InsightaaS: Veracap M&A International is a leading mid-market investment bank specializing in acquisitions, divestitures, financing and shareholder value advisory services. Based in Toronto with offices in Calgary and Halifax, Veracap is an important part of the Canadian IT ecosystem, active in helping to arrange purchases and sales of many important Canadian tech companies/
Veracap publishes a quarterly newsletter updating readers on trends in IT stock performance and M&A activity. In the recently-published Winter 2014 edition, we learn that tech stocks are faring much better than the overall market, and that “2013 was a very good year for Canadian mid-market technology company financings and M&A. A number of financing milestones were achieved including the largest deal and highest valuation. Public mid-market technology company valuations, as measured by the VTI, have been in a steady uptrend since July of 2012 improving from 5 times EBITDA to over 12 times EBITDA at end of 2013.”
Mid-market technology companies, as measured by the Veracap Technology Index(VTI) had a tremendous year in 2013, delivering an annual increase of 67.3% versus just 9.6% for the S&P/TSX Composite Index. Strong performers in the VTI included Sphere 3D Corporation, Wanted Technologies Corporation, PNI Digital Media Inc., Destiny Media Technologies and Solium Capital Inc., which were all up over 150% in the year. The large cap S&P/TSX Information Technology Index was up 34.9% in 2013, benefitting from Avigilon Corporation (162.8%), Constellation Software Inc. (87.5%) and Open Text Corporation (64.5%). All constituents of the index delivered returns in excess of 36% in the year with the exception of BlackBerry Limited (-33.1%).
Technology sector valuation multiples (enterprise value divided by EBITDA) have ended the year at 12.6 while the S&P/TSX was at 9.6. The strongest subsector, in terms of valuation multiples, was the Software subsector, where companies such as AdJunction Inc., QHR Corporation, Sylogist Ltd. and Solium Capital Inc. contributed to an average subsector LTM EBITDA multiple of 17.9…