Blog

Canadian Private Market Recap: May 6

  • Posted By: Ann Zhang, Paris Aden & Anan Sivapalu

  • |
  • Comments: 0

Market Updates

The North American equity markets pulled back in the wake of slower than expected job growth, mixed first quarter earnings results and mixed signals from the Federal Reserve. In addition to the effect of local factors, the embattled Eurozone and slowing pace of Chinese economy continue to weigh on the North American equity markets. In the credit markets, caution continues to drive middle market spreads higher. However, total leverage levels around 5x reflect robust conditions by historical standards.

 

Close

 

Change From

U.S. Middle Market Loans

This Week

Last Week

Year Ago

 

Last Week

Year Ago

 

 

 

 

 

 

 

 

New Issue Clearing Yield ≤ $50 million

7.1%

7.1%

5.8%

 

0.0%

+1.3%

 

Spread to Treasury

532 bps

527 bps

357 bps

 

+5 bps

+175 bps

 

Total Debt/EBITDA

5.1x

5.1x

5.2x

 

0.0x

-0.1x

 

 

 

 

 

 

 

North American M&A activity slowed down significantly from the levels seen a year ago as acquirers have become more cautious given historically high valuations and a general sense that the current economic expansion may be nearing its cyclical peak.  This first quarter is usually the least active month for M&A activity, so month-over-month comparisons at this time of year are less meaningful.

 

Close

Change From

M&A Market Fundamentals

3/31/16

2/29/16

3/31/15

2/29/16

3/31/15

Number of Transactions

 

 

 

 

 

 

Canada

98

116

126

-15.5%

-22.2%

 

U.S.

1,196

1,431

1,714

-16.4%

-30.2%

 

Canada % of Total

7.6%

7.5%

6.8%

+0.1%

+0.7%

 

 

 

 

 

 

 

Dollar Volume (US$ in billions)

 

 

 

 

 

 

Canada

10,811

13,247

17,618

-18.4%

-38.6%

 

U.S.

365,660

440,465

390,513

-17.0%

-6.4%

 

Canada % of Total

2.9%

2.9%

4.3%

-0.0%

-1.4%

 

Valitas Insights: Canadian Private Equity Activity Slows Down in the First Quarter of 2016

PitchBook released their first quarter update on Canadian mid-market private equity last week. According to the Pitchbook report, the Canadian private equity market closed a record number of transactions in 2015 with 283 completed deals and an aggregated deal value of C$49 billion. However, 2016 is off to a slow start in 2016 with C$7 billion invested in Q1 across 47 transactions.

Since 2010, U.S. private equity funds have made more investments in Canadian companies than Canadian funds and this gap widened in 2015.  So far in 2016, the gap has decreased, although it’s difficult to draw conclusions from such a small sample.

To view the full PitchBook report, click here.

 

Mid-market M&A Indicator: February 2016

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 that acquirers are signing with potential targets and indicate the volume of deals that are in the (pre-announcement) due diligence phase.  After December and January contractions in the leading indicators, February has bounced right back. 

Mergers & Acquisitions Magazine's Mid­Market Pulse (MMP), a forward-looking sentiment indicator, is 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.

While the forward-looking indicators have been in bullish territory each month for the last several months, the 12-month forward indicator has contracted in each of the last three months and is now in neutral territory.

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

 

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

The Business Transition Forum organizers surveyed the business owners and senior executives that are registered for BTF Toronto in order to understand their reason for attending, their industry and size of business.  The chart below summarizes their reasons for attending:

We look forward to seeing you there!

 

Weekly Canadian Private Market M&A Report

 

Closed Deals

Moody’s Acquires GGY, Significantly Enhances Insurance Risk Offerings

On March 1st, Moody’s Corporation (NYSE: MCO) announced that it acquired GGY, a leading provider of advanced actuarial software for the global life insurance industry. Combined with Moody’s Analytics’ insurance risk products, the acquisition creates an industry-leading enterprise risk offering for global life insurers and reinsurers. The terms of the transaction, which is expected to be $0.02 dilutive to Moody’s EPS in 2016, were not disclosed. GGY had approximately $28 million in annual revenue in 2015. Mark Almeida, President of Moody’s Analytics said, “The addition of GGY’s powerful actuarial solutions significantly extends Moody’s Analytics’ capabilities for our insurance customers.”

VC-backed Miroculus buys diagnostics specialist Kapplex

Kapplex, a Canadian developer of instruments and consumables for diagnostic markets, has been acquired by U.S.-based biotechnology company Miroculus. No financial terms were released. Kapplex was separated from the University of Toronto in 2012 in partnership with MaRS Innovation. Alejandro Tocigl, Miroculus’ CEO said, “We see increasing demand for decentralized testing, and both companies are dedicated to improving patient-centric care while bringing the diagnostics closer to patients in an automated, accurate and affordable way. Combining our efforts will allow us to combine novel miRNA detection chemistry, bioinformatics, and database support with their powerful and versatile microfluidic platform.”

3D printer Formlabs buys 500 Startups-backed Pinshape

Formlabs, a maker of 3D printing technology, announced it has acquired venture-backed Pinshape for an undisclosed price. “We’re proud to welcome Pinshape to Formlabs,” said Max Lobovsky, co-founder and CEO of Formlabs. “Pinshape is a company that shares the same passion and drive as Formlabs in making sophisticated 3D printing technology widely accessible. Pinshape is one of the fastest growing 3D design marketplaces, and Formlabs wants to make sure Pinshape stays that way. Formlabs is building the biggest desktop 3D printing company in the world, and we want to grow the collaboration part of the ecosystem to the same level.”

PE-backed Unique Fabricating buys Intasco in $27.5 million deal

Unique Fabricating Inc. (NYSE: UFAB) has acquired the business and substantially all of the assets of Intasco Corp., a London, Ontario-based manufacturer of precision die cut solutions for $27.5 million. “This strategic, highly synergistic and accretive acquisition significantly broadens our solution offerings, production capabilities, and expands our reach in our existing markets, as well as certain adjacent, markets,” said John Weinhardt, Chief Executive Officer of Unique Fabricating.

Add A Comment

Confidentiality and Communications Protocols

Continue Reading

Sign Up to Receive Valitas Publications

Subscribe