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Ernst & Young CFO Roundtable M & A VAL U AT I O N AN D O P E R AT I N G T R E N D S I N T H E E N G I N E E R I N G & C O N S T R U C T I O N I N D U S T RY

S E P T E M B E R 2 0 1 7 | C O N F I D E N T I A L

Engineering & Construction Indices Engineering Services Industrial Services Infrastructure Services

2

Engineering Services

(19.7%)

Industrial Services

(21.7%)

Infrastructure Services

(7.6%)

2016A – 2017E EBITDA Growth


(1.7%)

Industrial Services

(7.3%)


4.4%

2016A –2017E Revenue Growth

E&C Operating Performance

Source: Capital IQ as of August 31, 2017, and public filings Note: Selected numbers are the average of companies in sector


(6.9%)

Industrial Services

(4.9%)


15.9%

2015A – 2016A Backlog Growth

3

Earnings Performance vs. Estimates (1,2)

Source: Capital IQ (1) Based on 2015 and 2016 actual performance and consensus estimates from Capital IQ (2) “Met” includes companies whose performance was within 10% of estimates

While most companies continue to miss estimates, Industrial Services companies have shown the greatest YoY improvement

92%

8% 0%

58%

25% 17%

Missed Estimates Met Estimates Beat Estimates

2015 2016

81%

6% 13%

93%

0% 7%


2015 2016

89%

11%

0%

78%

11% 11%


2015 2016

Engineering Services Industrial Services Infrastructure Services

4

Trading Multiples – One Year Trend

2017 Multiples

EV / LTM EBITDA

EV / NCY EBITDA

12.3x 10.3x

EV / LTM EBITDA

EV / NCY EBITDA

8.8x 8.6x

EV / LTM EBITDA

EV / NCY EBITDA

12.2x 9.3x


Industrial Services


NCY

NCY

NCY

1%

Change

LTM

LTM

LTM

24% 17%

10% 11%

9%

Sources: Capital IQ as of August 31, 2017, and public filings

EV / LTM EBITDA

EV / NCY EBITDA

9.9x 8.0x

2016 Multiples

EV / LTM EBITDA

EV / NCY EBITDA

11.2x 9.3x

EV / LTM EBITDA

EV / NCY EBITDA

8.8x 7.9x

5

Δ in Median Stock Price

2015 – 2016 2016 – 2017

18.1% 11.0%

2015 – 2016 2016 – 2017

4.6% (1.3%)

2015 – 2016 2016 – 2017

34.1% 7.4%

Trading Multiples – Five Year Trends

EV / EBITDA Median EV / EBIT Median

EBITDA Median EBIT Median

8.0x

6.2x 6.7x

12.6x

8.8x

12.4x

0.0x

3.0x

6.0x

9.0x

12.0x

15.0x

EngineeringServices

IndustrialServices

InfrastructureServices

2012

2017 8.3x 7.9x

13.3x

17.1x

12.9x

18.9x

4.0x

8.0x

12.0x

16.0x

20.0x

EngineeringServices

IndustrialServices


2012

2017


($ in millions) ($ in millions)

$337

$88 $76

$265

$77 $81

$0

$100

$200

$300

$400

EngineeringServices

IndustrialServices


2012

2017

$427

$129 $123

$338

$125 $156

$0

$100

$200

$300

$400

$500

EngineeringServices

IndustrialServices


2012

2017

6

Trading Multiples – Five Year Trends (cont.)

Net Debt Median Diluted Shares Outstanding Median

$18 ($14)

$184

$141 $130

$237

($50)

$0

$50

$100

$150

$200

$250

EngineeringServices

IndustrialServices


2012

2017

143.0

44.1 47.6

139.9

44.2 54.3

0.0

50.0

100.0

150.0

EngineeringServices

IndustrialServices


2012

2017


(# in millions) ($ in millions)

2012 2017 CAGR

Engineering Services $2,805 $3,332 4%

Industrial Services $694 $1,604 18%

Infrastructure Services $1,006 $1,605 10%

Median Enterprise Value

2012 2017 CAGR

Engineering Services $18.87 $28.20 8%

Industrial Services $19.52 $28.61 8%

Infrastructure Services $10.04 $12.83 5%

Median Share Price ($ in millions)

