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Canadian M&A Market Recap: Week Ended January 6, 2017

  • Posted By: Karen Fisman, Louis Goldberg, Miranda Li, Michael Mazza, Paris Aden, Clear Li. and Manar Hassan-Agha

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  • Comments: 1

Market Update

Twenty-nine M&A transactions were announced this past week. WTI Crude Oil prices increased slightly after falling at the beginning of the week. The Canadian dollar rose by 1.24 cents this past week and the TSX overperformed relative to the S&P 500 by 1.3% in U.S. dollar terms.

Total debt/EBITDA levels for U.S. middle market companies decreased slightly to 4.8x.

Valitas Insights:  Avoiding Post-Acquisition Surprises

During a recent conversation with a senior M&A lawyer, I mentioned that I was writing an article about avoiding post-acquisition surprises.  “Send me a copy,” was his response.  “We’re all trying to avoid those.”

When buyers consider an acquisition target, the focus is typically on strategic fit and valuation. The subsequent due diligence process is used as a security blanket to validate the buyer’s vision of the target.  However, the typical due diligence checklist doesn’t address the subjective areas of the business – those involving people, culture and processes – that are often the source of post-acquisition surprises.

The very nature of a surprise, of course, is that it is unexpected, which leads to the following question. How does one anticipate the unexpected while engaged in the acquisition process?

“Predictions are difficult, especially about the future”

-Niels Bohr, Physicist and Nobel Prize Winner

This question is considered in a recent National Center for The Middle Market article. The authors surveyed executives, investors, and advisors, and distilled several useful insights and recommendations from their experiences.

Survey participants reported that post-acquisition surprises impacting value expectations were more typically found outside typical due diligence areas, with the highest surprise risks coming from:

1. People/Organization;

2. Customer/Market; and

3. Integration focused operations.

While there is no hard and fast rule around creating certainty in these softer areas (a subjective due diligence checklist misses the point), there are several steps that a prospective buyer can take to mitigate the risk of surprise.

  1. Be clear about “what you have to believe” for financial projections to materialize.  Run sensitivity analyses using different scenarios.  For example, where the buyer is restricted from talking to the target’s customers, there may be issues that are only apparent post-closing that impact financial projections for Year 1. 
  1. Use scenario analysis to try and anticipate surprises.  Examples include considering the impact of a clash in corporate culture, or unplanned departures of key executives or employees.  How would these factors impact the combined operations?
  1. Start the integration planning early, and include key acquirer employees in the process so different perspectives are heard.
  1. Don’t get emotionally attached to the target; try to maintain objectivity and rigour throughout the due diligence process.

With less experience in M&A and fewer resources to manage the process, mid-market acquirers are more likely to encounter post-acquisition surprises than their larger counterparts.  A trusted external advisor can be an invaluable resource, raising issues and considering scenarios from a different, outsider perspective.  As a wise man once said: “I like friends who have independent minds because they tend to make you see problems from all angles.”[1] And this is a critical step towards avoiding post-acquisition surprises.


[1] Nelson Mandela

 

Weekly M&A Deal Summary

Announced

Palisades Ventures to Acquire Intermont Exploration

Palisades Ventures Inc. (TSXV:PSV), a Canadian acquirer and developer of mineral resource properties, has agreed to acquire Intermont Exploration LLC, a U.S. based company that engages in the exploration of gold, precious, and base metals. Total transaction value is estimated to be $ 423 thousand.

Wheels International to Acquire Lomas Logistics

Wheels International Inc, a Canadian company that provides logistics services to the food and beverage, consumer packaged goods, frozen foods and refrigerated products, and building products sectors, has agreed to acquire Lomas Logistics Limited, a Canadian company that provides third party logistics solutions to clients in consumer goods, healthcare, technology, telecom, and various other industries internationally. No transaction terms were released.

M Pharmaceutical to Acquire 40 J's

M Pharmaceutical Inc. (CNSX:MQ), a Canadian clinical-stage biomedical technology company, has agreed to acquire 40 J's, LLC, a U.S. based company that develops medical products focused on patient health. Total transaction value is estimated to be $4.73 million.

Anthem Sports & Entertainment to Acquire TNA IMPACT Wrestling

Anthem Sports & Entertainment Corp., a Northern Pacific Group backed Canadian company that owns and operates specialty television channels on linear, digital, and mobile platforms, has agreed to acquire TNA IMPACT Wrestling, a U.S. based company that organizes wrestling events for television broadcast. No transaction terms were released.

