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Canadian Private Market Recap: Feb 5

  • Posted By: Ann Zhang & Anan Sivapalu

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  • Comments: 0

Market Update

Last week, U.S. equities erased the gains made from the previous week, driven primarily by Friday’s disappointing jobs report. The U.S. economy added 151,000 jobs compared to 190,000 expected by Wall Street. Despite this recent weakness, the fed is expected to continue increasing interest rates this year given the record low unemployment rate of 4.9%, and a 2.5% increase in wages. The perception of a slowing economic recovery and impending rate hike drove last week’s market pull-back. The Canadian equity markets were relatively unaffected by U.S. jobs report. Despite the U.S. equity market volatility, credit markets remained relatively stable.

 

 

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Change From

Capital Markets

 

This Week

Last Week

Year Ago

 

Last Week

Year Ago

Equity Markets

 

 

 

 

 

 

 

S&P 500 Composite

 

1,880

1,940

2,063

 

-3.1%

-8.8%

 

TEV/Forward EBITDA

 

9.7x

9.9x

10.4x

 

-0.2x

-0.6x

TSX Composite

 

12,764

12,822

15,125

 

-0.5%

-15.6%

 

TEV/Forward EBITDA

 

9.8x

9.8x

10.0x

 

-0.0x

-0.1x

Russell 2000 Index

 

986

1,035

1,209

 

-4.8%

-18.5%

 

TEV/Forward EBITDA

 

9.4x

9.7x

10.3x

 

-0.3x

-1.0x

CBOE VIX ("Fear Index")

 

23.4

20.2

16.9

 

+15.7%

+38.8%

USD/CAD

 

0.721

0.710

0.804

 

+0.011

-0.084

 

 

 

 

 

 

 

 

 

Debt Markets

 

 

 

 

 

 

 

U.S. 10-Year Treasury Yield

 

1.8%

1.9%

1.8%

 

-0.1%

+0.0%

U.S. Middle Market Loans

 

 

 

 

 

 

 

 

New Issue Clearing Yield ≤ $50 million

 

6.4%

6.4%

6.6%

 

0.0%

-0.3%

 

Spread to Treasury

 

451 bps

441 bps

481 bps

 

+10 bps

-30 bps

 

Total Debt/EBITDA

 

5.6x

5.6x

4.8x

 

0.0x

+0.8x

 


 

North American M&A activity has slowed considerably in December, partially due to seasonal factors but also versus the comparable prior year period. For the three months ended December 31, 2015, the number of announced transactions in Canada fell by 15% versus the three months ended November 30, 2015 and more than 23% versus the comparable prior year period. U.S. transaction activity also slowed, albeit at a lower rate, most notably activity declined by almost 18% versus the same period in 2014. M&A dollar volume in the U.S. has been a mixed story, while Canadian M&A dollar volume has fallen dramatically. This highlights the very high level of volatility in the largest end of the market versus the relative stability of the M&A market for smaller transactions. Corporate tentativeness has driven corporate cash balances slightly higher from the previous month, indicating significant latent acquisition capacity in the system.

 

Rolling 90 Days Ended

Change From

M&A Market Fundamentals

 

12/31/15

11/30/15

12/31/14

 

11/30/15

12/31/14

Number of Transactions

 

 

 

 

 

 

 

 

Canada

 

118

139

154

 

-15.1%

-23.4%

 

U.S.

 

1,401

1,457

1,705

 

-3.8%

-17.8%

 

Canada % of Total

 

7.8%

8.7%

8.3%

 

-0.9%

-0.5%

 

 

 

 

 

 

 

 

 

Dollar Volume (US$ in billions)

 

 

 

 

 

 

 

 

Canada

 

10,151

38,642

29,343

 

-73.7%

-65.4%

 

U.S.

