-
DISCLOSURE: Raptor Partners LLC is a registered broker-dealer
with the U.S. Securities Exchange Commission and a member of the
Financial Industry Regulatory Authority. This document is not a
“research report”, as such term is defined by applicable laws and
regulations. The information in this report has been obtained from
third-party sources deemed to be reliable, but is not represented
to be complete. This document has been prepared for general
information purposes only and does not represent a complete
analysis of any specific security, industry or issuer. This
information contained in this document does not represent an offer
or a solicitation of an offer to buy or sell securities of any form
or to participate in any particular trading strategy. This document
does not consider the investment objectives or financial situation
of any individual or entity. Raptor Partners has provided, may
continue to provide, or may seek to provide investment banking
services for companies included in this document.
Fall 2010
RAPTOR PARTNERS M&A MARKET MONITOR
M&A ACTIVITY CONTINUES DESPITE UNCERTAINTY
RAPTOR PARTNERS ADVISORY SERVICES: MERGERS &
ACQUISITIONS
CORPORATE SALES & DIVESTITURES CROSS-BORDER TRANSACTIONS
FAIRNESS OPINIONS STRATEGIC ALTERNATIVES
CORPORATE FINANCE CAPITAL STRUCTURE
RESTRUCTURING PRIVATE CAPITAL RAISING
TAKEOVER DEFENSE VALUATIONS
-
1
Raptor Partners M&A Market Monitor
Fall 2010
Source: Standard & Poor’s CapitalIQ
Global M&A Market Strong Despite Uncertainty Uncertainty
over global economic activity has led to increased volatility in
the financial markets recently. U.S. unemployment has remained
stubbornly around 10%. U.S. GDP growth has slowed due to weaker
global growth, reduced government stimulus, and uncertainty over
domestic economic and fiscal policy. According to revised figures
released by the Commerce Department on August 27th, the U.S.
economy grew at a 1.6% rate in the second quarter, which was below
previous estimates. U.S. government securities recorded their fifth
straight monthly increase which is the longest winning streak since
the period ended March 2008, when the credit crisis sent the
economy into recession. The “flight to safety” has resulted from
uncertainty among investors as to whether the U.S. economy is
headed for a double-dip recession or is only experiencing a slow
recovery. Despite the global economic uncertainty, global M&A
activity has continued to increase. In particular, a flurry of
high-profile M&A activity in the latter half of August has
given a window into the confidence among CEO’s in their companies’
prospects in a diverse range of industries. Several strategic
transactions in the face of persisting high unemployment have
demonstrated a greater willingness among companies to grow via
acquisition versus expanding their own internal development
activities. In the last two weeks of August, Anglo-Australian miner
BHP-Billiton made a hostile takeover attempt for fertilizer
producer Potash Corp. for $39 billion in cash. The offer has been
rejected by Potash as significantly undervaluing the company.
Biopharmaceutical giant Genzyme has been locked in difficult
takeover discussions with Sanofi-Aventis. Sanofi’s $18.5 billion
takeover offer, which represents a 46% premium to Genzyme’s
pre-offer price, has been rejected. Sanofi has indicated a
willingness to increase the price. Intel announced the purchase
McAfee for $7.7 billion to diversify its business into the security
software market. Two weeks later, Intel announced a $1.8 billion
acquisition of Infineon’s Wireless Solutions business to expand its
footprint in the market for chips used in the rapidly growing
Smartphone and tablet computer business. Dell and HP are engaged in
an intense bidding ware for data center storage company 3Par.
Dell’s initial offer for 3Par was $18 per share, which was an 87%
premium to 3Par’s previous closing price of $9.65. Since that time
and the entrance of HP in the takeover auction, bidding has
increased to $33 per share, representing a 242% premium to 3Par’s
closing price prior to the original offer. In large buyout news,
Burger King has agreed to a $3.3 billion takeover by private equity
firm 3G Capital. The offer was a 46%
premium to Burger King’s trading price before rumors of a
takeover began.
