Value Unleashed

Market Update

Fifty Canadian M&A transactions closed this past week. Year to date, M&A closed deal count is 2.4% higher than the comparable period in 2016. The Canadian dollar appreciated by 0.5 cents, ending the week at 80 cents relative to the U.S. dollar. The TSX outperformed the S&P 500 by 0.7% in U.S. dollar terms. WTI Crude oil fell by 0.9%, ending the week at $48.34 per barrel.

According to The Lead Left, total debt/EBITDA limits for Midcap U.S. companies during July 2017 averaged between 4.5x-6.0x EBITDA. This range is half a turn of EBITDA higher than the range published for June 2016 (4.0x-5.5x EBITDA). This increase in leverage capacity is likely due to increasing competition among middle market lenders. New Issue Clearing Yield and average total leverage remained unchanged from last week.

Valitas Insights: The League of the Overshadowed

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”.  

What are the trade implications for these three overshadowed nations?  Read our full article to learn more.

Canadian M&A Transactions[i]

Energy (Announced)

Kuro Coal to Acquire Elan Coal

Kuro Coal Limited, a Canadian company that offers coal mining and exploration services, has agreed to acquire Elan Coal Ltd, a Canadian company that explores and produces coking coal. Total transaction value is estimated to be $6.7 million.

Materials (Announced)

Sprott Resource Holdings to Acquire S.C. Minera Tres Valles

Sprott Resource Holdings Inc. (TSX: SRHI), a Canadian diversified holding company that focuses on the mining, energy, and agriculture sectors, has agreed to acquire S.C. Minera Tres Valles, a Chilean company that produces and markets copper cathodes. Total transaction value is estimated to be $50 million.

Erdene Resource Development to Acquire Leader Exploration

Erdene Resource Development Corporation (TSX: ERD), a Canadian company that engages in the exploration and development of precious and base mineral deposits in Mongolia, has agreed to acquire Leader Exploration LLC, a Mongolian company that owns gold exploration property. Total transaction value is estimated to be $940 thousand.

Materials (Closed)

Caisse de dépôt et placement du Québec; NAMAKOR Holdings has Acquired Gelpac

Caisse de dépôt et placement du Québec, a privately owned Canadian investment manager, and NAMAKOR Holdings, a Canadian principal investment firm, has acquired Gelpac Inc, a Canadian company that manufactures packaging solutions for industrial products and consumer goods. No transaction terms were released.

Jourdan Resources has Acquired 10320781 Canada

Jourdan Resources Inc. (TSXV: JOR), a Canadian company that engages in the acquisition, exploration, and development of lithium mining properties, has acquired 10320781 Canada Inc., a company that owns legal interest in Baillarge North Lithium – Molybdenum Property in Québec. Total transaction value is estimated to be $625 thousand.

Consumer Discretionary (Announced)

CAE to Acquire Asian Aviation Centre of Excellence

CAE Inc. (TSX: CAE), a Canadian company that designs, manufactures, and supplies simulation equipment worldwide, has agreed to acquire Asian Aviation Centre of Excellence Sdn Bhd, a Malaysian company that provides aviation training services. Total transaction value is estimated to be $125 million.

AEA Investors; Ontario Teachers' Pension Plan Board; Trilantic Capital Management to Acquire Traeger Pellet Grills

A consortium of buyers, including AEA Investors, a U.S. based Private Equity Firm, Ontario Teachers' Pension Plan Board, a Canadian privately owned pension fund and Trilantic Capital Management, a U.S. based Private Equity Firm, has agreed to acquire Traeger Pellet Grills, LLC, a Prospect Capital Management backed U.S. based manufacturer of wood pellet grills for outdoor cooking. No transaction terms were released.

Stinson Properties to Acquire Adam's Mark

Stinson Properties Inc., a Canadian company that develops real estate properties, has agreed to acquire Adam's Mark, Inc., a U.S. based owner and operator of hotels. No transaction terms were released.

Consumer Discretionary (Closed)

A5 Capital has Acquired Shift Marketing Studio

A5 Capital, a Canadian Private Equity firm, has acquired Shift Marketing Studio, Inc., a Canadian company that offers marketing services for automotive dealerships. No transaction terms were released.

Consumer Staples (Announced)

Sequoia Capital India to Acquire Faces Cosmetics

Sequoia Capital, a U.S. based venture capital firm, has agreed to acquire Faces Cosmetics Inc., a Everstone Capital Management backed Canadian company that manufactures and retails cosmetics for men and women. Total transaction value is estimated to be $50.2 million.

Healthcare (Announced)

Straumann Holding to Acquire Dental Wings

Straumann Holding AG (SWX:STMN), a Swiss company that provides tooth replacement solutions worldwide, has agreed to acquire Dental Wings Inc., a Canadian company that develops and distributes digital dentistry technologies. Total transaction value is estimated to be $389 million, implying a 3.97x revenue multiple.

Healthcare (Closed)

Umbral Energy has Acquired PhyeinMed

Umbral Energy Corp (CNSX: UMB) a Canadian company that engages in the acquisition, exploration, and development of mineral properties in North America, has acquired PhyeinMed Inc., a Canadian company that cultivates and produces cannabis for medical purposes. Total transaction value is estimated to be $1.0 million.

