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Canadian Private Market Recap: Dec 04

  • Posted By: Anan Sivapalu

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  • Comments: 0

Market Update

Last week the North American capital markets were unchanged, as the effects of sluggish European and Asian economic growth were offset by a positive U.S. job report. The U.S. economy added 211,000 jobs; resulting in 69 consecutive months of positive job growth.  The Fed is expected to increase interest rates this month. The North American credit market remains favorable to borrowers.   

 

 

 

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Change From

Capital Markets

 

This Week

Last Week

Year Ago

 

Last Week

Year Ago

Equity Markets

 

 

 

 

 

 

 

S&P 500 Composite

 

2,092

2,090

2,072

 

+0.1%

+1.0%

 

TEV/Forward EBITDA

 

10.3x

10.2x

9.8x

 

+0.0x

+0.5x

TSX Composite

 

13,359

13,368

14,470

 

-0.1%

-7.7%

 

TEV/Forward EBITDA

 

9.4x

9.6x

8.7x

 

-0.2x

+0.7x

Russell 2000 Index

 

1,183

1,202

1,173

 

-1.6%

+0.9%

 

TEV/Forward EBITDA

 

10.5x

10.6x

9.8x

 

-0.1x

+0.7x

CBOE VIX ("Fear Index")

 

14.8

15.1

12.4

 

-2.1%

+19.6%

USD/CAD

 

0.749

0.748

0.879

 

+0.001

-0.130

 

 

 

 

 

 

 

 

 

Debt Markets

 

 

 

 

 

 

 

U.S. 10-Year Treasury Yield

 

2.3%

2.2%

2.3%

 

+0.1%

+0.0%

U.S. Middle Market Loans

 

 

 

 

 

 

 

 

New Issue Clearing Yield ≤ $50 million

 

6.6%

6.6%

6.4%

 

0.0%

+0.2%

 

Spread to Treasury

 

431 bps

437 bps

417 bps

 

-6 bps

+14 bps

 

Total Debt/EBITDA

 

5.8x

5.8x

4.5x

 

0.0x

+1.3x

Source: Capital IQ

In a longer term context, the North American capital markets and equity valuations remain near cyclical highs, while U.S. treasury rates and the Canadian dollar are relatively low.

North American M&A activity and dollar volume moderated heading into the holiday season. Lower energy costs have been a catalyst for M&A activity in industries other than the energy sector.

 

 

Rolling 90 Days Ended

 

Change From

M&A Market Fundamentals

 

10/31/2015

9/30/2015

10/31/2014

 

9/30/2015

10/31/2014

Number of Transactions

 

 

 

 

 

 

 

 

Canada

 

133

113

143

 

+17.7%

-7.0%

 

U.S.

 

1,416

1,425

1,575

 

-0.6%

-10.1%

 

Canada % of Total

 

8.6%

7.3%

8.3%

 

+1.2%

+0.3%

 

 

 

 

 

 

 

 

 

Dollar Volume (US$ in billions)

 

 

 

 

 

 

 

 

Canada

 

39,644

37,315

15,576

 

+6.2%

+154.5%

 

U.S.

 

314,534

352,524

239,120

 

-10.8%

+31.5%

 

Canada % of Total

 

11.2%

9.6%

6.1%

 

+1.6%

+5.1%

 

 

 

 

 

 

 

 

 

Aggregate Corporate Cash (US$ in billions) 

 

 

 

 

 

 

S&P 500 Constituents

 

           5,735

           5,737

           5,847

 

-0.0%

-1.9%

 

TSX Composite Constituents

 

           1,472

           1,472

           1,341

 

0.0%

+9.7%

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. 

 

 

 

Close

 

 

Change From

Private Equity Overhang (US$ in billions)

 

2014  1H

2013 2H

2012 2H

 

2013 2H

2012 2H

North America

 

$535

$486

$519

 

