Five Tips for Success in the Consolidating Plastics Industry Blake Corners Merger & Acquisition Advisor

What does this number represent? 2,120 Answers a) The number of M&A transactions worldwide b) The number of global plastics M&A transactions c) The number of business here at MD&M Minneapolis d) The number of transactions the Douglas Group has closed

Global Plastics Industry M&A Transactions Source: PlasticsNews.com

Transaction Motives Primary Motives of M&A Transactions Fill a Strategic Portfolio Gap New Market Penetration

Today’s M&A Landscape Highly Active & Competitive Buyers Record Levels of “Dry Powder” & Favorable Interest Rates Growing & Fragmented Market Niches The Changing Manufacturing Environment Average Company Life Expectancy

Tip #1 Don’t subscribe to the “Knock, Knock plan.” Know who is knocking & why. Ask key questions & leverage it to gain competitive insights.

Tip #2 Avoid the Rip Van Winkle Effect. Be the industry pioneer/disruptor who seizes opportunities. There is security in a well executed transaction.

Tip #3 Understand Your Value & Competitive Edge. Price is what you pay, value is what you get. Know & understand your niche. Timing can make all the difference.

Tip #4 Embrace Competition. Competition drives innovation & growth. The reality of strengths & weaknesses Competitive market positioning drives business

Tip #5 Be True to Your Values. Human capital is the most valued asset. Creates significant opportunities for employees Alignment of values, culture & strategic objectives pays off.

Tips of Success Summary Don’t Subscribe to the “Knock, Knock Plan” Avoid the Rip Van Winkle Effect Understand Your Value & Competitive Edge Embrace Competition Be True to Your Values

Current Market Multiples Range: ~5Xs – ~8Xs EBITDA Value Differentors Rule of Thumb Middle market companies typically can expect valuations based on a multiple of pre-tax earnings (EBITDA – Earnings Before Interest, Taxes, Depreciation & Amortization) Current Market Multiples Range: ~5Xs – ~8Xs EBITDA Value Drivers Sales Volume Strong Gross Margins Steady Growth History Strong 2nd Tier Management Patented Products or Processes Equity 25% of sales Value Detractions Significant Customer dependency Recent Margin Erosion Lack of Niche Focus Low Profitability (% of sales) Capital Expenditure Requirements

How will you remain relevant? Blake Corners Merger & Acquisition Advisor Douglas Group bcorners@douglasgroup.net www.douglasgroup.net