XLMedia PLC to Acquire GreedyRates.ca

XLMedia PLC (AIM:XLM), an online marketing company that attracts and directs paying users to online businesses, has agreed to acquire GreedyRates.ca Inc., a Canadian company that helps users instantly compare credit card benefits. Total transaction value is estimated to be $12.48 million.

Stingray Digital Group to Acquire Classica GmbH

Stingray Digital Group Inc. (TSX:RAY.A), a Canadian company that provides business-to-business multi-platform music and in-store media solutions worldwide, has agreed to acquire Classica GmbH, a German company that broadcasts live events and world premieres internationally, from stages, festivals, and music events. No transaction terms were released.

Arm’s Length Private Party to Acquire Sandgold SA

An arm’s length private party has agreed to acquire Sandgold SA, a wholly owned subsidiary of Glen Eagle Resources Inc. (TSX Venture: GER), a Canadian business that explores, develops, mines, and produces mercury and gold. Total transaction value is estimated to be $100 thousand.

SG Spirit Gold to Acquire Northern Lights Marijuana Company

SG Spirit Gold Inc. (TSXV:SG), a Canadian company that acquires, explores and evaluates mineral resource properties in Canada, has agreed to acquire Northern Lights Marijuana Company Limited, a Canadian company committed to becoming a licensed producer of craft cannabis strains. No transaction terms were released.

Razor Energy to Acquire Vector Resources

Razor Energy Corp., a Canadian oil and gas exploration, development, and production company, has agreed to acquire Vector Resources Inc., a Canadian capital pool company. No transaction terms were released.

Relevium Technologies to Acquire BioGanix

Relevium Technologies Inc. (TSXV:RLV), a Canadian consolidator of e-commerce businesses, physio clinics, and technologies in the health and wellness market, has agreed to acquire BioGanix Ltd., a U.S. producer and seller of dietary supplement products under the brand name BioGanix. Total transaction value is estimated to be $5.7 million, reflecting a 3.3x EBITDA multiple.

Enerdynamic Hybrid Technologies to Acquire EEB Systems

Enerdynamic Hybrid Technologies Corp. (TSXV:EHT), a Canadian company that produces and distributes alternative energy products primarily in Canada, has agreed to acquire EEB Systems LLC, a building products company that develops and manufactures modular housing projects. No transaction terms were released.

Founders Advantage Capital to Acquire Impact Radio Accessories

Founders Advantage Capital Corp. (TSXV:FCF), a Canadian investment company, has agreed to acquire Impact Radio Accessories Inc., a Canadian manufacturer and distributor of two-way radio accessories in the land mobile radio industry. Total transaction value is estimated to be $12 million.

Brookfield Asset Management to Acquire Concesionaria Gasoducto Sur Peruano

Brookfield Asset Management Inc. (TSX:BAM.A), a Canadian asset management holding company, has agreed to acquire Concesionaria Gasoducto Sur Peruano S.A., a Peru-based oil and gas company that operates a network of pipelines for the transportation of hydrocarbons and natural gas. No transaction terms were released.

Imvescor Restaurant Group to Acquire Ben & Florentine Restaurants

Imvescor Restaurant Group Inc. (TSX:IRG), a Canadian franchise licensing company operating franchised and corporate restaurants under the Pizza Delight, toujours Mikes, Scores, and Baton Rouge brands, has agreed to acquire Ben & Florentine Restaurants Inc., a leading Canadian franchisor in the breakfast and lunch category. Total transaction value is estimated to be $25 million.

Alberta Investment Management to Acquire Howard Energy Partners

Alberta Investment Management Corporation, a crown corporation of the Province of Alberta, has agreed to acquire Howard Midstream Energy Partners, LLC, an Alinda Capital Partners LLC backed provider of integrated platforms to oil and gas producers. Total transaction value is estimated to be $254.3 million.

Thornton Tomasetti to Acquire Swallow Acoustic Consultants

Thornton Tomasetti Inc., a Canada-based international engineering firm, has agreed to acquire Swallow Acoustic Consultants Limited, an engineering company that offers acoustics, vibrations, and noise control engineering services. No transaction terms were released.

Jusu Bars to Acquire Krokodile Pear Foods

Jusu Bars Inc., a Canadian company that produces cold-pressed juices and smoothies, has agreed to acquire Krokodile Pear Foods Ltd., a Canadian producer of cold-pressed juices, blended juices, and nut milks. No transaction terms were released.

Baird AE to Acquire Jorden & Cook Architect

Baird AE Inc., a Canadian company that offers engineering, planning, and architectural services, has agreed to acquire Jorden & Cook Architect Ltd., a Canadian architectural and design firm. No transaction terms were released.

