pkf deal highlights...pkf deal highlights 2018 3 introduction the deal market fy 2017/18 has seen a...

PKF Deal HighlightsYEAR TO 30 JUNE 2018

corporateadvisory

healthcare

consumer goods

medicaltechnology

mergers andacquisitions

valuations

capitalraising

duediligence

transport

PKF DEAL HIGHLIGHTS 2018 3

IntroductionTHE DEAL MARKET

FY 2017/18 has seen a significant increase in activity with respect to mid-market merger and acquisition (M&A) deals and capital raisings. This is across a wide range of sectors and transaction sizes.

The market is very active with a large number of private equity funds and family offices seeking investment opportunities; as well as corporates looking to take advantage of improving market conditions and availability of capital to boost their growth plans through merger and acquisitions.

The PKF Corporate Finance team has certainly been busy advising on a wide range of deals in diverse sectors. This overview highlights some of the deals we are proud to have advised on.

We are currently advising on deals in the apparel, consumer goods, alcoholic beverages, healthcare, transport, medical technology and corporate hospitality sectors. We are also actively involved in originating deals where we see compelling opportunities.

THE PKF TEAM CONTINUES TO GROW

We would like to welcome Alan Stevenson and Greg Grant-Smith who are joining our team in Sydney. Alan is an experienced M&A adviser who has led a large number of successful deals over a long and distinguished career.

GLOBAL PERSPECTIVE

We continue to work closely with our Corporate Finance colleagues at PKF member firms throughout the world on the execution and origination of cross-border deals. We continue to see strong deal flow from China, Japan and North Amercia.

We enjoy helping our clients to achieve their deal objectives and are proud of the excellent feedback that we have received from them.

PKF DEAL HIGHLIGHTS 20184

Market AnalysisA record number of 598 M&A deals were recorded in Australia during the 2018 financial year (AU$102.2 billion), 35 more than FY17 (AU$103.1 billion, down 0.9%). Strong inbound M&A was a significant driver behind the increase in deals contributing almost 75% of the FY18 inbound deal value of AU$76.6 billion (FY17: AU$38.2 billion).

While domestic deal volume increased over the same period to 352 (FY17: 337), deal value decreased by 60.6% from AU$64.9 billion to AU$25.6 as a result of a lack of large cap deals (i.e. > AU$250m).

Real estate replaced Energy, Mining and Utilities (EMU) as the most targeted Australian sector during FY18 as a result of Unibail-Rodamco SA’s AU$32.6 billion acquisition of Westfield Corporation. The sector recorded eight deals during the year, equal to the number recorded in FY17 but representing 15.1x deal value to AU$38 billion (FY17: AU$2.4 billion).

Outbound buyer interest from Australia declined during FY18 from AU$41.4 billion in FY17 (127 deals) to AU$21.8 billion (118 deals), representing a 47.4% decrease in value. The strong FY17 result was however significantly skewed as a result of the Macquarie Infrastructure and Real Assets AU$19.3 billion acquisition of UK-based gas distribution business Cadent Gas.

Similarly, private equity investment in Australia saw a decline in value from AU$27.5 billion in FY17 (across 74 deals) to AU$14.3 billion (60 deals) in FY18. Equinix (USA)’s AU$1 billion acquisition of Metronode was the largest regional Private Equity exit deal announced in FY18.

Source: Mergermarket Regional Overview: Australia Trend Report

FY2018

DEALS UNDER AU$100M

Deals under AU$100m continue to be a driving force behind the Australian M&A market, with 474 deals closed during FY18 (excluding real estate transactions), worth a combined AU$6.9bn, and an average deal value of AU$14.6m.

SECTOR NO.

Materials 146

Consumer Discretionary 87

Industrials 52

No Primary Industry Assigned 49

Information Technology 43

Healthcare 36

Consumer Staples 31

Energy 15

Telecommunication Services 6

Utilities 5

Financials 4

Total 474

CLOSE DATE TARGET BUYER / INVESTOR EV

(AU$’M)PRIMARY SECTOR

27-Dec-17Maritime Container Services Pty Ltd.

