Discounted Cash Flow Model for Target

$ mm except per share

Free cash flow buildup

Fiscal year 2017A 2018P
Fiscal year end date 12/31/17 12/31/18

Sales 10,000 10,500

5%
COGS (Without Dep) (5,250)
50%
SG&A (1,575)
15%
EBITDA 3,675
EBIT 3,475
tax rate 30%
NOPAT 2,433

Depreciation and amortization 200

Stock based compensation
Changes in net working capital (25)
Other assets & liabilities
CFO 2,608
Less: Capital expenditures (300)
Less: Purchases of intangible assets
FCFF 2,308
% growth

Discount factor 91%

Assume cash flows are generated at: Middle of period
Midperiod adjustment factor 0.0%
Present value of Unlevered FCF 2,111

Perpetuity approach Exit EBITDA multiple approach

Normalized FCFt+1 2,649 Terminal year EBITDA
Long term growth rate (g) 2% Terminal value EBITDA multiple
Terminal value 36,968 Terminal value
Present value of terminal value 23,688 71.19% Present value of terminal value
Present value of stage 1 cash flows 9,586 28.81% Present value of stage 1 cash flows
Enterprise value 33,274 100.00% Enterprise value
Implied TV exit EBITDA multiple 10.1x Implied TV perpetual growth rate
Net Debt Fair value per share
Cash & equivalents ST & LT market. securities 100
Long term debt 10,100 Enterprise value
Net debt 10,000 Less: Net debt
Equity value
Equity Diluted shares
Value of equity 23,274 Equity value per share
Premium (discount) to LBO offer
Number of shares 850.00
Value per share 27.38

Cost of capital assumptions

Cost of debt 8.000%
Tax rate 22.6%
Debt and equivalents 5,010
Debt as a % of total capital 77.5%

Risk free rate 3.0%

Beta 1.20
Market risk premium 5.0%
Equity as % of total capital structure 9.0%
Cost of capital (WACC) 9.31%

Sensitivity analysis

Equity value per share

Long term growth rate (g):
$50.58 2.0% 2.5% 3.0%
13% 16.2 17.7 19.4
12% 21.2 23.1 25.2
WACC: 11% 27.2 29.7 32.5
10% 34.8 38.1 41.8
9% 44.6 49.0 54.3
8% 57.6 64.0 71.7

Equity value per share

Exit EBITDA Multiple
$32.83 6.3x 6.8x 7.3x
13% 15.5 18.0 20.4
12% 17.1 19.7 22.3
 WACC: 11% 18.9 21.5 24.2
10% 20.6 23.4 26.2
9% 22.5 25.4 28.3
8% 24.5 27.5 30.5

Equity value per share

Exit EBITDA Multiple
EBITDA % of plan $32.83 6.3x 6.8x
80% 982 47.8 49.9
90% 1,104 51.1 53.4
100% 1,227 54.3 56.9
110% 1,350 57.6 60.4
120% 1,473 60.9 63.9
130% 1,595 1,472.6 1,472.6

Football field

DCF / LBO Football Field

58.5
60.0
55.0 51.1
50.0 46.3
45.0
40.0 45.5
35.0 31.7
30.0 34.8 37.5
25.0
20.0
15.0 20.6
10.0
n ge n ge ate Lo
w
R
Ra Ra l e gh/
DA ti y rd i
IT etu
u tH
B rH ke
tE rp so ar
xi Pe n M
xE 0% Sp
o
ee
k
.3 4.
-8 - .0
% W
.3x 0% 35 52
6 2.
t t %-
u ea ea 5.
0
l lu t1
Va Va
F F ea
DC DC l u
Va
O
LB

Low Diff. High

DCF Value at 6.3x-8.3x Exit EBITDA Range 20.6 11.1 31.7
DCF Value at 2.0%-4.0% Perpetuity Range 34.8 16.3 51.1
LBO Value at 15.0%-35.0% Sponsor Hurdle Rate 45.5 13.0 58.5
52 Week Market High/Low 37.5 8.8 46.3
 2019P 2020P 2021P 2022P
12/31/19 12/31/20 12/31/21 12/31/22

10,920 11,248 11,473 11,702

4% 3.0% 2.0% 2.0%
(5,460) (5,624) (5,736) (5,851)
50% 50.0% 50.0% 50.0%
(1,638) (1,687) (1,721) (1,755)
15% 15.0% 15.0% 15.0%
3,822 3,937 4,015 4,096
3,612 3,718 3,790 3,866
30% 30.0% 30.0% 30.0%
2,528 2,603 2,653 2,706

