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Industrial DistributionM&A Update Report“Market Intelligence for Private Business Owners”Capstone PartnersInvestment Banking AdvisorsBOSTON CHICAGO LONDON LOS ANGELES PHILADELPHIA SAN DIEGO SILICON VALLEYQ4 2013

Industrial DistributionM&A Update Report2013 M&A COMMENTARYCAPSTONE PARTNERS LLC176 Federal Street3rd FloorBoston, MA 02110www.capstonellc.comJohn FerraraFounder & President(617) 619‐3325jferrara@capstonellc.comM&A activity in the industrial distribution industry lags 2012 levels, with 65 reportedtransactions through the end of September. Activity in the sector remains high, however,primarily driven by aggressive strategic buyers, which outnumber private equity buyersby about nine‐to‐one. However, Brazos Private Equity Partners‐backed BlackhawkIndustrial Distribution Inc. and AEA Investors‐backed Singer Equities remain activeconsolidators. Strategic buyers who accounted for more than one acquisition in 2013include Kaman Corporation, Production Tool Supply, Jergens Industrial Supply, DXPEnterprises, Airgas USA, FCX Performance and Motion & Flow Control Products.Industrial Distribution Transaction Trends120105Daniel SchultzVice President(617) 220020092010201120122013 YTDSource: Capstone Partners LLC research and Capital IQYTD through October 1, 2013The industry is expected to continue to consolidate as customers put greater demands ontheir industrial distributors for advanced technology and service offerings such asautomated vending and RFID capabilities. Customers are now as interested in productbreadth and offerings, service variety and product availability as they are in competitivepricing. For many industrial distribution companies, these elevated service requirementsare causing pressure, and those without the necessary capital to keep up with customerexpectations are turning to M&A as an attractive option.The health of the economy has also impacted, and will continue to occupy a central rolein the fortunes of the industrial distribution sector. A promising sign for industrialdistributors are the gains experienced over the course of 2013 in the manufacturingsector, which has seen mild but consistent improvement. As the U.S economy gainsmomentum and weak overseas demand for U.S. manufacturing exports regains itsstrength, the industrial distribution sector is expected to benefit further, and M&Aactivity in the space should be positively affected.1

Q4 2013Industrial DistributionNOTABLE TRANSACTIONSSumitomo Corporation of America acquires Edgen Group (October 2013) – SumitomoCorporation of America and Edgen Group Inc. announced the signing of a definitivemerger agreement whereby Sumitomo will acquire all outstanding shares of EdgenGroup for 832 million. The acquisition, which is expected to close before the end of2013, is subject to customary closing conditions and regulatory approvals. “Theinvestment in Edgen Group will represent further expansion of Sumitomo’s distributionpresence across the upstream, midstream, and downstream oil and gas markets, andother related energy and infrastructure segments and will complement Sumitomo’sintegrated supply solutions to the growing energy market,” said Kazuhiro Takeuchi,President and CEO, SCOA and SC General Manager for the Americas. Dan O’Leary,President and Chief Executive Officer of Edgen Group, will continue to lead EdgenGroup’s strategic growth initiatives. Mr. O’Leary stated, “The opportunity to align theEdgen Group strategy with the Sumitomo organization will benefit both businesses. TheEdgen Murray and Bourland & Leverich commercial brands are well established and cannow bring even greater scale to serve customers throughout global energy end‐markets.”W.W. Grainger acquires E&R Industrial Sales (August 2013) – W.W. Grainger acquiredE&R Industrial Sales, a distributor of metalworking, production supplies and MROmaterials to manufacturers and industrial customers across the Midwest and EasternUnited States. With this acquisition, Grainger added an industry‐leading team ofmetalworking experts and extends its capabilities for serving customers in themanufacturing space. "E&R Industrial's technical expertise and strong metalworkingcapabilities, along with Grainger's supply chain excellence, broad product offering andinventory management acumen, will enable customers to save time and money byconsolidating their MRO purchases with Grainger," said Court Carruthers, Senior VicePresident and President of Grainger U.S. E&R Industrial provides more than 100,000products to 4,000 customers across the aerospace, automotive and general industrialsectors. E&R Industrial reported 2012 sales of approximately 180 million. "We areexcited to join Grainger," said E&R Industrial President Jerry Pizzimenti. "This allows us tobetter serve manufacturing customers by combining Grainger's scale and capabilitieswith E&R's technical expertise and products. I look forward to bringing these two greatcompanies together for a very successful future.“Tencarva Machinery acquires Pump Technology & Solutions (August 2013) – TencarvaMachinery Company, a distributor specializing in pumps, liquid process and custom‐designed systems for the industrial and municipal marketplace, recently acquired theassets of Pump Technology & Solutions, located in Cumming, GA. Pump Technology &Solutions is a full service pump distributor and manufacturer's representative which willoperate as a branch within Tencarva's GPM Division. Pump Technology & SolutionsPresident Chris Brooks commented, "We are very excited to become part of the Tencarvateam. Tencarva's outstanding reputation throughout the pump industry and theirexcellent product offering made this an ideal fit for us.“ Tencarva President Rod Leeadded, Chris has built a remarkable business primarily around the seepex product line.Chris will be sharing his seepex expertise with our GPM Division team while he broadensthe business of his branch through the addition of our Tencarva product lines. PTS is agreat fit for us in Georgia, because they focus on accounts that are largely uncovered byour existing sales force.“2

