Q1 2019 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
Q1 2019 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 $10 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
ChemicalsDurable Goods
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 [email protected](404) 841-0639
Edward S. Croft, IIIManaging [email protected](404) 841-0055
R. Neale FisherManaging [email protected](404) 574-2906
Ronald B. GoldmanManaging [email protected](404) 841-0735
Steve B. TyeManaging [email protected](404) 841-9351
Erik M. ZalenskiManaging [email protected](404) 841-9826
Kyle C. [email protected](404) 574-2897
Matthew A. VealVice [email protected](404) 841-0056
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
has been acquired by
VNS is a leading supplier and manufacturer of building products.
Service Brands is a leading multi-concept residential services franchisor.
has been acquired by
HRI is a leading franchisor of in-home consumer services.
has soldHarris Research, Inc.
Franchisor of
to
The Erosion Company provides erosion control and related site services
to the construction industry.
has been recapitalized by
has been acquired by
Coverall is a leading franchisor of commercial cleaning services.
has been recapitalized by
Juniper Landscaping is a leading provider of landscaping services to
commercial customers.
Carousel Designs is a leading online provider of original and custom-
designed baby bedding, fabric and nursery décor.
has been acquired by
Mudlick Mail provides data-driven, direct mail and related marketing
solutions to small and medium-sized businesses.
has been recapitalized by
Secretariat is a leading provider of dispute resolution advisory services to
public and private sector clients across the world.
has been recapitalized by
has been recapitalized by
ML Healthcare provides financing and access to care for patients unable to
afford medical services.
Dominion Youth Services a leading provider of behavioral and mental
health support services to the youth and adolescent market.
has been acquired by
Nuesoft Technologies is a leading provider of SaaS solutions and RCM services for the healthcare industry.
has been acquired by
HCSC is a leading provider of hospice and palliative care services
in the Southeast.
has been recapitalized by
3
4th Source is a leading provider of nearshore software development and IT
services to sophisticated clients with complex technology requirements.
has been acquired by
Lexington Manufacturing is a leading provider of engineered components to window and door OEMs in the United
States and internationally.
has been acquired by
AN GLOBAL
has merged with
a portfolio company of
ControlScan is a leading provider of security and compliance solutions.
Gro Solutions provides a digital sales platform for financial institutions.
has been acquired by
ASP is the leading swimming pool cleaning franchisor in the U.S.
has been acquired by
a portfolio company of
Merit is the leading distributor of paint sundries and flooring products and
installation supplies.
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
a portfolio company of
FEATURED TRANSACTIONS
4
DEAL OVERVIEW
COMPANY OVERVIEW The Merit Distribution Group (“Merit”) is the leading distributor of paint
sundries and flooring products and installation supplies
The Company distributes over 30,000 products from approximately 600manufacturers who trust Merit to reliably deliver products to more than11,000 customers in the Americas as well as Australia and Poland
Merit is a critical link in the supply chain with warehousing, inventorymanagement and overnight and next day fulfillment capabilities
Croft & Bender was engaged by Centre Lane Partners to advise theCompany through a full exclusive sale process
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 sale of the Company toCenter Rock Capital Partners
DEAL OVERVIEW
COMPANY OVERVIEW SIP.US is a leading provider of on-demand, enterprise-class IP
communications software solutions to businesses
The Company’s fully automated SIP trunking software solution enablesquick and easy setup, flexibility and scalability and a powerful self-servicecontrol panel, all supported by a Tier-1 redundant network to ensure thehighest level of performance and reliability for its users
The Company’s SIPTRUNK platform offers a differentiated andcompelling value proposition for partner resellers who wish to add awhite label VoIP solution to their managed service portfolio and generatemonthly commission revenue
Croft & Bender was engaged to help the Company evaluate strategicalternatives, including a majority recapitalization or strategic sale
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 a sale to BCM One, a portfoliocompany of Thompson Street Capital Partners
SIP.US is a leading provider of on-demand, enterprise-class IP
communications software solutions.
has been acquired by
has been acquired by
Merit is the leading distributor of paint sundries and flooring products and
installation supplies.
a portfolio company of
a portfolio company of
Note: Middle-market transactions are defined as those with a disclosed transaction value of less than $1 billion.
