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.
Insider
Industrials
Spotlight:Engineered Components and Systems Page 4
Key industrial end markets are experiencing growth as the
economy picks up steam. Renewed downstream demand is
benefi ting suppliers of engineered components, with engineering
and design-focused manufacturers expanding their role in the
value chain and attracting investor interest.
July 2013
Brown Gibbons Lang & Company
ChicagoOne Magnifi cent Mile980 N. Michigan AvenueSuite 1880Chicago, IL 60611
Cleveland1111 Superior Avenue Suite 900Cleveland, OH 44114
Salt Lake City 9980 South 300 WestSuite 200Sandy, UT 84070
www.bglco.com
Environmental Services Insider
M&A Activity• M&A activity in the broader market continues to wane, with
H1 ‘13 volume, based on number of announced transactions, down
17 percent over the same period a year ago. Values are rising with
M&A spend up 29 percent on fewer deals. The middle market1 saw
a modest uptick in deal fl ow in the fi rst half, with acquisition activity
up 6 percent over the prior year and deal value up 4 percent.
• Valuation multiples have moderated, according to Standard &
Poors Leveraged Commentary & Data, which reported strategic and
fi nancial buyer multiples of 7.6x and 7.9x in June.
• Competition for scarce new deal fl ow remains fi erce across all layers
of the capital structure. Lender appetite for acquisition fi nancing
remains robust, with leverage creep on middle market buyouts
pushing senior debt to 4.4x EBITDA in June, surpassing the 2007
high. Aggressive structures and terms are expected to carry into
Q3 ’13 even with an uptick in deal fl ow given the supply/demand
imbalance in the marketplace. Non-bank lenders have a high
leverage tolerance, reported Thomson Reuters LPC in its
Q3 ’13 Middle Market Outlook with roughly 50 percent of
respondents surveyed reporting senior leverage of 3.5x-4.0x on
sponsored transactions and ano ther 40 percent at 4x or more. Bank
lenders are decidedly more conservative, with roughly 15 percent
of respondents reporting less than 3x senior leverage, another 40
percent at 3x-3.5x, and the remaining 45 percent at 3.5x to 4.5x.
• The industrials M&A market was active in the fi rst half of 2013,
with private equity taking the spotlight with Kohlberg Kravis
Roberts’ $3.9 billion take private of Gardner Denver announced
in March. Aerospace and Defense saw healthy fl ow, with an
acquisitive TransDigm Group spending about $475 million on
three acquisitions during the period with the purchase of the
Electromechanical Actuation Division from GE Aviation in June,
Arkwin Industries in May, and Aerosonic in April. Private equity
fi rm Greenbriar Equity Group completed the platform buy of EDAC
Technologies in March and in July, added on with the composites
business of Parkway Products. Dynamic Precision Group, backed
by The Carlyle Group, acquired Paradigm Precision Holdings from
American Capital in January. In Building Products, LIXIL Corporation
acquired AS America in a $542 million deal and North American
Pipe Corporation acquired the PVC Pipe Fittings and Foundations
Business of CertainTeed Corporation for $153 million.
1 Middle market defi ned as enterprise values between $25 million and $500 million.
For more information on how
BGL’s Global Industrials Practice can assist
your company, please contact:
Delivering Results to the Global Middle Market
Andrew K. Petryk Managing Director & PrincipalHead: Industrials216.920.6613
Kevin H. SargentDirector & Principal216.920.6639
Industry Valuations• Broader market indices have gained in recent weeks following a period
of volatility, with the S&P 500 and DJIA up 15.6 percent and 16.0 percent
through the year-to-date* period (Page 17).
• Industrial stocks have also gained, with the BGL composite indices for
Diversifi ed Industrials and Aerospace & Defense outperforming the market
during the same period (Page 17). EBITDA valuations expanded in Q1 ‘13.
*As of July 26, 2013.
Operating Highlights• The U.S. manufacturing sector is growing, according to data reported by
the Institute of Supply Management, which marked June as the fi fth month
of expansion in 2013, as measured by a PMI of 50.9 percent in its June 2013
Manufacturing ISM Report On Business. In the same report, ISM indicated
that the overall economy grew for the 49th consecutive month.
• Industrial OEMs are reporting healthy growth in the strengthening U.S.
economy, with producers of engineered components and systems
benefi ting from improving demand and expanding their role as supplier
partners in the value chain.
Engineered Components and Systems
Demand Outlook Favorable
Key industrial end markets are experiencing growth as the
economy picks up steam, with strong OEM demand pulling
through to su ppliers and equipment manufacturers:
Automotive OEMs continue to ramp up capacity with North
America light vehicle production projected to surpass 16
million units in 2013—more than in any year since 2002
according to IHS Automotive—primarily driven by pent-up
demand and more accessible fi nancing. The average age
of light vehicles on the road in the U.S. hit a record high
of 10.8 years at the end of 2011, up from 8.4 years in 1995.
North American production is expected to reach 17 million
units by 2015, a level last breached in 2000 and nearly
double the 8.6 million units built in 2009.1
Injection molders are among the
benefi ciaries in the supply chain of the
resurgence in the auto sector. Automotive
molders saw a 17 percent increase in sales
in 2012 according to Plastics News’ 2013
annual survey and ranking of injection
molding companies. “The North American
automotive plastics sector is benefi ting
from more than unit growth. It’s poised
to pick up business from OEMs desperate
to cut vehicle weight to improve fuel
economy,” commented Don Loepp, editor
of Plastics News. “Automakers also are
expected to introduce lots of new models
in the next few years as they battle for
consumers’ attention—and for market
share.”2
OEMs are using more lightweight
materials—plastics and polymer-based
components—to reduce vehicle weight
and optimize fuel effi ciency, observed
A.T. Kearney, which estimates plastics will
account for 18 percent of average vehicle
weight by 2020, up from 14 percent in
2000.3
Sales of specialty vehicles, trucks, and equipment are
benefi ting from residual pent up demand, restored civil
and corporate capital expenditure budgets, an aging civil
infrastructure, and increased environmental regulation and
compliance.
Aging fl eets are being replenished, with demand for
greater fuel effi ciency, versatility, and productivity for
new products and increased use of self-diagnostic and
monitoring tools driving equipment sales.
Municipal and industrial cleaning and hydro excavation
equipment continues to experience steady demand
growth, driven by:
• Aging municipal and utilities infrastructure that
require increasing levels of routine and emergency
maintenance.
• Increasingly stringent government
regulation of waste transportation and
disposal.
• A renewed focus on shale gas
exploration and production in
North America. Substantial investment in
heavy duty maintenance equipment will
be needed for the estimated 1.6 million
miles of new U.S. oil and gas pipeline.
The long-awaited rebound in the housing
market has materialized and is expected to
be a major driver of growth in construction
related machinery and equipment. Recovery
in the commercial construction market and
improving levels of industrial/commercial
investing will also boost sales.
Longer-term, fundamental changes arising
from the re-shoring of components and
systems previously sourced overseas and the
impact of low cost natural gas may stimulate
additional demand.
Insider Perspective
Industrials Insider
Engineered components and systems suppliers are experiencing upticks in demand as key industrial end markets
expand. Producers that can bring value-added engineering and design capabilities are expanding their role as supplier
partners in the value chain.
“The North American
automotive plastics
sector is benefi ting
from more than unit
growth. It’s poised
to pick up business
from OEMs desperate
to cut vehicle
weight to improve
fuel economy.
Automakers also
are expected to
introduce lots of new
models in the next
few years as they
battle for consumers’
attention—and for
market share.”
—Don Loepp Plastics News
1 IHS Automotive and Automotive News: “Output soars to 16M, with high-profi t twist,” Nick Bunkley. 17 Jun 2013. 2“Automotive market growth fuels injection molders,” Don Loepp. 21 Jun 2013. Plastics News.
3“Plastics. The Future for Automakers and Chemical Companies,” 2012. A.T. Kearney.
4
Engineered Components Manufacturers Seeing Uptick and Attracting Capital
Renewed downstream demand is benefi ting suppliers
of engineered products, with manufacturers of industrial
gears and transmissions, complex fabricated metal
parts, hydraulics, and precision plastic components and
assemblies reporting healthy growth. Turnkey producers
that can bring product development capabilities are
expanding their role as supplier partners in the value chain
as OEM customers have reduced engineering headcount
and are relying increasingly on their suppliers for
engineering and design support, technology and materials
innovation, and automation to reduce product cost,
increase functionality, and improve speed-to-market.
