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Archive for the ‘Industry Focus’ Category

M&A News | Construction and Engineering Sector

By Jeff Johnson | Oct 20, 2016

Construction and Engineering SectorM&A activity in the Construction and Engineering Sector for North American based target companies in the Engineering & Construction sector for Q3 2016 included 63 closed deals, according to data published by industry data tracker FactSetThe average transaction value was $383 million.

Nonresidential construction and heavy engineering activity continued along an upward path during the quarter and funding for government infrastructure projects continues to be strong.

As demand for new homes rises, builders nationwide are struggling to find workers at all levels, according to the National Association of Home Builders. The association estimates that 200,000 US construction jobs are unfilled, 81% more than just two years ago. Some states, including Arizona, California, Georgia, and Missouri, are seeing 20% fewer people working in construction than at the market peak, according to the Associated General Contractors of America. The ratio of construction job openings to hiring, a measurement maintained by the Department of Labor, is at its highest level since 2007. In the meantime, the persistent lack of skilled trades has spurred companies to increase pay for hourly workers, ramp up in-house training, and add more overtime hours.

Industry Indicators

  • The value of US nonresidential construction spending, a demand indicator for builders, rose 5.1% year-to-date in July 2016 compared to the same period in 2015.
  • US steel mill product prices, an indicator of commodity steel product costs used in construction, rose 0.3% in August 2016 compared to the same month in 2015.

Posted by Jeff Johnson.

Read the Entire Engineering & Construction 4th Quarter Newsletter Here


M&A Trends in the Transport & Logistics Industry

By Doug Nix | Oct 06, 2016

transport & logisticsTransport & Logistics: Trucking industry employment declined for a fifth straight month in June 2016. The freight economy began to soften during the first quarter of 2016 – after an uptick in employment in January, according to the American Trucking Associations (ATA), and driver demand weakened. Total employment for for-hire trucking fell by a noteworthy 6,300 jobs in June, according to a recent Department of Labor Employment Situation Report. Driver turnover rates also declined during the quarter, per the ATA, with turnover at large truckload fleets falling to an annualized rate of 89%. The turnover rate at small truckload carriers – fleets generating less than $30 million in annual revenue – came in at 88% during the same time frame. Turnover at less-than-truckload carriers, a small but growing part of the market, maintained its low rate, falling three points to just 8%.

Expansion by Amazon and other online retailers is boosting demand for warehouses in cities across the US, according to Bloomberg. E-commerce customers are becoming more accustomed to speedy shipping service, thanks in part to Amazon’s emphasis on same-day delivery, requiring retailers to find more warehouse space closer to population centers. The demand for warehouse space in cities is driving up rents: over the past year, prime warehouse rents are up nearly 10% across the US. The increase has been even greater in some large urban areas. Retailers that historically had one or two large warehouses in the middle of the country are now looking for smaller spaces in cities such as Atlanta, Dallas, and Kansas City to cut down their shipping times. Read more »


Packaging & Printing | M&A News Update

By Anthony Contaldo | Sep 29, 2016

packaging & printingM&A activity for North American based target companies in the packaging & printing sector for Q2 2016 included 39 closed deals, according to data published by industry data tracker FactSetThe average transaction value was $22.5 million.

One of the largest international transactions of the quarter was announced at the end of May when CVC Capital Partners announced that it signed a binding agreement to acquire ÅR Packaging Group AB. Under the terms of the transaction, CVC will acquire 100% of the company from its current owners, Ahlstrom Capital and Accent Equity. AR Packaging is one of Europe’s leading packaging companies with sales of approximately 560 million EUROS.

