Colorado M&A Update

Colorado continues to generate robust M&A activity. According to data sourced from industry research group FactSet, through late September 2016, there have been more than 200 announced M&A transactions in the state including a few transactions of note. The sectors that have seen the most M&A activity in Colorado in 2016 are technology, healthcare, oil and gas and construction - a historically common trend in the state. The largest Colorado based transaction announced this year was in June when Danone SA entered into a definitive agreement to acquire The WhiteWave Foods Co for US$10 billion in cash. Under the terms of the transaction, Danone SA will pay US$56.25 in cash for every share sought. The offer price represents a 24% premium over WhiteWave's 30-day average closing trading price. The transaction represents an EBITDA multiple or more than 22X.

The WhiteWave Foods Co. is a consumer packaged food and beverage company that manufactures, markets, distributes and sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce. It operates through the following segments: Americas Foods & Beverages, Americas Fresh Foods and Europe Foods & Beverages. The company was founded in 2004 and is headquartered in Denver, Colorado. Another large transaction took place in June when AmSurg Corp entered into a definitive agreement to acquire Envision Healthcare Holdings, Inc., for US$4.9 billion in stock in a merger of equals. Under the terms of the transaction, the shareholders of Envision Healthcare Holdings, Inc. will receive a 0.334 AmSurg Corp. share for every share they own in the target. Upon completion, the companies will be merged into a combined organization which will be owned 53% and 47% by Envision Healthcare Holdings, Inc. and AmSurg Corp shareholders, respectively.

The EBITDA multiple for the transaction was approximately 12.69X. Envision Healthcare Holdings, Inc. offers an array of healthcare-related services to consumers, hospitals, healthcare systems, health plans and local, state and national government entities. The company provides and manages community-based medical transportation services, including emergency, non-emergency, managed transportation, fixed-wing air ambulance and disaster response. It operates through two segments: EmCare and American Medical Response. Envision Healthcare Holdings was founded in February 2011 and is headquartered in Greenwood Village, Colorado. Colorado’s economy is expected to flatten out slightly over the next year before expanding again in 2018.

The minor decline is expected to be driven by slowing exports, weakening commodity prices, rising housing costs and a tightening labor market. Jobs in Colorado’s mining and oil and gas sectors dropped 8.5 percent in 2015. However, oil production in the state rose by just over 30% during the same period. Through May 2016, non-residential construction projects in Colorado were up approximately 25% percent year to date through May. Moving forward, nonresidential construction spending is expected to increase 8.3 percent through 2016 and 4.5 percent in 2017.

From a mergers and acquisitions perspective in Colorado, a flattening economy may represent an opportunity for buyers as many sellers may be looking for liquidity in the face of stagnating sales. However, with a projected boost in the economy just a year away, smart sellers should understand there is no reason to settle for any type of discount in value. Sectors expected to drive M&A in Colorado 2017 include: Software/Technology – Software and technology companies continue to be attractive to private equity and strategic buyers in Colorado as the economy continues to evolve technologically. This sector has been the recipient of healthy eye-popping multiples and there are no signs indicating there will be much of a change ahead.

Technology relating to energy production is particularly strong in Colorado, a state historically known as a beacon of energy production in the United States. Food and Beverage – Food and Beverage companies in Colorado, especially in light of the state’s rich history of ground breaking organic products, are highly sought after from both strategics looking to modernize their product offerings and private equity groups looking for companies they can eventually exit at significant multiples. All in all Colorado, with its mammoth natural resources and history of innovation will continue to be a strong home for mergers and acquisitions throughout the near term.