MEDICAL CONTRACT MANUFACTURING M&A PULSE

1 CONTRACT MANUFACTURING M&A PULSEFEBRUARY 2015 Introduction Page 3 Market Overview Page 4-9 MEDICAL MANUFACTURING Transaction Overview Page 10-13 General Transaction & Macroeconomic Discussion Page 14-15 Forecast and Thoughts Page 16 Consolidation Discussion Page 17 Sale Planning Page 18P&M Corporate Finance, LLCM edical CONTRACT MANUFACTURING M&A PULSE February 20151 BRYAN W. SASTREA ssociate TECHNOLOGY TRANSACTION UPDATESALE OF SOUTHEASTERN TECHNOLOGY, INC. TO AUTOCAM MEDICAL DEVICE HOLDINGSP&M Corporate Finance ( PMCF ) is pleased to announce that it served as the exclusive financial advisor to Autocam MEDICAL Devices, LLC, of Grand Rapids, MI in the successful acquisition of Southeastern Technology, Inc.

2 ( SET ), of Murfreesboro, TN. SET is a leading CONTRACT manufacturer of precision-machined components, assemblies and engineered solutions pri-marily focused on serving original equipment manufacturers ( OEMs ) in the MEDICAL device industry. SET serves the orthopedic and spine markets with precision implants and complex instruments. SET also machines precision components for other MEDICAL applications such as oncology and OF FISHER/UNITECH, INC. TO RIVERSIDE COMPANYP&M Corporate Finance ( PMCF ) is pleased to announce that it served as the exclusive financial advisor to FISHER/UNITECH, Inc. ( FISHER/UNI-TECH or the Company ), of Troy, MI in a successful recapitalization with The Riverside Company ( Riverside ) of New York City, NY.

3 The transaction and Riverside s partnership with FISHER/UNITECH will provide access to additional capital and resources to support the next phase of the Company s growth. This includes investing in the Company s sales, marketing, and tech support efforts to capitalize on the strong growth in the Company s core product offerings, as well as entering new markets and supporting new prod-uct offerings both organically and through add-on acquisitions. FISHER/UNITECH ( ) is a market leading value-added re-seller of 3D solid modeling design software, 3D printing hardware and relat-ed products and services to the industrial, automotive, and MEDICAL GORSKIVice MIKE BROOKSA nalyst MEDICAL Technology CONTRACT MANUFACTURING M&A PULSE February 20153 IntroductionConsolidation in the MEDICAL CONTRACT MANUFACTURING MarketIn the wake of Zimmer s April 2014 announcement that it was acquiring cross-town rival Biomet for $ billion, the MEDICAL device press immediately questioned the deal s impact on a combined workforce and supply-chain.

4 The Wall Street Journal went so far as to lead their coverage with the title The Deal That Shook Warsaw, Ind. Zimmer has stated it expects to realize cost synergies of $270 million annually by the third year after closing. Zimmer CEO David Dvorak explained that the company would go through a methodical planning process to retain the best talent in both organizations and would work very hard to maintain its sales employees and skilled production workers. Com-bined, Zimmer/Biomet will have over 2 million square feet of MANUFACTURING , R&D and administrative facilities in the same time, Qmed contributor Stephen Levy frames the synergies impact on the supply-chain stating, Larger pur-chasers can negotiate better deals with all of their suppliers, from suppliers of raw materials to the companies that make and print the packaging, and these savings will be a significant percentage of that number.

5 To build on that thought, the following is a summary of recent notable transactions in the MEDICAL technology space, as well as expected synergies in each case based on assumed outsourced spend. It is interesting to note synergies represent approximately 25% of this number. In order to cope with rising costs and increased purchasing power of hospital customers, cash rich OEMs like Zimmer have embarked on an aggressive pursuit of M&A opportunities. In an environment of continued globalization and higher de-mand for MEDICAL technology products and services, key players are feeling compelled to scale-up operations, gain market share and diversify their product portfolio in order to improve their negotiating power with hospital systems and comply with the demands of a value-based healthcare model.