Industrial growth companies remain a focus of strategic
and fi nancial buyers, underscored by recent M&A activity
involving engineered products manufacturers, suggesting
an optimistic outlook on growth prospects for the U.S.
manufacturing sector:
Metal Fabrication
Wynnchurch Capital acquired Detroit Tool Metal Products
(DTMP) in June 2013, in partnership with management,
calling the acquisition the fi rst in a series of planned
investments to build one of the largest Tier 1 metal
fabrication businesses in North America. Missouri-based
DTMP manufactures precision metal stampings, fabricated
components and value-added assemblies for the heavy
truck, construction, industrial, and agricultural end markets.
Wynnchurch is backing DTMP’s management team led
by CEO Terry Wogan. Wynnchurch and Wogan intend
to leverage the team’s operating track record to make
strategic acquisitions and build a unique fabrication
platform the likes of which does not currently exist in a
space dominated by smaller operators, according to a
press release announcing the transaction. Senior debt
fi nancing for the transaction was provided by Bank of the
West. Bank of Montreal provided mezzanine fi nancing and
an equity co-investment.
American Securities completed the acquisitions of
automotive parts suppliers Metaldyne for $820 million
in December 2012 and HHI Group Holdings (HHI) in
October 2012 for $750 million. HHI is the largest North
American manufacturer of highly engineered, safety-
critical forged components for automotive customers,
principally in the light vehicle market, and a leading
manufacturer of complex, highly engineered powdered
metal powertrain components and wheel bearings. HHI
was a former portfolio company of KPS Capital Partners
which had owned the company since 2005. KPS grew
the company through a series of acquisitions including
Jernberg Industries in 2005, Impact Forge in 2006, and
FormTech Industries in 2009. Metaldyne is a leading
global manufacturer of highly engineered metal-based
components for light vehicle engine, transmission, and
driveline applications.
Engineered Plastic Components
In February 2013, Jabil Circuit (NYSE:JBL) acquired Nypro.
Nypro engages in the design, development, mold making,
and injection molding of precision plastic products, as
well as contract manufacturing and assembly of fi nished
products. The company serves primarily healthcare
markets, including diagnostics, drug delivery, and medical/
surgical devices. Additional industries served include
consumer and electronics, wireless, and packaging. Nypro
operates 20 manufacturing sites throughout the United
States, Europe, China, and India. The custom injection
molder has estimated revenues of $1.2 billion.
The Nypro acquisition is expected to bolster Jabil’s
position in key markets, such as healthcare, and expand
the market in packaging for customers in the food and
beverage, household, and personal care industries. The
consumer electronics portion of Nypro operates as part of
Jabil’s Materials Technology Services.
The Watermill Group acquired Tenere in December 2012.
Tenere designs and manufactures advanced, customized
components from metal and plastic for companies in the
aerospace, agricultural, data management, information
technology, medical, and industrial markets. The company
fabricates sheet metal, injection molded products, and
machined products, as well as provides integration and
system-level assembly services. Tenere operates three
facilities in Wisconsin and one in Colorado. The transaction
represents an exit for Stonehenge Partners, which
provided development capital to the company in 2010.
Industrials Insider
SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data. 5
Norwest Equity Partners acquired precision injection
molder Quadion (dba Minnesota Rubber & Plastics)
(MR&P) in September 2012. Founded in 1945, MR&P is full-
service provider of high-value rubber and plastic molded
components and assembly solutions serving diverse
end markets including automotive, medical, plumbing,
industrial, off-road, distribution, food and beverage, and
fl uid management. The company employs over 1,100
people in nine facilities worldwide with six U.S. locations as
well as plants in China, Mexico, and Europe.
In September 2012, Dickten Masch Plastics (DMP) acquired
Indiana-based Nyloncraft, a manufacturer of engineered
plastic components for the automotive industry. The
company’s products include multishot over molding
products, door lock housings, steering column components,
brake system components, window regulator components,
exhaust hangers, suspension components, vacuum and
fuel distribution systems, interior trim components, and
injection-compression molding of long-glass fi ber resins.
Nyloncraft was a former portfolio company of Hammond,
Kennedy, Whitney & Company which owned the business
since 2002.
Dickten Masch has manufacturing facilities in Nashotah,
Wisconsin; Ankeny, Iowa; and Monterrey, Mexico. The
company acquired the Monterrey plant in 2011 from United
Plastics Grop. Dickten Masch is backed by private equity
fi rm Patmian LLC which acquired the company in 2010 with
plans to build the company through regional expansions.
Nyloncraft has production in Mishawaka, Indiana and
Jonesville, Michigan. The two companies will look to build
on their combined engineering-plastics experience to
replace metal components in the transportation industry.
Commenting on the partnership, Doreen Lettau, DMP vice
president of market and business development said, “There
is still a lot of stamping and die-casting parts in automotive
and there is a lot that we can still convert and identify both
under the hood and in structural parts.” Combined the
two companies will have more than 800 employees and
generate annual sales of about $175 million.
In June 2013, DMP affi liate Nyloncraft acquired the
Fort Wayne facility of NYX, a leading manufacturer of
highly engineered, pressurized fl uid handling vessels and
components for under-the-hood vehicle applications.
Commenting on the transaction, Nyloncraft CEO Jim
Krzyzewski said, “Under-the-hood components are
critical areas of focus when looking toward the future
of fuel-effi cient vehicles.” The Fort Wayne site will also
supplement Nyloncraft’s capabilities in providing parts for
small engines and sealed plastic welded products.
Private equity-backed MedPlast acquired United Plastics
Group (UPG) in April 2012, gaining entry to China and
boosting its growing medical business. UPG is a full-
service contract manufacturer of precision plastic
products and value-added services for the medical,
industrial, and datacenter markets. China accounts for
approximately one-third of UPG’s overall sales and
50 percent of its medical business. In November 2012,
UPG was rebranded as the industrial business company
of MedPlast serving four primary markets: consumer,
automotive, energy, and datacenter products for the
electronics and telecommunications industries. MedPlast
operates as the medical business.
MedPlast employs about 1,700 people from 14 facilities in
the United States, China, and Mexico. The company invests
about $5 million a year in plants and equipment, according
to CEO Harold Faig. The company projects 2013 sales to
exceed $250 million after recording $222 million last year,
according to Faig.
MedPlast was formed in 2008 by the merger of ATP’s
Engineered Rubber and Plastics Group and K&W Medical
Specialties with backing from fi nancial sponsors Baird
Capital Partners and River Cities Capital Funds. The
transaction represents an exit for private equity fi rm
Aurora Capital Group, which acquired UPG in 1999.
Industrials Insider
Engineered Components and SystemsInsider Perspective
6 SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.
Industrial Gears and Transmissions
In March 2013, GenNx360 Capital Partners acquired
custom industrial gear and gear drive manufacturer
The Horsburgh & Scott Co. (H&S) from Bolder Capital.
H&S provides various gear types and engineering
services for new or replacement installations as well
as custom industrial gears. Diverse end markets and
applications served include steel, wind energy, plastics,
mining, paper, food processing, coal, and pollution
control. The company also provides heat treating,
reverse engineering, gear reconditioning, and metric
gearing services. H&S employs over 200 people and
is headquartered in Cleveland, Ohio, with additional
facilities in Ohio and Canada. Bolder Capital acquired
H&S in a leveraged buyout in November 2007 for $43.5
million. JZ Equity Partners and the Edgewater Funds
co-invested in the transaction.
In February 2012, Regal Beloit (NYSE:RBC) acquired
custom precision gear and drive manufacturer
Milwaukee Gear in an $80 million all-cash transaction.
Milwaukee Gear manufactures large custom, precision
spur and helical gears utilized in energy, industrial
compressors, HVAC, and other general industrial
applications. Commenting on the acquisition, Regal
Beloit CEO Mark Gliebe said, “Milwaukee Gear is a very
well managed business with an excellent reputation
resulting from its application engineering excellence
and its high precision manufacturing processes.” The
transaction represents an exit for Charter Oak Private
Equity and High Road Capital Partners, which acquired
the company in 2008. The sale generated a 2.6x ROI and
a 31.6 percent IRR, according to PitchBook.