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Market Valuation by End-Market (2012 vs. 2017) 2012 2017

Transportation

Water & Water Resources

Telecommunications

Commercial General Buildings

Power

Government Service

Midstream / Downstream

Oil & Gas

High

Valuation

Low High Risk

Industrial Facilities

Transportation

Water & Water Resources

Power

Environmental

Telecommunications

Commercial General Buildings

Midstream / Downstream

Oil & Gas

Government Service

Industrial Facilities

High

Valuation

Low High Risk

Upstream Oil & Gas

Sources: Industry Research and HL estimates

Commercial Facilities

Maintenance

Environmental

Upstream Oil & Gas

8

$1,104 $1,167 $1,152

$1,068

$903 $805 $786

$850 $906

$1,006 $1,112

$1,164 $1,222

$1,282 $1,331 $1,370 $1,420

$500

$700

$900

$1,100

$1,300

$1,500

2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017E 2018P 2019P 2020P 2021P

Source: FMI 2013 and FMI 2017 Construction Outlook

Spotlight on U.S. Construction Spending

($ in billions)

Consistent Growth in U.S. Infrastructure Spending

Aging Ownership Profile Historical Underinvestment in Infrastructure

Typically Strong Free Cash Flow Profile

E&C Investment Themes

Ongoing Demand For High Quality Management and

Employees

Estimated $4.0 trillion investment needed to sufficiently improve U.S. infrastructure by 2020

2005 – 2021 CAGR: 1.6%

2011 – 2021 CAGR: 6.1%

9

Public Works $128 32%

Institutional $119 30%

Commercial $105 26%

Electric Utilities / Gas Plants

$30 7%

Manufacturing $18 5%

Spotlight on U.S. Construction Starts

Sources: Capital IQ, Dodge 2017 Construction Outlook, (1) Construction start sales by end-market excludes single and multi-family housing

Growth expected to continue in end-markets for U.S. construction industry

End-Market Single Family Housing Institutional Commercial Public Works Manufacturing Electric Utilities

/ Gas Plants

2016A Growth 9% 3% 12% (3%) (29%) (26%)

2017E Growth 12% 10% 6% 6% 6% (29%)

2017E Construction

Start Sales by End-Market(1)

($ in billions)

10

Notable Market Transactions – Last 12 Months

Sources: Capital IQ and public filings

Acquirer Target Announced Date

08/02/17

07/06/17

6/19/17

04/03/17

03/31/17

03/17/17

03/20/17

02/28/17

EV ($ in millions)

$3,274

$175

NA

$2,735

$654

NA

$755

$3,286

EV / EBITDA

6.9x

NA

NA

13.0x

10.8x

NA

8.7x

9.4x

Integrity Maintenance Platform

(Apollo Global Management)

(Victory Park Capital Advisors)

(Odyssey Investment Partners) (Clayton Dubilier & Rice)

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Environmental 36%

Power 34%

Infrastructure 17%

Oil & Gas 13%

Houlihan Lokey constructed an efficient and comprehensive sale process, resulting in a premium valuation for TRC shareholders

Selected Case Study: TRC Companies

(1) 52-week high

Bid Summary The HL Impact

The final offer of $17.55 per share represented a substantial premium for TRC shareholders:

1 Day(1) – 47%

3 Month Avg. – 65%

12 Month Avg. – 106%

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

12/12/16 12/30/16 01/17/17 02/04/17 02/22/17 03/12/17 03/30/17

TRC Share Price

NMC Final Bid: $17.55

03/30/17 Close: $11.95(1)

Refresh Midpoint:

$15.79 IOI Midpoint:

