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Q3 2020 Canadian M&A Roundup

North American Overview

In the third quarter of 2020, North American M&A activity experienced its largest increase since the start of the COVID-19 pandemic as companies looked to the middle market to complete transactions. Certain sectors engaged in M&A activity to take advantage of struggling businesses while other sectors participated in M&A activity for defensive reasons. All in all, deal activity in Q3 grew to 2,714 deals for a total transaction value of $361.1 billion, achieving QoQ gains of 23.5% and 7.0%, respectively.

Canadian Overview

For Q3, Canadian M&A activity included 818 transactions and $18 billion in deal value. Although an increase from Q2, this deal value was still down approximately 60% from Q3 of 2019. That $18 billion deal value reflects only 44% of the total M&A deals that were announced in Q3 of 2020. The total deals announced in Q3 was also the highest since the beginning of the COVID-19 pandemic and a 200% increase from Q2 of 2020. The TMT and Real Estate sectors led the way in terms of number of deals, securing 167 and 161 deals, respectively. Meanwhile, the Healthcare and Metals & Mining sectors led the way in terms of YoY percentage change. The Healthcare sector saw a 0% YoY change while Metals & Mining saw a 9% decrease YoY, both holding up much better than other sectors from a YoY percentage change standpoint.

Number of M&A Deals by Industry in Canada (Q3 2020)

Notable Q3 Deal Announcement

Altice USA, Inc. to acquire Cogeco Inc.

  • Value: C$10.3 billion
  • Industry: TMT
  • Buyer: Altice USA, Inc. (NYSE: ATUS)
  • Seller: Cogeco Inc. (TSE: CGO)

On September 2nd of 2020, Altice USA, Inc., one of the largest broadband communication and video service providers in the United States, announced an offer to acquire 100% of Cogeco’s outstanding and issued shares. Cogeco Inc. is a Canadian media and telecommunications company, who’s most notable comparison in the TMT industry is Bell Canada.

Altice offered an all-cash consideration of approximately C$10.3 billion to acquire all of Cogeco’s outstanding shares. This sum includes C$4.8 billion for the acquisition of Cogeco’s U.S. assets.

To dive further into the offer, it included C$106.53 per share for Cogeco’s remaining
subordinate voting shares and C$134.22 per share for each CCA subordinate voting share. Those prices reflect a premium of 30% to each stock’s 1-month volume weighted average price on the TSE.

A notable detail in this offer is the inclusion of C$800 million to Cogeco’s controlling
shareholders. This premium is used as an incentive for the controlling shareholders to support the transaction.

Canadian based healthcare company CloudMD’s acquisition of Snapclarity Inc.

  • Value: C$3.35 million
  • Industry: TMT
  • Buyer: CloudMD Software & Services Inc. (TSX Venture: DOC-X)
  • Seller: Snapclarity Inc. (Privately-held)

In late September of 2020, it was announced that Snapclarity, an Ottawa-based software company that allows organizations to help their employees identify health risks, individualize their healthcare plans and get matched with therapists, would be acquired by CloudMD Software & Services, a company that offers SAAS based health technology solutions to medical clinics across Canada.

The offer was for CloudMD to pay $975,000 in cash along with $2.375 million in common shares to be issued at a price of 70 cents per share for the following two years. If Snapclarity succeeds in reaching specific earnings targets in 2021 and 2022, then their shareholders will receive an additional $3.65 million in equity-based payments.

Under the agreement, Snapclarity will become a wholly owned subsidiary of CloudMD.

In 2017, Snapclarity received $1.5 in venture capital and was named “Next Big Thing” at the Best Ottawa Business Awards in November of 2019, so it will be interesting to see their software’s growth in the near future.

Crown Capital Partners acquired Ontario based Galaxy Broadband Communications

  • Value: C$7.5 million
  • Industry: Financial Industries/TMT
  • Buyer: Crown Capital Partners Inc. (TSE: CRWN)
  • Seller: Galaxy Broadband Communications Inc. (Privately-held)

On September 21st of 2020, Crown Capital Partners, a specialty finance company that provides capital to growth businesses and entrepreneurs, acquired Galaxy Broadband Communications, an organization that provides innovative enterprise communications to companies in remote
locations.

The price of the acquisition was $7.5 million which included cash, performance-based earnout payments, and assumed debt.

Crown Capital Partners is looking to combine Galaxy with their pre-existing WireIE operations, in hopes of catering to the need for better connectivity in remote locations that COVID-19 has created. On the selling side, Galaxy believes that this partnership will allow them to achieve accelerated growth, capitalize on upcoming opportunities, and continue to provide reliable connectivity solutions for companies in remote locations.

G4S rejects acquisition offer from Canadian security firm GardaWorld

  • Value: C$3.8 billion
  • Industry: Security Services
  • Buyer: GardaWorld Security Corp. (TSE: GW)
  • Seller: G4S plc (LON: GFS)

Towards the end of Q3 2020, Britain’s G4S rejected a near C$4 billion offer from Canadian security company GardaWorld Security Corp.

G4S’s Board of Directors believed that the timing of the offer was highly opportunistic given the turbulence seen in global markets since the beginning of the COVID-19 pandemic. Thus, they urged their shareholders to not accept the deal. GardaWorld attempted to break through to G4S’s shareholders as well, encouraging them to “mandate their board’s engagement.” G4S, who’s share price had plummeted around 33% in 2020, also rejected two prior offers.

The past year has been difficult for G4S. The loss of a contract to run a Birmingham prison, Norway’s wealth fund no longer investing in the company, and charges that some executives had defrauded the Ministry of justice have jeopardized the firm and resulted in G4S having to improve their image amongst investors.

References

– https://www.businesswire.com/news/home/20200902005626/en/Altice-USA-Inc.-
Presents-Offer-to-Acquire-Cogeco-in-Order-to-Own-Atlantic-Broadband
– https://www.reuters.com/article/us-canada-m-a-idCAKBN26Q17F
– https://originmerchant.com/q3-canadian-manda-activity/
– Bloomberg Terminal

Mergers & AcquisitionsGuide to Distressed M&A · Understanding a Merger and Understanding a Merger Model · Introduction to Hostile Takeovers and Unsolicited Bids · Sale and Leaseback Transactions in Investment Banking · Compiling a Buyers List in Investment Banking · Interview With A Mergers & Acquisitions Investment Banker – Part II · Interview with a Mergers & Acquisitions Investment Banker – Part I · Bid Pricing Strategy: Part II · Bid Pricing Strategy: Part I · Deal Protection in Mergers & Acquisitions · Investment Banking Bake-Off or Beauty Contest · Acquisition Finance: Equity Consideration · Acquisition Finance: Bullet Debt · Acquisition Finance: Bank Debt · M&A Process Walkthrough · Types of M&A Sell Side Processes · Investment Banking Teaser · Accretion/Dilution Analysis – Part IV: Synergies and Source of Funds for M&A · Accretion/Dilution Analysis – Part III: Using Debt for Acquisitions · Accretion/Dilution Analysis – Part II: Accretion/Dilution Math and Breakeven Premium · Accretion/Dilution Analysis – Part I: EPS, Earnings Yield and All-Stock Transactions · Purchasing a Company via Cash or Stock ·
Jacob
Jacob
Jacob Shandro is a second-year student currently specializing in finance and accounting at the Smith School of Business at Queen’s University. Jacob is pursuing a career in finance and is currently seeking relevant work experience. In his spare time, he enjoys reading, mountain biking, and playing chess.

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