M&A marches on

BY Richard Summerfield

Global M&A activity has continued at an impressive clip in 2018, with 15,349 completed deals worth a combined $2.4 trillion, according to Pitchbook’s 3Q 2018 M&A report. The latest quarter saw 5063 closed transactions valued at a total of $822.7bn.

Across the first three quarters of 2018, total deal count was down 12 percent year-on-year – 2017 saw 17,435 deals completed – while deal value declined 7.5 percent.

North America accounted for the highest proportion of deal value in over a decade, at 64.4 percent. The first three quarters of the year saw the region generate 8683 deals valued at $1.5 trillion. Furthermore, nine of the 10 largest deals of the year to date have targeted North American-based companies.

European activity, by contrast, has been lacklustre. According to Pitchbook, the spectre of Brexit and ongoing concerns around the outlook for international trade,have led to a subdued dealmaking environment in the region. European M&A saw 5646 transactions valued at $809.1bn, a considerable decline from the 7973 deals recorded in the first three quarters of 2017 valued at a total of $1 trillion.

“Global M&A activity remains healthy as North American dealmaking overcomes the weakness occurring in Europe, where a slowdown is underway," said Wylie Fernyhough, PE analyst at PitchBook. "Financing remains historically cheap and companies have shown an appetite for expansion via acquisitions as the economic expansion extends another year.”

Mega mergers – deals worth $5bn and above – were a notable feature of dealmaking activity in the first three quarters of the year. There were 45 mega mergers closed up to the end of Q3 and more notable mega mergers, including the $69bn merger between CVS Health and Aetna and the $50.6bn Comcast/Sky UK deal yet to close.

The private equity industry has also become increasingly influential of late. PE firms accounted for 33.3 percent of all M&A activity through the first three quarter of the year with many firms interested in sourcing deals through divestments.

The report also highlights developments in the oil & gas space where the record levels of activity recorded in 2017 fell away in the first three quarters of 2018. Oil & gas companies pursued 350 M&A deals valued at a combined $125.6bn to the end of Q3 2018, a decline of 23.6 percent and 49.1 percent respectively, from the first three quarters of 2017. There were still some notable deal closures during the period, however, with Concho Resource’s $9.5bn purchase of RSP Permain the most noteworthy in the space.

Report: 3Q M&A Report

Marketing and media M&A “resilient” in Q3 2018 despite Brexit uncertainty, says new report

BY Fraser Tennant

Despite the ongoing uncertainty induced by Brexit, mergers and acquisitions (M&A) activity in the marketing and media sectors has been “resilient” in Q3 2018, according to a report published this week by Kingston Smith.

In its ‘Mergers and acquisitions in the marketing and media sectors – Q3 2018’, the firm notes that 70 deals took place in the quarter, up from 60 in Q2 and keeping pace with the 73 recorded in Q1 2018.

Among the high-profile transactions were WPP acquiring Hirshorn-Zukerman Design Group,  Emark, Gorilla Group and 2Sale International, the acquisition of Digital Mind, Whitespace and Amicus Digital by Dentsu, and the deals by Next 15 to acquire Technical Associates Group and Viga.

“Q3 is testament to the enduring hunger of acquirers, with the deal announcements possibly lagging behind the appetite,” states the report. “Many mid-market buyers lack sufficient bandwidth to assess all the opportunities available to them and this is holding back deal completions. The quarterly uptick is welcome but the jury is out as to whether activity will continue at this level, as liquidity tends to dry up quickly once shocks impact on the system – meaning businesses may be rushing deals through before any material change in the external backdrop.”

Furthermore, digital businesses remain the most sought-after in the marketing services sector, accounting for nearly half of deals in this area (57 percent). In addition, media-tech continues to gain pace, accounting for almost a quarter of all deals (23 percent) in Q3 2018. Acquisitions in the media-tech space have been undertaken by WPP, Google and Deloitte, among others. 

Further key findings in the report include private equity (PE) portfolios proving a fertile hunting ground for mid-market buyers, and a number of marketing and media businesses thriving under PE stewardship and reaching sufficient scale to attract trade buyers. Among the key PE deals in Q3 2018 were Fishawack’s acquisition of Healthcircle and Williams Lea Tag acquiring Taylor James.

Also highlighted by the Kingston Smith report is the increasingly international nature of many of the transactions being seen.

The report concludes: “A strong quarter is encouraging and puts 2018 in line with the activity levels recorded in 2017 and 2016. What remains certain is that hungry acquirers will continue to hunt for deals.”

Report: Mergers and acquisitions in the marketing and media sectors – Q3 2018

Gastar Exploration files for Chapter 11 bankruptcy

BY Fraser Tennant

Struggling financially due to the slump in oil prices seen in the past few years, energy company Gastar Exploration has taken stock and entered into a restructuring support agreement (RSA) to be implemented via a pre-packaged Chapter 11 bankruptcy plan of reorganisation.

Houston-based Gastar has filed for bankruptcy with the support of its largest creditor and shareholder, private equity firm Ares Management LLC. While the RSA and Chapter 11 filing will clear more than $300m of Gastar’s debt, as well as provide $100m in new financing to fund the restructuring process and ongoing business operations, controlling ownership will cede to Ares.

Trading of Gastar’s common stock was suspended by the New York Stock Exchange in September due to the company’s low trading price.

