APAC Education Industry Report H2 2019

APAC Education Industry Report H2 2019

Published on 15 May 2020

Introduction

We are pleased to share with you a summary update of market valuations and activities in the Asia Pacific education services industry for the second half of 2019.

Education is one of the key sectors in which Armor specializes in and closely follows market trends.Please contact us for further discussion

Valuations of Asia Pacific’s public companies were lower over last 5 quarters ending December 2019. EBITDA multiples were over 29% lower by the end of Q4-2019 (12.0x in Q4-2019 vs 17.1x in Q3- 2018).

Based on around 250 selected companies, the table above illustrates that industry returns and leverage ratios have been relatively stable over the past five years. Companies margins reflect an upwards trend (EBITDA margin +4.6% between 2016 and beginning of May 2020).

Overall, Q3-2019 and Q4-2019 was characterized by lower M&A deal count, while total transaction value continue to show large fluctuations. In particular, the total transaction value in Q3-2019 was pushed up by a few large deals (e.g. Jinan Shuangsheng Education Consulting Company Limited – EV USD 234m).

Armor selected the largest M&A transactions across the region in H2 2019 for which information on Implied Enterprise Value (EV) was available.

Source: S&P Capital IQ, Armor Capital Analysis

Education is one of the key sectors in which Armor specializes and closely follows market trends.

Please contact us for an in-depth discussion via enquiry@armor-capital.com

Global Toys & Games Industry Report 2020

Global Toys & Games Industry Report 2020

Published on 3 March 2020

Introduction

We are pleased to share with you a summary update of market valuations and activities in the Global Toys and Games industry based on the year 2019.

Toys and Games is one the key sectors in which Armor specializes and closely follows market trends. Please contact us for a further discussion.

Valuations of public companies have increased in recent years. Median EBITDA was 9.7x by the end of 2019 vs. 7.7x in Q4-2015.

Key highlights from the above table are that margins have recovered over 2018-2019 from the drop in 2017. Over the same period, leverage of the industry constituents have slightly decreased over the last 24 months.

The number of transactions announced per year amounted 14 to 23 over the past 5 years. In the second quarter of 2019, two transactions in Spain (see below) and US drove the most of the total transaction value for the year.

Armor selected the largest M&A transactions across the globe in 2019 for which information on Implied Enterprise Value was available.

Source: S&P Capital IQ, Armor Capital Analysis

The toy industry is one of the key sectors in which Armor specializes and closely follows market trends.

Please contact us for an in-depth discussion via enquiry@armor-capital.com

APAC Software Industry Report H2 2019

APAC Software Industry Report H2 2020

Published on 3 March 2020

Introduction

We are pleased to share with you a summary update of market valuations and activities in the Asia Pacific Software industry for the second half of 2019.

Software is one of the key sectors in which Armor specializes and closely follows market trends. Please contact us for a further discussion.

Valuations of Asia Pacific’s public companies have increased over H2 2019 compared to the same period in 2018. Median EBITDA was 38.2x by the end of Q4-2019 vs. 24.0x in Q4-2018 – an increase of nearly 60% year-on-year.

Key highlights from the above table are that margins have narrowed since 2016. Over the same period, leverage of the industry constituents has increased.

M&A activity by volume has been relatively consistent over the last 6 quarters with c. 60-90 transactions (majority stake only) per quarter. Most of deals were in the lower mid market segment, while 1 to 2 transaction drove most of the total transaction value.

Armor selected the largest M&A transactions across the region in 2019 H2 for which information on Implied Enterprise Value was available. The acquisition of Minori Solutions Co., Ltd. was the most remarkable transaction so far for Q4 2019.

Source: S&P Capital IQ, Armor Capital Analysis

Software is one of the key sectors in which Armor specializes and closely follows market trends.

Please contact us for an in-depth discussion via enquiry@armor-capital.com

APAC Paper Packaging Industry Report H1 2019

APAC Paper Packaging Industry Report H1 2019

Published on 16 December 2019

Introduction

We are pleased to share with you a summary update of market valuations and activities in the Asia Pacific Paper Packaging industry for the first half of 2019.

Paper Packaging is one the key sectors in which Armor specializes and closely follows market trends. Please contact us for a further discussion.

