InSight

Exit and Growth Strategies for Middle Market Businesses

M&A News In The Healthcare Industry Sector

By Daniel Sirvent | Feb 20, 2019

The report below gives a good overview of the first quarter M&A activity in the Healthcare Industry Sector. M&A activity for North American based target companies in the Healthcare sector for Q4 2018 included 103 closed deals, according to data published by industry data tracker FactSet.

Pharos Capital Group LLC acquired an undisclosed majority stake in Charter Health Care Group LLC for an undisclosed amount. The acquisition helps Pharos Capital Group’s strategy to improve the patient experience and lower the costs of care. Founded in 2006, Charter Health Care Group is located in Covina, California and provides post-acute hospice, transitional care and home health care services throughout San Bernardino, Riverside, Los Angeles and Orange counties.

 Industry Indicators

  • Total U.S. revenue for healthcare and social assistance rose 4.7% in the third quarter of 2018 compared to the previous year.
  • U.S. consumer prices for medical care services, an indicator of profitability for healthcare services, rose 2.6% in December 2018 compared to the same month in 2017.
  • U.S. consumer prices for medical care commodities, an indicator of healthcare costs, decreased 0.5% in December 2018 compared to the same period in 2017.
  • U.S. nondurable goods manufacturers’ shipments of pharmaceuticals and medicines, an indicator of pharmaceuticals production, rose 9.1% year-to-date in October 2018 compared to the same period in 2017.
  • U.S. retail sales for health and personal care stores, a potential measure of consumer spending on pharmaceuticals, increased 3.8% in the first eleven months of 2018 compared to the same period in 2017.

Posted by Daniel Sirvent.

Read the Entire Healthcare 1st Quarter Newsletter Here


M&A Quarterly News In The Energy Industry Sector

By Roy Graham | Feb 20, 2019

The report below gives a good overview of the first quarter M&A activity in the Energy Industry Sector. M&A activity for North American based target companies in the Energy sector for Q4 2018 included 52 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was closed in November when Ørsted A/S acquired Deepwater Wind, LLC from D E Shaw & Co LP for US$510 million in cash. The acquisition is in line with growth strategy of Ørsted. Ørsted engages in the provision of renewable energy solutions. It operates through the following segments: wind power, bioenergy & thermal power, distribution and customer solutions. Founded in 2007, Deepwater Wind is located in Rhode Island and operates offshore wind power projects.

West Texas Intermediate had a difficult quarter due to an over-supplied market.

Industry Indicators

  • The average US retail price for diesel and regular gas, a major operating cost for distributor fleets in the wholesale sector, rose and fell 8.6% and 2.6%, respectively, in the week ending December 10, 2018, compared to the same week in 2017.
  • Crude shipments to the U.S. from OPEC and its partners fell to 1.41 MM bpd in January, the lowest in five years according to World Oil News.
  • Through November 2018 US exports of natural gas continued to rise for the third straight year with the aid of increased pipeline exports to Mexico and significant increases in the export of LNG.

Posted by Roy Graham.

Read the Entire Energy 1st Quarter Newsletter Here


M&A Quarterly News In The Hospitality and Leisure Industry Sector

By David Hulett | Feb 19, 2019

The report below gives a good overview of the first quarter M&A activity in the Hospitality & Leisure Industry Sector. M&A activity for North American based target companies in the Hospitality and Leisure sector for Q4 2018 included 67 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was closed in December when Pamplona Capital Management LLP, a subsidiary of Pamplona PE Investments Holding Ltd, acquired Latham Pool Products, Inc., a portfolio company of Wynnchurch Capital LLC and Franklin Square Holdings LP, for US$375 million in cash. The acquisition is in line with Pamplona Capital Management’s investment strategy. Following the transaction, Wynnchurch Capital LLC would retain minority stake in Latham Pool Products. Founded in 1956, Latham Pool Products is located in Latham, New York and manufactures inground residential swimming pools and components.

The hospitality sector has benefitted from a strong economy, which has enabled hotels and motels across the globe to continue to increase rate pricing.

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M&A Quarterly News In The Financial Services Industry Sector

By David Sinyard | Feb 06, 2019

The report below presents you with a good overview of the first quarter M&A activity in the Financial Services Industry Sector. M&A activity for North American based target companies in the Financial Services sector for Q4 2018 included 208 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was closed in December when Stone Point Capital, LLC acquired Rialto Capital Management, LLC from Lennar Corp for US$340 million. The acquisition enables Stone Point Capital to further expand its business portfolio. Rialto Capital Management is located in Miami, Florida and acts as an alternative investment manager. Stone Point Capital is a global private equity firm located in Greenwich, Connecticut that manages the Trident Funds.

