Valitas Weekly M&A Insights

  • In Part III of our Blockchain and M&A series, the series finale, we will explore the widespread M&A implications of the “Delaware Blockchain Initiative” and touch upon the newly announced Canadian equivalent. We are, without a doubt, amid a blockchain revolution...

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  • Private Equity Holding Period and Value Creation

    Posted By: Clear Li, Topher Abt

    Your typical source of finance literature would tell you that the standard holding period for a private equity investment is between three and five years. However, this theory has been contested lately, most notably by a PitchBook article positing that the 2017 year-to-date average holding period in the U.S. is 6.17 years.

    In this week’s article, we aim to discuss whether prolonged holding periods have become the “new normal” and examine whether there has been a fundamental shift in the private equity landscape. We also interviewed Michael O’Neill, Director at Stone Arch Capital, who offered some of his insights from the perspective of an industry practitioner.

    To read our full article, click "Open in Browser" below.

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  • Representations and warranties insurance has proliferated throughout the Canadian M&A marketplace in recent years as a tactical tool for M&A negotiations. We explore the impact that these insurance policies have in M&A negotiations and why some sellers make them a requirement in competitive auctions.

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  • Why M&A Deals Fail - Part 1

    Posted By: Chris Tuszynski

    This week's article is part 1 of a 2-part series overlooking why M&A deals fail to succeed in today's bull market. Part 1 considers M&A deals that fall apart during the pre-acquisition phase, comparing failure rates across different geographies and industries, as well as in private versus public companies.

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  • This article is the second issue in our Logistics & M&A series. In our first article, we discussed a general overview of the M&A landscape and alluded to five trends in the industry. This second issue will outline three methods companies are employing to adapt to the increasingly popular e-commerce industry, and how the Logistics industry serves as a catalyst to retailers capitalizing on this demand. 

    The Logistics industry was once a secondary focus for retailers, but has recently become the focal point for industry players looking to solidify the value proposition of their e-commerce operations. No longer just a tool used to move products from point A to point B, logistics offerings that are efficient and differentiated can be all the difference in today’s ultra-competitive retail landscape.

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  • This week’s article is Part 2 of a 2-part series on driving growth in new acquisitions against the backdrop of today’s challenging M&A landscape. Part 1 of this series considered the steps buyers can take during the due diligence stage to establish realistic growth objectives, whereas this edition will explore post-acquisition integration considerations for buyers aiming to meet their growth objectives.

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  • Last month, we introduced Part I of the three-part Blockchain and M&A series. In this week’s Part II of the series, we will cover possible improvements in due diligence & compliance, cross-border payment systems, and confidentiality.

    To understand the limitless potential of blockchain applications, it helps to imagine a world where all transactions occur on a blockchain. For this to be possible on a mass scale, local currencies would likely need to be ‘digital’.

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  • Management Diligence – The Power of a Leadership Blueprint

    Posted By: Karen Fisman and Daniel Borg

    There are a number of factors that PE investors consider when analyzing a potential acquisition target. However, according to a recent report, A View from Both Sides – How PE firms and sellers can form wise partnerships, firms perform rigorous due diligence on two of the most significant factors, operations and product offering, but treat the third factor, management team capability, more casually. We spoke with Richard Davis, Ph.D., CEO of Kilberry, a leadership advisory firm, and one of the authors of the report, who provided insights into why this occurs, and how rigorous management due diligence can drive future value creation.

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  • Whether we realize it or not, the Logistics industry is a key component in our everyday lives. Our grocery stores always have food on the shelves. We rely on full gas pumps to keep our cars running. And when we order novelty products from China, they arrive promptly, right at our doorsteps. Without the Logistics industry, none of this would be possible. On top of this, the emergence of e-commerce and its transformation of the retail market is driving the Logistics industry to adapt to a new life of customized orders with many more end destinations. 

    This article serves as the first in our Logistics & M&A series.  Part 1 provides an overview of the sector and historic M&A activity, and subsequent articles will discuss key industry trends. In writing this series, we benefit from the input of Martin Kelly and Keith Hart, industry veterans, who provided insights drawing on their wealth of Logistics experience.

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  • This article is Part 1 of a 2-part series about driving growth in new acquisitions against the backdrop of today’s challenging M&A landscape. With valuations at record highs, it is more critical than ever for buyers to develop realistic growth plans for their target acquisitions. Part 1 of this series considers the steps buyers can take during the due-diligence stage to establish realistic grow objectives. Part 2 will explore a post-acquisition action plan for buyers aiming to meet their growth objectives.

