q1 2021 market report - croft & bender

Q1 2021 Market Report

Mergers & Acquisitions • Private Equity • Financial Advisory

4401 Northside Parkway Suite 395 Atlanta, Georgia 30327 (404) 841-3131 www.croft-bender.com Member SIPC and FINRA

DEAL CRITERIA

MERGERS & ACQUISITIONS

• Buy side/sell side• Enterprise Values up to $500 million• Exceptions to typical EBITDA criteria:– High growth companies– Technology companies– Special situations

EQUITY & DEBT CAPITAL RAISES

• Middle-market companies• Emerging growth businesses• Large market opportunity• Experienced management team• Differentiated product or service• Greater than $15 million capital need

BROAD INDUSTRY EXPERTISE

BUSINESS SERVICES

Information ServicesMarketing Services Financial Services

Outsourced Services A/R Management

StaffingConsulting

TECHNOLOGY

Software/SaaSFinancial Technology

Human Capital ManagementInternet Marketing

E-CommerceSecurity/ComplianceBusiness IntelligenceTelecommunications

INDUSTRIAL

General ManufacturingBuilding Products

LogisticsSpecialty Contracting

DistributionIndustrial Services

Chemicals

HEALTHCARE

Healthcare ITClinical Services

Outsourced ServicesAlternate Site Care

Medical Products/Distribution

CONSUMER

Products/ServicesFranchisingRestaurants

RetailEntertainment/Leisure

OVERVIEW

Since 1996, Croft & Bender has provided superior M&A, private capital raising, andfinancial advisory services to middle-market and emerging growth companies. Thesenior professionals have completed more than 1,000 corporate financeengagements, resulting in deep experience across a broad set of industries and typesof transactions. In addition, the firm manages C&B Capital, three growth equity fundswith over $82 million under management.

CONTACT US

Frank H. “Bo” Briggs, IIIManaging [email protected](404) 841-0639

Edward S. Croft, IIIManaging [email protected](404) 841-0055

R. Neale FisherManaging [email protected](404) 574-2906

Ronald B. GoldmanManaging [email protected](404) 841-0735

Steve B. TyeManaging [email protected](404) 841-9351

Erik M. ZalenskiManaging [email protected](404) 841-9826

Kyle C. [email protected](404) 574-2897

Matthew A. [email protected](404) 841-0056

Christian GivenDirector of Business [email protected](404) 328-4837

4401 Northside Parkway Suite 395 Atlanta, Georgia 30327 (404) 841-3131 www.croft-bender.com Member SIPC and FINRA 2

REPRESENTATIVE TRANSACTIONS

BUSINESS SERVICES TECHNOLOGY INDUSTRIAL HEALTHCARE CONSUMER

3

Carousel Designs is a leading online provider of original and custom-

designed baby bedding, fabric and nursery décor.

has been acquired by

Dominion Youth Services is a leading provider of behavioral and mental

health support services to the youth and adolescent market.


Service Brands is a leading multi-concept residential services franchisor.


HRI is a leading franchisor of in-home consumer services.

has soldHarris Research, Inc.

Franchisor of

to

ASP is the leading swimming pool cleaning franchisor in the U.S.


a portfolio company of

SIP.US is a leading provider of on-demand, enterprise-class IP

communications software solutions.



HCSC is a leading provider of hospice and palliative care services

in the Southeast.

has been recapitalized by

NOVA is a leading provider of engineering, consulting, testing, and inspection services to the design and

construction industry.


IDology is a leading provider of identity verification and fraud prevention

services.

has acquired

Grayshift provides the leading mobile forensic access and extraction solution for law enforcement, national defense

and the intelligence community.

has issued$47 million of Series A Preferred Stock

to an investor group led by

Pinnacle is a leading customer communications management and engagement technology provider.



Vision is a leading provider of end-to-end Managed Mobility Services and

Mobile Telecom Expense Management.



NARROW GAUGE CAPITAL



ARP is a leading installer of insulation and other specialty products.

has been recapitalized by

Acousti is a leading subcontractor of interior finish solutions, specializing in

acoustical ceilings and walls.

has merged with

ESS is a leading tech-enabled services company in the employment

screening industry.



Sacred Journey Hospice is a leading hospice provider in Georgia.



TriLink Saw Chain is a leading provider of chainsaw replacement parts.


SEI is a leading installer of insulation and other specialty building products.




