Tech M&A deal volumes set to rocket in next 12 months, claims new report

BY Fraser Tennant

Tech M&A deal volumes are set to increase in 2023, with average values expected to rise over the same period, according to a new tech M&A survey report by Morrison Foerster and Mergermarket.

In ‘Cutting Edge: Tech M&A Is Powering Deal Markets’, it is claimed that dealmakers are cautiously optimistic about 2023 and view 2022 as a year of reset. The survey also found that 80 percent of private equity (PE) firms and 71 percent of corporates expect tech M&A deal volumes to increase in the next 12 months.

In term of deal value, through the first three quarters of 2022, technology, media and telecommunications (TMT) deals announced worldwide were worth a combined $887.4bn, behind 2021’s historic run but well ahead of 2020 and the preceding years .

Additionally, the survey report shows that the top driver for tech M&A deals over the next 12 months will be keeping pace with technological advances, mitigating risk through joint venture and club deals, and addressing concerns around antitrust, environmental, social and governance (ESG), and shareholder activism.

“I am emboldened by the results of this year’s tech M&A survey,” said Brandon Parris, co-chair of the global M&A group at Morrison Foerster . “Despite market volatility, global dealmakers continue to prioritise technology acquisitions, especially in heated sectors like artificial intelligence and machine learning.”

Additional survey findings include: (i) 62 percent of corporates outlined technological advancement as the most frequently referred to driver of tech M&A strategy; (ii) 46 percent of North American dealmakers and 43 percent of their peers in Asia Pacific expect antitrust scrutiny of tech M&A to become significantly stricter over the next three years; and (iii) survey respondents expect ESG considerations to grow in importance when it comes to choosing their tech M&A targets.

Mr Parris concluded: “While deal numbers for 2022 were never going to reach the historical peaks of 2021, deal activity remains steady, and dealmakers are cautiously optimistic for the future.”

Report: Cutting Edge: Tech M&A Is Powering Deal Markets

Nordic Capital exits The Binding Site in $2.6bn deal

BY Richard Summerfield

European private equity firm Nordic Capital has agreed to sell The Binding Site Group, a global leader in specialty diagnostics, to Thermo Fisher Scientific Inc., in an all-cash transaction valued at $2.6bn.

The transaction, which is expected to be completed in the first half of 2023, is subject to customary closing conditions, including regulatory approvals. Upon completion, The Binding Site will become part of Thermo Fisher’s specialty diagnostics segment and is expected to be accretive to adjusted earnings per share by $0.07 for the first full year of ownership.

The Binding Site, which is headquartered in Birmingham, UK, has more than 1100 employees globally and is an active and influential contributor to the broader scientific community. The company is an established leader in a fast-growing segment in which patient care has shifted toward early diagnosis and monitoring via regular testing. Its business has been growing approximately 10 percent annually and is on track to deliver more than $220m of revenue in 2022.

“This transaction perfectly aligns with our Mission and is an exciting addition to our existing specialty diagnostic offerings,” said Marc N. Casper, chairman, president and chief executive of Thermo Fisher. “With extensive expertise and a large and dedicated installed base in cancer diagnostics, The Binding Site will further enhance our specialty diagnostics portfolio. The Binding Site is extremely well-respected by researchers and clinicians alike for its pioneering diagnosis and monitoring solutions for multiple myeloma. We also know early diagnosis and well-informed treatment decisions for multiple myeloma can make a significant difference in patient outcomes. We are excited by the opportunity to enable further innovation in this area for the benefit of patients and look forward to welcoming The Binding Site team to Thermo Fisher.”

“This announcement marks the beginning of a new and exciting chapter for The Binding Site and is a testament to our team’s singular commitment to improving patient lives through the development and delivery of innovative solutions,” said Stefan Wolf, chief executive of The Binding Site. “The Binding Site has long been at the forefront of medical diagnostics and by joining the world leader in serving science, we will be even better positioned to accelerate scientific discovery and expand our product offering for the benefit of our colleagues, customers and, most importantly, the patients we serve.”

“We are proud to have partnered with The Binding Site,” said Dr Raj Shah, a partner and head of healthcare at Nordic Capital Advisors, and Jonas Agnblad, a partner at Nordic Capital Advisors and a board member of The Binding Site. “Their cutting-edge technology and innovative specialty diagnostic solutions improve millions of patient lives globally. During Nordic Capital’s ownership the company has experienced strong growth and transformation, achieved by a dedicated focus on R&D investment, commercial focus and global expansion. We are grateful to The Binding Site team, for their dedication and for building strong scientific foundations which support the changing needs of patients and clinicians. This transaction marks the culmination of a very successful partnership, a successful outcome for Nordic Capital’s investors and the start of an exciting next phase for The Binding Site.”

Nordic Capital has been the majority owner of The Binding Site since 2011 when it completed the acquisition together with Five Arrows.

News: Thermo Fisher Scientific to Acquire The Binding Site Group

Cyber security: recession proof?

BY Richard Summerfield

Amid ongoing economic and geopolitical challenges, the cyber security sector remains strong, according to a new report from ICON Corporate Finance.

Thus far, the sector is proving recession-proof and remains a growth area, defying current troubling macroeconomic headwinds. As such, the cyber security sector is leading the way for M&A and fundraising activity in 2022, with deal activity for Q1-Q3 up 60 percent compared to 2020 for M&A and up 22 percent for fundraising.

The report notes that going forward, enterprises must recognise that they must continue investing in cyber defences regardless to protect against an increasingly sophisticated threat landscape, and because of significant geopolitical and economic uncertainty. This, in turn, is acting as a catalyst for M&A and fundraising deal activity.

