The report below gives a good overview of the third quarter M&A activity in the Industrials Industry Sector. M&A activity for North American based target companies in the Industrials sector for Q2 2017 included 116 closed deals, according to data published by industry data tracker FactSet.

One of the largest middle market deals of the quarter was announced in April when A private group led by the Dutil family, Marcel Dutil’s holding company, Placements CMI Inc., and AIP LLC acquired Canam Group, Inc. for CAD557.9 million (US$411.5 million) in cash. Canam Group is located in Saint Georges, Québec, Canada and provides fabricated steel joists and construction components, semi-trailers and forestry equipment. As with the stock market as a whole, the Industrials sector has grown more than 8.2% since the start of 2017. Growth has, in part, been driven by a renewed focus on manufacturing in the U.S.

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M&A activity for North American based target companies in the industrials industry for Q3 2016 included 235 closed deals, according to data published by industry data tracker FactSet. The average transaction value was $231 million.

On the public markets the industrials industry sector had an up-and-down quarter affected by shifting commodity prices, but ended strongly heading into Q4. Both presidential candidates have promised to make significant investments in infrastructure if elected, which should positively affect industrials stock moving forward.

Mergers in the highly concentrated industrial gas sector could trigger more asset sales as the largest suppliers look to clear antitrust hurdles. Germany-based Linde recently entered preliminary talks to merge with US-based Praxair, a combination that would make Linde/Praxair the leading global industrial gas supplier, according to The Wall Street Journal. That designation currently belongs to France-based Air Liquide, which grabbed the top spot in May 2016 when its $13.4 billion acquisition of US-based Airgas closed. Like Air Liquide and Airgas, Linde and Praxair will face intense antitrust scrutiny if the transaction proceeds and regulators could force the companies to divest certain production units. The Federal Trade Commission required Air Liquide and Airgas to sell off assets with revenues of $270 million before greenlighting their merger. Air Liquide agreed to sell 18 air separation plants, two nitrous oxide plants, four liquid carbon dioxide facilities, and three welding gas retail stores to New Jersey-based Matheson Tri-Gas (a subsidiary of Japan’s Taiyo Nippon Sanso) in June 2016.

Industry Indicators

• US nondurable goods manufacturers’ shipments of chemical products, an indicator of industrial chemicals production, rose 2.3% year-to-date in August 2016 compared to the same period in 2015.
• The spot price of crude oil, a key ingredient in industrial chemical manufacturing, rose 10.0% in the week ending October 7, 2016, compared to the same week in 2015.

Posted by John Hammett.

Read the Entire Industrials M&A 4th Quarter Newsletter Here

One of the most significant deals in the industrials industry announced this year was the announcement of Johnson Controls (JCI) merging with Tyco International (TYC), an Ireland-based fire and security provider. The two companies announced their merger agreement on Jan. 25 for approximately $14.35 billion in cash and stock. The transaction is expected to close in early September.

On the whole, US manufacturers do not anticipate major business disruptions to result from the UK’s decision to exit the European Union, according to polling conducted by the Institute for Supply Management (ISM) in July 2016. Among manufacturing industry purchasing executives polled, 58% said Brexit would have a negligible financial impact on their organizations. However, 38% reported they believed Britain’s exit would have a negative or slightly negative impact. Among those who expect a negative impact, more than half said it would stem from a change in the exchange value of the US dollar; 14% expected disruptions in global demand. Nearly 85% of those polled said Brexit would have a negligible impact on capital spending, and fewer than 15% expected it to negatively affect their workforces. The ISM also reported that US manufacturing activity grew in June 2016 for the fourth consecutive month, and that 13 of 18 reporting industries reported expansions in activity. After a prolonged period of weak growth, US manufacturing may be improving amid a weaker dollar and strengthening energy markets, according to The Wall Street Journal.

Industry Indicators

• Total US manufacturers’ shipments, which indicate manufacturing sector activity, fell 2.7% year-to-date in May 2016 compared to the same period in 2015.The spot price of crude oil, which indicates energy prices paid by manufacturers, fell 29.1% in the week ending April 8, 2016, compared to the same week in 2015.
• The spot price of crude oil, which indicates energy prices paid by manufacturers, fell 10.8% in the week ending July 8, 2016, compared to the same week in 2015.

Posted by John Hammett.

Read the Entire Industrials M&A 3rd Quarter Newsletter Here

Four major business categories, manufacturing, healthcare, business services and distribution, account for approximately 80% of the deal activity reported to GF Data, a company charting middle market private company transactions.   The manufacturing M&A sector, coming off a banner year in 2015, is poised to continue right where it left off in 2016 in terms of middle market mergers and acquisitions activity.

