M&A ACTIVITY CONTINUES DESPITE UNCERTAINTY

Transcription

1 RAPTOR PARTNERS M&A MARKET MONITOR M&A ACTIVITY CONTINUES DESPITE UNCERTAINTY RAPTOR PARTNERS ADVISORY SERVICES: MERGERS & ACQUISITIONS CORPORATE SALES & DIVESTITURES CROSS-BORDER TRANSACTIONS FAIRNESS OPINIONS STRATEGIC ALTERNATIVES CORPORATE FINANCE CAPITAL STRUCTURE RESTRUCTURING PRIVATE CAPITAL RAISING TAKEOVER DEFENSE VALUATIONS DISCLOSURE: Raptor Partners LLC is a registered broker-dealer with the U.S. Securities Exchange Commission and a member of the Financial Industry Regulatory Authority. This document is not a research report, as such term is defined by applicable laws and regulations. The information in this report has been obtained from third-party sources deemed to be reliable, but is not represented to be complete. This document has been prepared for general information purposes only and does not represent a complete analysis of any specific security, industry or issuer. This information contained in this document does not represent an offer or a solicitation of an offer to buy or sell securities of any form or to participate in any particular trading strategy. This document does not consider the investment objectives or financial situation of any individual or entity. Raptor Partners has provided, may continue to provide, or may seek to provide investment banking services for companies included in this document.

2 Global M&A Market Strong Despite Uncertainty Uncertainty over global economic activity has led to increased volatility in the financial markets recently. U.S. unemployment has remained stubbornly around 1%. U.S. GDP growth has slowed due to weaker global growth, reduced government stimulus, and uncertainty over domestic economic and fiscal policy. According to revised figures released by the Commerce Department on August 27th, the U.S. economy grew at a 1.6% rate in the second quarter, which was below previous estimates. U.S. government securities recorded their fifth straight monthly increase which is the longest winning streak since the period ended March 28, when the credit crisis sent the economy into recession. The flight to safety has resulted from uncertainty among investors as to whether the U.S. economy is headed for a double-dip recession or is only experiencing a slow recovery. Despite the global economic uncertainty, global M&A activity has continued to increase. In particular, a flurry of high-profile M&A activity in the latter half of August has given a window into the confidence among CEO s in their companies prospects in a diverse range of industries. Several strategic transactions in the face of persisting high unemployment have demonstrated a greater willingness among companies to grow via acquisition versus expanding their own internal development activities. In the last two weeks of August, Anglo-Australian miner BHP-Billiton made a hostile takeover attempt for fertilizer producer Potash Corp. for $39 billion in cash. The offer has been rejected by Potash as significantly undervaluing the company. Biopharmaceutical giant Genzyme has been locked in difficult takeover discussions with Sanofi-Aventis. Sanofi s $18.5 billion takeover offer, which represents a 46% premium to Genzyme s pre-offer price, has been rejected. Sanofi has indicated a willingness to increase the price. Intel announced the purchase McAfee for $7.7 billion to diversify its business into the security software market. Two weeks later, Intel announced a $1.8 billion acquisition of Infineon s Wireless Solutions business to expand its footprint in the market for chips used in the rapidly growing Smartphone and tablet computer business. Dell and HP are engaged in an intense bidding ware for data center storage company 3Par. Dell s initial offer for 3Par was $18 per share, which was an 87% premium to 3Par s previous closing price of $9.65. Since that time and the entrance of HP in the takeover auction, bidding has increased to $33 per share, representing a 242% premium to 3Par s closing price prior to the original offer. In large buyout news, Burger King has agreed to a $3.3 billion takeover by private equity firm 3G Capital. The offer was a 46% 1 premium to Burger King s trading price before rumors of a takeover began. M&A Deal Volume Increases Global M&A transaction volume continued to increase in the second quarter of 21, marking the fifth straight quarterly rise since the four-year low reached in the beginning of 29. Second quarter transaction volume increased 5.2% to 8,379 over first quarter transactions of 7,962. Global M&A deal volume increased 4.1% for the second quarter of 21 as compared to the same period a year ago. Global deals announced in the second quarter had an aggregate announced value of $481 billion which was relatively flat compared to the $486 billion announced during the first quarter. Aggregate deal value remains well below the levels reached prior to the global economic recession in 29. Global Quarterly M&A Activity 15, 12, 9, 6, 3, 7,35 7,11 9,374 8,467 1,158 9,92 9,329 8,9859,448 8,969 8,116 Q26 Q36 Q46 Q17 Q27 Q37 Q47 Q18 Q28 Q38 Q48 Q19 6,424 5,979 5,486 Aggregate Value 7,72 7,9628,379 Q29 Q39 Q49 Q11 Q21 $2, $1,6 $1,2 U.S. M&A transaction volume also grew in the second quarter of 21 for the fifth consecutive time. Transaction volume grew 2.4% in the second quarter to 2,865 from 2,799 in the first quarter. Aggregate announced value increased 26% in the second quarter to $195 billion from $155 billion in the previous quarter. U.S. Quarterly M&A Activity 4, 8 Q26 Q36 Q46 Q17 Q27 Q37 Q47 Q18 Q28 Q38 Q48 Q19 Q29 Q39 Q49 Q11 Q21 $8 $4 3,2 $5 2,91 2,865 2,766 2,551 2,669 2,799 2,5812,542 2,526 2,449 2,587 2,477 2,449 2,4 $375 2,6 2,73 1,888 1,741 1,6 $25 Aggregate Value $ $625 $125 $ Aggregate Value ($ Billions) Aggregate Value ($ Billions)