Hydraulics
Ligon Industries, LLC acquired Energy Manufacturing
Company (EMC) in April 2013. Iowa-based EMC
designs and manufactures hydraulic cylinders and fl uid
power components and systems. EMC is Ligon’s sixth
acquisition since 2006 including, most recently, Stahl
Specialty Company in 2010.
Promus Equity Partners acquired Quality Control
Corporation, renaming it QCC, in April 2012. The
company specializes in the manufacture, assembly, and
testing of complete products and precision machined
components, with expertise in valves, pumps, motors,
mechanical seals, and other fl uid power products. With
its focus on precision machining and assembly, QCC supports
companies worldwide in industries with long product
lifecycles and with precision manufacturing requirements
such as aerospace, construction, and agriculture. Grace
Equity partnered with Promus on the deal, while Aldine
Capital and First Capital Partners provided mezzanine debt
and made equity co-investments. A senior credit facility was
supplied by Cole Taylor.
Private equity fi rm Pfi ngsten Partners acquired Tennessee-
based Bailey International LLC in April 2012. Bailey is
a manufacturer and distributor of mobile fl uid power
components including hydraulic cylinders, power units,
pumps, valves, motors, hoses and fi ttings, bearings and
bushings used primarily in mobile equipment applications.
With Pfi ngsten’s backing, the company intends to broaden
its product portfolio, expand sales and marketing efforts, and
evaluate strategic acquisitions.
7SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.
Economy picking up steam
Visible rebound in housing market
New housing starts reached
a fi ve-year high of 914,000
units* in May 2013, reported
the National Association of
Home Builders, representing
a 28.6 percent increase over the same period a year ago,
and by 2014, are forecasted to top one million new units
(1,174,000), a number that has not been breached since
2007. Helping to support the revitalization are growth
in real disposable income, low interest rates, housing
affordability, uptick in household formation, and tight
inventories. Diane Swonk, chief economist at Mesirow
Financial, calls rising home prices a “game changer” for
the broader economy. The ripple effects on the economy
are far reaching, as rising home prices stimulate spending
on everything from remodeling and construction activity
to vehicle purchases, said Swonk, with the resurgence in
home building spurring more manufacturing activity. “The
housing market will be a major driver of growth in 2013,”
observed Swonk, “contributing more than one percent to
real GDP including spillover effects for consumer spending
and manufacturing activity.”4
*seasonally adjusted annual rate
Cheap natural gas
Lower energy costs from shale gas
are benefi ting U.S. manufacturers
and are driving product demand,
according to a recent study by
PwC5 on shale gas development
activity in the United States. The PwC study found
“...that full-scale and robust shale gas development
through 2025 would likely have a number of knock-on
effects for other industries, particularly the manufacturing
and chemical sectors…,” with an estimated $11 billion in
annual cost savings potential available to manufacturers.
Contributing to the report, Kathryn Z. Klaber, President
of the Marcellus Shale Coalition (MSC), stated, “The
safe production of shale gas has been a game-changer
in a variety of regions and among a variety of sectors
throughout our economy—notably manufacturers.”
According to IHS Global Insight6, increased shale gas
activity will contribute to increased capital investment and
job opportunities. In 2010, the shale gas industry supported
600,000 jobs. That number is expected to grow to nearly
870,000 in 2015 and to over 1.6 million by 2035. Growth
in the shale gas industry has already made a signifi cant
impact on the economy, contributing $76 billion to GDP in
2010, reported IHS, and projects increasing to $118 billion by
2015 and tripling to $231 billion in 2035.
Industrials Insider
The housing market will be a major driver of growth in 2013, contributing more than one percent to real GDP including spillover effects for consumer spending and manufacturing activity.
Diane Swonk, Chief Economist at Mesirow Financial
The impact of increased shale gas development will ripple through our economy, with manufacturers, in particular, seeing great benefi ts. Shale gas development has the potential to boost manufacturing employment by one million jobs by the middle of the next decade.
Jay Timmons, President and CEO National Association of Manufacturers
Macroeconomic indicators evidence improving trend lines and hint at a sustainable recovery, with longer-term, fundamental changes that could present a turning point for the U.S. manufacturing economy and opportunity for domestic producers.
4 “Themes on the Economy.” 12 Mar 13. Diane Swonk, Mesirow Financial.5 “Shale Gas. A renaissance in US manufacturing, “ Dec 2011. PwC.
6 “The Economic and Employment Contributions of Shale Gas in the United States.” Dec 2011. IHS Global Insight.
Engineered Components and SystemsInsider Perspective
8
Industrials Insider
The cost advantage of manufacturing overseas is narrowing, and concerns over quality, protection of intellectual property, manufacturing fl exibility, and supply chain disruption are leading some U.S. manufacturers to reexamine their global footprints and bring production operations back to the states, which could means billions to the economy.
During the last two years announced 15 new manufacturing plants or existing facility expansions, including a new locomotive manufacturing plant in Texas, an aircraft engine composites factory in Mississippi, and appliance and lighting facilities in Kentucky, Alabama, and Ohio.
Announced in December 2012 plans to invest $100 million in manufacturing a line of Mac computers in the United States.
Invested $120 million in a new hydraulic excavator manufacturing plant in Victoria, Texas—machines formerly made at a Caterpillar plant in Japan. Opened in August 2012, the new factory, expected to employ about 800 people once fully operational, is the most recent expansion for Caterpillar in the United States and will more than triple the current domestic capacity of hydraulic excavators produced by the company.
Announced in August 2010 plans to bring back approximately 2,200 parts production jobs
Findings from a December 2012 survey conducted by the MIT Forum for Supply Chain Innovation in partnership with Supply Chain Digest7 indicate a signifi cant shift in manufacturing footprint, with 33.6 percent of the 340 companies surveyed actively “considering” bringing manufacturing back to the U.S., while 15.3 percent of U.S. companies “defi nitively” planning to re-shore to the U.S.
Manufacturers cited in the report that are either involved in re-shoring or expanding their U.S. manufacturing footprint include:
Findings from an April 2012 survey8 conducted by the Boston Consulting Group (BCG) evidence that re-shoring is building momentum. Executives from 106 U.S.-based manufacturers representing diverse industries were surveyed, with 37 percent of companies with annual sales above $1 billion planning or considering to re-shore production to the United States from China. The response rate rose to 48 percent for companies with sales of $10 billion or more.
BCG, in a March 2012 report series titled “U.S. Manufacturing Nears the Tipping Point”,9 identifi ed industries as nearing the “tipping point” (defi ned as those where the clear cost advantage of using China as an export base for the U.S. no longer applies), which include transportation goods, computers and electronics, fabricated metals, machinery, plastics and rubber, appliances and electrical equipment, and furniture. BCG estimates that 10 to 30 percent of production of the $200 billion in goods now imported from China for those industries could shift back to the U.S. before the end of the decade, adding $20 billion to $55 billion in output annually to the domestic economy. The combination of re-shoring overseas production and increased exports due to improved U.S. competitiveness will create 2 million to 3 million jobs, serving to reduce unemployment by 1.5 to 2 percentage points, estimates which BCG calls conservative.
Re-shoring taking hold
7 “U.S. Reshoring: A Turning Point.” 2012, MIT Forum for Supply Chain Innovation and Supply Chain Digest.8 “More Than a Third of Large Manufacturers Are Considering Reshoring from China to the U.S.” 20 Apr 2012. Boston Consulting Group.9 “U.S. Manufacturing Nears the Tipping Point.” Harold Sirkin. 22 Mar 2012. Boston Consulting Group.
9
Industrials Insider
Overall M&A Activity
Middle Market M&A Activity Private Equity Transaction Activity
Mergers & Acquisitions Activity
Trends in Valuation
Acquisition Financing Trends
Leverage Equity Contribution
Source: Standard & Poors LCD.
Source: Standard & Poors LCD.*NOTE: Data not reported due to limited number of observations for period.*NOTE: Data not reported due to limited number of observations for period. Source: Standard & Poors LCD.
Source: PitchBook.
Source: Standard & Poors LCD.
Transactions with Strategic Buyers Transactions with Financial Buyers
Transaction Count by Deal Size
Middle market enterprise values between $25 million and $500 million. Middle market enterprise values between $25 million and $500 million.