Qube Logistics (Aust) Pty Ltd

92.3 Industrials

24-Apr-18Contract Power Australia Pty Ltd

Pacific Energy Limited (ASX:PEA)

90.0 Industrials

03-Oct-17Edna May Operations Pty Ltd

Ramelius Operations Pty Ltd

90.0 -

23-Oct-17 Seymour Whyte LimitedVinci Construction International Network SAS

86.9 Industrials

10-Oct-17EMC Metals Australia Pty Ltd

Scandium International Mining Corp. (TSX:SCY)

86.8 Materials

30-Apr-18Tailored Packaging Pty Ltd.

Huhtamäki Oyj (HLSE:HHUH1V)

86.2Consumer

Discretionary

29-Mar-18

Dioro Exploration Pty Ltd and HBJ Minerals Pty Ltd and Hampton Gold Mining Areas Ltd.

Northern Star Resources Limited (ASX:NST)

83.1 Materials

31-Aug-17Capitol Health Limited, New South Wales Radiology Assets

I-MED Holdings Pty Limited

80.3 Healthcare

30-Apr-18 Donhad Pty Ltd.Moly-Cop Adesur S.A.

80.0 Materials

02-Jan-18ED Oates Holdings Pty Ltd.

Freudenberg Household Products Pty Limited

80.0Consumer

Staples

Number of transactions by sector Top 10 transactions by Enterprise Value (EV)

Source: S&P CapitalIQ: FY18 transactions EV <AU$100m excluding real estate


Trends and Highlights

Source: Mergermarket Regional Overview: Australia Trend Report FY2018

M&A deal size and breakdown

610

600

590

580

570

560

550

540FY17 FY18

DEALS

103.5

103

102.5

102

101.5FY17 FY18

VALUE (AU$bn)

Top sectors by deal value in FY17

EMU Leisure Consumer

Top sectors by deal value in FY18

Real Estate EMU Financial Services

Value of Australian targetedM&A in FY18

100.3%

Increase in Australian inboundM&A value (AU$76.6 billion)

compared to FY17

32.6BILLION

Largest Australian deal in FY18, Westfield Corporation acquired by

Unibail-Rodamco SA

AU$

102.2BILLION

AU$

M&A deal size and breakdown

60

40

20

02013 2014 2015 2016 2017 2018

Q1

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Q4

Case Studies


Furniture ManufacturerAugust 2017

Lead adviser on the acquisition of the business assets of the Sebel Group of Companies

AcquisitionsResero – Acquisition of manufacturer in administration

We were approached by the owner of Resero, Hamish Whyte, to advise on the acquisition of Sebel Furniture. Hamish was a strong advocate for the Sebel brand and the product, and felt the acquisition opportunity could add to Resero’s business portfolio in the education learning space environment.

Sebel was owned by a large US furniture manufacturer that had made the decision to exit its Australian operation, as the business had struggled with profitability and no longer met the owners investment requirement. The owner placed Sebel into voluntary administration.

Deloitte’s restructuring and insolvency team were managing the voluntary administration and leading a sale process. PKF was able to negotiate a structure that saw Sebel continue as a viable business. This included conducting due diligence on Sebel, advising on the terms of the acquisition and its structure as well as supporting negotiations with suppliers and Sebel’s landlord.

We have continued to provide advice to Hamish and his team on the restructuring of Sebel. Sebel is now forecast to operate profitably, has a strong purpose and positioning and great engagement from the staff who are excited to see Sebels potential being realised after a long period of underperformance.

“It has been a pleasure to work with the team at PKF throughout the process and we will continue to engage with them in the process of rebuilding the Sebel business. The ability to have one firm of great people who could help us work through due diligence, structure, negotiations, taxation and valuation was extremely beneficial, particularly with a business that was in administration and the time constraints involved. I look forward to working with the team in this, and future business adventures.” Hamish Whyte, Managing Director


Borg Group – Acquisition of Carter Holt Harvey’s (CHH) Particleboard Businesses in Oberon, Mt Gambier in Australia

PKF was the lead adviser to Borg Group to secure these business assets to shore up their supply chain for a material input and create capacity for growth and enter new markets including particleboard flooring.

