Value Unleashed

Market Update

The S&P 500 Index, along with average forward TEV/EBITDA multiples, closed Friday at respective record highs. As corporate quarterly data was released over the past week, it now expected that earnings in the S&P 500 are to contract 4.4% in the second quarter compared to the prior year. Canadian oil companies such as Encana and Precision Drilling claim oil producers are looking to increase production and capital budgets, spurring belief that a bottom for oil prices has been reached.

Credit markets remain sluggish as banks continue to increase scrutiny towards new credit issuances.

Valitas Insights: Avoiding Auctions Through a Proprietary Acquisition Program

At Valitas, we are in constant dialogue with shareholders seeking liquidity, strategic acquirers and financial sponsors. Over the past several years, we have seen an evolution in the marketplace toward:

1. Growing universe of financial buyers that have been able to effectively compete with strategic buyers on valuation
2. Proliferation of intermediaries that are continually extending their reach into an ever broader buyer universe.

Whether through auctions, or through proprietary deal flow, reasonable valuations enhance value creation. Through a systematic, proactive acquisition strategy, a buyer is exposed to targets that are not actively pursuing a sale. This reduces the likelihood of a buyer auction and moderates valuation, which is rarely the sole consideration for a business owner.

Aside from the valuation itself, auctioned companies may not be the best targets. Many of the ‘trigger events’ that cause a target to sell their business can be problematic for an acquirer. With active sellers, it is important for the buyer to ask: Why are they selling? Is the business deteriorating and the vendor is trying to salvage value? Has there been a lack of focus on the business over the last few years if the vendor has already decided to leave the business? Will there be leadership transition issues? With passive sellers, these concerns are less prevalent.

Gaining access to more proprietary acquisition opportunities not only makes strategic sense, it also allows for purchasing at more favourable valuations, while significantly mitigating risk through increased control over the process. 

Weekly Canadian Private Market M&A Report

Announced Deals

The Original Cakerie to Acquire Lawler Foods

The Original Cakerie, a Gryphon Investors backed business that produces and supplies frozen desserts for retail and foodservice customers internationally, has agreed to acquire Lawler Foods Limited, a producer and distributor of gourmet cheesecakes, cakes, and pies. No terms of the transaction were released.

Ag Growth International to Acquire Mitchell Mill Systems Canada

Ag Growth International Inc. (TSX: AFN), a Columbia Wanger Asset Management backed business that manufactures and distributes portable and stationary grain handling, storage, and conditioning equipment, has agreed to acquire Mitchell Mill Systems Canada Ltd., a designer, manufacturer, and installer of material handling equipment and specialty systems. No terms of the transaction were released.

Premier Diversified Holdings to Acquire MyCare MedTech

Premier Diversified Holdings Inc., a DLR Capital and Corner Market Capital backed company that operates medical diagnostic imaging centers in Canada and China, has agreed to acquire Mitchell Mill Systems Canada Ltd., a designer, manufacturer, and installer of material handling equipment and specialty systems. No terms of the transaction were released.

Horizon North Logistics to Acquire Empire Camp Equipment

Horizon North Logistics Incorporated (TSX: HNL), a Van Berkom and Associates backed business focused on remote resource development services, providing workforce accommodation solutions, camp management, catering services, and road and access matting solutions, has agreed to acquire Empire Camp Equipment, a provider of rental camp and well site buildings for the Energy, Mining & Construction sectors. The total transaction value of the deal is expected to be approximately $44.5 million.

SOCAN to Acquire Audiam Incorporated

SOCAN, a Canadian copyright collective that administers the performing rights of composer, author, and music publisher members by licensing the use of their music in Canada, has agreed to acquire Audiam Incorporated, an Archangel Venture Capital backed company that engages in identifying and collecting money earned by songwriters and music publishers for use of their works in YouTube videos. No terms of the transaction were released.

Closed Deals

Lucas Meyer Cosmetics Acquires Les Laboratoires Bio ForeXtra

Lucas Meyer Cosmetics S.A.S., a developer, manufacturer, and marketer of ingredients for the cosmetic and personal care industry, has acquired Les Laboratoires Bio ForeXtra Incorporated, a developer and manufacturer of active cosmetic and botanical extracts. No terms of the transaction were released.

Beringer Capital Acquires Adweek

Beringer Capital, a Toronto-based private equity firm, has acquired Adweek from Mediabistro Holdings Incorporated. Adweek is a Guggenheim Partners backed company that provides news for marketing, media, and advertising professionals. No terms of the transaction were released.

Volaris Group Acquires The Alpha School System PTY

Volaris Group Inc., the venture capital arm of Constellation Software Inc., has acquired The Alpha School System PTY Limited, a company that develops browser based administration and portal software system for K-12 schools.

DiversiTech Corporation Acquires Alltemp Products Co.

DiversiTech Corporation, a manufacturer and supplier of equipment pads, A/C condenser pads, service components, and related products for air conditioning, refrigeration, electrical, and swimming pool industries, has acquired Alltemp Products Co. Limited, a distributor of HVAC parts such as refrigeration and air conditioning components.

Tribute Resources Acquires Tocardo International BV

Tribute Resources Incorporated (TSXV: TRB), a Shoevest Investment backed company focused on renewable energy project development and oil and natural gas production activities in Canada, has acquired Tocardo International BV, an Ewic and Repsol New Energy Ventures, S.A. backed company that manufactures and markets tidal, river, and ocean energy power turbines to tidal and river energy markets in the United Kingdom, Japan, Canada, and the United States. The transaction value of the deal was approximately $0.14 million.

H-D Advanced Manufacturing Acquires Numeric Machine Company

H-D Advanced Manufacturing, Incorporated, a The Riverside Company, Weinberg Capital Group, Hicks Equity Partners, and Bratenahl Capital Partners backed company that, through its subsidiaries, manufactures heavy-duty, precision-engineered industrial components, mission-critical gears and gearboxes for the automobile industry, has acquired Numeric Machine Company, an industrial and commercial machinery and equipment company.

GHO Capital Partners Acquires Caprion Proteomics

GHO Capital Partners LLP, a Canadian mid-market private equity firm, has acquired Caprion Proteomics, an Chicago Growth Partners and Great Point Partners backed company that provides proteomics and immune monitoring services to the pharmaceutical and biotechnology industry in North America, Europe, and Asia.