    Historically, 70 to 90% of M&A transactions fail to create value. In addition, potential buyers, both strategic and financial, now find themselves having to pay more for targets than ever before, with valuations in the global M&A market reaching record highs. Combining this propensity for deal failure with sky-high valuations, it is more critical than ever for buyers to realize growth in their acquired companies. With this challenge in mind, Valitas recently sat down with Todd Blair, Founder & Managing Partner of GrowthPoint, a Canadian advisory firm specializing in the planning and execution of growth strategies.

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  • Cross-Border M&A: The Critical Role of Due Diligence

    Posted By: Karen Fisman and Miranda Li

    Dealmakers are reaching across borders, seemingly undaunted by political uncertainty. In Q2 2017, global cross-border deal value was up 49% over the previous year, accounting for 47% of total global value and 36% of volume. In Canada, cross-border transactions accounted for more than half of total activity by both value and volume.

    As deal makers accelerate their cross-border activity, the due diligence process becomes more critical than ever in addressing risks inherent in those transactions. We spoke with Michael O’Neill, a Director at Stone Arch Capital, about his experience with U.S./Canadian cross-border deal making, and the unique concerns that need to be addressed during the due diligence process.

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  • Over the past few months, “Bitcoin” has become a global buzzword, often associated with either incredible wealth creation, or scandal and dismissiveness. The concept of a decentralized currency is both a fascinating and polarizing subject. It has received public endorsements from the likes of Peter Thiel, Goldman Sachs, and even Paris Hilton and Floyd Mayweather. It has also received polarizing disapproval from Jamie Dimon, CEO of J.P. Morgan and Chinese government regulators. The concept of Bitcoin is such a profound and fascinating topic that the search term “Bitcoin” has surpassed the total “Justin Bieber” searches on Google since August 2017.

    In this three-part series, we will stay away from ‘Bitcoin Mania’ and focus on the underlying technology behind Bitcoin: Blockchain. More specifically, we will outline five potential use-cases for blockchain technology in M&A, with an emphasis on how blockchain can improve rather than compete with the current infrastructure.

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  • Negotiating Concessions in M&A Transactions

    Posted By: Chris Angelatos and Karen Fisman

    Price isn’t everything in a deal negotiation. While maximizing or minimizing price (depending on which side of the table you sit on) can make or break a deal, a shared goal of both parties to an exclusive negotiation is getting the deal done. Both sides need to feel they are getting a good deal for a negotiation to work successfully, and that means concessions should be offered, appreciated, and reciprocated. 

    What are the most effective strategies when offering up concessions? We share insights from Harvard Business  Review and get an on-the-ground perspective from M&A lawyer Jillian Swartz,  partner at Allen McDonald Swartz.

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  • Are we in a private equity bubble that is about to burst?   A recent Wall Street Journal article considers this question in light of increased stake sales, bigger funds, and record levels of investment capital. “Is it a bubble? My answer is no,” says one fund manager, whose view is shared by many of his peers.  In fact, despite some challenging industry dynamics, PE fund managers interviewed in the WSJ article and for a recent Prequin report share an optimistic outlook for investment activity. 

    We were curious about the Canadian PE viewpoint, so we spoke with Michael Wagman, a Managing Director at Clairvest, James Merkur, President of Intercap, and Darrell Pinto, Research Director of the Canadian Venture Capital and Private Equity Association (CVCA), to get their insights. Like many of those interviewed for the WSJ article and Prequin report, all three held cautiously optimistic views.   

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  • Economists have long tried to identify “goldilocks wages”: ideal compromises in the tradeoff between higher minimum wages and higher rates of unemployment. This is, of course, far more than a theoretical pursuit. With an election coming up in Ontario next year, it represents a significant issue that is likely to spill over from economics into politics. The province plans on raising its minimum wage from $11.40 today to $14 in 2018 and $15 in 2019. Inevitably, this plan gives rise to the question of whether, as a result, more jobs will be being outsourced or automated if employers decide they cannot afford to pay the higher wages. 

    So, how susceptible is Ontario to outsourcing or automation? And which of Ontario’s businesses are most likely to benefit from this potential push to automate?

    Please "Open in Browser" to read our full article, written by guest economics writer Joseph Shupac.

