Value Unleashed

Market Update

Thirty-four M&A transactions were announced this past week. The U.S. Federal Reserve raised interest rates by 0.25% this past week and indicated that rates will likely increase three more times in 2017. WTI Crude Oil prices decreased slightly for the second week straight. The Canadian dollar fell by 1.04 cents this past week and the TSX underperformed relative to the S&P 500 by 1.7% in U.S. dollar terms.

Total debt/EBITDA levels for U.S. middle market companies remained at 4.8x.

Valitas Insights: Our Last Insight Article of the Year!

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.

Here at Valitas, we’re big fans of Seth Godin.  This recent post articulates a key tenet on which we have built our firm and how we serve our clients.

The myth of quick

In his day job, The Wizard of Oz sold hokum. Patent medicines guaranteed to cure what ailed you. And none of them worked.

Deep within each of us is the yearning for the pill, the neck crack, the organizational re-do that will fix everything.

Sometimes, it even happens. Sometimes, once in a very rare while, there actually is a stone in our shoe, easy to remove. And this rare occurrence serves to encourage our dreams that all of our problems have such a simple diagnosis and an even simpler remedy.

Alas, it's not true.

Culture takes years to create and years to change.

Illnesses rarely respond in days to a treatment.

Organizations that are drowning need to learn to swim.

Habits beat interventions every time.

Consider these boundaries...

Avoid the crash diet.

Fear the stock that's a sure thing to double overnight.

Be skeptical of a new technology that's surely revolutionary.

Walk away from a consultant who can transform your organization in one fell swoop.

Your project (and your health) is too valuable to depend on lottery tickets.

There are innovations and moments that lead to change. But that change happens over time, with new rules causing new outputs that compound. The instant win is largely a myth.

The essential elements of a miracle are that it is rare and unpredictable. Not quite the reliable path you were seeking.

So, in 2017, don’t be lured by the promise of the quick fix.  It’s likely just a variant of fool’s gold.  And if you’re hiring an advisor, look to a team whose focus is on lasting value creation rather than a dash to the finish.

Happy holidays to all.  We look forward to sharing many more insights in 2017.

Weekly M&A Deal Summary

Announced

JUST EAT to Acquire SkipTheDishes

JUST EAT plc (LSE:JE), a leading global marketplace for online food delivery, has agreed to acquire SkipTheDishes Restaurant Services Inc., a technology company that operates an online platform connecting people to local restaurants and food couriers. Total transaction value is estimated to be $110 million.

Colliers International to Acquire Colliers Parrish International

Colliers International Group Inc. (TSX:CIGI), a commercial real estate services firm, has signed a merger agreement with Colliers Parrish International Inc., the largest independently owned affiliate of Colliers in the US. No transaction terms were released.

FortisOntario to Increase Investment in Wataynikaneyap Power

FortisOntario Inc., a Canadian electricity distribution utility company, has agreed to increase its share in the ownership of the transmission company Wataynikaneyap Power to 49%. No transaction terms were released.

Dominion Lending Centres to Acquire Marlborough Stirling Canada

Dominion Lending Centres Inc., a Founders Advantage Capital backed Canadian mortgage brokerage company, has agreed to acquire Marlborough Stirling Canada Limited, a licensed and hosted software implementations developer for the mortgage lending industry in Canada. Total transaction value is estimated to be $5.5 million.

Vinergy Resources to Acquire MJ Biopharma

Vinergy Resources Ltd., which acquires, explores, and develops oil and gas properties in Canada, has agreed to acquire MJ Biopharma Pvt. Ltd., a cannabis technology company. No transaction terms were released.

Gaming Nation to Acquire BD Sport Group

Gaming Nation Inc. (TSXV:FAN), which operates in the online and mobile sports gaming sector in North America, has agreed to acquire BD Sport Group Ltd., a UK based stadium betting services provider. Total transaction value is estimated to be $18.3 million, reflecting an 8.5x EBITDA multiple.

IFS to Acquire Mxi Technologies

Industrial and Financial Systems, IFS AB (publ), a global enterprise applications company, has agreed to acquire Mxi Technologies Ltd., a Moelis Capital Partners backed leading provider of integrated and intelligent maintenance management software solutions for the global aviation industry. No transaction terms were released.

ZTEST Electronics to Acquire Conversance

ZTEST Electronics Inc. (CNSX:ZTE), which offers Electronic Manufacturing Services (EMS) to a wide range of customers in Canada, has agreed to acquire a 15.05% equity interest in Conversance Inc., a private Waterloo based technology company. Total transaction value is estimated to be $300,000.

Inter Pipeline to Acquire Cold Lake Pipeline

Inter Pipeline Ltd. (TSX:IPL), a Calgary-based major petroleum transportation, natural gas liquids processing, and bulk liquid storage company, has agreed to acquire the remaining 15 percent interest in the Cold Lake Pipeline LP, which owns and operates crude oil transportation pipeline from northeast Alberta to Edmonton. Total transaction value is estimated to be $531.2 million.

