By: G. F. Gay Le Breton and Ryan Gerton January 13, 2022
Louisiana experienced a record year for merger and acquisition activity in 2021, with 208 announced or closed transactions disclosed, involving a Louisiana target, buyer or seller. The figure is up 52% from 137 transactions in 2020, and is the highest total for the state in the past 15 years.
Low interest rates and ample funding for deals, coupled with a sense of urgency among seller who anticipated a higher federal tax rate, got 2021 M&A off to a strong start, despite uncertain conditions as COVID-19 continued to impact life and business. Going into 2022, U.S. corporate buyers and private equity investors have upward of $3.7 trillion dry powder for continued deal making; however, the higher interest rates anticipated later in 2022 may put downward pressure on pricing.
The two largest 2021 deals were announced by Monroe-based telecom giant Lumen Technologies, Inc. as part of its efforts to refocus away from local phone service to enterprise IT services and long haul connectivity by fiber cable. The company agreed to sell a portion of its incumbent local exchange carrier (ILEC) business to New York private equity firm Apollo Global Management in a deal valued at $7.5 billion, representing a multiple of approximately 5.5x 2020 estimated adjusted EBITDA. Lumen also agreed to sell its Latin American business to another private equity firm, Stonepeak Infrastructure Partners, for $2.7 billion. That transaction value is approximately 9.0x Lumen Latin America’s 2020 estimated adjusted EBITDA.
Apollo sees the Lumen deal, which also includes Louisiana ILEC assets, as an opportunity to provide leading edge, fiber-to-the-home broadband technology to millions of business and residential customers as more of the U.S. educational system, entertainment choices and economy move online. The telecommunications industry appears to be one of Apollo’s investment theses for its second dedicated Infrastructure Fund, which raised $1.52 billion in 2021.
The transaction is expected to close in the second half of 2022.
Two E&P companies which were focused primarily on Haynesville Bossier shale assets also changed hands in 2021 as energy prices increased. Southwestern Energy Company announced it will purchase Indigo Natural Resources for $2.7 billion, which Chesapeake Energy purchased Vine Energy for $2.2 billion. Indigo will add 149,000 acres and 1,000 well sites in northwest Louisiana to Southwestern’s portfolio and grant them easy access to terminals along the Gulf Coast to serve the growing LNG market. Chesapeake’s acquisition of Vine will make it the largest producer in the Haynesville Shale, according to the company.
In addition, the Top 10 transactions include a series of sales by Louisiana startups, led by Louisiana’s first “unicorn” company, Lucid Holdings. Lucid is selling to Cint, a Swedish technology firm, for $1.1 billion. Lucid gathers and analyzes data for companies processing customer insights quickly. Joining Lucid in the Top 10 are Sunpro Solar, who agreed to be acquired by ADT Security Corp for approximately $825 million, and Express Lien, who will sell to Procore Technologies for $499 million.
In the health care space, two Louisiana home health and hospice companies, LHC Group and Amedisys, purchased a combined 13 companies in 2021. Amedisys, based in Baton Rouge, spent about $260 million in three acquisitions of home health providers, including the $241 million acquisition of Contessa Health.Lafayette-based LHC executed 10 transactions, acquiring a total of 50 hospice locations, 26 home health agencies and 13 therapy facilities. LHC’s $277 million acquisition of Heart of Hospice LLC and its 24 skilled nursing facilities was its largest transaction in 2021.
Behavioral health and recovery facilities were also an active area for Louisiana in 2021. There were seven acquisitions, totaling 11 behavioral health and recovery facilities, in 2021. The leader in this category was Metairie-based Applegate Recovery with three deals, all purchases of Tennessee facilities. In total, Louisiana saw 38 health care deals in 2021, more than double that of 2020. Behavioral health, home health and hospice are all industries expected to see continued consolidation in 2022.
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 an associate with the firm.
Investment banking services are provided by Chaffe Securities Inc., member FINRA/SIPC.