Value Unleashed

Market Update

Forty-two Canadian M&A transactions closed this past week. Year to date, M&A closed deal count is 10.3% higher than the comparable period in 2016. The Canadian dollar appreciated by 0.52 cents, ending the week at 74 cents. The TSX was down 0.3% and underperformed the S&P 500 by 1.0% in U.S. dollar terms.

The new issue environment for U.S. middle market loans became slightly less favourable. Average total leverage fell to 5.5x EBITDA from 5.6x last week while yields rose by 12 bps to 6.46%, which is 28 bps lower than a year ago. So far in 2Q17, 77% of middle market syndicated loans have a spread less than 500 bps, as compared to 50% in 2Q16. Middle market lenders who require such a minimum spread are likely struggling to find assets in the current market, according to The Lead Left.

Valitas Insights: Where’s the Value? Strategies for Successful Acquisitions: Part 2

We are living in an M&A world where many acquisitions fail to create value. The corollary, of course, is that some acquisitions DO create value, and the obvious question is why. In the current environment, where companies are relying more heavily on M&A to drive revenue growth, that’s a significant “why”, so we went looking for an answer.

A recent McKinsey article suggests that successful deals are initiated with specific and detailed value creation strategies, typically fitting with at least one of six archetypes. In last week’s article, we covered the first three archetypes. This week we discuss the remaining three, along with an overarching, Michael Jordan related value creation principle. Curious? Read our full article to learn more.

Canadian M&A Transactions[i]

Materials (Closed)

Anaconda Mining has Acquired Orex Exploration

Anaconda Mining Inc. (TSX: ANX), a Canadian gold mining and exploration company, has acquired Orex Exploration Inc., a Canadian company that offers gold exploration services. Total transaction value is estimated to be $13.1 million.

Industrials (Announced)

Ravencrest Resources to Acquire CL2G Group

Ravencrest Resources Inc. (CNSX: RVT), a Canadian company that engages in the exploration and development of mineral properties, has agreed to acquire CL2G Group, a Canadian company that provides security consulting, training, and advisory services to the cannabis industry. Total transaction value is estimated to be $364 thousand.

Blue Sky Energy to Acquire Aquion Energy

Blue Sky Energy Inc. (TSXV:BSI), a Canadian oil and gas exploration company, has agreed to acquire Aquion Energy Inc., an Advanced Technology Ventures, Foundation Capital, Kleiner Perkins Caufield & Byers, Cascade Investment L.L.C., Shell Technology Ventures B.V., Horizon Technology Finance Management LLC, Exelon Enterprises Management Inc., Total Energy Ventures International SAS, Yung's Enterprise Holdings Limited, CapX Partners, Bright Capital LLC, GSV Ventures, Trinity Capital Investment LLC, Tao Invest, Constellation Technology Ventures, Prelude Ventures LLC, and DNS Capital LLC backed U.S.-based company that designs, manufactures, and sells batteries and battery systems. Total transaction value is estimated to be $3.7 million.

Global UAV Technologies to Acquire NOVAerial Robotics

Global UAV Technologies Ltd. (CNSX: UAV), a Canadian company that provides unmanned aerial vehicle surveying services in Ontario, has agreed to acquire NOVAerial Robotics Inc., a Canadian company that manufactures unmanned aerial drone helicopters. Total transaction value is estimated to be $700 thousand.

Industrials (Closed)

Speyside Equity has Acquired McGregor & Thompson Hardware

Speyside Equity LLC, a U.S.-based private equity firm, has acquired McGregor & Thompson Hardware Ltd., a Canadian company that manufactures doors, frames, finishing hardware, and construction products. No transaction terms were released.

Consumer Discretionary (Closed)

Stingray Digital Group has Acquired C Music Entertainment

Stingray Digital Group Inc. (TSX: RAY.A), a Canadian company that provides B2B multi-platform music and in-store media solutions worldwide, has acquired C Music Entertainment Ltd., a U.K.-based operator of a cable television channel for classical, crossover, and cinematic music videos. No transaction terms were released.

Blue Ant Media has Acquired RACAT Group

Blue Ant Media Inc., a Difference Capital Financial Inc., Kensington Capital Partners Limited, TerraNova Partners LP, Relay Ventures and Gibraltar Ventures backed Canadian owner and operator of various media channels, has acquired RACAT Group, a Australian media production company. No transaction terms were released.

PokerVision Media Acquired

PokerVision Media Inc., a Canadian media, events, and sports entertainment company, has been acquired. No buyer details were released. Total transaction value is estimated to be $1.0 million.