According to ICON, the first three quarters of 2022 saw 353 cyber security M&A deals, with a total value of $125bn. As a result, the sector is on track to surpass pre-coronavirus (COVID-19) levels. With vendor platform consolidation, largely backed by private equity, being a chief driver behind the sustained deal activity.

Fundraising activity also remained in line with long-term trends, with $15.4bn of venture capital money invested in the sector globally across 572 deals in the first three quarters of the year.

“Enterprises recognise that they must continue hardening their security defences to keep above water in the arms race between good and bad,” said Florian Depner, director of ICON Corporate Finance. “Cybersecurity is mission-critical and companies have no choice but to keep investing given the uplift in malicious activity, and state-backed attacks.

“We also anticipate that Private Equity will continue injecting much-needed growth fuel into later-stage scale-up companies; a trend demonstrated by the BlackRock-backed $250m (£221.7m) investment in Swiss-based storage management and personal backup services provider Acronis.

“These factors, combined with Private Equity backing buy-and-build strategies and vendor platform consolidation, and the fact that the three-year cyber security index for public sector stocks rose 61.5%, while NASDAQ rose just 35.5%, makes cybersecurity players undeniably desirable.”

Going forward, ICON predicts that consolidation will continue at pace as trade and PE acquirers are ready to capitalise on market opportunities.

Report: Cybersecurity Sector Update – Q3 2022

Darling Ingredients acquires Gelnex in $1.2bn transaction

BY Fraser Tennant

In a move to boost production of collagen made from grass-fed cattle, US animal food manufacturing company Darling Ingredients Inc. is to acquire Brazilian collagen products maker Gelnex.

Under the terms of the definitive agreement, Darling will acquire all of the shares of Gelnex for approximately $1.2bn in cash.

With 11 state-of-the-art facilities on four continents around the world, Darling is the largest publicly traded company turning edible by-products and food waste into sustainable products, and a leading producer of renewable energy.

The company operates more than 250 plants in 17 countries and repurposes approximately 15 percent of the world's meat industry waste streams into value-added products, such as green energy, renewable diesel, collagen, fertiliser, animal proteins and meals and pet food ingredients.

“Driven by strong growth in demand for collagen products in the global health and nutrition market, we anticipate the collagen peptides market to double in the next five years,” said Randall C. Stuewe, chairman and chief executive of Darling Ingredients. “Gelnex is a well-run business and will be immediately accretive.”

Headquartered in Brazil with five facilities in South America and one in the US, Gelnex has the capacity to produce 46,000 metric tons of collagen products annually, which it exports to more than 60 countries around the world and employs about 1200 employees.

“Collagen is the most abundant protein naturally found in the body, and it plays an increasing role in the health and nutrition market by consumers seeking benefits to their hair, nails, skin, joints, bones and muscles," added Mr Stuewe. “Collagen products can be used in a broad range of applications, including powder blends, capsules, tablets, nutritional bars, drinks, dairy, confectionery and more.”

The transaction is subject to customary regulatory approvals and is anticipated to close in the first quarter of 2023.

Mr Stuewe concluded: “This acquisition will allow Darling to continue to grow its presence in the health and nutrition market and increases our production capacity for grass-fed bovine collagen in South America to help meet the future demand of our collagen customers worldwide.”

News: Darling Ingredients to buy collagen company Gelnex for $1.2 bln

Kroger agrees $25bn Albertsons acquisition

BY Richard Summerfield

US grocery firm The Kroger Co. has agreed to acquire Albertsons Companies, Inc. in a deal worth $25bn. The acquisition will create a grocery giant in the US.

Under the terms of the deal, Kroger will pay $34.10 for each Albertsons share, representing a premium of about 33 percent to the stock’s closing price last Wednesday, a day before media reports emerged of a deal between the two.

Kroger and Alberstons, already the number one and two standalone grocers in the US, will combine to create a firm with nearly 5000 stores across the country. The scale of the deal is likely to attract antitrust scrutiny, however, as federal regulators and critics express concern at the creation of a new supermarket mega power at a time of soaring food costs.

To tackle these concerns, the companies have already announced plans to divest some stores and Albertsons is prepared to spin off a standalone unit to its shareholders immediately before the deal’s close, which is expected in early 2024. The new public company is estimated to comprise of 375 stores.

Kroger said it expects to reinvest about half a billion dollars of cost savings from deal synergies to reduce prices for customers. An incremental $1.3bn will also be invested into Albertsons. Kroger will have to pay Albertsons $600m if the deal is terminated.

“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” said Rodney McMullen, chairman and chief executive of Kroger. “Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors.”

He continued: “As a combined entity, we will be better positioned to advance Kroger’s successful go-to-market strategy by providing an incredible seamless shopping experience, expanding Our Brands portfolio, and delivering personalized value and savings. We’ll also be able to further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network and grow our alternative profit businesses. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders.”

“We have been on a transformational journey to evolve Albertsons Cos. into a modern and efficient omnichannel food and drug retailer focused on building deep and lasting relationships with our customers and communities,” said Vivek Sankaran, chief executive of Albertsons. “I am proud of what our 290,000 associates have accomplished, delivering top-tier performance while furthering our purpose to bring people together around the joys of food and to inspire well-being. Today’s announcement is a testament to their success.”

Kroger is the largest supermarket operator in the US, with 420,000 employees and more than 2700 stores, including Ralphs, Harris Teeter, Fred Meyer, and King Soopers. Albertsons is the country’s second-largest supermarket company, with 290,000 employees and almost 2300 stores, including Safeway and Vons.

News: U.S. grocer Kroger carts away Albertsons for $25 billion but faces antitrust test