“The restructuring agreement is a comprehensive plan that will ensure Gastar remains competitive in its industry,” said Jerry R. Schuyler, interim chief executive and board chairman of Gastar. “We can now set our sights on facilitating a smooth, efficient in-court restructuring while continuing to meet our obligations to our employee and vendor constituencies. I am proud of the exceptional hard work and dedication of all our employees throughout this process."

The agreed restructuring was developed following numerous attempts to find strategic alternatives – including selling the company – that would have allowed Gastar to avoid a bankruptcy filing.

Serving as Gastar’s legal counsel is Kirkland & Ellis LLP, with Opportune LLP serving as restructuring adviser. Perella Weinberg Partners LP is serving as financial adviser.

Subject to approval of the plan of reorganisation by the Bankruptcy Court for the Southern District of Texas and the satisfaction of certain conditions, Gastar expects to emerge from Chapter 11 before the end of 2018. 

News: New restructuring deal for Gastar will support prepackaged bankruptcy

Canadian VC funding declines for second straight quarter after record Q1, reveals new report

BY Fraser Tennant

Following a record Q1, Canadian venture capital (VC) funding declined in Q3 2018 for a second straight quarter, reveals a new report by PwC Canada and CB Insights.

According to the ‘MoneyTree Canada Report Q3 2018’, Canadian venture-backed companies closed 87 deals, down from 127 in Q2. At the same time, total VC funding totalled $541m in Q3 2018, a 42 percent decline in investment from the previous quarter.

However, despite the overall fall, there has been an increase in VC funding for Canadian digital health and FinTech companies in the third quarter of 2018.

“The first half of 2018 saw a new high in venture capital investment in Canada, and yet we have seen a marked decrease in deal activity in the third quarter,” said Michael Dingle, national deals technology leader at PwC Canada. “While a decrease does not come as a surprise, we will be sure to keep a close eye on investment trends for the following quarters as the tech sector in particular seeks to maintain funding levels.”

The report also notes that: (i) early-stage rounds increased to 30 percent of all Canadian deals, while seed stage deals declined to 25 percent of all deals; (ii) corporate investment in Canadian startups has been rising steadily in recent quarters, and increased to 39 percent of all deals in Q3 2018; (iii) corporate participation in deal activity increased for the third consecutive quarter; (iv) Toronto and Vancouver continued to drive the highest number of deals; and (v) investment in Canadian digital health companies jumped 170 percent to $83m, the third-straight quarterly increase.

While Vancouver and Toronto remained the top markets in deal activity, funding and deal activity for these cities decreased slightly in Q3 2018 to $104m across 21 deals and $248m across 30 deals, respectively. Montréal also saw a slight decline, falling to $95m over 16 deals during Q3 2018, compared to $105m over 17 deals in Q2 2018. In addition, Québec City experienced a significant decline in funding – from $147m to $14m – returning to its historical range, following a massive second quarter.

"While overall funding and deal activity among Canadian startups fell this quarter, there were bright spots like digital health and FinTech," said Anand Sanwal, co-founder and chief executive of CB Insights. "The digital health sector saw a 168 percent spike in funding -- the third-straight quarterly increase in this industry and well above the funding range in recent years."

Report: MoneyTree Canada Report Q3 2018

Sykes acquires Symphony to boost RPA and IA credentials

BY Fraser Tennant

In a bid to capitalise on the growing demand for robotic process automation (RPA), US multinational corporation Sykes Enterprises is to acquire Symphony Ventures, a global services firm focused on RPA and intelligent automation (IA).

Under the terms of the definitive agreement, Sykes will pay a cash purchase price for 100 percent ownership of Symphony, which is expected to be funded through a combination of cash on hand and Sykes’ credit facility.

Sykes expects the acquisition to position it as clear leader to support RPA and IA initiatives globally across all facets of its business operations, while enabling it to tap into an adjacent market estimated to be worth $8.1bn.

“The acquisition of Symphony is another significant step in building our company’s capabilities to succeed as the digital revolution continues to transform our clients’ businesses, their customer service needs, and by extension, the customer support industry,” said Chuck Sykes, president and chief executive of Sykes. “Combining the power of RPA with human ingenuity enables us to help our clients modernise, optimise and integrate key components of their digital operations to significantly improve their business, as well as improve their customers’ lifecycle journey experience.”

Headquartered in London, Symphony offers RPA consulting, implementation, hosting and managed services. The company is approximately 200 people strong and has one of the largest independent global teams of marquee brands, serving financial services, healthcare, business services, manufacturing, consumer products, communications, and media and entertainment industries.

“Symphony has rapidly grown over the past four years to become the digital operations partner of choice for numerous enterprise clients looking to implement RPA and IA solutions,” said David Poole, chief executive of Symphony Ventures. “This growth has been due to the efforts of our highly trained and experienced team that take a process first approach to digital transformation to ensure we deliver top notch quality each and every time. Both Sykes and Symphony are innovative pioneers dedicated to improving customer and client experience.”

The transaction is subject to customary closing conditions and is expected to close on or about 1 November 2018.

Mr Sykes concluded: “The world of intelligent automation systems is approaching a tipping point, and we are excited to be able to participate in this new technological advancement in a meaningful way.”

News: Another UK Startup Snapped Up: Symphony Ventures Sold for £52 Million