Exit and Growth Strategies for Middle Market Businesses

M&A News From the Industrials Industry

By John Hammett | Nov 22, 2016

Industrials IndustryM&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

M&A News From the Aviation, Aerospace & Defense Industry

By Joe Contaldo | Nov 18, 2016

Aviation, Aerospace & Defense IndustryWorldwide shipments of general aviation airplanes, a key demand driver for manufacturers of aerospace products and parts, fell 4.5% in the first half of 2016 compared to the same period in 2015, according to the General Aviation Manufacturers Association (GAMA). Among airplane types, turboprops saw the biggest decline in shipments, with a drop of 4.9%, followed by piston planes (off 4.5%), and business jets (down 4.3%). Global rotorcraft shipments declined by 16.1%, led by an 18.3% reduction in turbine helicopter shipments. Piston helicopter shipments decreased by 10.1%. Demand for general aviation aircraft has been dampened by sluggish global economic growth, according to GAMA. The association has also criticized Congress for not moving to streamline the general aviation product certification process as part of the FAA Extension bill in July 2016. GAMA argues that a reformed regulatory environment would bring safer, more innovative products to market faster and reduce manufacturer costs.

  • US durable goods manufacturers’ shipments of military aircraft and parts, an indicator of demand for aerospace products and parts for military use, fell 11.6% year-to-date in August 2016 compared to the same period in 2015.
  • US durable goods manufacturers’ shipments of nondefense aircraft and parts, an indicator of demand for aerospace products and parts, fell 3.9% year-to-date in August 2016 compared to the same period in 2015.
  • US steel mill product prices, an indicator of commodity steel costs for aerospace products, rose 1.1% in September 2016 compared to the same month in 2015.

Posted by Joe Contaldo.

Read the Entire Aviation, Aerospace & Defense M&A 4th Quarter Newsletter Here

M&A Trends in the Food & Beverage Industry

By Terry Fick | Nov 10, 2016

M&A Trends | Food & Beverage IndustryOne of the largest food & beverage deals of the quarter was announced in July when French dairy company Danone SA agreed to buy U.S. organic-foods producer WhiteWave Foods Co. for $10.4 billion. The move is an example of M&A Trends in the Food & Beverage Industry large food companies paying strong multiples to get a footprint in organic product lines.

Food producers may have to spend more for in-house testing to determine whether their products contain GMOs as a result of a new federal labeling law. A new law requiring the USDA to develop a nationwide standard for labeling foods containing genetically modified organisms (GMOs) is expected to result in higher costs for food manufacturers. The law, approved in summer 2016, will require companies to disclose GMOs through text labels, symbols, or digital codes (such as QR codes). The USDA has been given two years to finalize the rules. The USDA is also tasked with determining the amounts of GMO substances present in foods necessary to prompt labeling, according to Food Safety News. The law’s supporters, which include many large food companies, trade groups, and retailers, contend that federal rules will counter a patchwork of state-level GMO labeling legislation. The legislation’s critics argue that the law could make it difficult for consumers to determine if GMOs are present in foods. Despite substantial scientific evidence that GMOs are safe, their presence in the food supply remains controversial.

Industry Indicators

  • US nondurable goods manufacturers’ shipments of food products, an indicator of demand for food manufacturing, rose 0.3% year-to-date in July 2016 compared to the same period in 2015.
  • US retail sales for food and beverage stores, a potential measure of food demand, increased 2.1% in the first eight months of 2016 compared to the same period in 2015.

Posted by Terry Fick.

Read the Entire Food & Beverage 4th Quarter Newsletter Here

How Your Business is Sold | The M&A Process

By George Walden | Nov 07, 2016

A well-run, solidly profitable Middle Market company will almost always be, and should be, represented by an Investment Banker and sold through what we call in the industry, “The Process”.  So what is the M&A Process? In a video I posted on Vimeo, I explain about the M&A Process.  Click on the play button below to see the entire video.


It begins with Documentation:

1. Documentation is more than a blind teaser, confidentiality agreement and a memorandum (CIM) on the business. It is about understanding the strengths and weaknesses of the company, industry and the likely types of buyers that should be approached.
Read more »

Technology Industry M&A News

By Dan Vermeire | Nov 03, 2016

Technology Industry M&A NewsTechnology Industry M&A News for North American based target companies in the Telecom, Media and Technology sector for Q3 2016 included 483 closed deals, according to data published by industry data tracker FactSet. The average transaction value was $303 million.

On the public markets, stocks continued to surge higher during the quarter led by sector behemoth Alphabet (GOOGL). Q3 earnings per share minus items for the stock rose 23% to $9.06 while total revenue climbed 20% to $22.45 billion vs. consensus estimates of $8.60 and $22.05 billion.

