Warning: A non-numeric value encountered in /home/stantonparkllc/public_html/wp-content/themes/Divi/functions.php on line 5837

Click here to download Capital Markets Insights for week of August 23, 2018

Q2 M&A Report (Pitchbook)

M&A investment experienced an uptick in the second quarter due to several completed mega-deals. 4,735 deals were completed totaling $987.8 billion across North America and Europe—a 2% decrease and 24% increase over 1Q, respectively. Five deals above $10 billion closed in the quarter—including Bayer’s $63 billion acquisition of Monsanto and Vodafone’s $21.8 billion (€18.4 billion) acquisition of UPC Czech—leading to the sizable rise in deal value on roughly flat transaction volume. Deals of this nature are likely to persist in the coming quarters, with a number of gargantuan transactions also being announced, including the $67 billion acquisition of Express Scripts by Cigna as well as The Walt Disney Company’s $71.3 billion bid for 21st Century Fox assets.

The M&A market is inexorably linked with business sentiment, corporate fundamentals and macroeconomic forces that can impact factors like access to financing. With all these indicators continuing to trend positively, the global M&A boom shows no signs of stopping. Altogether, 2018 is unlikely to eclipse the record-setting numbers achieved in 2015, but it is on pace for another $3 trillion+ year.

The subtle shifts and divergences in interest rates may also be influencing the dealmaking atmosphere. Today markets are awash in cash, providing cheap and easy access to acquisition financing; however, interest rates are rising in North America while Europe looks to hold rates at historically low levels for at least another year. Looking forward to the medium-to long term, interest rates across the globe will almost certainly be higher, meaning companies—especially ones hoping to finance an acquisition with tens of billions of dollars in debt—are incentivized to act now on planned deals to save on the financing costs.

In this increasingly competitive global environment, CEOs are becoming more active, disposing of noncore assets and bolstering current operations through M&A. According to a recent Ernst & Young report, “Nearly a third of executives have increased the frequency of portfolio reviews in the past three years.”1 Even though the rate of closed deals has slowed, the outlook remains bright for European M&A in the coming quarters. Similarly, the positive outlook for North American M&A persists with US GDP growth in 1Q coming in above 4%, adding to business executives’ sanguine view of the economic future.

Since falling to their respective nadirs in 2009, deal sizes have rebounded to unprecedented levels. The growth has been most pronounced for platform buyouts, where the median deal size has grown at a compound annual growth rate (CAGR) of 16.3%, outpacing both add-on buyouts (11.7%) and corporate acquisitions (12.7%).

Recent Notable M&A Transactions

August 20, 2018: VeriFone (NYSE: PAY), a provider of point of sale electronic payment transactions, was acquired by Francisco Partners and British Columbia Investment Management through a $3.40 billion, 1.9x revenue and 28.9x EBITDA, public-to-private LBO.

August 15, 2018: Rose Radiology Centers, an operator of 11 diagnostic centers, was acquired by Akumin (TSE: AKU.U) for $25 million, 0.9x revenue or 5.2x EBITDA.  The acquisition represents an opportunity for the acquirer to continue its growth in Florida’s west coast where they already operate four centers acquired in May 2018.

August 14, 2018: Xplore Technologies, a developer of wireless tablet PC, was acquired by Zebra Technologies (NASDAQ: ZBRA) for $90 million, 1.0x           revenue and 36.0x EBITDA.  The acquisition of Xplore will enhance the acquirer’s product lineup and gives them a complete rugged tablet portfolio that enables their customers to gain a performance.

August 10, 2018: TravelClick, an interactive distribution and marketing services to hotels, has entered into a definitive agreement to be acquired by Amadeus IT Group for $1.52 billion or 0.3x revenue and 0.4x      EBITDA. About 1,100 TravelClick employees will join Amadeus as part of the deal. The addition of TravelClick’s solutions to the Amadeus portfolio will create a hospitality Information Technology leader providing a broad range of innovative technology to hotels and chains of all sizes across the globe. The deal will give Amadeus a presence in the independent sector and help it grow in the middle chain segment. The deal is expected to close in the fourth quarter of 2018. Amadeus will partially finance the buy with a 1.00 billion euro ($1.14 billion) debt facility. Previously, the company raised $3 million in the form of a senior secured term loan from Audax Credit BDC on December 31, 2015.

