PayChex takes Oasis Outsourcing to the bank

BY Richard Summerfield

Payroll processor PayChex Inc has agreed to acquire Oasis Outsourcing Acquisition Corp for $1.2bn in cash.

The deal is expected to be financed through a combination of cash on PayChex’s balance sheet and borrowings under existing credit facilities or new debt.

“This acquisition reinforces PayChex’s commitment to meet the HR technology and advisory needs of our clients and their employees in ways that are transforming their experience, and accelerates top-line growth,” said Martin Mucci, president and chief executive of PayChex.

He continued: “We know there’s a growing need today among small and mid-sized businesses for HR technology and outsourcing services, especially given the ever-increasing number of regulations around issues like paid family leave, health care, and anti-harassment training requirements. Those businesses need the integrated technology and expert support PayChex offers, expertise that grows with the addition of Oasis. This acquisition will strengthen our PEO growth strategy, gain scale for new products with our insurance carrier partners, provide a new client base to offer PayChex retirement and time and attendance products, and augment our experienced management team. This is a great time for our two companies to come together.”

For PayChex, the deal represents an opportunity to significantly advance its position in HR outsourcing, leveraging the scope of its technology platform and providing new clients access to PayChex’s products and technology-enabled services. As a result of the deal, PayChex will now serve more than 1.4 million worksite employees through its HR outsourcing service. PayChex believes that the deal will generate a number of revenue and cost synergies.

Oasis serves more than 8400 clients across all 50 states of the US with HR solutions, employee benefits, payroll administration and risk management services.

“We are delighted to announce our agreement to join forces with PayChex,” said Mark Perlberg, president and chief executive of Oasis. “Our combined company will have enhanced capacity to develop and deliver critical human resources and payroll solutions for the clients and employees we have the privilege to serve.”

News: Paychex to buy outsourcing firm Oasis for $1.2 billion

Boston Scientific buys BTG in $4.2bn deal

BY Richard Summerfield

Boston Scientific Corp is to acquire British rival BTG Corp in an all-cash $4.2bn deal which will improve the US firm’s offering in the field of interventional medicine.

The deal will see Boston Scientific pay 840 pence in cash per share for BTG, a 37 percent premium over the company’s closing price on Monday and a 50 percent premium to BTG’s 90-day trading average. Completion of the deal is expected in mid-2019, subject to regulatory approval and customary closing conditions.

“The acquisition of BTG and its rapidly growing peripheral interventional portfolio is an exciting extension of our category leadership strategy that will augment our capabilities in important areas of unmet need such as cancer and pulmonary embolism,” said Michael F. Mahoney, chairman and chief executive of Boston Scientific. “We are confident that the addition of these therapies to our portfolio will ultimately advance patient care in ways that could not be realised by either company alone, while also allowing us to realise substantial synergies and provide a strong return for investors.”

Boston Scientific expects the acquisition to deliver short- and long-term benefits, including strengthening the company’s offerings in the area of cancer treatment through the addition of BTG’s interventional oncology division.

The acquisition is Boston Scientific’s biggest since 2005, when it acquired device maker Guidant for $25.2bn. The company will finance the deal through a combination of cash on hand and proceeds from debt financing. Boston Scientific said that the acquisition of BTG would boost adjusted earnings by two to three cents a share in 2019 and would be increasingly accretive thereafter.

“We believe Boston Scientific’s offer represents an attractive proposition for BTG Shareholders with a significant premium in cash and recognises the value created by the support of our long term large shareholders,” said Garry Watts, chairman of BTG. “We are proud of what BTG has become and of all BTG employees for their contributions.”

“I would like to thank and acknowledge all BTG colleagues for building a leading global healthcare company,” said Louise Makin, chief executive of BTG. “Our interventional medicine portfolio delivers value to patients and is a significant growth driver for the business, and we’re also proud of our highly profitable pharmaceuticals business focused on critical care products.”

News: Boston Scientific builds medical technology with $4.2 billion BTG deal

Global M&A deals to increase over next six months despite regional imbalances, claims new report

BY Fraser Tennant

Global mergers and acquisitions (M&A) activity over the next six months is expected to increase by around 6 percent year-over-year (YOY) compared to the same period in 2018, according to Intralinks’ ‘Deal Flow Predictor’.

However, while the short-term outlook for M&A activity is positive, particularly in the Asia-Pacific (APAC) region, regional imbalances and signs of stress underpin the market’s recent growth.

Drilling down, in APAC, the number of announced M&A deals is predicted to increase by around 14 percent YOY over the next six months, within a range of 7 to 20 percent, led by the technology, media, and telecom (TMT), energy and power, and materials sectors. Furthermore, all APAC regions are showing double-digit increases in their volumes of early-stage M&A activity.

In contrast, the number of announced M&A deals in Europe, the Middle East & Africa is forecast to remain flat YOY during the six months ending Q1 2019. Among the five largest European economies, over the next six months, France, Italy and the UK are expected to show the highest growth in M&A announcements, whereas levels of M&A announcements are expected to be flat in Germany and to decline in Spain.

“Structurally, YOY growth in M&A activity in the first nine months of 2018 has exclusively been driven by the Asia Pacific region,” said Philip Whitchelo, Intralinks’ vice president of strategic business & corporate development. “The number of announced deals increased by 6 percent compared to a 7 percent decline in the rest of the world.”

