CityBusiness January 19, 2021 https://bit.ly/3btWMQf
M&A activity in Louisiana and nationwide began to recover in the third quarter of 2020 and is expected to accelerate in 2021.
Louisiana had a total of 136 transactions announced or closed in 2020 involving a Louisiana target, buyer or seller, with only 14 transactions in the second quarter. Overall, this represented a 33% decline in volume compared to 2019. Approximately 62% of 2020 transaction occurred in the second half of the year, in contrast to a median of 51% over the previous 10 years.
According to Ernst & Young, US M&A value of $1.4 trillion in 2020 tracked approximately 22% below 2019’s value, with the US market seeing an 80% fall at the height of the lockdown compared with 2019. Large-scale technology deals, the financial services sector and media & entertainment drove M&A momentum in the second half of the year.
Private equity’s share of US deal volume also increased in 2020. PE firms represented 35% of deal volume, in comparison to 28% for each of the previous two years.
In 2020, Louisiana deal value total $14.8 billion, primarily in four transactions related to midstream and downstream energy. Most Louisiana transaction involve private companies where no deal value is disclosed. Other Top 10 transactions in 2020, with disclosed prices, were related to the financial services, health care, marine, alcohol beverage and gaming industries.
|Top 10 Louisiana Deals in 2020 With Disclosed Values||Size of Deal ($ in Millions)||Date|
|1. Blackstone Energy Partners sold its 42% stake in Cheniere Energy Partners, LP (AMEX:CQP) to Brookfield Infrastructure, LP (NYSE:BIP) and Blackstone Infrastructure Partners||7,000||9/24/2020|
|2. Riverstone Holdings, LLC purchased International-Matex Tank Terminals, Inc. from Macquarie Infrastructure Corporation (NYSE:MIC)||2,685||11/08/2020|
|3. Sasol Limited (JSE:SOL) sold a 50% interest in three Louisiana petrochemical plants to LydonellBassell Industries, NV (NYSE:LYB)||2,000||10/02/2020|
|4. Vopak Industrial Infrastructure Americas, a joint venture between Royal Vopack (ENXTAM:VPK) and Blackrock’s Global Energy & Power Infrastructure Fund purchased three industrial terminals from Dow, Inc. (NYSE:DOW)||620||09/14/2020|
|5. Diversified Crop Insurance Services, Inc. announced it will sell to Sompo International Holdings, Ltd.||470||09/04/2020|
|6. Advantage Capital Partners and others sold Veran Medical Technologies, Inc. to Olympus Corporation of the Americas||340||12/03/2020|
|7. Savage Inland Marine sold its Inland Tank Barge Fleet to Kirby Corporation (NYSE:KEX)||278||1/30/2020|
|8. Sazerac Company, Inc. purchased the Paul Masson Grande Amber Brandy Brand from Constellation Brands, Inc. (NYSE:STZ)||255||6/25/2020|
|9. Amedysis Hospice, LLC purchased AseraCare Hospice from Golden Gate Ancillary, LLC||235||4/2/2020|
|10. Eldorado Casino Shreveport Joint Venture sold to Maverick Gaming, LLC||230||1/10/2020|
Source: Capital IQ, corporate and other records, staff research; Price – Enterprise Value where available.
Note: Includes Announced or Closed transactions involving a Louisiana Target, Buyer or Seller.
Headlining 2020 was Blackstone Energy Partner’s sale of its 42% stake in Cheniere Energy Partners, LP, the owner and operator of the Sabine Pass LNG terminal in Cameron Parish, for $7.0 billion in September. The buyers were energy infrastructure owner/operator Brookfield Infrastructure and another Blackstone affiliate, Blackstone Infrastructure Partners. The exit coincided with a boost in LNG shipments as Coronavirus recovery expectations increased as of the September sale.
Riverstone Holdings, LLC, a private equity firm focused on energy and power, in November agreed to purchase New Orleans-based terminal operator International-Matex Tank Terminals (IMTT) from Macquarie Infrastructure Corporation for $2.685 billion. Riverstone wanted IMTT’s key North American locations, especially in New York City and the Lower Mississippi, as well as to broaden its capabilities with non-petroleum products.
In another midstream deal, the debt-ridden South African chemical firm Sasol, Ltd. announced in October that it had found a partner in Houston-based chemical firm LyondellBasell to co-own and operate three plants in Sasol’s huge Lake Charles complex. Sasol sold a 50% interest in the three plants for $2 billion. The deal closed in early December.
Finally, Dow, Inc. in September exited one terminalling facility in Texas and two in Louisiana in order to shift focus to its core operations. Vopak Industrial Infrastructure Americas, a joint venture of Blackstone’s Global Energy and Power Infrastructure Fund and Dutch tank storage industry company Royal Vopak N.V. purchased the facilities for $620 million. The deal included 30 storage tanks in Plaquemine and 73 storage tanks in St. Charles, along with 53 storage tanks in Freeport, Texas.
Louisiana also saw several financial services and real estate industry deals in 2020. Most of the deals were for smaller, independent firms bought out by larger international entities aiming to grow their market positions. The largest financial services deal was Covington-based CGB Enterprises, Inc., which sold a subsidiary, Diversified Crop Insurance Services, Inc. to Sompo Holdings, Inc. for $470 million. The buyer was looking to gain a foothold in crop insurance and reinsurance.
2020 was a year like no other, with an international pandemic, statewide lockdowns, a U.S. presidential election and massive economic uncertainty. The resilient end of year activity leading into 2021 is occurring as companies reposition themselves for improved economic activity, and accelerate long-term transformation of their business models as part of their M&A strategy in response to COVID 19. Disruption creates fuel for deals and strategic investments.
The biggest challenges for M&A in 2021 will be uncertain market conditions as COVID-19 continues to impact life and business, translating business strategy needs into M&A strategy and valuation. Cybersecurity and the ability to forge relationships with management teams in a virtual environment are also issues.
The rise of special purpose acquisition corporations (SPACs) and alternative deal structures, such as joint ventures and alliances, may also change the 2021 M&A equation, as companies take an ecosystem view to secure future positioning and enter new markets or business areas. Interest in SPACs remains high. SPACs raised $59.7 billion in 2020 through 177 transactions, compared to $12.1 billion in 59 transactions for 2019.
Still continued low interest rates and ample funding for deals, coupled with a safe and effective COVID-19 vaccine and a sense of greater certainty going into next year, should get 2021 M&A off to a strong start. Private equity capital is well-positioned for value creation during 2021, with $2.8 trillion in dry-powder available. Even at a time when M&A professionals are traveling less and continue to work remotely, dealmakers that remain ready to jump on opportunities will be best positioned to benefit in 2021.
G.F. Gay Le Breton is managing director for Chaffe & Associates Inc., responsible for the merger and acquisition activities of the firm. Ryan Gerton is financial analyst for the firm. Investment banking services are provided by Chaffe Securities Inc., member FINRA/SIPC.