During the first quarter of this year, manufacturing deal values averaged 6.5X EBITDA (earnings before interest, taxes, depreciation and amortization).  The averages are further segmented by whether or not there was a “branding” component involved in the manufacturing process, which added between 1.2X to 2.1X to the multiple. Deal size also played a role in manufacturing company valuation with transaction values between $50 and $100 million commanding the highest prices. Add-ons in the manufacturing sector between $25 and $50 million commanded slightly higher multiples than those under $25 million.

Data also suggests that the debt levels used to complete manufacturing transactions varies slightly by deal size, with the most debt being deployed for deals between $50 and $250 million at 4.1X EBITDA.

In addition, data shows that when an acquirer adds-on to an existing platform investment in their portfolio, they use markedly higher levels of debt than they do on the initial platform deal.  The deal is actually being financed based on the characteristics of an entity other than the business being acquired.

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M&A activity for North American based target companies in the Industrials industry for Q1 2016 included 216 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $126 million.

US production of manufactured goods increased 1.8% in February 2016 compared to the same month a year earlier. February’s rise represented the third consecutive monthly gain in US manufacturing output, which some economists are viewing as a sign that the sluggishness of the US manufacturing sector may be easing, according to the Wall Street Journal. US manufacturing growth has been hindered in recent months by weak global demand, a strong dollar that makes US goods more expensive in overseas markets, and low oil prices. The February gains in manufacturing production were led by motor vehicles and parts, which saw a 9.1% rise compared to February 2015. Growth in other key segments of the US manufacturing sector was muted in February. Consumer goods production rose 1.1%, while that of computer and electronic products saw a 1.5% gain. Production of industrial equipment declined 3.7%. Continued soft demand for US exports may prompt manufacturers to reduce their inventories, which could create further ripples of demand weakness within the overall manufacturing sector.

Industry Indicators

• Total US manufacturers’ shipments, which indicate manufacturing sector activity, fell 2.2% year-to-date in February 2016 compared to the same period in 2015.  In combination with the increase in production (see above), this indicates a significant increase in inventories in the sector.  If this isn’t followed by a pickup in shipments in the coming months, industrial producers will have to cut back on production again. Total US wholesale sales of durable goods, a potential measure of industrial demand, rose 1.5% in November 2015 compared to the same month in 2014.
• The spot price of crude oil, which indicates energy prices paid by manufacturers, fell 29.1% in the week ending April 8, 2016, compared to the same week in 2015.

Posted by John Hammett.

Read the Entire Industrials M&A 2nd Quarter Newsletter Here

Industrials Industry M&A Update

If oil prices remain low in 2016, industrial equipment wholesalers serving the energy industries may seek to alter their inventory and/or marketing strategies toward other industrial end-use markets with stronger growth potential. Global oil prices, a demand indicator for industrial equipment wholesalers that serve energy markets, are expected to average $57 per barrel in 2016, according to a recent Wall Street Journal poll of 11 investment banks. A global oversupply of crude oil in 2016 is expected to keep prices low, which could hurt demand for oil field equipment. In recent earnings calls, several oilfield services companies reported the industry is using sidelined machinery for spare parts to keep the equipment that is still operating in proper working order, according to The Houston Chronicle. Parts salvaged from idle equipment include motors, transmissions, and pumps.

US manufacturing activity, a demand indicator for industrial supply wholesalers, grew for the 33rd consecutive month in September 2015, according for the Institute for Supply Management (ISM). However, manufacturers generally reported slowdowns in new orders, production, and employment. Of 18 manufacturing industries reporting to the ISM, seven reported growth in September, including printing and related support activities; textile mills; furniture and related products; food, beverage, and tobacco products; paper mills; and nonmetallic mineral products. Manufacturing industries reporting contraction in September included primary metals; apparel and allied products; petroleum and coal products; wood products; electrical equipment, appliances, and components; machinery; computer and electronic products; and transportation equipment. Low oil prices are creating concerns for some industries including primary metals and petroleum products. The strong dollar has affected procurement costs and exports, and there is growing concern about economic uncertainty in China.

Industry Indicators

• Total US manufacturers’ shipments, an indicator of demand for industrial supplies used in manufacturing operations, fell 4.2% year-to-date in November 2015 compared to the same period in 2014.
• Total US wholesale sales of durable goods, a potential measure of industrial demand, rose 1.5% in November 2015 compared to the same month in 2014.

Posted by John Hammett.

