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Canadian M&A Market Recap: Week Ended February 3rd

  • Posted By: Karen Fisman, Louis Goldberg, Miranda Li, Michael Mazza, Clear Li and Paris Aden

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  • Comments: 1

Market Update

Thirty-four Canadian M&A transactions were announced this past week. The Canadian dollar appreciated relative to the U.S. dollar by 0.64 cents, ending the week at 77 cents. The TSX outperformed the S&P 500 by 0.1% in U.S. dollar terms, reflecting the effect of a rising Canadian dollar.

The new issue environment for U.S. middle market loans remains robust, with average total leverage at 4.9x EBITDA, unchanged from last week. New issue clearing yields over the past week were 6.9%, representing a 0.55% increase over the same period last year.    

The Lower Middle Market: Resilience in the Face of a Buyout Slowdown

“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.

Middle market private equity (PE) activity registered lower deal value and volume in 2016.  There were 1,908 deals closed, with a total value of $355.8 billion, representing decreases, respectively of 11.6% and 8.1% from 2015. This slowdown still places middle market activity ahead of the overall U.S. PE market, where deal value and volume fell, respectively, 12.0% and 14.4% year over year. 

As we’ve noted previously, PE investors are facing daunting competition from strategic buyers.  That competitive pressure appears to increase with the size of target, as strategics can justify higher valuations for large acquisitions[1], and are currently supported by lofty stock prices and record amounts of cash on their balance sheets.  With these buyers focusing their sights on larger acquisitions in the middle market and beyond, PE investors are directing their attention towards smaller targets that trade at lower multiples, including add-on acquisitions for existing portfolio companies.  This is the source of resilience for LMM deal activity.

In 2016, the LMM saw an increase in deal value of 21.3% over 748 transactions (a similar number of transactions to 2015).  Compare this to the upper middle market, which saw deal value decline by 20.3% and deal volume by 28.5%.

 

This pattern of PE deal activity makes sense to us, in an environment where PE’s are competing against strategic buyers for a shrinking pool of larger targets.  In pursuing smaller (LMM)  targets as add-ons to existing platforms, PE owned platform companies will already have infrastructure and management in place, and there is the potential benefit of cost-side and distribution synergies and multiple arbitrage.  In addition, there is a clear relationship between valuation and size of target.  With valuations reaching lofty new heights, the pursuit of smaller, add-on acquisitions at lower multiples represents an effective path to value creation for PE investors.

 

Weekly M&A Deal Summary

Announced

Liberty Leaf to Acquire GR8 Track

Liberty Leaf Holdings Ltd. (CNSX:WER), a Canadian company focused on building and supporting a diversified portfolio of cannabis-sector businesses, has agreed to acquire GR8 Track, Inc., a California-based medical cannabis producer. Total transaction value is estimated to be $2 million.       

Xylitol Canada to Acquire Nektar Naturals Holdings

Xylitol Canada Inc. (TSXV:XYL), a Canadian xylitol and xylitol based-products manufacturer, has agreed to acquire Nektar Naturals Holdings, Inc., an American natural sweetener producer. Total transaction value is estimated to be $715 thousand.

Kew Media Group to Acquire Our House Media

Kew Media Group Inc. (TSX:KEW.A), a Toronto-based special purpose acquisition company (SPAC), has agreed to acquire Our House Media Inc., a Canadian content creation company. Total transaction value is estimated to be $7.5 million.

Kew Media Group to Acquire Media Headquarters Film & Television

Kew Media Group Inc. has also agreed to acquire Media Headquarters Film & Television Inc., a Canadian broadcasting and media production company. Total transaction value is estimated to be $4.3 million.

Kew Media Group to Acquire Frantic Films

Kew Media Group Inc. has also agreed to acquire Frantic Films Corporation, a PRIVEQ Capital Funds backed Canadian films and television programs producer. Total transaction value is estimated to be $7.1 million.

Kew Media Group to Acquire Bristow Global Media

Kew Media Group Inc. has also agreed to acquire Bristow Global Media Inc., a Canadian specialized content production company. Total transaction value is estimated to be $7.1 million.

Kew Media Group to Acquire Architect Films

Kew Media Group Inc. has also agreed to acquire Architect Films Inc., a Toronto-based television production company. Total transaction value is estimated to be $4.5 million.