Industry Indicators

  • US corporate profits, an indicator of corporate demand for financial planning and investment advising, rose 10.3% in the third quarter of 2018 compared to the same period in 2017.
  • The bank prime loan rate, a tool for financial planners and investment advisers was 5.25% as of the week of December 12, 2018, up from a rate of 4.5% the same week in 2017.
  • US personal income, which is a driver for financial planning and investment services, rose 4.3% in October 2018 compared to the same month in 2017.
  • Total US revenue for other financial investment activities, which includes financial planners and investment advisors, rose 4.9% in the third quarter of 2018 compared to the previous year.

Posted by David Sinyard.

Read the Entire Financial Services 1st Quarter Newsletter Here


M&A News In The Commercial Real Estate Industry Sector

By Peter Moore | Feb 06, 2019

The report below gives a good overview of the first quarter M&A activity in the Commercial Real Estate Industry Sector. According to data released by Ten-X Commercial, a leading transaction platform for commercial real estate, commercial real estate transaction volume totaled $143.9 billion in the third quarter, up 24.6% from the second quarter and 22% from the prior year.

Retail real estate sector deal volume increased to $20.7 billion following a two-year decline. The bump marks its highest total since late 2014, driving increases in overall transaction volume. Office and apartment transaction volume accounted for a combined 58.1% of third quarter deal volume after climbing 15.3% and 14.2% from a year ago. Retail transaction volume saw the greatest year-over-year increase by 90% to $28.4 billion, the highest level on record.

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M&A News In The Wholesale Distribution Industry Sector

By Jeremiah Hughes | Jan 28, 2019

The report below gives a good overview of the first quarter M&A activity in the Wholesale Distribution Industry Sector. M&A activity for North American based target companies in the Wholesale Distribution sector for Q4 2018 included 129 closed deals, according to data published by industry data tracker FactSet. One of the notable middle market transactions was announced in October when The Andersons, Inc. acquired the remaining 67.5% majority stake not already owned in Lansing Trade Group, LLC for US$305 million in cash,.. Read more »


M&A Quarterly News In The Aviation, Aerospace and Defense Industry Sector

By Daniel Sirvent | Dec 19, 2018

The report below gives a good overview of the fourth quarter M&A activity in the Aviation, Aerospace and Defense Industry Sector. M&A activity for North American target companies in the Aerospace and Defense sector Q3 2018 included 11 closed deals, according to Factset Research.

One of the notable middle market transactions was announced in September when Boeing acquired Millennium Space Systems, Inc. for an undisclosed amount. Following the transaction, Millennium Space Systems Inc will be rebranded as Millennium Space Systems, A Boeing Company. The acquisition expands Boeing’s satellite and space portfolio, talent and capabilities. Founded in 2001, Millennium Space Systems is located in El Segundo, CA and develops high-performance spacecraft parts. It has approximately 260 employees .

Industry Update
  • US corporate profits, which affect airline traffic and demand for new commercial aircraft, rose 7.7% in the second quarter of 2018 compared to the same period in 2017.
  • US steel mill product prices, an indicator of commodity steel costs for aerospace products, rose 18.1% in September 2018 compared to the same month in 2017.

Posted by Daniel Sirvent.

Read the Entire Aviation, Aerospace & Defense M&A 4th Quarter Newsletter Here


M&A Quarterly News In The Engineering and Construction Industry Sector

By Peter Heydenrych | Dec 06, 2018

The report below gives a good overview of the fourth quarter M&A activity in the Engineering and Construction Industry Sector. M&A activity for North American based target companies in the Engineering and Construction sector for Q3 2018 included 97 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was closed in September when Infrastructure & Energy Alternatives, Inc. acquired American Civil Constructors, Inc., a portfolio company of Insight Equity Holdings LLC, for US$145 million. Included in the transaction is American Civil’s subsidiary Saiia Construction Co. LLC. The acquisition would expand Infrastructure & Energy’s capabilities in the engineering sector. American Civil Constructors is located in Phoenix, Arizona and provides construction services and supplies construction materials.

