VENUE ® Market Spotlight 2015 DEAL-MAKING OUTLOOK December 2014 Edition
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VENUE® Market Spotlight
2015 DEAL-MAKING OUTLOOK December 2014 Edition
VENUE® Market Spotlight: 2015 Deal-Making Outlook
CONTENTSWelcome 3
Foreword 4
Survey 5
2014 Notable Deals in the Room 8
About RR Donnelley 10
3
WELCOMEDear Valued Reader,
Welcome to the December 2014 edition of the Venue Market Spotlight. 2014 has been a great year for deal-making, as year-to-date US M&A activity has reached its highest point since 2007 at US$1.5tn. It is not surprising that following this resurgence, industry experts are generally optimistic that this upward trajectory will continue. With this in mind, this month we are turning our attention to 2015 and the expectations for M&A activity in the new year.
Respondents of this month’s Spotlight predict an increase in activity that spans across transaction types – global and regional M&A, private equity deals and initial public offerings. This apparent optimism in the current deal environment is being spurred by the recovering economy and companies across the globe are taking full advantage to search for inorganic growth through acquisitions. There is also belief that this recovery will serve to boost the IPO market as investors gain confidence and company valuations increase. At RR Donnelley, we know firsthand that deal-making is fast paced and extremely time consuming. When deal mode hits, we provide the tools to service our clients throughout each phase of a deal. As the only provider of 24/7, wholly-owned and localized support, our Venue® team continues to serve industry leading companies, completing high level deals that are changing the world.
As we welcome the New Year, we would like to thank you for your continued support of RR Donnelley and the Venue Market Spotlight throughout the years.
From all of us at RR Donnelley, please have a safe and happy holiday season!
Sincerely,
Tom JuhasePresident, Financial Services GroupRR Donnelley
VENUE® Market Spotlight: 2015 Deal-Making Outlook
FOREWORDOptimism characterizes respondents’ outlook on M&A activity in 2015. Most of the investment bankers interviewed for this month’s Spotlight overwhelmingly feel that deal-making, ranging from M&A to IPOs, will experience an increase in the upcoming year. Respondents unanimously expect a rise in private equity exit deal volume. There is a threefold reason for this anticipated trend: strategic buyers are actively looking to deploy their cash piles, the IPO market remains strong, and financial sponsors are still eagerly snapping up targets.
Respondents also express the improving economy as a factor that will boost deal activity in the next year. They expect companies to be more willing to take action given the current auspicious conditions for M&A, they can execute successful transactions.
If 2014 can serve as a basis for accurate projections, there seems to be little doubt that the telecommunications, media, and technology (TMT) sector will lead the pack in 2015. TMT, after all, lays claim to the biggest deal in 2014 (Comcast acquiring Time Warner for US$68.5bn) and respondents expect TMT’s winning streak to continue into the New Year, citing the industry’s never-ending appetite for innovation.
All eyes are on North America as the region to have the greatest number of M&A transactions. As one US-based investment banker we spoke with says, “I expect North America to lead the global M&A market in 2015 driven by US transactions. Companies will continue to seize the opportunities presented by the growing economy. There will also be significant cross-border activity as I expect North American outbound and inbound M&A will greatly increase in next 12 months.”
As all these factors coalesce, M&A activity is bound to remain strong in 2015, perhaps matching the revival seen in 2014.
Respondents are optimistic that deal-making activity will rise in 2015, particularly in private equity exits.
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Compared to 2014, what do you expect to happen to the volume of each of the following over the next 12 months:
This month’s survey respondents were generally optimistic about the increase of all types of deal-making activities in the next year, including both global and regional M&A. According to one US-based investment banker, “M&A activity will increase as the economy improves further. I expect increased participation by corporate, private equity and fund investors. Corporate investors are looking for new opportunities to beat the competition and will be betting on M&A.” Respondents are all on the same page regarding their outlook for private-equity exits, unequivocally agreeing that the market will see an increase in these deals in 2015. The current market environment is conducive to this rise because both buyers and sellers will benefit from these deals. “Buyers — who currently have easy access to financing that will enable them to grow inorganically through M&A, and are actively looking for new targets, will be driving M&A activity. Sellers are also motivated given the high valuations,” says another US-based managing director in an investment banking firm.
