Missouri PE Deal Report 2H 2019
This report provides an overview of private equity activity in the state of Missouri. Our report offers key market place trends and drivers as well as professional, high-level insights on the quantity, type, region, and industry of deals reported in the 2H of 2019 in Missouri. R.L. Hulett & Company uses data from Pitchbook for all accompanying charts. For more information please contact Trevor Hulett at [email protected]. 2020 Outlook Missouri PE Deal Report
Coronavirus Impact S&P 500 Index vs. WTI Crude Oil
As of this writing, the S&P 500 Index had dropped 19% from its all- S&P 500 WTI Crude Oil
time high set in Feb 2020 amid fears over the coronavirus outbreak 3600 70.00 coupled with a correction in the oil and gas market. 65.00 3400 Volatility has been extremely high in the equity markets in recent 60.00 3200 55.00 weeks, which could present challenges in dealmaking and could put 3000 50.00 pressure on transaction volumes over the next 3-6 months. 45.00 2800 According to PitchBook, the global M&A market is already set for its 40.00 2600 slowest first two months since 2006. 35.00 2400 30.00 In the state of Missouri, we expect deal volume in the first half of 2020 to see a similar decline.
Trade War & Tariffs Global Deal Count in Jan & Feb
Under the so-called "phase one" trade deal signed in January, China 8400 pledged to boost US imports by $200bn above 2017 levels and 7400 strengthen intellectual property rules. 6400
The U.S. agreed to halve some of the new tariffs it had imposed on 5400
China. 4400
The pause on trade war is good news for PE investors but the 3400 uncertainty of next step (phase two) is still cause for considerable 2400 volatility in the market. 2006 2008 2010 2012 2014 2016 2018 2020
1 | Confidential 2H 2019 Highlights Missouri PE Deal Report
Marketplace Trends
Deal activity in the state of Missouri declined in the 2nd half of 2019, down 24% compared to the first half of the year.
Despite the decreasing deal volume, deal value actually increased in 2019, led by Bain Capital’s $6 billion buyout of Redcard.
77% of the buyout deals in 2019 were add-ons as pricing on larger platform deals remained very competitive.
B2B sectors such as BPO services, Logistics, and other commercial services remained active in the Missouri market in 2019. Of particular note was the IT sector, which almost doubled 2018’s deal volume, showing that new technologies are attracting attention from PE buyers.
The EV/EBITDA valuation multiple increased slightly in 2019, while EV/Revenue dropped to the range of 1x – 2x from 3x – 4x in 2018.
Key Drivers
As always, good companies are getting plenty of attention as they go to market. Key drivers of interest include: Kansas Columbia • Diversified customer base • Low customer churn City St. Louis • A good handle on key performance • Minimal legal risks in play indicators • Strong and capable management team • Good sources of recurring revenue
• Growth Opportunities • Cutting-edge Technology
2 | Confidential St. Louis – Growing Hub for Agriculture and Tech Missouri PE Deal Report
St. Louis is a growing hub for startups, as well as Agriculture Technology (AgTech) companies. Investments for the future are made, and
companies are moving to the city. Some of the highlights for 2019 include:
The city has been named #2 in the Top 10 Rising Cities for Startups by Forbes Magazine
There has been a +20% tech job growth since 2014 (2nd largest in the country)
Venture capital investments are up 90% compared to the last three years
National Geospatial Intelligence Agency will construct a $1.75bn campus in St. Louis
Bayer backs BioSTL’s new Headquarters with a $1.5bn grant
Bunge, an agriculture giant with more than 31,000 employees, is moving its HQ from NY to St. Louis
Key Drivers
• St. Louis provides an unique geographic location
• Lower business and living cost
• Local Talent (According to TDC, STL has highest concentration of
plant science PhD’s in the world)
3 | Confidential PE Deals Closed by Quarter Missouri PE Deal Report
Deal Activity Records
PE deal activity in the state of Missouri slowed down a bit in the 2H of 2019 to 28 deals, down from 37 the 1H. Of these 28 deals in 2H, the St. Louis area accounts for the largest share at 11 deals, compared to 6 in Kansas City and 1 in Springfield.
