Business Products

and Services:
McGladrey’s Quarterly
Private Equity Deal
Flow Profile

1Q 2011
Insight | Analysis
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 Business Products and Services

McGladrey’s Quarterly Private Equity Deal Flow Profile

McGladrey Announces the Quarterly Private Equity Deal Flow Profile

McGladrey is proud to introduce the Quarterly Private Equity Deal Flow Pro le for the business
products and services industry. Powered by PitchBook, the Deal Flow Pro le o ers a full representa-
tion of U.S. private equity deal activity, performance and trends for the industry. Business products
and services was selected for its signi cant bearing on U.S. private equity investments as it has
historically accounted for 35 percent of deal activity.

Dedicated to serving the middle market—the primary area of private equity investment—
McGladrey meets the needs of private equity rms and their portfolio companies with integrated
transaction advisory, tax, audit and consulting services. Our experience spans a wide range of
sectors within business products and services and we serve thousands of manufacturing, distribu-
tion, transportation and construction companies. We also serve hundreds of private equity rms
with business products and services investments and have provided transaction advisory services
on many deals in this industry.

Because of our industry expertise, we understand the key trends and challenges impacting deal
ow in business products and services. We will be sharing those insights through this report at the
beginning of each quarter, as well as through a mid-quarter Spotlight report on a key sector within
the industry.

Donald A. Lipari
National Executive Director, Private Equity Services
RSM McGladrey, Inc.
212.372.1235
don.lipari@mcgladrey.com

www.mcgladrey.com
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 Business Products and Services

McGladrey’s Quarterly Private Equity Deal Flow Profile

B2B Private Equity Deal Flow

B2B Private Equity Deal Flow By The business products and services (B2B) industry is
Year
the largest industry for U.S. private equity investment,
accounting for 31 percent of all deals in 2010. With a
16 percent increase in B2B deal ow from 2009, 2010
marked the end of a two-year downward trend for the
industry with 475 completed deals and a total of $29.8
billion of capital invested. 4Q 2010 was the most
active quarter since 3Q 2008 with 133 completed
deals, and the $9.5 billion that was invested was over
six times greater than the lowpoint of 2009 (2Q 2009
saw only $1.43 billion in PE deals). The last three
Source: PitchBook quarters of 2010 were particularly good, with a total of

357 deals and $27.5 billion of capital invested.

The top sector in the business products and services industry during 2010 was commercial services with 238 deals, followed by
commercial products with 161 deals and transportation with 39 deals. In 2010, a number of positive trends developed in the B2B
industry, including an increase in the median deal amount and the return of signi cant exit activity. This report pro les these
trends and additional key data to give a more thorough understating of private equity activity in the U.S. business products and
services industry.

B2B Private Equity Deal Flow By Quarter

Source: PitchBook
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 Business Products and Services
McGladrey’s Quarterly Private Equity Deal Flow Profile
Deal Activity by Sector
Source: PitchBook
Deal Flow Details
Investment preferences in the B2B industry have been shifting over
the last few years away from commercial products and toward
commercial services. In 2010, for example, commercial services
companies accounted for 50 percent of all B2B deals, up from 46
percent in 2005 and 36 percent in 2001.
The most active sub-sectors of the B2B industry were media and
information services and industrial supplies and parts, with 53 and
37 deals respectively. The sub-sector that saw the biggest increase
in activity compared to 2009 was media and information services
with a 76 percent jump. The government services sub-sector saw
the biggest decline with a 50 percent drop in activity and only eight
completed deals.
PE Transactions (Count) by Sector
Source: PitchBook
Median Deal Size ($M)
Source: PitchBook
Capital Invested Details
In 2010, the median B2B private equity buyout increased by 188
percent to $127M from only $44M in 2009. There was a three-year
high of 23 deals above $500M in 2010, a result of the returning PE
appetite for larger deals that also drove the median deal size
increase.
The capital invested in commercial services companies has steadily
grown to account for 42 percent of the total capital invested in the
B2B industry. The other business products and services sector,
dominated by the buildings and property sub-sector, received a
larger share of B2B investment in 2010, accounting for 17 percent of
invested capital during the year. Aerospace and defense led all B2B
sub-sectors in 2010 with $3.65 billion of invested capital.
PE Transactions (Total $ Amount) by Sector
Source: PitchBook
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 Business Products and Services

McGladrey’s Quarterly Private Equity Deal Flow Profile

Companies Receiving Their First PE Financing

Source: PitchBook

First Time Deals in the B2B Industry

This chart highlights the number of deals within the B2B industry that represent a rst-time outside investment received by a company
and the portion of the overall private equity deal ow that these investments constitute. In 2010, rst-time deals accounted for 76
percent of the overall deal ow in the B2B industry, which closely matches the long-term average in the industry at about 80 percent.
Interestingly, the share of deal ow consisting of rst-time deals has been on a steady decline over the last ve years hitting a low of
70 percent in 2Q 2010. This trend is the result of PE rms investing in more previously PE or VC-backed companies.