Q4 2013Industrial DistributionNOTABLE TRANSACTIONS (CONTINUED)Singer Equities acquires Stewart‐Hunt (June 2013) – Singer Equities has acquiredStewart‐Hunt, a fluid power distributor based in Burlington, MA that specializes in thesales, service, testing and repair of hydraulic pumps, motors, cylinders and otherhydraulic components. Singer Equities said it will operate the company as a division ofPRC Industrial Supply, which provides services within the industrial and hydraulic hose,conveyor belt and gasket markets. Nelson Smith and Jim Hunt, previous owners ofStewart‐Hunt, will remain with the company and report to Kevin Easler, Vice Presidentand General Manager of PRC Industrial, headquartered in Portland, ME. Singer saidStewart‐Hunt is the company's 33rd location and first integrated fluid power business.Jergens Industrial Supply acquires certain assets of Gray Industrial Supply (June 2013) –Jergens Industrial Supply, an industrial distributor, purchased certain assets of GrayIndustrial Supply for an undisclosed amount. With the acquisition, Jergens adds to itsofferings Gray Industrial’s band saw blade welding and grinding capacities, which aredirected at the industrial and food processing markets. Jergens will look to harness thesynergy from the band saw blade distribution expertise the two companies share. KenBrown, Jr., President of Gray Industrial Supply, said, “As part of JIS, we now have accessto the leading manufacturers in the country of cutting tools, MRO supplies, vendingsolutions, work holding and coolants, allowing us to better and more completely serveour customers.” Matt Schron, Jergens General Manager, commented, “By combining JISand Gray Industrial Supply, we will be able to pull from the experience, knowledge andrelationships both companies have within the saw blade marketplace to better servemanufacturing end users. The purchase also gives JIS the opportunity to improvecustomer efficiency and experience by providing blade turnaround in 48 hours.”Production Tool Supply Company acquires Specialty Tool (June 2013) – Production ToolSupply Company, an industrial tool supplier, acquired Specialty Tool, also a supplier ofindustrial tools such as abrasives, gages, coolants, cutting tools and other MRO supplies.Financial terms of the transaction were not disclosed. Mitch Blair, previously the VP ofSales at Specialty Tool, will become Specialty Tool’s President. Larry Wolfe, President ofProduction Tool Supply, commented, “We are excited to welcome the talented anddedicated employees of Specialty Tool to our family.”AEA Investors acquires Aramsco Holdings from Summit Partners (May 2013) – AEAInvestors, through its Small Business Fund II along with management, has acquiredAramsco Holdings in Paulsboro, NJ, from Summit Partners. Aramsco is a distributor ofsafety products, equipment and supplies to specialty contractors. Aramsco servescontractors engaged in asbestos and lead abatement, fire, water and mold restoration,and surface preparation as well as state and local government agencies, utilities,pharmaceuticals, hazardous material handlers, hospitals and facilities maintenancedepartments. The company’s distribution capabilities are supported by a nationalnetwork of 19 branches and more than 200 employees. Rich Salerno, president and CEOof Aramsco, said the partnership with AEA will allow the company to continue to build itsbusiness organically and through acquisition.3