30 26 24 25 23 21 21 21 21 20 20 20 18 18 18 17 16 16 15 15 15 15 14 14 14 14 15 13 12 12 12 12 11 11 11 10 10 10 10 10 10 9 9 9 9 10 8 8 7 7 6 5 5 4
0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
4 | Confidential Private Equity Transactions Missouri PE Deal Report
Deal Size Implied EV Date Company Investor Primary Industry Code Transaction Type Transaction Detail City Target Business Description ($mm) ($mm)
03-Dec-19 GME Supply Platte River Equity Distributors/Wholesale PE Growth/Expansion - - - Columbia Distributor of safety equipment.
22-Nov-19 EPR Properties Rosemawr Management Buildings and Property Buyout/LBO Asset Acquisition 454.0 454.0 Kansas City Portfolio of Charter Schools.
19-Nov-19 Thomas McGee Group HarbourVest Partners Insurance Brokers Buyout/LBO Add-on - - Kansas City Provider of brokerage services.
Micro Medical Provider of medical device contract manufacturing 14-Nov-19 Audax Group BPO/Outsource Services Buyout/LBO Add-on - - Saint Louis Instruments services. Provider of electric heating and thermal management 08-Nov-19 ASPEQ Heating Group Industrial Growth Partners Electrical Equipment Buyout/LBO Secondary Buyout - - Saint Louis products. Solus Alternative Asset 04-Nov-19 Jack Cooper Ventures Logistics Buyout/LBO - 450.0 450.0 Kansas City Provider of transportation and logistics services. Management ABI Document Support Corporate 01-Nov-19 BV Investment Partners Medical Records Systems Buyout/LBO - - Saint Louis Provider of document retrieval services. Services Divestiture Converter of engineered plastics and polymer 18-Oct-19 Spartech Nautic Partners Industrial Supplies and Parts Buyout/LBO Secondary Buyout - - Maryland Heights products.
04-Oct-19 Redcard Bain Capital Medical Records Systems Buyout/LBO Add-on 6,000.0 6,000.0 Saint Louis Provider of claims services.
03-Oct-19 Banner Solutions Tailwind Capital Distributors/Wholesale Buyout/LBO Secondary Buyout - - Kansas City Distributor of building hardware.
Macquarie Asset 03-Sep-19 Bluebird Network Telecommunication Buyout/LBO - - - Columbia Provider of telecommunication services. Management
30-Aug-19 Vast Broadband Oak Hill Capital Internet Service Providers PE Growth/Expansion Recapitalization - - Sikeston Provider of internet services.
09-Aug-19 Vanguard Packaging Dunes Point Capital Paper Containers & Packaging Buyout/LBO - - - Kansas City Designer and manufacturer of packaging products.
06-Aug-19 Azimuth Energy Oakland Capital Partners Construction and Engineering Buyout/LBO - - - Saint Louis Operator of an engineering and construction company. Largest Transaction
Seller / Target Transaction Type Buyer / Investor Deal Size
Buyout/LBO USD $6,000mm
5 | Confidential Private Equity Transactions Missouri PE Deal Report
Deal Size Implied EV Date Company Investor Primary Industry Code Transaction Type Transaction Detail City Target Business Description ($mm) ($mm) Provider of insurance, risk and business support 06-Aug-19 Cretcher Heartland AlpInvest Partners Other Commercial Services Buyout/LBO Add-on - - Kansas City services. Provider of an online application for paperless board 05-Aug-19 BoardPaq Clearlake Capital Group Business/Productivity Software Buyout/LBO Add-on - - Saint Charles meetings. Summit Bank of Kansas 05-Aug-19 Castle Creek Capital Regional Banks Buyout/LBO Add-on - - Lee's Summit Provider of personal and commercial banking. City
01-Aug-19 Federal Steel Supply V&A Capital Distributors/Wholesale Buyout/LBO - - - Chesterfield Distributor of steel pipes, fittings and flanges.
