Q2 2020 Market Report · 2020. 8. 25. · [email protected] (404) 841-0735 Steve B. Tye...

Q2 2020 Market Report

Mergers & Acquisitions • Private Equity • Financial Advisory

4401 Northside Parkway Suite 395 Atlanta, Georgia 30327 (404) 841-3131 www.croft-bender.com Member SIPC and FINRA

DEAL CRITERIA

MERGERS & ACQUISITIONS

• Buy side/sell side• Enterprise Values up to $300 million• Exceptions to typical EBITDA criteria:– High growth companies– Technology companies– Special situations

EQUITY & DEBT CAPITAL RAISES

• Middle-market companies• Emerging growth businesses• Large market opportunity• Experienced management team• Differentiated product or service• Greater than $15 million capital need

BROAD INDUSTRY EXPERTISE

BUSINESS SERVICES

Information ServicesMarketing Services Financial Services

Outsourced Services A/R Management

StaffingConsulting

TECHNOLOGY

Software/SaaSFinancial Technology

Human Capital ManagementInternet Marketing

E-CommerceSecurity/ComplianceBusiness IntelligenceTelecommunications

INDUSTRIAL

General ManufacturingBuilding Products

LogisticsSpecialty Contracting

DistributionIndustrial Services

Chemicals

HEALTHCARE

Healthcare ITClinical Services

Outsourced ServicesAlternate Site Care

Medical Products/Distribution

CONSUMER

Products/ServicesFranchisingRestaurants

RetailEntertainment/Leisure

OVERVIEW

Since 1996, Croft & Bender has provided superior M&A, private capital raising, andfinancial advisory services to middle-market and emerging growth companies. Thesenior professionals have completed more than 1,000 corporate financeengagements, resulting in deep experience across a broad set of industries and typesof transactions. In addition, the firm manages C&B Capital, three growth equity fundswith over $82 million under management.

CONTACT US

Frank H. “Bo” Briggs, IIIManaging [email protected](404) 841-0639

Edward S. Croft, IIIManaging [email protected](404) 841-0055

R. Neale FisherManaging [email protected](404) 574-2906

Ronald B. GoldmanManaging [email protected](404) 841-0735

Steve B. TyeManaging [email protected](404) 841-9351

Erik M. ZalenskiManaging [email protected](404) 841-9826

Kyle C. [email protected](404) 574-2897

Matthew A. [email protected](404) 841-0056

Christian GivenDirector of Business [email protected](404) 328-4837

4401 Northside Parkway Suite 395 Atlanta, Georgia 30327 (404) 841-3131 www.croft-bender.com Member SIPC and FINRA 2

REPRESENTATIVE TRANSACTIONS

BUSINESS SERVICES TECHNOLOGY INDUSTRIAL HEALTHCARE CONSUMER

HRI is a leading franchisor of in-home consumer services.

has soldHarris Research, Inc.

Franchisor of

to

has been recapitalized by

ML Healthcare provides financing and access to care for patients unable to

afford medical services.

3

HCSC is a leading provider of hospice and palliative care services

in the Southeast.


Carousel Designs is a leading online provider of original and custom-

designed baby bedding, fabric and nursery décor.

has been acquired by

Dominion Youth Services a leading provider of behavioral and mental

health support services to the youth and adolescent market.


Service Brands is a leading multi-concept residential services franchisor.


Nuesoft Technologies is a leading provider of SaaS solutions and RCM services for the healthcare industry.


ASP is the leading swimming pool cleaning franchisor in the U.S.


a portfolio company of

Secretariat is a leading provider of dispute resolution advisory services to

public and private sector clients across the world.


Mudlick Mail provides data-driven, direct mail and related marketing

solutions to small and medium-sized businesses.


4th Source is a leading provider of nearshore software development and IT

services to sophisticated clients with complex technology requirements.


AN GLOBAL

Gro Solutions provides a digital sales platform for financial institutions.


SIP.US is a leading provider of on-demand, enterprise-class IP

communications software solutions.



NOVA is a leading provider of engineering, consulting, testing, and inspection services to the design and

construction industry.


Merit is the leading distributor of paint sundries and flooring products and

installation supplies.



IDology is a leading provider of identity verification and fraud prevention

services.

has acquired

Astra Group provides contracting services for infrastructure projects

across the Southeast.


Schiller designs and manufactures commercial and residential gardening

and turf care equipment.

has acquired the BOB-CAT Mowers, Steiner and Ryan brands of

Mountain Express Oil is a leading provider of fuels, lubricants and other

non-fuel products.

has completed a debt recapitalization with a syndicated group

led by

Project Clutch

Recapitalization

Clutch provides a leading digital forensics solution for law enforcement,

national defense and the intelligence community.

