Budgets Archives

Markross121_ June 21, 2021 No Comments

Private equity brushes off past club deal woes with $34B Medline buyout

Private equity’s biggest guns are once again showing they can have record-setting buyout firepower when they work as a team.

After recently backing away from so-called club deals that bring together multiple firms, the industry now has its largest acquisition in years. The Carlyle Group and Hellman & Friedman have joined forces to acquire Medline in a deal reportedly worth around $34 billion, including debt.

The deal comes after US private equity firms amassed approximately $721 billion in dry powder as of June 30, 2020 following years of record fundraising outputs. And it may signal that club deals involving multiple buyout shops have returned after they fell out of favor following a series of high-profile flops.

The Medline deal also marks the largest private equity buyout by value in at least a decade, according to PitchBook data. So far in 2021, private equity firms have struck 13 deals in the US worth $5 billion or more, surpassing last year’s total of 11.

Mergers & Acquisitions Modelling

Achieve Corporation act as either the buy or sell side advisors on corporate transitions. This experience in a dual role gives us a valuable insight into the metrics, thought process and modelling needed to successfully plan the financial aspects of a merger or acquisition.

Our modelling can be used as either a:

Pitch deck to seek funding for a project
Back up financials for sign off at Board level planning committee
Feasibility studies to highlight potential financial synergies on acquiring targets in either a horizontal or vertical sector

The Achieve Corporation M&A modelling includes:

Acquirer & Target Models – Map financials, 3-statement model, discounted cash flow model
Deal Assumptions – Inputs, synergies, financing, value added and goodwill
Accretion/Dilution – Pro forma per share metrics
Closing Balance Sheet – Acquirer + target, adjustments, goodwill and pro forma
Sensitivity Analysis – Intrinsic value per share, ROE, ROI, changes in assumptions
Pro Forma Model – Combination of synergies, 3-statement model, Discounted Cash Flow

For a discussion in the strictest confidence about the benefits of our M&A model, please contact Mark Roberts Senior Partner at Mark@achieve-corproation.com

Markross121_ November 26, 2020 No Comments

HelloFresh inks $277M deal for US meal delivery startup

Germany’s HelloFresh has agreed to buy Illinois-based meal delivery business Factor75 for up to $277 million, as European food companies turn their attention to the US to fuel growth.

The deal comes just a few weeks after Nestlé completed its $1.5 billion acquisition of New York-based meal delivery startup Freshly. In June, Just Eat Takeaway.com fought off a rival bid from Uber to buy Grubhub in an all-stock transaction worth about $7.3 billion.

Factor75 will join HelloFresh’s existing US portfolio including EveryPlate and Green Chef, which it bought in 2018. The deal will give HelloFresh its first office in Chicago, as well as four production and fulfillment facilities.

Frankfurt-listed HelloFresh is currently the largest meal-kit provider in the US in terms of market share, reportedly surpassing Blue Apron in 2018. It logged 2.5 million active customers in the US during Q3 2020, a near 70% increase year-over-year. The pandemic has created a surge in demand for meal kits as shoppers seek alternatives to grocery stores. The meal kit market is expected to reach $14.8 billion by 2025, representing a 10.6% compound annual growth rate, according to PitchBook’s Q3 2020 foodtech report.

Founded in 2013, Factor75 specializes in healthy ready-to-eat meals. It secured $12.5 million in May in a round led by Marcy Venture Partners. Factor75 is expected to generate revenue of around $100 million in 2020.

UK still top for US-EU inbound M&A activity, says new report

Despite Brexit, the UK is still the top destination for US-EU inbound M&A activity, representing nearly 40 per cent of EU deals since 2009 – and activity could pick up with greater Brexit certainty.

The report, which gathers the collective thoughts of Akin Gump lawyers and senior dealmakers at global companies to see how Brexit, global trade disputes and this year’s US elections are shaping the deal landscape, also finds that even though M&A now involves additional layers of geopolitical and regulatory complexity brought on by global trade tensions and political turbulence, deals are getting done.

with Republicans and Democrats offering starkly divergent platforms on a number of key policy issues, the report says the results of the 2020 US elections are certain to influence M&A activity in 2020 and beyond.