US demand for corrugated and paperboard boxes is forecast to grow 2.6% per year, reaching a value of more than $41 billion by 2020, according to an April 2016 report by The Freedonia Group. While market maturity and increased use of competing packaging materials are expected to limit volume growth, box manufacturers are responding by offering higher-margin, value-added products, including high-quality printing, easy-open tear strips, and special coatings. Corrugated box demand is forecast to rise 3% per year through 2020 amid demand related to e-commerce and rising use of shipping containers that double as retail displays. Folding carton demand is expected to post slower annual growth of 1.5% amid increased competition from flexible packaging such as stand-up pouches. However, pharmaceutical demand and the environmental benefit of folding cartons relative to plastic and foam restaurant containers should help sustain moderate growth. Read more »


Plastics & Rubber M&A Industry News

By Jim Zipursky | Sep 22, 2016

plastics & rubberPlastics & rubber production capacity has been on a steady decline since July of 2015. Global supplies of polyethylene (PE) and polypropylene (PP) are increasing as producers in the US and China ramp up capacity. More than one-third of new PE capacity added globally between 2015 and 2020 will come from the US, where PE and PP producers are benefiting from ample supplies of low-cost natural gas, according to research group IHS. Using coal as a feedstock, manufacturers in China are also expected to significantly expand their polyethylene and polypropylene production over the next five years. US exports of PE and PP should increase as producers expand capacity beyond domestic needs and achieve cost-competitiveness with suppliers in the Middle East, which have traditionally been the lowest-cost producers.

Increased production capacity for plastic and rubber in the US, China, and the Middle East is expected to create a global surplus of polyethylene and polypropylene, according to analysis released in May 2016 by market research firm IHS. Between 2015 and 2020, IHS expects more than 24 million metric tons of new polyethylene capacity to come online; more than 30% of which is expected to come from the US. The spike in plastics feedstocks derived from shale gas has increased the competitiveness of the US, especially relative to the Middle East, which historically has been the industry’s low-cost producer. Supplies from China also are surging, due to recent additions of coal-to-olefin production capacity. Although a surplus of global polyethylene and polypropylene resins will mean reduced prices for plastics product converters, it will likely result in tighter margins for resin producers.

Industry Indicators

  • US nondurable goods manufacturers’ shipments of chemical products, an indicator of demand for plastic resin and synthetic fibers, rose 3.5% year-to-date in May 2016 compared to the same period in 2015.
  • The spot price of crude oil, a key raw material in plastic resin and synthetic fiber manufacturing, fell 10.8% in the week ending July 8, 2016, compared to the same week in 2015.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber 3rd Quarter Newsletter Here


Fabricated Metal Industry News

By Robert Contaldo | Sep 15, 2016

fabricated metalFabricated metal products manufacturers with high levels of exposure to markets relating to energy and mining are likely to remain cautious with staffing and production until more concrete evidence of a commodities price recovery emerges. US industrial production, a demand indicator for metal fab products, declined 2% in March 2016 compared to the same month a year earlier. US industrial output has been hurt by low commodity prices and reduced production in the mining and energy sectors, which has reduced demand for machinery and metals. Throughout 2015, a strong dollar made US exports less competitive, and low oil prices hurt demand for machinery and equipment. But so far in 2016, those headwinds have abated somewhat as oil prices stabilized and the dollar weakened relative to some other key currencies, according to The Wall Street Journal. Also pointing to a possible turnaround, the manufacturing portion of the industrial production index rose 0.4% in March year-over-year. Additionally, in April 2016 the Institute for Supply Management reported that March manufacturing activity marked the first increase in six months.

US new orders for manufactured goods, a demand indicator for metal coating, engraving, and heat treating services, fell by 2.3% in the first four months of 2016 compared to the same period a year earlier. New machinery orders were off by 4.8% overall, as construction machinery orders fell 20% and mining and oil and gas field machinery orders declined by 56%. New orders increased in a couple of key markets for metal coating, engraving, and heat treating services, however. Transportation equipment orders rose by 4.5%, and orders for fabricated metal products were up 2.4%.

Industry Indicators

  • US durable goods manufacturers’ shipments of fabricated metal products, an indicator of fabricated metal parts production, rose 0.7% year-to-date in May 2016 compared to the same period in 2015.
  • US steel mill product prices, an indicator of commodity steel costs for fabricated metal products manufacturers, fell 4.6% in June 2016 compared to the same month in 2015.