 

319,534

292,850

342,802

 

+9.1%

-6.8%

 

Canada % of Total

 

3.1%

11.7%

7.9%

 

-8.6%

-4.8%

 

 

 

 

 

 

 

 

 

Aggregate Corporate Cash (US$ in billions)

 

 

 

 

 

 

 

 

S&P 500 Constituents

 

5,742

5,731

6,000

 

+0.2%

-4.3%

 

TSX Composite Constituents

 

1,422

1,416

1,294

 

+0.4%

+9.9%

 


 

Weekly Canadian Private Market M&A Report

 

Announced Deals

 

Upsight acquires venture-backed Fuse Powered
CPPIB-backed KSS to merge with China’s Joyson in $920 million deal
Novacap invests in growth of Intelerad Medical Systems

Closed Deals

 

Private equity investors pour $458 million into the GFL’s acquisition of Matrec
Deerfield-led $350 million deal helps launch Aralez Pharmaceuticals

 

Announced Deals

 

Upsight acquires venture-backed Fuse Powered

 

San Francisco-based Upsight, an analytics and marketing platform for mobile application businesses, has announced the acquisition of Fuse Powered Inc., a mobile supply-side monetization and ad mediation platform based in Toronto. No financial terms were disclosed. The combined companies will “enable end-to-end user lifecycle management to maximize lifetime value.” Upsight’s CEO, Andy Yang said, “Upsight currently tracks and optimizes $2B of commerce revenue on an annual basis. But, ad revenue has become an increasingly critical component of the mobile ecosystem for publishers to monetize users. With Fuse, we now complete the entire revenue picture and can help our customers achieve harmony between the two streams.”

 

CPPIB-backed KSS to merge with China’s Joyson in $920 Million deal

 

Sterling Heights, MI based supplier of advanced engineered safety products for automotive and non -automotive markets, Key Safety Systems (KSS), has agreed to be acquired by China’s Ningbo Joyson Electronic Corp.. The cash deal is valued at about US$920 million and is expected to close in the first half of 2016. The merger will help KSS expand its addressable market and further accelerate the business with even faster growth in the future. Jeff Wang, Chairman and Founder of Joyson, said, “KSS has emerged as an industry leader well recognized for its strong global management, innovative technology, high quality worldwide manufacturing presence and diverse customer base. I am particularly thrilled about the prospect of moving forward together in the areas of active safety, autonomous & intelligent driving and HMI where the companies have unique synergy. This is well aligned with the Joyson strategy of being a trusted global partner to the world’s best automakers while earning respect as a high growth company.”

 

Novacap invests in growth of Intelerad Medical Systems

 

Canadian private equity firm Novacap has invested in Intelerad Medical Systems Inc., a medical imaging company based in Montréal, specializing cross-enterprise media imaging solutions. No financial terms were disclosed. The new partnership will focus on expanding the reach of Intelerad’s products and solutions. François Laflamme, Senior Partner at NOVACAP said, “Our investment will allow Intelerad to enhance its operations, engage in strategic growth opportunities, and accelerate funding of key research and development programs, to continue building the Company’s leading suite of products. It is already well-positioned in the healthcare IT market and we look forward to working directly with its team to help it grow the Company even further.”

 

Closed Deals

 

Private equity investors pour $458 million into the GFL’s acquisition of Matrec

 

With an equity investment of $458 million, Ontario based GFL Environmental Inc. has closed an $800 million purchase of the solid waste business Matrec Services, from the Canadian trucking and logistics provider TransForce. The purchase of Matrec not only made GFL one of Canada’s largest independent waste management companies, but also added “scale and density” and expanded its geographic reach. The founder of GFL, Patrick Dovigi, mentioned that the future plan will be following the same market strategy and doubling the size of the businesses over the next five years.

 

Deerfield-led $350 million deal helps launch Aralez Pharmaceuticals

 

POZEN Inc. and Tribute Pharmaceuticals Canada Inc. have wrapped up their previously announced merger, creating a new parent company, Aralez Pharmaceuticals Inc. (Nasdaq: ARLZ, TSX: ARZ). Aralez is a pharmaceutical business focused on developing cardiovascular, pain and other specialty therapies in Canada. The merger that launched Aralez was supported by up to US$350 million ($486 million) in commitments by Deerfield Management, an U.S. healthcare investment firm. Adrian Adams, CEO of Aralez, said, “As Aralez, we have established an efficient platform that offers competitive advantages with committed capital to enable us to aggressively build out our portfolio through strategic business development and M&A, from which we plan to drive long-term value creation for shareholders.”

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