Universal Biosensors to Acquire Hemostasis Reference Laboratory

Universal Biosensors, Inc. (ASX:UBI), an Australian medical diagnostics company, has agreed to acquire Hemostasis Reference Laboratory Inc., a Canadian business that provides coagulation testing services to customers in Canada and internationally. No transaction terms were released.

Marine Harvest ASA to Acquire Gray Aqua Group

Marine Harvest ASA (OB:MHG), a Norwegian producer and seller of farmed salmon products worldwide, has agreed to acquire Gray Aqua Group Ltd., a Canadian salmon processing company. Total transaction value is estimated to be $15 million.

CCL Industries to Acquire Innovia Group

CCL Industries Inc. (TSX:CCL.B), a world leader in specialty label, security and packaging solutions, has agreed to acquire Innovia Group Limited, an Electra Private Equity, Epiris Managers LLP, and Smithfield Group LLP backed U.K.-based producer of surface engineered Biaxially Oriented Polypropylene Film for label, packaging and security applications. Total transaction value is estimated to be $1.13 billion, implying a 7.3x EBITDA and 3.6x revenue multiple.

Hamblin Watsa Investment Counsel to Acquire Farmers Edge Precision Consulting

Hamblin Watsa Investment Counsel Ltd., a Canadian investment manager, has agreed to acquire Farmers Edge Precision Consulting Inc., a Kleiner Perkins Caufield & ByersMitsui & Co. Global Investment, Inc., Avrio Capital Inc., and Green Growth Fund backed Canadian business that provides precision agriculture and data management solutions to producers internationally. No transaction terms were released.

Onex to Acquire Parkdean Resorts

Onex Corporation (TSX:ONEX), a Canadian private equity firm, has agreed to acquire Parkdean Resorts Limited, an Alchemy Partners LLPPolygon Investment Partners LLP, and Epiris Managers LLP backed business that operates holiday parks in the United Kingdom. Total transaction value is estimated to be $2.25 billion.

Dalian Zeus Entertainment to Acquire Pocket Technology

Dalian Zeus Entertainment Co., Ltd. (SZSE:002354), a China-based online games publisher and developer, has agreed to acquire Pocket Technology, a Canadian developer and retailer of specialized software for Personal Digital Assistants. Total transaction value is estimated to be $205 million.

 

Closed

9949941 Canada Acquires Boreal Agrominerals

9949941 Canada Inc., a Canadian-based company, has acquired Boreal Agrominerals Inc., a Canadian producer of mineral fertilizers and soil amendment products for bulk agricultural markets and retail settings. Total transaction value is estimated to be $960 thousand.

Colliers International Acquires Walker Companies

Colliers International Group Inc. (TSX:CIGI), a global leader in commercial real estate services, has acquired The Walker Companies, Inc., a U.S. based real estate consulting services provider. No transaction terms were released.

Colliers International Acquires Vision Asset Management

Colliers International has also acquired Vision Asset Management Co. (Holdings) Ltd., a UK based asset management advisory and consultancy services provider in the hospitality sector. No transaction terms were released.

Parabellum Capital Acquires Razor Risk Technologies

Parabellum Capital LLC, a private equity firm, has acquired Razor Risk Technologies Limited, which engages in the development and integration of risk management software for the financial sector in Australia and internationally. No transaction terms were released.

ATX Networks Acquires Pico Digital

ATX Networks Corp., an H.I.G. Capital backed leading global provider of cable television and private video networks products, has acquired Pico Digital Inc., a U.S. developer, producer, and supplier of solutions to the satellite video and radio broadcasting markets. No transaction terms were released.

Snowflake Technologies Acquires Learn Anything

Snowflake Technologies, Inc., doing business as LivingTree, which develops private and social networks for the K-12 education systems, has acquired Learn Anything, Inc., a Canadian custom computer programming service company. No transaction terms were released.

McCarthy Tétrault Acquires Wortzmans

McCarthy Tétrault LLP, a Canadian legal advisory service provider, has acquired Wortzmans, one of the first Canadian legal service providers specializing in the complexities of technology and the law. No transaction terms were released.

Compuware Acquires MVS Solutions

Compuware Corporation, an Accolade Partners and Thoma Bravo backed technology performance company providing software solutions and application practices for information technology organizations worldwide, has acquired MVS Solutions Inc., a mainframe batch automation technology company. No transaction terms were released.

