What is happening in the mezzanine?
After closing the year down 28% year-over-year, mezzanine financings continue to decline in 2018. The second quarter Mezzanine Market Perspective is now available and features the latest commentary on the most recent full quarter of mezzanine activity (Q1 2018), as well as notable transactions in the most recent quarter ending June 2018.
As noted in the Perspective, when comparing Q1 2017 with Q1 2018, activity has decreased by 21%, with a mere 97 mezzanine transactions closing in the latter. Notably, 12.6% of new platform sponsor investments were supported with mezzanine debt in the first quarter. During this period, the top three states for mezzanine transactions were California, Illinois, and a tie for third in Pennsylvania and Wisconsin
Industrial deals take the lead in Q1
The fourth quarter of 2017 concluded with the Services sector having the most transactions supported with mezzanine financing. Conversely, the first quarter of 2018 saw the Industrial sector with the highest volume, with nearly a quarter of all deals trading in this sector. Of those transactions, 71% were pure equity investments. Moreover, 75% of these Industrial transactions fell in the sub $50MM EV transaction size range.
The Healthcare sector closes bulge-bracket deals with mezzanine financing
The Healthcare sector comprised 13% of the mezzanine market in the first quarter. Unlike the most active Industrial sector, the Healthcare sector had a few larger transactions that were supported with subordinated debt and equity. Including one transaction totaling more than $1B+ EV. The most healthcare transactions supported with subordinated debt and equity occurred with targets located in New Jersey, Texas, and Pennsylvania.
A few recent transactions in the second quarter
California based Vander-Bend Manufacturing was acquired in the second quarter by Aterian Investment Partners. Patriot Capital supported this transaction with mezzanine debt and SSG Capital Advisors acted as the sell-side advisor. Vander-Bend manufactures electronic chassis, electronic panels, sheet metal cabinetry, shielding, and card cages.
Assurance Mezzanine Fund provided equity and debt in support of Canopy Capital Partners acquisition of Turtle Southeast. Based in Largo, Florida, Turtle Southeast provides asphalt milling services. Valley National Bancorp provided senior debt for this transaction and sell-side financial services were provided by CEA Capital Advisors.
Last week’s deals today
July 23 – July 27, 2018
~73 deals traded
Deal of the week
Strategic investor, Aurora Cannabis Inc. acquired the Ontario-based, MedReleaf Corp. for more than $2.5 billion. MedReleaf is a producer of cannabis-based pharmaceutical products, and this is thought to be the largest cannabis acquisition to date. Canaccord Genuity acted as the sell-side financial advisor, with both Davies Ward Phillips & Vineberg and Stikeman Elliott providing sell-side legal advisory services. to the strategic investor Assurant last week. The deal transacted was for $2.5 billion. UBS acted as the sell-side advisor.
Most active subsectors
- IT: Software & services
- Industrial: Equipment & products
- Services: Marketing & related
- Financial: Services
Most active cities
- New York
- San Francisco