February 2013
Brown Gibbons Lang
& Company
Industrials
Chicago
Spotlight:
M&A Outlook
Page 4
Early signs point to an M&A market poised for strong deal
flow in 2013. Confidence continues to build, with buyer cash
reserves and an accommodative credit market expected to
lend further support.
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Insider
The BGL Industrials Insider is published by Brown Gibbons Lang & Company, a leading independent investment bank
serving middle market companies throughout the U.S. and internationally.
Environmental Services Insider
M&A Activity
• Overall middle market M&A volume was up 6.7 percent in 2012,
based on number of announced transactions with deal values below
$500 million,1 boosted by a sharp increase in tax driven sales in the
fourth quarter (Page 9).
• A competitive deal market is driving attractive deal terms and
premium valuations for strong performing companies. 2012 reported
median middle market1 EBITDA multiples for strategic and financial
buyers were 8.1x and 7.7x, respectively, according to Standard &
Poors LCD (Page 9).
• Lender appetite remains strong. Loan supply continues to outstrip
demand, with competition for quality assets driving aggressive
financing terms in the marketplace. Senior and total leverage
increased to 3.9x and 4.5x, respectively, in 2012, reported S&P LCD
(Page 9), nearing pre-recession levels.
• The manufacturing sector is a bright spot of the U.S. economy with
differentiated industrials businesses garnering significant buyer
interest. 2012 saw a number of mega deals including Eaton/Cooper
Industries and ABB/Thomas & Betts. The middle market was active
with participation from notable acquisitive corporate buyers such
as Parker-Hannifin and Precision Castparts and significant private
equity add-on activity.
• Industry participants are optimistic about the M&A prospects for the
year, with drivers in place to bring more buyers and sellers to the
market. Confidence is continuing to build, buoyed by an improving
economic climate and rising corporate earnings. Excess capital
is pushing corporate and private equity buyers to aggressively
pursue growth acquisitions. The loan market remains active and
accommodating acquisition financing at borrower-friendly terms.
(1) Middle market defined as enterprise values between $25 million and $500 million.
Industry Valuations
• The public equity markets have rallied, with major indices gaining
4 percent year-to-date* (Page 17), but remain reactive to headline risks,
with the global economy and geopolitical uncertainty among the primary
concerns to rattle investor confidence.
• Industrial stocks have gained, with the Diversified Industrials and
Distribution composite indices outperforming the market—up 9 percent
and 7 percent in the year-to-date period.
• EBITDA valuations expanded in Q4 ‘12. LTM EBITDA multiples are ticking
up, with higher expectations for growth leading to equity appreciation.
* As of February 22, 2013.
Operating Highlights
• Public companies speak to solid demand in key industrial end markets,
citing automotive, chemical, mining, and oil and gas among the industries
seeing growth. Globally, companies are seeing signs of improvement in
China and solid growth in BRIC regions.
• Building products is expecting to benefit from an anticipated recovery in
the new construction and repair and remodel markets, driven by increased
confidence from rising home prices.
• Attention will be on the impact of U.S. budget cuts and potential
sequestration on A&D sales and margins.
For more information on how
BGL’s Global Industrials Practice can assist
your company, please contact:
Andrew K. Petryk
Kevin H. Sargent
Managing Director & Principal
Head: Industrials and Plastics & Packaging
Director & Principal
216.920.6613
216.920.6639
ksargent@bglco.com
apetryk@bglco.com
Delivering Results to the Global Middle Market
Industrials Insider
Insider Perspective
M&A Outlook
According to January data from the Institute of Supply
Management, the overall economy grew for the 44th
consecutive month and economic activity in the
manufacturing sector expanded for the second consecutive
month.1 Factors expected to drive domestic growth in
2013 will be proactive monetary policy, rise in business and
consumer spending, acceleration in the housing market,
and moderate rise in employment.
Early signs, notably positive economic indicators and rising
corporate earnings, point to an M&A market poised for
strong deal flow in 2013. Sustained improvement in these
trends will bolster confidence and bring more buyers
and sellers to the market. Buyer cash reserves and an
accommodative credit market should lend further support.
Looking to the broader M&A market, a flurry of mega
deals announced in recent weeks, notably the takeprivates of Heinz and Dell and Reliance Steel’s acquisition
of Metals USA, send strong signals that buyer confidence
is building and could be harbingers of more M&A activity
on the horizon. Insiders are forecasting a strong year for
industrials M&A, with a number of forces expected to help
the deal market:
Corporate buyers are back
Corporate balance sheets are healthy. Near-record cash
balances are driving industry buyers back to the market
in an aggressive fashion, with some insiders touting 2012
as the year of the strategic buyer. Companies in the BGL
Industrials Composite are sitting on more than $200 billion
in cash and have deleveraged since the downturn, leaving
ample capacity to pursue growth acquisitions.
Confidence
The economic outlook is improving. Economists are
forecasting accelerating growth in the U.S. economy in
2013, ranging from 2 percent to 3.4 percent GDP growth,1
and firming in growth globally, including a strengthening
recovery in China and a return to stability in Europe, which
had weighed on investor sentiment throughout 2012.
Industrials saw a number of billion-plus deals announced
in 2012, which included notable strategic buys by Eaton
(Cooper Industries), Pentair (Tyco Flow Control), and ABB
(Thomas & Betts). Serial acquirers such as Parker-Hannifin
and Precision Castparts tallied nine acquisitions each in
2012, Ametek with seven, Eaton five, and 3M three.
Healthy Corporate Buyer Community
Public Company Leverage
$2,000
$200
$1,600
$150
$1,200
$100
$800
$50
$-
$400
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Industrials
$28.5
$42.9
$49.8
$55.2
$53.4
$58.7
$70.5
$94.9
$145.9
$149.4
$160.1
$205.6
S&P 500
$492.9
$558.1
$672.2
$789.8
$906.9
$908.9
$1,001.0
$964.0
$1,524.3 $1,556.3 $1,681.4 $1,811.8
SOURCE: S&P Capital IQ.
SOURCE: S&P Capital IQ, PitchBook, Equity Research; and public data.
1
Institute of Supply Management and Bloomberg.
4
$0
3.0x
2.5x
Total Debt / EBITDA
$250
S&P 500 Cash ($ billions)
Industrials Cash ($ billions)
Public Company Cash Surplus
2.0x
1.5x
1.0x
0.5x
0.0x
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Industrials
2.4x
2.3x
2.0x
1.6x
1.7x
1.5x
1.4x
1.4x
1.8x
1.5x
1.6x
1.5x
S&P 500
1.6x
1.8x
1.6x
1.3x
1.3x
1.3x
1.4x
1.6x
1.7x
1.6x
1.7x
1.8x
Industrials Insider
Insider Perspective
Private Equity
Private Equity: Driving Deal Flow
In addition to billions in “dry powder,” the inventory
of aging private-equity backed industrial companies is
growing. In 2012, the number exceeded 1,100 (which
compares to roughly 6,500 for the broad market), with the
median time to exit climbing to 5.6 years (5.4 years for the
broad market), underscoring the likelihood of increased
private equity deal flow as market conditions remain
favorable for seeking exits.
Capital Overhang
$600
Cumulative Equity Capital Overhang ($ billions)
The private equity capital overhang is beginning to come
down, standing at just under $350 billion as of year-end
2012—more than $100 billion of which remains in 2007
and 2008 vintage funds which are nearing the end of their
investment periods.2 Pressure to deploy capital will drive
volume and value of private equity deals in the coming
months.
$500
$400
$348.2
$300
$200
$100
$2007
2008
2009
2010
2011
2012
Industrials - Company Inventory
1,200
Adding to the list of mega deals in 2012 include private
equity investors such as The Carlyle Group and BC
Partners (Neodyne Industries) and Bain Capital (Apex
Tool). Historically acquisitive sponsors such as Audax
Group, which completed nine buys during the year (three
platforms and six add-ons) and AEA Investors five (three
platforms and two add-ons), were prominent in industrials
deal flow.
1,000
800
600
400
200
Credit markets liquid
Recent activity reported by Thomson Reuters LPC evidences
that terms are continuing to loosen in Q1 ‘13, with middle
market term loan yields declining to 5.7 percent, roughly 150
basis points below December levels—the lowest level since
Q2 ’04. Yield compression is attributed to lower spreads and
a reduction in Libor floors, with the average Libor floor in
Q1 ’13 pricing at 1.11 percent, down from 1.23 percent in Q4
’12, which represents a shift from 2010 and 2011, when the
majority of deals had a floor of 1.5 percent or higher.3
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Industrials - Time to Exit
5.6 years
6
5
Number of Years Held
The financing market is open. Lender appetite remains
strong, and competition for quality assets is driving
aggressive financing terms in the marketplace. Leverage
multiples increased to 3.9x and 4.5x senior and total,
respectively, in 2012, according to Standard & Poors LCD.
Sponsor equity contribution dipped below 40 percent, the
lowest level since 2007.
1,106
4
3
2
1
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Years to Exit
SOURCE: Industry classification “Commercial Products,” PitchBook.
