MPI. M&A Market Snapshot Q Valuation Opinions & Transaction Advisory.

Transcription

1 Valuation Opinions & Transaction Advisory M&A Market Snapshot Q

2 Contents 02 Total U.S. Market Activity Increasing volume and ripe deal conditions 03 Capital Market Performance Growth continues in the U.S. 04 Industry Breakdown Major industries are commanding rich multiples 05 Transaction Multiples Overall median target EBITDA and revenue multiples decreased slightly in Q Private Equity Returning cash to investors in light of favorable exit opportunities 07 Notable Transactions Creating shareholder value through product diversification and geographic expansion 08 About 1

3 Total U.S. Market Activity Overview In recent quarters, growth in deal count has exceeded volume indicating a much more active middle market and smaller deal sizes. It also suggests that buyers are still hesitant to pull the trigger on larger deals. The average deal price amounted to roughly $19.4 million for transactions with reported deal values less than $100.0 million. According to a survey conducted by PricewaterhouseCoopers, dealmakers are continually placing a premium on deal certainty, agility and transparency. 7,000 6,000 5,000 Quarterly U.S. M&A Activity Total Announced Transactions Deal Count Volume ($bn) Deal Count 4,000 3,000 2, Volume 1, Quarterly U.S. M&A Activity Deal Value < $100 mm (USD) Deal Count Volume ($bn) 2,500 2,000 1,500 1, Source: S&P Capital IQ and Bloomberg. 2

4 Capital Market Performance The S&P 400 Mid-Cap index is a value-weighted index that measures the performance of mid-sized companies in the U.S. with market capitalizations reaching approximately $3.0 billion. The Russell Mid-Cap index measures the performance of the 800 smallest companies in the Russell 1000 index, representing companies with a median market capitalization of $3.6 billion. As of March 2014, the top sectors by weight include: financial services, industrials, information technology, consumer discretionary, and healthcare. During Q2 2014, the S&P 400 Mid-Cap index exhibited a 3.9% return vs. a 0.6% quarterly increase from a year ago. Performance in Q2 is also up slightly (about 120 bps) from Q The Russell Mid-Cap index followed a similar trend, reporting a 4.6% overall return in Q against a 1.8% return from a year ago and a 3.1% return in Q Market Vale Index (Q1 2008= 100) Quarterly Benchmark Performance S&P 400 Mid-Cap Russell Mid-Cap Market Vale Index (Q1 2008=100) 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% Quarterly Benchmark Returns S&P 400 Mid-Cap Russell Mid-Cap Source: S&P Capital IQ and 3

5 Industry Breakdown Median EV / EBITDA Multiples ( Q2' 2014 Total Announced Transactions) Utilities Information Technology Financials Healthcare Consumer Staples Consumer Discretionary Industrials Materials Energy 10.2x 14.5x 14.1x 19.0x 15.2x 14.5x 8.3x 7.8x 7.9x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 20.0x 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x Historical Median EV / EBITDA Multiples (EV < $100 mm) Energy Materials Industrials Consumer Discretionary Consumer Staples Healthcare Financials Information Technology Telecommunications Source: S&P Capital IQ. 4

6 Transaction Multiples The graph below illustrates the overall quarterly trend in EBITDA multiples from Q to Q for U.S. transactions with implied deal values less than $100 million. The median target EBITDA multiple for Q was 6.9 times. The average EBITDA multiple overthe period reviewed is approximately 8.2 times. 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x Median EV / EBITDA Multiples Deal Value < $100 mm (USD) The graph below illustrates the overall quarterly trend in revenue multiples from Q to Q for U.S. transactions with implied deal values less than $100 million. The median target revenue multiple for Q was 1.0 times. The average revenue multiple over the period reviewedheld stable at 1.1 times. 1.6x 1.4x 1.2x 1.0x 0.8x 0.6x 0.4x 0.2x 0.0x Median EV / Revenue Multiples Deal Value < $100 mm (USD) Source: S&P Capital IQ. 5