Consumer Staples (Announced)

Wildflower Marijuana to Acquire King Extracts

Wildflower Marijuana Inc. (DB: RSP), a Canadian cannabis company that focuses on developing and designing branded products in the cannabis and healthcare sectors, has agreed to acquire King Extracts, a U.S.-based manufacturer of no-burn disposable vaporizer cartridges with medical grade cannabis extracts. Total transaction value is estimated to be $988 thousand.

Consumer Staples (Closed)

Champlain Financial has Acquired Chéticamp Fisheries International

Champlain Financial Corporation, a Canadian private equity firm, has acquired Chéticamp Fisheries International Inc., a Canadian wholesale dealer of Atlantic Canada fresh seafood. No transaction terms were released.

Luigi Lavazza has Acquired Kicking Horse Coffee Co.

Luigi Lavazza S.p.A., an Italian owner and operator of coffee shops internationally, has acquired Kicking Horse Coffee Co. Ltd, a Canadian company that engages in brewing and roasting organic coffee. No transaction terms were released.

Novacap has Acquired Mucci Farms

Novacap, a Canadian private equity and venture capital firm, has acquired Mucci Farms Ltd., a BMO Capital Partners backed Canadian company that engages in growing, packing, and marketing greenhouse vegetables. No transaction terms were released.

Healthcare (Announced)

Ravencrest Resources to Acquire Alberta Green Biotech

Ravencrest Resources Inc. (CNSX:RVT), a Canadian company that engages in the exploration and development of mineral properties in Canada, has also agreed to acquire Alberta Green Biotech Inc., a producer of medical marijuana. No transaction terms were released.

THC Dispensaries Canada Acquired

THC Dispensaries Canada Ltd., a Canadian company that produces medical marijuana, is to be acquired. No buyer details were released. Total transaction value is estimated to be $943 thousand.

Healthcare (Closed)

ZZ Capital International has Acquired Angiotech Pharmaceuticals

ZZ Capital International Limited, a Hong Kong based investment holding company, has acquired Angiotech Pharmaceuticals Inc., a Vivo Capital LLC, GSO Capital Partners LP, Cathay Venture Inc., China Orient Asset Management Holdings Limited, Zhongzhi Capital Group, ABCI Investment Management Limited and Fung Shing Investment Limited backed Canadian company that develops, manufactures, and markets medical device products and technologies worldwide. Total transaction value is estimated to be $2.5 million.

Aurora Cannabis has Acquired Pedanios

Aurora Cannabis Inc. (TSXV:ACB), a Canadian company that cultivates, harvests, produces, and distributes medical marijuana and cannabis oil products, has acquired Pedanios GmbH, a Germany-based company that distributes pharmaceutical products. Total transaction value is estimated to be $23.7 million.

Information Technology (Announced)

Intercap to Acquire ZipLocal

Intercap Inc., a Canadian boutique investment banking firm, has agreed to acquire ZipLocal Inc., a Relay Ventures backed Canadian company that builds client visibility through print and digital media solutions. Total transaction value is estimated to be $1.2 million.

Information Technology (Closed)

Electronic Commerce has Acquired cfactor Works

Electronic Commerce Inc., a Frontier Capital LLC and Escalate Capital Partners backed U.S.-based company that develops and sells SaaS based software solution, has acquired cfactor Works Inc., a Canadian company that provides personalized on-demand social HRMS, talent management, and employee collaboration software. No transaction terms were released.

ESCO Technologies has Acquired Morgan Schaffer Systems

ESCO Technologies Inc. (NYSE:ESE), a U.S.-based company that produces and supplies engineered products and systems for utility, industrial, aerospace, and commercial applications worldwide, has acquired Morgan Schaffer Systems Inc., a Canadian company that supplies dissolved gas analysis (DGA) services and monitoring solutions for large HV transformers. No transaction terms were released.

Softvision has Acquired Momentus Software

Softvision LLC, a U.S.-based company that develops software solutions for digital products, mobility, analytics, merchandise planning, and in-store engagements, has acquired Momentus Software Inc., a Canadian company that designs and develops technology solutions for companies worldwide. No transaction terms were released.

Global Daily Fantasy Sports has Acquired Mondogoal Trading

Global Daily Fantasy Sports Inc. (TSXV:DFS), a Canadian company that provides a mobile based tenanted gateway for fantasy sports products, has acquired Mondogoal Trading Ltd., a U.K.-based owner and operator of a global fantasy sports platform. No transaction terms were released.