3 European Deal Volume Reflects Uncertainty European M&A targets declined for the second straight quarter while global volume increased. The second quarter witnessed concerns that rigorous fiscal tightening in Europe and the possibility of global contagion following the Greek debt crisis could stifle the fledgling economic recovery. European M&A targets became more difficult to value in the second quarter as their projected financial results were more uncertain. With Asian emerging markets recovering from the global economic recession much faster than the developed markets, Asian M&A activity continues to outpace the global market. Demand for Asian targets has been brisk as Western countries seek an increased presence in the world s fastest growing economies and Asian countries, with strong local currencies, look to consolidate at home. Change in Deal Volume by Geography: Q2 vs. Q1 2.% 18.4% 15.% 1.% 5.%.% -5.% and Raptor Partners Valuation Trends Median U.S. Enterprise Value/EBITDA M&A multiples declined slightly in the second quarter. Valuation levels have improved significantly from the recent depths reached in the first half of 29. Improved valuation trends have resulted from cash-rich acquirors looking to offset slower economic growth with acquisitions Q26 Q36 Q46 Q17 2.4% -3.% U.S. Europe Asia U.S. Target M&A Multiple Trends Q27 Q37 Q47 Q18 Enterprise Value/Sales Q28 Q38 Q48 and Raptor Partners Q19 Q29 Q39 Enterprise Value/EBITDA Q49 Q11 Q21 Companies Continue to Hoard Cash Cash and equivalents on-hand for non-financial S&P 5 companies continued to increase to their highest levels in the last four years. At the end of the second quarter of 21 non-financial S&P 5 companies held $1.3 trillion in cash and equivalents, a 4% increase over the first quarter. Companies are looking to utilize the strong cash balances through selective, strategic acquisitions, increased dividend payments and share repurchases. Non-Financial S&P 5 Companies: Cash & Equivalents (Billions) $1,1 $1, $9 $8 $7 $6 $5 and Raptor Partners Cash and equivalents include short-term investments Q26 Q36 Q46 Q17 Q27 Q37 Q47 Q18 Q28 Q38 Q48 Q19 Q29 Q39 Q49 Q11 Q21 Larger Transactions Continue Comeback Following a year in which acquirors increasingly favored smaller, tuck-in acquisitions in 29, the appetite for bigger acquisitions has been improving. In the second quarter, transactions above $1 million represented 16.4% of the deals completed where a value was reported versus 15.1% in the first quarter. Transactions by Deal Size LT M Above $1. Billion 4.4% 3.8% 2.6% 2.1% 2.3% $5 M illion - $1. Billion 3.1% 2.9% 2.3% 2.% 2.% $1 M illion - $5 Million 14.2% 12.6% 12.% 11.% 11.6% Below $1 M illion 78.3% 8.7% 83.2% 84.9% 84.1% and Raptor Partners Takeover Premiums Continue to Normalize Public company takeover premiums remained above historical averages; however, they were expectedly below the highs reached during 29 when equity prices were significantly depressed. Public targets have continued to be leery of takeover attempts at price levels which do not reflect their Company s underlying growth opportunities as their business prospects improve. Public Company Takeover Premiums LT M One Day Premium 21.1% 22.4% 33.6% 34.8% 28.5% One Week Premium 23.6% 23.% 33.8% 35.9% 3.% Four Week Premium 26.4% 25.% 31.3% 41.3% 34.2% 2