How much impact will the continued rise in dividend recapitalizations have on exit activity over the next 12 months?
The improved economy is a consistent top driver of M&A, boosting M&A activity for 2014 and into 2015, according to respondents. Companies seeking growth is also a common denominator between the two years. “Economic recovery has given companies the required confidence to spend and look for growth through M&A,” says a US-based investment banker. The economic lift has encouraged heads of companies across different industries to embark on transformational and large-cap acquisitions. Respondents also indicated that in 2014 companies accumulated cash throughout the financial crisis, giving them sufficient resources to more readily execute deals.
Percentage of respondents
Percentage of respondents
*Respondents were allowed to select top two choices
SURVEY
0 20 40 60 80 100
IPOs
PE Exits
PE Buyouts
Regional M&A
Global M&A 87% 13%
71% 29%
93% 7%
79% 21%
100%
0 5 10 15 20 25 30 35
CEO confidence
Firms shoring up core competencies
Availability of targets due to increased divestitures
Easy access to financing
Pressure from shareholders
Companies seeking growth
Accumulated cash piles
Improved economy 30%30%
17%27%
13%
17%10%
6%
17%
10%
7%3%
6%7%
Increase Remain the same
2014 2015
VENUE® Market Spotlight: 2015 Deal-Making Outlook
TMT IS EXPECTED TO DOMINATE DEAL ACTIVITY NEXT YEAR
What are the biggest factors that will drive IPO activity in 2015?
The continued rise in the stock market will drive IPO activity in the next year, according to a majority of respondents (60%). With the steady flow of investors to the stock market and low volatility, “IPOs are currently attracting a significant amount of attention among investors,” says a US-based managing director. To prove this point, there have been many successful IPOs in 2014, including one from action photography camera company GoPro, whose stock price has risen since the company’s stock hit the market in June. Just like GoPro, “…a few of the recent IPOs have been very successful in raising capital while managing to perform post-listing, which will greatly drive M&A activity in 2015,” says a US-based investment banker. The recovery of the global economy as well as favorable economic indicators will also help the IPO market. “As the economy continues to recover and investors gain confidence in the future liquidity of the stock market, these conditions will only further spur strong IPO activity,” says a US-based managing director.
SURVEY (CONTINUED)
In which sectors do you expect to see the most M&A in 2015?
The TMT sector should continue its 2014 dominance into 2015, as respondents expect the sector to garner the most M&A activity in the new year. This year saw a few high-profile large-cap TMT transactions including the largest deal of 2014 — Comcast Corporation’s US$68bn acquisition of Time Warner Cable. Respondents think these TMT trends from 2014 might be repeated in 2015 given the continuous need for innovation in the industry. To cope with shifting demands, TMT companies are likely going to resort to M&A as a way to grow. Respondents also named the financial services and energy sectors as industries that will also see significant M&A activity in the upcoming year.
Percentage of respondentsPercentage of respondents
0 10 20 30 40 50 60 70
Industrials & Chemicals
Life Sciences & Healthcare
Consumer
Energy
Financial services
TMT 60%
33%
40%
27%
13%
27%
0 10 20 30 40 50 60 70
Positive performance of firms post IPO
Private equity and venture capital exiting
their investments
Company growth insectors ready to go public
Recovery of global economy and favorable
economic indicators
Continued rise in the stock market 60%
40%
47%
20%
33%
7
In which region do you expect to see the most M&A activity in 2015?
Close to half of respondents expect North America to witness the most M&A in 2015. Many attribute this expectation to the recovering market in the region that will allow companies to seek M&A opportunities as a way to pursue growth. “The North American economy has recovered steadily and growth is expected to be positive,” says a managing director for a global investment bank. Almost a third of respondents (33%) believe that Europe will see the most M&A deals in the upcoming year as the region recovers from the economic crisis and companies start to take stock of their growth opportunities that include M&A. “The recovering economy, continuing low interest rates and increasing pressure on corporations to grow will generate significant M&A activity in North America,” says a Europe-based managing director. A fifth of respondents (20%) name Asia-Pacific as the region that will see the most activity, although the lower percentage is likely because of the region’s current slower growth rates.