Selected Business Products and Services 2010 PE Transactions

Company Name Investor(s) Sector Amount ($M)

Associated Materials Hellman & Friedman Commercial Products 1,300

TransUnion Madison Dearborn Partners Commercial Services 1,020

The SI Organization Veritas Capital Other 815

ATC Technology Greenbriar Equity Group, GENCO Commercial Services 513

Distribution System

Health Grades America Vestar Capital Partners Sun Capital Partners

Screenvision Shamrock Holdings

Revenew International Levine Leichtman Capital

FrontLine Marketing www.mcgladrey.com Partners [5

MediaTrust Acosta, AEA Investors ]
Protective Products of Ropart Asset Management
Commercial Services Commercial Products 294 8

Commercial Services 160

Commercial Services 51

Commercial Services 36 www.pitchbook.c

Commercial Services 19 om
 Business Products and Services

McGladrey’s Quarterly Private Equity Deal Flow Profile

B2B Private Equity Exits (Count) by Quarter

Source: PitchBook

Private Equity Exit Activity

Private equity exits in the business products and services industry rebounded from 2009’s total of 68 exits to 116 in 2010, although it was still
the second worst year for exit activity in the B2B industry since 2005 and barely surpassed half of 2007’s total of 202. The bump in exits during
2010 was led by PE-to-PE sales (secondary deals), which increased 3.5x from 2009’s 13 deals to 46 in 2010. Overall, sales to corporate/strategic
acquirers continued to be the primary exit method for private equity B2B investments. For those investors who decided not to exit or
couldn’t exit in 2009, they were rewarded in 2010 with a rebound in values and larger exit opportunities, as shown by the increase in the
median sale amount from $86 million in 2009 to $159 million in 2010. The most active sectors for exits during 2010 were commercial services
with 52 and commercial products with 43. With plenty of PE dry powder available and corporations looking forward to using available cash
for additional growth, 2011 has the potential to be a strong year for PE exits in the B2B industry.

B2B PE Exits (Count) by Year B2B PE Exits by Sector

Source: PitchBook Source: PitchBook

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 Business Products and Services

McGladrey’s Quarterly Private Equity Deal Flow Profile

The following list shows a detailed breakdown of the PitchBook industry codes for the business products and services industry.

1. Business Products and Services (B2B):

1.1 Commercial Products 1.3 Transportation

1.1.1 Aerospace and Defense 1.3.1 Air
1.1.2 Building Products 1.3.2 Marine
1.1.3 Distributors/Wholesale 1.3.3 Rail
1.1.4 Electrical Equipment 1.3.4 Road
1.1.5 Industrial Supplies and Parts 1.3.5 Infrastructure
1.1.6 Machinery 1.3.6 Other Transportation
1.1.7 Other Commercial Products 1.4 Other Business Products and Services
1.2 Commercial Services 1.4.1 Buildings and Property
1.2.1 Accounting, Audit and Tax Services 1.4.2 Conglomerates
1.2.2 BPO/Outsource Services 1.4.3 Government
1.2.3 Construction and Engineering 1.4.4 Other Business Products and Services
1.2.4 Consulting Services
1.2.5 Education and Training Services
1.2.6 Environmental Services
1.2.7 Human Capital Services
1.2.8 Legal Services
1.2.9 Logistics
1.2.10 Media and Information Services
1.2.11 O ce Services
1.2.12 Printing Services
1.2.13 Security Services
1.2.14 Other Commercial Services
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McGladrey meets the needs of private equity firms and their portfolio companies with integrated
transaction
advisory, tax, audit, consulting and investment banking services. Clients benefit from a single-point-of-
contact
service model and teams that operate as strategic partners throughout the private equity life cycle.
Our transac-
tion advisory services emphasize responsiveness and drive appropriate purchase price and optimal
exit price. We
offer scalable audit and tax services to meet the business needs of our fund and portfolio company
clients, and
continually monitor tax and regulatory changes to inform clients of relevant issues. Our investment
banking
practice provides carefully tailored acquisition opportunities or divestiture services.

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and are the

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and member
FINRA).

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