McCoy Global Acquires 3PS

McCoy Global Inc. (TSX:MCB), which provides equipment and technologies for the oil and gas industry, has acquired 3PS, Inc., which specializes in sensors, systems and services for heavy industry applications. Total transaction value is estimated to be $8.1 million.

Pason Systems Acquires Verdazo Analytics

Pason Systems Inc. (TSX:PSI), a leading global provider of specialized data management systems for drilling rigs, has acquired Verdazo Analytics Inc., a Calgary-based software company offering discovery analytics. No transaction terms were released.

HUB International Acquires Mainline Insurance

HUB International Limited, an AlpInvest Partners and Hellman & Friedman backed U.S. insurance brokerage, has acquired Mainline Insurance Brokers Inc., a Canadian insurance broker services provider to clients in South Eastern Saskatchewan. No transaction terms were released.

PCM Acquires Stratiform

PCM, Inc. (NasdaqGM:PCMI), a North American multi-vendor technology solutions provider, has acquired Stratiform, Inc., an industry-leading provider of cloud IT solutions. Total transaction value is estimated to be $3.9 million.

BDO Canada Merges with Etelligent Solutions

BDO Canada LLP, a Canadian accounting and management advisory firm, has merged with Etelligent Solutions Inc., a Canada-based consulting firm that specializes in technology-enabled solutions. No transaction terms were released.

Bell Media Acquires Cieslok Media

Bell Media Inc., a Stadnyk and Partners backed multimedia services company, has acquired Cieslok Media, an out-of-home advertising services provider in Canada. No transaction terms were released.

Waste Connections Acquires Groot Industries

Waste Connections, Inc. (NYSE:WCN), a North American solid waste services company, has acquired Groot Industries Inc., a solid waste management services provider in Illinois. No transaction terms were released.

NFI Acquires Dominion Warehousing & Distribution

NFI Industries, Inc., a U.S. based international third-party logistics and supply chain solutions provider, has acquired Dominion Warehousing & Distribution Services Ltd., one of the largest privately held integrated supply chain solutions providers in North America. No transaction terms were released.

Archway Insurance Acquires D.R. Hayman Insurance

Archway Insurance Inc., an Atlantic Canada insurance brokerage services provider, has acquired D.R. Hayman Insurance, a personal and business insurance provider in Pictou County area. No transaction terms were released.

Alumichem Acquires Nordisk

Alumichem Inc., a Canadian manufacturer and distributer of specialty chemicals for the water, waste-water treatment, and energy industries, has acquired Nordisk Aluminat A/S, a Danish manufacturer of aluminates for use in water purification processes, the concrete industry, and the paper pulp industry. No transaction terms were released.

Sentinel Capital Invest in Altima Dental Canada

Sentinel Capital Partners, L.L.C., a private equity firm, has invested in Altima Dental Canada, Inc., one of the largest dental services organization in Canada. No transaction terms were released.

Bradam Group Acquires Elementa Group

Bradam Group LLC, a U.S.-based business that converts carbon-based waste material into synthetic gas to be used as a clean energy fuel, has acquired Elementa Group Inc., a Canadian renewable energy company that converts carbon-based waste material into synthetic gas. No transaction terms were released.

TFI International Acquires National Fast Freight

TFI International Inc. (TSX:TFII), a Canadian transport and logistics company, has acquired National Fast Freight Inc., a transportation company that provides less than truckload and truckload services in Canada. No transaction terms were released.

Brewster Acquires Soaring Attractions

Brewster Inc., a travel and tourism services company in Canada, has acquired Soaring Attractions LP, a Canadian business that develops, owns, and operates themed entertainment attractions. Total transaction value is estimated to be $68.8 million.

The Descartes Systems Group Acquires Datamyne

The Descartes Systems Group Inc (TSX:DSG), a Canadian company that provides federated network and logistics technology solutions worldwide, has acquired Datamyne, Inc., a U.S.-based trade data analytics firm that covers the import/export trade internationally. Total transaction value is estimated to be $71.3 million.

Belron Canada Acquires Speedy Collision

Belron Canada Inc., an automotive glass replacement and repair services provider, has acquired Speedy Collision Ltd., a vehicle damage repair company that operates as a network of 24 collision centers across Canada. No transaction terms were released.

Centric Health Acquires Vic's Pharmacy Services

Centric Health Corporation (TSX:CHH), a health care service provider in Canada, has acquired Vic's Pharmacy Services Ltd, an Alberta-based specialty pharmacy operations company. Total transaction value is estimated to be $6.1 million.

