Canadian Private Market Recap: June 10

  • Posted By: Ann Zhang, Louis Goldberg and Paris Aden

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  • Comments: 1

Market Update

Stocks hit fresh 2016 highs on Wednesday but fell Thursday and Friday, ending flat for the week. Interestingly, the price of oil followed a similar pattern, hitting year-to-date highs midweek, just to give most of these gains back later in the week. While stocks fell Thursday and Friday, bond yields fell as the World Bank lowered its global GDP forecasts. The TSX was down over one percent this week on a Canadian dollar basis, but flat on a U.S. dollar basis. Monetary policy is proving less divergent than markets expected early in 2016, as the Fed has indicated it will hike rates more slowly than it signaled it would at the beginning of the tightening cycle. This has also driven weakness in the U.S. dollar.




Change From

U.S. Middle Market Loans

This Week

Last Week

Year Ago


Last Week

Year Ago









New Issue Clearing Yield ≤ $50 million








Spread to Treasury

519 bps

462 bps

379 bps


+57 bps

+140 bps


Total Debt/EBITDA












To further emphasize the liquidity underpinning future M&A activity, corporate cash balances for the equity index constituents as of the end of May were approximately $8.3 trillion, a significant increase from the $7.6 trillion one year earlier.

(US$ in billions)

For Period Ended

Change From

Aggregate Corporate Cash













S&P 500 Constituents







TSX Composite Constituents











Valitas Insights: First Quarter Mid-Market M&A Activity at Lowest Level Since 2009 – Is the Sky Falling?

According to Thomson Reuters, first quarter M&A activity for 2016 wasn’t pretty. Only 330 middle-market transactions closed in the first quarter of 2016 (versus almost 500 in the first quarter of 2015), the lowest deal volume for any period since the depth of the financial crisis in 2009. The factors contributing to the M&A slowdown include the tightening of credit and increased acquirer caution and selectivity.

While the slowdown in activity that we started to see in the second half of 2015 is undeniable, the general economic conditions (slow growth, low inflation, cheap money) and unprecedented liquidity in the system, most notably the US$500+ billion in private equity “dry powder” and peak-cycle valuations, we see a healthy M&A environment over the next 12 months. This is supported by a handful of leading indicators, including the two indices noted below.

Mid-market M&A Indicator: April 2016 – Rebound Muted, More Selective Buyers

Mergers & Acquisitions Magazine has been publishing the M&A Conditions Index (MACI) since the fall of 2013 to gauge general M&A market conditions. Derived from monthly surveys of approximately 250 executives, the MACI is a diffusion index. Readings above 50 indicate expansion in M&A activity, and conversely, readings below 50 indicate contraction.

The index is a composite of multiple components that include several market factors. The chart below focuses on the composite score and the two leading indicators. “Leads” represent the general volume of transactions that potential acquirers are seeing in the marketplace and “Signed Letters” represent the volume of indications of interest (“IOI’s) that acquirers are signing with potential targets and indicate the volume of deals that are in the (pre-announcement) due diligence phase. While still signaling an expansionary environment, the momentum slowed in April. Leads remain fairly robust, while IOI volume has been more neutral, suggesting buyers are becoming much more selective.

Mergers & Acquisitions Magazine also publishes the Mid­Market Pulse (MMP), a forward-looking sentiment indicator, derived from monthly surveys of approximately 250 executives and published in partnership with RSM LLP. As with the MACI above, the MMP is a diffusion index. Readings above 50 indicate expansion in M&A activity, and conversely, readings below 50 indicate contraction.

There were significant improvements in M&A market sentiment in May. The 12-month outlook indicator exceeded 60 for the second time in the last 6 months and the more immediate 3-month outlook improved for the third consecutive month.

So what does all of this mean? We continue to believe that while the exuberance we saw in 2014-2015 is clearly moderating, conditions will remain strong and activity will likely remain near peak-cycle levels.

Weekly Canadian Private Market M&A Report

Announced Deals

Cott Corp. to buy Eden Springs from PE firm Rhône Capital for $682 million

Cott Corporation (NYSE: COT, TSX: BCB), a global producer of beverages on behalf of retailers, brand owners and distributors, has agreed to acquire Eden Springs International, a Swiss provider of water and coffee services to workplaces in Europe, for $682 million. This valuation reflects a mid 7x adjusted EBITDA multiple. Tom Harrington, CEO of DS Services (a Cott subsidiary), stated: “We expect to be able to capitalize on Eden’s and DS Services’ combined expertise in tuck-in acquisitions to pursue further opportunities in the fragmented home and office bottled water, office coffee service and filtration markets across Europe.”