SOURCE: S&P Capital IQ, PitchBook, Equity Research; and public data.
2
PitchBook.
3
Middle Market Weekly, 15 Feb. 2013, Thomson Reuters LPC.
5
Industrials Insider
Insider Perspective
M&A Outlook
Public Company Revenue
$1,200
$12,000
$1,000
$10,000
$800
$8,000
$600
$6,000
$400
$4,000
$200
$2,000
$0
Industrials
S&P 500
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
$620.7
$634.6
$659.7
$759.6
$829.9
$894.1
$992.8
$1,058.1
$903.5
$953.3
$1,038.8
$1,087.9
$4,592.3
$4,815.4
$5,374.8
$6,117.1
$6,797.0
$7,419.1
$8,146.9
$8,684.9
$7,934.2
$8,879.7
$9,918.7
$10,143.6
S&P 500 Revenue ($ billions)
Performance of S&P 500 companies in fourth quarter
2012 points to improving top-line growth, according to
S&P Capital IQ. Revenue growth for the quarter is pegged
to come in at 4.0 percent, a marked improvement from
the 0.4 percent figure seen in third quarter 2012. Not
only is revenue growth on the rise, so are the number of
companies beating analysts’ sales estimates. According
to its January Lookout Report, 65 percent of the 252
reporting companies surpassed expectations for the
quarter, better than the historical average of 61 percent and
exceeding the 38 percent reported in Q3 ’12, which was the
lowest such figure in the 10 years S&P Capital IQ had been
tracking such data.4
Industrials Company Performance
Industrials Revenue ($ billions)
Improving fundamentals
$0
Revenue Growth
20.0%
15.0%
Manufacturing a bright spot
YoY Growth (%)
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
2006
2007
2008
2009
Industrials
2.2%
4.0%
15.1%
9.3%
7.7%
11.0%
6.6%
-14.6%
5.5%
9.0%
4.7%
S&P 500
2002
4.9%
11.6%
2003
13.8%
2004
11.1%
2005
9.2%
9.8%
6.6%
-8.6%
11.9%
2010
11.7%
2011
2012
2.3%
Public Company EBITDA
$800
$2,000
Insiders speak to the game-changing potential of natural
gas and natural gas liquids for U.S. manufacturing. Some
are calling for a resurgence in activity, as companies
capitalize on low-cost natural gas to expand production
capacity and reshore activity from markets such as China,
where labor and supply chain costs are increasing.
$1,600
$600
$1,200
$400
$800
$200
$400
$0
2004
2005
2006
2007
2008
2009
2010
2011
2012
S&P 500
$714.3
$730.5
$831.4
$983.1
$1,102.3
$1,240.5
$1,372.5
$1,290.8
$1,235.5
$1,514.3
$1,673.9
$1,743.2
Industrials
$249.1
2001
$233.7
2002
$264.2
2003
$335.2
$388.4
$476.9
$527.8
$681.7
$452.7
$534.5
$676.4
$709.2
EBITDA Growth
40%
30%
YoY Growth (%)
20%
10%
0%
-10%
-20%
-30%
-40%
SOURCE: S&P Capital IQ, PitchBook, Equity Research; and public data.
4
Lookout Report from Global Markets Intelligence, January 2013, S&P Capital IQ.
5
Morningstar.
6
2002
2003
2004
2005
2007
2008
2009
Industrials
-6.2%
13.1%
26.9%
15.9%
22.8%
10.7%
29.2%
-33.6%
18.1%
26.5%
4.8%
S&P 500
2.3%
13.8%
18.2%
12.1%
12.5%
10.6%
-6.0%
-4.3%
22.6%
10.5%
4.1%
SOURCE: S&P Capital IQ.
2006
2010
2011
2012
$0
S&P 500 EBITDA ($ billions)
For many sectors, profit margins are at a cyclical peak,
so acquisitions will be critical to drive the bottom line.5
Strategics will continue to look to acquire growth that they
are not seeing organically.
10.0%
Industrials EBITDA ($ billions)
Industrials companies have demonstrated a solid rebound
post-downturn but the rate of growth is slowing. A
majority of companies (59 percent) in the BGL Industrials
Composite reported better-than-expected revenue growth
in fourth quarter 2012. EBITDA has grown substantially,
returning to the 2008 high last year.
Industrials Insider
Industrials companies are focusing on M&A to build their
economic moats and drive returns for shareholders.7
Acquisitions provide a means to access new products and
technologies to provide growth and margin expansion and
to stay close to customers as globalization accelerates the
need for increased collaboration. Geographic markets cited
for significant growth include Latin America, particularly
Brazil, China, Southeast Asia, India, Russia, and the
Middle East.
Valuations remain elevated
The deal market remains competitive with healthy
interest from corporate and private equity buyers. Given
fundamental drivers of deal flow, namely excess capital
and the need for acquisitions to demonstrate growth, high
valuations are likely here to stay for strong performing
companies. Competition for assets is propping up purchase
multiples, driven by an almost frenetic appetite in the
market as capital looks to be deployed. The market is
bifurcated by the haves and have nots, with a smaller
percentage of companies commanding the most attention
and garnering premium multiples.
Public Company EBITDA Multiples
14.0x
12.0x
Enterprise Value / EBITDA
M&A continues to be an important tool for portfolio
management. Companies are seeking highly engineered
solutions to enhance product portfolios, with end markets
such as energy, oil and gas, automotive, water, and mining
end markets seeing increased activity. Portfolio reshaping
through divestitures of non-core assets in slow growth or
cyclical markets will also drive deal flow.6
Industrials Valuation Multiples
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Industrials
8.7x
9.1x
10.6x
11.0x
10.0x
9.8x
9.7x
6.0x
9.7x
10.6x
8.6x
9.5x
S&P 500
12.1x
10.4x
11.4x
10.5x
9.7x
9.7x
6.5x
6.5x
9.3x
8.5x
7.9x
8.4x
Industrials M&A Multiples
14.0x
12.0x
Enterprise Value / EBITDA
Industrial businesses attractive
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
6.6x
5.9x
6.3x
8.4x
7.1x
6.0x
5.5x
7.1x
NA*
6.5x
8.2x
6.9x
$250M-$499M 8.6x
6.6x
6.6x
6.1x
8.2x
9.4x
10.1x
8.8x
NA*
NA*
NA*
NA*
> $500M
7.0x
9.8x
10.0x 10.8x 10.9x 10.7x 10.9x
NA*
8.9x
8.5x
9.7x
< $250M
8.2x
*NOTE: Data not reported due to limited number of observations for period.
SOURCE: S&P Capital IQ and Standard & Poors LCD.
SOURCE: S&P Capital IQ, PitchBook, Equity Research; and public data.
6
PwC.
7
Morningstar.
7
Industrials Insider
Insider Perspective
M&A Outlook
Summary of Selected Industrials M&A Transactions in 2012
Sector
Target
A&D
Dec-12
Avio S.p.A, Aviaon Bus ines s
Indus trial Machinery
Dec-12
MEI, Inc.
Building Products
Dec-12
TIN Building Products (Internaonal Paper)
Target Country
Italy
Acquirer
Acquirer Country
Enterprise Value
($ millions)
EV / TTM
Revenue
EBITDA
GE Aviaon
United States
$4,300.0
-
-
United States
Crane Co.; Mondais Holdings B.V.
United States
$820.5
2.1x
9.6x
United States
Georgia-Pacific Building Products LLC
United States
$750.0
-
-
Div. Indus trials
Dec-12
Intermec, Inc.
United States
Honeywell Internaonal Inc.
United States
$606.4
0.7x
21.6x
A&D
Nov-12
Titanium Metals Corporaon
United States
Precis ion Cas tparts Corp.
United States
$2,989.9
2.8x
14.0x
Building Products
Nov-12
Decorave Surfa ces Bus i nes s
(Illinois Tool Works ) (51% s take)
United States
Clayton Dublier & Rice
United States
$2,100.0
1.8x
-
Div. Indus trials
Nov-12
Anthony, Inc.
United States
Dover Corporaon
United States
$602.5
1.9x
-
Div. Indus trials
Nov-12
Thermax Inc. and Raydex/CDT Limited
United States
Tens olite LLC
United States
$265.0
-
-
Div. Indus trials
Oct-12
Apex Tool Group, LLC
United States
Bain Capital Private Equity
United States
$1,600.0
1.1x
-
Building Products
Oct-12
Hardware & Home Improvement Group
(Stanley Black & Decker, Inc.,)
United States
Spectrum Brands , Inc.
United States
6.9x
A&D
Oct-12
Goodrich Electric Power Sys tems
Div. Indus trials
Sep-12
Ceradyne, Inc.
United States
3M Company
Building Products
Aug-12
Goodman Global Group, Inc.
United States
Daikin Indus tries Ltd.
Indus trial Machinery
Jul-12
Milton Roy Company Inc., Sullair
Corporaon, Sundyne Corporaon
United States
BC Partners ; The Carlyle Group LP
A&D
Jul-12
GeoEye, Inc.
United States
DigitalGlobe, Inc.
