Capital Ideas | Newsletter 2nd Half 2019

Capital Ideas for Middle Market Businesses

Welcome to this issue of Capital Ideas, our newsletter dedicated to business selling, business buying and financial resources for mid-market companies.

Middle Market Business Insights

M&A activity for North American based target companies for H1 2019 included 4,242 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was announced in February when Plaid Inc. acquired Quovo Inc., a portfolio company of Fintech Collective Inc., Napier Park Financial Partners, Impresa Management LLC, Portag3 Ventures and Salesforce Ventures LLC, for US$200 million. Plaid builds and develops financial software applications. Quovo develops and markets a platform that provides financial analytics, data management and insights to small- and mid-sized investors. The company was founded in 2010 and is headquartered in New York, NY.

The year started out strong with more than 900 deals in January. However, deal count declined to less than 600 by June.

Transactional Overview

Notable closed lower middle market transactions for H1 2019 include:

June 2019 - Immortals LLC, trading as Immortals Gaming Club and a portfolio company of Anschutz Investment Co, acquired Infinite Esports & Entertainment, a portfolio of Deep Space Exploration LLC, for US$100 million. The transaction strengthens Immortals’ portfolio of gaming service offerings. As part of the transaction, Immortals would acquire OpTic's Call of Duty World League team. Anschutz is a venture capital firm located in Denver, Colorado. Infinite Esports & Entertainment is located in Frisco, Texas and provides sports and entertainment services.

June 2019 - Ithaca Holdings acquired Big Machine Label Group for US$300 million in cash and stock. Ithaca Holdings provides film and television production services. Big Machine Label Group operates as a record label company, which specializes in country and pop artists. It encompasses Big Machine Records, The Valory Music Co., BMLG Records, Big Machine Records/John Varvatos Records, and publishing company Big Machine Music, as well as its own digital radio station, Big Machine Radio. The company was founded in 2005 and is headquartered in Nashville.

June 2019 - Hartree Cardinal Gas LLC, a subsidiary of Hartree Bulk Storage LLC, which is a portfolio company of Oaktree Capital Management, acquired Perryville Gas Storage LLC, Monroe Gas Storage Co. LLC, Cadeville Gas Storage LLC and Arcadia Gas Storage LLC from Cardinal Gas Storage Partners LLC, ultimately owned by Martin Midstream Partners LP for US$212 million in cash. The transaction strengthens Hartree Cardinal Gas' refinery services.

M&A Update

US manufacturing activity increased in March 2019 according to the Institute for Supply Management (ISM). Overall, manufacturers reported faster growth in production, new orders, and employment. New export orders also rose, but at a slower pace. Of 18 industries surveyed by the ISM, 16 reported expansions in March, including printing and related support activities; textile mills; food, beverage, and tobacco products; petroleum and coal products; computer and electronic products; electrical equipment, appliances, and components; transportation equipment; fabricated metal products; and machinery. While the current US economic expansion seems to have peaked in the fourth-quarter 2018, the strong ISM indicators of growth of new orders in March could bode well for continued demand for US manufactured goods in the coming months.

Industry Indicators

  • US corporate profits, which affect corporate investment activity, rose 3.1% in the first quarter of 2019 compared to the same period in 2018.

  • The bank prime loan rate, which indicates the rates available for asset purchases, was 5.5% as of the week of June 13, 2019, up from a rate of 5% the same week in 2018.

  • US personal income, which drives investment spending, rose 3.9% in March 2019 compared to the same month in 2018.


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2nd Half  |  2019