Pet Industry Update August 2017

1 Pet Industry Update August 2017 . 780 Third Avenue 35th Floor New York, NY 10017. Brooks, houghton & Company, Inc. Introduction Why Brooks, houghton & Company Brooks, houghton & Company, Inc. ( BHC ) is a merchant banking firm BHC is well suited to the task of serving as an exclusive M&A advisor dedicated to providing corporate finance advisory services and direct investment to: Established and experienced merchant bank with both M&A and capital Middle-market public and private companies raising capabilities, as well as Industry knowledge Emerging growth companies Provide senior-level attention to the assignment on a day-to-day basis Founded in 1989, BHC emphasizes building long-term relationships with its Offer Wall Street-quality work product and experience clients by.

2 Providing innovative corporate finance solutions and professional Well versed in helping small and mid-sized business owners/operators execution at a reasonable cost achieve their liquidity and growth objectives Taking a partnership approach with clients based upon mutual trust and responsibility Long-standing working relationships with third-party capital providers ( Delivering independent, objective and discreet advice senior debt, mezzanine debt and private equity) and strategic partners Applying these principles, BHC has earned a reputation for providing high Confident in our ability to attain the best possible transaction outcome quality, reliable professional services to its corporate clients, investors and referral sources in the United States and internationally For more information, please contact: Kevin Centofanti, CFA.

3 BHC's merchant banking products and services include: President Mergers and acquisitions advisory Tel: 212-329-1675. Debt and equity private placements through Brooks houghton Securities, Inc. (BHS), a FINRA member Anthony Moretti Valuations and fairness opinions Senior Managing Director and Head of IB. Tel: 212-329-1667. General corporate finance advisory Principal investments in interim and bridge capital Marc R. Leizman Executive Director Additionally, BHC is a member of Globalscope Partners, a premier global Tel: 216-287-4228. mergers and acquisitions advisors network BROOKS, houghton & COMPANY, INC. 2. Industry Overview Total pet Industry revenue is estimated at almost $70 billion in 2017 with the pet food market segment projected at approximately $27 billion in 2017 .

4 An increase in pet ownership has coincided with a growing tendency to treat pets as members of the family, thereby encouraging the purchase of higher-priced premium pet food products that are marketed as possessing special benefits, formulations or specialized ingredients. Industry Structure Pet Food Market Revenue Life Cycle Mature 32,000 30,000. Revenue Volatility Low 28,000. Capital Intensity High 26,000. Market Concentration Medium 24,000 2016 2017 2018 2019 2020 2021. Regulation Level Very High $ million % Change Technology Change Medium Products Segmentation Entry Barriers Medium Wet dog food, Cat treats, Competition Level High Wet cat food, Natural and organic pet Supply Industries Demand Industries Dog treats, food and Soybean Farming Grocery Wholesaling treats, Corn Farming Supermarkets & Grocery Stores Dry cat food, Vegetable Farming Convenience Stores Dry dog food, Meat, Beef, & Poultry Processing Pet Stores Seafood Preparation Consumers Major Companies in Pet Food Market (Market Share).

5 Other, Nestle SA, Blue Bufflo Pet Key Success Factors Mars, Inc., Products, Inc., Production of premium Access to high-quality inputs goods and services Colgate- The JM. Palmolive Smucker Economies of scale and scope Effective quality control Company, Company, Source: IBIS World; American Pet Products Association BROOKS, houghton & COMPANY, INC. Low Medium High Very High 3. Market Overview Key External Drivers The pet food market's revenue growth has been driven by increasing disposable income, growing pet ownership with a tendency to treat pets as family members (growing prevalence of pet parents) and a heightened focus on organic and premium pet food products. The Industry profitability has benefited from falling agricultural commodity input costs, lowering Industry operators' purchase costs.

