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Canadian Private Market Recap: Mar 4

  • Posted By: Anan Sivapalu & Ann Zhang

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  • Comments: 1

Market Update

Last week, the North American equity indices continued their recovery, largely erasing the losses seen at the beginning of the year. Rebounding oil prices and further stimulus planned by the G20, especially by the ECB to curb deflationary pressure in the Eurozone have contributed to the rebound seen in the last three weeks. While leveraged credit spreads in the mid-market remain moderate and total leverage levels remain healthy, we note leverage levels have pulled back recently from the 5x-plus levels seen as recently as a few weeks ago.

 

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Change From

Capital Markets

This Week

Last Week

Year Ago

 

Last Week

Year Ago

Equity Markets

 

 

 

 

 

 

S&P 500 Composite

2,000

1,948

2,099

 

+2.7%

-4.7%

 

TEV/Forward EBITDA

10.2x

10.0x

10.5x

 

+0.2x

-0.3x

TSX Composite

13,213

12,798

15,083

 

+3.2%

-12.4%

 

TEV/Forward EBITDA

10.3x

10.0x

10.1x

 

+0.3x

+0.2x

Russell 2000 Index

1,082

1,037

1,231

 

+4.3%

-12.1%

 

TEV/Forward EBITDA

10.1x

9.9x

10.7x

 

+0.3x

-0.6x

CBOE VIX ("Fear Index")

16.9

19.8

14.2

 

-14.9%

+18.5%

USD/CAD

0.750

0.738

0.804

 

+0.012

-0.055

 

 

 

 

 

 

 

 

Debt Markets

 

 

 

 

 

 

U.S. 10-Year Treasury Yield

1.9%

1.8%

2.1%

 

+0.1%

-0.2%

U.S. Middle Market Loans

 

 

 

 

 

 

 

New Issue Clearing Yield ≤ $50 million

6.5%

6.7%

7.0%

 

-0.3%

-0.5%

 

Spread to Treasury

458 bps

496 bps

489 bps

 

-38 bps

-31 bps

 

Total Debt/EBITDA

4.6x

4.6x

4.8x

 

0.0x

-0.2x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Update on Canadian M&A Activity

M&A activity, and particularly dollar volume, in Canada have decreased significantly since the start of the year, primarily due to the decline in the oil and gas sector. However, larger domestic and foreign acquirers, particularly the pension funds, have begun to explore acquisitions of cheap energy assets in Canada. U.S. M&A activity is also down, while dollar volume is up as a result of several large transactions.   Despite the slowdown in activity, significant liquidity remains available to underpin future activity.  Corporate cash balances have increased in Canada and remain healthy in the U.S., despite modest declines, perhaps due in part to the significant increases in M&A dollar volume in that market.

 

Rolling 90 Days Ended

Change From

M&A Market Fundamentals

1/31/16

12/31/15

1/31/15

 

12/30/15

1/31/15

Number of Transactions

 

 

 

 

 

 

 

Canada

111

120

158

 

-7.5%

-29.7%

 

U.S.

1,374

1,490

1,687

 

-7.8%

-18.6%

 

Canada % of Total

7.5%

7.5%

8.6%

 

+0.0%

-1.1%

 

 

 

 

 

 

 

 

Dollar Volume (US$ in billions)

 

 

 

 

 

 

 

Canada

6,961

10,591

31,128

 

-34.3%

-77.6%

 

U.S.

394,770

333,192

368,128

 

+18.5%

+7.2%

 

Canada % of Total

1.7%

3.1%

7.8%

 

-1.3%

-6.1%

 

 

 

 

 

 

 

 

Aggregate Corporate Cash (US$ in billions)

 

 

 

 

 

 

 

S&P 500 Constituents

5,702

5,742

6,017

 

-0.7%

-5.2%

 

TSX Composite Constituents

1,584

1,422

1,561

 

+11.4%

+1.5%

 

 

Weekly Canadian Private Market M&A Report

Announced Deals

McCain Foods to buy majority stake in Van Geloven from TowerBrook

McCain Foods will acquire majority stake in Van Geloven BV from British private equity firm TowerBrook Capital Partners. Financial terms of the transaction were not released. Dirk van de Put, the CEO of McCain Foods commented on the strategic importance of the transaction: “Whilst Van Geloven will operate as a standalone company within the McCain Group, this acquisition truly complements our strategy for growth within our European markets. Van Geloven’s market leading brands and products offer us a fantastic opportunity to strengthen our overall appetizer and snack food market presence within the region.” The CEO of Van Geloven, Peter Doodeman added, “We are very excited to partner with McCain, whose global scale and expertise in frozen food will not only help further strengthen our position in the Benelux region but will also accelerate our growth internationally as we continue to develop our European customer base.”

Ecotex and Fengate will acquire Booth Centennial Healthcare

Ecotex Healthcare Linen Service, a Canadian provider of healthcare laundry and linen services has partnered with Fengate Capital Management to purchase Booth Centennial Healthcare Linen Service. Booth Centennial Healthcare is the leading healthcare laundry and linen services company in Ontario with over 40% of the market. Booth is a non-profit entity which is currently co-owned by 22 hospitals in the region.

Vertafore to acquire Keal Technology

TPG Capital’s portfolio company Vertofore has agreed to purchase Keal Technology based in Concord, Ontario. Financial terms of the transaction were not released. Keal Techoloogy develops broker and commercial management systems specifically for the Canadian marketplace.  This acquisition will bolster Vertafore’s Canadian presence and add to its product portfolio. Jeff Hawn, Chairman and CEO of Vertafore said, “As part of this acquisition, Keal will join Vertafore, but importantly, maintain its own brand and identity which have strong reputations and recognition in the Canadian market already.” Pat Durepos, President at Keal added, “The insurance industry is undergoing tremendous change. In times of uncertainty, working with the market leader brings stability to Keal and our over 16,000 broker users. ”

BB&T to buy U.S. insurance broker Cooper Gay

BB&T has agreed to purchase Swett & Crawford from Cooper Gay Swett & Crawford, a British wholesale and reinsurance broker for US$500 million in cash. BB&T is the fifth largest insurance broker in the U.S. and sixth largest in the world with over 200 insurance agencies under its umbrella. “Swett & Crawford nicely enhances our insurance business and increases and diversifies our overall fee income profile,” said Kelly S. King, BB&T’s chairman and CEO. The sellers in the transaction include Lightyear Capital and PSP Investments.

 

Closed Deals

Shaw closes acquisition of Wind Mobile

Shaw Communications has closed its acquisition of Mid-Bowline Group, the parent of Wind Mobile Corp. for $1.6 billion. The stake was purchased from a consortium of private equity firms in Canada and the U.S.. Wind Mobile is a non-incumbent wireless provider with over 940,000 subscribers with 50MHz of spectrum. Shaw Communications plans on expanding the geographic reach of the Wind Mobile networks.

Mama Earth Organics secures financing, merges with Farms & Forks

Under a financing deal from InvestEco Capital and Renewable Funds, Mama Earth Organics will be combined with Farms & Forks and operate under the Mama Earth name. Financial details of the transaction were not released. Both companies are in the direct-to-home organic food delivery services in the Toronto region. Andrew Heintzman, the InvestEco CEO commented, “…we think that Farms & Forks fits very nicely with Mama Earth, and that together they will be able to provide an even better service offering to Torontonians looking for the very best organic food.”

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