InSight

Exit and Growth Strategies for Middle Market Businesses

M&A Industry News From the Metal Fabrication Sector

By Robert Contaldo | Mar 16, 2017

metal fabrication sectorM&A activity for North American based target companies in the metal fabrication sector for Q4 2016 included 46 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $62.8 million.

On a global scale, M&A activity in the metal fab sector was stronger in Q4 than Q3, but still lower than in 2015. Total deal value surged by 12% to $12.9 billion in Q4, bringing the total deal value in 2016 to $40.2 billion, still 40% lower than in the year prior.

Global demand for steel is expected to rise 0.5% in 2017 compared to 2016, according to a recent report by The World Steel Association. Key challenges include uncertainties related to the UK’s vote to exit the EU, along with China’s efforts to shift its economy toward services and consumption, with less investment in manufacturing, exports, and construction. Demand in China is forecast to drop 2% in 2017. However, some emerging markets should experience robust growth in steel demand. Amid government investments in infrastructure, India’s steel demand is forecast to increase 5.7% in 2017. Other key pockets of steel demand growth include Turkey (with 4.2% growth expected), Brazil (3.8%), and Mexico (3.2%). In developed markets, steel demand is forecast to rise 1.1% in 2017, led by the US, which should see demand grow by 3%. The EU and Japan are each expected to experience a 1.4% increase in steel demand.

Industry Indicators

  •  US durable goods manufacturers’ shipments of primary metals, an indicator of primary metal production, fell 7.8% year-to-date in November 2016 compared to the same period in 2015.
  • US steel mill product prices, which impacts profitability for primary metal manufacturers, rose 8.7% in December 2016 compared to the same month in 2015.

Posted by Bob Contaldo.

Read the Entire Metal Fabrication 1st Quarter Newsletter Here


Energy Sector Q1 M&A News

By Roy Graham | Mar 08, 2017

energy sectorM&A activity for North American based target companies in the Energy sector for Q4 2016 included 118 closed deals, according to data published by industry data tracker FactSet. The average transaction value was $271 million.

With oil prices making a slow recovery, US oil production activity is becoming increasingly concentrated in the Permian Basin. Spanning parts of western Texas and southeastern New Mexico, the Permian Basin’s highly productive fields and substantial transportation infrastructure make it one of the few places for profitable oil production when prices are relatively low. (US oil prices, which were over $100 per barrel as recently as August 2014, dropped below $30 per barrel in early 2016 and averaged $45 per barrel in the first week of November 2016.) The Permian now holds nearly as many active oil rigs as the rest of the US combined. Read more »


Does Your Company Deserve a Higher Valuation?

By George Walden | Mar 05, 2017

In a video I posted on Vimeo, I explain about why  some companies are worth more and have a higher valuation than others when the numbers appear the same? Why do some companies receive a 7X multiple and others receive a 4? Click on the play button below to see the entire video.

Recently I was at a presentation by a Texas Private Equity Group (PEG), a financial buying group of businesses to get insights into how they evaluate companies. They showed us their template of analysis. Read more »


M&A News From the Healthcare Industry

By Peter Heydenrych | Mar 02, 2017

healthcare industryM&A activity for North American based target companies in the Healthcare industry for Q4 2016 included 147 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $137 million.

The number of US physician practices owned by hospitals is rising rapidly, as changes in medical payment systems prompt providers to seek efficiencies through new operational structures. Some 31,000 practices were acquired by hospital groups between 2012 and 2015, leading to an 86% jump in the number of hospital-owned doctors’ offices, according to a recent study from Avalere Health and the Physicians Advocacy Institute (PAI). Nearly 40% of physicians in the US are employed by hospitals or health systems. Typical acquisitions include employment contracts for multiple physicians’ services, along with physical property and equipment. The study found that Medicare payments for some common outpatient hospital services are up to three times higher than if they’d been performed at a physician-owned office, leading to concerns that the acquisition trend could drive up health care costs for payers. 