Read the Entire Industrials M&A 1st Quarter Newsletter Here

According to a report from international consulting firm PWC, the industrials sector is expected to continue to prosper for the remainder of 2015 as larger corporate buyers seek to acquire improved technology, facilities and people. The US Federal Reserve’s decision to keep interest rates low has substantially lowered the cost of M&A funded by debt. For companies with limited growth opportunities, acquisitions are a natural path to bolstering market share. 

Manufacturers may be more cautious with inventory, production, staffing and capital expenditure strategies if US industrial production growth remains flat in the coming months.US industrial production of manufactured goods unexpectedly fell 0.2% in May 2015 compared to the month before. The recent stagnating US industrial output has sparked concern among some economists that US manufacturing may be in a technical recession. Economists polled by MarketWatch had expected to see May industrial production growth of 0.2%. Manufacturing activity has slowed as the strong dollar has made US exports less competitive in overseas markets. In addition, the decline in oil prices since mid-2014 has reduced investment in new equipment by energy producers. Overall global economic weakness also has contributed to reduced demand for US manufactured goods.

According to data from the Institute for Supply Management (ISM) industries in the industrials sector reporting growth in manufacturing include paper products; printing and related support activities; furniture; primary metals; nonmetallic mineral products; and food, beverage, and tobacco products. Three industries reporting a decline include textile mills; apparel, leather, and allied products; and computer and electronic products.

Posted by John Hammett.

Read the Entire Industrials M&A 3rd Quarter Newsletter Here

Industrials M&A: US industrial production in  of several types of industrial chemicals increased in December 2014 compared to same period a year earlier. Production of basic chemicals rose nearly 4 percent. Industrial gases saw production grow more than 9 percent, while basic inorganic chemicals saw an increase of more than 8 percent. Organic chemical production increased just over 2 percent. Overall, US industrial production, a general indicator of demand for industrial chemicals, grew more than 4 percent in 2014 compared to the prior year.

Slowing growth in the oil production sector could reduce demand for some industrial equipment wholesalers. Oil production and prices have boomed in recent years, particularly in the US, but Brent crude spot prices recently hit a six-year low. Falling oil prices are expected to slow production growth over the next two years among non-OPEC suppliers, a key customer segment for industrial equipment dealers. US crude oil production, which rose 16 percent in 2014, is projected to grow 8 percent in 2015 and 2 percent in 2016, according to the US Energy Information Administration’s Short-Term Energy Outlook for February 2015.

The best post-recession year for machine tool consumption could be ahead in the remainder of 2015, according to the Gardner Research Capital Spending Survey and Forecast. Metal cutting machine tool consumption is expected to grow by close to 40 percent and reach $8.8 billion by the end of the year. Gardner predicts that the US could become the top consumer of CNC machine tools in 2015, for the first time since 2000. Top industries for machine tools in 2015 include job shops, machinery and equipment manufacturers, and automotive in Industrials M&A.

Posted by John Hammett.

Read the Entire Industrials M&A 2nd Quarter Newsletter Here

M&A activity for North American based industrial target companies in Q3 2014 included 563 closed deals and total deal value of $20.3 billion, according to data provided by S&P Capital IQ. This is a slight increase from the previous quarter where 541 deals were closed. Total transaction value increased from $11.4 billion to $20.2 billion from Q2 2014 to Q3 2014 largely due to the AECOM acquisition of URS Corporation.

Oil, gas, and petrochemical related companies dominated industrial manufacturing activity. Almost 40 percent of US related transactions were energy related deals. In addition, there were several mega-deals announced, indicating the market has grown and is actively looking to consolidate. According to the report, industrial manufacturers will continue searching for growth in non-core businesses with good leadership and an existing competitive edge.

Read the Entire Industrials M&A 4th Quarter Newsletter Here

M&A activity for North American based industrial target companies in Q2 2014 included 517 closed deals and total deal value of $10.3 billion, according to data provided by S&P Capital IQ. According to a report from, President & CEO Magazine, a business trade magazine, M&A activity surged in the second quarter with the industrial sector on track to post the strongest year of M&A since before the 2008 financial crisis.  

According to a report from PricewaterhouseCoopers, an international consulting firm, the industrial sector saw a 72% increase in transaction announcements over Q1. Several mega-deals were announced, and although some were withdrawn, it indicates that the market has grown and is actively looking to consolidate. According to the report industrial manufacturers will continue to search for growth in non-core businesses with strong leadership and an existing competitive advantage.

Read the Entire Industrials M&A 3rd Quarter Newsletter Here