risk Management / Tax Efficiency: Build a concentrated portfolio of controllable assets with a long-term investment horizon to maximize tax efficiency

2. Multi-generational Wealth Transfer: Effective means for transferring wealth across generations

3. Competitive Advantage: While the private equity market is competitive, families do have certain competitive advantages

4. Family Continuity: Provides a source of family continuity across generations and family members

5. Reduce Costs: Investing directly cuts out a layer of fees 6. Build a customized portfolio: Invest in companies that meet

your specific industry, geographic, size and company attributes

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PROPRIETARY AND CONFIDENTIAL

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Consider Various Risk/Return Characteristics When Selecting An Approach To PE Investing

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PROPRIETARY AND CONFIDENTIAL

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Families Are Not Monolithic In Their Approach To PE Investing; There Is A Spectrum Of Options

►Families can play across the entire spectrum, or focus on one approach ►Other models and permutations exist within the spectrum of broader PE

investing, e.g. seeding a fund manager ►Families can also invest in other layers of the capital structure, aside

from equity – such as senior debt, mezzanine debt, or preferred equity

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Direct Control Deal

Co-invest Alongside a Lead Family

Club/Syndicate Fundless Sponsor PE Funds

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Depending On The Option - The Trade Offs And Economics For Each Family Will Be Different

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Direct Control

Deal

Co-invest Alongside a

Lead Family

Club/Syndicate

Fundless Sponsor PE Funds

Control

Cost

Time