VENUE Market Spotlight 2015 DEAL-MAKING OUTLOOK December 2014 Edition
CONTENTS Welcome 3 Foreword 4 Survey 5 2014 Notable Deals in the Room 8 About RR Donnelley 10 VENUE Market Spotlight: 2015 Deal-Making Outlook
WELCOME Dear 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 Spotligh throughout the years. From all of us at RR Donnelley, please have a safe and happy holiday season! Sincerely, Tom Juhase President, Financial Services Group RR Donnelley 3
FOREWORD Optimism 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. Respondents are optimistic that dealmaking activity will rise in 2015, particularly in private equity exits. As all these factors coalesce, M&A activity is bound to remain strong in 2015, perhaps matching the revival seen in 2014. VENUE Market Spotlight: 2015 Deal-Making Outlook
SURVEY Compared to 2014, what do you expect to happen to the volume of each of the following over the next 12 months: Global M&A 87% 13% Regional M&A PE Buyouts PE Exits IPOs 93% 7% 71% 29% 100% 79% 21% 0 20 40 60 80 100 Increase Percentage of respondents Remain the same 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 privateequity 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? Improved economy Accumulated cash piles Companies seeking growth Pressure from shareholders Easy access to financing Availability of targets due to increased divestitures Firms shoring up core competencies 7% 3% 6% 7% 10% 17% 17% 13% 17% 10% CEO confidence 6% 0 5 10 15 20 25 30 35 Percentage of respondents 2014 2015 *Respondents were allowed to select top two choices 27% 30% 30% 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 largecap acquisitions. Respondents also indicated that in 2014 companies accumulated cash throughout the financial crisis, giving them sufficient resources to more readily execute deals. 5
SURVEY (CONTINUED) What are the biggest factors that will drive IPO activity in 2015? In which sectors do you expect to see the most M&A in 2015? Continued rise in the stock market 60% TMT 60% Recovery of global economy and favorable economic indicators Company growth in sectors ready to go public Private equity and venture capital exiting their investments 33% 40% 47% Financial services Energy Consumer Life Sciences & Healthcare 40% 33% 27% 27% Positive performance of firms post IPO 20% Industrials & Chemicals 13% 0 10 20 30 40 50 60 70 Percentage of respondents 0 10 20 30 40 50 60 70 Percentage of respondents 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 postlisting, 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. 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 highprofile 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. TMT IS EXPECTED TO DOMINATE DEAL ACTIVITY NEXT YEAR VENUE Market Spotlight: 2015 Deal-Making Outlook
In which region do you expect to see the most M&A activity in 2015? What will be the greatest drivers of private equity exits over the next 12 months? 20% North America Europe Asia-Pacific Post-merger integration issues Regulatory compliance High valuations 10% 10% 10% 7% 17% 17% 33% 37% 47% Value gap between seller and buyer 33% Anti-trust risks Rising competition for quality targets Accessing finance 3% 3% 7% 13% 20% Performing sufficient due diligence 7% 3% Other: Shareholder Approval 3% 0 5 10 15 20 25 30 35 40 Percentage of respondents 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. 2014 2015 *Respondents were allowed to select top two choices 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 newlyjoined 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. 7
2014 Notable Deals in the Room Venue data room: A special report 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 LLP Industry: 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: Investec Counsel for Target: DLA Piper Financial 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); Business support services; Medical equipment & services Vista Equity Partners acquires Tibco Software September 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 Morgan Industry: Computer software; Application software products; Software development and Systems integration Rakuten, Inc., acquires Ebates Inc. September 9, 2014 Target: Ebates Financial Advisor for Target: Qatalyst Group Financial Advisor for Buyer: Morgan Stanley Counsel for Buyer: Fenwick & West LLP; Goodwin Procter LLP Private Equity Firm for Seller: August Capital; Canaan Partners; Foundation Capital Industry: Financial Services; Internet / e- commerce; Leisure; Media; Services (other) Amazon acquires Twitch August 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 InterMune August 24, 2014 Financial Advisor for Target: Centerview Partners; Goldman Sachs Counsel for Target: Cravath, Swaine & Moore LLP; Sullivan & Cromwell LLP Financial Advisor for Buyer: Citi Counsel for Buyer: Davis Polk & Wardwell LLP Industry: Biotechnology; Medical: Pharmaceuticals; Biotechnology related research; Drug development; Drug manufacture; Drug supply Zillow acquires Trulia July 28, 2014 Financial Advisor for Target: JP Morgan; Qatalyst Group Counsel for Target: Davis Polk & Wardwell LLP; Goodwin Procter LLP; Wilson Sonsini Goodrich & Rosati P.C. Financial Advisor for Buyer: Goldman Sachs Counsel for Buyer: Latham & Watkins LLP; Perkins Coie LLP; Shearman & Sterling LLP Industry: Internet / ecommerce; Real Estate: Real estate; Search engines and other internet enabling technology Exelon acquires Pepco April 30, 2014 Target: Pepco Holding Financial 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 Markets Counsel 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 For more information: Please contact your RR Donnelley Sales Rep. Call 1.888.773.8379 Or visit www.venue.rrd.com Venue demo (audio enabled): http://www.rrdonnelley.com/venue/ Resources/ProductDemo.asp Corporate Headquarters 111 South Wacker Drive Chicago, IL 60606-4301 U.S.A. 888.773.8379 www.rrdonnelley.com www.venue.rrd.com Copyright 2014 R. R. Donnelley & Sons Company. All rights reserved.