August 9, 2018: Power Products (Global Marine & Mobile Business), a manufacturer of marine and mobile electrical components and power electronics, was acquired by Brunswick (NYSE: BC) for $910 million for 3.9x revenue. This acquisition advances Brunswick’s leadership by adding integrated electrical systems solutions to the marine market and an array of other mobile, specialty vehicle and industrial applications.

August 9, 2018: Interface Performance Materials, a manufacturer of sealing systems and engineered composite products, reached a definitive agreement to be acquired by Lydall (NYS: LDL) for $265 million, or 1.8x revenue and 9.1x EBITDA. The transaction will further advance Lydall’s engineered materials offering in new markets with similar technologies utilized in its performance materials business. The transaction is expected to close in the third quarter of 2018. Previously, the company was acquired by Wind Point Partners and Bill Warkentin through an LBO on December 21, 2011 for an undisclosed sum.

August 8, 2018: Dun & Bradstreet (NYS: DNB), a business information and software for risk and supply management decisions, entered a definitive agreement to be acquired by a consortium of investors led by CC Capital, Thomas H. Lee Partners and Cannae Holdings through a $5.38 billion public-to-private LBO on August 8, 2018. The company has $1.5 billion in existing debt, bringing the enterprise value to about $6.9 billion or 3.0x revenue and 9.7x EBITDA. Bank of America Merrill Lynch, Citigroup and RBC Capital Markets will provide debt financing for the transaction. Previously, the company (NYSE: DNB) was in talks to be acquired by undisclosed private equity investors through a public to private LBO as of July 31, 2012. Subsequently, the company decided to stay public.

August 6, 2018: Bemis Company (NYS: BMS), a manufacturer and distributor of packaging products, has reached a definitive agreement to be acquired by Amcor (ASX: AMC) for $6.8 billion or 2.3x revenue and 32.0x EBITDA. Amcor will issue 5.1 of its shares for each Bemis share under the deal, in a transaction that will see Bemis stockholders owning 29 percent of the combined company and Amcor the rest. The deal would deliver the scale and capabilities to drive significant value for shareholders as well as offering customers and employees the most compelling value proposition in the packaging industry. The deal is expected to close on March 31, 2019.

August 2, 2018: Jamba Juice (NAS: JMBA), a retailer of specialty beverage and food items in the United States, has entered into a definitive agreement to be acquired by Focus Brands, via its financial sponsor Roark Capital Group, for $200 million or 2.6x revenue and 129.6x EBITDA. The transaction is expected to close during the third quarter of 2018 and will be funded by FBI using cash on hand and available borrowing capacity under its existing credit facilities. Previously Certain shareholders sold their stake in the company (NASDAQ: JMBA) on an undisclosed date. The company did not receive any proceeds from the offering.

August 1, 2018: Capella Education (NAS: CPLA), a provider of online post-secondary education services, was acquired by Strayer Education (NASDAQ: STRA) for $1.9 billion or 4.3x revenue and 28.7x EBITDA. Under the terms of the merger agreement, Capella shareholders will receive 0.875 Strayer shares for each Capella share.

August 1, 2018: PowerSchool Group, a provider of student information management and reporting platform, was acquired by Onex for $3 billion or 21.4x EBITDA. Ares Capital provided an undisclosed amount of debt financing in the form of second lien on June 12, 2018 to support the transaction.

August 1, 2018: Covance Food Solutions, a provider of food product integrity, safety and consulting services, was acquired by Eurofins Scientific (EPA: ERF) for $670 million or 4.2x revenue. The company’s competencies, reputation for scientific excellence and complementary geographic footprint, client focus and service offerings further strengthen the acquirer’s global offering in the very competitive food testing market.

