Value Unleashed

Market Update

The equity and debt markets remain conducive to M&A activity.  Last week, the North American equity markets rebounded from last week’s drop, with all broad indices increasing significantly. Positive earnings releases from U.S. discount retailers and a positive U.S. economic outlook contributed to the surge in stock prices. The terrorist attack on Paris had very little impact on the North American markets. The VIX declined by 23.0% and credit markets were unchanged versus last week.   

Source: Capital IQ

The following table summarizes M&A activity and dollar volume on a trailing three-month basis to the end of October and these against the preceding three month period and the corresponding period from the prior year.  Weak commodity markets and a weaker Canadian dollar have been a catalyst for Canadian M&A activity, particularly with larger transactions. In the U.S., activity is moderating as both the number of transactions and dollar volume fell versus the preceding three months.   However, dollar volume is significantly higher than the three months ended October 31, 2014.

Source: Capital IQ

There is tremendous liquidity available to underpin M&A activity.  Corporate cash balances in North America have increased to US$7.6 trillion from US$7.2 trillion a year ago. On the private equity and venture capital front, the equity capital overhang is estimated at US$535 billion. 

Source: PitchBook

Weekly Canadian Private M&A Report

·         Penfund-owned JET Group buys Sellstrom Manufacturing

·         Resolute buys Atlas Paper from Peak Rock Capital for $156 million

·         Farm At Hand to combine with FarmLink Marketing Solutions

·         Clearlake ties up buy of Georgian Partners-backed Syncsort

·         PE-backed Mister Car Wash acquires Auto Spa Express

Penfund-owned JET Group buys Sellstrom Manufacturing

The JET Group, a portfolio company of Penfund, has acquired Sellstrom Manufacturing Co, a manufacturer of personal safety equipment based in Illinois. Financial terms of the transaction were not released. The acquisition expanded JET Group’s product portfolio, geographic scope and growth initiatives. President and COO of the JET Group, Chirs Baby noted, “Sellstrom offers our group the product line, expertise, and technical knowledge required to service the critical North American safety markets and beyond. Similarly, the JET Group offers Sellstrom several benefits including additional resources and financial capacity. These benefits will allow the Sellstrom brand to further capitalize on its legacy of outstanding product innovation, customer service and growth. This product range addition will also benefit our Canadian customer base tremendously and delivers on our promise to our distribution partners of expanding our Canadian safety portfolio to include a full range of PPE products.” JET Group was previously owned by Diamond Investment Group Ltd.

Resolute buys Atlas Paper from Peak Rock Capital for $156 million

Resolute Forest Products Inc. has acquired a Peak Rock Capital portfolio company, Atlas Paper Holdings. Atlas Paper Holdings is a manufacturer or tissue products based out of Miami, Florida. The purchase price was announced at US$156 million. The CEO of Resolute, Richard Garneau stated, “This is a step-change acquisition that provides us with an immediate position in the multi-billion-dollar North American consumer tissue market. We’re following through on our strategy toward the Resolute of the future with an acquisition that capitalizes on our unique ability to capture synergies by integrating forward our U.S. market pulp assets. This acquisition also gives us immediate tissue industry experience as we work toward bringing our Calhoun tissue project online by early 2017.” Resolute aims to generate synergies by optimizing its distribution networks, capitalizing on its excess tissue converting capacity, leveraging Atlas’ expertise toward the Calhoun tissue project and by increasing the product offering to existing customers.

Farm At Hand to combine with FarmLink Marketing Solutions

Farm At Hand Inc. is to merge with FarmLine Marketing Solutions. Farm At Hand is a cloud based management software platform for farms. FarmLine is a grain marketing services provider. “Today farmers are using technology across their entire operations and engaging with outside experts. With FarmLink we gain new relationships and expertise, allowing Farm At Hand to truly become the platform for agriculture, from seed to sale,” said Kim Keller, co-founder of Farm At Hand. While, Brenda Tjaden Lepp, co-founder of FarmLink added, “We are merging with Farm At Hand because it’s revolutionary for farm record-keeping, maintaining integrity in the process. Having farmers in control of their data is critical to their farm’s success.” Terms of the merger were not disclosed.

Clearlake ties up buy of Georgian Partners-backed Syncsort

Syncsort Inc, a portfolio company of Georgian Partners has been acquired by Clearlake Capital Group. Financial terms of the transaction were not released. Syncsort Inc provides cost effective enterprise software which allows organization to efficiently manage large volume of data. Syncsort spans 85 countries and 87 of the Fortune 100 companies. Lonne Jaffe, the CEO of Syncsort stated, “Our organic product investments and related software acquisitions over the last couple of years have been singularly focused on one of the most important secular growth opportunities in the technology industry today. This significant investment from Clearlake will allow Syncsort to double-down on our successful strategy and to deliver meaningful value for customers.”

PE-backed Mister Car Wash acquires Auto Spa Express

Mister Car Wash, a portfolio company of Penfund has bought Auto Spa Express. Auto Spa Express is a Colorado based car wash and detail center. Financial terms of the transaction were not released. With this latest acquisition, Mister Car Wash now operates 160 locations in 19 states. In a press release, John Lai, the President and CEO of Mister Car Wash said, “We’re excited to join forces with the team from Auto Spa Express to begin serving customers in the Denver market at this prime location. During its ten years in business at this location, Auto Spa has kept pace well with increasing demand from the growing Denver market. Being situated inside the largest outdoor mall in the United States will give us an awesome opportunity to introduce the Mister Car Wash experience to Denver customers.” Mister Car Wash was previously owned by ONCAP.