$15.30 Unsolicited

Strategic Offer: $14.00

Comprehensive and Diversified Service Offering

1

Robust Sales Program with Identified Target Accounts

3

Proven Acquisition History with Actionable Pipeline

5

Recurring Blue-Chip Customer Base

2

Disruptive Technologies and Pursuing New Business Models

4

Experienced Executive Team with Clear Vision for Growth

6

Earnings Contribution Value Drivers

12

has completed a financing consisting of

$24,000,000Series D Convertible Preferred Stock

Placement Agent

has been acquired by

Sellside Advisor

Houlihan Lokey’s Recent Activity

Recent Deals Current Deals

Project Build

Sellside Advisor

Project Aqua

Sellside Advisor

Project Fission

Sellside Advisor

Project Tango

Sellside Advisor

Project Orange

Sellside Advisor

Project Tiger

Sellside Advisor

13

a portfolio company of

has sold its integrity maintenance platform to

Sellside Advisor

has been recapitalized by

Financial Advisor


Sellside Advisor

Heavy Civil Division


Management and Other Investors

Sellside Advisor



Sellside Advisor


Sellside Advisor


Sellside Advisor



Sellside Advisor


Sellside Advisor

International Investment Bank With Offices Across the World and Extensive Industry Coverage

Private Company Sale

Public M&A Advisory

Buyside Advisory

Corporate Divestitures

Equity / Debt Capital Markets

Special Committee Advisory

Debt Advisory

Strategic Alternatives Analysis

Fairness and Capital Adequacy Opinions

Business and Securities Valuations

Tax and Financial Reporting Valuations

Portfolio and Derivatives Valuation Services

Restructuring Debt and Equity

Plans of Reorganization

Re-negotiation of Debt

Capital Raising

140+ M&A Deals Annually and 50+ European Deals since 2005

No. 1 M&A Advisor for all U.S. Transactions (1)

No.1 M&A Advisor for All U.S. Industrials Transactions (1)

Industrials / Engineering & Construction

Financial Institutions Healthcare

Aerospace Defense

Government

Business Services Energy Consumer,

Food & Retail

Media & Telecom

Real Estate Lodging &

Leisure Technology Transportation

& Logistics

Financial Technology

Over 15 Dedicated Financial Sponsors Coverage Group Officers

No. 1 Investment Banking Restructuring Advisor (1)

No. 1 Provider of M&A Fairness Opinions (1)

Houlihan Lokey is now a public independent investment bank that is listed on the NYSE under the ticker “HLI”

M&A / Corporate Finance Financial Advisory

Financial Restructuring

Comprehensive Industry Coverage 1,200 Employees in 25 Total Offices Worldwide

Note: Houlihan Lokey holds an indirect minority investment in Leonardo & Co. S.p.A., with offices in Milan and Rome, and a minority investment in Avista Advisory, with offices in Mumbai and Singapore (1) Thomson Reuters

Atlanta Chicago Dallas Houston Los Angeles Miami

Minneapolis New York San Francisco Washington, D.C.

Beijing Hong Kong Mumbai Singapore

Sydney Tokyo

Amsterdam Frankfurt London Madrid

Milan Paris Rome

North America Europe Asia-Pacific

14

Industrials Expertise

#1 ranked advisor by volume overall and to industrial companies

Active senior-level dialogue with key industry participants on a global basis

Expertise with Engineering & Construction companies

Over 600 institutional, strategic, and private equity investors

Over 50 public and private investors

Interaction with thought leaders in the industry and presentations by unique companies

Industry Relationships and Knowledge The Proven Leader in Industrials

12th Annual Global Industrials Conference

Broad Industrials Sector Coverage

Engineering & Construction

Plastics & Packaging

Environmental Services

Chemicals

Testing, Inspection & Certification

Distribution

Oilfield Services

Industrial Technologies

Metals & Mining

Transportation & Automotive

Houlihan Lokey’s Industrials Group will host its next annual Global Industrials Conference in May 2018