Competition is intensifying in the fast-growing education software market as tech giants including Facebook, Amazon, and Google roll out new digital education products and services. Many of these early offerings are provided free to educators, but the companies are likely to use them as springboards to sell more advanced academic and institutional software to the education sector in the future, The New York Times reports. In summer 2016, Amazon unveiled a new online marketplace called Amazon Inspire, which gives teachers access to thousands of lesson plans and instructional materials at no cost. Facebook introduced a personalized digital learning platform that enables students to manage their own projects and assignments online and learn at their own pace. Google is another major force in the ed-tech sector: more than 60 million students and teachers now use its cloud-based Google Apps for Education software, and more than 5 million Chromebooks were sold to US schools in 2015, according to the International Data Corporation. Annual spending on education software and digital teaching materials at US pre-K through high schools is about $8.3 billion, according to the Software and Information Industry Association.

Industry Indicators

  • US retail sales for electronics and appliance stores, a potential measure of demand for computer software, decreased 2.8% in the first nine months of 2016 compared to the same period in 2015.
  • Total US revenue for software publishers rose 0.5% in the second quarter of 2016 compared to the previous year.

Posted by Dan Vermeire.

Read the Entire Technology, Media and Telecom 4th Quarter Newsletter Here

Fabricated Metal Industry M&A News

By Robert Contaldo | Oct 27, 2016

fabricated metalUS manufacturing activity, a leading demand indicator for manufacturers of fabricated metal products, grew in June 2016 for the fourth consecutive month, according to the Institute for Supply Management. Among 18 manufacturing industries tracked by the institute, 13 reported expansions in June, including fabricated metal products. Other industries of importance to metal fabrication product manufacturers also reported growth in June, including petroleum and coal products; food, beverage, and tobacco products; and machinery. However, transportation equipment manufacturers, a major demand driver for fabricated metal products, reported a contraction in activity in June. Overall, manufacturers generally reported faster growth in production and new orders in June, and employment gained ground over the prior month.

US industrial production, a demand indicator for metal coating, engraving, and heat treating services, fell 0.5% in July 2016 compared the same month in 2015. Production by providers of metal coating, engraving, and heat treating services fell more than 2%. Although industrial production dropped in July on a year-over-year basis, it saw monthly gains in June and July. The growth in June and July, along with a weaker US dollar and higher oil prices, could signal that the US manufacturing sector is poised for more robust growth, according to The Wall Street Journal.

Industry Indicators

  • US durable goods manufacturers’ shipments of fabricated metal products, an indicator of fabricated metal parts production, rose 1.1% year-to-date in August 2016 compared to the same period in 2015.
  • US steel mill product prices, an indicator of commodity steel costs for fabricated metal products manufacturers, rose 1.1% in September 2016 compared to the same month in 2015.

Posted by Bob Contaldo.

Read the Entire Metal Fabrication 4th Quarter Newsletter Here

What Keeps M&A Transactions From Closing?

By Jim Zipursky | Oct 25, 2016

What keeps M&A transactions from closing? A recent survey of investment bankers at CFA regarding their experience with M&A deal failures leads to interesting results, as can be seen in the accompanying graphic.


Failure reasons can be broken into five general categories: Seller Issues, Buyer Issues, Company Issues, External Factors, and The Process. Not surprising, Seller Issues and Company Issues account for nearly 66% of deal failures. Buyer Issues and The Process account for 28% of deal failures.

What is the number one reason for deal failures? Earnings fluctuations, which means the earnings are not as projected. This causes significant problems for buyers, making valuations and lending much more difficult. Not surprising, the number two reason is Seller valuation issues, which means Sellers want more than their company is worth. Taken in the aggregate, across all five categories, valuation-related issues account for more than 52% of deal failures. Clearly, valuation/earnings issues are the number one cause of deal failures.

Surprisingly, external factors and the process itself do not cause as many deal failures. The silver lining in these results? Seller Issues and Company Issues can be avoided with proper preparation of the seller and the company. A seller who has reasonable valuation expectations, clean financial statements with verifiable earnings and realistic financial projections help keep most deals out of the ditch.

Posted by Jim Zipursky.

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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

Second Half of 2016 – Marked Increase in M&A Activity

By Kim Levin | Oct 13, 2016

Marked Increase in M&A ActivityAccording to data published by international financial data tracker Bureau Van Dijk, North American deal volume and value declined significantly during the first half of 2016 following the global trend. According to Bureau Van Dijk, there were 12,298 transactions completed in H1 2016 (a decline of 17.3% over H2 2015) with a combined value of $692.5 billion (a decline of 41.3% over H2 2015). During H1 2016 the U.S. saw 10,147 US deals worth a combined $633.4 billion. Canada saw 2,152 deals worth$59.9 billion.

Private Equity

Falling in line with general M&A trends, North American private equity and venture activity also slowed on the value and volume fronts. Private equity and venture investors took part in 6,487 deals in the region worth $120.8 billion. In contrast, H2 2015 saw 7,792 deals worth $262. 6 billion invested in the second half of 2015.

Sector Activity

Sectors that saw the most activity were metals/metal products (981 deals) followed by general capital machinery (799 deals) and publishing/printing (791) deals. Read more »

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 »