+10.1%

+3.1%

Source: PitchBook


 Weekly Canadian Private Market M&A Report

§  Welltok acquires Silverlink with backing from Georgian Partners

§  Technomedia acquired by France’s Cegid

§  Novacap buys remaining Host.net stake from other shareholders

§  Roark Capital’s Driven Brands acquires CARSTAR Canada

§  Fengate Capital acquires British solar parks

§  CRCD acquires minority equity stake in Textiles Amalgamated

§  Wealthsimple acquires ShareOwner Investments

§  Mobify buys mobile marketing platform Dónde

§  AltaGas closes buy of GWF Energy Holdings

§  Brookfield partners with Kinder Morgan to acquire Gas Pipeline

§  Klass Capital partners in buyout of e-learning platform Docebo

§  Grenville exits 4tell Solutions investment via buyout transaction

§  Gryphon Investors acquires majority stake in The Original Cakerie

Welltok acquires Silverlink with backing from Georgian Partners

Welltok’s aggressive expansion strategy has been backed by a consortium led by Georgian Partners. In its latest round, Welltok secured $45 million in funding from the consortium. Welltok, the developer of the CafeWell Health Optimization platform, uses predictive analytics and cognitive computing to provide health solutions to consumers by organizing health improvement and condition management resources.    The latest funding has allowed Welltok to acquire Silverlink, the developer of a targeted communication platform. Stan Nowak, the CEO of Silverlink stated, “Together, Silverlink’s targeted communication capabilities and Welltok’s groundbreaking platform will create the ability to connect and support millions of consumers in a personalized and meaningful way, like never before.” The details of the acquisition were not released.

Technomedia acquired by France’s Cegid

Technomedia, a Novacap portfolio company has been acquired by Cegid Group of France.  The financial terms of the transaction were not released. Technomedia provides a talent management software solution to companies in over 70 countries. Cegid Group, the provider of a digital transformation solution, acquired Technomedia to expand its human resources segment. Patrick Bertrand, the CEO of Cegid stated, “Our alliance with Technomedia represents a change of pace in Cegid’s strategy. It marks a major milestone in our international growth plan, and cements our position as a leading provider in the HR sector, with one of the largest and best ranges of solutions on the market. It also strengthens our position as a major player in SaaS solutions.”

Novacap buys remaining Host.net stake from other shareholders

Novacap has acquired the remaining minority Host.net stake from a group of shareholders including Jeffrey Davis, the co-founder and CEO of the company. The financial details of the transaction were not released. Host.net provides IT infrastructure, cloud computing and storage to enterprise level organizations. “The purchase of the balance of the ownership is a reflection of our confidence in the company and remaining management. We have exciting plans to continue focusing on introducing innovative products and services to the market, leveraging our existing customer base, and expanding our geographical footprint,” said Stephane Tremblay, Senior Partner at Novacap.

Roark Capital’s Driven Brands acquires CARSTAR Canada

Driven Brands Inc., a portfolio company of Roark Capital, has acquired CARSTAR Automotive Canada Inc., an aftermarket automotive repair service provider with 230 locations in Canada. Financial terms of the transaction were not disclosed. The acquisition was received well by Sam Mercanti, the CEO of CARSTAR Canada. He stated, “CARSTAR Canada and our customers will benefit from Driven Brands’ and Roark Capital’s best in class executive teams and their extensive franchising expertise across a number of industries including automotive and retail services.”

Fengate Capital acquires British solar parks

Fengate Capital, a Canadian investment firm with focus on Infrastructure and real estate assets has acquired two solar properties located in the United Kingdom for $110 million. The two properties, co-developed by Kinetica and WElink Energy, with combined 39 MW production capacity are located in Cumbria and Raventhrope. The head of Fengate’s infrastructure division, George Theodoropoulos, highlighted, “As our first investment in the UK market, this is an opportunity to strengthen our relationships with market participants, such as Macquarie, Aurium Capital Markets and Kinetica Solar, while providing stable, long-term returns to our investors.”

CRCD acquires minority equity stake in Textiles Amalgamated

Capital regional et cooperative Desjardins (CRCD) has acquired a minority position in Textiles Amalgamated. Textiles Amalgamated designs and distributes home fashion products. Financial terms of the transaction were not released.

Wealthsimple acquires ShareOwner Investments

Wealthsimple Financial Inc., a venture backed online investing service firm based in Canada has acquired ShareOwner Investments. Financial terms of the transaction were not released. ShareOwner Investments provides investors an affordable self-directed investment platform. With this latest acquisition WealthSimple owns 14 discount brokerages across Canada. It joins the ranks of RBC and BMO as an active consolidator in the financial technology sector.  WealthSimple CEO, Michael Katchen commented, “This deal accelerates our mission to make smart investing accessible to everybody. It means we can move faster to bring innovation to Canada’s financial industry, and we’re adding complementary technology, like fractional shares that will help deliver a superior experience to our clients.” ShareOwner CEO, Bruce Seago added, “The partnership with Wealthsimple means ShareOwner can continue to innovate with increased speed and confidence. Our existing clients can expect the same great service and support they’ve always enjoyed.”

