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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 Directorbbriggs@croft-bender.com(404) 841-0639
Edward S. Croft, IIIManaging Directorecroft@croft-bender.com(404) 841-0055
R. Neale FisherManaging Directornfisher@croft-bender.com(404) 574-2906
Ronald B. GoldmanManaging Directorrgoldman@croft-bender.com(404) 841-0735
Steve B. TyeManaging Directorstye@croft-bender.com(404) 841-9351
Erik M. ZalenskiManaging Directorezalenski@croft-bender.com(404) 841-9826
Kyle C. SchicknerDirectorkschickner@croft-bender.com(404) 574-2897
Matthew A. VealDirectormveal@croft-bender.com(404) 841-0056
Christian GivenDirector of Business Developmentcgiven@croft-bender.com(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.
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
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
ASP is the leading swimming pool cleaning franchisor in the U.S.
has been acquired by
a portfolio company of
Secretariat is a leading provider of dispute resolution advisory services to
public and private sector clients across the world.
has been recapitalized by
Mudlick Mail provides data-driven, direct mail and related marketing
solutions to small and medium-sized businesses.
has been recapitalized by
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
NOVA is a leading provider of engineering, consulting, testing, and inspection services to the design and
construction industry.
has been acquired by
Merit is the leading distributor of paint sundries and flooring products and
installation supplies.
has been acquired by
a portfolio company of
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.
has been acquired by
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.
has been recapitalized by
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
$1,400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'16 '17 '18 '19 '20
96
98
100
102
104
106
108
110
112
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'16 '17 '18 '19 '20
Unemployment RateConsumer Confidence(2)
Real GDP Growth Industrial Production(1)
Retail Sales
($ 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
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'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%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'16 '17 '18 '19 '20
(10.0%)
(8.0%)
(6.0%)
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'16 '17 '18 '19 '20
$10
$11
$12
$13
$14
$15
$16
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
'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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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*
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 & 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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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
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