M&A Deal Volume Increases Global M&A transaction volume
continued to increase in the second quarter of 2010, marking the
fifth straight quarterly rise since the four-year low reached in
the beginning of 2009. Second quarter transaction volume increased
5.2% to 8,379 over first quarter transactions of 7,962. Global
M&A deal volume increased 40.1% for the second quarter of 2010
as compared to the same period a year ago. Global deals announced
in the second quarter had an aggregate announced value of $481
billion which was relatively flat compared to the $486 billion
announced during the first quarter. Aggregate deal value remains
well below the levels reached prior to the global economic
recession in 2009.
U.S. M&A transaction volume also grew in the second quarter
of 2010 for the fifth consecutive time. Transaction volume grew
2.4% in the second quarter to 2,865 from 2,799 in the first
quarter. Aggregate announced value increased 26% in the second
quarter to $195 billion from $155 billion in the previous
quarter.
8,98510,158
9,3748,467
5,486
8,116
5,979
7,7207,9628,379
7,3057,0116,424
9,4488,969
9,9029,329
0
3,000
6,000
9,000
12,000
15,000
Q206
Q306
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Tran
sact
ions
Ann
ounc
ed
$0
$400
$800
$1,200
$1,600
$2,000
Aggr
egat
e Va
lue
($ B
illion
s)
Transactions Announced Aggregate Value
U.S. Quarterly M&A Activity
2,073
2,4492,5872,7662,551
2,9012,669
2,5262,4772,5812,542
2,8652,799
2,449
1,8882,060
1,741
0
800
1,600
2,400
3,200
4,000
Q206
Q306
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Tran
sact
ions
Ann
ounc
ed
$0
$125
$250
$375
$500
$625
Aggr
egat
e Va
lue
($ B
illion
s)
Transactions Announced Aggregate Value
Source: Standard & Poor’s CapitalIQ
Global Quarterly M&A Activity
-
Source: Standard & Poor’s CapitalIQ and Raptor Partners Cash
and equivalents include short-term investments
Source: Standard & Poor’s CapitalIQ and Raptor Partners
2
Raptor Partners M&A Market Monitor
Fall 2010
European Deal Volume Reflects Uncertainty European M&A
targets declined for the second straight quarter while global
volume increased. The second quarter witnessed concerns that
rigorous fiscal tightening in Europe and the possibility of global
contagion following the Greek debt crisis could stifle the
fledgling economic recovery. European M&A targets became more
difficult to value in the second quarter as their projected
financial results were more uncertain. With Asian emerging markets
recovering from the global economic recession much faster than the
developed markets, Asian M&A activity continues to outpace the
global market. Demand for Asian targets has been brisk as Western
countries seek an increased presence in the world’s fastest growing
economies and Asian countries, with strong local currencies, look
to consolidate at home.
Valuation Trends Median U.S. Enterprise Value/EBITDA M&A
multiples declined slightly in the second quarter. Valuation levels
have improved significantly from the recent depths reached in the
first half of 2009. Improved valuation trends have resulted from
cash-rich acquirors looking to offset slower economic growth with
acquisitions.
Companies Continue to Hoard Cash Cash and equivalents on-hand
for non-financial S&P 500 companies continued to increase to
their highest levels in the last four years. At the end of the
second quarter of 2010 non-financial S&P 500 companies held
$1.03 trillion in cash and equivalents, a 4% increase over the
first quarter. Companies are looking to utilize the strong cash
balances through selective, strategic acquisitions, increased
dividend payments and share repurchases.
Larger Transactions Continue Comeback Following a year in which
acquirors increasingly favored smaller, tuck-in acquisitions in
2009, the appetite for bigger acquisitions has been improving. In
the second quarter, transactions above $100 million represented
16.4% of the deals completed where a value was reported versus
15.1% in the first quarter.
Takeover Premiums Continue to Normalize Public company takeover
premiums remained above historical averages; however, they were
expectedly below the highs reached during 2009 when equity prices
were significantly depressed. Public targets have continued to be
leery of takeover attempts at price levels which do not reflect
their Company’s underlying growth opportunities as their business
prospects improve.