Mobify buys mobile marketing platform Dónde

Mobify, a Canadian targeted marketing platform has acquired Dionde, a developer of location-based mobile technology. Financial terms of the transaction were not released. With the combination of Mobify and Dionde, consumers can expect location-based commerce offerings. Currently, Diode serves notable customers including Pizza Hut, Applebees and Eddie Bauer, among others. Igo Faletski, the CEO of Mobify commented, “Dónde is essential technology because it finally connects online and offline worlds by focusing on the location of the customer. Retailers and brands can now reach customers through mobile web, apps, social media and real-time web push notification messaging, with content personalized to locations like the city they are in and where they are in the store, as well as past behavior and preferences, bar code scans, or even current weather.”

AltaGas closes buy of GWF Energy Holdings

AtlasGas Ltd., an energy infrastructure company which creates value by optimizing its portfolio of acquired assets, has purchased GWF Energy Holdings LLC. GWF, a portfolio company of Highstar Capital, holds three natural-gas electric power plants in northern California. AtlasGas acquired GWF for US$642 million from Highstar. David Cornhill, the Chairman and CEO of AltaGas stated, “This acquisition is an important addition to our energy infrastructure portfolio and fits well with our strategy of adding to our stable, long life asset base. The addition of natural gas-fired power generation in northern California further diversifies our growth opportunities while also meeting the increasing demand for clean sources of energy and capitalizes on the renaissance of natural gas.”

Brookfield partners with Kinder Morgan to acquire Gas Pipeline

Brookfield Infrastructure Partners and Kinder Morgan Inc. (KMI) have jointly agreed to acquire the remaining 53% stake in Natural Gas Pipelines Co. of America LLC (NGPL) from Myria Holdings. The two acquirers have agreed to pay US$242 million to Myria Holdings subject to regulatory approval. The total value of the deal including debt is valued at US$3.4 billion. KMI will pay $136 million to increase its 20% stake to 50%, while Brookfield Infrastructure Partners will pay $106 million to increase its 27% stake to 50%.  Steve Kean, the CEO of KMI stated, “We are extremely pleased to announce an agreement to acquire full ownership of NGPL in partnership with Brookfield. This partnership ensures that NGPL is positioned to take full advantage of future opportunities to provide natural gas transportation and storage services to its current and future customers.” Sam Pollock, CEO of Brookfield Infrastructure Partners added, “We are delighted to be strengthening our relationship with Kinder Morgan. We look forward to working together to execute NGPL’s growth strategy to achieve its potential.”

Klass Capital partners in buyout of e-learning platform Docebo

Klass Capital Partners has partnered with the management of Docebo SpA to acquire a controlling stake in the company. Docebo provides a cloud-based corporate learning platform to leading global enterprises. Klass purchased the shares from Principia SGR, an Italian venture capital firm. It also made an additional growth equity investment in the company. Daniel Klass, the Managing Partner of Klass Capital welcomed the investment and stated, “We continue to be impressed with how quickly Docebo has been able to scale internationally. We also believe that Docebo is in a strong position to address the social and informal learning management needs that exist in the market.” Docebo is expected to experience triple digit growth with the addition of 10 enterprise customers each month.

Grenville exits 4tell Solutions investment via buyout transaction

Grenville Strategic Royalty Corp has exited its investment in 4tell Solutions by a contract buyout. The exit represents a 42% IRR and 1.75x cash on cash return. 4tell Solutions LP provides performance governance software solutions to the real estate and infrastructure sectors.

Gryphon Investors acquires majority stake in The Original Cakerie

Gryphon Investors has acquired majority stake in The Original Cakerie. Financial terms of the transaction were not released.  The Original Cakerie is a British Columbia based manufacturer of frozen desserts. It serves retail and food service customers. Dave Hood, the CEO of The Original Cakerie stated, “We are very excited to partner with Gryphon, given their proven track record in the food sector and the significant resources they bring to the table to assist us in building the company and accelerating our growth. Gryphon’s investment will provide our customers and employees with the opportunity to be associated with an exciting growth platform and enduring leader in the premium baked goods space. We welcome Gryphon’s partnership as we enter our next stage of growth.” Matt Farron, a Principal in Gryphon’s Consumer Group added, “The Original Cakerie is poised for ongoing rapid growth as it continues to bring innovative, delicious dessert products to its retail and foodservice partners. We look forward to working with Dave and his team to continue to drive The Original Cakerie’s growth both organically as well as through strategic add-on acquisitions.”

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