Posted by Bob Contaldo.

Read the Entire Metal Fabrication 3rd Quarter Newsletter Here


M&A Information from the Industrials Industry

By John Hammett | Sep 08, 2016

industrials industryOne 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


Food & Beverage Industry M&A News

By Terry Fick | Sep 01, 2016

food and beverage industryFood & Beverage Industry – A major recall of frozen foods contaminated by listeria bacteria is putting pressure on government regulators to take a closer look at safety practices in the food manufacturing sector. Millions of packages of fruits and vegetables made by Washington-based CRF Frozen Foods were pulled from store shelves in April and May 2016, making the incident one of the largest food recalls in recent history, according to the Associated Press. The company’s recall includes more than 350 product lines under 40 different brand names, and CRF’s retail customers — which include Costco, Target, Trader Joe’s, and Safeway — have imposed secondary recalls of at least 150 additional products, Food Safety News reports. There is evidence that past enforcement of health and safety regulations has been lax at the CRF plant where the listeria outbreak originated: FDA and state agriculture inspectors documented several code violations at the facility since 2014 that were never adequately resolved. The US Justice Department is investigating a similar incident in which Dole Food recalled listeria-contaminated packaged salad products earlier this year, more than a year after federal investigators first found evidence of contamination at one of the company’s production plants.

Commercial water bottlers may face increased opposition from the public and government agencies concerned about water usage and pollution caused by discarded bottles. A recent vote by residents near Portland, Oregon, to halt construction of a commercial water bottling plant could signal growing opposition to the industry. Hood River County voters defeated an eight-year effort by Nestlé Waters North America to build a bottling plant, citing drought and environmental issues. An appeal is possible, according to the Wall Street Journal. A similar fight is underway in Flathead County, Montana.

Industry Indicators

  • US nondurable goods manufacturers’ shipments of food products, an indicator of demand for food manufacturing, rose 0.2% year-to-date in May 2016 compared to the same period in 2015.
  • US retail sales for food and beverage stores, a potential measure of food demand, increased 2.5% in the first six months of 2016 compared to the same period in 2015.

Posted by Terry Fick.

Read the Entire Food & Beverage 3rd Quarter Newsletter Here


M&A Trends | Engineering & Construction Industry

By Jeff Johnson | Aug 25, 2016

Engineering & construction industryEngineering & Construction industry companies reliant on business from energy producers may consider shifting their bidding efforts to other sectors. While 44 US states and the District of Columbia added construction jobs between March 2015 and March 2016, five energy-producing states logged construction employment declines, according to Associated General Contractors of America. Job gains were concentrated in California, Florida, New York, and Massachusetts, states that altogether added 100,400 construction jobs year-over-year. Two of the nation’s smallest states, Hawaii and Rhode Island, saw the highest percentage increases in new construction jobs. Due to declining prices for coal, oil, and other fuels, demand for construction is waning in states that rely on energy extraction for economic stability. North Dakota and Alaska, big producers of coal and natural gas, suffered the highest percentage of construction job losses during the year, along with Wyoming, Kansas, and West Virginia.

Engineering services firms that specialize in infrastructure projects should anticipate rising requests to bid on tunneling projects as more big cities turn to underground development. Creating demand for specialized engineering services, more cities worldwide are extending their reach underground rather than building up, thanks to new technologies, analytical tools, and materials. Urban centers are tunneling at a record pace, according to The Wall Street Journal, as subterranean development has grown highly technical and surprisingly less expensive. Digging manually can cost nearly $1 million per foot as compared to about $19,000 per foot using a giant boring machine.

Industry Indicators 

  • The value of US nonresidential construction spending, an indicator of the health of the construction market, rose 7.1% year-to-date in May 2016 compared to the same period in 2015.
  • The value of US residential construction spending, an indicator of the health of the construction market, rose 9.8% year-to-date in May 2016 compared to the same period in 2015.
  • US steel mill product prices, an indicator of commodity steel product costs used in construction, fell 4.6% in June 2016 compared to the same month in 2015.