FEATURED TRANSACTIONS

4

DEAL OVERVIEW

COMPANY OVERVIEW Hissho Sushi is a leading operator and franchisor of turnkey sushi and

Pan-Asian hot bar programs within supermarkets, healthcare facilities,corporate cafeterias, colleges and airports

The Company has a diversified base of locations nationwide that serve avariety of sushi products and freshly prepared Asian cuisine

Croft & Bender was engaged to help the Company evaluate strategicalternatives, including a majority recapitalization or strategic sale of thebusiness

Croft & Bender worked with the Company to build a financial model,develop marketing materials, conduct management presentations,manage the diligence process and negotiate with buyers

Croft & Bender completed the transaction with American InvestmentHoldings and Beem Holdings

Hissho Sushi is a leading operator and franchisor of turnkey sushi and Pan-Asian

hot bar programs.

has received a growth equity Investment from

DEAL OVERVIEW

COMPANY OVERVIEW MS Biotec is a leading provider of high performance products for the

beef feedlot and dairy markets

The Company is the world’s first and only commercial producer of aproprietary bacteria strain that increases cattle production by enablingcattle to more rapidly transition to high-energy diets

MS Biotec received a preemptive offer to be acquired by a Europe-basedstrategic buyer and engaged Croft & Bender to help the Companyevaluate strategic alternatives

After discussing potential transaction scenarios, C&B and the Companydecided that a competitive process would generate the most options andmost desirable outcome for the Company

Croft & Bender worked with the Company to build a financial model,develop marketing materials, conduct management presentations,manage the diligence process and negotiate with buyers

Croft & Bender successfully negotiated the recapitalization of theCompany with Paine Schwartz Partners

MS Biotec is a leading provider of high performance products for the beef feedlot

and dairy markets.


American Investment Holdings

and

Beem Holdings

$396 $386 $386 $383 $393 $353

$174

$118

'14 '15 '16 '17 '18 '19 YTDQ2 '19

YTDQ2 '20

(20.0%)

0.0%

20.0%

40.0%

60.0%

80.0%

6/17 12/17 6/18 12/18 6/19 12/19 6/20

S&P 500 NASDAQ Dow Jones

Public Equity Markets Middle Market Deal Volume

($ in billions)

Cash on Corporate Balance Sheets(1)

($ in billions)

Private Equity Dry Powder

($ in billions)

KEY CAPITAL MARKETS DATA

5

US PE Enterprise Value / EBITDA Multiples US PE Debt / EBITDA Multiples

27.9%

20.9%

63.8%

Note: Middle-market transactions have a disclosed enterprise value of less than $1 billion.(1) Reflects S&P 500 constituents.

$839 $895$1,013

$1,309

$1,516$1,626

'14 '15 '16 '17 '18 '19

$5,905 $5,630 $5,815

$6,198 $5,939 $6,049

$7,417

'14 '15 '16 '17 '18 '19 Q2 '20

12.6x

10.1x11.2x

12.1x11.5x

12.5x

14.3x

'14 '15 '16 '17 '18 '19 LTMQ2 '20

6.8x

5.4x 5.5x6.2x

5.9x 5.9x5.4x

'14 '15 '16 '17 '18 '19 LTMQ2 '20

$1,000

$1,100

$1,200

$1,300

$1,400

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

'16 '17 '18 '19 '20

96

98

100

102

104

106

108

110

112


'16 '17 '18 '19 '20

Unemployment RateConsumer Confidence(2)

Real GDP Growth Industrial Production(1)

Retail Sales

($ in billions)

Consumer Spending

($ in trillions)

KEY ECONOMIC DATA

6(1) Indexed relative to 2012.(2) Indexed relative to 1985.

70

80

90

100

110

120

130

140


'16 '17 '18 '19 '20

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%


'16 '17 '18 '19 '20

(10.0%)

(8.0%)

(6.0%)

(4.0%)

(2.0%)

0.0%

2.0%

4.0%


'16 '17 '18 '19 '20

$10

$11

$12

$13

$14

$15

$16


'16 '17 '18 '19 '20

AVERAGE PUBLIC MULTIPLES & U.S. DEAL ACTIVITY BY SELECT INDUSTRY GROUPS

General Industrial IT Consulting & Other Services

Building Products Trading Companies & Distributors

Consumer ServicesRetailing

7*Latest twelve months as of June 30, 2020.Note: EV = Enterprise Value.