4 Sector Spotlight Following volume growth across each of the five major sectors tracked by Raptor Partners in the first quarter, the second quarter was more of a mixed picture. The industrial and consumer sectors recorded volume increases in the second quarter while the business services, healthcare, and technology sectors saw declines. Each of the sectors except healthcare saw improved valuations in the second quarter of 21 versus the first quarter. The healthcare sector has remained under a cloud of uncertainty as investors attempt to quantify the impact of government regulation and reform. The number of mid-cap transactions above $1 billion increased in the quarter; however, there weren t many mega deals announced. One of the largest U.S. transactions announced in the quarter was CenturyTel s $22.2 billion acquisition of Qwest Communications. The airline industry witnessed continued consolidation through the all-stock merger of equals between Continental Airlines and UAL Corporation which valued Continental at $6.1 billion. Business Services U.S. Deal Statistics LTM 2,5 Sales 1.14x 1.22x.91x x EBITDA 1.2x x Volume 2,182 2,494 2,28 1,516 1,996 Value ($ Bil.) $88.2 $16.8 $79.8 $77.6 $ x x , 1,5 Significant Business Services Transactions: 6/22/21 Inspectorate Holdings Plc Bureau Veritas SA $.7 B 1.8x NA 5/6/21 Stanley, Inc. CGI Federal Inc. $1.1 B 1.2x 11. 5/3/21 Interactive Data Corporation Private Equity Consortium $2.9 B 3.8x 1. 5/2/21 Continental Airlines, Inc. UAL Corporation $6.1 B.5x 12.4x 4/26/21 Protection One Inc. GTCR Golder Rauner, LLC $.8 B 2.2x 9.2x 4/25/21 Dollar Thrifty Automotive Group Hertz Global Holdings, Inc. $2.3 B 1.5x 1. 4/11/21 DynCorp International Inc. Cerberus Capital Management $1.6 B.4x 5. x 1.1x 1.2x. 1.x LTM Sales EBITDA Volume 1, 5 Consumer Products & Services U.S. Deal Statistics LTM Sales.92x.95x EBITDA 1.1x 1.2x 9.7x 9.8x 9.8x Volume 2,485 2,794 2,181 1,571 1, x 1.2x 9.7x 9.8x 9.8x 3, 2,4 1,8 Value ($ Bil.) $247.2 $259.2 $152. $16.6 $121.2 Significant Consumer Products & Services Transactions: 6/2/21 American Italian Pasta Co. Ralcorp Holdings Inc. $1.2 B 2.1x 8.2x 6/14/21 Keystone Foods, LLC Marfrig Alimentos SA $1.3 B.2x NA 6/7/21 Fresh Start Bakeries, Inc. ARYZTA AG $.9 B NA NA 5/31/21 Mediacom Communications Corp. Rocco B. Commisso $3.7 B 2.5x 6. 5/2/21 Michael Foods Inc. GS Capital Partners $2.6 B 1.7x 11.8x 5/3/21 Dave & Buster's Holdings, Inc. Oak Hill Capital Partners $.6 B 1.1x NA 4/18/21 CKE Restaurants, Inc. Apollo Management VII L.P. $1. B.7x 6. x. 1.x.. 1.2x LTM Sales EBITDA Volume 1,2 6 Healthcare & Life Sciences U.S. Deal Statistics LTM Sales 1.81x 1.85x 1.62x x EBITDA 13.4x 14.7x x 11.8x Volume Value ($ Bil.) $154.9 $147.5 $76.3 $18.5 $8. Significant Healthcare & Life Sciences Transactions: 6/3/21 Abraxis BioScience, Inc. Celgene Corporation $3.5 B 8.7x NA 6/2/21 Valeant Pharmaceuticals Int'l Biovail Corporation $4.7 B x 6/6/21 Talecris Biotherapeutics Holdings Grifols, S.A. $4. B x 6/1/21 ev3, Inc. Covidien $2.6 B 5.5x 31.2x 5/16/21 Psychiatric Solutions, Inc. Universal Health Services Inc. $3.1 B 1.7x 9.8x 5/4/21 SenoRx, Inc. CR Bard Inc. $.2 B 3.4x 46. 4/28/21 ATS Medical Inc. Medtronic, Inc. $.3 B 4. NM & Raptor Partners x 13.4x 1.8x 1. = Multiples Above LTM Median 14.7x x 1.7x LTM Sales EBITDA Volume 11.8x 1,