United States
$900.0
-
-
A&D
Jul-12
Volvo Aero AB
GKN Aeros pace New England Inc.
United States
$874.0
0.9x
7.5x
United Kingdom Safran SA
Sweden
$1,300.0
1.3x
France
$414.0
2.1x
-
United States
$667.7
1.4x
7.7x
Japan
$3,700.0
1.8x
-
United States , London
$3,440.0
-
-
Indus trial Machinery
Jun-12
Xaloy Superior Holdings , Inc.
Elec. Components
May-12
Cooper Indus tries plc
Cons trucon & Farm Equipment
May-12
Indus trea Limited
Indus trial Machinery
May-12
Extrus ion Dies Indus tries , LLC
Cons trucon & Farm Equipment
Apr-12
Distribuon and Support Business in Australia
(Bucyrus Internaonal Inc.)
Div. Indus trials
Mar-12
Tyco Flow Control Internaonal Ltd.
Elec. Components
Mar-12
Avtron LoadBank, Inc.
United States
Emers on Network Power, Inc.
United States
-
-
Elec. Components
Jan-12
Thomas & Bes Corp.
United States
ABB Low Voltage Products & Sys tems
United States
$3,717.7
1.6x
9.2x
A&D
Jan-12
AmSafe, Inc.
United States
Trans Digm Inc.
United States
$750.0
2.9x
12.4x
Source: S&P Capital IQ.
8
Announced
Date
United States
Nordson Corporaon
United States
$200.0
-
-
Ireland
Eaton Corporaon
(nka Eaton Corporaon plc)
United States
$13,103.4
2.3x
12.4x
Aus tralia
General Electric Company
United States
$708.2
1.8x
6.0x
Nords on Corporaon
United States
$200.0
-
-
United States
Aus tral i a
Switzerland
Wes Trac Pty Ltd.
Pentair, Inc. (nka:Pentair Ltd.)
Aus tral i a
Switzerland
$400.0
-
-
$5,654.1
1.4x
11.8x
-
Industrials Insider
Overall M&A Activity
Mergers & Acquisitions Activity
Private Equity Transaction Activity
Middle Market M&A Activity
Transaction Count by Deal Size
$60
500
307
50
$20
235
54
211
$40
$30
188
164
160
214
154
137
176 42
53
68
63
55
226
163
166
120
168
230
61
58
234
161 42
204
134
141
122
197
131
100 145 32
97 120 26
96 111 35
58 91 19
233
207
148
132
114 113 19
40
58
43
63
36
191
268
145
222
211
156
141
107
63
67
63
66
65
62
240
207
151
214
219
59
106
0
125
100
119
200
207
300
148
400
$50
$10
$0
2,500
Number of Transactions
$70
600
69
700
Transaction Value ($ in billions)
Number of Transactions
3,000
2,000
1,500
1,000
500
2006
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2006
2007
2008
$25M-$50M
2009
2010
$50M-$250M
2011
$250M-$500M
2012
2007
2008
2009
2010
2011
Under $25M
$25M-$100M
$100M-$500M
$500M-$1B
$1B-$2.5B
$2.5B+
2012
Trans Value
Based on announced deals, where the primary location of the target is in the United States.
Middle market enterprise values between $25 million and $500 million.
Source: S&P Capital IQ.
Source: PitchBook.
Counts only include deals with disclosed transaction values.
Trends in Valuation
2008
<$250 million
2010
$250-$499 million
2011
2006
2012
2007
2008
<$250 million
$500 million+
*NOTE: Data not reported due to limited number of observations for period.
8.7x
6.3x
7.4x
8.0x
8.0x
8.5x
7.5x
NA*
2009
2010
$250-$499 million
2011
2012
$500 million+
Source: Standard & Poors LCD.
*NOTE: Data not reported due to limited number of observations for period.
Source: Standard & Poors LCD.
9.1x
9.4x
8.3x
8.5x
NA* NA*
5.0x
2009
6.6x
7.6x
NA*
2007
8.1x
8.5x
8.2x
7.7x
9.2x
9.7x
9.5x
9.8x
8.0x
7.6x
7.0x
6.0x
5.0x
2006
8.0x
6.5x
6.0x
9.0x
7.2x
6.8x
7.1x
7.0x
8.4x
9.4x
9.1x
8.0x
8.2x
8.7x
9.0x
8.2x
10.0x
EBITDA Multiple
10.0x
9.5x
9.7x
11.0x
10.2x
11.0x
10.0x
12.0x
EBITDA Multiple
12.0x
9.9x
Transactions with Financial Buyers
Transactions with Strategic Buyers
Acquisition Financing Trends
Leverage
Equity Contribution
55%
6.0x
50%
5.0x
4.0x
0.4
0.6
0.6
1.0
3.0x
3.6
1.0x
47%
46%
43%
40%
4.0
3.1
45%
0.8
1.0
2.0x
51%
1.5
1.2
3.2
3.9
3.9
4.0
2.6
35%
41%
40%
2012
LTM
1/31/13
38%
35%
30%
25%
0.0x
2006
2007
2008
2009
2010
Senior Debt/EBITDA
Middle market enterprise values between $25 million and $500 million.
2011
2012
LTM
1/31/13
2006
2007
2008
2009
2010
2011
Sub Debt/EBITDA
Source: Standard & Poors LCD.
Middle market enterprise values between $25 million and $500 million.
Source: Standard & Poors LCD.
9
Industrials Insider
Industrials M&A Activity
NOTABLE ACTIVITY IN DIVERSIFIED INDUSTRIALS
Honeywell International (HON) announced in December
2012 it was acquiring Intermec (IN), a provider of
mobile computing, radio frequency identification (RFID)
solutions, and barcode, label, and receipt printers
for use in warehousing, supply chain, field service,
and manufacturing environments. The acquisition is
expected to add geographic reach and technology
such as voice and RFID solutions to HON’s Scanning
and Mobility business. Intermec is based in Everett,
Washington, and has 2,200 employees in more than 65
offices worldwide. The $600 million transaction valued
the company at .7x Revenue and 21.6x EBITDA (~10.0x
2013 EBITDA (estimate))
In November 2012, Dover Corporation (DOV) acquired
Anthony International from Avista Capital Partners
for $602.5 million. Anthony manufactures glass
refrigerator and freezer doors and frames, sliders, case
lighting, viewing windows, displays, and merchandising
systems. The company also specializes in custom glass
applications, such as heated, tempered, and coated
for use in cooler and freezer doors and panels for the
refrigeration industry. Avista Capital Partners acquired
the company from Aurora Capital Group in June 2011.
The acquisition is expected to be a game-changer for
Dover in the global commercial refrigeration market,
according to industry analysts, targeted to take
advantage of challenges still being faced by competitors
in the commercial refrigeration market and expand
energy efficiency via LED lighting and insulated glass
applications. Anthony also brings a new market in
the convenience store channel to Dover. Transaction
Multiple: 1.9x Revenue
In November 2012, 3M Company (MMM) announced the
acquisition of Ceradyne Inc. (CRDN), broadening its
ceramic platform. Ceradyne is a leading global provider
of advanced technical ceramics for applications in
the defense (39 percent of 2011 sales), industrial (29
percent), energy (23 percent, including oil and gas,
solar, and nuclear), automotive/diesel (6 percent) and
commercial markets (2 percent). The company operates
facilities in the United States, Canada, China, India, and
Germany. Transaction Multiples: 1.4x Revenue and 7.7x
EBITDA
10
- 4Q 2012
In October 2012, Bain Capital Private Equity announced
it was acquiring Apex Tool Group, LLC from Cooper
Industries plc and Danaher Corp. (DHR) in a $1.6 billion
transaction. Based in Sparks, Maryland, Apex Tool
provides industrial hand tools, tool storage products,
horseshoes and farrier tools, precision machine parts,
ratcheting wrenches, jacobs chucks, airtools, delta truck
boxes, and wellers. Transaction Multiple: 1.1x Revenue
NOTABLE ACTIVITY IN AEROSPACE & DEFENSE
In December 2012, LMI Aerospace Inc. (LMIA) acquired
Valent Aerostructures, LLC for consideration of
$246.7 million. Based in Kansas City, Missouri, Valent
manufactures complex, structural components and
subassemblies for OEM and Tier 1 airframe manufacturers
in the aerospace and defense industries. The
transformative acquisition will add over 40 percent to
LMI’s 2013 revenues, bringing management talent and
certain complex assembly capabilities, enabling LMI to
offer more diversified products and roughly tripling LMI’s
737 shipset content. The transaction represents an exit for
Tech Investments LLC, which acquired the company in
1999. Transaction Multiples: 1.7x 2013 Revenue and 10.0x
2013 EBITDA (estimate)
In December 2012, Moog Inc. (MOG.A and MOG.B)
acquired Broad Reach Engineering Company. Founded
in 1997 and based in Golden, Colorado, Broad Reach
Engineering designs and manufactures spaceflight
electronics and software for aerospace, scientific,
commercial, and military missions. The company also
provides ground testing, launch, and on-orbit operations.
