Value Unleashed

Market Updates

Stocks rallied for the second consecutive week, driven to a large extent by strength in the U.S. housing sector: new home sales grew at their fastest pace since January 2008 and pending home sales grew 5.1% over the last month. The housing data fueled optimism that the economy can rebound from soft growth in the first quarter and companies can grow their earnings in the back half of 2016.

Fed officials that spoke since last Friday reminded investors that the FOMC is ready to raise rates if economic data does not take a turn for the worse. This message was consistent with remarks from two weeks ago that boosted the probability of a June hike from 8.0% to 30.0%. Expectations for a hike in July inched up to 62.0% from 55.0% at the end of last week.
 

Valitas Insights: Private Equity-Backed Middle Market Companies are Growth Champions

The National Center for the Middle Market, a partnership with GE Capital and The Ohio State University Fisher College of Business, is the nation's first and foremost expert on the U.S. middle market. There were two very interesting insights from their most recent report:

• Approximately one in three U.S. middle market companies ($10 million to $1 billion revenue) are private equity backed.  In Canada, that proportion is much lower.  We estimate that somewhere between 5% and 10% of Canadian middle market companies are private equity backed.
   
• In the U.S., the average middle market revenue growth rate had been both higher and more stable than the growth rate for the companies in the S&P 500 index.  Also, the private equity backed companies have significantly outperformed the rest.
   

Please contact Paris Aden if you would like to receive the full report.

Business Transitions Forum in Toronto on June 8: Maintaining Confidentiality During a Competitive Sale Process

Weekly Canadian Private Market M&A Report

Announced Deals

MTY Food Group to buy PE-backed Kahala Brands for $300 million

Montreal-based MTY Food Group Inc. (TSX: MTY) has agreed to acquire the shares of Kahala Brands Ltd., a Scottsdale, Arizona-based restaurant franchising company with 2,800 stores worldwide. Total consideration is US$300 million, US$240 million of which will be paid in cash. MTY said the acquisition will facilitate the U.S. expansion of its quick-service franchising business. Stanley Ma, Chair of the Board and Chief Executive Officer of MTY, said: "MTY had been searching for the right foundation for its US expansion for the last three years, and it has finally found the perfect match. The combination of the two companies' portfolios and expertise will produce tremendous opportunities in Canada, in the United States and worldwide."

PE-backed WSP Global to buy Sweett Group for $46.1 million

WSP Global Inc. (TSX: WSP) has agreed to acquire Sweett Group plc, a London, U.K.-based provider of professional services for the construction and management of building and infrastructure projects. Under the deal's terms, WSP will pay Sweett shareholders 67 cents per share, valuing the company's entire issued share capital at about $46.1 million. Paul Dollin, Chief Operating Officer of WSP, said: "This transaction is a key step on WSP's journey as a world class professional services organisation. The combination of skills and compatible cultures will provide a great foundation for the two organisations to work together constructively and enjoyably on selected projects, creating attractive and competitive solutions for our clients. This is a transaction that will truly benefit the business, our people and our clients."

Closed Deals

Enghouse acquires Eureka-backed NetBoss Technologies

Canadian enterprise software company Enghouse Systems Ltd. (TSX: ESL) has acquired the assets of NetBoss Technologies Inc., a Sebastian, Florida-based provider of network management assurance software and services. The purchase price was about $9.3 million. "NetBoss complements our OSS (Operations Support Systems) offerings with a comprehensive service assurance and analytics platform," said Sunil Diaz, General Manager, Enghouse Networks. "With its longstanding experience, NetBoss is one of the market leaders in service assurance. The NetBoss product portfolio, impressive customer base and knowledgeable employees help solidify our position as a leading provider of OSS solutions to service providers worldwide. We are pleased to welcome NetBoss' customers and employees to our organization."

IMS Health acquires venture-backed Privacy Analytics

IMS Health Inc. (NYSE: IMS) has acquired Privacy Analytics Inc., a Canadian provider of technology solutions for de-identifying and anonymizing healthcare data. No financial terms were disclosed. IMS Health, a U.S. health information business, indicated that the acquisition will extend its real-world evidence capabilities and reinforce its commitment to patient data privacy. Jon Resnick, vice president and general manager, RWE Solutions, IMS Health said, "This acquisition strengthens our role as a leading patient privacy and data protection advocate while increasing the value clients across healthcare can realize from real-world evidence."

MidOcean Partners acquires assets of Holiday Group

U.S. private equity firm MidOcean Partners has acquired the assets of Holiday Group Inc., a Montreal-based licensed luggage, bag and travel accessory maker and distributor in Canada. No financial terms were released for the deal. Daniel Penn, Managing Director at MidOcean said, "Travelpro Group has tremendous brands with very high quality products and an impressive sourcing operation that has led to strong growth across retailers and channels. We see numerous opportunities to continue and increase Travelpro Group's growth trajectory, including through acquisition."

Venture-backed MTI acquires venture-backed Rolith

Canadian smart materials and photonics company Metamaterial Technologies Inc. (MTI) has bought Rolith Inc., a provider of nanostructured coatings and devices based in Pleasanton, California. The deal's financial terms were not disclosed. George Palikaras, founder and chief executive officer of MTI said, "This is a strategic acquisition for MTI. One of the biggest challenges in our industry has been the absence of viable manufacturing tools to produce large-scale, high-volume optical metamaterial products. Rolith's patented RML lithographic technology is the first of its kind and will allow us to scale-up our manufacturing to meet the industry demands."