EBIT
DA
Mul
tiple
EBIT
DA
Mul
tiple
Num
ber o
f Tra
nsac
tions
Source: S&P Capital IQ.
3.6 4.0 3.1
2.6 3.2
3.9 3.9 4.4
1.2 1.5
1.0 1.0
0.8 0.4 0.6
0.4
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
2006 2007 2008 2009 2010 2011 2012 Jun-13
Sen ior Debt/EBITDA Sub D ebt/EBITDA
38%
35%
46%
51%
47%
43%41% 40%
25%
30%
35%
40%
45%
50%
55%
2006 2007 2008 2009 2010 2011 2012 Jun-13
119
148
125
151
106
141
156
145
107
132
148
114
58 97 96 131
100
122
141
134
120 16
6
163
154
137
160
164 23
5
147
161
207 21
9
214 24
0
207 22
2
211
268
191 20
7 233
113
91
120
111
197
145 16
1 234
204
168
230
226
214
176 21
1
188
307
208 22
7
65
66
59
63
62
67 63
63
36
58
43
19
19
26 35
40
32
42
58
61
55
63 68
53
42
54 50
69
39
46
$0
$10
$20
$30
$40
$50
$60
$70
0
100
200
300
400
500
600
700
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2006 2007 2008 2009 2010 2011 2012 2013
Transaction Value ($ in billions)
Num
ber
of T
rans
actio
ns
$25M-$50M $50M-$250M $250M-$500M Trans Value
7.2x
8.3x
6.5x 6.6x
6.3x
8.1x 8.
5x
8.2x
8.0x
8.0x
7.4x
6.7x
8.5x
9.9x
9.4x
7.5x
8.5x
9.1x
8.7x
7.8x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
2006 2007 2008 2009 2010 2011 2012 Jun-13
<$250 mill ion $250-$499 million $500 mi llion +
8.2x
6.8x 7.
1x
9.8x
8.0x
7.6x
7.7x 8.
0x
8.7x
9.4x
8.4x
7.6x
9.2x 9.
5x10.0
x
9.1x
10.2
x
8.2x
9.5x 9.7x
9.7x
10.5
x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
2006 2007 2008 2009 2010 2011 2012 Jun-13
<$250 mill ion $250-$499 million $500 mi llion +
NA*NA*NA*NA*NA*NA* NA*
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.
-
500
1,000
1,500
2,000
2,500
3,000
2006 2007 2008 2009 2010 2011 2012 H1 '13
Under $25M $25M-$100M $100M-$500M
$500M-$1B $1B-$2.5B $2.5B+
10
Industrials M&A Activity
DIVERSIFIED INDUSTRIALSTyco International (NYSE:TYC) announced in June 2013
it was acquiring Exacq Technologies, Inc., a developer
of open architecture video management systems
(VMS) for security and surveillance applications,
in a $150 million all-cash transaction. Exacq’s VMS
solutions scale from small single camera applications to
large, integrated systems with thousands of cameras.
The acquisition is expected to complement Tyco
Security Products’ video technology portfolio while
strengthening its presence in the video security market.
Exacq is projecting revenues of approximately $75
million in fi scal 2014.
Transaction Multiple: Revenue 2.7x
In January 2013, Danaher Corp. (NYSE:DHR) acquired
Navman Wireless North America, LLC, a provider of
GPS-based fl eet optimization products and services,
including real-time vehicle tracking and analytics that
enable companies to monitor, measure, and improve
fl eet-related costs and effi ciencies.
AEROSPACE & DEFENSEIn June 2013, TransDigm Group Incorporated (NYSE:TDG) acquired the Electromechanical Actuation Division from GE Aviation in a $150 million all-cash
transaction. The business manufactures aerospace
electromechanical motion control subsystems for both
civilian and military uses, including control electronics,
motors, high power mechanical transmissions, and
actuators.
Also in June, TransDigm acquired Long Island-based
Arkwin Industries, Inc., in an all-cash deal valued at
$286 million. Arkwin designs and produces hydraulic
and fuel system components for civil and military fi xed-
wing aircraft, helicopters, spacecraft, turbine engines,
and other special applications. With the acquisition, as
TransDigm will be able to expand content offerings for
various platforms and applications.
Transaction Multiple: Revenue 3.0x
In May 2013, Pacifi c Architects and Engineers Incorporated announced it was acquiring the Base Operations, Aviation, and Range Services Unit of CSC Applied Technologies for $175 million. The business
offers managed engineering, aviation maintenance,
base operations and maintenance, testing and training,
and space range services primarily to U.S. government
clients. The deal is the latest step in CSC’s non-core
asset divestiture strategy, representing the sixth deal of
this type in the last seven months.
In May 2013, Astronics Corporation announced it was
acquiring PECO, Inc. for $136 million in cash. PECO
manufactures aerospace systems, including various parts,
confi gurations, assemblies, and injection molded products
for commercial aircraft OEMs, defense contractors, and
MRO centers.
Transaction Multiple: Revenue 1.8x
In May 2013, Erickson Air-Crane Incorporated acquired
Evergreen Helicopters, Inc. from Evergreen International Aviation, Inc. for $288 million. Evergreen Helicopter
provides air transportation services for search and rescue,
emergency medevac, peacekeeping and disaster relief,
executive travel, marine service, cargo and personal
shuttle, and fi refi ghting purposes. With the acquisition,
Erickson will expand its global fl eet and capabilities
and diversify its revenue sources, which was previously
dependent upon fi refi ghting services. Consideration
consisted of $185 million in cash, a $17.5 million unsecured
promissory note, and four million convertible preferred
shares with an approximate value of $47.5 million.
Included in the consideration are performance-based
earnout incentives estimated at $30 million.
Transaction Multiples: Revenue 1.4x; EBITDA 5.6x
In May 2013, Greenbriar Equity Group LLC completed
the acquisition of EDAC Technologies Corp., previously
announced in March. EDAC designs, manufactures, and
services tooling, fi xtures, molds, jet engine components,
and machine spindles primarily for the aerospace,
industrial, semiconductor, and electronic medical device
industries. The $141 million purchase price consisted of $95
million in cash, approximately $10 million in warrants and
options, and $36.5 million in assumed liabilities.
Transaction Multiples: Revenue 1.3x; EBITDA 9.9x
In January of 2013, Dynamic Precision Group, Inc., backed
by private equity fi rm The Carlyle Group, completed
the add-on acquisition of Paradigm Precision Holdings LLC, a former portfolio company of American Capital, in a transaction valued at $129 million. The company
manufactures turbine engines and various machine
products that are used in aerospace, industrial, land-
based power generation, and marine applications. The
acquisition is expected to expand Dynamic’s technical and
client service abilities.
Industrials Insider
- H1 2013
SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.
11
In May 2013, Snap-On Inc. (NYSE:SNA) closed its purchase
of Challenger Lifts, Inc. for $38 million in cash, marking
an exit for Gen Cap America. Challenger Lifts designs,
manufactures, and distributes car lifts, jacks, and auto life
accessories that are used in various applications for cars,
SUVs, vans, trucks, and commercial vehicles. Snap-On now
seeks to expand relationships with repair shop owners and
managers as part of its business development strategy.
Transaction Multiple: Revenue .84x
In May 2013, Douglas Dynamics, Inc. acquired TrynEx Inc. in a $33 million all-cash transaction. TrynEx manufactures
salt spreaders, sand spreaders, de-icing sprayers, and
accessories for snow and ice control. The acquisition
is expected to strengthen Douglas’ market position
through product portfolio enhancement and geographic
expansion.
In April 2013, IPEG Inc. acquired Thermal Care, Inc. from MFRI Inc. for $15.9 million in cash. IPEG designs,
manufactures, installs, and services process cooling
equipment and systems used for heat removal in industrial
applications, primarily serving the aerospace, chemicals,
food processing, die casting, and welding industries.
The acquisition is expected to bring technological
development potential and more robust product offerings.
In April 2013, CECO Environmental Corp. (NasdaqGM:CECE) acquired Met-Pro Corp. (NYSE:MPR)
in a $210 million cash and stock transaction. Met-Pro
manufactures fl uid handling equipment, product recovery
and pollution control equipment, and fi ltration products.