The $48 million purchase price, consisting of $37 million
in cash, $6 million in a note payable, and a $5 million
potential earn out payment, values the company at
~1.7x Revenue. Broad Reach Engineering is Moog’s third
acquisition in 2012, following Tritech International, Ltd.,
a manufacturer of high performance acoustic sensors,
sonars, video cameras, and mechanical tooling equipment,
acquired from Halma plc in August and AMPAC-ISP
Corp., a manufacturer of liquid propulsion systems and
components for satellites and missile defense systems
in June.
SOURCE: S&P Capital IQ, PitchBook, Equity Research and Company Filings.
Industrials Insider
Industrials M&A Activity
NOTABLE ACTIVITY IN AEROSPACE & DEFENSE (cont.)
Precision Castparts Corp. (PCP) announced the
acquisition of Synchronous Aerospace Group, Inc. in
November 2012. Synchronous is a build-to-print producer
of complex aerospace mechanical assemblies such as
high-lift mechanisms and secondary flight controls, as well
as structural components, including wing ribs, bulkheads,
and track and beam assemblies. The company’s core
capabilities include gantry machining, hard-metal
machining, high-speed machining, turning, sheet-metal
forming, and metal and composite bonding. Synchronous
derives about 90 percent of revenues from commercial
aerospace programs, including the 787, 747-8, 737, and
will extend PCP’s reach in aerostructures capabilities.
The transaction represents an exit for Littlejohn & Co.
LLC, which acquired the company in August 2007. The
(estimated) $340 million transaction values the company
at 1.8x Revenue and 9.8x EBITDA.
PCP is leveraging its vertically integrated model with
applications in fasteners, forgings, and castings to grow
its exposure in the fragmented Tier 2 aerostructures
market. Synchronous is PCP’s fifth acquisition following
aerostructure deals McSwain, Centra Industries, Klune
Industries, and Primus International.
In November 2012, private equity firm American Industrial
Partners, acquired the U.S. operating subsidiaries of
Hampson Industries plc to form platform AIP Aerospace.
The business is comprised of five operating divisions that
develop complex metallic and composite aerospace molds,
mandrels, assembly jigs, and fixtures (Odyssey Industries,
LLC; Global Tooling Systems, LLC; and Coast Composites,
LLC) and aerostructure and composite components
(Composites Horizons, LLC and Texstars, LLC) for the global
aerospace market. AIP Aerospace employs approximately
1,140 people from 10 manufacturing facilities located in
California, Michigan, and Texas. The business generates
annual sales of approximately $210 million.
Safran SA (SAF) of France announced in October 2012
the acquisition of Goodrich Electric Power Systems
from Goodrich Corporation, a subsidiary of United
Technologies, in a transaction valued at $414 million.
The transaction will create a leader in aerospace
electrical power systems, allowing Safran to develop new
leading-edge solutions for the electrification of aircraft
SOURCE: S&P Capital IQ, PitchBook, Equity Research, and Company Filings.
- 4Q 2012
equipment including landing gear, nacelle, and equipment
linked to power transmissions and closer integration of
electrical systems with the aircraft engine. GEPS’ annual
revenues are approximately $200 million. The business
employs approximately 560 people, primarily at its UK
headquarters (~460 people) and at a facility in Twinsburg,
Ohio. (~100 people). Transaction Multiple: 2.1x Revenue
NOTABLE ACTIVITY IN ELECTRONIC COMPONENTS
AND EQUIPMENT
In December 2012, Pfingsten Partners acquired AC and
DC power supply manufacturer Dynapower Company.
Founded in 1963 and based in South Burlington, Vermont,
Dynapower manufactures power transformers, rectifiers,
and bidirectional inverters that convert electricity between
AC and DC. Pfingsten will look to increase the company’s
market share in its power supply end markets and
capitalize on an opportunity in smart grid energy storage
adoption.
In November 2012, General Cable Corp. (BGC) acquired
Prestolite Wire, LLC, from financial sponsor Liberty
Lane Partners. Prestolite offers wire and cable and wire
harness products serving predominantly transportation
OEMs, Tier 1 wire harness manufacturers, and distribution
customers. Liberty completed two add-on acquisitions
during its ownership of Prestolite: QuickTime in July
2010, a manufacturer of bell housings, flex plates and
flywheels, valve covers, and other racing accessories for
car manufacturers and the racing industry, and in August
2007, Mr. Gasket, a manufacturer of performance auto
products under the ACCEL, Mallory, Lakewood, Hays, and
Mr. Gasket brands for the automotive aftermarket.
Prestolite is General Cable’s fourth acquisition in 2012,
following the April purchase of Délphia Produtos Elétricos
Ltda., a Brazilian manufacturer of ignition cables for
automotive OEM clients; in May 2012 (completed in
December), Alcan Products Corporation, a manufacturer
of aluminum cables for the utility and building industries
in North America; and in October 2012, Colombia-based
Productora de Cables S.A. CI, a producer of copper and
aluminum alloy electrical cables and wires and copper
conductors for rural electrification, urban grids, and
commercial distribution.
11
Industrials Insider
Industrials M&A Activity
NOTABLE ACTIVITY IN INDUSTRIAL MACHINERY
In December 2012, The Carlyle Group and BC Partners
acquired Neodyne Industries in a $3.4 billion transaction.
Based in Luxembourg, Neodyne manufactures flow
control machinery and industrial air compressors under
the brand names, Milton Roy, Sundyne, and Sullair.
In December 2012, Crane Co. (CR) acquired MEI Conlux
in an $820 million transaction, representing an exit from
a six-year investment for Advantage Partners and Bain
Capital Private Equity. Headquartered in West Chester,
Pennsylvania, MEI manufactures electronic bill acceptors
and recyclers, coin validators and dispensers, and
cashless card readers, having the largest installed base of
unattended payment systems, handling over two billion
transactions per week in more than 100 countries. The
acquisition will broaden CR’s Payment Solutions business
through more efficient R&D spending across products,
increased utilization of MEI’s low-cost manufacturing
facilities in Mexico and China, and provide more growth
opportunities in emerging markets. Transaction Multiples:
2.1x Revenue and 9.6x EBITDA
In December 2012, Irving Place Capital and Audax Capital
acquired Chromalox from Sentinel Capital Partners.
Founded in 1918, Chromalox provides industrial heating
solutions. Products include immersion heaters, circulation
systems, heat transfer systems, boilers, industrial and
comfort air heating, heat trace cables, sensors, and
precision electronic controls. Sentinel acquired the
company in March 2011, and during its ownership,
oversaw the opening of a manufacturing facility in China,
sales offices in India, Germany, and parts of Asia, and
performance improvement of the company’s European
operations. Irving Place will look to help build the business
through organic growth and strategic acquisitions.
In December 2012, Sweden’s ASSA Abloy AB (ASSA B)
acquired 4Front Engineered Solutions, Inc., representing
an exit for Wynnchurch Capital Partners which acquired
the company in 2006. Founded in 1953 and headquartered
in Carrollton, Texas, 4Front manufactures truck and rail
loading dock equipment for the material handling industry,
including mechanical, air-powered, hydraulic, and vertical
storing dock levelers, trailer restraints, dock seals and
shelters, industrial lift products, impact resistant dock
doors, and loading lock accessories. The company serves
12
- 4Q 2012
warehouse, manufacturing, retail, and distribution center
customers worldwide. 4Front operates facilities in Texas,
Canada, Mexico, and India. Wynnchurch Capital, along with
company management, acquired 4Front in a carve out of
the Dock Products business from SPX (SPW) in October
2006.
Harbour Group completed two acquisitions in the fourth
quarter, Cleaver-Brooks, Inc. in December and CPS
Products, Inc. in November. Based in Thomasville, Georgia,
Cleaver-Brooks is a manufacturer of boiler room products
and systems, such as firetube packaged boilers, industrial
watertube boilers, modular boilers, commercial watertube
packaged boilers, waste heat recovery systems, burners,
and boiler room accessories for commercial, industrial,
and institutional applications in the United States and
internationally. Its products are used in waste heat
applications, as well as in heat recovery applications for
turbines. Cleaver-Brooks had been a Wellspring Capital
Management investment since June 2008. During its
ownership, Wellspring helped the company develop
its aftermarket segment and expand its product line
through organic growth and strategic acquisition. Hialeah,
Florida-based CPS Products, is a manufacturer of tools,
equipment, and instruments used by technicians who
service commercial HVAC/R and automotive AC systems.
Parker-Hannifin Corporation (PH) completed three
acquisitions in Q4 ‘12: PGI International, Ltd. in November
2012, representing an exit for The Edgewater Funds,
which acquired the company in June 2007. Houston,
Texas-based PGI manufactures high-pressure flow control
components and systems for oil and gas, agriculture, and
petrochemical applications. The company’s products
include instrumentation valves, thermo wells and
temperature probes, thermoelectric battery chargers,
valve fittings, and wellhead components.