Information Technology (Announced)

Quorum Information Technologies to Acquire Autovance Technologies

Quorum Information Technologies Inc. (TSXV: QIS), a Canadian information technology company, has agreed to acquire Autovance Technologies Inc., a Canadian company that develops desking software for the automotive industry. No transaction terms were released.

Cameo Resources to Acquire Pinot Global

Cameo Resources Corp. (TSXV: CRU), a Canadian company that engages in the exploration of mineral properties, has agreed to acquire Pinot Global Ltd, a Bulgarian supplier and reseller of B2B smart phone and telecom peripheral hardware. No transaction terms were released.

Information Technology (Closed)

Tantalus Systems has Acquired Energate

Tantalus Systems Corp., a Altira Group, Connecticut Innovations, Discovery Capital, Redpoint Ventures, Houston Ventures, ARC Financial, Marin Investments and PenderFund Capital Management backed Canadian company that provides multi-purpose smart grid solutions and platforms, has acquired Energate Inc., a Canadian company that provides interactive energy management solutions and products for utilities and residential customers. No transaction terms were released.

CGI Group has Acquired Summa Technologies

CGI Group Inc. (TSX: GIB.A), a Canadian company that provides information technology and business process services internationally, has acquired Summa Technologies, Inc., a U.S. based company that provides digital solutions and agile software development capabilities. No transaction terms were released.

Rave Mobile Safe has Acquired Emergency Response Management Services

Rave Mobile Safety, a RRE Ventures and Sigma Partners backed U.S. based company that provides software-as-a-service based campus and public safety solutions, has acquired Emergency Response Management Services Corporation, a Canadian company that provides enterprise-class emergency notification systems. No transaction terms were released.

M-Files has Acquired Apprento

M-Files Corporation, a Partech Ventures, Draper Esprit and Finnish Industry Investment  backed U.S. based developer and provider of document management software and cloud-based document management services, has acquired Apprento Inc, a Canadian company that develops natural language processing and machine learning engines. No transaction terms were released.

Lucidea has Acquired Eloquent Systems

Lucidea Ltd, a Canadian company that provides IT services, has acquired Eloquent Systems Inc., a Canadian company that develops knowledge management software solutions for managing archives, libraries, museums, and records. No transaction terms were released.

Other (Announced)

Royalty North Partners to Acquire Advance Wire Products

Royalty North Partners Ltd. (TSXV: RNP), a Canadian company that provides royalty financing to businesses, has agreed to acquire Advance Wire Products Ltd, a Canadian designer and manufacturer of innovative merchandising solutions. No transaction terms were released.

Savaria to Acquire Visilift

Savaria Corporation (TSX: SIS), a Canadian company that operates in the accessibility industry, has agreed to acquire Visilift LLC, a U.S. based manufacturer of home elevators. Total transaction value is estimated to be $10.0 million.

1040433 B C to Acquire eXeBlock Technology

1040433 B C Ltd, a Canadian company that has no significant operations, has agreed to acquire eXeBlock Technology Inc., a Canadian company that develops and operates blockchain software solutions. No transaction terms were released.

Other (Closed)

Accenture has Acquired Verax

Accenture plc (NYSE: ACN), an Irish company that provides consulting, technology, and outsourcing services worldwide, has acquired Verax Inc, a Canadian company that provides consulting services. No transaction terms were released.

Assumption Group has Acquired Tech Knowledge Solutions

Assumption Group, a Canadian company that provides financial planning, investment management, and real estate management services, has acquired Tech Knowledge Solutions, a Canadian provider of technology services. No transaction terms were released.

Student Transportation has Acquired Annapolis Bus Company

Student Transportation Inc. (TSX:STB), a Canadian company that provides school bus transportation and management services to public and private schools in North America, has acquired Annapolis Bus Company, Inc., a U.S. based provider of school bus transportation services. No transaction terms were released.

WTS Paradigm has Acquired 360 Innovations

WTS Paradigm, LLC, a U.S. based provider of enterprise resource planning software, has acquired 360 Innovations, a Canadian company that provides ERP and integrated software suites for manufacturers and distributors. No transaction terms were released.

Nicola-Crosby Real Estate Asset Management has Acquired Dunbar CBC

Nicola-Crosby Real Estate Asset Management Ltd, a Canadian real estate investment firm specializing in acquisitions of multi-family residential properties and commercial real estate assets, has acquired Dunbar CBC LLC, a U.S. based affiliate of Dunbar Real Estate Investment Management. Total transaction value is estimated to be $14.5 million.

COROB acquires Novaflow Systems

COROB S.p.A., a Wise SGR backed Italian manufacturer and distributer of advanced tinting equipment for the paints and coatings industry, has acquired Novaflow Systems Inc., a Canadian manufacturer of in-plant dispensing equipment and software solutions for industrial applications. No transaction terms were released.

Telus International acquires Voxpro

Telus International, a Baring Private Equity Asia backed Canadian company that provides contact center, customer care, and business process outsourcing (BPO) solutions, has acquired Voxpro, an Ireland-based provider of outsourced multilingual customer service, technical support and sales operations solutions. No transaction terms were released.