Kew Media Group to Acquire Content Media

Kew Media Group Inc. has also agreed to acquire Content Media Corporation plc, a Syntek Capital backed, U.K.-based film, television and digital sales company. Total transaction value is estimated to be $137 million, implying a 16.1x EBITDA multiple.

First Cobalt to Acquire Cobalt Projects International

First Cobalt Corp. (TSXV:FCC), a Canadian company focusing on the acquisition of exploration stage mineral properties, has agreed to acquire Cobalt Projects International Corp., a Canadian mineral exploration company. No transaction terms were released.

MYM Nutraceuticals to Acquire Sublime Culture

MYM Nutraceuticals Inc. (DB:0MY), a Canadian medical marijuana producer and distributor, has agreed to acquire Sublime Culture Inc., a Canadian medical cannabis producer. Total transaction value is estimated to be $122 thousand.

Savaria to Acquire Premier Lifts

Savaria Corporation (TSX:SIS), one of North America's leaders in the accessibility industry, has agreed to acquire Premier Lifts, Inc., an American residential elevators and accessibility equipment supplier. Total transaction value is estimated to be $4.6 million.

Spriza Media to Acquire FanLogic

Spriza Media Inc. (TSXV:SPZ), a Canadian incentive marketing system developer, has agreed to acquire FanLogic LLC, a U.S.-based sports and social gaming platform developer. Total transaction value is estimated to be $2.9 million.

Asia Pacific Education Group to Acquire CG Masters Academy

Asia Pacific Education Group, a post-secondary education company that operates Canadian Tourism College, has agreed to acquire CG Masters Academy Inc., a Canadian company that offers professional training for studio production. No transaction terms were released.

KMG Chemicals to Acquire Sealweld

KMG Chemicals, Inc. (NYSE:KMG), a global provider of specialty chemicals, has agreed to acquire Sealweld Corporation, a First West Capital backed, global supplier of high-performance products and services for industrial valve and actuator maintenance. Total transaction value is estimated to be $22.6 million, implying a 6.7x EBITDA multiple.

DATA Communications Management to Acquire Eclipse Colour and Imaging

DATA Communications Management Corp. (TSX:DCM), a Canadian business communications management company, has agreed to acquire Eclipse Colour and Imaging Corp., a Canadian large-format and point-of-purchase printing and packaging company. Total transaction value is estimated to be $8.8 million.

DATA Communications Management to Acquire Thistle Printing

DATA Communications Management Corp. (TSX:DCM) has agreed to acquire Thistle Printing Limited, a VRG Investment backed, full service commercial printing company. Total transaction value is estimated to be $6.4 million.

Cooper Rentals Canada to Acquire 4-Way Equipment Rentals

Cooper Rentals Canada Inc., a SeaFort Capital backed, construction equipment rental services provider, has agreed to acquire 4-Way Equipment Rentals Corp., a Canadian full-service construction equipment rental company. 4-Way Equipment Rentals is a subsidiary of Canadian Equipment Rentals Corp (TSX-V: CFL). Total transaction value is estimated to be $8.5 million.

British Columbia Investment Management to Acquire Hayfin Capital Management

British Columbia Investment Management Corporation, a Canadian privately owned investment manager, has agreed to acquire Hayfin Capital Management LLP, a TowerBrook Capital Partners, Public Sector Pension Investment Board, OMERS Private Equity, and Australian Government Future Fund backed, leading European credit platform. No transaction terms were released.

Richardson Pioneer to Acquire Crop First Agro

Richardson Pioneer Limited, a division of Winnipeg-based agribusiness giant Richardson International, has agreed to acquire Crop First Agro Ltd., a Canadian seed and crop protection products manufacturer. No transaction terms were released.

Avyonce Cosmedics to be Divested

Avyonce Cosmedics Inc., a wholly-owned subsidiary of bio-tech company Cell MedX Corp. (OTCPK:CMXC), marketing and distributing spa technologies, is to be divested. No transaction details were released.             

Mueller Water Products to Acquire Singer Valve

Mueller Water Products, Inc. (NYSE:MWA), an American manufacturer and marketer of products and services used in the transmission, distribution and measurement of water in North America, has agreed to acquire Singer Valve Inc, a Canadian manufacturer of automatic control valves. Total transaction value is estimated to be $34 million.