Industry Indicators

  • US consumer prices for medical care commodities, an indicator of healthcare costs, increased 4.3% in November 2016 compared to the same period in 2015.
  • US consumer prices for medical care services, an indicator of profitability for healthcare services, rose 3.9% in November 2016 compared to the same month in 2015.
  • Total US revenue for healthcare and social assistance rose 5.40% in the third quarter of 2016 compared to the previous year.

Posted by Peter Heydenrych.

Read the Entire Healthcare 1st Quarter Newsletter Here


M&A News From the Food & Beverage Industry

By Terry Fick | Feb 23, 2017

food & beverageOn the public markets the Food & Beverage sector kept pace with the rest of the market experiencing a hefty post-election bounce. Conagra Brands, Inc. (NYSE: CAG) had a topsy turvy quarter taking a precipitous drop in November from $48/share to $34/share, but finished the year on an uptick at $39.14/share.

Faced with slowing sales in grocery stores and discount clubs, snack food manufacturers are looking to grow revenue online. E-commerce has become one of the fastest-growing avenues for purchases of ready-to-eat snacks as major food companies continue to increase their investments in the channel, according to NPD Group. Mondelez International recently launched a holiday-themed website to sell tins of Oreos directly to consumers, marking the first time the company is overseeing its own supply chain and shipping logistics, Bloomberg News reports. The snack food giant established a dedicated e-commerce team in 2016 and hopes to reach $1 billion in online revenue by 2020. The company will occasionally offer special limited-time promotions through its own website, but most of its products will ultimately be sold through third-party online retailers like Amazon. Some manufacturers have leveraged social media buzz to sell rare and premium varieties of snack foods that are unavailable in most brick-and-mortar outlets. Typical online snack food purchasers are households with incomes of $75,000 and above.

Industry Indicators

  • The consumer price index for food, an indicator of food product values, fell 0.2% in December 2016 compared to the same month in 2015.
  • US nondurable goods manufacturers’ shipments of food products, an indicator of demand for food manufacturing, rose 0.4% year-to-date in November 2016 compared to the same period in 2015.
  • US retail sales for food and beverage stores, a potential measure of food demand, increased 2.4% during 2016 compared to 2015.

Posted by Terry Fick.


Read the Entire Food & Beverage 1st Quarter Newsletter Here


Construction & Engineering Sector | M&A News

By Jeff Johnson | Feb 15, 2017

construction & engineeringNew US infrastructure projects such as repaving roads, shoring up bridges, and expanding busy highways with toll roads – a key source of demand for contractors – are predicted to rise in value in 2017 compared to the year before, according to Dodge Data & Analytics. The value of new public works construction & engineering projects, which include highway, street, and bridge construction as well as natural gas and oil pipelines and environmental work, is expected to rise 6%. The forecast represents improvement over 2016, when the value of new public works projects fell by 3% year over year. Demand is being driven in part by highway and bridge work funded by the new federal transportation bill.

New US regulations make it easier for companies that construct highways, streets, and bridges to begin or expand their use of drones. The FAA in mid-2016 issued commercial drone regulations that allow construction companies to begin using drones within days, rather than weeks or months. The infrastructure sector, along with the engineering & construction sector, leads in the number of exemption applications since the FAA began granting exceptions to its ban on the commercial use of drones. According to the Association for Unmanned Vehicle Systems International, nearly 40% of FAA-approved exemptions so far have come from these sectors.

Industry Indicators

  • The value of US nonresidential construction spending, a demand indicator for builders, rose 4.1% year-to-date in November 2016 compared to the same period in 2015.
  • US steel mill product prices, an indicator of commodity steel product costs used in construction, rose 8.7% in December 2016 compared to the same month in 2015.
  • The spot price of crude oil, which affects highway construction costs for asphalt, bituminous concrete, plastic pipe products, and for running equipment fleets, rose 50.3% in the week ending January 13, 2017, compared to the same week in 2016.

Posted by Jeff Johnson.

Read the Entire Engineering & Construction M&A 1st Quarter Newsletter Here


4 Potential Value Killers of Your Business

By George Walden | Feb 08, 2017

In a video I posted on Vimeo, I explain about four of the many potential value killers of your business when it is time to sell. Click on the play button below to see the entire video.

Four of the many potential destroyers of value of your business when it is time to sell: Read more »


When Should You Sell Your Company?