01-Aug-19 InterCarrier Networks Grain Management Communications and Networking Buyout/LBO Add-on - - Clayton Provider of critical bandwidth infrastructure solutions.
Provider of insurance products and consultancy 01-Aug-19 The Meyer Group LNC Partners Insurance Brokers Buyout/LBO Add-on - - Saint Louis services. Underground Records Access Information 26-Jul-19 Other Commercial Services Buyout/LBO Add-on - - Columbia Provider of access and information management. Management Protected
23-Jul-19 Grant Cooper Diversified Search Human Capital Services Buyout/LBO Add-on - - Saint Louis Provider of staffing and recruitment services.
19-Jul-19 2e Creative Fishawack Media and Information Services Buyout/LBO Add-on - - Saint Louis Provider of healthcare marketing strategy services.
18-Jul-19 Anchor Packaging The Jordan Company Plastic Containers & Packaging Buyout/LBO - - - Ballwin Manufacturer of rigid packaging products.
11-Jul-19 Thrive Autism Solutions Blue Sprig Pediatrics Clinics/Outpatient Services Buyout/LBO Add-on - - Saint Louis Provider of applied behavior analysis therapy.
09-Jul-19 Lew's Fishing BDT Capital Partners Recreational Goods Buyout/LBO Secondary Buyout - - Springfield Supplier of fishing equipment and tackle.
08-Jul-19 Meridian Loyalty InComm Media and Information Services Buyout/LBO Add-on - - Saint Louis Operator of a full-service incentives business.
Developer of an application for access to ATM 03-Jul-19 Just Cash Canaccord Genuity Financial Software Buyout/LBO Add-on - - Saint Louis networks.
6 | Confidential Active PE Investors in Missouri Missouri PE Deal Report
# of Investments Company Location Targets (2019)
St. Louis 12
St. Louis 9
Kansas 6 City
St. Louis 6
Ballwin 6
7 | Confidential PE Deals Closed by Type Missouri PE Deal Report
The Consolidation Game 100% 90% 80% 12 20 20 19 26 31 28 42 We saw 77% of PE transactions closed 70% 19 27 36 37 as add-ons in the 2H of 2019. This is 60% 50% 10 3 3 up marginally from 65% in the 7 13 40% 12 10 4 5 14 15 9 previous year and up from 49% in 30% 20% 21 18 22 10 10 19 22 19 2008. We expect add-ons to remain a 10% 13 14 16 23 high percentage of PE transactions. 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Buyout/LBO PE Growth/Expansion Platform Creation Add-On
70 90% 77% 60 80% 70% 50
60% 42
40 50%
31 37
26 36 20 40%
30 20
28 19 27 30% 20
19 20%
12
23
22 22
10 21
19 19
18 10%
16
14
13
10 10 0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Buyout/LBO (Non Add-On) Add-On Add-On %
8 | Confidential PE Deals by Sector Missouri PE Deal Report
B2B biggest by deal count
100% B2B sector has been the largest sector in 2 4 6 Missouri PE Deal activity. 13 deals have 90% 5 8 6 13 8 3 5 4 3 11 been completed in the 2H 2019, 80% 15 6 6 4 5 contributing to a total of 28 deals in the 11 8 year. Both B2B and B2C deals decreased 70% 11 4 9 18 slightly in terms of deal count compared 60% 7 11 10 6 to 2018, down 24% and 33%, 15 50% respectively. 9 6 9 7 10 40% 6 8 2019 saw a total of 11 deals closed in the 30% IT sector, which almost doubled the prior 24 15 27 24 37 20% 26 26 28 year’s deals. Of note was a significant 15 10 23 19 increase in the second half of 2019, 10% leading by the acquisition of Bluebird 0% Network by Macquarie Asset 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Management and the Diligent takeover of BoardPaq. B2B B2C Energy Financial Services Healthcare IT Materials and Resources
9 | Confidential PE-Backed Exits by Type Missouri PE Deal Report
Persistence of SBO Exits
30 Secondary buyouts (SBOs) have been a popular exit type over the last few years. However, Missouri 25 has seen a slow down in these 8 types of exits in 2019 as well as in 20 corporate acquisitions. 13 12
15 8 8
7 4 1 10 6 6 2 17 12 4 5 10 11 11 11 8 2 7 7 6 4 2 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Corporate Acquisitions IPO Secondary Buyouts
10 | Confidential Inventory of Currently PE-Backed Companies Missouri PE Deal Report
PE holdings on the rise The number of companies in Missouri held by Private Equity firms has increased over the past decade. This demonstrates the growth and appeal of the PE business model. Dry powder for investments is still largely available in the private markets. We expect this trend to continue.
