q2 2019 market report - croft & bender
TRANSCRIPT
Q2 2019 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 $10 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
ChemicalsDurable Goods
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. VealVice [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
has been acquired by
VNS is a leading supplier and manufacturer of building products.
HRI is a leading franchisor of in-home consumer services.
has soldHarris Research, Inc.
Franchisor of
to
has been recapitalized by
has been acquired by
Coverall is a leading franchisor of commercial cleaning services.
Secretariat is a leading provider of dispute resolution advisory services to
public and private sector clients across the world.
has been recapitalized by
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.
has been recapitalized by
Carousel Designs is a leading online provider of original and custom-
designed baby bedding, fabric and nursery décor.
has been acquired by
Mudlick Mail provides data-driven, direct mail and related marketing
solutions to small and medium-sized businesses.
has been recapitalized by
The Erosion Company provides erosion control and related site services
to the construction industry.
Dominion Youth Services a leading provider of behavioral and mental
health support services to the youth and adolescent market.
has been acquired by
Service Brands is a leading multi-concept residential services franchisor.
has been acquired by
Nuesoft Technologies is a leading provider of SaaS solutions and RCM services for the healthcare industry.
has been acquired by
Lexington Manufacturing is a leading provider of engineered components to window and door OEMs in the United
States and internationally.
has been acquired by
has merged with
a portfolio company of
ControlScan is a leading provider of security and compliance solutions.
ASP is the leading swimming pool cleaning franchisor in the U.S.
has been acquired by
a portfolio company of
Merit is the leading distributor of paint sundries and flooring products and
installation supplies.
has been acquired by
a portfolio company of
4th Source is a leading provider of nearshore software development and IT
services to sophisticated clients with complex technology requirements.
has been acquired by
AN GLOBAL
Gro Solutions provides a digital sales platform for financial institutions.
has been acquired by
SIP.US is a leading provider of on-demand, enterprise-class IP
communications software solutions.
has been acquired by
a portfolio company of
IDology is a leading provider of identity verification and fraud prevention
services.
has acquired
FEATURED TRANSACTIONS
4
DEAL OVERVIEW
COMPANY OVERVIEW Headquartered in Chester, UK, GB Group is a $1.4 billion, publicly-traded
company that is a leading data intelligence specialist
The Company can quickly validate and verify the identity and location of4.4 billion people globally and accesses a breadth of data from over 200global partners to establish trust between businesses and theircustomers
Headquartered in Atlanta, Georgia, IDology is a fast-growing provider ofidentity verification services that helps remove friction both inonboarding customers and in the detection of fraud
GB Group had been impressed with Croft & Bender’s approach on theother side of another process
GB Group engaged Croft & Bender to advise the Company on its strategyand approach in acquiring IDology
Croft & Bender worked with the Company to analyze the market andadvise on bidding strategy, which resulted in successfully securing aLetter of Intent
Croft & Bender supported the Company throughout confirmatorydiligence, including negotiating the final definitive documentation
Croft & Bender successfully advised on the $300 million acquisition ofIDology by GB Group
DEAL OVERVIEW
COMPANY OVERVIEW Hospice Care of South Carolina is a leading provider of hospice and
palliative care services
Hospice Care of South Carolina provides all four levels of hospice care, asdefined by Medicare, as well as pediatric and adult palliative care
The Company employs highly trained, certified and dedicatedprofessionals providing evidence-based care through home-, facility-,clinic- and hospital-based settings
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 ran a competitive process that included a broad group ofpotential strategic and financial buyers
Croft & Bender successfully negotiated a recapitalization with The VistriaGroup, LP
HCSC is a leading provider of hospice and palliative care services
in the Southeast.
has been recapitalized by
IDology is a leading provider of identity verification and fraud prevention services.
has acquired
Note: Middle-market transactions are defined as those with a disclosed transaction value of less than $1 billion.
Public Equity Markets Middle Market Deal Volume
($ in billions)
Cash on Corporate Balance Sheets
($ in trillions)
Private Equity Dry Powder
($ in billions)
KEY CAPITAL MARKETS DATA
5
US PE EBITDA Multiples US PE Leverage Multiples
$672 $683$745
$829
$1,029
$1,194
$1,540
'13 '14 '15 '16 '17 '18 Q2 '19
$5.9 $6.0$5.7 $5.9
$6.3 $6.1 $6.2
'13 '14 '15 '16 '17 '18 Q2 '19
$327
$396 $385 $385 $380 $387
$193 $173
'13 '14 '15 '16 '17 '18 YTDQ2 '18
YTDQ2 '19
10.1x
12.8x
9.8x10.5x
12.1x11.5x
12.4x
'13 '14 '15 '16 '17 '18 LTMQ2 '19
6.1x
7.2x
5.4x 5.2x
6.2x5.8x 5.8x
'13 '14 '15 '16 '17 '18 LTMQ2 '19
(20.0%)
0.0%
20.0%
40.0%
60.0%
80.0%
6/16 12/16 6/17 12/17 6/18 12/18 6/19
S&P 500 NASDAQ Dow Jones
40.2%48.4%
65.3%
(1) Indexed relative to 2012.(2) Indexed relative to 1985.