6 The highly fragmented MEDICAL CONTRACT MANUFACTURING /outsourcing market is undergoing significant transformation, driv-en by the consolidation among OEM clients as well as sound macroeconomic conditions. MEDICAL OEMs are increasingly aware of CMO s ( CONTRACT MANUFACTURING organization) capabilities as true providers of lower-cost, time sensitive and high quality solutions. This versatility enables OEMs to improve their operational performance, and meet shorter product life cycles while maintaining focus on their core business. As a result, the outsourcing of MANUFACTURING functions has increased, a trend that is expected to continue as OEMs seek one-stop solutions to accommodate their growing needs in terms of increased volume, product differentiation and compliance with a more stringent regulatory environment.

7 This shift towards outsourcing will likely prompt further consolidation, particularly in the therapeutic, diagnostic and cardio-vascular segments. Large CMOs are expected to lead this industry consolidation by acquiring smaller specialized compa-nies with complementary services from engineering and precision machining to quality assurance. As their multi-faceted cost-saving capabilities broaden, large CMOs are better positioned to become the preferred supplier among OEMs, and ultimately benefit from additional partnerships. This is exemplified by Tecomet, which recently acquired Symmetry MEDICAL Inc. s OEM Solutions Business and 3D MEDICAL MANUFACTURING , Inc., in an effort to create a CMO with a global footprint, capable of extending their comprehensive array of services.

8 (Additional information on the Symmetry transaction can be found on page 12). Conversely, small players, which account for approximately 40% of the MEDICAL MANUFACTURING /outsourcing s market share, may opt to exit the market by selling to a larger SizeCombined RevenueCombined COGSEst. Combined Outsourced*Expected SynergiesSynergy %Medtronic/Covidien$ 42,900$ 27,898$ 8,559$ 2,140$ Fisher/Life Technologies13,60019,7069,9942, ,4007,9772, ,20012,3666,1181, & Nephew/Arthrocare1,5004,9251, $83,600$72,871$28,046$ 7,011$1, : S&P Capital IQ, Company Financial Information, Qmed($ MM)Source: S&P Capital IQ, Company Financial Information*PMCF Est. combined Outsourced equals 25% of Target and Buyer combined CONTRACT MANUFACTURING M&A PULSE February 20154 Market OverviewMedical TechnologyThe MEDICAL technology market has expanded in recent years, driven primarily by longer life expectancy and increased expenditure on healthcare, especially in emerging economies.

9 Additionally, the regulatory environment in North America and Europe has created a shift to value-based healthcare solutions, which has resulted in increased competition, changing business models, and innovative strategies to achieve sustainable growth in this dynamic market. MEDICAL Technology Global Market Size Estimate*Company Name 2010 2014 2014 LTM 2014 LTMCAGR 2010-2014 Johnson & Johnson$ 24,601$ 28,490$ 28, Electric ,89718,20018, Inc.**15,39216,58917, AG16,66017,84216, Philips Electronics nv11,41012,71912, Holding10,02011,30811, Health ,75010,06011, Plc**8,43810,23510, International ,2038,6959, Corp7,3209,0219, Top 10126,691143,159146, ,12778,02980, ,80251,34253, ,13771,88785, Market$281,757$344,417$364, Technology RevenueMarket ShareSource: Bloomberg, Company Filings, PMCF Analysis*Company Market Share data is based on the TTM of each company s most recent reported financials as of 1/6/15**Medtronic acquired Covidien, effective 1/26/15 MEDICAL Technology market size amounts to an estimated $365 billion in terms of estimated 2014 revenues.

10 Top 10 companies account for approximately 40% of the total market. Top 50 companies account for approximately 77% of the total market. Middle market and start-up technology firms have experienced strong revenue growth, as smaller firms (those outside the top 50) have doubled in aggregate size from $ billion in revenue in 2010 to an estimated $85 billion in 2014. This segment has significantly outpaced the growth of larger players, increasing at a 19% CAGR versus a combined 4% for the top 50 firms. With long life expectancy and emerging economies increasing expenditure on healthcare, there is an increased demand for technologically superior MEDICAL devices. As such, the MEDICAL technology market will continue to grow in the , and in other developed countries and emerging markets.