Canadian Private Market Recap: Mar 11

  • Posted By: Ann Zhang & Anan Sivapalu

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Market Update

Last week, the North American markets continued their gains for a fourth consecutive week. The markets were helped by the ECB, the Fed and the stabilizing oil prices. The European Central Bank’s (ECB’s) decision to dampen the deflationary condition in Europe had a positive effect on the global equity markets. The ECB will implement negative interest rates, setting the rate at minus 0.4 percent while pursuing other quantitative easing measures. In addition to the ECB’s action, the market expects the Fed to hold its interest rate at its current level. The curbing of oil production by the OPEC, especially the effect of controlled Iranian oil production are expected mitigate any further decline in oil prices.  The futures market seems to be suggesting that oil prices have now hit the bottom (see chart below). Leverage levels for middle market loans in the U.S. remain high by historical standards, however the price of this credit risk is now well above levels seen over the past year.




Change From

Capital Markets

This Week

Last Week

Year Ago


Last Week

Year Ago

Equity Markets







S&P 500 Composite















TSX Composite















Russell 2000 Index















CBOE VIX ("Fear Index")






















Debt Markets







U.S. 10-Year Treasury Yield







U.S. Middle Market Loans








New Issue Clearing Yield ≤ $50 million








Spread to Treasury

531 bps

458 bps

463 bps


+73 bps

+68 bps


Total Debt/EBITDA

























Have Global Oil Prices Found their Bottom?

The EIA has released its short-term outlook in which it notes “production is more resilient to lower prices than previously expected”. The agency cut its oil price forecast to $34 in 2016 and $40 in 2017. The reason for the cut is larger-than-expected inventory builds as well as US production which isn’t rolling over as much as expected. U.S. production was 9.4 million barrels per day in 2015 and is only expected to get down to 8.7 million in 2016. Non-OPEC production is expected to decline by 400,000 barrels per day in 2016. 

The conventional wisdom in commodity markets is that the “supply response” to weak prices usually takes four to five quarters to bring markets back into equilibrium.  The chart below, courtesy of the EIA, seems to suggest the supply response is right on schedule and the oil markets have reached their bottom…

North American Equity Markets: A 10-year View

The equity markets have largely erased losses experienced at the beginning of the year, with price levels and valuations returning to near cyclical highs. The TSX composite however, continues to lag significantly on a US dollar basis, while the average EBITDA multiple for Canadian companies is at a cyclical peak.  These factors in combination highlight the very weak outlook for Canadian corporate profits in the coming year and the expectation that the next twelve months will likely be the bottom.

Weekly Canadian Private Market M&A Report

Announced Deals

PledgeMusic to buy Golden Venture Partners-backed

London based PledgeMusic has agreed to acquire, an Austin, Texas-based online platform and app suite that enables the sharing and selling of audio recordings of live performances in real-time. No financial terms were released. PledgeMusic Founder and CEO Benji Rogers commented that the combination of the companies will create “a unique platform” that supports the full life-cycle of recordings, tours and the “constantly-changing forms of artistic output.”

Enercare to acquire PE-backed Service Experts for $341 million

Canada based Enercare Inc. (TSX: ECI) has agreed to buy SEHAC Holdings Corp, a.k.a. Service Experts, a heating, ventilating, and air conditioning (HVAC) services and repairs specialist based in Dallas, Texas. The acquisition is valued at US$340.75 million and is expected to close in the second quarter of 2016. John Macdonald, President and CEO of Enercare commented on the deal, “The acquisition, which is a natural extension to our business, creates an opportunity to drive growth and create shareholder value. This Transaction is expected to be immediately accretive to 2016 Normalized pro forma Distributable Cash per common share.”

Closed Deals

Crown Capital-funded Distinct acquires Mega Diesel Excavating

Toronto based utility and telecom infrastructure contractor,  Distinct Infrastructure Group Inc. (TSX-V: DUG),  has acquired Mega Diesel Excavating Ltd., a provider of hydro vac, vacuum truck and excavating services in the Edmonton region. No financial terms were released. Joe Lanni, Co-Chief Executive Officer of the Company said the deal supports it strategy to expand operations and the company’s presence in Western Canada. The acquisition is the first completed by Distinct Infrastructure since it received $20 million in subordinated debt funding from Canadian specialty finance firm Crown Capital Partners last November. The funding is also intended to support growth plans focused on Ontario.

Partners Group to take Axia NetMedia private in $272 million deal

Swiss private equity firm Partners Group has agreed to buy all of the outstanding common shares of Axia NetMedia Corp (TSX: AXX), a Canadian operator and seller of services over fiber optic infrastructure. Partners Group has agreed to pay $4.25 per share for the company, which reflects a total equity value of $272 million. The board of directors of Calgary-based Axia has recommended the offer to shareholders, who will vote on it at a special meeting expected to be held in May. Brandon Prater, Partner, Co-Head Private Infrastructure, Partners Group, comments: “We are confident that Partners Group’s experience in the communications sector, coupled with our global platform, represent an excellent match for Axia’s growth strategy and will help the Company to continue its development going forward. Our plan is to provide Axia with the expansion capital it needs and access to our platform to become a world-class communication network operator.”

Airbus ties up buy of PE-backed flight solutions provider Navtech

France’s Airbus Group has completed its acquisition of 100 percent of the shares of Navtech Inc., a Cambridge, Ontario-based provider of flight operations solutions. No financial terms were disclosed for the deal. Mike Hulley, CEO of Navtech said: “Navtech will benefit from Airbus’ technologies and worldwide footprint to further develop the quality of its services to its customers while keeping its recognized agility. Through the expertise of our team of approximately 250 employees, we design and deliver superior solutions which contribute to the success of our hundreds of aviation customers. The industry will benefit from our complementary assets as we provide game-changing innovations and a ‘one-stop-shop’ venue for digital flight operations services.”



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