In November 2012, Parker-Hannifin acquired Velcon
Filters, LLC, marking an exit for The Sterling Group,
L.P. Velcon manufactures filtration equipment and
replacement cartridges for the aviation, industrial fuel
and industrial process filtration markets. The Sterling
Group purchased Velcon as the platform for a buy-andbuild strategy initiated in 2009, and during its ownership,
completed three add-on acquisitions, expanding into both
new end-markets and geographies: Netherlands-based
SOURCE: S&P Capital IQ, PitchBook, Equity Research, and Company Filings.
Industrials Insider
Industrials M&A Activity
NOTABLE ACTIVITY IN INDUSTRIAL MACHINERY (cont.)
Twin Filters, a manufacturer of filtration equipment and
replacement cartridges for the oil, liquid, and air filtration
markets; Warner Lewis of Germany, a manufacturer of
aircraft refueling solutions, strengthening its presence
in Europe, the Middle East, and Africa; and Chemflo, a
manufacturer of high-capacity filters and coalescers for
petrochemical producers, refineries, pipeline companies,
natural gas processors, the food and beverage industry,
and many other process industries.
In October, Parker-Hannifin acquired Compton, Californiabased Sea Recovery, from Danfoss A/S. Founded in 1981,
Sea Recovery manufactures small to high capacity reverse
osmosis systems for sea water desalination used primarily
in commercial and pleasure marine applications. ParkerHannifin completed a total of nine acquisitions in 2012.
In October 2012, AEA Investors completed the second
add-on acquisition for portfolio company Industrial
Acoustics with Stafford, Texas-based MaximSilex.
The transaction follows the September acquisition of
Lincoln, Nebraska-based GTE Industries. Both companies
provide sound and emissions control solutions to the
energy, power, and heavy transportation industries.
Products include silencers, catalytic converters, diesel
particulate filters, emissions monitoring systems, and
related accessories. MaximSilex also offers advanced
software engineering to enhance the design and selection
of exhaust systems. AEA Investors acquired Industrial
Acoustics in June 2012 from MML Capital Partners, which
owned the company since 1998. Industrial Acoustics is
based in Winchester, United Kingdom.
NOTABLE ACTIVITY IN BUILDING PRODUCTS
In December 2012, Georgia-Pacific Building Products
LLC reached an agreement to acquire the assets of the
Temple-Inland Building Products business from International Paper Co. (IP) in a $750 million transaction, serving
to expand its geographic footprint and enhance service
to new and existing customers. Operating from 16 facilities across eight states, primarily in the southeastern and
eastern regions of the United States, the business manufactures a broad range of building products including
gypsum, lumber, fiberboard, medium density fiberboard
(MDF), and particleboard.
SOURCE: S&P Capital IQ, PitchBook, Equity Research, and Company Filings.
- 4Q 2012
In November 2012, Clayton Dublier & Rice acquired a
majority equity stake (51 percent) in the Decorative
Surfaces Business of Illinois Tool Works (ITW) in a
transaction valued at $2.1 billion. The business manufactures
laminate and work surface products for the construction
market. The company also provides decorative laminate,
solid surface, adhesives, and custom edging. Transaction
Multiple: ~1.8x 2013 Revenue (estimate)
In October 2012, Spectrum Brands Holdings, Inc. (SPB)
acquired the Hardware and Home Improvement Group
(HHI Group) from Stanley Black & Decker, Inc. (SWK) in
a $1.3 billion cash transaction. The HHI Group is a leading
manufacturer of residential locksets, residential builders’
hardware, and faucets. The acquisition will increase HHI’s
U.S. residential exposure (85% of HHI sales) and margins,
delivering upside in a housing recovery and international
expansion opportunities on SPB’s existing distribution
platform. Transaction Multiples: 1.3x Revenue and 6.9x
EBITDA
NOTABLE ACTIVITY IN DISTRIBUTION
Applied Industrial Technologies, Inc. (AIT) completed two
acquisitions during the fourth quarter and four in 2012:
Parts Associates, Inc. in December 2012, a Cleveland, Ohiobased distributor of maintenance supplies and solutions,
including fasteners, fluid flow, paints, chemicals, electrical,
and shop supplies serving MRO customers in the fleet,
rental, manufacturing, agriculture, and food industries; and
in November 2012, HyQuip, LLC, a Waukesha, Wisconsinbased distributor of hydraulic, rubber, and plastic industrial
hose and tubing and hose assemblies for fluid conveyance
applications, building on its market position in fluid power.
Other 2012 buys include New Zealand-based SKF Bearing
Supplies Pty. Ltd., a supplier of bearings, seals, lubrication
products, and power transmission products, and SKF New
Zealand Limited, a distributor of bearings, housings, and
sealing devices, from AB SKF (SKF B). In February 2012,
AIT acquired Solutions Industrielles Inc., a distributor
of bearings and power transmission products based in
Canada.
13
Industrials Insider
Industry Valuations
Relative Valuation Trends
'LYHUVL´HG,QGXVWULDOV
Aerospace & Defense
12.00x
2.00x
10.00x
1.50x
11.00x
1.80x
9.00x
1.35x
10.00x
1.60x
8.00x
1.20x
9.00x
1.40x
7.00x
1.05x
8.00x
1.20x
6.00x
0.90x
7.00x
1.00x
5.00x
0.75x
6.00x
0.80x
4.00x
0.60x
5.00x
0.60x
3.00x
0.45x
2.00x
0.30x
4.00x
0.40x
3.00x
0.20x
2.00x
0.00x
1.00x
0.00x
EV/EBITDA
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412
5.3x
6.9x
8.6x 10.4x 10.5x 9.0x
9.3x 10.0x 10.5x 9.8x
7.2x
8.1x
8.6x
8.1x
8.6x
9.0x
EV/Revenue 0.7x
0.8x
1.0x
1.3x
1.1x
1.2x
1.4x
1.3x
1.3x
1.4x
1.1x
1.3x
1.1x
1.4x
1.5x
1.5x
EV/EBITDA
0.00x
5.3x 6.2x 7.3x 8.0x 8.1x 6.9x 7.5x 7.4x 8.5x 8.2x 6.8x 7.4x 7.9x 7.4x 6.7x 7.3x
EV/Revenue 0.7x 0.8x 0.9x 0.9x 1.0x 0.8x 0.8x 0.9x 1.0x 0.9x 0.7x 0.9x 0.9x 0.8x 0.8x 0.8x
Industrial Machinery
Electrical Components and Equipment
2.00x
12.00x
2.50x
12.00x
11.00x
2.25x
11.00x
1.80x
10.00x
2.00x
10.00x
1.60x
9.00x
1.75x
9.00x
1.40x
8.00x
1.50x
8.00x
1.20x
7.00x
1.25x
7.00x
1.00x
6.00x
1.00x
6.00x
0.80x
5.00x
0.75x
5.00x
0.60x
4.00x
0.50x
4.00x
0.40x
3.00x
0.25x
3.00x
0.00x
2.00x
2.00x
EV/EBITDA
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412
0.20x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412
5.3x
6.8x
8.8x 10.4x 11.4x 9.3x 10.2x 11.8x 12.0x 11.3x 7.8x
9.4x 10.0x 8.7x
8.8x
9.6x
EV/EBITDA
5.1x
6.4x
8.9x 10.7x 11.7x 9.6x 10.2x 10.5x 11.5x 10.6x 8.1x
9.1x
9.8x
8.9x
9.2x 10.0x
EV/Revenue 0.7x
0.9x
1.2x
1.5x
1.6x
1.7x
EV/Revenue 0.9x
1.1x
1.3x
1.6x
1.7x
1.5x
1.6x
1.4x
1.7x
1.4x
1.6x
1.8x
2.0x
1.8x
1.3x
1.7x
1.5x
Construction and Farm Equipment
2.00x
13.00x
1.80x
12.00x
1.60x
11.00x
1.40x
10.00x
1.20x
9.00x
1.00x
8.00x
0.80x
7.00x
0.60x
6.00x
0.40x
5.00x
0.20x
4.00x
0.00x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412
4.6x
EV/Revenue 0.5x
7.1x 12.2x 12.4x 11.9x 12.2x 11.4x 12.3x 13.9x 11.1x 8.8x
8.8x
9.6x
7.8x
7.8x
7.9x
0.7x
1.0x
1.1x
1.0x
0.9x
1.1x
0.9x
0.9x
1.0x
1.2x
1.5x
1.6x
1.5x
1.3x
1.0x
1.20x
1.10x
12.00x
1.00x
11.00x
0.90x
10.00x
0.80x
9.00x
0.70x
8.00x
0.60x
7.00x
0.50x
6.00x
0.40x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412
6.0x
6.7x
7.6x
9.1x
10.1x 9.7x
10.2x 11.1x 11.6x 11.0x 9.0x
10.1x 10.7x 8.8x
9.6x
10.6x
EV/Revenue 0.5x
0.6x
0.7x
0.7x
0.8x
0.7x
0.7x
0.8x
0.9x
0.7x
0.7x
0.6x
0.8x
0.7x
1.9x
1.9x
2.0x
1.5x
1.7x
1.20x
1.10x
12.00x
1.00x
11.00x
0.90x
10.00x
0.80x
9.00x
0.70x
8.00x
0.60x
7.00x
0.50x
6.00x
0.40x
4.00x
0.30x
5.00x
0.7x
1.7x
13.00x
0.30x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412
5.7x
EV/Revenue 0.4x
13.00x
0.8x
1.5x
14.00x
EV/EBITDA
14.00x
EV/EBITDA
1.5x
5.00x
Distribution
4.00x
1.4x
0.00x
Building Products
14.00x
EV/EBITDA
0.20x
SOURCE: S&P Capital IQ.