North America
Europe
Asia-Pacific
20%
47%
33%
What will be the greatest drivers of private equity exits over the next 12 months?
Respondents say that the greatest challenges in 2014 that will likely continue in 2015 are post-merger integration issues. Even after a successful merger, the real work begins when the newly-joined companies have to reconcile their operational and cultural differences. “Organizational and cultural differences are very hard to integrate and getting the groups to work together is probably the biggest challenge when conducting M&A. We have to accept that these difficulties will always exist,” says a UK-based managing director. Respondents also cite rising competition for quality targets as a big challenge for 2015, and regulatory compliance as the other big hurdle for companies that have M&A plans in both years.
0 5 10 15 20 25 30 35 40
Other: Shareholder Approval
Performing sufficient due diligence
Accessing finance
Rising competition for quality targets
Anti-trust risks
Value gap between seller and buyer
High valuations
Regulatory compliance
Post-merger integration issues 37%33%
10%10%10%
7%
17%17%
3%
13%3%3%
20%7%
7%3%
Percentage of respondents
*Respondents were allowed to select top two choices
2014 2015
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GIC Private Limited and Global Logistic Properties Limited acquires IndCor
December 1, 2014
Financial Advisor for Seller: Barclays; Citi; RBC Capital Markets Inc.; Wells Fargo Securities, LLC Counsel for Sller: Simpson Thacher & Bartlett LLP Counsel for Buyer: Skadden Arps Slate Meagher & Flom LLP; Morrison & Foerster LLPIndustry: Real Estate
SunEdison Inc. and TerraForm Power, Inc. acquires
First Wind Holdings, Inc.November 17, 2014
Financial Advisor for Target: Goldman Sachs; Marathon Capital LLC
Counsel for Target: Davis Polk & Wardwell LLP
Financial Advisor for Buyer: Barclays; Morgan Stanley
Counsel for Buyer: Orrick Herrington & Sutcliffe LLP; White & Case LLP
Financial Advisor for Buyer: Bank of America Merrill Lynch; Citi; Lazard
Counsel for Buyer: Cleary Gottlieb Steen & Hamilton LLP
Industry: Energy; Alternative energy
STERIS acquires Synergy Health
October 13, 2014
Financial Advisor for Target: InvestecCounsel for Target: DLA PiperFinancial Advisor for Buyer: Lazard Counsel for Buyer: Davis Polk & Wardwell LLP; Jones Day; Sullivan & Cromwell LLP; Wachtell, Lipton, Rosen & Katz Debt Provider (Other): Bank of America Merrill Lynch; JP Morgan; KeyBanc Capital Markets Inc. Industry: Medical; Services (other); Busi-ness support services; Medical equipment & services
Vista Equity Partners acquires Tibco SoftwareSeptember 29, 2014
Target: TIBCO Software Inc.Financial Advisor for Target: Goldman Sachs Counsel for Target: Wilson Sonsini Goodrich & Rosati P.C. Financial Advisor for Buyer: Bank of America Merrill Lynch; Deutsche Bank AG; Jefferies LLC; JP Morgan; Union Square Advisors LLC Counsel for Buyer: Kirkland & Ellis LLP Private Equity Firm for Buyer: Vista Equity Partners Debt Provider for Buyer: Jefferies LLC; JP MorganIndustry: Computer software; Application software products; Software development and Systems integration
Rakuten, Inc., acquires Ebates Inc.