5 Industrial & Material U.S. Deal Statistics LTM Sales.91x.95x.87x.77x.6 EBITDA 8.5x x x Volume 1,531 1,758 1,56 1,21 1,26 Value ($ Bil.) $154.4 $22.6 $81.4 $45. $57.2 Significant Industrial & Material Transactions: 6/3/21 Argon ST, Inc. Boeing Co. $.8 B x 6/22/21 Cognis GmbH BASF SE $2.9 B. 6.1x 6/19/21 National Starch and Chemical Co Corn Products International Inc. $1.4 B 1.2x 14.5x 6/8/21 Chloride Group plc Emerson Electric Co. $1.5 B 3.1x 21.4x 5/26/21 Mallinckrodt Baker, Inc New Mountain Capital, LLC $.3 B.7x NA 5/19/21 Sperian Protection Honeywell International Inc. $1.4 B 1.7x 13.1x 4/21/21 Hillman Companies Inc. Oak Hill Capital Partners $.8 B 1.8x 9. x x 8.5x 9.1x x.7x LTM Sales EBITDA Volume 2, 1,6 1,2 8 4 Technology & Software U.S. Deal Statistics LTM 12. Sales 1.57x 1.62x 1.37x 1.5x 1.62x 11.4x 1. EBITDA 11.4x x 9.7x 9.7x 9.2x Volume 2,53 2,225 1,832 1,32 1,78 Value ($ Bil.) $241.8 $29.6 $112.1 $75.9 $115.6 Significant Technology & Software Transactions: 6/9/21 Eclipsys Corporation Allscripts-Misys Healthcare $1.2 B /12/21 Sybase, Inc. SAP America, Inc. $5.4 B 4.5x x 1.5x 1. 5/5/21 Ventyx, Inc. ABB Ltd. $1. B 4.x NA x 4/28/21 Palm, Inc. Hewlett-Packard Company $1.2 B 1.1x NM 4/21/21 Qwest Communications Int'l CenturyTel, Inc. $22.2B 1.8x LTM 4/2/21 CyberSource Corporation Visa, Inc. $1.8 B 6.5x 32.4x Sales EBITDA Volume 4/15/21 Phase Forward Inc. Oracle Corp. $.6 B 2.7x 2.x & Raptor Partners = Multiples Above LTM Median Private Equity ( PE ) Activity U.S. PE acquisition volume increased slightly in the second quarter of 21, up 4.2% over the first quarter. The value of PE acquisitions announced during the quarter, however, increased significantly to $24.5 billion, up 163% over the first quarter. Several $1-billion-plus PE deals occurred in the quarter, including the acquisition of Interactive Data Corp. by Warburg Pincus and Silver Lake Partners for $2.9 billion and the acquisition of Michael Foods by Goldman Sachs Capital Partners for $2.7 billion. Year-to-date middle-market LBO leverage multiples were 4.2x EBITDA, which remained above the lows reached in 29. Subordinated debt and equity continue to represent an increasing portion of the LBO capital structure as transaction multiples have improved and senior lenders have remained disciplined on middle-market transactions. U.S. Private Equity Activity Q26 Q Q46 Q17 Q27 $ $ $ Q37 Q47 Q18 Q28 Q38 Q48 Q19 Aggregate Value Q29 Q39 Q49 Q11 Q21 $3 $6 $ Aggregate Value ($ Billions) Middle-Market LBO Leverage Multiples 6.x 5.x 4.x 3.x 2.x 1.x.x 4.2x.7x 3.5x 4.7x 4.7x.4x.5x x 5..4x Source: Standard & Poor s Leveraged Commentary & Data EBITDA < $5 million 5.2x YTD 21 Senior-Debt/EBITDA 4.5x.8x 3.7x Sub-Debt/EBITDA 3..8x 2.5x 4.2x ,5 2, 1,5 1, 5

6

7 DISCLOSURE: Raptor Partners LLC is a registered broker-dealer with the U.S. Securities Exchange Commission and a member of the Financial Industry Regulatory Authority. This document is not a research report, as such term is defined by applicable laws and regulations. The information in this report has been obtained from third-party sources deemed to be reliable, but is not represented to be complete. This document has been prepared for general information purposes only and does not represent a complete analysis of any specific security, industry or issuer. This information contained in this document does not represent an offer or a solicitation of an offer to buy or sell securities of any form or to participate in any particular trading strategy. This document does not consider the investment objectives or financial situation of any individual or entity. Raptor Partners has provided, may continue to provide, or may seek to provide investment banking services for companies included in this document.