*Figures include latest reported earnings for index constituents. Q4 2012 earnings had not been released for all companies by publish date.
14
0.15x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412
8.1x 10.3x 10.4x 8.9x
7.4x
7.3x 10.4x 10.7x 10.1x 7.5x
9.3x 12.0x 12.5x 11.9x 12.8x
0.5x
0.8x
0.8x
0.8x
0.7x
0.8x
0.9x
0.9x
1.0x
0.9x
0.7x
1.1x
1.0x
1.1x
1.2x
0.20x
Industrials Insider
Industry Valuations
Relative Valuation Trends
($ in millions, except per share data)
Company Name
DIVERSIFIED INDUSTRIALS
General Electric Company
United Technologies Corp.
3M Company
Honeywell International Inc.
Danaher Corp.
Eaton Corporation plc
Ingersoll-Rand Plc
Tyco International Ltd.
Parker-Hannifin Corporation
Dover Corporation
Textron Inc.
Carlisle Companies Incorporated
ITT Corporation
Median
Mean
AEROSPACE AND DEFENSE
United Technologies Corp.
The Boeing Company
Lockheed Martin Corporation
Precision Castparts Corp.
General Dynamics Corp.
Raytheon Co.
Northrop Grumman Corporation
Rockwell Collins Inc.
TransDigm Group Incorporated
L-3 Communications Holdings Inc.
Spirit AeroSystems Holdings, Inc.
Moog Inc.
Median
Mean
ELECTRICAL COMPONENTS AND EQUIPMENT
Emerson Electric Co.
Johnson Controls Inc.
Rockwell Automation Inc.
Roper Industries Inc.
Ametek Inc.
Hubbell Inc.
Regal Beloit Corporation
Acuity Brands, Inc.
Median
Mean
Ticker
Current
% of
Market
Enterprise TTM Enterprise Value / Total Debt/
TTM
Stock Price (1)52W High Capitalization (2) Value (3) Revenue EBITDA
EBITDA Revenue
TTM Margins
Gross EBITDA
NYSE:GE
NYSE:UTX
NYSE:MMM
NYSE:HON
NYSE:DHR
NYSE:ETN
NYSE:IR
NYSE:TYC
NYSE:PH
NYSE:DOV
NYSE:TXT
NYSE:CSL
NYSE:ITT
$23.39
90.49
103.54
69.89
61.46
59.75
52.61
31.85
94.54
73.12
29.14
67.68
25.79
$61.46
$60.25
98.5%
98.9%
99.2%
97.8%
98.9%
96.8%
97.6%
54.8%
97.0%
99.6%
97.9%
98.3%
97.3%
97.9%
94.8%
$245,274.6
82,946.8
71,441.6
54,778.9
42,422.5
27,675.8
15,590.9
14,842.7
14,101.4
12,772.5
7,912.8
4,276.4
2,390.7
$15,590.9
$45,879.0
$539,074.6
102,741.8
73,447.6
57,293.9
46,154.3
37,446.8
18,023.3
15,862.7
15,626.3
14,772.6
10,529.8
4,916.4
1,628.7
$18,023.3
$72,116.8
3.7x
1.8x
2.5x
1.5x
2.5x
2.3x
1.3x
1.5x
1.2x
1.8x
0.9x
1.4x
0.7x
1.5x
1.8x
18.8x
10.6x
9.5x
11.2x
11.5x
17.8x
9.5x
12.5x
8.5x
9.0x
7.7x
8.6x
5.4x
9.5x
10.0x
14.4x $147,359.0 12.4% 19.5%
2.4x 57,708.0 27.5% 16.8%
0.8x 29,904.0 47.5% 26.0%
1.5x 37,665.0 24.9% 13.5%
1.4x 18,260.4 51.6% 21.5%
5.2x
16,311.0 29.8% 12.9%
1.7x 14,034.9 30.6% 13.6%
1.2x 10,525.0 36.2% 12.2%
1.1x 13,085.7 23.2% 14.0%
1.7x
8,104.3 38.4% 20.3%
2.9x 12,237.0 17.6% 11.2%
1.3x
3,629.4 24.9% 15.7%
0.0x
2,217.9 30.3% 13.7%
1.4x $14,034.9 29.8% 14.0%
1.6x $28,541.7 30.4% 16.2%
NYSE:UTX
NYSE:BA
NYSE:LMT
NYSE:PCP
NYSE:GD
NYSE:RTN
NYSE:NOC
NYSE:COL
NYSE:TDG
NYSE:LLL
NYSE:SPR
NYSE:MOG.A
$90.49
76.66
88.12
184.50
67.32
54.44
65.97
58.82
142.74
76.88
16.43
45.82
$71.99
$80.68
98.9%
98.3%
91.3%
94.6%
90.3%
91.7%
92.6%
95.1%
93.5%
96.3%
63.2%
100.0%
94.1%
92.2%
$82,946.8
57,967.6
28,286.5
27,020.6
23,793.8
17,766.8
15,643.3
8,127.9
7,428.2
7,231.3
2,360.9
2,074.6
$16,705.0
$23,387.3
$102,741.8
54,974.6
32,696.5
30,754.0
24,405.8
18,617.8
15,716.3
8,913.9
11,202.7
10,587.3
3,096.9
2,681.7
$17,167.0
$26,365.8
1.8x
0.7x
0.7x
3.9x
0.8x
0.8x
0.6x
1.9x
6.3x
0.8x
0.6x
1.1x
0.8x
1.7x
10.6x
7.0x
6.0x
13.8x
6.5x
5.6x
4.3x
8.2x
13.8x
6.7x
26.6x
7.8x
7.0x
8.2x
2.4x $57,708.0 27.5% 16.8%
1.3x 81,698.0 16.0%
9.6%
1.2x 47,182.0
9.0% 11.6%
1.7x
7,898.1 32.0% 28.1%
1.0x 31,513.0 16.8% 11.9%
1.4x 24,414.0 21.8% 13.7%
1.1x 25,218.0 22.1% 14.4%
1.0x
4,694.0 30.5% 22.8%
5.3x
1,778.2 56.4% 45.6%
2.3x 13,146.0 10.3% 12.0%
10.0x
5,397.7
2.8%
2.2%
2.2x
2,489.7 30.2% 13.7%
1.4x $18,780.0 22.0% 13.7%
1.9x $25,261.4 23.0% 16.9%
NYSE:EMR
NYSE:JCI
NYSE:ROK
NYSE:ROP
NYSE:AME
NYSE:HUB.B
NYSE:RBC
NYSE:AYI
$57.27
31.31
90.06
124.31
42.24
93.31
77.48
72.13
$74.81
$73.51
97.6%
92.7%
97.9%
99.7%
99.5%
98.1%
95.7%
98.2%
98.0%
97.4%
$41,353.1
21,426.1
12,590.7
12,230.9
10,276.2
5,462.0
3,448.8
2,956.5
$11,253.5
$13,718.0
$44,420.1
27,962.1
12,444.4
13,882.4
11,572.0
5,411.6
3,935.1
3,042.5
$12,008.2
$15,333.8
1.8x
0.7x
2.0x
4.6x
3.5x
1.8x
1.2x
1.6x
1.8x
2.1x
9.0x
9.7x
10.9x
15.1x
13.6x
10.0x
8.8x
11.7x
10.5x
11.1x
1.1x $24,656.0 40.2% 20.0%
2.5x 41,960.0 14.8%
6.2%
1.0x
6,274.7 40.0% 18.2%
2.2x
2,993.5 55.8% 30.7%
1.7x
3,334.2 35.4% 25.5%
1.1x
3,044.4 33.2% 17.7%
1.8x
3,166.9 24.6% 14.2%
1.4x
1,940.5 40.6% 13.5%
1.5x $3,250.6 37.7% 18.0%
1.6x $10,921.3 35.6% 18.2%
NOTE: Figures in bold and italic type were excluded from median and mean calculation.
(1) As of 2/22/2013
(2) Market Capitalization is the aggregate value of a firm's outstanding common stock.
(3) Enterprise Value is the total value of a firm (including all debt and equity).
Source: S&P Capital IQ.
15
Industrials Insider
Industry Valuations
Relative Valuation Trends
($ in millions, except per share data)
Current
% of
Market
Enterprise TTM Enterprise Value / Total Debt/
Stock Price (1)52W High Capitalization (2) Value (3) Revenue EBITDA
EBITDA
Company Name
Ticker
INDUSTRIAL MACHINERY
Illinois Tool Works Inc.