6 Per Capita Disposable Income Number of Pets (Cats and Dogs) Key Takeaways 190 The pet Industry is recession resistant as pet 185 owners tend not to cut back on pet food 180 spending during an economic downturn 175 Ownership of cats and dogs is a strong demand % change 170 determinant for pet foods, as growth in the 165 number of these pets drives demand for pet food 160. 155 Pet stores represent a major market for dog 2016 2017 2018 2019 2020 2021 and cat foods, which offers consumers a one- Millions % Change stop shop for all their pets' needs. Online pet 2015 2016 2017 2018 2019 2020 2021. food and pet supply sales ($ billion in 2016). Demand from Pet Stores Agricultural Price Index are increasing, with more pet owners buying 22000 120. their pet food from Amazon and other websites 21000 like Chewy 110.

7 Since a variety of livestock and crop inputs are 20000 utilized in pet food production, falling 19000 100 agricultural prices have lowered input purchase costs 18000. 90. 17000 2016 2017 2018 2019 2020 2021. 80. Millions % Change 2012 2013 2014 2015 2016 2017 . Source: IBIS World; World Bank BROOKS, houghton & COMPANY, INC. 4. M&A Deal Activity Overview M&A Deals by Deal Size M&A Activity 100% $1,600 14,000. $5B+ Deal Value ($B) Deal Count 90% 11,627. $1,400 12,000. 10,824. 80%. $1B-$5B $1,200 9,641. 70% 9,208 10,000. 8,616. 8,175. 60% $500M-$1B $1,000. 7,104 8,000. 50%. $800. 40% $250M-$500M. 6,000. $600. 30%. $100M-$250M 4,000. 20% $400. 1,899. 10% Under $100M 2,000. $1,364. $1,386. $200. $554. $588. $718. $685. $984. 0% $265. 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q $0 0.

8 2010 2011 2012 2013 2014 2015 2016 2017 *. 2013 2014 2015 2016 2017 . M&A Activity & Transactions in the Pet Food Market EV / EBITDA Multiples By Transaction Size Perceived high valuations and the anticipation of a tax reform contributed to the slow down in the M&A market during 1Q 2017 The lower middle market remains the most active market sector despite seeing a slight decrease in terms of market share compared to 1Q 2016. Valuation multiples for middle market transactions below $250mm remained steady 2016 represented a slow down in pet food M&A compared to the previous three years Valuations for pet food companies are historically high, so investors are looking elsewhere for values, and there is a scarcity of opportunities after the big deals in 2014 2015 2016.

9 Recent years $10-25mm $25-50mm $50-100mm $100-250mm Source: Pitchbook, Thompson One, GF Data *As of 3/31/ 2017 . BROOKS, houghton & COMPANY, INC. 5. Private Equity Deal Activity Overview PE Deals by Deal Size add-on % of Buyout Activity 100% Add-on Non add-on Add-on % of buyout 90% 3,500 66% 70%. 64%. 60% 61% 61%. 80% 58% 56%. 3,000 56% 56% 60%. $ + 52% 51%. 70%. 1,229. 1,200. 46%. 1,060. 2,500 50%. 60% $1B-$ 1,360. 1,177. 50% $500M-$1B 2,000 40%. 960. 993. 1,209. 1,036. 906. 40%. $100M-$500M 1,500 30%. 30%. 599. 1,936. 1,871. 1,870. $25M-$100M 1,000 20%. 1,523. 1,454. 20%. 1,424. 1,349. 1,140. 1,090. 1,037. Under $25M. 10% 500 190 10%. 750. 366. 0% 0 0%. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 * 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 .

10 Private Equity Deal Activity Middle Market Capital Stack 100%. Across Industry sectors, PE-backed transactions have slightly decreased compared to 80% the same period in 2016 for the same reasons as the overall M&A market 60%. Transactions up to $100mm still account for about 70% of all PE deals with a 40% focus on add-on transactions 20% The percentage of add-on transactions has been growing at a steady pace since 2009. 0%. The middle market transactions below $250mm have been stacked up with a large portion of equity and senior debt, a small portion of subordinated debt for the past 2014 2015 2016. three years Senior Debt Sub Debt Equity Source: Pitchbook, Thompson One, GF Data BROOKS, houghton & COMPANY, INC. 6. Valuation Summary With most companies in the pet food space being private, this valuation summary is based on the limited data available on precedent transactions, four pet products public companies, and six consumer products public companies with pet lines.