By George Walden | Jan 09, 2017

When should you sell your company?  If you were to ask most business owners this question they would say, “When I am ready.” Not a very scientific approach for the wealth generating machine you have created. But let’s assume for the sake of argument you decide you are within 5 years of that decision.

In a video I posted on Vimeo, I explain about the indicators that let you know it is time to sell.  Click on the play button below to see the entire video.

Here are three indicators that let you know it is time to sell and when used correctly they may even raise the value of you company: Read more »


Print & Packaging M&A News Update

By Anthony Contaldo | Jan 06, 2017
Print & PackagingM&A activity for North American based target companies in the Print & Packaging sector for Q3 2016 included 54 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $401 million.
A transaction of note announced early in the quarter was Packaging Corporation of America (NYSE: PKG) announcing that it has entered into a definitive agreement to acquire substantially all of the assets of TimBar Corporation, a large independent corrugated products producer, in a cash-free, debt-free transaction for a cash purchase price of $386 million. PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States and the third largest producer of uncoated free-sheet paper in North America. PCA operates eight mills and 90 corrugated products plants and related facilities.

US commercial printing industry sales are expected to increase between 1.5% and 3% in 2017, according to an industry report and forecast released in September 2016 by printing trade industry association Idealliance. In the first half of 2016, printing industry sales grew just 0.3% from the same period the year before, the weakest growth in three years. Commercial printing industry supply and production capacity continue to outstrip demand as the digitization of information has eroded demand for core services. However, nearly 49% of printers surveyed for Idealliance’s 2016 State of the Industry report said their profits rose in the first half of 2016 compared to the same period in 2015; about 27% said profits had declined. Gains in profitability were achieved mainly by controlling costs, increasing production efficiencies, and winning higher-margin work.

Industry Indicators

  • US corporate profits, an indicator for corporate demand for printing services, fell 4.9% in the second quarter of 2016 compared to the same period in 2015.
  • US nondurable goods manufacturers’ shipments of printed goods, an indicator of demand for commercial printing, rose 0.4% year-to-date in August 2016 compared to the same period in 2015.

Posted by Anthony Contaldo.

Read the Entire Print & Packaging 4th Quarter Newsletter Here


Logistics & Transport M&A News

By Doug Nix | Jan 06, 2017

logistics & transportM&A activity for North American based target companies in the Logistics & Transport sector for Q3 2016 included 55 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $197 million.

One of the largest deals of the quarter in the Transport & Logistics sector  took place in September when XPO Logistics announced it would acquire Con-way Inc., one of the country’s largest trucking companies, for $3 billion. XPO will launch a tender offer for all of Con-way’s outstanding shares at a cash price of $47.60 per share. All of the divisions under Con-way, which include Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal, are expected to be rebranded as XPO Logistics.

Developers of self-driving vehicles are moving closer to delivering technology that could improve safety, increase productivity, and reduce operating costs for trucking companies. Citing potential safety benefits, the US Department of Transportation issued federal policy for testing and deployment of automated vehicles in September 2016. The framework clarifies federal and state roles for the regulation of such vehicles, laying necessary groundwork for companies that plan to deploy self-driving cars and trucks. One such company, Otto, plans to start hauling freight with semi-autonomous vehicles sometime in 2017, according to Reuters. Commercial use of fully automated trucks is likely still many years away, and manufacturers will have to overcome significant challenges, including vehicle technology, inadequate infrastructure, and high development costs. However, Otto’s viability got a boost in August 2016: the company was acquired by Uber for $680 million.

Industry Indicators 

  • The average US retail price for diesel and regular gas, a major operating cost for trucking fleets, fell 2% and 0.9%, respectively, in the week ending October 17, 2016, compared to the same week in 2015.
  • Total US manufacturers’ shipments, an indicator of the volume of goods shipped by truck, fell 2.7% year-to-date in August 2016 compared to the same period in 2015.
  • Total US revenue for general freight trucking fell 1.4% in the second quarter of 2016 compared to the previous year.

Posted by Doug Nix.

Read the Entire Transport, Logistics and Supply Chain 4th Quarter Newsletter Here