Valparaiso Energy and Oro Sur to Acquire Minexos

Valparaiso Energy Inc (TSXV:VPO.H), a Canadian petroleum and natural gas reserves development company, has agreed to acquire Minexos S.A.S., a Colombia-based mining company. Total transaction value is estimated to be $393 thousand.

National Epicure to Acquire A-1 Bags & Supplies

National Epicure, Inc., a Canadian distributor of packed food products, has agreed to acquire A-1 Bags & Supplies Inc., a Canadian distributor and wholesaler of food service products, operating A1 Cash + Carry stores. No transaction terms were released.

Guangxi Bossco Environmental Protection Technology to Acquire RemedX Remediation Service

Guangxi Bossco Environmental Protection Technology Co.,Ltd. (SZSE:300422), an IPV Capital, Shenzhen Fortune Venture Capital Management, and Fortune Venture Capital backed, Chinese environmental engineering company, has agreed to acquire RemedX Remediation Service Inc., a Canadian remediation, reclamation, technical, and waste management services provider. Total transaction value is estimated to be $13.2 million.

Closed 

Jamieson Laboratories Acquires Body Plus

Jamieson Laboratories Ltd., a CCMP Capital Advisors and Stockton Road Capital backed, Canadian natural health products manufacturer, has acquired Body Plus, a U.S.-based manufacturer and marketer of innovative natural health and sports nutrition supplements. No transaction terms were released.

Quantum Capital Acquires Apache Industrial Services

Quantum Capital, a Canadian private equity firm, has acquired Apache Industrial Services, Inc., a leading U.S.-based provider of multi-craft industrial services. No transaction terms were released.  

LDC Logistics Acquires Metro Supply Chain Group

LDC Logistics Holdings Inc., a Canadian diversified holding company, has acquired Metro Supply Chain Group Inc., a Novacap backed, leading provider of third-party logistics (3PL) services across Canada. No transaction terms were released.

Trescal Acquires Digital Measurement Metrology

Trescal SA, an IDInvest Partners and Ardian backed, French company specializing in calibration services, has acquired Digital Measurement Metrology, Inc., a Canadian calibration services provider. No transaction terms were released.

Composites One Acquires BMB Solutions Composites

Composites One LLC, a leading North American supplier of composites raw materials and value added services, has acquired BMB Solutions Composites Inc., a Canadian provider of composite materials and ancillary supplies. No transaction terms were released.

TFI International Acquires Cavalier Transportation Services

TFI International Inc. (TSX:TFII), a North American leader in the transportation and logistics industry, has acquired Cavalier Transportation Services Inc., a Canadian freight forwarding services provider. No transaction terms were released.

Navitar Acquires Vitana

Navitar, Inc., an American designer, developer, and manufacturer of innovative optical solutions, has acquired Vitana Corporation, a GrowthWorks and BMO Capital Partners backed, Canadian designer and manufacturer of digital cameras for machine vision, scientific, and industrial applications. No transaction terms were released.

HealthBrands Acquires Ask the Veterinarian

HealthBrands Inc., a Canadian operator of online healthcare platforms, medical clinics, and health & wellness centers, has acquired Ask the Veterinarian, an American pet health platform. No transaction terms were released.

Morris Capital Management and Henry & Wallace Acquire Polar Window of Canada

Morris Capital Management, LLC, a private equity firm; and Henry & Wallace, LLC, a commercial and institutional buildings developer and manager, have acquired Polar Window of Canada Ltd., a Riverside Company backed Canadian manufacturer of window and door systems for residential customers living in climates prone to extreme weather. No transaction terms were released.

Sentinel Acquires ASF Advisory Group

Sentinel Financial Group, Inc., a financial services provider, has acquired ASF Advisory Group Inc, a Canadian managing general agency. No transaction terms were released.

WinMedia Group Acquires OMT Technologies

WinMedia Group, SAS, a ACG Management backed, France-based software provider, has acquired OMT Technologies Inc., a Canadian technology solutions provider, selling under the iMediaTouch brand name. No transaction terms were released.

Probat Acquires ED Industrial Ltd and ED Industrial USA

Probat Inc., an American industrial coffee roasting and grinding machines manufacturer, has acquired ED Industrial Ltd. and ED Industrial USA Inc., Canadian millwrighting and heavy steel fabrication companies operating in the food and beverage industry. No transaction terms were released.

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