11.2x 11.1x 10.1x

9.1x 8.9x

1.4x 1.4x 1.3x 1.2x 1.2x

2,205 2,302

2,524

2,832

2,380

500

1,000

1,500

2,000

2,500

3,000

2x

4x

6x

8x

10x

12x

2016 2017 2018 2019 Q2 '20*

EV/EBITDA Multiple EV/Revenue Multiple

# of M&A Transactions

11.5x 12.6x

11.1x 11.3x 10.5x

1.7x 1.7x 1.6x 1.8x 1.7x

276295

318348

319

50

100

150

200

250

300

350

400

2x

4x

6x

8x

10x

12x

14x

2016 2017 2018 2019 Q2 '20*



11.2x 10.8x 9.6x 9.9x

8.9x

1.4x 1.4x 1.2x 1.4x 1.3x

64 66

89

76

56

20

40

60

80

100

2x

4x

6x

8x

10x

12x

2016 2017 2018 2019 Q2 '20*



13.7x 11.4x

10.0x 9.5x 9.1x

0.9x 0.9x 0.7x 0.7x 0.7x

298 275

332362

257

50

100

150

200

250

300

350

400

2x

4x

6x

8x

10x

12x

14x

16x

2016 2017 2018 2019 Q2 '20*



14.1x 16.1x

14.9x

12.6x 14.8x

1.4x 1.5x 1.4x 1.5x 1.7x

515

412439

507

421

100

200

300

400

500

600

5x

10x

15x

20x

2016 2017 2018 2019 Q2 '20*



12.9x 13.8x 12.8x 11.7x 11.4x

2.5x 2.7x 2.5x 2.6x 2.4x

936

843

9551,040

850

200

400

600

800

1,000

1,200

2x

4x

6x

8x

10x

12x

14x

16x

2016 2017 2018 2019 Q2 '20*



AVERAGE PUBLIC MULTIPLES & U.S. DEAL ACTIVITY BY SELECT INDUSTRY GROUPS

Healthcare Facilities Healthcare Software

Healthcare Services Data Processing & Outsourced Services

General Software & Services Software-as-a-Service

8*Latest twelve months as of June 30, 2020.Note: EV = Enterprise Value.

11.6x 12.5x 11.9x 10.5x 10.2x

1.8x 1.9x 2.0x 2.0x 1.9x

421

331294

388

340

125

250

375

500

2x

4x

6x

8x

10x

12x

14x

2016 2017 2018 2019 Q2 '20*



19.8x 21.7x 25.9x 27.5x 28.7x

3.3x 3.6x 3.9x 4.7x 5.3x

69

62 52

90

79

25

50

75

100

5x

10x

15x

20x

25x

30x

35x

2016 2017 2018 2019 Q2 '20*



9.8x 10.2x 12.3x

9.4x 9.2x

1.0x 1.0x 1.3x 1.0x 1.0x

428 448 462 485

392

100

200

300

400

500

600

2x

4x

6x

8x

10x

12x

14x

2016 2017 2018 2019 Q2 '20*



16.2x 19.8x

19.7x

25.2x 21.7x

4.9x 6.2x 6.4x

8.3x 7.1x

70

8998

7866

20

40

60

80

100

120

5x

10x

15x

20x

25x

30x

2016 2017 2018 2019 Q2 '20*



33.9x 36.8x 35.8x 38.2x 42.0x

6.7x 9.0x 9.3x 9.4x 11.4x

1,590 1,5981,484

1,368

1,195

300

600

900

1,200

1,500

1,800

10x

20x

30x

40x

50x

2016 2017 2018 2019 Q2 '20*



15.6x 18.2x 17.2x

19.6x 18.9x

3.4x 3.9x 4.1x 4.9x 4.9x

1,3641,467

1,558 1,5731,393

400

800

1,200

1,600

2,000

5x

10x

15x

20x

25x

2016 2017 2018 2019 Q2 '20*



257

119

198

72

133

67

0

50

100

150

200

250

300

'12 '13 '14 '15 '16 '17 '18 '19 YTDQ2 '20

$15M-$30M$30M-$50M$50M-$75M

2,043

825

1,455

412

1,513

386

0

500

1,000

1,500

2,000

2,500

'12 '13 '14 '15 '16 '17 '18 '19 YTDQ2 '20

Under $25M$25M-$100M$100M-$500M

$4

1

$4

8

$7

3

$8

5

$8

1

$8

6

$1

41

$1

36

$6

9

8,052

9,590 10,905

11,332

10,016

10,832

11,246 12,211

5,058

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

$0

$20

$40

$60

$80

$100

$120

$140

$160

'12 '13 '14 '15 '16 '17 '18 '19 YTDQ2 '20

Deal value ($B)