The acquisition is expected to bring cost synergies, cross-
selling opportunities which will lift revenue and margins,
increased product portfolio depth, and increased global
reach.
Transaction Multiples: Revenue 1.6x; EBITDA 12.1x
In April 2013, Worthington Industries, Inc. (NYSE:WOR)
acquired Palmer Manufacturing and Tank Inc. for $114
million in an all-cash transaction. Kansas City-based
Palmer is a designer and manufacturer of fi berglass and
steel tanks serving the drilling, agricultural, chemical, and
diversifi ed industrials end markets. The transaction follows
on Worthington’s 2012 purchase of Westerman Cos.,
allowing the company to better compete in the alternative
energy space, involving compressed natural gas, liquefi ed
natural gas, autogas, and hydrogen.
Transaction Multiple: Revenue 1.6x
In March 2013, Triumph Aerospace Systems Group LLC
completed the $209 million acquisition of Goodrich Pump & Engine Control Systems, previously announced
in January, renaming the business Triumph Engine Control Systems, LLC. The company designs, develops,
manufactures, and markets fuel pumps and controls to
both civilian and military helicopter OEMs in the United
States. The acquisition will bring Triumph customer
diversifi cation and additional technical capabilities in new
markets. The incumbent Goodrich management team and
employees will remain with the company post-acquisition.
ELECTRONIC COMPONENTS AND EQUIPMENTIn April 2013, Measurement Specialties Inc. (NasdaqGS:MEAS) purchased the Sensors Products business from API Technologies Corp. for $31.4 million in
cash. Spectrum is a manufacturer and marketer of plastic
potentiometers and contact-less position sensors and
transducers. The business contributed approximately $26
million to API Technologies’ revenue in fi scal 2012. The
divestiture will allow API to pay down debt and re-aim its
focus toward its core businesses.
In February 2013, Regal Beloit Corporation (NYSE:RBC)
acquired the RAM Motor Business from Schneider Electric S.A. (ENXTPA:SU), a producer of motors used in HVAC
systems. The acquisition brings Beloit a specialization in
hermetic motors and the capacity to better serve existing
and potential customers.
INDUSTRIAL MACHINERYIn June 2013, New Flyer Industries Inc. (TSX:NFI) acquired
North American Bus Industries, Inc. in $80 million all-cash
transaction. The company designs and manufactures clean
diesel, hybrid, heavy-duty, and compressed natural gas
urban transit buses. The transaction represents an exit for
Cerberus Capital Management. The acquisition will bring
access to new customers and manufacturing platforms.
Transaction Multiple: EBITDA 4.0x
In June 2013, Stratasys Ltd. (NYSE:NasdaqGS:SSYS)
announced it was acquiring MakerBot Industries, LLC, a
manufacturer and distributor of 3D printers used to print
various plastic objects. The all-stock deal is valued at $410
million, with the potential for $615 million when factoring
in earn-out provisions. The purchase will likely spur 3D
printing adoption in multiple industries and strengthen
Stratasys’ position in the consumer segment of the
market, which is growing rapidly.
Transaction Multiple: Revenue 39.17x
Industrials Insider
Industrials M&A Activity - H1 2013
SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.
12
for both residential and commercial kitchen and baths. The
acquisition furthers LIXIL’s global acquisition strategy and
is expected to bring further opportunities in North America,
including brand enhancement and manufacturing and
technological capability improvements.
Transaction Multiples: Revenue .65x; EBITDA 18.3x
In July 2013, Tyman plc (LSE:TYMN) completed the
acquisitions of Atlas Holdings Company Limited and
Truth Hardware Corporation from Fki Engineering Ltd for
$200 million. Both companies design and manufacture
door and window hardware products including operators,
hinges, locks, skylights, latches, lifts, and rollers and home
safety products. The acquisitions are expected to enhance
Tyman’s market position in North America and broaden
its casement hardware product portfolio, customer
relationships, and manufacturing footprint.
Transaction Multiples: Revenue 1.6x; EBITDA 8.9x
In May 2013, North American Pipe Corporation, a subsidiary
of Westlake Chemical Corp. (NYSE:WLK), completed
the acquisition of the PVC Pipe Fittings and Foundations Business of CertainTeed Corporation (nka North American
Specialty Products LLC) for $153 million in cash. The
company manufactures and distributes PVC piping, fi tting s,
and foundations to companies in the building products,
agricultural, mining, and other industrial sectors. Assets
acquired include facilities in Lodi, California and McPherson,
Kansas with production capacity of approximately 150
million pounds per year. Westlake also has acquired
technologies and intellectual properties for the production
of a number of specialized products, including Certa-Lok(R)
restrained joint pipe and Yelomine(TM) branded products
for a variety of end market applications.
DISTRIBUTIONIn April 2013, MSC Industrial Direct Co. Inc. (NYSE:MSM)
acquired the North American Distribution Business
of Barnes Group Inc. (NYSE:B) for $550 million. The
business, which generated sales of approximately $300
million in 2012, is a leading distributor of fasteners and
other consumables with a broad distribution footprint
throughout the U.S. and Canada, serving customers across
manufacturing, government, transportation, and natural
resources end-markets.
With the acquisition, MSC extends its inventory
management solutions and product offering in fasteners
and other high gross margin consumable products and
establishes a signifi cant presence in the Canadian market.
Transaction Multiple: Revenue 1.8x
In March 2013, Moog Inc. (NYSE:MOG.A) acquired Aspen Motion Technologies from Pentair (NYSE:PNR) in a $34.0
million all-cash transaction. Aspen Motion designs and
manufactures high-performance DC motors, integrated
digital controls, and motorized impellers that are used in
motors. The acquisition will provide Moog with product and
technology enhancements and access to Aspen’s customer
base and manufacturing knowledge.
Transaction Multiple: Revenue .94x
In March 2013, private equity fi rm Kohlberg Kravis Roberts (NYSE:KKR) announced the take private of Gardner Denver Inc. (NYSE:GDI) in a $3.9 billion transaction including
debt assumption. Gardner Denver manufactures industrial
compressors, blowers, pumps, loading arms, and fuel
systems serving diverse industries.
Transaction Multiples: Revenue 1.6x; EBITDA 8.3x
In March 2013, Riverstone Holdings LLC announced the
acquisition of UTEX Industries, Inc. from Rhone Capital, LLC. UTEX manufactures sealing products that are
used in oil drilling, water treatment, and other industrial
applications. The transaction was valued at $825 million.
In January 2013, Bilfi nger SE (DB:GBF) acquired Johnson Screens, Inc. from Weatherford International Ltd. in a $133
million transaction. Johnson Screens produces components
used in fi ltration capacities for drinking water extraction,
wastewater treatment, and resource reclamation primarily
in North America, Europe, and Asia. The acquisition is
expected to double Bilfi nger’s water and wastewater
volume, building on its 2011 purchase of Italian-based
Diemme. Bilfi nger will also gain access to additional
markets and synergies arising from manufacturing
technology improvements.
Transaction Multiple: Revenue .63x
BUILDING PRODUCTSIn July 2013, Gentex signed a defi nitive agreement to
acquire the HomeLink product line from Johnson Controls, Inc. (NYSE:JCI) for approximately $700 million in cash. The
HomeLink Product Line comprises a vehicle-based radio
frequency device that communicates with other devices
including garage door openers, estate gates, and home
lighting. The acquisition is expected to contribute $125 to
$150 million in annual revenue.
In June 2013, LIXIL Corporation announced it was acquiring
ASD Americas Holding Corp, the parent company of
American Standard Brands, in a $542 million all-cash
transaction. The company manufactures various products
Industrials Insider
Industrials M&A Activity - H1 2013
SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data. 13
Industrials Insider
Industry Valuations
Relative Valuation Trends
SOURCE: S&P Capital IQ.
*Figures include latest reported earnings for index constituents. Q2 2013 earnings had not been released for all companies by publish date.