Following a decisive UK election outcome, the report suggests that deal activity could pick up. “There is an M&A backlog, as some deals went on hold before the election,” says Akin Gump corporate partner Gavin Weir. “This bodes well for activity in 2020 as buyers and sellers return to the market.”

Sebastian Rice, partner in charge of Akin Gump’s London office, adds: “There is recognition that the [deal] process is more complex, but if you address issues early, deals will close.”

Looking at deal activity in the United States, Jeff Kochian, co-head of Akin Gump’s corporate practice, says: “The US M&A market has been very strong for the last several years. In spite of global trade and political volatility, the strong US economy and bullish equity markets have been particularly helpful to strategic buyers. Private equity has also been very active, doing more, albeit somewhat smaller deals.”

Markross121_ July 22, 2020 No Comments

Musk qualifies for $2.1bn payday after Tesla rally

A prolonged bounce in Tesla’s share price means its chief executive Elon Musk has qualified for a $2.1bn payout, in his second award since May.

The electric carmaker’s six-month average market capitalisation officially surpassed $150bn today, triggering the vesting of the second of 12 tranches of options granted to Musk in 2018.

Musk, who is also majority owner and chief executive of rocket firm Space X, receives no salary.

Tesla is now the world’s most valuable carmaker, almost reaching $300bn this month to be worth more than the market values of Toyota, Ford, General Motors and Fiat Chrysler combined.

It is set to report its quarterly earnings on Wednesday evening, which if profitable, will determine whether Tesla can enter the S&P 500 index on Wall Street.

Analysts’ estimates for Tesla currently range from an adjusted loss as steep as $2.53 a share to a $1.41 per share profit.

However on average, they expect an adjusted 11 cents loss per share and a net loss of $240m, according to Refinitiv data.

Tesla shares have surged more than 275 per cent so far this year, though reporting a loss this evening could send its stock plummeting.

Earlier this month, Tesla surpassed expectations when it announced it had delivered more than 90,000 vehicles in the quarter, defying a wider industry downturn.

But while vehicle deliveries increased 2.5 per cent on a quarterly basis, production dropped nearly 20 per cent. Tesla had previously predicted it would deliver at least 500,000 vehicles by the end of the year.

Its main Fremont carmaking plant was shut for six weeks earlier this year due to lockdown measures during the coronavirus pandemic, putting a dampener on production numbers.

Tesla has said it plans to open a new plant in the south-west of the US as soon as the third quarter, but it has yet to announce a location.

Hedge fund criticises ‘unjust’ takeover bid for Sirius Minerals

Crispin Odey’shedge fund has attacked Anglo-American’s “unjust” takeover bid for Sirius Minerals, saying the £405m offer does not represent a fair price for shareholders in the troubled fertiliser miner.

Odey Asset Management, which owns 1.3% of Sirius, said it would vote against the mining giant’s 5.5p-a-share bid for the company, which plans to dig the UK’s first deep mine in 40 years under the North York moors.

In an open letter to Anglo’s boss, Mark Cutifani, and Chris Fraser, the chief executive of Sirius, the London-based fund argued that Anglo had stopped short of making a “final” offer so that it could raise its bid to see off any potential counter bid for the company.

Odey said it believed Anglo would be willing to “bid substantially more” for Sirius if a counter bid for the company emerged, which it said proved that the existing offer did not represent a fair price for the company.

“It is Odey’s belief that Anglo American’s current offer does not represent fair value for shareholders in Sirius,” said the letter, which was signed by Odey’s fund manager, Henry Steel. The hedge fund said it would vote against any offer that was not final or that was less than 7p a share.

The existing takeover offer would wipe out the investments of thousands of small shareholders, but it still won the support of the Sirius chairman, Russell Scrimshaw. He said last month it was “the only viable proposal” to save the company’s multibillion-pound project to develop the Woodsmith fertiliser mine under the North York moors.