We advised and participated in the heads of agreement negotiation, financial models, structuring, detailed commercial due diligence, contract negotiation, purchase price allocation and completion statement review.

There was complexity in terms of competition issues and obtaining ACCC approval over an extended period. There were complex separation and transitional arrangements due to Borg acquiring part of the CHH panels group.

The transaction successfully completed in January 2018 and the businesses have been successfully integrated into the wider Borg Group.

Tech-link Storage – Acquisition of Dexion

PKF was approached by Tech-Link, a Singapore based provider of industrial logistics, warehousing and racking solutions, to advise on the proposed acquisition of Dexion.

Dexion was owned by GUD Holdings, which had determined that the business was no longer a core part of its investment portfolio.

Dexion was in the early stage of a turnaround program. We worked closely with Tech-Link’s management to perform a detailed assessment of the turnaround strategy and its progress. We prepared a detailed three-way financial model to stress test the turn-around, evaluate potential synergies with Tech-Link and prepare a discounted cash flow valuation.

PKF advised Tech-Link on structuring the acquisition to contain the risks arising from a number of significant actual and potential commercial and legal issues including restructuring of offshore operations, customer disputes and growth initiatives that were not delivering outcomes that would meet Tech-Link’s objectives.

We led negotiations with GUD and its adviser PWC and were able to negotiate a deal structure that was acceptable to GUD and that provided value to Tech-Link.

Tech-Link’s management team has successfully restructured the business and is achieving sales growth and financial performance that exceed its own turnaround plan.

“Tech-Link engaged the services of PKF Australia to provide advice on the acquisition of Dexion. We were absolutely delighted with the detailed, diligent and valuable advice provided to us by the PKF Australia team. During the course of the due diligence period we built a strong rapport with the PKF team. The PKF team advised and guided us throughout the process which culminated in a very successful acquisition of Dexion. We would like to express our sincere thanks to the team at PKF.” Khurshed Mirza, CEO

ManufacturingJanuary 2018 | EV - $95 Million

Lead Adviser on acquisition of Carter Holt Harvey’s particle board assets

Warehouse racking and systems manufacturer

July 2017

Lead adviser to Tech-Link on the acquisition of Dexion from GUD Holdings


DivestmentsTowers Transport – Sale of the BusinessWe assisted in the sale of the business to a large national freight company, Followmont Transport.

We acted as lead adviser and participated in the initial feasibility and valuation models, compilation of detailed information memorandum and structuring, heads of agreement proposal and negotiation, detailed commercial due diligence management and support, contract negotiation, purchase price allocation, completion statement calculations, assistance with transferring over the business and records.

There was complexity in terms of the information that could be extracted out of the business during the detailed due diligence process, combined with their internal management

TransportJanuary 2018

EV - $13 Million

Lead adviser on thesale of the business

accountant leaving just before the due diligence process commencing. We were also involved in the negotiation process between both parties to achieve our client’s desired selling price.

The transaction successfully completed in January 2018 and the business has been successfully integrated into the Followmont Transport Group.

“We found that partnering with PKF enabled us to get timely and accurate reporting. The team has always been readily available to take our questions and provide advice to help us face our challenges.” Barry Towers, General Manager

FoodJuly 2017

Financial adviser on thesale of the business

Guzzardi Fine Foods – Sale AdvisoryPKF is proud to have advised Guzzardi Fine Foods (Guzzardi) on their divestment.

Guzzardi is a food manufacturer and wholesaler supplying national and export markets producing authentic Australian made European delights using the finest ingredients. These include marinated, filled, whole and sliced olives, antipasti, chargrilled vegetables, pestos, dips, crushed garlic, herbs and spices - with choices of packaging in labelled, generic, made to order and private label.

Established in 1989 and originally focused on marinated olives, Guzzardi is now one of the larger foodservice suppliers in the Antipasto market in Australia.

Completion of the sale occurred in July 2017.

The sale represented an important milestone in the succession of the business, when both the existing Directors of the business accepted offers to remain within the business post completion of the acquisition by Ausfresh.