2013 M&A Advisory Rankings All U.S. Industrial Transactions

Advisor Deals

1 Houlihan Lokey 32

2 Lincoln International 27

3 Goldman Sachs & Co 26

4 Barclays 21

5 Lazard 20

Source: Thomson Reuters

2014 M&A Advisory Rankings U.S. Industrial Transactions Under $1 Billion

Advisor Deals

1 Houlihan Lokey 27


2 Citi 26

2 Barclays 26

5 Lincoln International 25

5 Generational Equity 25



Advisor Deals

1 Houlihan Lokey 39



4 JP Morgan 29

5 Morgan Stanley 27Source: Thomson Reuters


Advisor Deals

1 Houlihan Lokey 35

2 Morgan Stanley 23



5 Lazard 19


15

Mr. Kolbrenner heads Houlihan Lokey’s Engineering, Industrial & Infrastructure Services practice and co-heads the Global Industrial Services practice. His recent transactions include sellside, buyside, financing, restructuring, and strategic advisory engagements, as well as fair market value, ESOP, fairness, and solvency opinions. Mr. Kolbrenner is a regular speaker at industry gatherings, including those sponsored by the American Institute of Certified Public Accountants, Associated Builders & Contractors, Associated General Contractors, Construction Financial Managers Association, Engineering News-Record, McGraw-Hill Construction, and many others. He was recognized by Investment Dealers’ Digest as a recipient of its “Forty Under Forty” award.

Before joining Houlihan Lokey, Mr. Kolbrenner was an Associate in the asset securitization group of Lehman Brothers Holdings, Inc., where he was involved in structuring, marketing, and executing medium- and short-term asset-backed securities transactions. Previously, he was an Associate in the corporate department of Sullivan & Cromwell LLP, where he focused on M&A, corporate finance, and financial derivatives.

Mr. Kolbrenner is a board member of Hollygrove Family Services, a nonprofit agency serving abused and neglected children in Los Angeles. He is also a member of the Young Presidents’ Organization, Golden West chapter.

Mr. Kolbrenner graduated summa cum laude with a B.A. in Psychology from the University of Colorado Boulder and holds a J.D. from Harvard Law School.

Scott Kolbrenner Managing Director Los Angeles

Qualifications

B.A. University of Colorado Boulder

J.D. Harvard Law School

PAST Lehman Brothers

Sullivan & Cromwell

Email [email protected]

Phone (310) 712-6524

Contact Information

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Disclaimer

© 2017 Houlihan Lokey. All rights reserved. This material may not be reproduced in any format by any means or redistributed without the prior written consent of Houlihan Lokey.

Houlihan Lokey is a trade name for Houlihan Lokey, Inc. and its subsidiaries and affiliates which include: Houlihan Lokey Capital, Inc., a California corporation, a registered broker-dealer and SIPC member firm, which provides investment banking, private placement, merger, acquisition and divestiture services; Houlihan Lokey Financial Advisors, Inc., a California corporation, a registered investment advisor, which provides investment advisory, fairness opinion, solvency opinion, valuation opinion, restructuring advisory and portfolio management services; and Houlihan Lokey (Europe) Limited, a company incorporated in England which is authorized and regulated by the U.K. Financial Conduct Authority and Houlihan Lokey (China) Limited, a company incorporated in Hong Kong SAR which is licensed in Hong Kong by the Securities and Futures Commission to conduct Type 1, 4 and 6 regulated activities to professional investors only, which provide investment banking, restructuring advisory, merger, acquisition and divestiture services, valuation opinion and private placement services and which may direct this communication within the European Economic Area and Hong Kong, respectively, to intended recipients including professional investors, high-net-worth companies or other institutional investors.

Houlihan Lokey gathers its data from sources it considers reliable; however, it does not guarantee the accuracy or completeness of the information provided within this presentation. The material presented reflects information known to the authors at the time this presentation was written, and this information is subject to change. Houlihan Lokey makes no representations or warranties, expressed or implied, regarding the accuracy of this material. The views expressed in this material accurately reflect the personal views of the authors regarding the subject securities and issuers and do not necessarily coincide with those of Houlihan Lokey. Officers, directors and partners in the Houlihan Lokey group of companies may have positions in the securities of the companies discussed. This presentation does not constitute advice or a recommendation, offer or solicitation with respect to the securities of any company discussed herein, is not intended to provide information upon which to base an investment decision, and should not be construed as such. Houlihan Lokey or its affiliates may from time to time provide investment banking or related services to these companies. Like all Houlihan Lokey employees, the authors of this presentation receive compensation that is affected by overall firm profitability.

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