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Top Stories
Black Gold: Clean Harbors to Acquire Eveready
 Waste-management-services provider Clean Harbors Inc. announced it signed a deal to buy Eveready Inc., a Canadian provider of industrial and oilfield services, in a cash and stock deal valued at $167 million plus the assumption of debt. Clean Harbors will acquire Eveready for $49 million in cash, or about $2.64 per share, plus $118 million in stock. The stock portion represents 2.4 million shares. Clean Harbors will also take on $220 million in Eveready debt. Including Eveready's debt, the purchase is valued at $387 million, or $48.81 per share. Last year, Eveready posted a yearly revenue of $614 million. Clean Harbors posted a yearly revenue of $1.03 billion in 2008. The acquisition is expected to close in the third quarter, pending regulatory, Eveready shareholder approval and other closing conditions.
Going Virtual: ARI Acquires Channel Blade Technologies
 ARI announced it is acquiring Channel Blade Technologies Corp., a provider of websites, lead management and marketing automation solutions in the marine and recreation vehicle markets. ARI is a provider of electronic parts catalogs and marketing services to dealers, distributors and manufacturers in the manufactured equipment markets. ARI currently serves approximately 85 manufacturers and 180 distributors worldwide. Additionally, ARI provides electronic parts catalogs, dealer websites and/or professional marketing services to more than 24,000 dealers in about a dozen segments of the worldwide equipment market including outdoor power, power sports, marine, appliances, agricultural equipment, recreation vehicles, floor maintenance, auto and truck after-market parts and construction. The acquisition is anticipated to add more than $3.5 million in revenue to ARI. Terms of the deal were not disclosed.
Perfect for Prime Time: Prime Time Acquires Mstar
 Prime Time Communications announced it has completed its acquisition of Mstar, a Utah-based internet service provider on the UTOPIA fiber-optic network. Russo will continue to advise Prime Time throughout the transition in ownership. In addition to updating the IPTV service, Prime Time VP of Business Development Mike Woods emphasized that Prime Time is eager to sign up new subscribers for triple-play services. Prime Time will offer video, voice and data services. Terms of the deal were not disclosed.
Line-by-line: LS Power Purchases Wyoming-Colorado Intertie
LS Power announced this week its completed purchase of rights to the Wyoming-Colorado Intertie Project. The Wyoming-Colorado Intertie Project consists of a proposed 850 megawatt (MW) transmission line.
Acquisition of the Wyoming-Colorado Intertie represents an expansion of LS Power's transmission development platform, which is being created to support the delivery of new renewable energy resources throughout the U.S. Subsidiaries of LS Power Transmission, LLC are advancing the development of the high-voltage transmission projects in Texas, Southern Nevada, Wyoming and Idaho. LS Power has raised over $11 billion in debt and equity since 2005.
Strength in Numbers: VODone Buys Domouse
VODone, an Internet video new media company in China, announced this week that it has successfully acquired Domouse, an Internet community network. The purchase took place through the issue of new shares at prime consideration. Customer coverage includes approximately 298,000,000 current subscribers.
The intent of the acquisition of Domouse's by VODone is to build on VODone's foundation of its IT specialization and operational licenses. Specific terms of the deal were not disclosed.
By Way of Back Office: Headstrong Acquires iX Partners
 Headstrong, a global financial services consulting firm, announced this week its acquisition of iX Partners. iXP is a provider of middle and back-office services to the global asset management and financial services communities. iXP offers investment managers end-to-end outsourcing solutions for all investment operations functions, from trade settlement through performance measurement and client reporting. Headstrong has yielded sustained year-on-year growth in earnings and profitability with an annual revenue of $200M. Terms of the deal were not disclosed.
It's All About Chemistry: Analytical Bio-Chemistry Merges with Morse
 Analytical Bio-Chemistry Laboratories, Inc. (ABC), of Columbia, Missouri, announced earlier this week its merger with Morse Laboratories of Sacramento, California. The merger strengthens ABC's position as a provider of pesticide residue chemistry services. Morse Laboratories will continue to operate under the same name. Morse Laboratories, LLC will increase ABC's Chemical Services division annual revenues by approximately 30%. Terms of the deal were not disclosed.