     

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    Intralinks Annual M&A Leaks Report 2017 dives into the investigative analysis of deal leakage, drawing on a sample of 5,997 publicly traded targets. The study determined that an average of 7.7% of deals were leaked over the 2009 – 2016 period. The most compelling finding was that, over this period, leaked transactions exhibited a median premium 20% higher than deals that were not leaked.

    Does this leak premium effect also apply to privately acquisitions? We considered this question, drawing on the insights of Frank Guarascio, a senior M&A partner with Blake, Cassels & Graydon. 

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  • In our 2016 review of Canadian Private Equity (PE), we reported sluggish results.  But according to the latest CVCA PE report, that’s history; Canadian PE has definitively reversed its trajectory. The second quarter yielded $8.9 billion in deal value invested over 170 transactions, an increase of 79% over the previous quarter, and 164% over Q2, 2016. 

    These results are particularly interesting in the face of today’s challenging deal environment (described so often in such similar terms, it’s achieving cliché status).  We’ve written recently, however, about how PE firms are evolving to address current challenges, and perhaps we’re starting to see the impact - although obviously, one strong quarter doesn’t constitute a trend.

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  • League of the Overshadowed

    Posted By: Joseph Shupac

    In the realm of economics, there are three very large countries which, while not exactly overlooked, nevertheless tend to be overshadowed by their even larger neighbours, the United States and China. These three overshadowed countries are Japan, Canada, and Mexico.

    Japan is the third largest economy in the world. Canada is the tenth largest economy in the world and the second largest landmass. And Mexico is the only country, apart from the U.S. or the BRIC states, to be among the top fifteen in the world in economic size, population, and landmass.

    Currently, trade between Canada, Mexico, and Japan is quite small. Neither Canada nor Mexico are included among Japan’s top fifteen trade partners. And while Mexico and Canada do considerable trade with one another — Mexico recently overtook Britain to become Canada’s third biggest trade partner — Mexico accounts for less than three percent of Canada’s total trade. Their trade with one another is greatly eclipsed by their trade with the U.S.. Indeed, California alone trades more with Canada, Mexico, and Japan than they do with one another.

    The current U.S. administration, however, is creating uncertainty for its trade relationships with Canada, Mexico, and Japan. President Trump’s first executive order was to withdraw from the Trans-Pacific Trade Partnership (TPP), in which Japan would have accounted for over 60 percent of the twelve member-states’ GDP, apart from the U.S. itself. Trump has also signaled his intention to tighten the U.S.-Mexico border and reduce legal and illegal immigration into the U.S.. Additionally, he has triggered a renegotiation of NAFTA to remedy what he has called the “worst trade deal the U.S. has ever signed”.

    These actions could have the effect of driving U.S. trade partners closer together. Canada and Mexico have an interest in showing that they can trade with one another regardless of what the U.S. government intends to say or do about NAFTA. Canadian cities would also become the obvious destination for Latin American emigrants, in the event that the U.S. government follows through on its recently announced plan to reduce legal immigration while prioritizing immigrants with English-language proficiency.

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  • We write regularly about growth through acquisition in our newsletter.  This week, however, we are shifting our focus to the importance of organic growth.  After all, as noted in the HBR article Creating an Organic Growth Machine, acquirers need to generate organic growth in the businesses they buy to make their acquisitions successful.  Cost synergies only go so far, generating cost savings that justify an acquisition premium in only 36% of transactions.

    A recent McKinsey article examined the growth profiles of businesses that succeed at driving organic growth (“growers”).  Drawing on survey results of almost 600 executives in the EU and North America, the authors found that growth strategies and behavior fall into three broad profiles:

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  • Sky high valuations, fierce competition, and scarcity of quality targets…the oft-repeated description of our current deal environment.  But in the face of that, private equity firms remain resilient, continuing to invest (as they must) and outperforming their public market peers.  According to a recent Pitchbook report, U.S., sponsor-backed acquisitions have increased from 24.7% of all transactions in Q1, 2016 to 29.8% in Q2, 2017.  As for performance, the data indicates that even bottom-ranked PE firms are outperforming the public markets over a one and fifteen-year time horizon, and their top-ranked peers are generating considerably higher returns.

    In the first half of 2017, U.S. PE fundraising continued to thrive, bringing along the associated need to invest.  As one industry observer points out: “The simple fact is that if sponsors don’t do deals, they fade away”[1].  But how do they do it in this seller’s market? Based on a review of several industry reports[2] and our own experience, several clear trends emerge...

