Canadian Private Market Recap: July 15

  • Posted By: Louis Goldberg and Paris Aden

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Market Update

Stocks continued their rally this week, with the S&P 500 closing four out of five days at record highs. Stephen Poloz announced this week that the Bank of Canada will maintain the benchmark lending rate at 0.5%. Total M&A deals involving Canadian companies in 2016 fell to 223 from 295 one-year prior; Q2 total deal volume was the lowest since 2012.

Credit markets remain sluggish as banks continue to act hesitant towards new credit issuances.

Valitas Insights: Value Enhancement of an Acquisition Program

Surfacing Passive Sellers:  For many vendors, price is not the sole consideration when selling. In our experience 15-40% of business owners are passive sellers – they are willing to engage in a sale discussion when approached by a serious acquirer who can pay a fair price, yet they are not willing to expend the time and resources to engage a financial advisor to run an auction process.  

Value Creation: In sourcing and acquiring proprietary targets, acquirers can experience significant Economic Value-Added (EVA) by acquiring at lower multiples than those paid for targets involved an auction process. If the acquirer can also increase target margins through cost synergies and sales through distribution synergies, the EVA increases even more.

Negotiating Leverage is critical to valuation and terms. Typically, this advantage is enjoyed by the vendor in an auction. In proprietary deal, inverse auction dynamics arise. When an Acquisition Program is in full-swing, it will often generate a pipeline of proprietary targets, each vying for your time and focus. It is much easier to move past sticking points with vendors when you (and possibly they) know that others are in the queue. Conveying, whether subtly or directly, that you are reviewing many opportunities creates some competitive tension and urgency for the vendor.

Acceleration: Accelerated consolidation that can be realized with an Acquisition Program improves return on capital for the acquirer. If the EVA from acquisitions is realized at a faster pace, IRR is enhanced. Faster completion of the consolidation phase allows the acquirer to gain first-mover advantage over competitors and to move towards integration much more quickly.

Strategic Choice: Acquisition Programs combine disciplined targeting with maximum strategic choice and optionality. Where there is a pipeline or inventory of opportunities, you can decide when and where you will focus time and effort. Targets can also be sequenced optimally according to corporate priorities.

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Weekly Canadian Private Market M&A Report

Announced Deals

Groupe Touchette to Acquire Dealer Tire Canada

Groupe Touchette, a Canadian-headquartered tire distributor, has agreed to acquire Dealer Tire Canada ULC, a Canadian distributor and manager of tire replacement parts and programs for original equipment manufacturers. No financial terms were disclosed.

SYNNEX to Acquire Minacs

SYNNEX Corporation, a leading business process services company that optimizes supply chains and provides outsourcing services for customer relationship management, has agreed to acquire Minacs (NYSE: SNX), a leading global outsourcing business solutions provider. The deal is valued at roughly $551 million. Kevin Murai, CEO and President of SYNNEX stated: “This strategic investment is expected to create even greater scale and a more compelling value proposition for our clients and shareholders. This transaction is also in line with our stated goals of margin expansion and diversification of our revenue.”

Alta Vista Ventures to Acquire Aeromao

Alta Vista Ventures, a Canadian VC firm, has agreed to acquire Aeromao Inc., a designer and manufacturer of unmanned aerial vehicles for image, mapping, and surveying applications. The transaction was valued at $1.94 million.

Fiera Axium Infrastructure to Acquire Slate Creek Wind Project

Fiera Axium Infrastructure Inc., a private equity firm specializing in mid-market investments, has agreed to acquire Slate Creek Wind Project LLC, an owner and operator of a 150 MW wind farm located in Kansas. The value of the transaction was not disclosed.

American Lithium Corporation to Acquire British Columbia Mineral Exploration Services Company

American Lithium Corporation (TSXC: LI), a lithium deposit exploration stage-focused company, has agreed to acquire 1074654 B.C. Limited, a British Columbia mineral exploration services company. The deal was valued at $1.04 million.

Strad Energy Services to Acquire Redneck Oilfield Services

Strad Energy Services Limited (TSX: SDY), a Canadian oil and gas well services company, has agreed to acquire Redneck Oilfield Services Limited, a Western Canada-based oilfield equipment rental and services business. The deal was valued at approximately $28 million.