September 9, 2014
Target: EbatesFinancial Advisor for Target: Qatalyst GroupFinancial Advisor for Buyer: Morgan StanleyCounsel for Buyer: Fenwick & West LLP; Goodwin Procter LLPPrivate Equity Firm for Seller: August Capital; Canaan Partners; Foundation CapitalIndustry: Financial Services; Internet / e-commerce; Leisure; Media; Services (other)
Amazon acquires TwitchAugust 25, 2014
Target: Twitch
Financial Advisor for Target: Qatalyst Group
Counsel for Target: Latham & Watkins LLP
Financial Advisor for Buyer: Allen & Company LLC
Counsel for Buyer: Debevoise & Plimpton LLP
Private Equity Firm for Seller(s): Draper Fisher Jurvetson; Bessemer Venture Partners; Alsop Louie Partners; Y Combinator LLC; WestSummit Capital; Thrive Capital
Industry: Internet / ecommerce; Leisure; Media; Services (other); Other entertainment; Portals; TV broadcast
Roche acquires InterMuneAugust 24, 2014
Financial Advisor for Target: Centerview Partners; Goldman SachsCounsel for Target: Cravath, Swaine & Moore LLP; Sullivan & Cromwell LLP Financial Advisor for Buyer: CitiCounsel for Buyer: Davis Polk & Wardwell LLP Industry: Biotechnology; Medical: Pharmaceuticals; Biotechnology related research; Drug development; Drug manufacture; Drug supply
Zillow acquires TruliaJuly 28, 2014
Financial Advisor for Target: JP Morgan; Qatalyst GroupCounsel for Target: Davis Polk & Wardwell LLP; Goodwin Procter LLP; Wilson Sonsini Goodrich & Rosati P.C.Financial Advisor for Buyer: Goldman SachsCounsel for Buyer: Latham & Watkins LLP; Perkins Coie LLP; Shearman & Sterling LLPIndustry: Internet / ecommerce; Real Estate: Real estate; Search engines and other internet enabling technology
Exelon acquires PepcoApril 30, 2014
Target: Pepco HoldingFinancial Advisor for Target: Lazard; Morgan Stanley Counsel for Target: Covington & Burling LLP; Davis Polk & Wardwell LLP; Sullivan & Cromwell LLP Financial Advisor for Buyer: Barclays; Goldman Sachs; Loop Capital MarketsCounsel for Buyer: Baker Botts LLP; Fried Frank Harris Shriver & Jacobson LLP; Kirkland & Ellis LLP; Weil Gotshal & Manges LLP Industry: Energy; Utilities (other); Electrical power; Transmission; Integrated utilities
888.773.8379www.rrdonnelley.comwww.venue.rrd.comCopyright © 2014 R. R. Donnelley & Sons Company. All rights reserved.
Corporate Headquarters 111 South Wacker Drive Chicago, IL 60606-4301U.S.A.
Warburg Pincus acquires Electronic Funds Source
April 16, 2014
Target: Electronic Funds Source LLCFinancial Advisor for Target: Goldman Sachs; SunTrust Robinson; Humphrey Capital Markets; Wells Fargo Securities, LLC Counsel for Target: Harwell Howard Hyne Gabbert & Manner PC; White & Case LLP Financial Advisor for Buyer(s): Credit Suisse; Deutsche Bank AG Counsel for Buyer(s): Cleary Gottlieb Steen & Hamilton LLP Private Equity for Buyer(s): Warburg Pincus LLC Advisor for Seller(s): FJ Capital Management LLC; CTP Holdings LLC; First Data Transportation Services Inc.Industry: Services (other); Transportation; Business support services; Other services
Mallinckrodt Plc acquires Questcor Pharmaceuticals, Inc.