So where are the middle-market M&A deals taking place? Some say to get a deal done today, look to emerging market contenders.
China, India and Brazil are investment priorities for private equity firms now poised to capitalize on lower valuations, according to a survey conducted by the Emerging Markets Private Equity Association and Coller Capital.
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In emerging markets, despite the global credit markets, there is a need and appetite for private equity capital because companies have fewer financing options.
Some markets are not considered as hot as others. Russia, Central and Eastern Europe and Africa are, for example, are considered higher risk these days than before the global crisis.
Yet even has the numbers slow to what may seem like a crawl, the emerging markets of Central and Eastern Europe, Latin America and the Middle East and Africa regions jumped from a total of 5% M&A activity value in 2003 to a 17% increase in value in 2008. In that time span the Middle East and Africa accounted for 7% M&A volume jump to14% of M&A volume in 2008.
In overall global M&A, China, Brazil and India are ranked, as the most attractive destination for investments in the next 12 months. Some experts see Brazil as the next big wave of PE activity.
Some barriers to rapid growth in emerging markets has been accurate data on private companies, which clouds valuation calculations (e.g. local labor laws, environmental mandates and local tax structures). Also dealmakers should be on the look out for the lack of formal risk assessments in an given vertical market or insurance matters within an emerging market.
On the US domestic front, while everyone knows, global M&A deals dropped by a third in 2008, foreign acquirors, of U.S. targets, however, increased their share of the U.S. middle-market. The former announced deal volume rose by 1.9% to 15.4% in 2008.
For the overall global M&A industry, the recent numbers are in and they aren‘t pretty. Global M&A slowed in first quarter 2009, dropping 32% or $561.1 billion, according to Dealogic.
For the first quarter 2009, health care M&A activity accounted for 23% of the global total, bringing in $128.1 billion.
Yet the number of deals declined 29% to 7,554 for the first quarter 2009. M&A activity here in the US took it in the chin with a 42% decline or a showing of just $216.4 billion.
As stock for capital transactions have been hammered by the down markets; M&A continues to be stunted.
Despite the current situation, by 2012, the estimates are that Sovereign wealth funds are anticipated to drop up to $10 trillion dollars or the total combined GDP of the UK, China and Japan. These funds are already playing a role in equity investments. How much of a role? We will soon find out but this column will report back on middle-market activities in the months and years to come.
In the meantime, we want to hear from you. Where is your firm going global and how do you plan to get there? Please take our survey and we'll share the results next time.
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Q & A |
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A Leader Speaks
Houlihan Lokey is the M&A Advisor Investment Banking Firm of the Year for 2008. The firm has also received other numerous accolades for its middle-market investment banking leadership, earning global recognition among its peers.
Through its innovation and tenacity, the firm has been able to offer middle-market clients expansive capabilities previously only available to much larger companies.
Houlihan's restructuring practice is now one of the largest of any investment bank and includes a significant distressed M&A practice that has played a leading role in some of the largest and most complex distressed company transactions.
We asked Scott Adelson, Senior Managing Director, for his take on current market conditions and how his firm thrives.
M&A: What is happening overall in the market for 2009?
S.A.: What we are seeing is people shedding non-core assets, people shedding non-core divisions. Companies that are concerned about their viability on a stand alone basis merging with companies that in a like state that will enable them to better survive this unstable environment. We are seeing people recapitalize their balance sheets by bringing in incremental equity to help stabilize them through this difficult time.
Distressed M&A [is a focus] as there are clearly a number of companies that will not be able to, in the ordinary course, continue to survive and therefore will need to sell or will be in and out of bankruptcy.
M&A: Which sector or sectors should dealmakers pay attention to for the year, either because of stress or opportunity?