First Cobalt to Acquire Cobalt Industries of Canada

First Cobalt Corp. (TSXV:FCC), which acquires exploration stage mineral properties in the strategic metals sector, has agreed to acquire Cobalt Industries of Canada Inc., a privately-held Ontario based mineral exploration company. Total transaction value is estimated to be $1.7 million.

GreenSpace Brands to Acquire Nothing But Nature

GreenSpace Brands Inc. (TSXV:JTR), which develops, markets, and sells natural food products to consumers in Canada, has agreed to acquire Nothing But Nature Inc., a Canadian producer and supplier of organic beverages. Total transaction value is estimated to be $10 million.

Black Springs Capital to Acquire Groupe Geomines Resources

Black Springs Capital Corp., a capital pool company, has agreed to acquire all of the outstanding shares of Groupe Géomines Resources Inc., a privately owned junior mineral exploration company based in Québec. No transaction terms were released.

Closed

Nexonia Merges with Tallie

Nexonia Inc., a mobile applications developer owned by K1 Investment Management, has agreed to merge with Tallie, a cloud-based expense report solutions provider. No transaction terms were released.

iCON Infrastructure Acquires Bristol Water

iCON Infrastructure LLP, a principal investment firm, has acquired Bristol Water plc, a UK based drinking water supplier for homes and businesses that was previously owned by Capstone Infrastructure Corporation (TSX: CSE-A). Total transaction value is estimated to be $729 million.

Training Innovations Merges with Back in Motion Rehab

Training Innovations Inc., an employment service provider for job seekers, has agreed to merge with Back in Motion Rehab Inc., which provides rehabilitation, disability prevention, and employment services for communities in Metro Vancouver. No transaction terms were released.

Apogee Enterprises Acquires Sotawall

Apogee Enterprises, Inc. (NasdaqGS:APOG), a designer and manufacturer of window systems for commercial and security buildings, has acquired Sotawall Limited, a leading designer and fabricator of curtainwall systems for commercial construction projects in North America. Total transaction value is estimated to be $177 million.

Six S Partners Acquires Tri Gem

Six S Partners Inc., an enterprise resource planning (ERP) software and services provider across North America, has acquired Tri Gem Company LLC, a U.S. based ERP consultancy. No transaction terms were released.

Omnicom Acquires Critical Mass

Omnicom Group, Inc., a U.S. based global marketing and corporate communications holding company, has taken full control of Critical Mass, a Calgary-based mobile design and strategy agency. No transaction terms were released.

Delbrook Capital and Elemental Capital Acquire Anacott Resources

Delbrook Capital Advisors Inc., a Vancouver-based independent investment manager, and Elemental Capital Partners, LLP, a private capital company, have acquired Anacott Resources Corp., a junior mining company. No transaction terms were released.

Just Energy Acquires SWDirekt

Just Energy Group Inc. (NYSE:JE), a leading retail energy provider specializing in electricity and natural gas commodities, energy efficiency solutions, and renewable energy options, has agreed to acquire db swdirekt GmbH, a provider of natural gas and power to consumers in Germany. Total transaction value is estimated to be $39.5 million.

Altamont Capital Acquires Maxi Canada

Altamont Capital Partners, a private investment firm based in San Francisco, has acquired Maxi Canada, Inc., a Lake Pacific Partners backed, leading manufacturer of frozen poultry products based in Quebec. No transaction terms were released.

Match Marketing Group Acquires TRISECT

Match Marketing Group Inc., a Beringer Capital backed leading activation and engagement marketing agency in North America, has acquired TRISECT, LLC, a Chicago-based creative agency. No transaction terms were released.

Aircraft Technical Publishers Acquires Casebank Technologies

Aircraft Technical Publishers, a Maranon Capital and ParkerGale Capital backed aviation information solutions provider, has acquired Casebank Technologies Inc., a leader in integrated diagnostic, troubleshooting and fault detection solutions for the aviation, aerospace and defense industries. No transaction terms were released.

RS Energy Group Acquires Navport

RS Energy Group, a Warburg Pincus backed energy intelligence company, has acquired Navport Inc., a leading completion and production data company serving the upstream oil and gas market. No transaction terms were released.

OneSource Risk Management Acquires Pangaea

OneSource Risk Management Canada Inc., North America's largest specialist credit risk solutions firm, has acquired Pangaea Global Risk Management Inc., a leading trade credit and political risk insurance broker. No transaction terms were released.

Investel Capital Acquires RuralCom

Investel Capital Corporation, a principal investment firm specializing in the acquisition of telecommunications companies and development of new technologies, has acquired RuralCom Corporation, a Vancouver-based licensed wireless operator offering wholesale and retail service in underserved areas throughout Canada. No transaction terms were released.

GE Transportation Acquires Iders

GE Transportation, the world’s leading producer of rail and transportation-related products and offerings, has acquired Iders Incorporated, an electronic product design and manufacturing company for the rail industry. No transaction terms were released.