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Canadian Private Market Recap: Apr 1

  • Posted By: Ann Zhang, Paris Aden & Anan Sivapalu

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Market Update

The equity and credit markets continue to indicate significant liquidity in the system to underpin M&A activity.  Valuation multiples remain near 10-year highs, while market volatility and bond yields remain near historic lows.

The dovish remarks by central banks in North America, Europe and Asia and new jobs data in the U.S. contributed to the reversal of the decline seen the week before last.  As oil prices have stabilized, the impact of the energy sector on the overall economy has become less pronounced. However, recession fears remain.  Mid-market credit conditions continue to moderate with credit spreads above prior year levels and average total leverage pulling back from the 5.5x levels seen a few months ago to about 5x, which is still robust by historical standards.  

 

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Change From

U.S. Middle Market Loans

This Week

Last Week

Year Ago

 

Last Week

Year Ago

 

 

 

 

 

 

 

 

New Issue Clearing Yield ≤ $50 million

7.3%

7.2%

6.7%

 

+0.2%

+0.6%

 

Spread to Treasury

555 bps

526 bps

487 bps

 

+29 bps

+68 bps

 

Total Debt/EBITDA

4.9x

4.9x

5.0x

 

0.0x

-0.1x

 

 

 

 

 

 

U.S. PE Capital Overhang

There remains ample capital in the system to support M&A activity. The equity overhang in private equity and venture funds is estimated at US$543 billion as of the middle of 2015.

 

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Change From

Private Equity Overhang (US$ in billions)

2015 1H

2014 1H

2013 1H

 

2014 1H

2013 1H

 

 

 

 

 

 

 

 

U.S. PE Capital Overhang

$543

$533

$530

 

+1.9%

+2.5%

               

 

 

 

 

 

Valitas Insights: Private Equity Q&A Featured in the March 29th edition of Ian Campbell's Business Transition & Valuation Newsletter

Ian Campbell, the pioneer of the modern business valuation profession in Canada and a thought leader on business transition, has recently started an excellent newsletter that we would highly recommend.  Click here to subscribe to his mailing list.  We are pleased to have Ian's Q&A with Paris Aden featured in his latest edition.

Private equity increasingly is behaving like any other asset class that pursues returns in the marketplace. Investors in private equity funds are balancing returns and risks while comparing their fund investments against the credit asset class, the public equity market asset class, the treasury asset classes, infrastructure, real estate and so on. So what is private equity ultimately after and what motivates them?  Click here to read more.

Business Transitions Forum in Toronto on June 8: Maintaining Confidentiality During a Competitive Sale Process

The most successful transactions are those that bring the “outlier” to the surface, that one acquirer or investor who sees more value in a business than any of the others. It’s often difficult to identify the outlier, it is essential that multiple parties be contacted through a structured sale process to uncover outliers. To keep bidders honest, the competitive tension between bidders should be palpable.

How do you run a competitive sale process under the radar without information leaks to employees, customers or suppliers? How do you protect yourself against potential competitors using information gained through the due diligence process against you in the marketplace? What strategies come into play when speaking to different potential buyers concurrently and how can business owners manage the complexity of a confidential sale process? At what stage should personnel within and outside your organization be made aware of the bigger picture? What do you say (and do) if there is a leak? How should the announcement be made when the deal is finalized? What role can you expect your senior management, board, advisors and the rest of your employees to play?

Paris Aden is moderating a panel discussion at the Business Transitions Forum Program in Toronto on June 8th.  The panelists include some of Canada’s leading M&A professionals:

Harry Blum, Managing Partner, Collins Barrow Toronto LLP

Curtis Cusinato, Partner, Stikeman Elliott LLP

Tim Morton, Managing Partner and Founder, Prompta Consulting Group

This panel will discuss the best practices and protocols that they use to maintain strict transaction confidentiality for their clients during the process.  They will also discuss when and how the deal is best communicated to key stakeholders.  We look forward to seeing you there.

Click here to register.

Weekly Canadian Private Market M&A Report

Announced Deals

Caisse and OTPP-backed Catalina Holdings to buy AGF Insurance

An affiliate of Catalina Holdings (Bermuda) Ltd. has agreed to acquire AGF Insurance Ltd., a British regulated insurance business. No financial terms were released for the deal, which is expected to close in the third quarter. Chris Fagan, Chairman and Chief Executive of Catalina, said, “AGF will be Catalina’s first significant acquisition of UK Employers Liability legacy risk. We have been developing our expertise in this class of business over several years and retain an appetite to acquire more of this class and related legacy risk.”

Closed Deals

PE-backed Highline Mushrooms sold to Fyffes for $145 million

Highline Produce Ltd. (Highline Mushrooms), a Canadian portfolio company of U.S. private equity firm Peak Rock Capital, has been acquired by Fyffes plc. Fyffes, an Irish fruit and fresh produce company, said in a separate statement that it paid $145 million (98 million euros) to acquire Highline’s equity and refinance its debt. Commenting on this transaction, Fyffes Chairman David McCann said: “Highline is a very fine business with a strong position in an important product category. We look forward to working with Glenn Martin and his management team to continue to develop the business. This transaction fits perfectly with Fyffes strategic objective of adding an additional product to its existing three through the acquisition of an established, successful, integrated operator in a category with significant scale.”

Actuant buys Dubai assets of Fulcrum-backed FourQuest Energy

Actuant Corp (NYSE: ATU) has acquired the Middle East, Caspian and North Africa division (FourQuest MENAC) of Canada’s FourQuest Energy Inc. for about US$60 million. Based in Dubai, United Arab Emirates, FourQuest MENAC is a provider of pipeline and process services in the region. Actuant, a U.S. diversified industrial company, said the acquisition enhances its position as a specialist in maintenance services in the energy space.

Corus Entertainment wraps up $2.65 billion buy of Shaw Media

Corus Entertainment Inc. (TSX: CJR.B) has closed its previously announced $2.65 billion buy of Shaw Media Inc. from its sister company Shaw Communications Inc. (TSX: SJR.B). The deal more than doubles Corus’ size of its media and content business. Doug Murphy, President and Chief Executive Officer of Corus said, “As a combined company, we are creating an integrated media and content powerhouse that gives us the competitive scale to grow both domestically and globally. With our strong media brands, compelling content and talented team, this transformational acquisition marks a new beginning that builds on our strengths and positions us well for future growth.”

TPG-backed Vertafore ties up Keal Technology acquisition

U.S. insurance technology company Vertafore has closed its acquisition of Keal Technology, a provider of broker and commercial management systems in Canada. No financial terms were released for the deal. Pat Durepos, President of Keal Technology, said “We are looking forward to a tremendous partnership that will benefit our customers all across Canada.”

VC-backed Hootsuite buys Sales Prodigy to fill social selling gap

Canadian social media management platform Hootsuite has bought Sales Prodigy, a Vancouver-based mobile app that helps sales organizations tap into social selling opportunities. The deal’s financial terms were not disclosed. Matt Switzer, vice president of corporate development at Hootsuite, said the acquisition will bolster the company’s platform so it can address a current “big gap” in the market for social selling solutions.

 

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