Medport is a leading, tech-enabled provider of healthcare

financing solutions.




Aqua Smart is a leading producer of treatment chemicals for the drinking

water market.

▪ Employment Screening Services, LLC (“ESS” or the “Company”) is aleading tech-enabled services company in the employment screeningindustry

▪ The Company offers the full spectrum of background screening and drugtesting solutions across a variety of verticals, including healthcare,hospitality, staffing, franchising, manufacturing and education

FEATURED TRANSACTIONS

4

DEAL OVERVIEW

COMPANY OVERVIEW▪ SEI Group, LLC (“SEI” or the “Company”) is a leading distributor and

installer of insulation and other residential building products for single-family and multi-family builders and general contractors across five high-growth states in the Southeast

▪ The Company employs nearly 500 trained installers, establishing SEI’sposition as the #1 fiberglass and spray foam installer in the Southeast

▪ Since selling SEI to Narrow Gauge Capital in 2016, Croft & Bendercontinued to operate as an informal advisor and most recentlysuccessfully negotiated the sale of American Residential Products(“ARP”) to the Company in October 2020

▪ Upon receiving inbound interest from a strategic buyer, the Companyengaged Croft & Bender to help the Company evaluate its alternatives

▪ Croft & Bender initiated a targeted and accelerated process andsuccessfully negotiated a sale to Quad-C

DEAL OVERVIEW

COMPANY OVERVIEW

▪ Croft & Bender was engaged to help the Company evaluate strategicalternatives, including a majority recapitalization or strategic sale

▪ Croft & Bender worked with the Company to build a financial model,develop marketing materials, conduct management presentations,manage the diligence process and negotiate with buyers

▪ Croft & Bender guided the Company through an efficient process andsuccessfully negotiated a merger with GlobalHR Research, a portfoliocompany of Renovo Capital

ESS is a leading tech-enabled services company in the employment

screening industry.

has merged with


SEI is a leading installer of insulation and other specialty building products.




Public Equity Markets Middle Market Deal Volume

($ in billions)

Cash on Corporate Balance Sheets(1)

($ in billions)

Private Equity Dry Powder

($ in billions)

KEY CAPITAL MARKETS DATA

5

US PE Enterprise Value / EBITDA MultiplesUS PE Debt / EBITDA Multiples

50.4%

36.8%

87.5%

Note: Middle-market transactions have a disclosed enterprise value of less than $1 billion.(1) Reflects S&P 500 constituents.

(30.0%)

(10.0%)

10.0%

30.0%

50.0%

70.0%

90.0%

110.0%

3/18 9/18 3/19 9/19 3/20 9/20 3/21

S&P 500 NASDAQ Dow Jones

$387 $387 $385 $396

$353 $345

$76

$126

'15 '16 '17 '18 '19 '20 YTDQ1 '20

YTDQ1 '21

$5,632 $5,808 $6,195

$5,814 $5,988

$8,135 $8,276

'15 '16 '17 '18 '19 '20 Q1 '21

$896$1,013

$1,304

$1,509$1,669

$1,914

'15 '16 '17 '18 '19 '20

10.5x

13.3x11.9x 12.3x

14.9x

13.2x

'15 '16 '17 '18 '19 '20

5.6x

6.6x6.1x 6.3x

6.9x

5.9x

'15 '16 '17 '18 '19 '20

Unemployment RateConsumer Confidence(2)

Real GDP Growth Industrial Production(1)

Retail Sales

($ in billions)

Consumer Spending

($ in trillions)

KEY ECONOMIC DATA

6(1) Indexed relative to 2012.(2) Indexed relative to 1985.

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

'17 '18 '19 '20 '21

96

98

100

102

104

106

108

110

112


'17 '18 '19 '20 '21

70

80

90

100

110

120

130

140


'17 '18 '19 '20 '21

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600


'17 '18 '19 '20 '21

$10

$11

$12

$13

$14

$15

$16


'17 '18 '19 '20 '21

(10.00)%

(8.00)%

(6.00)%

(4.00)%

(2.00)%

0.00%

2.00%

4.00%

6.00%


'17 '18 '19 '20 '21

AVERAGE PUBLIC MULTIPLES & U.S. DEAL ACTIVITY BY SELECT INDUSTRY GROUPS

General Industrial IT Consulting & Other Services

Building Products Trading Companies & Distributors

Consumer ServicesRetailing

7*Latest twelve months as of March, 31 2021.Note: EV = Enterprise Value.