August 1, 2018: Adaptive Insights, a provider of a new generation of business planning software, was acquired by Workday (NAS: WDAY) for $1.6 billion or 14.0x revenue. With Adaptive Insights as part of the acquirer, organizations will have a more comprehensive planning system that further fuels finance and business transformation to drive competitive advantage

August 1, 2018: Cardinal Solutions, an information technology services intended for the advancement of business, was acquired by Insight Enterprises (NAS: NSIT) for $79 million or 1.1x revenue. The acquisition further strengthens Insight Enterprises’s existing capabilities in digital innovation for clients across sectors and also makes Insight one of the top partners in the Microsoft ecosystem.

July 31, 2018:  Abaxis, a point of care blood analyzers to the medical market and the veterinarian market, was acquired by Zoetis (NYSE: ZTS) for $2 billion or 8.2x revenue and 42.9x EBITDA. The acquirer plans to fund the acquisition through cash and new debt. The acquisition will enable the acquirer to expand its line of diagnostic instruments and consumables, providing a new platform for growth.

July 31, 2018:  Ball Metalpack, the steel food and steel aerosol packaging business of Ball (NYS: BLL), a manufacturer of steel containers, was acquired by Platinum Equity through a $675 million or 1.1x revenue. Subsequently the business was renamed Ball Metalpack.

July 31, 2018: Bakercorp, a supplier of containment rental equipment, tanks, pumps and pipes, was acquired by United Rentals (NYSE: URI) for $715 million or 2.4x revenue and 9.1x EBITDA. The Baker acquisition is a highly strategic move on United Rentals’ part to grow its Specialty segment.

July 31, 2018: Accruent, a provider of enterprise contract management software, reached a definitive agreement to be acquired by Fortive (NYS: FTV) for $2 billion or 7.4x EBITDA. The acquisition strategy have positioned Fortive for accelerated growth. The deal is expected to close in the third quarter of 2018. Previously, the company completed an undisclosed amount of debt refinancing round on May 31, 2018. Ares Capital provided an undisclosed amount of debt financing in the form of first lien, second lien and subordinated debt in the transaction.

July 31, 2018: Unifire, a manufacturer and distributor of high-performance rescue equipment, reached a definitive agreement to be acquired by Mission Ready Solutions (TSX: MRS) for $9 million or 0.3x revenue. The acquisition will help Mission Ready Solutions to increase sales and would provide privileged access to valuable contracts that are set aside for small business which might not otherwise be available to Mission Ready Solutions.

July 31, 2018: Pro-Tech Hardbanding, a provider of hardbanding services, was acquired by Victory Oilfield Tech (OTCQB: VYEY) for $1.6 or 0.8x revenue. The acquisition helps the acquirer to grow strategic oilfield services companies in the major oil and gas basins of the United States. The acquirer will pay $700,000 in cash to the seller over a period of two years following the closing in equal quarterly installments of $87,500 each, with the first such installment payable on October 31, 2018 and the last such installment payable on July 31, 2020 (the “Deferred Portion”), provided that upon a change of control of Victory, the deferred Portion shall become immediately due and payable.

July 30, 2018: Adcel, a developer of app advertising platform software, was acquired by engage:BDR (ASX: EN1) for $3.5 million or 2.8x revenue. The acquisition will enable the acquirer’s current publisher suppliers to buy access to Adcel’s existing forty plus buyers and lead to a multiplier effect on revenue with the increase in the number of publishers onto which the company can sell inventory.

July 28, 2018: Indigo Slate, a provider of digital marketing, marketing agency, content marketing, was acquired by Zensar Technologies (BOM: 504067) for $18 million or 0.9x revenue. The addition of Indigo Slate will strengthen Zensar’s capabilities in digital marketing’s fast-growing segment.