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213EV/EBITDA 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 9.9x 10.1x
EV/Revenue 0.7x 0.8x 1.0x 1.1x 1.3x 1.1x 1.3x 1.4x 1.5x 1.5x 1.1x 1.2x 1.4x 1.3x 1.3x 1.4x 1.6x 1.7x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.20x
1.40x
1.60x
1.80x
2.00x
4.00x
5.00x
6.00x
7.00x
8.00x
9.00x
10.00x
11.00x
12.00x
13.00x
14.00x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213EV/EBITDA 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 7.9x 8.8x
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 0.8x 0.9x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.20x
1.40x
1.60x
1.80x
2.00x
4.00x
5.00x
6.00x
7.00x
8.00x
9.00x
10.00x
11.00x
12.00x
13.00x
14.00x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213EV/EBITDA 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 10.5x 10.8x
EV/Revenue 0.7x 0.9x 1.2x 1.4x 1.7x 1.4x 1.6x 1.8x 2.0x 1.8x 1.3x 1.5x 1.7x 1.5x 1.6x 1.7x 1.8x 1.8x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.20x
1.40x
1.60x
1.80x
2.00x
4.00x
5.00x
6.00x
7.00x
8.00x
9.00x
10.00x
11.00x
12.00x
13.00x
14.00x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213EV/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 10.3x 10.3x
EV/Revenue 0.9x 1.1x 1.3x 1.4x 1.5x 1.5x 1.7x 1.9x 1.9x 2.0x 1.5x 1.6x 1.7x 1.5x 1.6x 1.7x 1.7x 1.9x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.20x
1.40x
1.60x
1.80x
2.00x
4.00x
5.00x
6.00x
7.00x
8.00x
9.00x
10.00x
11.00x
12.00x
13.00x
14.00x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213EV/EBITDA 4.6x 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 7.8x 8.3x 8.1x
EV/Revenue 0.5x 0.7x 0.9x 0.9x 1.0x 1.2x 1.5x 1.6x 1.5x 1.3x 1.0x 1.0x 1.1x 1.0x 0.9x 1.1x 1.1x 1.1x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.20x
1.40x
1.60x
1.80x
2.00x
4.00x
5.00x
6.00x
7.00x
8.00x
9.00x
10.00x
11.00x
12.00x
13.00x
14.00x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213EV/EBITDA 5.7x 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 13.1x 13.4x
EV/Revenue 0.4x 0.5x 0.7x 0.8x 0.9x 0.8x 0.8x 0.9x 1.0x 0.9x 0.7x 0.8x 1.1x 1.0x 1.1x 1.2x 1.3x 1.3x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.20x
1.40x
1.60x
1.80x
2.00x
4.00x
5.00x
6.00x
7.00x
8.00x
9.00x
10.00x
11.00x
12.00x
13.00x
14.00x
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213EV/EBITDA 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 12.5x 11.8x
EV/Revenue 0.5x 0.6x 0.7x 0.7x 0.8x 0.8x 0.7x 0.7x 0.7x 0.7x 0.6x 0.7x 0.8x 0.7x 0.8x 0.9x 1.0x 1.0x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.20x
1.40x
1.60x
1.80x
2.00x
4.00x
5.00x
6.00x
7.00x
8.00x
9.00x
10.00x
11.00x
12.00x
13.00x
14.00x
Industrial Machinery
Aerospace & Defense
Building Products
Electrical Components and Equipment
Distribution
Construction and Farm Equipment
14
Industrials Insider
Industry Valuations
Relative Valuation Trends
NOTE: Figures in bold and italic type were excluded from median and mean calculation.
(1) As of 7/26/2013
(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.
($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTM
Company Name Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDA
DIVERSIFIED INDUSTRIALSGeneral Electric Company NYSE:GE $24.65 98.8% $251,030.2 $512,130.2 3.5x 17.7x 13.4x $145,441.0 37.0% 19.9%United Technologies Corp. NYSE:UTX 104.97 99.3% 96,310.9 114,613.9 1.9x 10.8x 2.0x 61,890.0 27.3% 17.2%3M Company NYSE:MMM 116.91 99.7% 79,904.2 81,598.2 2.7x 10.5x 0.8x 30,270.0 47.4% 25.8%Honeywell International Inc. NYSE:HON 82.88 97.7% 65,047.8 67,799.8 1.8x 12.6x 1.4x 37,944.0 25.4% 14.1%Danaher Corp. NYSE:DHR 66.72 96.7% 46,408.4 48,306.8 2.6x 11.5x 1.0x 18,572.9 52.1% 22.3%Eaton Corporation plc NYSE:ETN 68.03 97.3% 32,185.0 41,317.0 2.3x 17.8x 4.4x 17,661.0 29.6% 13.1%Ingersoll-Rand Plc NYSE:IR 61.15 96.5% 17,798.5 20,461.9 1.5x 10.8x 2.5x 14,108.0 31.1% 13.5%Tyco International Ltd. NYSE:TYC 34.59 59.5% 16,049.8 17,102.8 1.6x 13.5x 1.1x 10,614.0 36.3% 12.2%Parker-Hannifin Corporation NYSE:PH 102.12 98.4% 15,241.5 16,591.3 1.3x 9.4x 1.7x 12,999.1 22.8% 13.6%Dover Corporation NYSE:DOV 84.67 97.3% 14,450.8 16,700.4 2.0x 9.7x 1.7x 8,379.8 38.5% 20.6%Textron Inc. NYSE:TXT 27.59 88.1% 7,739.1 10,895.1 0.9x 8.5x 2.8x 12,056.0 16.7% 10.6%Carlisle Companies Incorporated NYSE:CSL 67.53 95.7% 4,289.3 4,873.7 1.4x 9.2x 1.4x 3,608.6 23.9% 14.7%ITT Corporation NYSE:ITT 30.97 96.1% 2,784.2 2,293.6 1.0x 7.2x 0.1x 2,267.9 30.9% 14.1%Median $67.53 97.3% $17,798.5 $20,461.9 1.8x 10.5x 1.5x $14,108.0 30.9% 14.1%
Mean $67.14 93.9% $49,941.5 $73,437.3 1.9x 10.7x 1.7x $28,908.6 32.2% 16.3%
AEROSPACE AND DEFENSEUnited Technologies Corp. NYSE:UTX $104.97 99.3% $96,310.9 $114,613.9 1.9x 10.8x 2.0x $61,890.0 27.3% 17.2%The Boeing Company NYSE:BA 105.60 96.4% 79,669.3 75,074.3 0.9x 9.4x 1.2x 83,018.0 15.6% 9.6%Lockheed Martin Corporation NYSE:LMT 120.00 99.7% 38,296.4 41,591.4 0.9x 7.3x 1.1x 46,446.0 9.4% 11.5%Precision Castparts Corp. NYSE:PCP 225.00 83.3% 32,868.0 36,416.0 4.1x 14.4x 1.5x 8,778.8 32.6% 28.7%General Dynamics Corp. NYSE:GD 85.86 99.1% 30,039.7 30,189.7 1.0x 8.2x 1.1x 31,327.0 16.7% 11.8%Raytheon Co. NYSE:RTN 70.01 99.0% 22,577.6 24,016.6 1.0x 7.1x 1.4x 24,478.0 21.8% 13.7%Northrop Grumman Corporation NYSE:NOC 90.56 97.4% 20,843.7 21,872.7 0.9x 6.0x 1.6x 25,144.0 22.2% 14.4%Rockwell Collins Inc. NYSE:COL 70.78 99.0% 9,555.9 10,369.9 2.2x 9.6x 1.1x 4,624.0 30.7% 23.1%L-3 Communications Holdings Inc. NYSE:LLL 92.15 98.3% 8,293.1 11,669.1 0.9x 7.4x 2.3x 13,220.0 10.2% 11.9%TransDigm Group Incorporated NYSE:TDG 142.64 86.6% 7,474.2 11,147.7 6.1x 13.6x 5.3x 1,820.3 56.1% 45.1%Spirit AeroSystems Holdings, Inc. NYSE:SPR 25.99 97.3% 3,734.1 4,599.5 0.8x 29.7x 7.6x 5,574.1 3.6% 2.8%Moog Inc. NYSE:MOG.A 56.82 97.9% 2,573.1 3,196.1 1.2x 9.1x 2.2x 2,567.2 30.4% 13.7%Median $91.36 98.1% $21,710.7 $22,944.7 1.0x 9.1x 1.5x $18,849.0 22.0% 13.7%
Mean $99.20 96.1% $29,353.0 $32,063.1 1.8x 9.4x 1.9x $25,740.6 23.1% 17.0%
ELECTRICAL COMPONENTS AND EQUIPMENTEmerson Electric Co. NYSE:EMR $59.80 98.1% $42,988.0 $46,059.0 1.9x 9.3x 1.1x $24,697.0 40.3% 20.1%Johnson Controls Inc. NYSE:JCI 40.96 98.7% 28,016.6 34,097.6 0.8x 11.2x 2.3x 42,075.0 14.9% 6.3%Roper Industries Inc. NYSE:ROP 131.21 98.9% 12,992.2 14,478.5 4.7x 15.2x 2.9x 3,078.7 56.8% 31.0%Rockwell Automation Inc. NYSE:ROK 90.81 97.2% 12,682.5 12,492.8 2.0x 11.0x 1.0x 6,236.4 40.2% 18.3%Ametek Inc. NYSE:AME 45.76 98.8% 11,144.1 12,290.5 3.6x 14.1x 1.5x 3,389.9 35.3% 25.7%Hubbell Inc. NYSE:HUB.B 106.88 98.7% 6,265.0 6,276.1 2.0x 11.5x 1.1x 3,083.6 33.4% 17.8%Acuity Brands, Inc. NYSE:AYI 86.96 98.1% 3,676.7 3,728.3 1.8x 13.9x 1.3x 2,023.5 40.3% 13.2%Regal Beloit Corporation NYSE:RBC 71.10 80.6% 3,198.6 3,684.8 1.2x 8.2x 1.9x 3,137.2 24.9% 14.3%Median $79.03 98.4% $11,913.3 $12,391.6 1.9x 11.3x 1.4x $3,263.6 37.8% 18.0%
Mean $79.19 96.1% $15,120.5 $16,638.4 2.3x 11.8x 1.6x $10,965.2 35.8% 18.3%
TTM MarginsTTM Enterprise Value /
15
Industrials Insider
Industry Valuations
Relative Valuation Trends
NOTE: Figures in bold and italic type were excluded from median and mean calculation.