April 7, 2014
Target: Questcor PharmaceuticalsFinancial Advisor for Target: BofA Merrill Lynch; Centerview PartnersCounsel for Target: Latham & Watkins LLP; Matheson Simpson Thacher & Bartlett LLPFinancial Advisor for Buyer(s): BarclaysCounsel for Buyer(s): Arthur Cox; Wachtell Lipton Rosen & KatzIndustry: Medical: Pharmaceuticals; Drug development; Drug supply
Sterigenics, GTCR acquires Nordion
March 28, 2014
Financial Advisor for Seller: Jefferies LLC Counsel for Seller: Davies Ward Phillips & Vineberg LLP; Skadden Arps Slate Meagher & Flom LLP; Stikeman Elliott LLP; White & Case LLPFinancial Advisor for Buyer: Goldman Sachs & Co.Counsel for Buyer: -son LLP; Kirkland & Ellis LLPIndustry: Biotechnology; Medical; Medi-cal: Pharmaceuticals
Oracle acquires BlueKaiFebruary 24, 2014
Target: Blue Kai Inc.Financial Advisor for Target: Morgan Stanley Counsel for Target: Fenwick & West LLP Private Equity Seller(s): Redpoint Ven-tures; Battery Ventures; GGV Capital; Split Rock Partners LLC Industry: Computer software; Internet /ecommerce; Services (other)
IBM acquires CloudantFebruary 24, 2014
Target: Cloudant Inc.Financial Advisor for Target: Union Square Advisors LLC Counsel for Target: Perkins Coie LLP Private Equity Seller(s): Avalon Ventures Inc.; Devonshire Investors; In-Q-Tel Inc.; Samsung Venture Investment Corporation; Toba Capital; Y Combinator LLC Counsel for Buyer: Cravath Swaine & Moore LLP Industry: Computer services; Data processing
Starr Investment acquires MultiPlan
February 17, 2014
Target: MultiPlan Inc.
Financial Advisor for Target: BofA Merrill Lynch; Credit Suisse; Dean Bradley Osborne; Goldman Sachs; LionTree Advisors LLC; Raine Group LLC; RBC Capital Markets Inc.
Counsel for Target: Simpson Thacher & Bartlett LLP
Private Equity Sellers: BC Partners Limited; Silver Lake Partners
Private Equity Buyer: Partners Group Holding
Financial Advisor for Buyer(s): Barclays; JP Morgan; LionTree Advisors LLC
Counsel for Buyer: Kirkland & Ellis LLP
Industry: Medical; Services (other)
KKR acquires National VisionFebruary 7, 2014
Target: National VisionCounsel for Seller: Weil Gotshal & Manges LLP Financial Advisor for Seller: Barclays; Wells Fargo Securities LLC Counsel for Buyer: Simpson Thacher & Bartlett LLP Private Equity Buyer: Kohlberg Kravis Roberts & Co. L.P. Private Equity Seller: Berkshire Partners LLCIndustry: Consumer: Retail; Chemists/health; Other retailing of consumer prod-ucts and services
Groupon acquires ideeliJanuary 13, 2014
Target: ideeliCounsel for Seller: Wachtell Lipton Rosen & Katz Counsel for Buyer: DLA Piper Private Equity Seller(s): Betaworks Studio, LLC; Credit Suisse; Highbridge Principal Strategies Growth Equity; Kodiak Venture Partners; Next World Capital; StarVest Partners, L.P.; The Cue Ball Group Industry: Consumer: Retail; Internet / e-commerce; Apparel; e-retailing; Other re-tailing of consumer products and services
Microsoft acquires Parature
January 6, 2014
Target: ParaturePrivate Equity Seller(s): Accel Partners; Sierra Ventures; Valhalla Partners Industry: Computer services; Computer software; Software development; Systems integration
Deals. Done. Simple.
VENUE® Market Spotlight: 2015 Deal-Making Outlook
VENUE® Market Spotlight: 2015 Deal-Making Outlook
ABOUT RR DONNELLEY
About Venue®
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RR DONNELLEY AT A GLANCE
$10.2 billion 2012 net sales
55,000+ Employees500+ Global locations
Nearly 125 Manufacturing locations
750+ Issued and pending patents
Nearly $1.2 billion
Capital investments over the past five years
RR Donnelley is a global provider of integrated communications. The company works collaboratively with more than 60,000 customers worldwide to develop custom communications solutions that help to drive top-line growth, reduce costs, enhance ROI and ensure compliance. Drawing on a range of proprietary and commercially available digital and conventional technologies deployed across four continents, the company employs a suite of leading Internet based capabilities and other resources to provide premedia, printing, logistics and business process outsourcing services to clients in virtually every private and public sector.
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VENUE® Market Spotlight: 2015 Deal-Making Outlook
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