600
499 500
411 400 # of PE Backed 327 Companies
277 300 2012-2019 224 2007 - 2011 182 2000 - 2006 200 146 Pre-2000 117 89 74 100 55 62 29 41 16 21 2 4 6 6 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
11 | Confidential Valuation Multiples Missouri PE Deal Report
Total Capital Invested Leverage 25 25.00x
20 20.00x
15 15.00x
10 10.00x
5 5.00x
0 0.00x 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Debt/ Equity Debt/ EBITDA
EV/EBITDA EV/Revenue 80.00x 6.00x
70.00x 5.00x 60.00x 4.00x 50.00x
40.00x 3.00x
30.00x 2.00x 20.00x 1.00x 10.00x
0.00x 0.00x 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
12 | Confidential Strategic Acquisitions Missouri PE Deal Report
Note: Strategic acquisitions are not analyzed in our report.
Deal Size EV Date Company Investor Primary Industry Code City Target Business Description ($mm) EBITDA Revenue
31-Dec-19 W. L. Cassell and Associates IMEG Construction and Engineering - - - Kansas City Provider of engineering services
23-Dec-19 World's Fair Donuts - Food Products - - - Saint Louis Retailer of donuts Provider of staffing services focusing on industrial and 02-Dec-19 AmeriStaff QPS Employment Group Human Capital Services - - - Saint. Peters clerical staffing 25-Nov-19 Tuva Interactive Alliance Technologies Software Development Applications - - - Saint Louis Operator of a digital agency
19-Nov-19 Catastrophe Cleaning & Restoration Interstate Restoration Other Commercial Services - - - Maryland Heights Provider of commercial restoration services
12-Nov-19 Element - The Data Agency - Media and Information Services (B2B) - - - Kansas City Provider of medical media services
12-Nov-19 Smoker's Outlet Smoker Friendly Specialty Retail - - - Wright City Operator of retail chain selling smoking products
05-Nov-19 Electronic Check Services Surge Holdings Telecommunications Service Providers - - - Springfield Provider of communication services Supplier of quality millwork products to the greater 30-Oct-19 Pacific Mutual Door Hardwoods Distribution Distributors/Wholesale 34.5 - - Kansas City kansas city area 25-Oct-19 Kozeny & McCubbin Buckley Madole P.C Legal Services (B2B) - - - Saint Louis Provider of legal services
24-Oct-19 Timberlake Engineering Customengr Construction and Engineering - - - Columbia Provider of engineering consulting services
01-Oct-19 NorthStar Battery EnerSys Energy Storage 182.5 13.04x 1.16x Springfield Designer and manufacturer of lead-acid batteries
01-Oct-19 Bank of Cairo & Moberly RMB Bancshares Regional Banks - - - Moberly Provider of banking services to its clients Provider of supply chain, business information, 01-Oct-19 Resource Optimization & Innovation HealthTrust Purchasing Group Consulting Services (B2B) - - - Saint Louis business model, and manufacturing solutions 25-Sep-19 The Printing Source Garlich Printing Printing Services (B2B) - - - Saint Louis Provider of printing services for commercial customers owns and operates day ski and overnight drive ski 24-Sep-19 Peak Resorts Vail Resorts Holding Companies 265.0 5.73x 1.34x Wildwood resorts through its wholly-owned subsidiaries Provider of dealership service offering brand inventory 12-Sep-19 Wiethop Truck Sales Summit Truck Group Road - - - Cape Girardeau for medium, heavy and severe service trucks Provider of a web-based marketing automation 10-Sep-19 Hatchbuck Benchmark Internet Group Automation/Workflow Software - - - Saint Louis platform 06-Sep-19 Atlas Team Deveron UAS Government 0.1 Kansas City Provider of digital agricultural solutions
04-Sep-19 Kansas City Royals - Other Restaurants, Hotels and Leisure - - - Kansas City Operator of a baseball team
