Southern California M&A Update

The last quarter of 2016 saw quite a bit of M&A activity across Southern California (including San Diego, Orange, Los Angeles and San Bernadino counties) as the election cycle completed and the uncertainty about the future subsided. The technology sector saw the most activity during the period including tangential sectors like healthcare technology.

Below is a quick synopsis of some of the most notable lower middle market M&A deals completed in Southern California over the past three months.

November 2016 – National Tobacco Co L P (Kentucky), a subsidiary of Turning Point Brands, Inc. acquired Carlsbad, California based Smoke Free Technologies, Inc. trading as VaporBeast, for US$27 million in cash, notes and future payout. Under the terms of transaction, National Tobacco Co LP Kentucky would pay US$4 million in cash at closing, US$19 million in notes payable and would pay US$4 million in deferred payments in 18 months to Smoke Free Technologies Inc. Part of Standard General Holdings LP, National Tobacco Co. LP is a company headquartered in Louisville, KY, that manufactures chewing tobacco. Smoke Free Technologies, Inc. provides electronic cigarettes. It promotes alternatives to analog cigarettes.

November 2016 – Marina Biotech, Inc. acquired Fountain Valley, California based IthenaPharma, Inc. from Autotelic, Inc. for US$5.3 million in stock. Under the terms of the agreement, Marina Biotech issued 53,097,022 shares, which represents 64% of the issued and outstanding shares of its common stock, to the stockholders of IthenaPharma. Marina Biotech operates as a biotechnology company, which is focused on the discovery, development and commercialization of nucleic acid-based therapies to treat orphan diseases. IthenaPharma, engages in the development and commercialization of combination products for pain, arthritis, hypertension, and cancer.

November 2016 – YFC-BonEagle Electric Co Ltd acquired Rancho Cucamonga, California based Monoprice, Inc., a subsidiary of Blucora, Inc., for US$40 million in cash. YFC-BonEagle Electric Co. engages in the manufacture, and sale of power cords. It offers products such as power cable, LAN cable and patch cable, electronic wire and cable, networking accessories, HDMI and USB Series, Fiber Optics, MHL Accessories. Monoprice engages in the manufacture, retail of cables, components and accessories for computer and consumer electronics. Its products include video cables, wall, dashboard mounts, display projectors, speakers, headphones, keyboards, battery packs and power supply adapters.

September 2016 – MTY Food Group, Inc. acquired Irvine, California based BF Acquisition Holdings LLC for US$27 million in cash, subject to customary working capital adjustments. The transaction was funded through MTY Food Group existing credit facility. The transaction includes Fresh Enterprises LLC, trading as Baja Fresh Mexican Grill and La Salsa, Inc., a subsidiary of BF Acquisition Holdings LLC. MTY Food Group operates as a franchisor in the quick service food industry. Its activities include franchising and operating corporate-owned locations under a multitude of banners. The company also operates a distribution center and a food processing plant. BF Acquisition Holdings LLC owns, operates and franchises restaurants.

October 2016 – Aspen Technology, Inc. acquired San Diego, California based Mtelligence Corp for US$37.4 million in cash and future payout. Under the terms of transaction, Aspen Technology paid US$31.9 million in cash and will pay an additional US$5.5 million to be held back until April 2018 as security for certain obligations. Aspen Technology engages in the provision of process optimization software solutions designed to manage and optimize plant and process design, operational performance, and supply chain planning.  Mtelligence develops software for the management of industrial equipment. It offers Mtell Basis, a platform that bridges the gap between operations and maintenance systems, allowing personnel to collaborate, support the decision-making, and create optimal asset performance.

As we head into 2017 with a new administration at the helm of the United States, the business climate is buoyant. Consumer confidence is high and the public markets have been on a strong growth curve. Sectors that are expected to lead M&A activity in the New Year include:

  • Aerospace – very strong second half of 2016 driven by large companies looking to increase capabilities. As an example, GE Aviation currently has offers to acquire Arcam AB and SLM Solution Group AG – both a involved in 3D printing.
  • Healthcare – deal value increased approximately 24% during Q3. New technologies in the space will certainly continue to drive M&A activity.
  • Manufacturing – deal value increased approximately 65% during Q3. The renewed emphasis in American manufacturing should be a boon for M&A activity in the space in 2017.

To discuss the current state of the Southern Californian M&A, or to learn more how to Leland Group can help support your next M&A transaction, please feel free to contact us.

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