H20 Innovation to Acquire Utility Partners

H2O Innovation Inc. (TSXV: HEO), an integrated technological water treatment solutions company, has agreed to acquire Utility Partners LLC, a company that focuses on maintaining sewer pump stations responsible for transporting waste water to local treatment plants for procession. The deal was valued at approximately $22 million, which represents an implied Enterprise Value/EBITDA multiple of 7.73x.

Fantasy 6 Sports to Acquire NFC Games

Fantasy 6 Sports Inc., an operator of sports, entertainment, and technology companies worldwide, has agreed to acquire NFC Games, a developer of mobile fantasy sports games. The terms of the deal were not disclosed.

PharmaCan Capital to Acquire Peace Naturals Project

PharmaCan Capital Corporation (TSXV: MJN), a Canadian healthcare-focused investment firm, has agreed to acquire Peace Naturals Project Inc., a Canadian producer and distributor of medical cannabis. The transaction value of the deal was approximately $9.5 million.

Montan Mining to Acquire Cerro Dorado SAC

Montan Mining Corporation (TSXV: MNY), a Canadian company focused on exploration, development, and processing of gold mineral properties, has agreed to acquire Cerro Dorado SAC, a Lima, Peru based company. The deal was valued at approximately $1 million.

Wolf Infrastructure to Acquire Access Pipeline

Wolf Infrastructure Inc., A company focused on origination and execution of greenfield energy infrastructure projects in Western Canada, has agreed to acquire Access Pipeline Inc., a builder and operator of pipeline systems including diluent ad blended bitumen pipelines. The deal was valued at approximately $1.55 billion.

Superior Plus to Sell its Construction Products Distribution Business to Foundation Building Materials

Superior Plus Corporation (TSX: SPB), has agreed to sell its Toronto-based construction products distribution business to Foundation Building Materials LLC, a U.S. building products and equipment distributor backed by Lone Star Funds. The deal was valued at approximately $420 million, which implies an EBITDA multiple of approximately 8x, according to research analysts.

Closed Deals

STC Construction Group Acquires De Angelis Construction

STC Construction Group, a provider of construction services for commercial, industrial, institutional, automotive, and retail projects, has agreed to acquire De Angelis Construction Inc., a construction services company focusing on restaurant chains and retailers. No financial terms were disclosed.

Pet Supermarket Acquires Pet Retail Brands

Pet Supermarket Inc., an operator of chain pet care supply retail stores in the U.S., has acquired Pet Retail Brands, a company with similar operations. Pet Supermarket is backed by Penfund, a Toronto headquartered private equity firm and Roark Capital Group, a Georgia-based private equity firm. No financial terms were disclosed.

The Boyd Group Acquires Blue Ribbon Autobody

The Boyd Group (TSX: BYD.UN), an owner and operator of collision repair centers, has acquired Blue Ribbon Autobody, a company with similar operations. No financial terms were disclosed.

StayinFront Acquires GHI Technologies

StayinFront Inc., a provider of CRM solutions, has acquired GHI Technologies Inc., a designer and distributor of business intelligence, CRM, and sales force automation solutions. No financial terms were disclosed.

Trailcon Leasing Acquires Stewart Trailers

Trailcon Leasing Inc., a Canadian provider of lease, rental, and trailer maintenance services, has acquired Stewart Trailers, an operator, manufacturer, and designer, of highway trailer equipment. No financial terms were disclosed.

FARO Technologies Acquires BuildIT Software & Solutions

FARO Technologies Inc. (NasdaqGS: FARO), a company that designs, develops, manufactures, markets, and supports software driven, three-dimensional (3D) measurement, imaging, and realization systems, has acquired BuildIT Software & Solutions Ltd., a company that develops and distributes custom and off-the-shelf 3D software solutions. No financial terms were disclosed.

Planet Paper Box Acquires Tri-Cor

Planet Paper Box, a manufacturer of corrugated packaging products for shipping, display, and storage applications, has acquired Tri-Cor LLC., a packaging, point of purchase display, and retail signage company. No financial terms were disclosed.

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