Housing starts in the US increased 1.5 percent from September to an annualized rate of 1,228 thousand in October of 2018, compared with market expectations of a 1.6 percent rise.

Industry Indicators

  • US corporate profits, an indicator of corporate demand for construction services, rose 7.7% in the second quarter of 2018 compared to the same period in 2017.
  • The value of US nonresidential construction spending, a demand indicator for heavy construction, rose 5.0% year-to-date in September 2018 compared to the same period in 2017.
  • US steel mill product prices, an indicator of commodity steel product costs used in construction, rose 18.2% in October 2018 compared to the same month in 2017.

Posted by Peter Heydenrych.

Read the Entire Engineering & Construction 4th Quarter Newsletter Here


M&A News In The Consumer Retail Industry Sector

By Joe Sands | Dec 05, 2018

The report below gives a good overview of the fourth quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer Retail sector for Q3 2018 included 107 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was announced in July when Canopy Growth Corp acquired Hiku Brands Co Ltd for CAD546.7 million (US$417.5 million) in stock. The transaction allows Canopy Growth Corp to further strengthen its retail and brand portfolio. Hiku Brands Co. Ltd. operates clothing stores. It focuses on building a portfolio of engaging cannabis brands, unsurpassed retail experiences and handcrafted cannabis production. It also operates a network of retail stores selling coffee, clothing and curated accessories, across British Columbia, Alberta and Ontario.

Although retail store openings continue to grow year over year the openings have not kept up with the store closings.
Read more »


Middle Market M&A

By Robert St. Germain | Nov 30, 2018

Business PlanningThe National Center for the Middle Market (NCMM), which is a collaboration between The Ohio State University’s Fisher College of Business, SunTrust Banks Inc., Grant Thornton LLP, and Cisco Systems, conducted a study in late 2017 that reported on the state of M&A within the middle market.
For the reader’s frame of reference, the NCMM defines the middle market as both privately and publicly held companies that generate between $10 million and $1 billion in annual revenues, of which, there are approximately 200,000 such companies in the U.S. In aggregate, they generate $10 trillion in annual revenues and account for one-third of private sector GDP and employment.
The stated purpose of this report was “…to inform both middle market executives and their external advisors and consultants in order to facilitate more successful deals in the future.” Its findings were quite illuminating:

  1. 60% of study participants said that inorganic growth plays an important role in their company’s growth strategy.
  2. Every year, roughly 20% of middle market companies complete an acquisition and about 5% of those companies sell to or merge into another business.
  3. Among companies that had completed a purchase in the previous three years, for 29%, it was their first deal while another 41% had limited previous experience.
  4. Among sellers in the previous three years, for 46%, it was their first deal and only one in 10 companies had significant previous experience with sale transactions.
  5. Middle market leaders said that finding the right target or buyer was one of the most confusing aspects of M&A.
  6. On the front end of an acquisition or sale, 41% of buyers and 43% of sellers found it difficult to assess the value of the business they were buying or selling.

In spite of the above findings, however, the study also found:

  1. Both buying and selling companies tend to rely mostly on their internal executives and top managers when searching for companies to buy or to whom to sell.
  2. Only about a third of buyers consulted an external law firm, and even fewer talked to consultants or investment bankers.
  3. Sellers were even less likely to bring in external advisors as part of their search for the right buyer.

The study did not provide any deal specific details (e.g. transaction prices as a function of a financial metric); but juxtaposing the first set of findings with the second set would lead one to infer that the deals generally referenced in the study were likely sub-optimal in outcome.

That inference comes from the companies’ cited paucity of deal making experience, as well as their general avoidance of using outside M&A experts to complement their relatively inexperienced internal resources.

So, one major take-away from this NCMM study is for buyers and sellers to first build a high quality deal team that certainly includes their appropriate insiders, but, importantly, also includes outside experts with deep and current M&A experience. Among those outside M&A experts should be an attorney, a CPA and an investment banker.

The investment banker on the team will add significant value by running a sophisticated buy-side or sell-side process in accordance with expected market protocols. That process will naturally include finding the right target or buyer, as well as assessing the value of the business being bought or sold, which were two of the weaknesses cited in the study when companies used internal resources only.
Investment bankers also add significant value by allowing management to keep their focus on the business while the buy/sell process is run in parallel; and, most importantly, by negotiating on behalf of management the best price and deal terms to optimize deal outcome.