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  • Why, with our focus on Canadian mid-market M&A, are we writing about the U.S. Middle Market?

    U.S. middle market companies[1] generate 33% of U.S. private sector GDP, and as such, represent a significant economic force.  According to a recent survey conducted by the National Center for the Middle Market, 38% of middle market firms expect to engage in an M&A transaction over the next twelve months, motivated in large part by a desire to add new markets and customers.   Additionally, there is an expectation that increased revenues will be generated outside the U.S., with Canada identified as one of the top three contributing markets[2].

    A healthy U.S. middle market with an appetite for growth through outbound M&A is likely to impact our Canadian deal activity, particularly when we layer on the discount attributed to Canadian company valuations relative to their U.S. counterparts.

    So now that we’ve established why we care, let’s discuss U.S. Middle Market Q2 performance, which comes on the heels of a record setting first quarter. 

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    [1] As defined by the National Center for the Middle Market

    [2] In a recent (post-election) Deloitte’s survey of U.S. middle market companies, more than half of respondents reported this expectation.

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  • Over the past couple of years, Chinese outbound M&A has reached record high levels, hitting a peak of US$227 billion in 2016, and more than doubling its 2015 level.  In November 2016, the Chinese State Council announced that new capital controls would be put in place, effective January 2017, to reduce this outflow of currency.

    Chinese investment in Canada differs from the global pattern.  Deal activity peaked in 2012, with China taking first place in the rankings of inbound M&A, but dropped off in subsequent years as commodity prices fell.  In 2016, however, Chinese inbound deal activity in Canada was back in the top three, ranking by value behind the U.S. and the U.K..

    We were curious about whether the new Chinese capital controls were impacting Chinese M&A activity in Canada, and were fortunate to speak with Chris Flood, counsel at Blakes, who has extensive experience advising Chinese corporate and financial investors on M&A transactions in Canada.  

    Please click on “Open in Browser” for Chris’s insights, and to read our full article.

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  • In the recently released EY Global Capital Confidence Barometer, the following question is posed:

    Can complex geopolitical uncertainty and a healthy, active M&A environment co-exist?

    The simple answer is yes, based on survey results reflecting the expectations[1] of 2300 executives in 43 countries including Canada, which is where we will focus. While geopolitical uncertainty is regarded as a significant risk factor, there is an overriding focus on other drivers (including, paradoxically, an interest in cross-border transactions) that are likely to fuel M&A activity. 

    Read our full article to learn more.

     

    [1] Expectations have proven to be predictive of M&A activity, but the predictive power weakens over a relatively short period.  For example, see “Can Business Expectations predict Merger Activity?”

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  • Private Equity and Portfolio Company Management

    Posted By: Clear Li, Paris Aden, Miranda Li

    Private equity has remained one of the most reliable asset classes amid recent challenges in the market. However, PE investors still need to be vigilant in order to retain their competitive position going forward. The management team of the portfolio company is crucial to a successful partnership. A recent Mergermarket report surveying 25 middle market PE firms and 25 company executives across North America revealed several key insights on this issue, and we thought it is worthwhile to share some of their findings.

    Click "open in browser" to read the full article and find out more. 

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  • Canadian Venture Capital and Private Equity Activity Continue to Diverge

    Posted By: Miranda Li, Karen Fisman, Yingxi Liao

    In our recent review of Canadian Venture Capital (VC) and Private Equity (PE) activity for the first nine months of 2016, we reported a significant difference in trends.  While VC investment exceeded the four-year quarterly average, PE investment and deal volume lagged relative to the same period of the previous year.

    According to the latest first quarter 2017 VC and PE update by the Canadian Venture Capital and Private Equity Association, this divergence in activity continues. 

    Click "open in browser" to read the full article and find out more. 

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  • The subject of trade agreements has been grabbing plenty of media space in recent months, with NAFTA (and its related uncertainty) occupying the lion’s share.  BUT…

    This week, our focus is on the Canadian - European Union Comprehensive Economic and Trade Agreement (CETA).  CETA received Royal Assent on May 16, 2017, and opens a gateway to increased cross-border trade and investment, including, of course, M&A activity.  On implementation, the agreement will immediately eliminate 98% of EU tariffs, as well as many non-tariff barriers, yielding significant cost savings and competitive advantage for Canadian exporters of goods and services.

    recent article by Mario Nigro and Eric Bremermann, of leading law firm, Stikeman Elliott, describes CETA as a catalyst for cross-border M&A.  We were fortunate to speak directly with Mr. Nigro, who is a partner in Stikeman’s M&A and Private Equity & Venture Capital Groups. 

