Blog

Canadian Private Market Recap: Oct 30

  • Posted By: Anan Sivapalu

  • |
  • Comments: 0

Market Update

Last week, the North American equity markets were virtually unchanged from the prior week, with the exception of the TSX Composite, which declined 3%, reflecting slower than expected Canadian GDP growth (+0.1%).  The results of the stress test on the Greek banking sector revealed a capital deficit of only $15.8 billion provided some relief.  The credit spread on mid-market loans continues to fall, reflecting favorable credit conditions.

 

 

 

Close

 

 

Close From

Capital Markets

 

This Week

Last Week

Year Ago

 

Last Week

Year Ago

Equity Markets

 

 

 

 

 

 

 

S&P 500 Composite

 

       2,079

       2,075

       1,995

 

+0.2%

+4.2%

 

TEV/Forward EBITDA

 

10.3x

10.4x

9.4x

 

-0.1x

+0.9x

TSX Composite

 

     13,529

     13,954

     14,459

 

-3.0%

-6.4%

 

TEV/Forward EBITDA

 

9.6x

10.1x

8.6x

 

-0.5x

+1.0x

CBOE VIX ("Fear Index")

 

         15.1

         14.5

         14.5

 

+4.2%

+3.8%

USD/CAD

 

       0.764

       0.760

       0.894

 

+0.00

-0.13

 

 

 

 

 

 

 

 

 

Debt Markets

 

 

 

 

 

 

 

U.S. 10-Year Treasury Yield

 

2.2%

2.1%

2.3%

 

+0.1%

-0.2%

U.S. Middle Market Loans

 

 

 

 

 

 

 

 

New Issue Clearing Yield ≤ $50 million

 

6.2%

6.3%

6.8%

 

-0.1%

-0.6%

 

Spread to Treasury

 

400 bps

421 bps

449 bps

 

-21 bps

-49 bps

 

Total Debt/EBITDA

 

5.8x

5.8x

5.0x

 

0.0x

+0.8x


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.

 

 

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

 

127

110

143

 

+15.5%

-11.2%

 

U.S.

 

1,203

1,313

1,575

 

-8.4%

-23.6%

 

Canada % of Total

 

9.5%

7.7%

8.3%

 

-1.8%

+1.2%

 

 

 

 

 

 

 

 

 

Dollar Volume (US$ in billions)

 

 

 

 

 

 

 

 

Canada

 

38,739

36,571

15,576

 

+5.9%

+148.7%

 

U.S.

 

302,089

345,570

239,120

 

-12.6%

+26.3%

 

Canada % of Total

 

11.4%

9.6%

6.1%

 

-1.8%

+5.3%

 

 

 

 

 

 

 

 

 

Aggregate Corporate Cash (US$ in billions)

 

 

 

 

 

 

 

 

S&P 500 Constituents

 

           6,059

           6,061

           5,861

 

-0.0%

+3.4%

 

TSX Composite Constituents

 

           1,574

           1,574

           1,362

 

0.0%

+15.6%


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, capital overhang hovers around US$535 billion, a slight decline from second half of 2013 (-1.8%). The increase in M&A activity in U.S. and Canada can be attributed to capital deployment by strategic acquirers and private equity firms. This trend is expected to continue for the next several quarters.      

 

 

 

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%

 

Weekly Canadian M&A Overview

Roots Canada partnered with a private equity firm to seek global expansion and major Canadian private equity funds solidified their joint venture agreements with overseas partners. Here are some of the noteworthy deals from last week: 

§  Searchlight Capital buys majority stake in Roots Canada

§  CPPIB acquires interest in U.S. logistics properties for $350 million

§  Johnson Electric completes $800 million buy of PE-owned Stackpole

§  Brookfield sells stake in Manhattan development to Qatar fund

Searchlight Capital buys majority stake in Roots Canada

Roots Canada co-founders, Michael Budman and Don Green, have sold a controlling stake in the company to Searchlight Capital Partners, a U.S. private equity firm. The terms of the deal were not disclosed. “As one of the few iconic Canadian heritage brands, we see significant growth potential for Roots in both Canada and internationally across multiple distribution channels,” said Erol Uzumeri, founding partner at Searchlight. The co-founders will retain substantial ownership of the company and remain actively involved. Roots Canada is one of the most recognized clothing brands in Canada with 245 retail stores in Canada, United States and Asia.   

CPPIB acquires interest in U.S. logistics properties for $350 million

Canada Pension Plan Investment Board (CPPIB) has invested US$350 million in a portfolio of logistics properties in partnership with Global Logistics Properties Ltd and three other institutional investors. CPPIB will own a 10.6 percent interest in the U.K. based portfolio. The portfolio comprises 722 assets which include warehouses, business parks and light industrial assets. The gross purchase price of the portfolio totaled US$8.1 billion.   “Our investment in one of the largest and most diverse industrial portfolios in the U.S. enables us to build scale in this sector with high-quality, well-located assets,” said Peter Ballon, Head of Real Estate Investments Americas at CPPIB. “GLP is a well-aligned global partner for CPPIB and we look forward to continuing to build our relationship.” GLP will manage the day-to-day operations of the portfolio of assets.

Johnson Electric completes $800 million buyout of PE-owned Stackpole

Johnson Electric Holdings has acquired Stackpole International, a Canadian manufacturer of pumps and components for original equipment manufacturers. An investor group led by Crestview Partners, a U.S. private equity firm, sold the company for $800 million in an all cash transaction. Stackpole is expected to continue its operations in Ancaster, Ontario.  Stackpole has a global footprint with over 2,500 employees and nine manufacturing facilities. “We are very excited to take this next step with Johnson Electric,” said Peter Ballantyne, President and CEO of Stackpole. “It allows for the continued advancement of our core product portfolio and the development of innovative new technologies to meet the changing needs of our industry. It also offers our employees additional benefits from becoming part of a larger manufacturing group that brings global breadth and financial strength to support our growth initiatives over the long term.” The combined company will have over 37,000 employees and span across 20 countries.

Brookfield sells stake in Manhattan development to Qatar fund

Brookfield Property Partners’ latest transaction has cemented its strategic alliance with Qatar Investment Authority. Brookfield has sold a 44 percent stake in its West Side Manhattan development project worth US$4.5 billion. By completion, the project is estimated to be worth US$8.6 billion. The terms of the strategic relationship were not disclosed. The Qatari sovereign fund and Brookfield are also partners in the upcoming development of London’s Canary Wharf district. Qatar Investment Authority is expected to invest further US$35 billion in the U.S. over the next five years.

Add A Comment

Confidentiality and Communications Protocols

Continue Reading

Sign Up to Receive Valitas Publications

Subscribe