The red-hot mergers-and-acquisitions market of the last several years cooled during the first half of 2016.
The slowdown, folÂlowÂing a couÂple annual reÂcords for deals and dolÂlar volÂumes, was typiÂcal amid unÂcerÂtainÂty over the pendÂing U.S. presÂiÂdenÂtial eÂlecÂtion, risÂing prices in a frothÂy marÂket and conÂcerns that most of the good targets alÂreadÂy are taken.
Prices have reached 10-year highÂs, Bloomberg reÂportÂed reÂcentÂly, as buyers seek growth through acÂquiÂsiÂtions in a low-inÂflaÂtion, slow-growth enÂviÂronÂment in many inÂdusÂtries. AcÂquirÂers paid a meÂdiÂan of 11 times tarÂget comÂpanies EBIDTA — or earnÂings beÂfore inÂterÂest, taxÂes, deÂpreÂciÂaÂtion and amÂorÂtiÂzaÂtion.
"Things have slowed down a bit but not enÂough so that peoÂple are worÂried," said Bill Jonason, a vetÂerÂan merÂgers-and-acÂquiÂsiÂtion atÂtorÂney at DorÂsey & WhitÂney in Minneapolis. "Total deals in terms of numÂbers and value were down in the first half of 2016. Some of that is beÂcause 2014 and 2015 were reÂalÂly good years.
"MayÂbe 2016 will just get back to norÂmal. I'm busy workÂing on deals that likeÂly will close in the seÂcond half of the year."
NaÂtionÂalÂly, there were 4,937 transÂacÂtions durÂing the first half valued at $757.3 bilÂlion, comÂpared with 5,321 deals valued at $910.74 billion durÂing the first six months of 2015, acÂcordÂing to Dealogic, which tracks merÂgers and public stock ofÂferÂings.
In Minnesota, there were 92 deals so far this year, comÂpared to 101 durÂing the first half of last year. HowÂever, the value of the transÂacÂtions in which a Minnesota firm was a buyÂer or sellÂer rose in 2016 to $52.5 bilÂlion from $20.9 bilÂlion durÂing the first six months of 2015.
The value upÂtick was drivÂen by two large transÂacÂtions aÂmong public comÂpanies: Valspar's $11.3 bilÂlion sale of the coatÂings manÂuÂfacÂturÂer to riÂval SherÂwin-Williams. And St. Jude Medical's $25 bilÂlion sale to AbÂbott Laboratories.
AcÂcordÂing to Dealogic, the numÂber of megadeals, those valued greatÂer than $10 bilÂlion, dropped off in the first half of 2016. GlobÂalÂly there were 24 big deals in first half of 2015 comÂpared to 16 in the first half of 2016. Half were outsiders buying U.S. tarÂgets. The Abbott-St. Jude deal was third largÂest deal by dolÂlar value anÂnounced in the first half. The deal is expected to close by year's end.
Those tiÂtanÂic transÂacÂtions got the headÂlines, but the mergers-and-acquisitions marÂket is domiÂnatÂed by nuÂmerÂous sales of priÂvate comÂpanies.
One of the most intriguing private deals in the year's first half wasn't even anÂnounced. It inÂvolved the sale of a $30 milÂlion-plus revenue day-care proÂvidÂer that was startÂed in 2001 by a stuÂdent in his University of St. Thomas dorÂm room.
Joe Keeley, 35, said he sold his comÂpany, College Nannies & Tutors, which proÂvides baby sitÂters on deÂmand through 100 franÂchiÂsees across the counÂtry to Bright HoÂriÂzons, the BosÂton-based, $1.5 bilÂlion revenue opÂerÂaÂtor of day cares and on-deÂmand sitÂters for an unÂdisÂclosed sum.
"I had to deÂterÂmine what's the right anÂswer to acÂcelÂerÂate the comÂpany and when a $1.5 bilÂlion apÂproachÂes you …" said Keeley, who will stay to run the nanÂny busiÂness for Bright HoÂriÂzons. "And we had been kind of datÂing for eight years. This gives us a chance to play a bit, if you will, with the house's monÂey."
Keeley's comÂpany acÂtuÂalÂly did about $10 milÂlion in busiÂness anÂnuÂalÂly through Bright HoÂriÂzons.
Bright HoÂriÂzons has about 900 day-care centers. They also sell "famÂiÂly serÂvices" to comÂpanies such as 3M, Gray Plant Mooty and GoldÂman Sachs, as part of a fast-growÂing diÂviÂsion called Care AdÂvanÂtage. If an employee can't get to work, beÂcause of slightÂly ill child or a day-care proÂvidÂer who is ill or on vaÂcaÂtion, Bright HoÂriÂzons will send an in-home care proÂvidÂer who acÂtuÂalÂly is a conÂtractÂed College NanÂnies employees.
That's made posÂsiÂble through the Nannies "my sitÂter" softÂware apÂpliÂcaÂtion.
"I'm not done yet," Keeley said. "I'm exÂcitÂed to stay on. This also is best for our franÂchiÂsees."
Keeley, who hails from Grafton, N.D., employs about 3,500 people at the Nannies. That's more than the population of his hometown.
Meanwhile no Minnesota company has gone public so far in 2016. Capital-hungry companies are choosing to raise cash through low-cost debt or selling themselves to strategic buyers, private equity or other institutional owners.
Neal St. Anthony • 612-673-7144 • neal.st.anthony@startribune.com
Patrick Kennedy • 612-673-7926 • patrick.kennedy@startribune.com