Optiv confirms ‘temporary’ UK closure and turns attention to M&A

Security giant says it is still committed to European expansion

US-based MSSP Optiv has confirmed what it called a “downsizing” of its UK operation, claiming the move is temporary as it turns its attention to M&A.

CRN reported yesterday that Optiv was in the process of shutting down in the UK, keeping on a handful of staff to continue any outstanding customer transactions.

In a statement Optiv called the move “temporary”, insisting that it still has plans to build a presence in Europe and has looked at 40 European businesses to acquire before deciding it “simply couldn’t justify the high valuations of these companies”.

“After a comprehensive strategic review, we’re temporarily downsizing our London-based organic operations,” Optiv said.

“We remain committed to serving the European market, clients, partners and prospects,” it added, claiming it could acquire “once European valuations right-size”.

Optiv’s CMO had previously said that the firm looked at acquiring the likes of SecureData and SecureLink, opting against making a bid because it thought the pair were overvalued.

SecureData was bought last year for a multiple of 20 times its EBITDA.

Micky Patel – partner at August Equity, which sold SecureData to Orange – told CRN earlier this year that the multiple was achieved because SecureData was unique in that it was a cybersecurity service provider that had scaled.

A panel of private equity investors also told delegates at CRN‘s Channel Conference MSP that they believe high multiples are here to stay.

Thomas Cook’s Nordic business lives on after private equity deal

A trio of investors—including two private equity firms—has teamed up to save Thomas Cook’s Nordic business a month after the British travel company suddenly declared bankruptcy, delisted its shares, ceased operations and stranded more than 150,000 customers.

European buyout firms Altor Equity Partners and TDR Capital, along with Norwegian real estate tycoon Petter Stordalen’s Strawberry Group, are slated to assume ownership of the Ving Group, as the Northern Europe unit is called. The group employs 2,300 people across charter businesses in Sweden, Norway, Denmark and Finland, along with Thomas Cook Airlines Scandinavia.

Strawberry Group and Altor will each buy 40 percent of Ving, while TDR Capital will purchase the remaining 20 percent, though no price was revealed. Following the acquisition, the investors will work to secure approximately 6 billion Swedish kronor (about $618 million) in liquidity and guarantees for the business.

Unlike the larger Thomas Cook Group, which was founded in the 1840s to serve the burgeoning British middle class, Ving has recently proved itself profitable. Some of the Ving units will declare bankruptcy in order to facilitate the redirection of all businesses to a freshly established company created by its new owners, but the company’s sale will ensure 400,000 people who have booked upcoming trips will be able to travel without issue.

“[The deal] secures the business and creates a stable foundation for future development,” Harald Mix, a partner at Altor, said in a statement.

Altor, based in Stockholm, has raised five funds since its creation in 2003. It has invested in more than 60 middle-market Northern European companies, worth a total of €8.3 billion (about $9.25 billion).

TDR Capital, founded in 2002, manages €8 billion in assets and is headquartered in London. It also focuses on mid-market companies, with a preference for growth-oriented investments.

Strawberry Group maintains 11 companies and invests primarily across the real estate, finance, hospitality and art industries. Stordalen is a Norwegian billionaire who, along with his three children, also owns the region’s largest resort chain, Nordic Choice Hotels. The brand operates 180 luxury hotels across five countries.

The buyout of Thomas Cook’s Nordic unit may be one of the more dramatic deals in recent memory, but it fits cleanly into the bigger picture of the region’s PE landscape. Nordic dealmakers such as Altor have maintained a relatively consistent slice of the European private equity pie over the past decade. As of September 30, Nordic PE deal value this year totaled about €26 billion, about 11% of overall European deal value, per PitchBook’s 3Q 2019 European PE Breakdown. Through the past decade, the Nordic region’s deals have largely hovered around that same share of the total.

China-driven M&A in North America is nearly MIA this year

North American M&A activity involving Chinese buyers has fallen off a cliff this year. That’s not a complete surprise, but it’s not often you see such swift drop-offs without something alarming going on. China-driven M&A is on pace to fall by more than 90% from its 2016 peak, according to PitchBook’s 3Q 2019 North American M&A Report.