NYSE:ITW
$61.48
93.7%
$27,754.3
$30,032.3
1.7x
8.7x
1.5x
Pentair Ltd.
NYSE:PNR
51.56
96.4%
10,842.7
13,038.7
3.0x
71.0x
13.5x
Flowserve Corp.
NYSE:FLS
161.30
99.2%
7,762.2
8,390.8
1.8x
10.8x
1.2x
Pall Corporation
NYSE:PLL
67.70
98.0%
7,520.9
7,230.3
2.7x
12.4x
1.1x
Donaldson Company, Inc.
NYSE:DCI
36.45
95.2%
5,345.5
5,328.8
2.1x
13.0x
0.6x
Timken Co.
NYSE:TKR
54.25
93.6%
5,204.6
5,080.3
1.0x
5.6x
0.5x
Lincoln Electric Holdings Inc.
NasdaqGS:LECO
55.92
98.5%
4,638.3
4,388.0
1.5x
9.9x
0.0x
IDEX Corporation
NYSE:IEX
50.21
98.1%
4,143.5
4,611.2
2.4x
10.5x
1.8x
SPX Corporation
NYSE:SPW
80.15
99.1%
4,072.0
4,791.2
0.9x
10.2x
3.9x
Nordson Corporation
NasdaqGS:NDSN
62.00
87.5%
3,998.9
4,567.5
3.2x
12.1x
1.6x
Gardner Denver Inc.
NYSE:GDI
70.84
92.5%
3,478.4
3,593.5
1.5x
8.2x
0.8x
Trinity Industries Inc.
NYSE:TRN
43.00
99.6%
3,402.1
6,011.5
1.6x
8.0x
4.1x
Crane Co.
NYSE:CR
53.72
98.4%
3,058.0
3,034.3
1.2x
7.8x
1.0x
CLARCOR Inc.
NYSE:CLC
52.10
99.0%
2,584.9
2,418.8
2.2x
11.3x
0.1x
Median
$55.09
98.1%
$4,390.9
$4,935.8
1.7x
10.2x
1.1x
Mean
$64.33
96.3%
$6,700.5
$7,322.7
1.9x
9.9x
1.4x
CONSTRUCTION, FARM, AND OTHER INDUSTRIAL EQUIPMENT
Caterpillar Inc.
NYSE:CAT
$91.54
78.6%
$59,963.1
$96,840.1
1.5x
8.4x
3.5x
Deere & Company
NYSE:DE
87.13
91.1%
33,815.6
62,186.1
1.7x
10.4x
5.4x
Cummins Inc.
NYSE:CMI
112.79
87.1%
21,412.6
20,942.6
1.2x
7.8x
0.3x
PACCAR Inc.
NasdaqGS:PCAR
46.86
96.1%
16,560.3
23,294.0
1.4x
10.1x
4.0x
CNH Global NV
NYSE:CNH
44.71
89.4%
10,794.1
24,025.1
1.2x
8.1x
6.3x
Joy Global, Inc.
NYSE:JOY
63.02
67.7%
6,811.3
7,919.4
1.4x
5.9x
1.0x
AGCO Corporation
NYSE:AGCO
50.70
92.1%
4,917.8
5,456.6
0.5x
5.5x
1.4x
Terex Corp.
NYSE:TEX
32.47
90.8%
3,587.9
5,279.1
0.7x
9.7x
3.9x
Oshkosh Corporation
NYSE:OSK
39.17
94.9%
3,422.1
3,921.4
0.5x
7.9x
1.9x
Navistar International Corporation
NYSE:NAV
25.18
57.2%
2,015.8
5,329.8
0.4x
NM
NM
Federal Signal Corp.
NYSE:FSS
8.19
94.9%
510.2
661.0
0.7x
10.3x
2.5x
Median
$46.86
90.8%
$6,811.3
$7,919.4
1.2x
8.2x
3.0x
Mean
$54.71
85.5%
$14,891.9
$23,259.6
1.0x
8.4x
3.0x
BUILDING PRODUCTS
Masco Corporation
NYSE:MAS
$18.92
91.4%
$6,746.2
$9,235.2
1.2x
15.2x
6.0x
Fortune Brands Home & Security, Inc.
NYSE:FBHS
34.13
95.8%
5,556.5
5,549.6
1.5x
20.0x
1.2x
Owens Corning
NYSE:OC
40.15
91.5%
4,748.6
6,762.6
1.3x
10.6x
3.2x
Armstrong World Industries, Inc.
NYSE:AWI
52.11
87.2%
3,065.2
2,728.8
1.0x
7.4x
0.0x
USG Corporation
NYSE:USG
27.81
89.8%
3,000.0
4,670.0
1.4x
18.9x
9.3x
Lennox International, Inc.
NYSE:LII
58.18
97.0%
2,924.0
3,258.8
1.1x
11.6x
1.4x
Simpson Manufacturing Co., Inc.
NYSE:SSD
28.91
84.2%
1,397.1
1,221.8
1.9x
13.3x
0.0x
Universal Forest Products Inc.
NasdaqGS:UFPI
40.86
94.2%
808.6
889.9
0.4x
12.5x
1.3x
Quanex Building Products Corporation
NYSE:NX
19.53
87.7%
717.9
648.1
0.8x
32.0x
0.1x
Griffon Corporation
NYSE:GFF
11.46
93.6%
701.5
1,250.1
0.7x
8.9x
5.0x
Median
$31.52
91.5%
$2,962.0
$2,993.8
1.1x
12.5x
1.4x
Mean
$33.21
91.2%
$2,966.6
$3,621.5
1.1x
13.1x
2.3x
DISTRIBUTION
W.W. Grainger, Inc.
NYSE:GWW
$224.86
97.3%
$15,622.8
$15,735.4
1.8x
12.2x
0.4x
Fastenal Company
NasdaqGS:FAST
51.47
93.5%
15,267.8
15,187.8
4.8x
20.9x
0.0x
MSC Industrial Direct Co. Inc.
NYSE:MSM
85.24
98.2%
5,382.9
5,152.7
2.2x
11.2x
0.0x
WESCO International Inc.
NYSE:WCC
73.35
95.4%
3,208.8
4,857.8
0.7x
11.9x
4.3x
Watsco Inc.
NYSE:WSO
78.11
97.2%
2,401.4
2,917.6
0.9x
12.2x
1.3x
Anixter International Inc.
NYSE:AXE
69.98
94.6%
2,261.4
3,155.1
0.5x
8.7x
2.7x
Applied Industrial Technologies, Inc.
NYSE:AIT
43.83
96.8%
1,845.5
1,826.7
0.8x
9.1x
0.2x
Beacon Roofing Supply, Inc.
NasdaqGS:BECN
36.72
94.5%
1,779.3
2,036.7
1.0x
12.2x
1.7x
Median
$71.67
96.1%
$2,805.1
$4,006.5
0.9x
12.1x
1.3x
Mean
$82.95
95.9%
$5,971.3
$6,358.7
1.6x
12.3x
1.3x
NOTE: Figures in bold and italic type were excluded from median and mean calculation.
(1) As of 2/22/2013
(2) Market Capitalization is the aggregate value of a firm's outstanding common stock.
(3) Enterprise Value is the total value of a firm (including all debt and equity).
Source: S&P Capital IQ.
16
TTM
Revenue
TTM Margins
Gross EBITDA
$17,924.0 36.1% 19.3%
4,416.1 28.7%
4.1%
4,751.3 33.3% 16.1%
2,648.0 51.8% 22.0%
2,489.1 34.4% 16.3%
4,987.0 27.6% 18.2%
2,853.4 30.4% 15.4%
1,954.3 41.2% 22.6%
5,100.2 27.0%
8.4%
1,480.8 57.6% 26.1%
2,355.5 34.1% 18.6%
3,811.9 20.5% 19.7%
2,579.1 33.8% 15.1%
1,121.8 33.9% 19.1%
$2,750.7 33.8% 18.4%
$4,176.6 35.0% 17.2%
$65,875.0 27.4% 17.5%
36,812.0 28.9% 16.3%
17,334.0 26.2% 13.2%
17,050.5 13.8% 13.5%
20,447.0 23.9% 14.1%
5,660.9 33.7% 23.8%
9,962.2 21.3%
9.5%
7,348.4 19.7%
7.4%
8,066.2 12.6%
6.1%
12,948.0
9.2% -4.0%
887.4 25.4%
7.2%
$12,948.0 23.9% 13.2%
$18,399.2 22.0% 11.3%
$7,745.0 25.2%
3,591.1 32.7%
5,172.0 17.2%
2,618.9 24.2%
3,224.0 12.3%
2,949.4 24.5%
657.2 43.1%
2,054.9 11.0%
829.0 15.1%
1,833.9 22.6%
$2,784.2 23.4%
$3,067.5 22.8%
7.8%
7.7%
12.5%
12.0%
7.7%
9.2%
14.0%
3.5%
2.4%
7.7%
7.8%
8.4%
$8,950.0 43.8% 14.4%
3,133.6 51.5% 23.2%
2,387.7 45.7% 19.2%
6,579.3 20.2%
6.2%
3,431.7 23.7%
7.0%
6,253.1 22.5%
5.8%
2,425.5 27.5%
8.3%
2,067.5 24.7%
8.1%
$3,282.6 26.1%
8.2%
$4,403.6 32.5% 11.5%
Industrials Insider
Industry Valuations
Sector Performance
By Sector
140%
130.6%
120%
109%
100%
Returns
80%
58%
60%
53%
40%
53%
42%
41%
34%
41%
41%
32%
22%
20%
14%
9%
5%
12%
5%
3%
12%
4%
11%
7% 7%
4%
0%
0%
0%
-6%
-10%
-20%
Diversified
Industrials
Aerospace &
Defense
Electrical
Components and
Equipment
YTD
Industrial
Machinery
1 Year
Construcon &
Farm Equipment
3 Year
Building Products
Distribuon
5Y
Overall Market
40%
37%
35%
30%
Returns
20%
12%
13%
12%
8%
10%
4%
4%
0%
-10%
-20%
S&P 500
DJIA
YTD
1 Year
3 Year
5Y
Source: S&P Capital IQ.