CPPIB to invest $570 million in LongPoint Minerals

The Canada Pension Plan Investment Board will invest $570 million CAD in LongPoint Minerals LLC, a company that invests in oil and gas mineral and royalty interests in the lower 48 U.S. states. The investment will be deployed over two to three years and will give it a majority stake in Denver-based LongPoint. Adam Vigna, Managing Director and Head of Principal Credit Investments at CPPIB stated: “In owning royalty interests, we are able to participate in production revenues without the burden of associated capital or operating costs.”

Caisse-backed SterlingBackcheck to buy RISQ Group

SterlingBackcheck, a world-leading background screening and HR solutions company, has acquired RISQ Group, an Australian provider of employment background check services in the Asia-Pacific region. No financial terms were disclosed. The primary intent of the acquisition was to expand its global footprint. As Clare Hart, CEO of SterlingBackcheck stated: “With the acquisition of RISQ, we are taking another meaningful step towards becoming the true global leader in background screening and HR solutions […] serving the global background screening needs of our clients.”

KingSett to buy 50 percent of Scotia Plaza from Dream Office, H&R REIT

KingSett Capital is set to acquire 50 percent of Scotia Plaza, Canada’s second tallest office building, from Dream Office REIT and H&R REIT. No financial terms were disclosed, however, four years prior a 50 percent stake was valued at $975 million. Sources have claimed that Dream Office will own the remaining half and expects to maintain management control.

Fresche Legacy to buy Quadrant LLC

Fresche Legacy, a provider of application management and modernization solutions for IBM i applications, agreed to buy Quadrant LLC, an IBM i modernization and Fax over IP document output management solutions designer and distributor. No financial terms were disclosed. The combination of the two companies will provide a breadth of solutions and services to leverage and extend the value of IBM i systems and applications. Andy Kulakowski, President and CEO of Fresche stated: “Our solutions enable customers to better understand, leverage and extend the value that resides within their IBM i applications and systems. We are thrilled to welcome all of the amazing and incredibly talented people joining us from The Quadrant Group who share the same commitment.”

Closed Deals

Sterling Group’s Safe Fleet acquires FleetMind Solutions

Safe Fleet, a Belton, Missouri-based provider of increased functionality and integrated solutions for fleet vehicle manufacturers and operators, has acquired FleetMind Solutions Inc., a Canadian technology leader in fleet management solutions, specifically designed for waste and recycling environments. No financial terms were disclosed. John R. Knox, President & CEO of Safe Fleet stated: “This acquisition supports our vision to build the leading global provider of safety solutions for fleet vehicles […] and expands Safe Fleet’s presence in the waste and recycling market.”

Pine Brook-backed Cahill Services buys Drive Rental

Cahill Services LLC, a Houston-based provider of specialty rental services to customers in the oil & gas, refining, industrial, petrochemicals, utilities and related industries, has acquired Drive Rental Corp., a Red Deer, Alberta-based specialty flameless heating rental business with operations in Canada and the United States. Drive Rental will be rebranded as Cahill Heating. No financial terms were disclosed. George Walker, Cahill Services CEO stated: “[Drive Rental’s] attention to customer service was very attractive to us as every heating application has its own unique challenges and projects in very remote areas simply must perform. We look forward to working with management to help Drive Rental expand to an even broader customer base across North America.”

CCPME-backed JSS Medical acquires Poland’s Bonne Santé

JSS Medical Research Inc., a Montreal-based Contract research organization (CRO) providing clinical research services to the pharmaceutical, biotechnology and medical device industries, has acquired Bonne Santé, a CRO based in Warsaw, Poland providing a range of clinical research services to the global pharmaceutical, biotechnology and medical device industries. No financial terms were disclosed. Dr. John S. Sampalis, President and CEO of JSS Medical Research stated: “Bonne Santé will now provide the foundation upon which we can leverage our expertise in late phase, post marketing, epidemiological and health economics […] and international business development to expand client / patient service offerings.”


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