M&A 2015 CONFERENCE INDIANAPOLIS JUNE 11

Transcription

1 M&A 2015 CONFERENCE INDIANAPOLIS JUNE 11 1

2 Marketing Update: Current Deal Activity, Valuations and Outlook 2015 M&A CONFERENCE 2015 M&A CONFERENCE 2

3 Panelists Moderator: Jim Birge, Partner, Faegre Baker Daniels Devin Anderson, President / CEO, E&A Companies LLC Brian Baker, Executive Vice President Corporate Finance, City Securities Corporation Chris Caniff, Senior Managing Director, Periculum Capital Corporation Steve Cobb, Managing Partner, CID Capital Scott Lutzke, Founding Partner, Centerfield Capital Partners 3

4 Middle-Market M&A Valuations The chart illustrates valuation multiples of private equity-sponsored, middle-market* M&A transactions by transaction size since Transaction multiples are at their highest levels since 2011, with the $ mm transaction size range leading the way at 8.3x. 8.5x Valuation Multiples by Transaction Size 8.3x TEV/EBITDA 8.0x 7.5x 7.0x 6.5x 6.0x 7.5x 7.2x 6.0x 7.4x 6.8x 6.1x 7.1x 6.9x 6.7x 7.6x 7.5x 6.3x 7.9x 7.7x 5.5x 5.7x 5.9x 5.9x 5.0x 5.3x Q x $10-25mm $25-50mm $50-100mm $ mm Source: GF Data, M&A Report May 2015 *Note: middle market is $10 -$250mm 4

5 Middle-Market M&A Valuations by Industry The charts below illustrate valuation multiples of private equity-sponsored, middle-market* M&A transactions by industry and transaction size since Manufacturing Business Services 12.0x 12.0x TEV/EBITDA 10.0x 8.0x 6.0x TEV/EBITDA 10.0x 8.0x 6.0x 4.0x /1Q x /1Q 2015 $10-25mm $25-50mm $50-100mm $ mm $10-25mm $25-50mm $50-100mm $ mm Healthcare Services Distribution TEV/EBITDA TEV/EBITDA /1Q /1Q 2015 $10-25mm $25-50mm $50-100mm $ mm $10-25mm $25-50mm $50-100mm $ mm Source: GF Data, M&A Report May 2015 *Note: middle market is $10 -$250mm 5

6 M&A Drivers Private equity capital raised has increased from a total of $112B in 2011 to $223B and $197B in 2013 and 2014, respectively. Private Equity U.S. Fundraising by Quarter $ $75 $50 $25 $0 $34 $32 $25 $21 $33 $37 $26 $32 $36 $78 $31 $78 $43 $52 $41 $61 $38 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Capital Raised ($B) # of Funds Closed Private Equity U.S. Investments-to-Exits Ratio 2, x 2,000 1,500 1, x 3.1x 3.6x 3.7x 2.6x * Investments/Exits # of Investments (excl. add-ons) # of Exits Source: Pitch Book & Renaissance Capital *YTD x 1.9x 2.1x 1.9x 1.6x 3.0x 2.0x 1.0x 0.0x 6

7 Current Trends in Senior Debt Structure Pre Hold Levels $50 million $25 million max $50 million + Stretch Pieces Aggressive Nonexistent Yes Term Loan Amortization Little or none Nearly a prerequisite Little or back-end loaded Covenants Limited to 1 or 2 and loose Full package, much tighter 1 to 2 covenants; looser Advance Rates Aggressive (ABL-Lite) Conservative (ABL-Heavy) Aggressive (ABL-Lite) Rate Floors Rare Standard Rare Rate Protection Language Minimal Robust and complex Robust and complex Prepayment Penalties Rare Standard Rare Bank Commitment Fully underwritten Best efforts Best efforts Market Flex Language Limited, if any Required Required Bank Group Syndications Relationship driven "Club Deals" Syndications 7

8 Senior and Subordinated Debt Leverage The chart below shows senior and subordinated debt multiples on private equity-sponsored, middle-market* M&A transactions since Total average leverage has increased from 3.4x EBITDA in 2011 to 4.0x in 1Q 2015, with sub debt as a % of average capital structure declining over that period. 5.0x 4.0x 0.6x Debt/EBITDA 3.0x 2.0x 1.0x 1.0x 0.9x 1.0x 3.4x 1.0x 2.4x 2.4x 2.5x 2.6x 0.0x Q 2015 Senior Debt/EBITDA Subordinated Debt/EBITDA Source: GF Data, Leverage Report May 2015 *Note: middle market is $10 -$250mm 8

9 Recent Loan Pricing Senior debt spreads increased about 50 basis points to L+4.8% over the past year, while subordinated debt spreads declined about 80 basis point to L+11%. 14.0% 12.0% 12.1% 12.0% 11.6% 11.5% 11.3% 10.0% Interest Rate 8.0% 6.0% 4.5% 4.6% 5.0% 4.8% 5.0% 4.0% 2.0% 0.0% 1Q Q Q Q Q 2015 Senior Debt Pricing/EBITDA - Splits by Period Subordinated Debt - Average Coupon & Spreads 90-Day LIBOR 0.2% 0.2% 0.2% 0.3% 0.3% Senior Spread vs. LIBOR Sub Debt Spread vs. LIBOR 4.3% 4.4% 4.8% 4.5% 4.8% 11.8% 11.7% 11.4% 11.2% 11.0% Source: GF Data, Leverage Report May

10 S&P 500 Cash Balances The chart illustrates U.S. cash holdings for the non-financial members of the S&P 500. There is a significant amount of available capital to support strategic acquisitions, as the non-financial members of the S&P 500 had aggregate cash holdings of ~$1.4 trillion at year-end ,500 1,350 1,200 Cash Holdings ($ in billions) 1, Source: Capital IQ Note: Cash includes short-term investments. 10

11 Predictions for

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