7 Private Equity In Q4 2013, valuations averaged 6.7 times trailing twelve months adjusted EBITDA, up slightly from 6.5x in Q Of the total completed transactions reported with total enterprise values ( TEV ) of $10-$250 million, adjusted EBITDA multiples ranged from 3.0 to 12.0 times. All Transactions ($10 mm < TEV < $250 mm) Private Equity Deal Volume Quarter Deals Enterprise Total Senior Value / Debt / Debt / EBITDA Q4' x 3.3x 2.5x Q3' x 3.8x 2.6x Q2' x 3.4x 2.9x Q1' x 3.1x 2.4x Q4' x 3.4x 2.5x Average TEV / EBITDA Multiples TEV Range mm 5.5x 5.2x 5.3x 5.7x 5.9x mm 6.0x 6.1x 6.0x 6.2x 6.9x mm 6.5x 6.5x 7.1x 6.8x 6.7x mm 7.2x 6.5x 7.5x 7.4x 7.1x Average TEV / EBITDA Multiples By Industry Industry Manufacturing 5.7x 5.8x 6.0x 5.9x 5.9x Business Services 5.8x 6.0x 6.5x 5.8x 6.7x Healthcare 6.3x 6.7x 7.2x 7.3x 7.3x Retail 5.2x 5.5x 5.8x 6.3x 7.1x Distribution 5.6x 5.5x 6.0x 6.3x 6.8x Publishing/Media 7.4x 4.2x 6.1x N.A. 5.9x Technology 6.6x 5.5x 8.1x 7.4x 9.1x Other 6.4x 5.7x 5.1x 6.3x 6.3x Source: GF Data Resources. Data as of February

8 Notable Transactions In January, the U.S. drugmaker Pfizer Inc. ( Pfizer ) proposed a takeover to Britain's AstraZeneca worth $98.9 billion (or 11.8x LTM EBITDA and 4.0x LTM revenues) but was denied by the AstraZeneca board. However, the proposed merger was welcomed by investors in both companies and share prices of both companies rose significantly. The deal was positioned to be the biggest foreign acquisition of a British company and would create the world s largest drugmaker to date. AstraZeneca would boost Pfizer s depth of cancer drugs and create significant cost and tax savings. Pfizer announced on May 18, 2014 that it tried to reignite the takeover with a final merger proposal of $117 billion (or 14.0x LTM EBITDA and 4.7x LTM revenues) to AstraZeneca. Once again, the AstraZeneca board denied the proposal. AstraZeneca said Pfizer s suggested offer undervalued the company significantly and urged shareholders to take no action. Pfizer wanted to pay 70% in shares and only 30% in cash. AstraZeneca remains confident of its independent strategy and said it would need an offer higher than pounds (current offer was 55 pounds per share) to recommend it to shareholders. AstraZeneca also stated that Pfizer s bid did not account for the promise of its pipeline of experimental medicines. Under British takeover rules, Pfizer had until May 26 th to announce a firm intention to make an offer or back away. No other offers were made. On May 18, 2014, AT&T, Inc. agreed to buy DirecTV, the second largest pay-tv provider, for about $48.5 billion. The merger, which was approved by both boards, indicated AT&T would pay DirecTV shareholders $95 per share. DirecTV shareholders would receive $28.50 per share in cash and $66.50 per share worth in AT&T stock. The deal includes DirecTV s debt which brings the total transaction value to about $67.1 billion (or 8.1x LTM EBITDA and 2.1x LTM revenues). The merger is the latest evidence of TV-industry consolidation and telecommunications companies desire to amass customers and control content and delivery. Randall Stephenson, AT&T s chairman and CEO, stated, This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens. DirecTV s 18 million customers in Latin America will give AT&T immediate access to a fast-growing market. There are consumer groups loudly opposing media industry consolidation and this merger could face difficult regulatory roadblocks. AT&T s acquisition of DirecTV eliminates a competitor in AT&T U-Verse s (TV service) market. The merger is still in progress and has not been finalized as of quarter two. In January 2014, Beam, Inc. (formerly known as Fortune Brands, Inc.), a manufacturer of premium bourbon, whiskey, tequila, scotch, vodka, cognac, rum, and other alcoholic beverages, announced it would be acquired by Suntory Holdings Limited, a Japanese manufacturer of beverage and food products. The total transaction value reported was $16 billion (or 20.4x LTM EBITDA and 6.3x LTM revenues), which includes Beam s debt of about $2 billion. The move by Suntory to buy Illinoisbased Beam, Inc. will create the world s third largest premium spirits company. Beam's chief executive Matt Shattock and management team will continue to lead the business. Mr. Shattock added: "This is a very exciting development that delivers substantial value for our stockholders and creates an even stronger global company with an excellent platform for future growth. Together we will be a global leader in distilled spirits with the number three position in premium spirits and a dynamic portfolio across key categories. With particular strength in Bourbon, Scotch, Canadian, Irish and Japanese whisky, the combined company will have unparalleled expertise and portfolio breadth in premium whisky, which is driving the fastest growth in western spirits. On completion of the transaction, Suntory and Beam aim to achieve growth in markets worldwide, including the United States, the world s largest spirits market, by leveraging a combined portfolio of strong brands, an expanded distribution network and fully sharing production and quality control know how. Source: S&P Capital IQ and related news articles. 7