(1) As of 7/26/2013
(2) Market Capitalization is the aggregate value of a firm's outstanding common stock.
(3) Enterprise Value is the total value of a firm (including all debt and equity).
Source: S&P Capital IQ.
($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTM
Company Name Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDA
INDUSTRIAL MACHINERYIllinois Tool Works Inc. NYSE:ITW $71.97 97.2% $32,417.7 $34,727.7 2.0x 10.5x 1.5x $17,331.0 36.5% 19.3%Pentair Ltd. NYSE:PNR 60.63 98.2% 12,074.5 14,678.6 2.3x 27.1x 5.1x 6,354.6 29.4% 8.5%Flowserve Corp. NYSE:FLS 56.82 98.1% 7,989.6 9,018.7 1.9x 11.1x 1.5x 4,830.3 33.8% 16.0%Pall Corporation NYSE:PLL 70.37 96.1% 7,851.4 7,630.4 2.9x 11.9x 1.1x 2,653.6 51.8% 24.1%Timken Co. NYSE:TKR 56.65 92.4% 5,447.1 5,529.0 1.2x 7.8x 0.7x 4,439.2 26.2% 15.9%Donaldson Company, Inc. NYSE:DCI 36.46 92.6% 5,357.8 5,259.2 2.1x 12.7x 0.6x 2,461.2 34.5% 16.6%Lincoln Electric Holdings Inc. NasdaqGS:LECO 60.94 96.3% 5,062.4 4,848.5 1.7x 10.7x 0.0x 2,828.2 31.6% 15.8%IDEX Corporation NYSE:IEX 59.10 98.4% 4,859.9 5,300.9 2.7x 11.6x 1.8x 1,983.6 42.0% 22.9%Nordson Corporation NasdaqGS:NDSN 71.72 95.3% 4,605.5 5,165.2 3.3x 13.0x 1.6x 1,547.7 56.8% 25.6%Gardner Denver Inc. NYSE:GDI 75.95 99.2% 3,739.6 3,839.9 1.7x 9.0x 0.8x 2,264.7 34.3% 18.9%Crane Co. NYSE:CR 61.98 95.8% 3,584.7 3,577.4 1.4x 9.0x 1.0x 2,552.1 34.2% 15.6%SPX Corporation NYSE:SPW 75.01 87.4% 3,510.0 4,457.4 0.9x 9.3x 3.8x 5,080.4 27.1% 8.6%Trinity Industries Inc. NYSE:TRN 37.37 81.8% 2,959.9 5,604.7 1.5x 7.1x 3.8x 3,848.6 21.7% 20.5%CLARCOR Inc. NYSE:CLC 54.93 98.3% 2,740.9 2,569.9 2.3x 11.9x 0.1x 1,123.5 33.4% 19.2%Median $60.79 96.2% $4,961.2 $5,280.0 1.9x 10.7x 1.1x $2,740.9 34.0% 17.8%
Mean $60.71 94.8% $7,300.1 $8,014.8 2.0x 10.4x 1.4x $4,235.6 35.2% 17.7%
CONSTRUCTION, FARM, AND OTHER INDUSTRIAL EQUIPMENTCaterpillar Inc. NYSE:CAT $82.06 82.3% $53,970.9 $89,604.9 1.5x 9.4x 4.2x $60,351.0 25.9% 15.7%Deere & Company NYSE:DE 82.81 86.6% 32,133.9 62,061.7 1.6x 10.1x 5.5x 37,717.0 28.9% 16.3%Cummins Inc. NYSE:CMI 115.88 94.6% 21,987.0 21,501.0 1.3x 8.7x 0.4x 16,784.0 25.6% 12.5%PACCAR Inc. NasdaqGS:PCAR 56.10 93.5% 19,848.2 26,414.2 1.6x 12.1x 4.2x 16,042.0 13.5% 13.6%CNH Global NV NYSE:CNH 44.18 88.4% 10,762.6 24,451.6 1.2x 8.0x 6.4x 20,498.0 24.0% 14.3%AGCO Corporation NYSE:AGCO 54.34 95.6% 5,288.0 6,205.2 0.6x 6.1x 1.5x 10,091.6 21.4% 9.5%Joy Global, Inc. NYSE:JOY 48.83 70.6% 5,188.8 6,323.6 1.2x 4.9x 1.1x 5,493.9 33.9% 23.5%Oshkosh Corporation NYSE:OSK 40.39 94.7% 3,553.8 4,056.5 0.5x 7.4x 1.8x 7,984.3 13.4% 6.8%Terex Corp. NYSE:TEX 28.49 76.8% 3,170.9 4,745.9 0.7x 9.8x 3.8x 7,148.8 19.3% 6.8%Navistar International Corporation NYSE:NAV 34.41 88.7% 2,766.8 6,421.8 0.5x NM NM 11,841.0 8.4% -4.2%Federal Signal Corp. NYSE:FSS 9.76 93.8% 609.4 757.9 0.9x 11.3x 2.4x 806.9 23.7% 8.3%Median $48.83 88.7% $5,288.0 $6,421.8 1.2x 9.1x 3.1x $11,841.0 23.7% 12.5%
Mean $54.30 87.8% $14,480.0 $22,958.6 1.1x 8.8x 3.1x $17,705.3 21.6% 11.2%
BUILDING PRODUCTSMasco Corporation NYSE:MAS $19.84 86.9% $7,080.2 $9,888.2 1.3x 15.7x 5.8x $7,815.0 25.3% 8.0%Fortune Brands Home & Security, Inc. NYSE:FBHS 41.65 94.6% 6,872.9 7,138.3 1.9x 20.1x 1.1x 3,787.4 34.0% 9.4%Owens Corning NYSE:OC 39.42 86.5% 4,686.8 6,923.8 1.3x 10.4x 3.4x 5,132.0 18.0% 13.0%Lennox International, Inc. NYSE:LII 72.07 96.0% 3,598.4 4,090.2 1.3x 13.0x 1.8x 3,076.1 25.7% 9.9%Armstrong World Industries, Inc. NYSE:AWI 50.41 86.2% 2,981.5 3,796.8 1.4x 9.9x 0.0x 2,636.4 24.5% 12.4%USG Corporation NYSE:USG 25.27 81.6% 2,743.6 4,559.6 1.4x 14.3x 7.3x 3,373.0 13.8% 9.4%Simpson Manufacturing Co., Inc. NYSE:SSD 32.44 94.5% 1,575.2 1,411.1 2.2x 15.2x 0.0x 666.9 43.3% 14.3%Universal Forest Products Inc. NasdaqGS:UFPI 40.87 89.6% 812.0 957.9 0.4x 12.2x 1.9x 2,297.1 10.3% 3.4%Griffon Corporation NYSE:GFF 11.95 94.7% 716.2 1,297.6 0.7x 8.9x 4.8x 1,840.2 22.6% 7.9%Quanex Building Products Corporation NYSE:NX 16.15 72.5% 595.2 596.9 0.7x 28.6x 0.5x 891.1 15.2% 2.3%Median $35.93 88.3% $2,862.6 $3,943.5 1.3x 14.3x 2.6x $2,856.3 23.6% 9.4%
Mean $35.01 88.3% $3,166.2 $4,066.1 1.3x 15.5x 3.3x $3,151.5 23.3% 9.0%
DISTRIBUTIONW.W. Grainger, Inc. NYSE:GWW $256.65 95.3% $17,836.4 $17,895.6 2.0x 12.9x 0.4x $9,169.3 44.1% 15.1%Fastenal Company NasdaqGS:FAST 46.68 87.4% 13,856.6 13,733.3 4.3x 18.1x 0.0x 3,213.7 52.0% 23.6%MSC Industrial Direct Co. Inc. NYSE:MSM 79.81 90.8% 5,059.1 5,294.0 2.2x 11.6x 0.6x 2,419.1 45.4% 18.9%WESCO International Inc. NYSE:WCC 74.47 94.0% 3,284.7 4,796.1 0.7x 11.7x 3.9x 7,002.6 20.7% 5.9%Watsco Inc. NYSE:WSO 92.94 97.2% 2,987.8 3,655.8 1.0x 13.4x 1.5x 3,620.5 24.0% 7.6%Anixter International Inc. NYSE:AXE 81.07 98.2% 2,638.0 3,433.1 0.6x 9.5x 2.4x 6,223.8 22.4% 5.8%Applied Industrial Technologies, Inc. NYSE:AIT 51.58 98.3% 2,173.6 2,130.5 0.9x 10.5x 0.0x 2,441.7 27.6% 8.3%Beacon Roofing Supply, Inc. NasdaqGS:BECN 40.91 95.8% 1,991.6 2,271.1 1.1x 14.0x 1.8x 2,088.6 24.7% 7.7%Median $77.14 95.6% $3,136.3 $4,225.9 1.0x 12.3x 1.5x $3,417.1 26.2% 8.0%
Mean $90.51 94.6% $6,228.5 $6,651.2 1.6x 12.7x 1.2x $4,522.4 32.6% 11.6%
TTM MarginsTTM Enterprise Value /
16
Industrials Insider
Industry Valuations
Sector Performance
Source: S&P Capital IQ.As of 7/26/2013.
By Sector
Overall Market
20%26%
15% 15%
-3%
10% 11%
27%
39% 39% 38%
14%
51%
24%
50%54% 50%
70%
23%
57%
96%
19%
49%
58%49%
21%
56%
118.4%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