In terms of North America, the number of announced M&A deals is predicted to increase by around 3 percent YOY over the next six months, led by the real estate, industrial, and materials sectors. However, in Latin America (LATAM), the number of M&A deals is predicted to decrease by around 5 percent YOY over the next six months, with Argentina highest, Brazil declining and Mexico flat.

“There are also warning signs of market stress such as rising US interest rates, declining global equity markets, overstretched M&A valuation levels and increasing protectionism against cross-border M&A deals and global trade flows,” adds Mr Whitchelo. “Taken together, these suggest that the current M&A up-cycle may be nearing its peak.”

Intralinks forecasts the number of future M&A announcements by tracking early-stage M&A activity – deals that are, on average, six months away from being publicly announced.

Report: Deal Flow Predictor

SAP to acquire Qualtrics International

BY Richard Summerfield

German enterprise software behemoth SAP is to acquire Qualtrics International Inc for $8bn just as the company was about to go public. The all-cash deal, which is expected to close in the first half of 2019, is part of SAP’s push to enhance its customer-facing business.

Qualtrics, which filed for an IPO in October, recorded a profit of $2.6m on $289.9m in revenue in 2017. The company’s 2017 revenue was up 52 percent on 2016. Qualtrics expects 2018 revenue to exceed $400m. The company’s chief executive Ryan Smith said that the proposed IPO would have valued Qualtrics at more than $6bn. Mr Smith, who co-founded the company in 2002, will continue to serve as its CEO. Following the completion of the deal, Qualtrics will become part of SAP’s Cloud Business Group. SAP, by contrast, reported revenue of more than $26bn in 2017.

SAP will fund the deal through $7.9bn of financing that it secured to cover the purchase price and acquisition-related costs for the deal, which has already been approved by both companies’ boards and Qualtrics’ shareholders.

“We continually seek out transformational opportunities – today’s announcement is exactly that,” said Bill McDermott, CEO of SAP. “Together, SAP and Qualtrics represent a new paradigm, similar to market-making shifts in personal operating systems, smart devices and social networks. SAP already touches 77 percent of the world’s transactions. When you combine our operational data with Qualtrics’ experience data, we will accelerate the XM category with an end-to-end solution with immediate global scale. For Qualtrics, this introduces a dynamic new partner with the belief, passion and scale to bring experience management to millions of customers around the world.”

“Our mission is to help organisations deliver the experiences that turn their customers into fanatics, employees into ambassadors, products into obsessions and brands into religions,” said Mr Smith. “Supported by a global team of over 95,000, SAP will help us scale faster and achieve our mission on a broader stage. This will put the XM Platform everywhere overnight. We could not be more excited to join forces with Bill and the SAP team in this once-in-a-generation opportunity to power the experience economy.”

Qualtrics had planned to raise around $495m in its IPO – around double the company’s most recent valuation. Mr Smith noted that Qualtrics’ IPO was “13 times oversubscribed” due to high investor demand. However, the sale to SAP was deemed more to be more advantageous to the company’s shareholders.

The deal for Qualtrics is the second largest acquisition in SAP’s history. The company’s 2014 purchase of travel and expense software firm Concur was valued at $8.3bn.

News: SAP snatches sentiment tracker Qualtrics from verge of IPO for $8 billion

M&A marches on

BY Richard Summerfield

Global M&A activity has continued at an impressive clip in 2018, with 15,349 completed deals worth a combined $2.4 trillion, according to Pitchbook’s 3Q 2018 M&A report. The latest quarter saw 5063 closed transactions valued at a total of $822.7bn.

Across the first three quarters of 2018, total deal count was down 12 percent year-on-year – 2017 saw 17,435 deals completed – while deal value declined 7.5 percent.

North America accounted for the highest proportion of deal value in over a decade, at 64.4 percent. The first three quarters of the year saw the region generate 8683 deals valued at $1.5 trillion. Furthermore, nine of the 10 largest deals of the year to date have targeted North American-based companies.

European activity, by contrast, has been lacklustre. According to Pitchbook, the spectre of Brexit and ongoing concerns around the outlook for international trade,have led to a subdued dealmaking environment in the region. European M&A saw 5646 transactions valued at $809.1bn, a considerable decline from the 7973 deals recorded in the first three quarters of 2017 valued at a total of $1 trillion.

“Global M&A activity remains healthy as North American dealmaking overcomes the weakness occurring in Europe, where a slowdown is underway," said Wylie Fernyhough, PE analyst at PitchBook. "Financing remains historically cheap and companies have shown an appetite for expansion via acquisitions as the economic expansion extends another year.”

Mega mergers – deals worth $5bn and above – were a notable feature of dealmaking activity in the first three quarters of the year. There were 45 mega mergers closed up to the end of Q3 and more notable mega mergers, including the $69bn merger between CVS Health and Aetna and the $50.6bn Comcast/Sky UK deal yet to close.

The private equity industry has also become increasingly influential of late. PE firms accounted for 33.3 percent of all M&A activity through the first three quarter of the year with many firms interested in sourcing deals through divestments.

The report also highlights developments in the oil & gas space where the record levels of activity recorded in 2017 fell away in the first three quarters of 2018. Oil & gas companies pursued 350 M&A deals valued at a combined $125.6bn to the end of Q3 2018, a decline of 23.6 percent and 49.1 percent respectively, from the first three quarters of 2017. There were still some notable deal closures during the period, however, with Concho Resource’s $9.5bn purchase of RSP Permain the most noteworthy in the space.

Report: 3Q M&A Report