    Please click "open in browser" to read our full interview with Mario Nigro.

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  • What do Sellers Want?

    Posted By: Karen Fisman

    Valitas Insights:  What do Sellers Want?

    It’s a competitive market out there for buyers.  We’ve talked often about the high levels of capital available for a shrinking pool of quality targets. And of course, there are those sky-high valuations.  In this challenging market, it becomes more important than ever to understand seller preferences and experiences.  A recent Mergermarkets survey provides insight into sell-side strategies and views, and we thought it worthwhile to share some of their findings.

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  • Canadian M&A Diverges from the Global Trend

    Posted By: Karen Fisman and Clear Li

    Are you wondering where M&A is heading this quarter?  We took a dive into April deal activity, and while our findings might not be predictive of the full quarter, they looked interesting enough to share.  What caught our interest? We noticed that Canadian deal activity diverged from the global trend.

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  • We are living in an M&A world where many acquisitions fail to create value.  The corollary, of course, is that some acquisitions DO create value, and the obvious question is why.  In the current environment, where companies are relying more heavily on M&A to drive revenue growth, that’s a significant “why”, so we went looking for an answer.

    We’ve discussed post-merger integration (PMI) as a critical factor in any successful M&A transaction. But a recent McKinsey article, The Six Types of Successful Acquisitions, takes a front-end perspective.  The authors suggest that successful deals are initiated with specific and detailed value creation strategies, typically fitting with at least one of six archetypes.  In last week’s article, we covered the first three archetypes.  This week we discuss the remaining three, along with an overarching value creation principle.

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  • We are living in an M&A world where many acquisitions fail to create value.  But the corollary, of course, is that some acquisitions DO create value, and the obvious question is why.  In the current environment, where companies are relying more heavily on M&A to drive revenue growth, that’s a significant “why”, so we went looking for an answer.

    We’ve discussed post-merger integration (PMI) as a critical factor in any successful M&A transaction. But a recent McKinsey article, The Six Types of Successful Acquisitions, takes a front-end perspective.  The authors suggest that successful deals are initiated with specific and detailed value creation strategies, typically fitting with at least one of six archetypes.  We will discuss the first three archetypes this week, and the remaining three in next week’s article, along with some overarching value creation principles.

     

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  • How do they do it?  In last week’s Valitas Insights article, we reported that the U.S. middle market is experiencing record levels of employment and revenue growth, but private-equity (PE) owned firms are way out ahead of the pack.

    So again, how do they do it?  We’ve previously discussed several factors underlying this outperformance, but a recent Harvard Business Review (HBR) article raises an additional compelling explanation.  The article is aptly titled Finally, Evidence That Managing for the Long Term Pays Off (leaving no doubt about its contents).  The authors contrast results generated by companies with a long-term outlook with those focused on “short-termism” - that is, a focus on quarterly earnings.   PE firms, with their longer investment horizon, are a closer match to the former camp.

     

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  • South of the border, middle market sentiment is bullish.  Recently released Q1 2017 survey results reveal that U.S. middle market companies are outpacing their larger counterparts by a strong margin, with private equity (PE) owned companies leading the pack. And there is a notable level of optimism about the future. 

    U.S. middle market companies[1] generate 33% of U.S. private sector GDP, and as such, represent a significant economic force.  From our perspective in Canada, this is a segment to watch for a couple of reasons. Read our full article to learn more.

     

     

     

    [1] As defined by the National Center for the Middle Market

     

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  • In the opening pages of Trump: The Art of the Deal, Donald Trump describes his work style:

    “I play it very loose…I prefer to come to work each day and just see what develops.”

    This approach was recently highlighted in President Donald Trump’s rumblings about trade policy with Canada. Last week, after a visit to Wisconsin, he remarked that “[i]n Canada, some very unfair things have happened to our dairy farmers, and others, and we're going to start working on that.” This was followed by an announcement that a tariff of approximately 20% would be imposed on Canadian softwood lumber imported to the U.S..  Then came media reports that Trump was going to sign an executive order withdrawing the U.S. from NAFTA, a plan that was reversed after emergency calls with Mexican President Peña Nieto and our own Prime Minister Trudeau.  Thursday morning, President Trump tweeted: “Relationships are good – deal very possible!”. It’s been quite a couple of weeks.