210 218 225 229

(21) (16) (11) (11)

2,717 2,805 2,867 2,924

(294) (284) (270) (275)

2,423 2,521 2,597 2,649

5.0% 4.0% 3.0% 2.0%

84% 77% 70% 64%

2,028 1,930 1,819 1,698

multiple approach
1,227
e EBITDA multiple 7.3x
8,956
e of terminal value 6,652
e of stage 1 cash flows 3,144
9,796
erpetual growth rate (2.7%)
 LBO Offer Perpetuity EBITDA
12,383 9,796
(5,010) (5,010)
6,742 7,373 4,785
145.771 145.771 145.771
$46.25 $50.58 $32.83
count) to LBO offer NM 9.4% (29.0%)

hare
owth rate (g):
3.5% 4.0%
21.2 23.3
27.6 30.2
35.6 39.2
46.1 51.1
60.5 67.9
81.2 93.0

hare
DA Multiple
7.8x 8.3x
22.9 25.3
24.8 27.4
 26.8 29.5
28.9 31.7
31.2 34.0
33.5 36.5

hare
DA Multiple
7.3x 7.8x
52.0 54.0
55.7 58.1
59.5 62.1
63.3 66.1
67.0 70.1
1,472.6 1,472.6
Discounted Cash Flow Model for BMC
$ mm except per share

Free cash flow buildup

Fiscal year 2017A 2018P
Fiscal year end date 12/31/17 12/31/18

Fixed Assets Beginning 2,000

Depreciation (200)
Dep Rate 10%
CAPEX 300
Fixed Assets End 2,000 2,100

Net Working Capital 500 525

As % of Sales 5% 5%
 2019P 2020P 2021P 2022P
12/31/19 12/31/20 12/31/21 12/31/22

2,100 2,184 2,250 2,295

(210) (218) (225) (229)
10% 10% 10% 10%
294 284 270 275
2,184 2,250 2,295 2,340

546 562 574 585

5% 5% 5% 5%
Discounted Cash Flow Model for Target
$ mm except per share

Free cash flow buildup

Fiscal year 2017A 2018P
Fiscal year end date 12/31/17 12/31/18

Sales 10,000 11,000

5%
COGS (Without Dep) (5,280)
48%
SG&A (1,540)
14%
EBITDA 4,180
EBIT 3,980
tax rate 30%
NOPAT 2,786

Depreciation and amortization 200

Stock based compensation
Changes in net working capital (50)
Other assets & liabilities
CFO 2,936
Less: Capital expenditures (300)
Less: Purchases of intangible assets
FCFF 2,636
% growth

Discount factor 91%

Assume cash flows are generated at: Middle of period
Midperiod adjustment factor 0.0%
Present value of Unlevered FCF 2,411

Perpetuity approach Exit EBITDA multiple approach

Normalized FCFt+1 3,043 Terminal year EBITDA
Long term growth rate (g) 2% Terminal value EBITDA multiple
Terminal value 42,457 Terminal value
Present value of terminal value 27,205 71.20% Present value of terminal value
Present value of stage 1 cash flows 11,005 28.80% Present value of stage 1 cash flows
Enterprise value 38,210 100.00% Enterprise value
Implied TV perpetual growth rate
Net Debt Fair value per share
Cash & equivalents ST & LT market. securities 100
Long term debt 10,100 Enterprise value
Net debt 10,000 Less: Net debt
Equity value
Equity Diluted shares
Value of equity 28,210 Equity value per share
Premium (discount) to LBO offer
Number of shares 850.00
Value per share 33.19

Cost of capital assumptions

Cost of debt 8.000%
Tax rate 22.6%
Debt and equivalents 5,010
Debt as a % of total capital 77.5%

Risk free rate 3.0%

Beta 1.20
Market risk premium 5.0%
Equity as % of total capital structure 9.0%
Cost of capital (WACC) 9.31%

Sensitivity analysis

Equity value per share

Long term growth rate (g):
$50.58 2.0% 2.5% 3.0%
13% 16.2 17.7 19.4
12% 21.2 23.1 25.2
WACC: 11% 27.2 29.7 32.5
10% 34.8 38.1 41.8
9% 44.6 49.0 54.3
8% 57.6 64.0 71.7

