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2005 Year In Review
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2005 Year In Review
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Dear Friends,
McColl Partners would like to thank you for your continued support in making 2005 another record year for the Firm. Highlighting the Firm’s activities, McColl Partners has now successfully advised on over
$1.7 billion of middle-market transactions, including numerous strategic mergers and acquisitions, private capital raises, cross-border transactions, and the initial advisory assignments of the recently launched Financial Institutions Group. |
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In the market every day, the Firm continues to see record levels of enthusiasm
from both strategic industry participants and private capital groups. With merger, acquisition, and recapitalization activity at robust levels as we enter 2006,
McColl Partners is currently executing transactions valued at $3.0 billion for clients located in North America, South America, and Europe.
As always, McColl Partners appreciates your continuing support in its efforts.
Kindest personal regards.
Sincerely,
Hugh L. McColl, Jr.
Chairman, The McColl Group LLC
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Opportune Time to Sell for Privately Held Businesses
According to Mergerstat, the number of announced mergers and acquisitions (“M&A”) transactions in 2005 rose to 29,585 from an already robust 28,302 in 2004. Global aggregate M&A transaction value soared to approximately $2.0 trillion in 2005 from approximately $1.5 trillion in 2004, with the average deal size rising to $157 million in 2005 from $128 million in 2004. Generally positive economic trends, robust consumer spending, and abundant and inexpensive debt capital have strengthened strategic acquirors’ desire to compete in an M&A market in which the competition for desirable assets from private equity is increasingly relevant. Such a robust M&A environment has yielded an opportune time for entrepreneurs and other privately held business owners to seek growth capital and/or liquidity.
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Indicative Transactions:
- McColl Partners advised eSmartloan.com, an online mortgage originator, on
its sale to Capital One Financial Corporation. Through the partnership, eSmartloan.com’s founder, Lance Melber, achieved access to a broader platform with adequate capitalization and marketing acumen to rapidly grow his business on a national scale.
- McColl Partners advised Zymed Laboratories, Inc. (“Zymed”), a custom antibody developer and manufacturer, on its sale to Invitrogen Corporation (“Invitrogen”). Invitrogen’s acquisition of Zymed enabled Zymed’s founder,
Dr. Dean Zao, to diversify his personal financial assets while providing an international platform on which Zymed will remain at the leading edge of life sciences applications.
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Private Capital
According to Thomson Venture Economics, 159 private capital investment funds raised $86.2 billion in 2005. During 2004, 129 private capital investment funds raised
$51.6 billion. With debt and equity funds reaching record levels, private capital investors are aggressively pursuing opportunities to deploy funds through the acquisition and recapitalization of middle-market companies. Such a competitive environment is driving middle-market company valuations higher while leading to more attractive contract terms than have been achieved in recent years. Private equity firms and debt providers are rapidly recapitalizing entrepreneur-run businesses, enabling entrepreneurs to institutionalize and grow their businesses while providing liquidity to assist them in diversifying their personal holdings without the regulatory, financial, and administrative burdens required by the public markets. Also, the willingness of the debt capital markets to lend aggressively on cash flow has enabled owners of privately held businesses, if they desire, to achieve both growth capital and liquidity objectives while minimizing ownership dilution.
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Indicative Transactions:
- McColl Partners advised Frontier Capital, Ballast Point Venture Partners, and certain members of Optical Experts Manufacturing, Inc.’s (“OEM”) management, on the sale of OEM, one of the largest independent optical disc replicators, to Harbert Management Corporation and Prism Capital. The sale enabled OEM to provide liquidity to its non-operating shareholder base while allowing the operating shareholders to augment their ownership interest.
- McColl Partners advised Ridge Capital Partners, Merritt Capital, and Aegon Investment Management ("Shareholders") on the sale of SP Industries, Inc., a global supplier of specialty glassware, environmental control chambers, and lyophilizers. The sale enabled Shareholders to receive an attractive return on their investment.
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Cross-Border Transactions
Based on a recent Mergermarket survey, 61% of survey participants expect an increase in middle-market, cross-border mergers and acquisitions over the next
six months compared to only 48% six months ago (as of August 30, 2005). Moreover,
75% of participants expect more cross-border activity involving private equity groups in the next six months than in the previous six months. With such enthusiasm around cross-border transactions, middle-market companies are more frequently finding themselves in a unique position to benefit from an international partner or achieve liquidity at a premium valuation due to their ability to enhance shareholder value for an acquiror. Corporations, as well as private equity groups, are increasingly attracted to foreign assets in order to gain an entrance into new geographic and product markets, achieve global scale economies, and expand access to raw materials.
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Indicative Transactions:
- McColl Partners advised Texas Growth Fund and Austin Ventures on the sale
of Southern Star Concrete, Inc. (“Southern Star”), a leading ready mixed concrete operator, to Compañia de Cemento Argos S.A. (“Argos”) of Colombia, South America. With its acquisition of Southern Star, Argos enters the U.S. ready mixed concrete industry as the leading participant in two of the top ten, fastest-growing metropolitan statistical areas in the United States. Additionally, the acquisition provides Argos with the opportunity to optimize its global cement and concrete operations through the creation of an integrated, global supply chain.
- McColl Partners advised BURLE INDUSTRIES, INC. (“BURLE”), a leading manufacturer of highly engineered components for health care and military equipment, on its sale to PHOTONIS-DEP B.V. (“PHOTONIS”), a portfolio company of France-based AXA Private Equity. AXA Private Equity and PHOTONIS pursued the acquisition of BURLE for various reasons, but several cross-boarder aspects contributed significantly to their interest in the company. BURLE enables PHOTONIS to reach and maintain its U.S. customer base through its substantial operations in the western hemisphere. In addition, BURLE’s dollar-denominated manufacturing operations provide a natural hedge against currency fluctuations, as a significant portion of PHOTONIS’ sales are transacted in U.S. dollar denominations.
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Financial Institutions Consolidation
In 2005, the banking industry experienced continued consolidation especially of large depository institutions. With smaller depository institutions trading at higher share valuations on public markets than large depository institutions, larger institutions typically were unwilling to pay a premium for smaller institutions. Continuing regulatory initiatives, such as The Sarbanes-Oxley Act and the Bank Secrecy Act; a difficult earnings environment; and more realistic price expectations should result in more bank mergers in 2006 than in 2005, creating opportunities for acquisitive bank management.
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Indicative Transactions:
- McColl Partners’ Financial Institutions Group advised Columbia, South
Carolina-based SCBT Financial Corporation (“SCBT”) on its acquisition of
Murrells Inlet-based Sun Bancshares, Inc., which SCBT utilized to gain entry into the “Grand Strand” region of coastal South Carolina, one of the fastest-growing areas in the Southeast.
- McColl Partners’ Financial Institutions Group advised Hickory, North
Carolina-based Integrity Financial Corp. on its recently announced merger with Asheboro, North Carolina-based FNB Corp., which will create the eighth-largest banking institution in North Carolina with 41 offices covering 17 counties and
pro forma assets of $1.8 billion.
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2005 Year in Review
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About McColl Partners
McColl Partners is an independent investment banking firm specializing in the needs of management and owners of middle-market companies. With significant experience working with entrepreneurs, family-owned businesses, public companies, private equity groups, and divisions of larger companies, the firm is dedicated to offering strategic advice and assistance to its clients regarding mergers and acquisitions and private capital raising assignments.
To learn more about McColl Partners, please call David Vorhoff at 704-333-0525. More information about McColl Partners can be found at www.mccollpartners.com.
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