Public Equity Markets Middle Market Deal Volume
($ in billions)
Cash on Corporate Balance Sheets
($ in trillions)
Private Equity Dry Powder
($ in billions)
KEY CAPITAL MARKETS DATA
5
(20.0%)
0.0%
20.0%
40.0%
60.0%
80.0%
3/16 9/16 3/17 9/17 3/18 9/18 3/19
S&P 500 NASDAQ Dow Jones
37.6%
46.6%
58.7%
US PE Middle Market EBITDA Multiples US PE Middle Market Leverage Multiples
10.2x
12.8x
9.8x10.8x
11.7x 11.5x 11.5x
'13 '14 '15 '16 '17 '18 LTMQ1 '19
6.2x
7.2x
5.4x 5.4x
6.0x5.7x 5.8x
'13 '14 '15 '16 '17 '18 LTMQ1 '19
$672 $683$745
$829
$1,029
$1,194$1,257
'13 '14 '15 '16 '17 '18 Q1 '19
$5.9 $6.0$5.7 $5.9
$6.2 $6.1 $6.0
'13 '14 '15 '16 '17 '18 Q1 '19
$327
$396 $385 $385 $380 $388
$93 $73
'13 '14 '15 '16 '17 '18 YTDQ1 '18
YTDQ1 '19
(1) Indexed relative to 2012.(2) Indexed relative to 1985.
Unemployment RateConsumer Confidence(2)
Real GDP Growth Industrial Production(1)
Retail Sales
($ in billions)
Consumer Spending
($ in trillions)
KEY ECONOMIC DATA
6
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
'15 '16 '17 '18 '19
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
'15 '16 '17 '18 '19
100
102
104
106
108
110
112
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
'15 '16 '17 '18 '19
0.0%
1.0%
2.0%
3.0%
4.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
'15 '16 '17 '18 '19
$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
'15 '16 '17 '18 '19
$10
$11
$12
$13
$14
$15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
'15 '16 '17 '18 '19
AVERAGE PUBLIC MULTIPLES & U.S. DEAL ACTIVITY BY SELECT INDUSTRY GROUPS
*Latest twelve months as of March 31, 2019.Note: EV = Enterprise Value.
General Industrial IT Consulting & Other Services
Building Products Trading Companies & Distributors
Consumer ServicesRetailing
7
9.8x 11.1x 11.1x 10.4x 10.1x
1.2x 1.4x 1.4x 1.3x 1.2x
2,432
2,156 2,194
2,389 2,459
0
500
1,000
1,500
2,000
2,500
3,000
0x
2x
4x
6x
8x
10x
12x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
10.4x 11.3x 12.6x
10.9x 11.2x
1.6x 1.7x 1.8x 1.7x 1.7x
340
271 280
310 320
0
50
100
150
200
250
300
350
400
0x
2x
4x
6x
8x
10x
12x
14x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
9.6x
11.0x 10.7x 9.4x 9.3x
1.2x 1.4x 1.4x 1.2x 1.2x
55
62 63
88
75
0
20
40
60
80
100
0x
2x
4x
6x
8x
10x
12x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
11.7x 13.7x
11.3x 10.0x 9.9x
0.8x 0.8x 0.9x 0.7x 0.7x
320
282 251
312
356
0
50
100
150
200
250
300
350
400
0x
2x
4x
6x
8x
10x
12x
14x
16x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
12.1x 12.6x 13.7x
12.9x
12.8x
1.2x 1.2x 1.3x 1.3x 1.2x
601
494
370406
453
0
100
200
300
400
500
600
700
0x
2x
4x
6x
8x
10x
12x
14x
16x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
12.3x 12.9x 13.8x 13.0x 12.6x
2.3x 2.6x 2.8x 2.8x 2.5x
1,057
914
817
901 913
0
200
400
600
800
1,000
1,200
0x
2x
4x
6x
8x
10x
12x
14x
16x
2015 2016 2017 2018 Q1 '19*
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 & ServicesApplication Software
*Latest twelve months as of March 31, 2019.Note: EV = Enterprise Value.