IBS A. V. – Sale AdvisoryPKF advised IBS A.V. (Aust) Pty Ltd (IBSAV) on their sale to international group Engie Services (Engie).

IBSAV is engaged in the provision of commercial pro audio visual design, integration and support services to the Victorian market. The company has a successful history of implementing and delivering installation projects for nearly 30 years.

Established in 1988 and originally focused on the provision of service maintenance for commercial and broadcast hardware and systems, the business has grown from humble beginnings to employ in excess of 100 staff.

Completion of the sale occurred in September 2017.

In what was at times, a complex transaction involving a number of challenging issues to be commercially dealt with to ensure a mutually beneficial t ransaction for both vendor and acquirer, PKF were proud to have assisted IBSAV in reaching this successful outcome.

Managing Director of IBSAV, Ian Ward has accepted an offer to remain with Engie and continue to develop and further grow the Engie brand within the AV market.

Audio Visual SolutionsSeptember 2017

Financial adviser on thesale of the business


Special SituationsUGM Engineers – Special Situation Debt AdvisoryPKF advised UGM on the refinancing of its debt facilities with ANZ during a period of anti-coal sentiment in the banking sector. ANZ was keen to work with UGM’s Directors and management to facilitate refinancing of the facilities with another fi nancier. We worked closely with UGM’s Directors and managers to achieve a refinancing that both UGM and ANZ were very happy with.

Special situations are typically complex and require a deep understanding of all key stakeholders’ positions, objectives and requirements. Sensitivity is required to keep stakeholders sufficiently aligned as well as being able to hold the line when required to achieve an acceptable outcome for all stakeholders.

China Textile Traders – Restructuring of Customer DebtPKF were approached by Jeremy Maclaurin, the owner of China Textile Traders to advise him on the negotiation and restructuring of a large and long outstanding trade debt owed by one of his major customers.

We analysed the customers financial position, cash flows and prospects and worked with Jeremy to develop a debt structure that was viable for the customer and met China Textile Traders’ objectives both with respect to recovery of the debt and establishment of appropriate trading terms going forward that appropriately managed credit risk and were sustainable for both parties.

The customer has met its continuing debt obligations and continues as a valued customer

Mining ServicesNovember 2017

Lead adviser for refinancing of$40m debt facilities

Financial Adviser for restructuringcustomer trade credit

ManufacturingMarch 2018

“PKF has been a long-standing adviser to UGM and were our first choice to advise the Board on the refinancing and debt restructuring. The team worked hard to achieve an outcome that the Board and management are very happy with and that has positioned UGM to achieve its longer term objectives.” Paul Valaire, Finance Director

of China

“I was referred to PKF as we had a large outstanding debt existing from one of our major clients. I engaged PKF to analyse the current debt and our client’s books then structured a robust debt repayment plan that worked for us and our client.

I was very happy with the service provided by the PKF team.“ Jeremy Maclaurin, Director

PKF Australia is a member firm of the PKF International Limited family of

legally independent firms and does not accept any responsibility or liability

for the actions or inactions of any individual member or correspondent firm

or firms.

Meet the Corporate Finance TeamNEWCASTLE

Andrew BeattieDIRECTOR

[email protected]

+61 2 4962 2688

SYDNEY

Andrew JonesDIRECTOR

[email protected]

+61 2 8346 6000

Alan StevensonDIRECTOR

[email protected]

+61 2 8346 6000

Nick NavarraDIRECTOR

[email protected]

+61 2 8346 6000

Vikas NaharSENIOR MANAGER

[email protected]

+61 2 8346 6000

MELBOURNE

Steven PerriPARTNER

[email protected]

+61 3 9679 2222

Alistair RichardsASSOCIATE DIRECTOR

[email protected]

+61 3 9679 2222

Stefan GalboMANAGER

[email protected]

+61 3 9679 2222

Simon RutherfordDIRECTOR

[email protected]

+61 2 4962 2688

pkf deal highlights...pkf deal highlights 2018 3 introduction the deal market fy 2017/18 has seen a...

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