Canadian M&A Market Recap: Week Ended March 31

  • Posted By: Karen Fisman, Miranda Li, Michael Mazza, Paris Aden, Chris Angelatos, and Yingxi Liao

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  • Comments: 5

Market Update

Thirty-five Canadian M&A transactions were announced this past week. Year to date, M&A deal count is 19.0% higher than the comparable period in 2016. The Canadian dollar appreciated by 0.23 cents, ending the week at 75 cents. The TSX gained 0.7% and outperformed the S&P 500 by 0.2% in U.S. dollar terms.

The new issue environment for U.S. middle market loans remained tighter relative to last month, with average total leverage of 4.3x EBITDA compared to 4.9x at the end of February.  New issue clearing yields were 0.51% lower than last year’s levels. After averaging over 10x for the previous three years, the average purchase price multiple on LBO deals has fallen to 9.6x in Q1 2017, due to a higher concentration of smaller deals and a more diverse industry composition of LBOs.

Insight Article: The February Plummet

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.

According to a recent Mergermarkets report, in February 2017, total global deal value plummeted 43.4%, to US$135.3 billion year over year, and transaction volume decreased 41%, from 1,434 to 843. Global PE buyout activity contributed to this slowdown. In the first two months of 2017, there were 329 buyouts with a total value of US$40.7 billion, less than half of the 677 Q1, 2016 deals worth US$72 billion.

North American deal activity also slowed, though in aggregate, not as dramatically. Deal value declined 18.7% to US$80.5 billion over 320 deals, down 39% from 492 deals in February 2016. North American PE activity was a particularly weak spot, with buyout total value of US$14.4 billion over 129 deals in the first two months of 2017, compared to US$33.9 billion over 260 deals in Q1, 2016.

The sector star in February was the Energy, Mining, and Utilities sector, which led deal activity in North America with 28 acquisitions worth US$24.1 billion, although both deal value and volume were down from February 2016. Watch for more on the energy sector, and specifically, Canadian Oil & Gas, in next week’s Valitas article, where (spoiler alert) we will share our optimistic insights on sector activity through 2017. 

Getting back to the broader deal activity, what’s going on here? We’ve been writing over the past months about the mounting availability of capital, but as we’ve noted, it’s becoming increasingly difficult to source quality targets, and because of all that available capital, buyers face stiff competition. Place that scenario into the current global environment fraught with political uncertainty – think Brexit, elections in France and Germany, and Trump administration policies – and it’s no surprise that buyers are stopping to take a breath.

That said, we are optimistic for Canadian deal activity in 2017. Year to date, Canadian deal activity is up 19% over the same period in 2016 and the momentum continues. We should also see more activity in the oil & gas sector (to be discussed further next week). In addition, in spite of uncertainties related to pending White House policies, there is an optimism related to their potential outcomes reflected in a recent survey of U.S. middle market executives. According to survey results, a substantial majority of respondents report strong positive expectations relating to economic and company growth. 

In these uncertain times, we appreciate these words of wisdom from Zig Ziglar (we don’t actually know who he is, but do think the quote is fitting):

“Expect the best.  Prepare for the worst.  Capitalize on what comes.”


Cheung Kong Property Holdings to Acquire Reliance Home Comfort

Cheung Kong Property Holdings Limited (SEHK:1113), a Hong Kong company that operates as a property developer in Hong Kong and internationally, has agreed to acquire Reliance Home Comfort, an Alinda Capital Partners backed Canadian company that offers water heater rental services. Total transaction value is estimated to be $2.8 billion.

MasterCard to Acquire NuData Security

MasterCard Incorporated (NYSE:MA), an American company that provides transaction processing and other payment-related products and services in the United States and internationally, has agreed to acquire NuData Security Inc., a Canadian company that develops and markets biometrics and behavioral analytics solutions. No transaction terms were released.

Palantir Economic Solutions to Acquire Caesar Systems

Palantir Economic Solutions Ltd., a Canadian company that develops integrated planning software for the upstream oil and gas industry, has agreed to acquire Caesar Systems LLC, a Clairvest Group backed American company that, trading as PetroVR, develops and operates diversified oil and gas planning software. No transaction terms were released.

Permira Advisers to Acquire Lyophilization Services Of New England

Permira Advisers Ltd., a U.K. private equity firm, has agreed to acquire Lyophilization Services Of New England, Inc., an Clairvest Group backed American company that specializes in the aseptic fill finish and lyophilization of drug and medical device products. Total transaction value is estimated to be $106 million.

Annon Consulting to Acquire 4A Technologies

Annon Consulting, Inc., a Canadian company based in Toronto, has agreed to acquire 4A Technologies, LLC, an American company that produces urea fertilizer from biomass and natural gas. Total transaction value is estimated to be $2.4 million.

Andrew Agencies to Acquire McCracken Insurance M.I.L.

Andrew Agencies Ltd., a Canadian general insurance and travel agency, has agreed to acquire McCracken Insurance M.I.L. Ltd., a Canadian family-owned insurance company. No transaction terms were released.

Beijing BDStar Navigation to Acquire Rx Networks

Beijing BDStar Navigation Co Ltd., a Chinese company offering satellite navigation positioning products, has agreed to acquire Rx Network Inc., a Discovery Capital and Telus Ventures backed Canadian mobile positioning technology company. Total transaction value is estimated at $31 million.

StandardAero Holdings to Acquire PAS International Holdings

StandardAero Holdings Inc, a Canadian company providing aftermarket maintenance, repair and overhaul services for gas turbine engines used primarily for military, regional and business aircraft, has agreed to acquire PAS International Holdings Inc, a KRG Capital Partners backed American company providing oil and gas valve components and OEM and aftermarket aerospace and industrial gas turbine components. No transaction terms were released.



XRF Scientific Acquires Gestion Scancia

XRF Scientific Limited (ASX:XRF), an Australian company that manufactures and markets precious metal products, specialized chemicals, and instruments for the scientific, analytical, and mining industries in Australia, has acquired Gestion Scancia Inc., a Canadian company that manufactures and markets fusion fluxes for industrial laboratories and research facilities. Total transaction value is estimated to be $400 thousand.

Mullen Group Acquires Envolve Energy Services

Mullen Group Ltd. (TSX:MTL), a Canadian company that provides transportation and related services to the oil and natural gas industry, has acquired Envolve Energy Services Corp., a Canadian well disposal company that Mullen Group previously had a 37.9% stake in. No transaction terms were released.

Bridge Growth Partners Acquires Accedian Networks

Bridge Growth Partners, LLC, an American private equity firm, has acquired Accedian Networks Inc., a Canadian company that manufactures performance assurance systems. Total transaction value is estimated to be $133 million.

StarFish Product Engineering Acquires Kangaroo Group

StarFish Product Engineering Inc., a Canadian company that designs, develops and manfuactures medical devices for entrepreneurial medical device companies in North America, has acquired Kangaroo Group Inc., a Canadian company that designs and develops medical devices for emerging technology startups. No transaction terms were released.

Volaris Group Acquires ShipNet AS

Volaris Group Inc., a Canadian company that is the venture capital arm of Constellation Software, specializing in start-ups and early stage companies, has acquired ShipNet AS, a Norwegian company that provides maritime software solutions. No transaction terms were released.

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