    Where does this trade policy uncertainty leave us in Canada?  What are the implications for our own economy, and more specifically, for Canadian M&A deal activity?

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  • I recently attended a seminar at Torys, one of Canada’s leading law firms.  The room was packed with men and women in blue suits (actually, mostly men).  Bankers from the big five were at nearby tables.  And the focus of the seminar was…Recreational Cannabis.

    With the release of the draft Cannabis Act (Bill C-45) on April 13, opportunities in the sector are scaling, and with them, support from top tier Canadian law firms like Torys and Blakes (who will be holding their own Cannabis Round Table on May 2).  In this week’s article, we share some of the insights gleaned from the Torys seminar – insights that are not apparent on a straightforward reading of the draft legislation.  

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  • Last week yielded a blockbuster deal in the Canadian oil patch:  Cenovus Energy announced the acquisition of ConocoPhillips Co.’s oil sands assets for the mega price of C$17.7 billion.  The deal arrived on the heels of Canadian Natural Resources Ltd.’s C$11.1 billion acquisition of oil sands assets from Royal Dutch Shell Plc, and reflects the ongoing oil sands consolidation by major Canadian companies.

    This activity is consistent with findings in a recent Mergermarkets/Tory’s report relating to expectations for the Canadian Oil and Gas sector in 2017.  Respondents to the survey were optimistic about deal activity for the current year, with 67% expressing a belief that volume would increase. We discuss the challenges likely to drive 2017 M&A in our full article...

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  • The February Plummet

    Posted By: Karen Fisman

    There was a sharp reversal in global M&A activity in February. After a busy start to the year, it appears that corporate and private equity (PE) buyers have decided to hit the brakes. 

    What are the reasons behind this slowdown? Read our full article to find out.

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  • “Dry powder at record highs.” This phrase has acquired cliché status in current Private Equity (PE) circles.  According to Pitchbook, the global PE capital overhang hit a high of US$754 billion by June, 2016, with Prequin reporting the total as US$820 billion by year end.  Worthy of note: more than 70% of that overhang comes from prior vintages, with 81.5% of capital raised in 2015 still to be deployed. 

    What does that leave us? Read our full article to find out. 

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  • US management consulting firm Bain & Company’s 2017 Global Private Equity Report summarizes key changes in the PE industry in 2016.  The primary finding?  PE firms are putting more emphasis on the importance of a strong advisory network, investment strategy focus and due diligence. These are factors Valitas regards as critical at a time when returns are ebbing to the downside, holding periods are lengthening, and competition for quality targets is rising, supported by high levels of available capital.

    Top-ranked PE firms are citing three key strategic differences that are crucial to outperforming the competition. Read our full article to find out more. 

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  • The past year ended on an interesting note for Canadian Private Equity (PE).  When we last reported on Canadian VC and PE activity (Q3, 2016), there was a divergence in trends: VC surged ahead, while PE deal value plummeted.  But the recently released Canadian Venture Capital and Private Equity Association’s 2016 VC & PE Year in Review paints a different PE picture.   

    Read our full article to find out more. 

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  • The abundance of private equity “dry powder” persists as a recurrent theme in 2017.  As we note in this week’s blog, there is approximately US$749 billion in North America. And if we factor in leverage, with median debt financing running at 50.5% of U.S. M&A deals in 2016, buying power doubles to about US$1.5 trillion. There is more “powder” …but why is so much of it still “dry”? Read our full article to find out. 

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  • “PE activity in the US middle market thwarted by competition”.  This is a headline accompanying the release of Pitchbook’s  U.S. PE Middle Market Report.  But while overall middle market deal flow and deal value were down in 2016, it didn’t come as a surprise to us that the lower middle market (LMM) bucked this trend. Read our full article to find out why. 

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  • This week, the National Center for the Middle Market (NCMM) reported the results of its Q4 2016 survey.  The findings:  on several key indicators, U.S. middle market companies are outpacing their larger and smaller counterparts, and private equity (PE) owned middle market firms continue to lead the pack.  Read our full article to find out more. 

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  • Our Last Insight Article of the Year!