9 M&A Market Snapshot First Quarter 2014 About is a full service valuation and investment banking firm serving both private and publicly held companies. Since 1939, has prepared thousands of valuations in a wide variety of industries and for many purposes. Our valuation and investment banking practices are national in scope, with clients in every state. We have significant experience providing advisory services to Boards and management teams on topics such as shareholder liquidity options and the valuation implications of various strategic initiatives. Our valuation services can be broadly categorized into Corporate, Transaction Advisory, Financial Reporting, Litigation Support and Tax- Based applications. For additional information pertaining to or S and our valuation and advisory services, visit DISCLAIMERS: The information provided in this publication is only general in nature. It has been prepared without taking into account any specific objectives, financial circumstances or needs. Accordingly, disclaims any and all guarantees, undertakings and warranties, expressed or implied, and shall not be liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or actual, incidental, consequential or any other loss or damage) arising out of or in connection with any use or reliance upon the information or advice contained within this publication. The viewer must accept sole responsibility associated with the use of the material in this publication, irrespective of the purpose for which such use or results are applied. This material should not be viewed as advice or recommendations. This information is not intended to, and should not, form a primary basis for any investment, valuation or other decisions. is not acting as a fiduciary, an expert or advisor in any capacity whatsoever in providing the information set forth herein. The information set forth herein may not be relied upon and is not a substitute for competent legal and financial advice. The viewer of this material is cautioned and advised to consult with his or her own legal and financial counsel in evaluating the information provided herein. The information provided in this publication is based on public information. makes every effort to use reliable and comprehensive information, but makes no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the information provided herein and shall not have liability for any damages of any kind relating to any reliance on such data. Further, the information set forth herein is continuously subject to change and may fluctuate. has no obligation to update the information set forth herein or to advise the viewer when opinions or information may change. Investment banking and transaction advisory services are provided by Securities, Inc., member FINRA/SIPC. Persons affiliated with Securities, Inc. are registered representatives of and securities are offered through Securities, Inc. This publication is not a solicitation or offer to buy or sell securities. The information contained in this publication was prepared for information purposes only and was not intended or written to be used as investmentor tax advice or as a recommendation to buy or sell securities. Contacts Harry L. Curtis, III, CFA, ASA President (609) hcurtis@mpvial.com Daniel M. Kerrigan, CFA Managing Director (609) dkerrigan@mpvial.com Princeton Headquarters: 101 Poor Farm Road Princeton, NJ (609) Princeton New York Chicago Boston Atlanta Hartford Orlando 8