Deal count

$0.5 $0.5

$2.2 $2.5

$6.0 $6.7

$10.0

$8.5

$0

$2

$4

$6

$8

$10

$12

'12 '13 '14 '15 '16 '17 '18 '19 YTDQ1 '20

Angel Seed Early VC Late VC

$0.5 $0.6

$2.2 $2.2

$6.0 $6.0

$10.0

$8.8

$0

$2

$4

$6

$8

$10

$12

'12 '13 '14 '15 '16 '17 '18 '19 YTDQ2 '20

Angel Seed Early VC Late VC

$2

3

$2

4

$4

1

$4

9

$4

4

$4

5

$7

2

$6

5

$4

0

671 689

894

1,005914

1,040

1,246 1,270

533

0

200

400

600

800

1,000

1,200

1,400

$0

$10

$20

$30

$40

$50

$60

$70

$80

'12 '13 '14 '15 '16 '17 '18 '19 YTDQ2 '20

Deal value ($B)

# of deals closed

Median VC Round Size by Stage

($ in millions)

U.S. VC Activity by Year

U.S. Growth Equity Activity by Year U.S. Growth Equity Deals by Deal Size

(# of deals)

U.S. Private Equity Deals by Deal Size

(# of deals)

U.S. Private Equity Activity by Year

PRIVATE CAPITAL DATA

9

$3

77

$4

31

$5

31

$5

07

$6

08

$6

22

$7

56

$7

68

$2

46

3,5503,401

4,2344,454 4,477

4,821

5,495 5,261

1,678

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

$0

$100

$200

$300

$400

$500

$600

$700

$800

'12 '13 '14 '15 '16 '17 '18 '19 YTDQ2 '20

Deal value ($B)

# of deals closed

Croft & Bender LP (www.croft-bender.com) is a leading middle market investment bank focused on the advisory needs of clients nationwide. The firmhas extensive industry knowledge, transaction expertise, and a commitment to its clients’ success. Croft & Bender LP provides sell-side and buy-sideadvisory, capital raising, and financial advisory.

Investment banking services are provided by Croft & Bender, a registered broker-dealer and member of FINRA and SIPC.

THIS REPORT MAY CONTAIN REFERENCES TO REGISTERED TRADEMARKS, SERVICE MARKS AND COPYRIGHTS OWNED BY THIRD-PARTY INFORMATIONPROVIDERS. NONE OF THE THIRD-PARTY INFORMATION PROVIDERS IS ENDORSING THE OFFERING OF, AND SHALL NOT IN ANY WAY BE DEEMED ANISSUER OR UNDERWRITER OF, THE SECURITIES, FINANCIAL INSTRUMENTS OR OTHER INVESTMENTS DISCUSSED IN THIS REPORT, AND SHALL NOT HAVEANY LIABILITY OR RESPONSIBILITY FOR ANY STATEMENTS MADE IN THE REPORT OR FOR ANY FINANCIAL STATEMENTS, FINANCIAL PROJECTIONS OROTHER FINANCIAL INFORMATION CONTAINED OR ATTACHED AS AN EXHIBIT TO THE REPORT. FOR MORE INFORMATION ABOUT THE MATERIALSPROVIDED BY SUCH THIRD PARTIES, PLEASE CONTACT US AT THE ADDRESSES OR NUMBERS AT THE BEGINNING OF THE REPORT.

The information and views contained in this report were prepared by Croft & Bender LP. It is not a research report, as such term is defined by applicablelaw and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buyor sell any financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Croft & Bender to bereliable, but Croft & Bender makes no representation as to the accuracy or completeness of such information. Transaction numbers include thosetransactions that closed during the year they appear under and the industry classification assigned to the target by S&P Capital IQ. Croft & Bender and/orits affiliates act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide,may have provided, or may seek to provide investment banking services for those companies. In addition, Croft & Bender and/or its affiliates or theirrespective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products ofcompanies discussed herein. Opinions, estimates and projections in this report constitute Croft & Bender’s judgment and are subject to change withoutnotice. The financial instruments discussed in this report may not be suitable for all investors, and investors must make their own investment decisionsusing their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, pastperformance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, orredistributed, without Croft & Bender’s prior written consent. Sources of information include Baird, Dealogic, Pitchbook, Preqin, S&P Capital IQ, and theU.S. Department of Labor.

DISCLOSURES

10

Q2 2020 Market Report · 2020. 8. 25. · [email protected] (404) 841-0735 Steve B. Tye...

Documents

Transcript of Q2 2020 Market Report · 2020. 8. 25. · [email protected] (404) 841-0735 Steve B. Tye...