13 | Confidential Strategic Acquisitions Missouri PE Deal Report
Deal Size EV Date Company Investor Primary Industry Code City Target Business Description ($mm) EBITDA Revenue Developer of a kidney monitoring system designed to 04-Sep-19 MediBeacon Huadong Medicine Company Monitoring Equipment 34.3 Saint Louis fetch critical information about the renal function 03-Sep-19 Lowenhaupt Global Advisors CIBC Private Wealth Management Asset Management - - - Saint Louis Provider of investment advise
01-Sep-19 DL Insurance Group Lakenan Insurance agency Property and Casualty Insurance - - - Chesterfield Provider of Property Insurance services Manufacturer of refractory materials for the container 30-Aug-19 Bucher Emhart Glass Rath Raw Materials (Non-Wood) - - - Owensville glass industry 27-Aug-19 Pulse Systems Harris Healthcare Enterprise Systems (Healthcare) - - - Kansas City Developer of health care information system software
21-Aug-19 Perched Elasticsearch Education and Training Services (B2B) - - - Lohman Provider of education and consulting services
16-Aug-19 10/10 Taxi WHC Worldwide Automotive - - - Kansas City Provider of taxi services
13-Aug-19 Oak Street Sales WHC Worldwide Other Commercial Services - - - Kansas City Provider of transport acquisition services
02-Aug-19 QM Power KCK Group Electrical Equipment - - - Kansas City Developer of an electric motor technology Liberty Bancorp Inc is a holding company for 01-Aug-19 BankLiberty Central Bank Regional Banks 103.7 Kansas City BankLiberty, which is a full-service community bank 31-Jul-19 Center Oil Company BioUrja Group Distributors/Wholesale - - - Saint Louis Wholesaler of gasoline, diesel and ethanol
31-Jul-19 PenTech Computer Company NWO IT Services IT Consulting and Outsourcing - - - Saint Louis Provider of managed IT services
29-Jul-19 Stanbury Uniforms Varsity Spirit Clothing - - - Brookfield Designer and manufacturer of uniforms
26-Jul-19 American Railcar Industries The Greenbrier Companies Rail 418.3 - - Saint Charles Manufacturer of hopper and tank railcars
12-Jul-19 Navvis Healthcare - Consulting Services (B2B) 4.0 - - Saint Louis Provider of healthcare consultancy services
11-Jul-19 CADMIN Services D3 Technologies IT Consulting and Outsourcing - - - O'Fallon Provider of Information Technology (IT) services
10-Jul-19 Transmission Digest Babcox Publications Media and Information Services (B2B) - - - Springfield Publisher of an automotive journal
01-Jul-19 Air Industrial Resource Sullair Distributors/Wholesale - - - Kansas City Distributor of compressed air equipments
01-Jul-19 American Piping Products Blue Sprig Pediatrics Distributors/Wholesale 3.2 - - Chesterfield Distributor of pipes and fittings
14 | Confidential Active Strategic Investors in Missouri Missouri PE Deal Report
# of Investments Company Location Targets (2019)
St. Louis 5
St. Louis 5
St. Louis 5
St. Louis 3
Kansas 2 City
15 | Confidential About R.L. Hulett & Company
Founded Experience Transactions Closed 1981 39 years 230+
Second generation family-owned, middle-market investment bank
Focused on advising middle-market businesses with revenues from $10 to $250 million
Small Business Monthly’s Best M&A Providers: 2018-2020
Named one of “Top 100 Very Best Middle Market M&A Advisory Firms in the U.S.” by Axial Markets in 2017
CorporateINTL Magazine’s M&A Advisor of the Year: 2014-2019
Silver Sponsor in the Association for Corporate Growth
Member firm in the Alliance for M&A Advisors, an international network of over 900 M&A professionals
16 | Confidential Recent Transactions
has sold substantially all of its assets to
The Boeing Company
has completed a has been acquired by recapitalization with