As of 2/22/2013.
17
Global Industrials Practice
Case Studies in
Value Creation
CCPI Inc.
recapitalized in a
change of control
transaction by
Prospect Capital Corporation
(NASDAQ: PSEC)
recapitalized by
ZS Fund L.P.
Client: CCPI Inc.
Results:
Established in 1957 and headquartered in
Blanchester, Ohio, CCPI is an industry leading
manufacturer of highly engineered refractory
products and outsourced refractory services,
temperature test and measurement devices
and calibration services, precision wire,
and other consumable products. CCPI’s
mission critical products are used in multiple
applications, including specialty steel and
aluminum production and high precision heat
treating for the aerospace, glass, and medical
markets.
CCPI was recapitalized in a change of control
transaction with combined debt and equity
financing provided by Prospect Capital
Corporation (PSEC).
CCPI has global operations on three continents
and in four countries, including manufacturing
facilities in Ohio, Connecticut, the United
Kingdom, and Bahrain and a sales office in the
Netherlands. The company sells its products
under various proprietary brands including
COMAT® and TunTemp.®
Role in Value Creation:
•
Played a significant role in advising the
business on its strategic alternatives,
the culmination of which resulted in
a competitive sale process and both
strategic and financial buyer alternatives.
•
Generated broad interest through a global
sale process which involved contacting
strategic and financial buyers, ultimately
selecting Prospect Capital to close on a
majority recapitalization of the business—a
transaction that enabled the senior
managers to invest alongside Prospect in
the recapitalization while partnering with
an investor that shares management’s
vision for growth.
Client: ECS Refining, LLC
Results:
Established in 1980, ECS is one of the nation’s
largest full-service recycling and end-of-life
services providers for electronics, industrial
equipment, and related hazardous waste. ECS’
unique and broad set of capabilities represents
a complete “end-to-end” solution for IT and
other electronic products (i.e., zero landfilling
or overseas processing), spanning precious
metals recovery and refining, cathode ray tube
(CRT) glass recycling, and asset management,
refurbishment, and resale. In 2011, the company
was featured on Inc. magazine’s list of Fastest
Growing Private Businesses in America.
ECS Refining was recapitalized by ZS Fund L.P.
The partnership will bring capital and additional
operating resources to pursue a national
expansion strategy with the Midwest and East
Coast regions in focus.
Role in Value Creation:
•
Played a significant role in advising the
business on its growth strategy, including
(i) evaluation of merger opportunities,
(ii) completion of acquisitions, and (iii)
broadening of services (e.g., a reverse
logistics program for a major international
retailer and CRT glass recycling).
•
Generated broad interest through a global
auction process which involved contacting
strategic and financial buyers. Following
management meetings, BGL managed
two potential buyers through final due
diligence, ultimately selecting ZS Fund to
close on a majority recapitalization of the
business—a transaction that enabled the
shareholders to generate a substantial
liquidity event while partnering with an
investor that shares management’s vision
for growth.
Global Industrials Practice
Precision Manufacturing
Materials & Inputs
• Metal Working
• Precision Metals
• Lubricants
• Injection & Blow Molding
• Commodity Metals
• Plastic, Rubber & Aluminum
Extrusion
• Resin
• Aggregates &
Minerals
• Automation & Controls
• Rubber
• Motors & Drives
• Aluminum
• Sensing & Imaging
Equipment
• Coatings
Capital Goods
Industrial Services
• Power Generation &
Management
• Military &
Defense
• Machine Tools
• Aerospace
• Concrete &
Concrete Products
• Building Products &
Materials
• Test & Measurement • Coatings
Development &
Services
Application
• Design & Engineering
Services
• Cranes, Material
• Automotive &
Handling & Off Road
Heavy Truck
Equipment
• Oil & Gas
• Preventative
& Predictive
Maintenance
• Rebuild &
Remanufacturing
Who We Are
• Infrastructure
Installation, Repair &
Maintenance
• Logistics &
Distribution
• Sanitation & Hygiene
Leading Independent Firm
• Independent investment banking
advisory firm focused on the middle
market
• Founding member and the exclusive
U.S. partner of Global M&A, the
world’s leading partnership of
investment banking firms focusing on
middle market transactions
• Senior bankers with significant
experience and tenure; partners
average over 20 years of experience
• Offices in Chicago, Cleveland, Salt Lake
City, and Seattle
Comprehensive Capabilities
M&A Advisory
Sell-Side Advisory
General Financial
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& Joint Venture Formation
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about content
and circulation,
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editor, Rebecca
Dickenscheidt, at
rdickenscheidt@
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or 312-513-7476.
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Products, Healthcare and Life Sciences,
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Growth
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Restructurings
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Recapitalizations
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Sales of Non-Core
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§363 Auctions
The information contained in this publication was derived from proprietary research conducted by a division or owned or affiliated entity of Brown Gibbons Lang
& Company LLC. Any projections, estimates or other forward-looking statements contained in this publication involve numerous and significant subjective assumptions
and are subject to risks, contingencies, and uncertainties that are outside of our control, which could and likely will cause actual results to differ materially. We do not
expect to, and assume no obligation to update or otherwise revise this publication or any information contained herein. Neither Brown Gibbons Lang & Company
LLC, nor any of its officers, directors, employees, affiliates, agents or representatives makes any representation or warranty, expressed or implied, as to the accuracy,
completeness or fitness of any information contained in this publication, and no legal liability is assumed or is to be implied against any of the aforementioned with
respect thereto. This publication does not constitute the giving of investment advice, nor a part of any advice on investment decisions and nothing in this publication is intended to be a recommendation of a specific security or company, nor is any of the information contained herein intended to constitute an analysis of any
company or security reasonably sufficient to form the basis for any investment decision. Brown Gibbons Lang & Company LLC, its affiliates and their officers, directors, employees or affiliates, or members of their families, may have a beneficial interest in the securities of a specific company mentioned in this publication and may
purchase or sell such securities in the open market or otherwise. Nothing contained in this publication constitutes an offer to buy or sell or the solicitation of an offer
to buy or sell any security.
Global Industrials Practice
Representative Transactions:
CCPI Inc.
acquired by
acquired by
a wholly-owned
subsidiary of
recapitalized by
acquired by
Lauren International, Inc.
ZS Fund L.P.
acquired by
acquired by
Prospect Capital Corporation
(NASDAQ: PSEC)
PVC Container Corporation
a portfolio company of
The melting operations of
The recycling operations of
divested
obtained financing
provided by
acquired by
merged with
A valuation analysis
has been completed for
Motion Control Group
acquired by
to
in support of a
strategic alternatives analysis
and
which has been acquired by
a portfolio company of
acquired by
acquired by
with interest held by
acquired by
TAD Metals, Inc.
a portfolio company of
acquired by
acquired by
acquired by
divested
substantially all of the
business and assets of
Castle Harlan
Partners IV L.P.
(CHPIV)
acquired
and its affiliate
acquired by
TINICUM CAPITAL
PARTNERS II, L.P.
Aerospace International
Materials-OEM, LLC
acquired by
to
acquired by
KILL OOL &
sold the assets
of its subsidiary
Bass-Trigon Software
to
sold the assets
of its subsidiary
acquired by
acquired by
a subsidiary of
The Power Tool
Business Unit of
IE
acquired by
Rohrback Cosasco System
acquired by
to
acquired by
Intermet Corporation
divested
Aeroquip - Vickers S.p.A.
acquired by
acquired by
acquired by
acquired by
Industrial Powder
Coatings, Inc.
through a sale to
acquired by
Citicorp Venture
Capital, Ltd.
MG Capital, L.L.C.
For questions
about content
and circulation,
please contact
editor, Rebecca
Dickenscheidt, at
rdickenscheidt@
bglco.com
or 312-513-7476.
BGL Contacts:
Andrew K. Petryk
Kevin H. Sargent
Head: Industrials and Plastics & Packaging
216.920.6613
apetryk@bglco.com
Director & Principal
216.920.6639
ksargent@bglco.com
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