Centric Health Acquires RPH.A.R. Consulting

Centric Health Corporation has also acquired RPH.A.R. Consulting Inc., an independent Alberta-based company that offers long-term care and supportive pharmacy services. Total transaction value is estimated to be $2.5 million.

Infinite Electronics Acquires KP Performance

Infinite Electronics, LLC, a U.S.-based supplier of engineering grade RF components, assemblies and wired/wireless connectivity solutions, has acquired KP Performance Inc., an independent Canadian manufacturer of broadband antennas and accessories. No transaction terms were released.

Pure Technologies Acquires E-MAC Corrosion

Pure Technologies Ltd. (TSX:PUR), a Calgary-based company that engages in the development and application of technologies for inspection, monitoring, and management of physical infrastructure worldwide, has acquired E-MAC Corrosion Inc., an independent Edmonton-based  pipeline inspection and corrosion prevention services provider. Total transaction value is estimated to be $4.6 million.

Maple Farm Equipment Acquired

Maple Farm Equipment Partnership, an independent business that offers John Deere farm equipment, parts, and services in Saskatchewan, has been acquired. No buyer details were released. Total transaction value is estimated to be $9.1 million.

Petrocapita Acquires Crucible Resources

Petrocapita GP II Ltd (CSE:PCE.UN), a Canadian company that owns and operates heavy oil production and infrastructure assets, has acquired Crucible Resources Corp., an independent oil and gas company that develops medium gravity oil assets in Saskatchewan. No transaction terms were released.

Morneau Shepell Acquires Solareh International

Morneau Shepell Inc. (TSX:MSI), a Canadian leading human resource consulting and technology company, has acquired Solareh International Inc., a Montreal-based health insurance provider. No transaction terms were released.

TorQuest Partners Acquires Can Art Aluminum Extrusion

TorQuest Partners, Inc., a Canadian private equity firm that invests in middle market companies, has acquired Can Art Aluminum Extrusion Inc., a Canadian manufacturer and seller of aluminum extrusions. No transaction terms were released.

Carver Group Acquires Applied Comfort Products

Carver Group Limited, a U.K.-based manufacturer of heating, air conditioning, and refrigeration equipment, has acquired Applied Comfort Products Inc., a Canadian company that develops, manufactures, and services a range of packaged terminal air conditioners in North America. No transaction terms were released.

North American Substation Services Acquires NOMOS SYSTÈMES

North American Substation Services, LLC, an Industrial Growth Partners backed company that provides installation, repair, and maintenance services to high voltage substation equipment in the United States, has acquired NOMOS SYSTÈMES INC., a Québec-based manufacturer of control cabinets and electrical apparatus for high voltage equipment. No transaction terms were released.

Northern Biologics Acquires Mosaic Biomedicals

Northern Biologics Inc., a Versant Ventures, Inc. backed Canadian biotechnology company that develops antibody-based therapeutics for oncology and fibrosis, has acquired Mosaic Biomedicals SL, a Spanish company that develops personalized cancer treatments specifically designed to target cancer stem cells. No transaction terms were released.

Grey Advertising Acquires Entreprise de Communications Tank

Grey Advertising ULC, a Canadian marketing communications company, has acquired Entreprise de Communications Tank Inc., a healthcare and consumer agency that provides consumer and health marketing services in Montréal. No transaction terms were released.

FinishMaster Canada Acquires Vancouver Autocolor

FinishMaster Canada, Inc., a leading distributor of automotive paints, coatings, and related accessories, has acquired Vancouver Autocolor Ltd., an independent company that owns and operates paint and body shops in British Columbia. No transaction terms were released.

DAC Group Acquires ad× media

DAC Group (Holdings) Limited, a Canadian digital advertising business operating in North America, has acquired ad× media GmbH, a German marketing company. No transaction terms were released.

Tank Holding Acquires Agri Plastics’ Material Handling Division

Tank Holding Corp., North America’s largest rotational molder, has acquired Agri Plastics’ Material Handling Division, a leading rotational molder of a wide range of products. No transaction terms were released.

Acasta Enterprises Acquires Apollo Health & Beauty Care     

Acasta Enterprises Inc. (TSX: AEF), a leading Canadian company that specializes in the acquisition of companies with value creation potential, has acquired Apollo Health & Beauty Care Partnership, one of the largest private label personal care manufacturers in North America. Total transaction value is estimated to be $390 million.

Acasta Enterprises Acquires JemPak   

Acasta Enterprises has also acquired JemPak Corporation, which manufactures and distributes store brand laundry and dish cleaning products for a range of retail stores. Total transaction value is estimated to be $135 million.

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