    Posted By: Karen Fisman

    In past weeks, we’ve talked about the powerful mid-market, the high valuations and add-on trends of 2016, and what to expect from M&A in 2017.  But for our last post, we’re sharing something different. Read our full article to find our more!

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  • As the end of the year draws near, we are setting our sights on 2017 and expectations for M&A. Read our full article to find out more. 

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  • Slow organic revenue growth is an issue for many companies – over the past twelve months, revenue growth for S&P 500 companies was an unimpressive 2.5%. This week, however, we are reporting on an interesting twist:  U.S. middle market companies are outpacing their larger counterparts by a strong margin, and PE owned companies are leading the pack. 

    Read our full article to learn more. 

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  • What trends are surfacing in an environment characterized by lofty valuations, slow organic earnings growth and ample corporate cash balances and investor “dry powder”?

    Pitchbook’s recent report, US PE Breakdown 3Q 2016 reveals 2016 YTD results that do not surprise.  Investors are reaching down-market, targeting smaller, less expensive add-ons to mitigate the inflated valuations of larger, platform acquisitions.  Add-ons represented a whopping 64% of buyout activity for the first 9 months of 2016, the highest level recorded in a decade.

    Read our full article to find out more. 

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  • “It was the best of times, it was the worst of times…”  a reference to Dicken’s Tale of Two Cities, or alternatively, the contrast in year to date activity for Canadian Venture Capital (VC) versus Private Equity (PE). 

    Read our full article to find out more.

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  • Recent acquisition activity, as set out in Pitchbook’s Global Q3 2016 M&A Report, gives us cause for pessimism.  As we have noted previously, factors relating to negative outcomes are pervasive in current transactions.  This week, however, our focus is on the positive as we consider an M&A strategy that is proven to create value. Read our full article to learn more. 

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  • “Larger corporate acquisitions buttress deal value”.  This is the headline in PitchBook’s recently released Global Q3 2016 M&A Report.  While the report notes that deal count dropped off considerably in the third quarter, average deal value continued to increase (up 42% over Q1) as acquirers, armed with excess cash and highly valued stock currency, bid up valuations on a decreasing pool of quality targets. 

    So does this acquisition activity translate into value?  Read our full article to find out more. 

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  • At JP Morgan Chase, software is expediting the review of commercial loan documents, a process previously completed by lawyers and loan officers, which consumed about 360,000 hours per year.  

    And this is just the start. JP Morgan Chase will use Canadian fintech startup Dream Payments’ technology to roll out a mobile-payments service across Canada.   Other bank/startup partnerships have formed as well over the past year. 

    What’s ahead for Canadian fintech? Read our full article to find out. 

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  • Each week, there is at least one cannabis-related deal on the list. At the same time, valuations of publicly traded cannabis companies have reached lofty heights, as south of the border, more states legalize the use of cannabis in some form, and here in Canada, investors anticipate a market expansion with the impending legalization of recreational marijuana.

    Given the activity in the sector, and the recently released report by The Task Force on Cannabis Legalization and Regulation, we thought it would be interesting to take a look ahead at future prospects for the legalization of recreational marijuana in Canada. 

    Read our full article to find out more. 

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  • Looking through the Windshield

    Posted By: Karen Fisman

    “In the business world, the rearview mirror is always clearer than the windshield.”[1] 

    But like a good set of wipers, insights from reliable sources can improve that forward looking visibility. Read our full article to find out more. 

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  • Get the Most Out of Your Merger: Key Activities to Achieve Revenue Synergies

    While M&A transactions are driven by an assortment of reasons, the realization of synergies is omnipresent. An acquirer’s focus, post-merger, is more frequently on cost synergies, as they are more tangible and easier to achieve than revenue synergies. In fact, a recent Mckinsey article Merge to grow: Realizing the full commercial potential of your merger revealed that revenue growth of companies involved in large merger deals tend to decline post-transaction.  And while many companies do expect revenue synergies to comprise a significant component of total deal synergies, less than a quarter report achieving 80% of their target[1].

    According to Tim Morton, Managing Partner at Prompta Consulting Group, and an expert on post-merger integration:

    “Far too often the M&A focus is on achieving cost synergies, [and] the culture, people, processes and ways of working are often overlooked. It’s paramount for companies to have a clearly planned vision of success to support the achievement of M&A revenue synergies.”

    So how to get the most out of your merger? Please click "Open in Browser" to read our full article.

     

    [1] According to a Deloitte report on acquisition synergies  

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