Valuations of Asia Pacific’s public companies have decreased over H1 2019 compared to the same period in 2018. Median EBITDA was 7.4x by the end of Q2-2019 vs. 8.8x in Q2-2018 – a decrease of nearly 15%.

Key highlights from the above table are that margins have improved since 2015. Over the same period, leverage of the industry constituents has decreased.

With the exception of Q1-2019, each quarter saw 7-9 deals in APAC’s Paper Packaging. Most of deals were in the lower mid market segment, while in Q2-2019 one transaction in Indonesia (see below) drove the most of the total transaction value.

Armor selected the largest M&A transactions across the region in 2019 H1 for which information on Implied Enterprise Value was available. The privatization of P.T. Fajar Surya Wisesa was the most remarkable transaction so far for 2019.

Source: S&P Capital IQ, Armor Capital Analysis

Packaging is one of the key sectors in which Armor specializes and closely follows market trends.

Please contact us for an in-depth discussion via enquiry@armor-capital.com

APAC Logistics Industry Report H1 2019

APAC Logistics Industry Report H1 2019

Published on 13 December 2019

Introduction

We are pleased to share with you a summary update of market valuations and activities in the Asia Pacific logistics industry for the first half of 2019.

Logistics is one the key sectors in which Armor specializes and closely follows market trends. Please contact us for a further discussion.

Based on quarterly data, valuations of Asia Pacific’s public companies have fluctuated over the 18 months ending June 2019 with an overall slight downward trend.

Based on 90-100 selected companies, the table above illustrates that industry returns and companies’ margins have been stable over the past years.

While the M&A deal count in H1 2019 was slightly higher vs. H1 2018, the total transaction value was less than half (USD 336m vs. 709m), mainly due to smaller sized transactions in Q1 2019.

Armor selected the largest M&A transactions across the region in 2019 H1 for which information on Implied Enterprise Value (EV) was available. The EV/Revenue multiple shows that while investors pay a median of 0.5x, the relative difference between high and low multiples is large.

Source: S&P Capital IQ, Armor Capital Analysis

Logistics is one of the key sectors in which Armor specializes and closely follows market trends.

Please contact us for an in-depth discussion via enquiry@armor-capital.com

How Much is My Company Worth?

How Much is My Company Worth?

As your company continues to evolve and you focus more on growth, it is possible to lose track of a valuable data point – your company’s valuation, which is ultimately the valuation of your capital or total number of shares, and this data impacts your wealth.

Understanding and monitoring your business valuation is important. Typically, the time you need this information is when you are looking to issue new shares, sell or merge. The boardroom meeting with other shareholders, the talk with your banker, or other exceptional and unfortunate situations like an appointment with the divorce lawyers or a call from a tax controller are some likely scenarios where this discussion takes place. Beyond that, maybe you need to value your company every few years for audit purposes. Regardless of the circumstances, knowing your company’s worth is a must.

Taking it a step further, knowing the proper valuation metrics is also critical. Each company operates differently and needs a slightly different valuation methodology. To understand your company’s valuation, you need to understand widely used valuation approaches at a high level. From there, you can have a confident grasp of your company’s value.

Liquidation or Balance Sheet Approach

This method is very conservative and used by your creditors to protect their interests in case your business stops operations due to litigation, working capital shortage, recurring losses or any situation leading to bankruptcy. It consists of understanding the liquidity of your assets and assessing their value. For instance, your available cash is highly liquid; other instruments such as receivables are not as certain to be fully cashed in a timely manner and therefore less liquid. So, a discount on their value needs to be applied. We can also take the example of your inventory. While it may have a certain value on your balance sheet book value, the market value of the inventory may be lower (especially in a liquidation scenario).

Another approach to come up with a price floor is to calculate what it would cost to rebuild ex-nihilo the same business whilst acknowledging the time dimension.

While this will not likely be your preferred valuation method, it could provide you with the bottom line price which is important to know.

Discounted Cash Flow Approach

The Discounted Cash Flow method (or DCF) looks at the company’s future free cash flows (FCF), which are the estimated cashflows generated by your company to which debt- and equity stakeholders are entitled to after deducting all operating expenses, working capital effects and capital expenditures. This technique considers future cash flows, discounts them back to the present day – the present value of future streams of FCF, using the Weighted Average Cost of Capital (WACC).