Source: Standard & Poor’s CapitalIQ and Raptor Partners
40
60
80
100
120
140
Q206
Q306
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Enterprise Value/Sales Enterprise Value/EBITDA
U.S. Target M&A Multiple Trends
Source: Standard & Poor’s CapitalIQ and Raptor Partners
-3.0%
18.4%
2.4%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
U.S. Europe Asia
Change in Deal Volume by Geography: Q2 vs. Q1
$500
$600
$700
$800
$900
$1,000
$1,100
Q206
Q306
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Non-Financial S&P 500 Companies: Cash & Equivalents
(Billi
ons)
2006 2007 2008 2009 LT MA bove $1.0 B illion 4.4% 3.8% 2.6% 2.1%
2.3%$500 M illion - $1.0 Bi llio n 3.1% 2.9% 2.3% 2.0% 2.0%$100 M
illion - $500 Million 14.2% 12.6% 12.0% 11.0% 11.6%B elow $100 M
illion 78.3% 80.7% 83.2% 84.9% 84.1%
Transactions by Deal Size
Public Company Takeover Premiums 2006 2007 2008 2009 LTM
One Day Premium 21.1% 22.4% 33.6% 34.8% 28.5%One Week Premium
23.6% 23.0% 33.8% 35.9% 30.0%Four Week Premium 26.4% 25.0% 31.3%
41.3% 34.2%
Source: Standard & Poor’s CapitalIQ
-
3
Sector Spotlight
Following volume growth across each of the five major sectors
tracked by Raptor Partners in the first quarter, the second quarter
was more of a mixed picture. The industrial and consumer sectors
recorded volume increases in the second quarter while the business
services, healthcare, and technology sectors saw declines. Each of
the sectors except healthcare saw improved valuations in the second
quarter of 2010 versus the first quarter. The healthcare sector has
remained under a cloud of uncertainty as investors attempt to
quantify the impact of government regulation and reform. The number
of mid-cap transactions above $1 billion increased in the quarter;
however, there weren’t many mega deals announced. One of the
largest U.S. transactions announced in the quarter was CenturyTel’s
$22.2 billion acquisition of Qwest Communications. The airline
industry witnessed continued consolidation through the all-stock
merger of equals between Continental Airlines and UAL Corporation
which valued Continental at $6.1 billion.
Healthcare & Life Sciences U.S. Deal Statistics
Consumer Products & Services U.S. Deal Statistics
Source: Standard & Poor’s CapitalIQ & Raptor
Partners
Raptor Partners M&A Market Monitor
Fall 2010
2006 2007 2008 2009 LTMEV/Sales 1.81x 1.85x 1.62x 1.26x
1.67xEV/EBITDA 13.4x 14.7x 13.3x 9.0x 11.8xVolume 902 989 831 723
893Value ($ Bil.) $154.9 $147.5 $76.3 $180.5 $80.0
2006 2007 2008 2009 LTMEV/Sales 0.92x 0.95x 0.93x 0.93x
1.23xEV/EBITDA 10.1x 10.2x 9.7x 9.8x 9.8xVolume 2,485 2,794 2,181
1,571 1,962Value ($ Bil.) $247.2 $259.2 $152.0 $106.6 $121.2
Business Services U.S. Deal Statistics 2006 2007 2008 2009
LTM
EV/Sales 1.14x 1.22x 0.91x 1.03x 1.25xEV/EBITDA 10.2x 11.9x 9.7x
9.6x 9.6xVolume 2,182 2,494 2,028 1,516 1,996Value ($ Bil.) $88.2
$160.8 $79.8 $77.6 $101.0
Significant Business Services Transactions: EV/Date Target
Acquiror EV Sales EBITDA6/22/2010 Inspectorate Holdings Plc Bureau
Veritas SA $0.7 B 1.8x NA5/6/2010 Stanley, Inc. CGI Federal Inc.
$1.1 B 1.2x 11.6x5/3/2010 Interactive Data Corporation Private
Equity Consortium $2.9 B 3.8x 10.6x5/2/2010 Continental Airlines,
Inc. UAL Corporation $6.1 B 0.5x 12.4x4/26/2010 Protection One Inc.