Warburg Pincus acquires Electronic Funds Source April 16, 2014 Target: Electronic Funds Source LLC Financial 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 Pharmaceuticals Financial Advisor for Target: BofA Merrill Lynch; Centerview Partners Counsel for Target: Latham & Watkins LLP; Matheson Simpson Thacher & Bartlett LLP Financial Advisor for Buyer(s): Barclays Counsel for Buyer(s): Arthur Cox; Wachtell Lipton Rosen & Katz Industry: 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 LLP Financial Advisor for Buyer: Goldman Sachs & Co. Counsel for Buyer: - son LLP; Kirkland & Ellis LLP Industry: Biotechnology; Medical; Medical: Pharmaceuticals Oracle acquires BlueKai February 24, 2014 Target: Blue Kai Inc. Financial Advisor for Target: Morgan Stanley Counsel for Target: Fenwick & West LLP Private Equity Seller(s): Redpoint Ventures; Battery Ventures; GGV Capital; Split Rock Partners LLC Industry: Computer software; Internet /ecommerce; Services (other) IBM acquires Cloudant February 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 Vision February 7, 2014 Target: National Vision Counsel 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 LLC Industry: Consumer: Retail; Chemists/ health; Other retailing of consumer products and services Groupon acquires ideeli January 13, 2014 Target: ideeli Counsel 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 retailing of consumer products and services Microsoft acquires Parature January 6, 2014 Target: Parature Private Equity Seller(s): Accel Partners; Sierra Ventures; Valhalla Partners Industry: Computer services; Computer software; Software development; Systems integration Deals. Done. Simple. Corporate Headquarters 111 South Wacker Drive Chicago, IL 60606-4301 U.S.A. 888.773.8379 www.rrdonnelley.com www.venue.rrd.com Copyright 2014 R. R. Donnelley & Sons Company. All rights reserved.
ABOUT RR DONNELLEY 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. About Venue Venue is a secure online workspace with a powerful feature-set and an intuitive design that allow you to easily organize, manage, share and track all of your sensitive information. Venue data rooms provide complete control, ensuring that you can manage who has access to your data room, which documents they see, and how they can interact with those documents. RR DONNELLEY AT A GLANCE $10.2 billion 2012 net sales 55,000+ Employees 500+ Global locations Nearly 125 Manufacturing locations 750+ Issued and pending patents Nearly $1.2 billion Capital investments over the past five years Venue data rooms are backed by RR Donnelley, a $10.2 billion corporation with more than 500 locations and over 55,000 employees worldwide. RR Donnelley s total revenues are larger than all other virtual data room providers combined. We bring extensive experience to providing integrated communications services. For more information regarding Venue, RR Donnelley, or this report, please contact us directly. Daniel Perez Marketing Manager, Venue Data Room RR Donnelley Financial Services Group financial.rrd.com 255 Greenwich St. New York, NY 10007 Phone: 888.773.8379 Fax: 212.341.7475 venuecommunications@rrdvenue.com VENUE Market Spotlight: 2015 Deal-Making Outlook
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VENUE Market Spotlight: 2015 Deal-Making Outlook