17 | Confidential RLH Team
. R.L. Hulett & Company is one of the most established middle-market investment banking firms in St. Louis . 9 professionals from a variety of backgrounds
Managing Directors
Bob Hulett Founder & Chairman, over five decades of experience as Investment Banker and CPA Trevor Hulett CPA with over 25 years of Investment banking, Corporate Finance and Public Accounting experience
Directors
Pete Fischer 15 years of manufacturing management and 10 years of financial industry experience Holly Hart CPA with 15 years of corporate development and Big 4 transaction group experience David Vass 30 years of business executive level and business management experience in multiple industries
Analyst Senior Advisors
Jason Qiao Turk Lewis Bill Sheridan
Marketing & Administration
Cheryl Morris 30 years of experience in marketing and office administration
18 | Confidential Our Team
At R.L. Hulett and Co. we are ready to assist you or your clients in determining a succession plan and process. We have advised on over 230 transactions over our 39 years in business.
Robert L. Hulett R. Trevor Hulett David T. Vass [email protected] | (314) 721-0607 x 103 [email protected] | (314) 721-0607 x 112 [email protected] | (314) 721-0607 x 115 Chairman & Managing Director Managing Director Director
Mr. Hulett founded the firm in 1981 and has Mr. Hulett has led M&A transactions in a variety of Mr. Vass has over 30 years of business management negotiated and completed more than 200 transactions industries including manufacturing/industrial, experience including more than 10 years as President throughout his career. He began his career as a software development/IT, business services and of a highly successful consumer products Certified Public Accountant and practiced with Peat, value-added distribution. Prior to joining the firm, he manufacturing company with revenues exceeding $25 Marwick, Mitchell & Co. in St. Louis as an Audit held senior level accounting and financial million. During this time, he not only reversed a Manager and in New York as the Director of Training management positions in both public accounting and declining sales and earnings trend, but increased both for Private Business. Mr. Hulett has also served as large corporate environment. Mr. Hulett holds his sales and operating income over 100%. In addition, he Chief Executive & Board Member for various middle Series 62, 63 and 79 Securities registration. Mr. Hulett has spent over 20 years at the executive level of Vice market companies. Mr. Hulett earned his MBA from earned a Bachelor’s Degree in Accounting from the President of Sales and Business Development. Mr. Lindenwood University. University of Missouri, Columbia. Vass earned his MBA from the University of Michigan.
19 | Confidential Methodology Missouri PE Deal Report 2H 2019
Private Equity Backed Missouri Private Missouri Private Missouri Companies Equity Deals Equity Firms
Missouri private equity backed companies Private equity deals in Missouri are defined Missouri private equity firms are defined in are defined in this report as companies that in this report as investments made by this report as private-equity firms are headquartered in the state of Missouri private equity firms or their portfolio headquartered in Missouri that are actively and financially backed in whole or in part by companies. These deals include companies investing or raising funds in the 2H of 2019. private equity firms. headquartered in Missouri that are categorized as Buyout/LBO, secondary buyouts, public to private, growth/expansion, recapitalization, or PIPE. Real estate is not included in our data.
20 | Confidential