DiversifiedIndustrials
Aerospace &Defense
ElectricalComponents and
Equipment
IndustrialMachinery
Construc�on &Farm Equipment
Building Products Distribu�on
Retu
rns
YTD 1 Year 3 Year 5Y
16% 16%
24%21%
52%48%
37%40%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
S&P 500 DJIA
Retu
rns
YTD 1 Year 3 Year 5Y
17
Global Industrials Practice
For questions about content and circulation, please contact editor, Rebecca Dickenscheidt, at [email protected] or 312-513-7476.
• Metal Working
• Injection & Blow Molding
• Plastic, Rubber & Aluminum Extrusion
• Automation & Controls
• Motors & Drives
• Sensing & Imaging Equipment
Precision Manufacturing
Leading Independent Firm• Independent investment banking
advisory fi rm focused on the middle market
• Senior bankers with signifi cant experience and tenure; partners average over 20 years of experience
• Offi ces in Chicago, Cleveland, and Salt Lake City
Who We Are
• Founding member and the exclusive U.S. partner of Global M&A, the world’s leading partnership of investment banking fi rms focusing on middle market transactions
• Deep industry experience across core sectors of focus, including: Business and Environmental Services, Consumer Products, Healthcare and Life Sciences, Industrials, and Real Estate
Comprehensive Capabilities Private Placements Financial Advisory
M&A Advisory Private Placements
Sell-Side Advisory
General Financial& Strategic Advice
Acquisitions & Divestitures
Public & Private Mergers
Special Committee Advice
Strategic Partnerships& Joint Venture Formation
Fairness Opinions & Fair Value Opinions
All Tranches ofDebt & Equity Capital for:
Growth
Acquisitions
Recapitalizations
Dividends
General Financial& Strategic Advice
Balance SheetRestructurings
Sales of Non-CoreAssets or Businesses
§363 Auctions
Financial Advisory
• Power Generation &
Management
• Machine Tools
• Cranes, Material
Handling & Off Road
Equipment
Capital Goods
• Military &
Defense
• Aerospace
• Automotive &
Heavy Truck
• Oil & Gas
Industrial Services
• Test & Measurement Services
• Design & Engineering Services
• Preventative & Predictive Maintenance
• Rebuild & Remanufacturing
• Coatings Development & Application
• Infrastructure Installation, Repair & Maintenance
• Logistics & Distribution
• Sanitation & Hygiene
• Precision Metals
• Commodity Metals
• Resin
• Rubber
• Aluminum
• Coatings
• Lubricants
• Aggregates &
Minerals
• Concrete &
Concrete Products
• Building Products &
Materials
Materials & Inputs
The information contained in this publication was derived from proprietary research conducted by a division or owned or affi liated entity of Brown Gibbons Lang & Company LLC. Any projections, estimates or other forward-looking statements contained in this publication involve numerous and signifi cant 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 offi cers, directors, employees, affi liates, agents or representatives makes any representation or warranty, expressed or implied, as to the accuracy, completeness or fi tness 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 publica-tion is intended to be a recommendation of a specifi c security or company, nor is any of the information contained herein intended to constitute an analysis of any company or security reasonably suffi cient to form the basis for any investment decision. Brown Gibbons Lang & Company LLC, its affi liates and their offi cers, direc-tors, employees or affi liates, or members of their families, may have a benefi cial interest in the securities of a specifi c 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.
For questions about content and circulation, please contact editor, Rebecca Dickenscheidt, at [email protected] or 312-513-7476.
Representative Transactions:
Andrew K. PetrykHead: [email protected]
Kevin H. SargentDirector & [email protected]
BGL Contacts:
www.bglco.com www.globalma.com
recapitalized by
ZS Fund L.P.
E C S R E F I N I N G
acquired byacquired by
Prospect Capital Corporation(NASDAQ: PSEC)
CCPI Inc. recapitalized in a change of control
transaction by
a wholly-ownedsubsidiary of
acquired by
Lauren International, Inc. acquired by
obtained financingprovided by
and
merged with
a portfolio company of
which has been acquired by
PVC Container Corporation
acquired by
The melting operations of
acquired by
The recycling operations of
divested
Motion Control Group
to
acquired by
a portfolio company of
acquired by
with interest held by
a portfolio company of
acquired by
acquired by
TAD Metals, Inc.
acquired by
acquired by
TINICUM CAPITALPARTNERS II, L.P.
divested substantially all of thebusiness and assets of
toacquired by
and its affiliate
Aerospace InternationalMaterials-OEM, LLC acquired
a subsidiary of
Castle HarlanPartners IV L.P.
(CHPIV)
sold the assetsof its subsidiary
Rohrback Cosasco Systemto
acquired by
acquired by
The Power ToolBusiness Unit of
acquired by
Aeroquip - Vickers S.p.A.
acquired by
Intermet Corporation
Industrial PowderCoatings, Inc.
MG Capital, L.L.C.
divested
through a sale to
acquired by
acquired by
sold the assetsof its subsidiary
Bass-Trigon Softwareto
in support of a strategic alternatives analysis
A valuation analysishas been completed for
Global Industrials Practice
acquired by
acquired by
KILL OOL & IE
acquired by
acquired by
a portfolio company of
acquired by
UndisclosedFamily Office
acquired by
a division of
(TSE: 6201)
MATERIAL HANDLING U.S.A.