Building out a DCF can be extremely complicated and many valuation firms have models in place to quickly help calculate a value. While it is not as important to know all the calculations, it is important to understand what goes into the calculations. There are some critical assumptions that would greatly impact future streams of FCF and they need to be documented.

The DCF methodology allows you to tweak certain scenarios. This is ideal for privately held companies that need to measure risk and future cash flows. The downside of using a DCF is that it is very dependent on the assumptions made. Therefore, assumptions need to be well considered and circumstantiated.

Trading Comparable Approach

This may go by a few slightly different names, but essentially, this approach values your company against others with a similar size and geography. Some data points considered include EBITDA multiples, price-to-earnings and so on.

An advantage to using this valuation methodology is that you are comparing your company to others in the current marketplace. However, depending on your size and market, finding data can be difficult. Many smaller companies are private, meaning they are not required to disclose their financials. Using larger listed comparable companies is an option if you use a marketability discount for the company and a liquidity discount for your shares.

Knowing the earnings multiple, you can go into a situation knowing how much your company is worth and if a willing buyer is paying the proper premium for your company. Also, you will know what other companies are worth – even if you receive an offer below your asking price, you can still be confident on how the market views comparable peers.

Precedent Transactions

Lastly, you can value your company using the Precedent Transaction Analysis. Similar to Comparable Analysis, this methodology compares your company against others ‘on-the-market’, that is, companies that are on sale or have been sold. (Companies not engaged in M&A are ‘off-the-market’.)

This type of valuation method is more likely used if your company is looking to engage in M&A activities. It will provide you with your company’s premium for being acquired, which is critical when identifying the proper price. The approach also considers data points such as EV/EBITDA, EV/EBIT and EV/Sales, and takes into account the M&A marketplace, whether it is a “buy” or “sell” market and therefore the dynamics in your ecosystem.

While this is not as widely used as the previous two methodologies and data may not be available, it gives you a perspective that other valuation methods may leave out, such as recent sales. When engaging an advisor to value your company, ensure they give you as many methodologies as possible.

How to Apply Different Valuations in Your Situation

It is important to note that valuation is more of an art than a science. To better illustrate the possible valuation of a company, we use a football field with the implied valuation range of each valuation methodology used, as shown in the following example.

Guillaume Caillet
Managing Partner

Are you looking at merging? Does the time seem right to sell your company? Let us help you in preparing your company for a sale. At Armor Capital, we help alleviate the stress and unknowns that go along with company valuations, especially those related to M&A activities. We do this by providing you with the right tools and helping you understand the or ‘a’ fair value of your company.

With over a decade of experience, you can rest assured your company will be properly and accurately reviewed. Browse our website to learn a bit more about our team and expertise. From there, reach out to us and we can begin by understanding your company’s needs as you embark on the transition to greater things.

To contact us, please email enquiry@armor-capital.com

APAC Education Industry Report H1 2019

Education-reports

APAC Education Industry Report H1 2019

Published on 21 October 2019

Introduction

We are pleased to share with you a summary update of market valuations and activities in the Asia Pacific education services industry for the first half of 2019.

Education is one the key sectors in which Armor specializes and closely follows market trends. Please contact us for a further discussion.

Valuations of Asia Pacific’s public companies were lower over last 3 quarters ending June 2019. EBITDA multiples were over 15% lower by the end of Q2-2019 (13.4x in Q2-2019 vs 15.9x in Q2-2018).

Based on around 250 selected companies, the table above illustrates that industry returns and companies margins have been quite stable over the past five years. By contrast, companies’ leverage ratios did not remain stable and we observed an increase (+23% in average between 2015 and end of October 2019) in debt over the period.

While Q2-2018 and Q3-2018 were characterised by a slowdown in M&A deal count, Q4-2018 saw a few mega-deals (e.g. Navitas Limited – EV USD 1,649m) pushing up the total transaction volume. Although we observed smaller sized transactions in Q1-2019, the total transaction value is higher in H1-2019 vs H1-2018 (USD 794m H1-2019 vs USD 464m H1-2018).

Armor selected the largest M&A transactions across the region in 2019 H1 for which information on Implied Enterprise Value (EV) was available.