S.A: Retail has already and will likely continue to experience a very difficult time, which lead a number of those companies to outright liquidate and go out of business. Many of them will get sold. Many of them will consolidate. [Retail] is probably one of the poster children industries. On the other hand, there are companies like healthcare that the world is looking at and saying ‘healthcare is not going away, and the demographics trends are still the same as they have always been, lower today'. So there are meaningful opportunities, so that you don't see this same degree of trouble in healthcare that you do in retail obviously.
M&A: What advice do you have for other dealmakers when considering distressed opportunities?
S.A.: There is a natural desire to run towards where the activity is, so there are going to be a lot of dealmakers that say, ‘There are huge distressed opportunities, companies are in trouble, I can buy them really cheap, I don't really understand this very well but I think I am going to try and do it.' I think it is a different skill-set to acquire a truly distressed company than a healthy company. So, I think people need to recognize that. I also think there are a number of companies that should be taking advantage of today's opportunities to aggressively go after companies that may not be obviously for sale. As, I think, in today's environment people are open to combination ideas that they may not have been in the past.
M&A: Is there any specific change in distressed deals that come to mind as a result of the drastic change in the economy?
S.A.: We run our distressed business differently. We have people who do nothing but "true, true" distress. One of the thoughts that comes to mind from your questions is the fact that there are companies out there that are trading at ridiculously low multiples; and there are many many boards that are sitting there saying, ‘Wait a minute, I am vulnerable to be taken over at this ludicrously low value.' And that is something that they need to deal with. That is not a regulatory change but that is an environmental change. You could have a perfectly healthy company in today's environment that is trading at three, four, five times EBITDA and be quite concerned about that.
M&A: Can you explain your cross-border success and what advice would you give other middle-market players?
S.A.: That is a great question. One we the main benefits we having a truly global presence with a broad array of twenty-nine industry specializations. And being a leader in the categories we serve in both traditional M&A and also on the restructuring side, is that we are in a position that is very different than some of our larger brethren. They are focused on larger-cap companies and larger transactions which have really come to a grinding halt. The middle-market has continued and always continues to have a meaningful degree of activity, but is just far less volatile than the mega-deal market place.
So, number one: we are able to take advantage of cross-border M&A through continuing to be able to hire really talented people who have lost their way or their home in larger organizations.
Number two: we are able to take advantage of continuing to provide uninterrupted service to our clients big and small because we are not turning over our people like many institutions that have expanded and contracted 30%-40% of their staff.
Number three: we are able to continue to have a dialog about transactions that are not for many large companies transformational, but are portfolio- rebalancing focused. So that is a dialog that is taking place regardless of the economic environment.
Fourth and last: our very large presence in restructuring--which both in Europe, increasingly in Asia and obviously in the US is a meaningful part of the business today.
M&A: Should people sell at all today, given that it is a buyer's market?
S.A.: It really depends. There is no blanket answer because it depends on why they are [selling]. That is a question that I have been asked many times, but unfortunately there is no blanket answer to it. Very early on finance you learn it is difficult to be a market timer. Don't be a market timer. Buy good companies and hold them. That is a prevailing wisdom, but when for you as a seller it is the right time to sell for personal reasons, for company reasons, for market reasons then all you have to do is conduct the best possible process to drive the greatest value.
My example would be if you have a public company in today's environment that doesn't believe it has access to incremental capital and is at a turning point in the company--and they need capital to make it to the next step. What should they do? Should they effectively wait it out, or should they try and partner up with somebody and realize that long-term vision, because they really believe in that long-term vision. The answer is they are probably better partnering up.
Likewise, if you have an 85+ year-old owner who has found out he is ill and he doesn't want to leave the company in disarray, and he hands it over to family members for them to deal with. It may not be an optimal time to sell but the alternative for them may not be as good. So, it really depends greatly on what the circumstances are.
Perhaps you are a PE firm and you need a realization for whatever reason. There are many reasons for why people sell. I think that if you have the luxury of not selling today and making acquisitions today [one would choose not selling,] as it is a great time to make acquisitions, right?
On the other hand, there are many, many reasons why people buy and there are many, many reasons why people sell and you can't paint it all with one brush.
M&A: Thank you.
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