11.3x 10.2x 9.4x

13.0x 12.9x

1.4x 1.3x 1.3x 1.7x 1.6x

2,316

2,5482,899

2,515 2,432

500

1,000

1,500

2,000

2,500

3,000

2x

4x

6x

8x

10x

12x

14x

2017 2018 2019 2020 Q1 '21*

EV/EBITDA Multiple EV/Revenue Multiple

# of M&A Transactions

12.7x 11.1x 11.2x

13.4x 13.7x

1.8x 1.6x 1.8x 2.2x 2.2x

293

316353

326357

50

100

150

200

250

300

350

400

2x

4x

6x

8x

10x

12x

14x

16x

2017 2018 2019 2020 Q1 '21*



10.9x 9.6x 10.0x

12.8x 12.8x

1.4x 1.2x 1.4x 1.9x 1.8x

70

89

77

52 57

20

40

60

80

100

2x

4x

6x

8x

10x

12x

14x

2017 2018 2019 2020 Q1 '21*



11.4x 10.1x 9.5x

11.8x 11.6x

0.9x 0.7x 0.7x 0.9x 0.9x

275334

367286 261

50

100

150

200

250

300

350

400

2x

4x

6x

8x

10x

12x

14x

2017 2018 2019 2020 Q1 '21*



15.9x

14.7x

12.6x

17.7x 17.5x

1.5x 1.4x 1.5x 2.4x 2.3x

416 443

522 493 521

100

200

300

400

500

600

5x

10x

15x

20x

2017 2018 2019 2020 Q1 '21*



14.0x 13.1x 11.7x

23.3x 22.4x

2.8x 2.6x 2.7x

5.6x 4.9x

843955

1,058

704 686

200

400

600

800

1,000

1,200

5x

10x

15x

20x

25x

2017 2018 2019 2020 Q1 '21*



AVERAGE PUBLIC MULTIPLES & U.S. DEAL ACTIVITY BY SELECT INDUSTRY GROUPS

Healthcare Facilities Healthcare Software

Healthcare Services Data Processing & Outsourced Services

General Software & Services Software-as-a-Service

8*Latest twelve months as of March, 31 2021.Note: EV = Enterprise Value.

12.8x

12.0x 10.6x

12.6x 13.8x

1.9x 2.0x 2.0x 2.6x 2.8x

333 294

395

314284

125

250

375

500

2x

4x

6x

8x

10x

12x

14x

16x

2017 2018 2019 2020 Q1 '21*



20.1x 24.9x

28.3x 34.7x 35.6x

3.6x 4.1x 5.2x 6.5x 6.6x

66 56

95 9098

25

50

75

100

125

5x

10x

15x

20x

25x

30x

35x

40x

2017 2018 2019 2020 Q1 '21*



11.0x 11.0x 10.1x 9.7x

10.6x

1.4x 1.8x 2.0x 2.3x 2.4x

449 467498

411 416

100

200

300

400

500

600

2x

4x

6x

8x

10x

12x

2017 2018 2019 2020 Q1 '21*



20.1x

20.0x 25.1x

28.4x 28.3x

6.2x 6.3x 8.1x

9.5x 9.2x

9198

80

6574

20

40

60

80

100

120

5x

10x

15x

20x

25x

30x

2017 2018 2019 2020 Q1 '21*



18.2x 17.2x 19.7x

23.3x 23.3x

4.0x 4.1x 5.0x 6.8x 6.5x

1,478 1,563 1,6181,445

1,557

400

800

1,200

1,600

2,000

5x

10x

15x

20x

25x

2017 2018 2019 2020 Q1 '21*



40.2x 35.9x

40.3x 31.6x 34.9x

9.0x 9.5x 9.9x

15.7x 14.0x

210 221 223 207226

100

200

300

10x

20x

30x

40x

2017 2018 2019 2020 Q1 '21*



U.S. Growth Equity Deals by Deal Size

(# of deals)

U.S. Growth Equity Activity by Year

U.S. Private Equity Activity by Year

Median VC Round Size by Stage

($ in millions)

U.S. VC Activity by Year

U.S. Private Equity Deals by Deal Size

(# of deals)