8
11.3x 11.5x 12.6x
11.8x 11.9x
1.8x 1.8x 1.8x 2.0x 1.9x
465414
308 273 284
0
125
250
375
500
0x
2x
4x
6x
8x
10x
12x
14x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
19.7x 20.7x 22.9x 24.5x 24.0x
3.4x 3.5x 3.9x 4.0x 4.0x
6863
5347
59
0
25
50
75
0x
5x
10x
15x
20x
25x
30x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
10.4x 9.9x 10.1x 12.5x 11.9x
1.0x 1.0x 1.0x 1.3x 1.1x
464421 434 432 415
0
100
200
300
400
500
0x
2x
4x
6x
8x
10x
12x
14x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
15.0x 16.0x 19.6x 19.6x 19.6x
4.5x 4.7x 5.9x 6.4x 6.2x
6165
8999
92
0
20
40
60
80
100
120
0x
5x
10x
15x
20x
25x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
22.8x 24.4x 26.8x 29.1x 28.3x
4.8x 5.2x 5.9x 6.7x 6.3x
953842 910
935 909
0
200
400
600
800
1000
0x
5x
10x
15x
20x
25x
30x
35x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
13.4x 15.6x
18.3x 17.1x 17.4x
3.0x 3.4x 4.0x 4.3x 4.1x
1,5221,330
1,4271,506 1,490
0
400
800
1,200
1,600
0x
5x
10x
15x
20x
2015 2016 2017 2018 Q1 '19*
EV/EBITDA Multiple EV/Revenue Multiple
# of M&A Transactions
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 Deal Size Metrics
($ in millions)
U.S. Private Equity Deals by Deal Size
(# of deals)
U.S. Private Equity Activity by Year
PRIVATE CAPITAL DATA
9
$3
36
$3
77
$4
39
$5
31
$5
60
$6
08
$6
14
$7
17
$9
6
3,1703,541
3,427
4,276 4,438 4,434 4,6855,005
795
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
$800
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ1 '19
Deal value ($B)
# of deals closed2,099
296
1,174
237
1,266
1780
500
1,000
1,500
2,000
2,500
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ1 '19
Under $25M
$25M-$100M
$100M-$500M
$46.0 $44.0
$196.8
$163.0
$0
$50
$100
$150
$200
$250
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ1 '19
Median deal size
Median pre-money valuation
$2
4
$2
2
$2
2
$4
0
$4
5
$3
8
$4
2
$6
6
$1
4
634 646 663
870958
836943
1,090
214
0
200
400
600
800
1,000
1,200
$0
$10
$20
$30
$40
$50
$60
$70
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ1 '19
Deal value ($B)
# of deals closed
$1.1 $1.0
$6.0
$8.2
$10.5 $10.0
$0
$2
$4
$6
$8
$10
$12
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ1 '19
Angel/Seed
Early VC
Later VC
$4
5
$4
2
$4
8
$7
1
$8
3
$7
7
$8
3
$1
32
$3
3
6,7587,877
9,300
10,554 10,758
9,242 9,634
9,487
1,853
0
2,000
4,000
6,000
8,000
10,000
12,000
$0
$20
$40
$60
$80
$100
$120
$140
'11 '12 '13 '14 '15 '16 '17 '18 YTDQ1 '19
Deal value ($B)
Deal count
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 Dealogic, Pitchbook, S&P Capital IQ, and the U.S.Department of Labor.
DISCLOSURES
10