GTCR Golder Rauner, LLC $0.8 B 2.2x 9.2x4/25/2010 Dollar Thrifty
Automotive Group Hertz Global Holdings, Inc. $2.3 B 1.5x
10.9x4/11/2010 DynCorp International Inc. Cerberus Capital
Management $1.6 B 0.4x 5.6x
Significant Consumer Products & Services Transactions:
EV/Date Target Acquiror EV Sales EBITDA6/20/2010 American Italian
Pasta Co. Ralcorp Holdings Inc. $1.2 B 2.1x 8.2x6/14/2010 Keystone
Foods, LLC Marfrig Alimentos SA $1.3 B 0.2x NA6/7/2010 Fresh Start
Bakeries, Inc. ARYZTA AG $0.9 B NA NA5/31/2010 Mediacom
Communications Corp. Rocco B. Commisso $3.7 B 2.5x 6.9x5/20/2010
Michael Foods Inc. GS Capital Partners $2.6 B 1.7x 11.8x5/3/2010
Dave & Buster's Holdings, Inc. Oak Hill Capital Partners $0.6 B
1.1x NA4/18/2010 CKE Restaurants, Inc. Apollo Management VII L.P.
$1.0 B 0.7x 6.6x
Significant Healthcare & Life Sciences Transactions: EV/Date
Target Acquiror EV Sales EBITDA6/30/2010 Abraxis BioScience, Inc.
Celgene Corporation $3.5 B 8.7x NA6/20/2010 Valeant Pharmaceuticals
Int'l Biovail Corporation $4.7 B 5.3x 12.1x6/6/2010 Talecris
Biotherapeutics Holdings Grifols, S.A. $4.0 B 2.6x 13.1x6/1/2010
ev3, Inc. Covidien $2.6 B 5.5x 31.2x5/16/2010 Psychiatric
Solutions, Inc. Universal Health Services Inc. $3.1 B 1.7x
9.8x5/4/2010 SenoRx, Inc. CR Bard Inc. $0.2 B 3.4x 46.3x4/28/2010
ATS Medical Inc. Medtronic, Inc. $0.3 B 4.6x NM
1.1x 1.2x 0.9x 1.0x 1.3x
10.2x
11.9x
9.7x 9.6x 9.6x
0x
3x
6x
9x
12x
15x
2006 2007 2008 2009 LTM0
500
1,000
1,500
2,000
2,500
EV/Sales EV/EBITDA Volume
1.2x0.9x0.9x1.0x0.9x
9.8x9.8x9.7x10.2x10.1x
0x
3x
6x
9x
12x
15x
2006 2007 2008 2009 LTM0
600
1,200
1,800
2,400
3,000
EV/Sales EV/EBITDA Volume
1.8x 1.9x 1.6x 1.3x 1.7x
13.4x14.7x
13.3x
9.0x
11.8x
0x
3x
6x
9x
12x
15x
2006 2007 2008 2009 LTM0
200
400
600
800
1,000
EV/Sales EV/EBITDA Volume= Multiples Above LTM Median
-
4
Raptor Partners M&A Market Monitor
Fall 2010
Industrial & Material U.S. Deal Statistics 2006 2007 2008
2009 LTM
EV/Sales 0.91x 0.95x 0.87x 0.77x 0.69xEV/EBITDA 8.5x 9.9x 8.5x
6.9x 9.1xVolume 1,531 1,758 1,506 1,021 1,206Value ($ Bil.) $154.4
$202.6 $81.4 $45.0 $57.2Significant Industrial & Material
Transactions: EV/Date Target Acquiror EV Sales EBITDA6/30/2010
Argon ST, Inc. Boeing Co. $0.8 B 2.3x 18.1x6/22/2010 Cognis GmbH
BASF SE $2.9 B 0.9x 6.1x6/19/2010 National Starch and Chemical Co
Corn Products International Inc. $1.4 B 1.2x 14.5x6/8/2010 Chloride
Group plc Emerson Electric Co. $1.5 B 3.1x 21.4x5/26/2010
Mallinckrodt Baker, Inc New Mountain Capital, LLC $0.3 B 0.7x
NA5/19/2010 Sperian Protection Honeywell International Inc. $1.4 B
1.7x 13.1x4/21/2010 Hillman Companies Inc. Oak Hill Capital
Partners $0.8 B 1.8x 9.6x
2006 2007 2008 2009 LTMEV/Sales 1.57x 1.62x 1.37x 1.50x
1.62xEV/EBITDA 11.4x 12.9x 10.9x 9.2x 9.7xVolume 2,053 2,225 1,832
1,320 1,708Value ($ Bil.) $241.8 $209.6 $112.1 $75.9 $115.6
Technology & Software U.S. Deal Statistics
Significant Technology & Software Transactions: EV/Date
Target Acquiror EV Sales EBITDA6/9/2010 Eclipsys Corporation
Allscripts-Misys Healthcare $1.2 B 2.3x 21.6x5/12/2010 Sybase, Inc.
