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September 1, 2017

Out-of-state M&A buyers on shopping spree in Maine

Maine-based companies are luring out-of-state M&A buyers with a hearty appetite that shows no signs of slowing.

So far this year, $640 million worth of Maine-targeted mergers and acquisitions have been announced — already more than double the $300 million recorded for the whole of 2016 — according to data compiled for Mainebiz by Dealogic. (The $640 million figure takes into account just the six deals whose values were disclosed, out of 25 total transactions.)

Dealogic’s 2017 tally includes the $175 million cash purchase of CashStar Inc., a Portland-based provider of gift card commerce solutions, by Blackhawk Network Holdings Inc. (NASDAQ: HAWK) of Pleasanton, Calif., completed Aug. 30.

Strategic and financial buyers from out of state have been snapping up Maine targets across a broad spectrum of sectors from agribusiness and food to professional services and energy.

Other recent deals include Bob Evans Farms Inc. (NASDAQ: BOBE) gulping down Pineland Farms Potato Co. in Mars Hill for $115 million, though the final price tag may rise by $25 million if certain financial metrics are achieved within the first 24 months after closing; and Gray Television Inc. (NYSE: GTN), of Atlanta, Ga., buying two television stations, including WABI TV5 in Bangor, from Portland’s Diversified Communications Inc. for $85 million.

Experts see the inbound buying momentum continuing, with particular interest in Maine-based consumer brands.

“My sense is that we’re going to continue to see activity in the consumer products sector,” Pierce Atwood partner Christopher Howard told Mainebiz on Thursday. Howard, a member of the law firm’s business group, said the interest goes beyond just retail, to vertically integrated brands from product development to production to retail and wholesale.

“We’re going to continue to see a lot of activity there because Maine has built a lot of great brands that have wide market acceptance but are probably still affordable” from an acquisition standpoint, he added. He also predicted strong M&A activity in the hospitality sector, where there’s already been a “fair amount of acquisition and disposal of properties.”

More generally, he attributed today’s ramped-up dealmaking to the economic climate.

“We’ve had a long period of relative stability, and I think perceptions on the sell side of the m&a equation is that valuations have peaked, and this is an opportune time to try and capitalize on these valuations,” he said.

Cash ‘looking for a home’

Howard added that the same factors are influencing buyers, both strategic and financial. “I also think there’s lot a cash out there looking for a home, and that results in a fair level of buyer appetite,” he said.

He also predicts more acquisitions by Maine buyers, particularly bigger players looking for strategic investments that add to earnings. “We have a handful of larger businesses in Maine that have the kind of capital that can look outside the state, even into the global marketplace, and do acquisitions that are meaningful,” he said.

Vets First Choice, a fast-growing Portland-based veterinary pharmacy and prescription management, company that recently received a $233 million investment from a group led by Clayton, Dubilier & Rice, has said it will use the money to accelerate growth, launch new innovative services and spread its wings internationally, to Europe and Asia.

Indeed, within weeks of the latest capital infusion, it made good on its promise by announcing its purchase of two pharmaceutical practices in Arizona.

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