PRIVATE CAPITAL DATA

9

$4

33

$5

28

$4

99

$5

97

$6

41

$7

43

$7

64

$6

49

$1

35

3,376

4,2234,410 4,482

4,905

5,639 5,585 5,251

1,182

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

$0

$100

$200

$300

$400

$500

$600

$700

$800

'13 '14 '15 '16 '17 '18 '19 '20 YTDQ1 '21

Deal value ($B)

# of deals closed

2,335

1,426

1,327

0

500

1,000

1,500

2,000

2,500

3,000

'13 '14 '15 '16 '17 '18 '19 '20 YTDQ1 '21

Under $25M$25M-$100M$100M-$500M

357357

434

$2

6

$4

4

$4

8

$4

6

$4

7

$7

3

$6

8

$1

00

$4

6

711

9301,027

9471,051

1,304 1,3771,478

481

0

200

400

600

800

1,000

1,200

1,400

1,600

$0

$20

$40

$60

$80

$100

$120

'13 '14 '15 '16 '17 '18 '19 '20 YTDQ1 '21

Deal value ($B)

# of deals closed260

79

221

64

169

58

0

50

100

150

200

250

300

'13 '14 '15 '16 '17 '18 '19 '20 YTD Q1'21

$15M-$30M$30M-$50M$50M-$75M

$0.55 $0.62

$2.10 $2.60

$6.50$7.50

$10.00

$14.00

$0

$2

$4

$6

$8

$10

$12

$14

$16

'13 '14 '15 '16 '17 '18 '19 '20 YTD Q1'21

Angel Seed Early VC Late VC

$4

8

$7

4

$8

5

$8

1

$8

8

$1

43

$1

40

$1

66

$6

9

9,471

10,65911,270

10,113

10,96311,398

12,336 11,930

3,042

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

'13 '14 '15 '16 '17 '18 '19 '20 YTDQ1 '21

Deal value ($B)

Deal count

Croft & Bender LP (www.croft-bender.com) is a leading middle market investment bank focused on the advisory needs of clients nationwide. The firmhas extensive industry knowledge, transaction expertise, and a commitment to its clients’ success. Croft & Bender LP provides sell-side and buy-sideadvisory, capital raising, and financial advisory.

Investment banking services are provided by Croft & Bender, a registered broker-dealer and member of FINRA and SIPC.

THIS REPORT MAY CONTAIN REFERENCES TO REGISTERED TRADEMARKS, SERVICE MARKS AND COPYRIGHTS OWNED BY THIRD-PARTY INFORMATIONPROVIDERS. NONE OF THE THIRD-PARTY INFORMATION PROVIDERS IS ENDORSING THE OFFERING OF, AND SHALL NOT IN ANY WAY BE DEEMED ANISSUER OR UNDERWRITER OF, THE SECURITIES, FINANCIAL INSTRUMENTS OR OTHER INVESTMENTS DISCUSSED IN THIS REPORT, AND SHALL NOT HAVEANY LIABILITY OR RESPONSIBILITY FOR ANY STATEMENTS MADE IN THE REPORT OR FOR ANY FINANCIAL STATEMENTS, FINANCIAL PROJECTIONS OROTHER FINANCIAL INFORMATION CONTAINED OR ATTACHED AS AN EXHIBIT TO THE REPORT. FOR MORE INFORMATION ABOUT THE MATERIALSPROVIDED BY SUCH THIRD PARTIES, PLEASE CONTACT US AT THE ADDRESSES OR NUMBERS AT THE BEGINNING OF THE REPORT.

The information and views contained in this report were prepared by Croft & Bender LP. It is not a research report, as such term is defined by applicablelaw and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buyor sell any financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Croft & Bender to bereliable, but Croft & Bender makes no representation as to the accuracy or completeness of such information. Transaction numbers include thosetransactions that closed during the year they appear under and the industry classification assigned to the target by S&P Capital IQ. Croft & Bender and/orits affiliates act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide,may have provided, or may seek to provide investment banking services for those companies. In addition, Croft & Bender and/or its affiliates or theirrespective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products ofcompanies discussed herein. Opinions, estimates and projections in this report constitute Croft & Bender’s judgment and are subject to change withoutnotice. The financial instruments discussed in this report may not be suitable for all investors, and investors must make their own investment decisionsusing their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, pastperformance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, orredistributed, without Croft & Bender’s prior written consent. Sources of information include Baird, Dealogic, Pitchbook, Preqin, S&P Capital IQ, and theU.S. Department of Labor.

DISCLOSURES

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q1 2021 market report - croft & bender

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