SAP America, Inc. $5.4 B 4.5x 14.6x5/5/2010 Ventyx, Inc. ABB Ltd.
$1.0 B 4.0x NA4/28/2010 Palm, Inc. Hewlett-Packard Company $1.2 B
1.1x NM4/21/2010 Qwest Communications Int'l CenturyTel, Inc. $22.2B
1.8x 5.6x4/20/2010 CyberSource Corporation Visa, Inc. $1.8 B 6.5x
32.4x4/15/2010 Phase Forward Inc. Oracle Corp. $0.6 B 2.7x
20.0x
Source: Standard & Poor’s CapitalIQ & Raptor
Partners
198
313
272285313
262
357336304
146
218189
269237 247
283273
0
100
200
300
400
500
Q206
Q306
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Tran
sact
ions
Ann
ounc
ed
$0
$60
$120
$180
$240
$300
Agg
rega
te V
alue
($ B
illio
ns)
Transactions Announced Aggregate Value
U.S. Private Equity Activity
Source: Standard & Poor’s CapitalIQ
Private Equity (“PE”) Activity
U.S. PE acquisition volume increased slightly in the second
quarter of 2010, up 4.2% over the first quarter. The value of PE
acquisitions announced during the quarter, however, increased
significantly to $24.5 billion, up 163% over the first quarter.
Several $1-billion-plus PE deals occurred in the quarter, including
the acquisition of Interactive Data Corp. by Warburg Pincus and
Silver Lake Partners for $2.9 billion and the acquisition of
Michael Foods by Goldman Sachs Capital Partners for $2.7 billion.
Year-to-date middle-market LBO leverage multi-ples were 4.2x
EBITDA, which remained above the lows reached in 2009. Subordinated
debt and equity continue to represent an increasing portion of the
LBO capital structure as transaction multiples have improved and
senior lenders have remained disciplined on middle-market
transactions.
Middle-Market LBO Leverage Multiples
Source: Standard & Poor’s Leveraged Commentary & Data
EBITDA < $50 million
0.7x
0.4x 0.5x
0.4x
0.8x
0.8x
1.3x
5.2x
3.7x
2.5x 2.9x
4.2x4.3x3.5x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
2004 2005 2006 2007 2008 2009 YTD 2010Senior-Debt/EBITDA
Sub-Debt/EBITDA
4.2x4.7x 4.7x
5.6x
4.5x
3.3x
4.2x
0.7x0.8x0.9x0.9x0.9x
9.1x
6.9x
8.5x
9.9x
8.5x
0x
3x
6x
9x
12x
15x
2006 2007 2008 2009 LTM0
400
800
1,200
1,600
2,000
EV/Sales EV/EBITDA Volume
1.6x 1.6x 1.4x 1.5x 1.6x
11.4x
12.9x
10.9x
9.2x9.7x
0x
3x
6x
9x
12x
15x
2006 2007 2008 2009 LTM0
500
1,000
1,500
2,000
2,500
EV/Sales EV/EBITDA Volume
= Multiples Above LTM Median
-
DISCLOSURE: Raptor Partners LLC is a registered broker-dealer
with the U.S. Securities Exchange Commission and a member of the
Financial Industry Regulatory Authority. This document is not a
“research report”, as such term is defined by applicable laws and
regulations. The information in this report has been obtained from
third-party sources deemed to be reliable, but is not represented
to be complete. This document has been prepared for general
information purposes only and does not represent a complete
analysis of any specific security, industry or issuer. This
information contained in this document does not represent an offer
or a solicitation of an offer to buy or sell securities of any form
or to participate in any particular trading strategy. This document
does not consider the investment objectives or financial situation
of any individual or entity. Raptor Partners has provided, may
continue to provide, or may seek to provide investment banking
services for companies included in this document.
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