Source: S&P Capital IQ, Armor Capital Analysis

Education is one the key sectors in which Armor specializes and closely follows market trends.

Please contact us for an in-depth discussion via enquiry@armor-capital.com

APAC Healthcare Industry Report H1 2019

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APAC Healthcare Industry Report H1 2019

Published on 27 September 2019

We are pleased to share with you a summary update of market valuations and activities in the Asia Pacific healthcare industry (equipment and services) for the first half of 2019.

Updated Quarterly Valuation Trends of APAC Top 50 Listed Companies by Market Cap

Valuations of Asia Pacific’s public companies have decreased over H1 2019 compared to the same period in 2018. Average EBITDA was 24.7x by the end of Q2-2019 vs. 27.3x in Q2-2018 – a decrease of nearly 10% year-on-year.

Key Industry Statistics and Ratios (CapitaI IQ Constituents)

Based on 400-500 selected companies, the table above illustrates that industry returns (along with the companies’ margins and leverage ratios) have been stable over the past five years.

M&A Deal Announced Per Quarter

M&A activity by volume has been relatively consistent over the last 6 quarters with c. 60-75 transactions (majority stake only) per quarter. The year 2018 was characterised by a few mega-deals (e.g. Healthscope) pushing up the total transaction volume for the year.

Selected M&A Transactions H1 2019 (USDm)

Armor selected the largest M&A transactions across the region in 2019 H1 for which information on Implied Enterprise Value was available. The data shows that investors pay relatively high multiples for acquisitions in the sector in Asia.

Source: S&P Capital IQ, Armor Capital Analysis

Healthcare is one the key sectors in which Armor specializes and closely follows market trends.

Please contact us for an in-depth discussion via enquiry@armor-capital.com

How Armor Capital Can Help You Successfully Sell Your Business

How Armor Capital Can Help You
Successfully Sell Your Business

Looking to sell your business in 2 years? Start preparing for it now!

Many business owners underestimate the preparation and time needed for a company to sell their business. It may take up to one to two years between exploring options in a company sale and a successful closing of such a project, and the duration is dependent on many factors. Below we provide guidance on key steps in a sell-side M&A process from a business owner’s perspective when working with Armor Capital:

Phase 1 – Exploration

An initial meeting would be held with our M&A experts to discuss your motivation and objectives of selling your business, as well as your company’s business model, industry landscape, financial performance & standing and organizational structure. An initial estimate of the value of your company may be provided depending on the quality of the information. We may also provide you with a roadmap and explain your own role & responsibilities during such a process.

Phase 2 – Preparation

Subsequent meetings will take place to identify opportunities that would maximize the perceived value of your company in the eyes of potential buyers. A more in-depth analysis will be conducted on your company’s strengths & weaknesses, market positioning, key employees and corporate strategy and financials. Armor Capital will use all relevant information to draft the marketing materials for potential buyers, so that you can focus on your business and, if required, take initiatives to prepare the business for a sale.

Phase 3 – Approach

Now that we have the marketing materials, it is time to market the opportunity to investors! Armor Capital will gather a list of potential buyers to approach and discuss it with you. We will identify key decision-makers within those companies and test their interest by sharing anonymous preliminary information about your company. Interested buyers will be requested to sign a non-disclosure agreement (NDA) before Armor Capital shares further information. We will organize introductory meetings between you and interested buyers, and prepare you for an excellent presentation of your company and a well-handled Q&A. 

Phase 4 – Engagement

After initial discussions with various buyers, Armor will assist you in selecting potential ones that are not just a good match but, more importantly, serious bidders. Using a highly secured virtual data room, further detailed information may be shared with 2 to 3 interested parties. In the meantime, you will be briefed by us on key commercial terms in a Letter of Intent (LOI) that buyers may provide you. The objective is to sign this letter with one of the bidders. 

Phase 5 – Final Negotiation and Closing

Although key commercial terms are usually addressed in the LOI, they may not always be finalized until the prospective buyer has further analyzed your company’s financials, commercial positioning and legal risks, which is done through third parties.  Armor Capital will seek to minimize the burden that this analysis may pose on your daily operations and staff.  Then, we will further coordinate the drafting of the final transaction documents with legal advisors and ensure that you are satisfied with the final terms.