Thomson Reuters, the publisher of Buyouts, tracked 119 M&A exits involving U.S.-based financial sponsors in the first three months of 2014 through March 25. Of these transactions, 41 disclosed their financial terms for an aggregate total of approximately $22.5 billion. Both figures are roughly consistent with strong showings in the third and fourth quarters of 2013 (see accompanying chart). Significantly, seven of these M&A deals were valued at over $1 billion, with two deals coming in at over $2 billion and the average size of a deal this quarter hitting $547.9 million.
The first quarter of 2014 is starting off much stronger then 2013, when 105 M&A transactions were completed by U.S.-based financial sponsors. Similarly, the total disclosed value of Q1 2013 deals was well below the current amount, with only $8.4 billion.
The largest M&A deal to close in the first quarter was the acquisition of Birmingham-based Aptalis Pharma Inc by Forest Laboratories Inc. The TPG Capital-backed manufacturer of pharmaceuticals was sold on February 3 for $2.9 billion. The other deal that was valued at over $2 billion took place on January 17 when CVS Caremark Corp acquired the entire share capital of Coram LLC, a Denver-based provider of infusion therapy services, from Apria Healthcare Group Inc, a unit of Blackstone Group LP, for an estimated $2.1 billion.
In another healthcare deal, DSM Pharmaceutical Products, a unit of Koninklijke DSM NV, acquired the entire share capital of Patheon Inc, a Durham-based manufacturer of pharmaceutical products, from JLL Partners Fund V LP, JLL Partners Inc’s fifth flagship fund, for $9.32 in cash per share for a total of $1.394 billion. On completion, the company was delisted in the Toronto Stock Exchange.
In a secondary buyout transaction, Applied Systems Inc SPV, a special purpose acquisition vehicle formed and led by Hellman & Friedman LLC and JMI Equity Inc, acquired an undisclosed majority interest in Applied Systems Inc, a University Park-based developer of insurance automation software, from Bain Capital LLC for an estimated $1.8 billion.
For $1.65 billion, NCR Corp acquired Digital Insight Corp, a Menlo Park-based provider of online and mobile banking services, from Thoma Bravo LLC. Kokusai Kogyo Holdings acquired the remaining 55 percent interest that it did not already own in Kokusai Kogyo Co Ltd, a Tokyo-based provider of real estate services, and a majority-owned unit of Cerberus Capital Management LP, for an estimated JPY 140 billion ($1.368 billion) in cash.
The final deal to be over the $1 billion mark was when OpenText Corp of Canada acquired GXS Inc, a Gaithersburg-based provider of cloud-based business-to-business integration services, from Francisco Partners Management LLC, for $1.165 billion. The deal consisted of $1.065 billion in cash and $100 million in OpenText common shares.
In the first three months of 2014, at least eight private equity-backed portfolio companies went public and the total value of their combined IPO size was over $3.65 billion. The latest figure is significantly lower than the $8.32 billion witnessed in the fourth quarter of last year when 18 companies with U.S.-based financial sponsors went public.
On January 23, Santander Consumer USA Inc made its public debut under the ticker SC at $24 per share. The auto-finance unit of Spanish bank Santander SA is backed by Kohlberg Kravis Roberts & Co, Warburg Pincus LLC, Centerbridge Partners LP as well as an undisclosed firm. The initial public offering of the Dallas-based company raised almost $1.8 billion for investors. By January 28, shares hit a high of $26.45, a ten percent rise over their debut and brought the value of the company to $9.19 billion.
Another significant IPO by a company with U.S.-based financial sponsors was EP Energy Global LLC on January 17. The oil and gas exploration services company, backed by Apollo Global Management LP, Riverstone Holdings LLC and other undisclosed firms, raised $704 million after its initial public offering was priced at $20 per share. However, at the end of their first day of trading, shares in the company fell by as much as three percent, valuing the company at just below $4.9 billion. In 2012, Apollo Global purchased EP Energy from Kinder Morgan Inc for $7.15 billion, the largest private equity deal of that year.