Just over $20 billion worth of North American M&A deals with Chinese acquirers have been consummated this year through 3Q, which would have been a blip in 2016, when $298.5 billion changed hands. Combined M&A value figures treaded water over the past two years, at least comparatively, and a few big deals were executed. In the background, though, volume slid very quickly, from 696 deals in 2016 to 496 in 2017, then to 274 deals last year, and finally, to only 73 so far this year:

US-based companies and Chinese acquirers have more or less ceased doing business, at least for now. Some of that is collateral damage from the trade war, but more of it is likely related to The Committee on Foreign Investment in the US. The CFIUS has effectively blocked several major transactions, mostly on national security grounds.

The list of affected sectors is broader than aerospace and semiconductors—reviews are now triggered for energy, transportation, healthcare and even financial services companies. Taken together, the regulatory territory covered by CFIUS reviews is quite extensive. The market is now very aware of the penalties involved, thanks to high-profile deals being scuttled by regulators—including some completed deals that had to be unwound after the fact. It would be interesting to track all of the broken deal fees and legal expenses involved in the deals that didn’t make it into the chart above.

It isn’t clear that an end to the trade war would lead to an immediate recovery in the M&A market. Activity would pick up to some degree with an agreement, but most of these cross-border cancellations boil down to those security concerns, many of them well-founded. As long as Donald Trump remains in office, China remains communist and we continue to give each other the side eye, it may be radio silence on the M&A front for a while.

Permira-backed TeamViewer defies European IPO drought

PE-backed software company TeamViewer has announced plans to go public on the Frankfurt Stock Exchange by the end of the year. The offering could be one of Germany’s largest listings since 2017, with the expected valuation said to be between €4 billion and €5 billion (between around $4.4 billion and $5.5 billion).

Based in the city of Göppingen, TeamViewer develops a platform for online meetings and remote desktop access that has been installed on over 2 billion devices. Last year, the company reportedly generated sales of €230 million and EBITDA of €121 million.

Permira bought the business in 2014 for a reported €870 million from GFI Software. The PE firm is anticipated to sell between 30% and 40% of its shares, according to the Financial Times, but is said to be retaining its position as a majority stakeholder. Permira was reportedly approached by Hellman & Friedman and Vista Equity Partners in 2017, with each firm offering separate bids of some $2 billion to acquire TeamViewer.

If successful, the listing bucks a trend that has seen a significant drop in European IPOs. According to data from PitchBook, public offerings on the continent are at their lowest levels in nearly a decade. So far this year, 106 European companies have gone public compared with 311 last year. What’s more, very few of the companies that debuted on the markets this year raised large amounts of cash.

Only three businesses from the continent have broken the €1 billion mark in eight months. The largest IPO came courtesy of Italian lender Nexi, which priced its shares at €9 apiece to raise more than €2 billion in April. Europe’s second-biggest listing of the year saw Volkswagen’s truck and bus unit Traton make its stock market debut at €27 per share which brought in €1.55 billion. The final company that raised at least €1 billion is Trainline, the developer of a platform offering train and bus tickets. The KKR-backed business secured £951 million (around $1.2 billion at the time) by floating in London.

Some European businesses have avoided the markets altogether or backed out of scheduled IPOs. In July, Swiss Re pulled plans to list its UK life insurance arm ReAssure, which could have given the business a market cap of up to £3.3 billion. The group cited weak demand and heightened caution as its reasons, suggesting that certain political events may play a role in IPO suspension.

Of course, Brexit gets some of the blame, especially in the UK, but political uncertainty may not be the only reason for the lackluster demand for IPOs. Considering share price performance, European businesses haven’t been the best performers when going public. Traton’s stock has pretty much been on a downward spiral since the company’s June IPO—closing Wednesday at just over €22 per share—while Nexi’s stock fell a reported 6.2% on its first day. And we all know the debacles that were the Aston Martin and Funding Circle listings.

Still, there is hope that if it is executed, TeamViewer’s public debut will fare better than some of its peers, with its profitability and the attractiveness of the software market.

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