Unemployment RateConsumer Confidence(2)
Real GDP Growth Industrial Production(1)
Retail Sales
($ in billions)
Consumer Spending
($ in trillions)
KEY ECONOMIC DATA
6
0.0%
1.0%
2.0%
3.0%
4.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'15 '16 '17 '18 '19
100
102
104
106
108
110
112
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'15 '16 '17 '18 '19
70
80
90
100
110
120
130
140
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'15 '16 '17 '18 '19
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'15 '16 '17 '18 '19
$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
'15 '16 '17 '18 '19
$10
$11
$12
$13
$14
$15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'15 '16 '17 '18 '19
AVERAGE PUBLIC MULTIPLES & U.S. DEAL ACTIVITY BY SELECT INDUSTRY GROUPS
*Latest twelve months as of June 30, 2019.Note: EV = Enterprise Value.
General Industrial IT Consulting & Other Services
Building Products Trading Companies & Distributors
Consumer ServicesRetailing
7
9.9x 11.3x 11.2x
10.3x 10.5x
1.3x 1.4x 1.4x 1.3x 1.3x
2,433
2,167 2,220
2,4192,594
500
1,000
1,500
2,000
2,500
3,000
2x
4x
6x
8x
10x
12x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
10.5x 11.5x
12.7x 11.2x 11.9x
1.6x 1.7x 1.8x 1.7x 1.8x
339
269 284
314 314
50
100
150
200
250
300
350
400
2x
4x
6x
8x
10x
12x
14x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
9.7x
11.1x 10.8x 9.4x 10.0x
1.2x 1.4x 1.4x 1.2x 1.3x
55
62 63
8982
20
40
60
80
100
2x
4x
6x
8x
10x
12x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
11.8x 13.8x
11.3x 9.9x 9.7x
0.8x 0.8x 0.8x 0.7x 0.7x
320
285 256
319
366
50
100
150
200
250
300
350
400
2x
4x
6x
8x
10x
12x
14x
16x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
13.3x 14.1x 16.2x
15.0x
15.5x
1.3x 1.3x 1.5x 1.4x 1.5x
602498
374409
453
100
200
300
400
500
600
700
5x
10x
15x
20x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
12.4x 12.9x 13.9x 13.0x 13.5x
2.4x 2.6x 2.8x 2.6x 2.7x
1,059
923
829
916 919
200
400
600
800
1,000
1,200
2x
4x
6x
8x
10x
12x
14x
16x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
AVERAGE PUBLIC MULTIPLES & U.S. DEAL ACTIVITY BY SELECT INDUSTRY GROUPS
Healthcare Facilities Healthcare Software
Healthcare Services Data Processing & Outsourced Services
General Software & ServicesApplication Software
*Latest twelve months as of June 30, 2019.Note: EV = Enterprise Value.
8
11.3x 11.6x 12.6x
11.9x 12.0x
1.8x 1.8x 1.8x 2.0x 1.9x
465416
316 280308
125
250
375
500
2x
4x
6x
8x
10x
12x
14x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
20.7x 21.3x 23.7x
26.7x 28.5x
3.6x 3.7x 4.1x 4.2x 4.7x
69 67
56 47
70
25
50
75
5x
10x
15x
20x
25x
30x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
10.3x 9.7x 10.1x
12.9x 12.0x
1.0x 0.9x 1.0x 1.3x 1.1x
465424 440 441 444
100
200
300
400
500
2x
4x
6x
8x
10x
12x
14x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
15.1x 16.0x 19.7x 19.7x
21.7x
4.5x 4.7x 6.0x 6.3x 6.8x
60
66
90100
90
20
40
60
80
100
120
5x
10x
15x
20x
25x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
22.6x 24.2x 26.8x 28.5x 29.6x
4.7x 5.1x 5.8x 6.4x 6.6x
955845 914
938 930
200
400
600
800
1,000
5x
10x
15x
20x
25x
30x
35x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
13.4x 15.6x
18.3x 17.3x 18.7x
3.0x 3.4x 4.0x 4.1x 4.5x
1,524 1,3341,439 1,516
1,505
400
800
1,200
1,600
2,000
5x
10x
15x
20x
2015 2016 2017 2018 Q2 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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 Deal Size Metrics
($ in millions)
U.S. Private Equity Deals by Deal Size
(# of deals)
U.S. Private Equity Activity by Year
PRIVATE CAPITAL DATA
9
$3
37
$3
79
$4
39
$5
31
$5
62
$6
05
$6
18
$7
27
$2
61
3,1793,559
3,440
4,280 4,446 4,452 4,725
5,181
1,911
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
$800
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ2 '19
Deal value ($B)
# of deals closed 2,183
1,209
1,295
0
500
1,000
1,500
2,000
2,500
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ2 '19
Under $25M
$25M-$100M
$100M-$500M
$47.0 $50.0
$190.0
$203.0
$0
$50
$100
$150
$200
$250
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ2 '19
Median deal size
Median pre-money valuation
$2
4
$2
3
$2
3
$4
1
$4
6
$3
9
$4
2
$6
9
$3
2
641 663 680
882978
852973
1,157
531
0
200
400
600
800
1,000
1,200
1,400
$0
$10
$20
$30
$40
$50
$60
$70
$80
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ2 '19
Deal value ($B)
# of deals closed
$1.1 $1.1
$6.0 $6.5
$11.5
$10.3
$0
$2
$4
$6
$8
$10
$12
$14
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ2 '19
Angel/Seed
Early VC
Later VC
$4
5
$4
1
$4
8
$7
2
$8
4
$7
7
$8
3
$1
37
$6
6
6,7747,881
9,343
10,596 10,839
9,364 9,8899,845
4,868
0
2,000
4,000
6,000
8,000
10,000
12,000
$0
$20
$40
$60
$80
$100
$120
$140
$160
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ2 '19
Deal value ($B)
Deal count
692530457
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 Dealogic, Pitchbook, Preqin, S&P Capital IQ, and the U.S.Department of Labor.
DISCLOSURES
10