Equity value per share

Exit EBITDA Multiple
$32.83 6.3x 6.8x 7.3x
13% 15.5 18.0 20.4
12% 17.1 19.7 22.3
 WACC: 11% 18.9 21.5 24.2
10% 20.6 23.4 26.2
9% 22.5 25.4 28.3
8% 24.5 27.5 30.5

Equity value per share

Exit EBITDA Multiple
EBITDA % of plan $32.83 6.3x 6.8x
80% 982 47.8 49.9
90% 1,104 51.1 53.4
100% 1,227 54.3 56.9
110% 1,350 57.6 60.4
120% 1,473 60.9 63.9
130% 1,595 1,472.6 1,472.6

Football field

DCF / LBO Football Field

58.5
60.0
55.0 51.1
50.0 46.3
45.0
40.0 45.5
35.0 31.7
30.0 34.8 37.5
25.0
20.0
15.0 20.6
10.0
n ge n ge ate Lo
w
R
Ra Ra l e gh/
DA ti y rd i
IT etu
u tH
B rH ke
tE rp so ar
xi Pe n M
xE 0% Sp
o
ee
k
.3 4.
-8 - .0
% W
.3x 0% 35 52
6 2.
t t %-
u ea ea 5.
0
l lu t1
Va Va
F F ea
DC DC l u
Va
O
LB

Low Diff. High

DCF Value at 6.3x-8.3x Exit EBITDA Range 20.6 11.1 31.7
DCF Value at 2.0%-4.0% Perpetuity Range 34.8 16.3 51.1
LBO Value at 15.0%-35.0% Sponsor Hurdle Rate 45.5 13.0 58.5
52 Week Market High/Low 37.5 8.8 46.3
 2019P 2020P 2021P 2022P
12/31/19 12/31/20 12/31/21 12/31/22

11,440 11,783 12,019 12,259

4% 3.0% 2.0% 2.0%
(5,491) (5,656) (5,769) (5,884)
48% 48% 48% 48%
(1,602) (1,650) (1,683) (1,716)
14% 14% 14% 14%
4,347 4,478 4,567 4,659
4,137 4,259 4,342 4,429
30% 30.0% 30.0% 30.0%
2,896 2,981 3,040 3,100

210 218 225 229

(22) (17) (12) (12)

3,084 3,183 3,253 3,318

(294) (284) (270) (275)

2,790 2,899 2,983 3,043

5.8% 3.9% 2.9% 2.0%

84% 77% 70% 64%

2,335 2,219 2,089 1,950

multiple approach
1,227
e EBITDA multiple 7.3x
8,956
e of terminal value 6,652
e of stage 1 cash flows 3,144
9,796
erpetual growth rate (2.7%)
 LBO Offer Perpetuity EBITDA
12,383 9,796
(5,010) (5,010)
6,742 7,373 4,785
145.771 145.771 145.771
$46.25 $50.58 $32.83
count) to LBO offer NM 9.4% (29.0%)

hare
owth rate (g):
3.5% 4.0%
21.2 23.3
27.6 30.2
35.6 39.2
46.1 51.1
60.5 67.9
81.2 93.0

hare
DA Multiple
7.8x 8.3x
22.9 25.3
24.8 27.4
 26.8 29.5
28.9 31.7
31.2 34.0
33.5 36.5

hare
DA Multiple
7.3x 7.8x
52.0 54.0
55.7 58.1
59.5 62.1
63.3 66.1
67.0 70.1
1,472.6 1,472.6
Discounted Cash Flow Model for BMC
$ mm except per share

Free cash flow buildup

Fiscal year 2017A 2018P
Fiscal year end date 12/31/17 12/31/18

Fixed Assets Beginning 2,000

Depreciation (200)
Dep Rate 10%
CAPEX 300
Fixed Assets End 2,000 2,100

Net Working Capital 500 550

As % of Sales 5% 5%
 2019P 2020P 2021P 2022P
12/31/19 12/31/20 12/31/21 12/31/22

2,100 2,184 2,250 2,295

(210) (218) (225) (229)
10% 10% 10% 10%
294 284 270 275
2,184 2,250 2,295 2,340

572 589 601 613

5% 5% 5% 5%
Target Equity Value with synergies 28,210
No. Shares 850.00
Value per share 33.19

Target Equity Value standalone 23,274

No. Shares 850.00
Valiue per share 27.38

Value of synergies 4,936.50

100% synergies per share 5.81
% synergies for buyer 30% 1,480.95
% synergies for seller 70% 3,455.55

Offer per share 31.45

Premium 14.85%
80% 3,949.20
20% 4.65