Posted by Jeff Johnson.

Read the Entire Engineering and Construction M&A 3rd Quarter Newsletter Here


Energy Sector M&A News

By Roy Graham | Aug 18, 2016

energy sector m&a newsEnergy Sector M&A news for North American based target companies in the Energy sector for Q2 2016 included 162 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $113 million.

Pressured by continued low oil prices and a global supply glut, several leading US oil explorers are selling more than $4 billion in assets. For companies still holding cash, it could be time to buy. Anadarko, Chesapeake Energy, Noble Energy, and Statoil ASA recently announced plans to sell assets totaling about $4.3 billion. Marathon Oil has already sold $1.3 billion worth of assets. Meanwhile, US rig counts continue to decline, as oil prices remain at less than half of their 2014 peak.

Utilities in several US states are piloting residential smart energy storage programs to reduce emissions and generation costs during peak times. Companies in Kentucky, New York, and Vermont — Glasgow Electric Plant Board, Consolidated Edison, and Green Mountain Power — are installing smart energy storage devices in selected customer homes. The devices capture power from the grid during periods of low demand and release power during high-cost peak demand periods, reducing the need to supply power from traditional generation plants. All three programs use software to remotely manage the residential units as if they are a single power source, according to UtilityDIVE; the model is called a virtual power plant. The utilities are partnering with device manufacturers Sunverge, SunPower, and Tesla Motors.

Industry Indicators

  • The average US retail price for diesel and regular gas, which influences profitability for oil and gas companies, fell 14.2% and 20.5%, respectively, in the week ending July 11, 2016, compared to the same week in 2015.
  • The spot price of crude oil, which affects profitability for oil and natural gas operations, fell 10.8% in the week ending July 8, 2016, compared to the same week in 2015.

Posted by Roy Graham.

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


Technology M&A News

By Dan Vermeire | Aug 11, 2016

technology M&AReports from various industry observers present a mixed outlook on IT employment growth, according to Computerworld. Analysts use terms ranging from “modest” to “pre-recession” to describe recent industry hiring trends. Trade association CompTIA noted steep declines of about 96,000 IT jobs across all industries in May 2016 compared to the month before. That figure includes the impact of the approximately 37,000 telecommunications jobs not on payrolls due to a recent strike of Verizon workers, which has since been settled. Analyst group Foote Partners and industry group TechServe Alliance both said that once the Verizon strike is adjusted for, tech employment actually gained some 13,500 jobs that month. Analyst group Janco Associates is less optimistic, forecasting only 40,300 IT jobs will be created in 2016, down from 112,500 new IT jobs that were created in 2015.

Leading technology vendors are using acquisitions to quickly build Internet of Things (IoT) expertise and service capabilities. With a growing number of devices being embedded with software and sensors and connected to the Internet, a trend commonly referred to as IoT, companies with IoT service platforms have become hot commodities. Recent deals include Microsoft’s May 2016 purchase of Solair, an Italian provider of IoT products and services; Cisco Systems’ acquisition of IoT service platform provider Jasper in March 2016; and IBM’s acquisition of The Weather Company’s product and technology business in January 2016. Microsoft plans to integrate Solair’s technology into its Azure IoT Suite, Jasper will become Cisco’s IoT Cloud Business Unit, and IBM is using The Weather Company’s technology to form its Watson IoT Cloud platform. The new offerings should help the companies capture revenue in the rapidly expanding market, which will grow from $157 billion in 2016 to $662 billion by 2021, according to MarketsandMarkets.

  • Total US consumer spending, a driver for the IT needs of consumers, rose 0.9%, primarily from service expenditures, in May 2016 compared to the same month in 2015.
  • Total US revenue for computer systems design and related services rose 3.8% in the first quarter of 2016 compared to the previous year.

Read the Entire Technology, Media and Telecom 3rd Quarter Newsletter Here