Aggregate value of domestic M&A transactions continues to swell despite a reduced number of announced deals, with dollars committed in May surpassing last year’s pace, supported by several billion-dollar-plus strategic buys.
Strategic buyers are actively pursuing acquisitions, incentivized by a slow organic growth environment and abundant cash reserves. S&P 500 companies are sitting on $1.7 trillion in cash and need to put money to work in higher earning assets. Competition for quality acquisition opportunities remains fierce, with industry buyers showing an increased willingness to pay premium valuations for growth and quantifiable synergies.
May highlights support a healthy strategic buyer appetite:
A. Schulman Inc. announced it was acquiring Akron-based Network Polymers Inc., a niche compounder of thermoplastic resins and alloys, bringing complementary business in specialty engineered plastics ABS and ASA. The deal is expected to strengthen its U.S. market presence by increasing penetration in key end markets such as building and construction, agricultural products and lawn and garden, as well as expand its distribution business. Schulman intends to continue an aggressive bolt-on acquisition strategy in its specialty plastics business, as well as other opportunities for transformational acquisitions.
The Timken Co. acquired Standard Machine Ltd., its fifth acquisition in 2013. The Saskatoon, Saskatchewan, Canada-based company provides new gearboxes, gearbox service and repair, open gearing, large fabrication, machining, and field technical services to the mining, oil and gas, and pulp and paper markets. The acquisition will expand Timken’s industrial services capabilities.
TransDigm Group Inc. announced it was acquiring Arkwin Industries Inc., a Westbury, New York-based manufacturer of hydraulic and fuel system components for commercial and military aircraft, helicopters and other specialty applications. Arkwin is TransDigm’s second acquisition this year, following Aerosonic Corp. in April, a Clearwater, Florida-based manufacturer of proprietary air data sensing, test and display components for use primarily in the business jet, helicopter and military markets. Both transactions were completed in June.
PolyOne Corp. completed the sale of its vinyl dispersion, blending and suspension resin assets to Mexichem SAB de CV. Assets acquired include manufacturing plants in Pedricktown, New Jersey; Henry, Illinois; and a resin research facility in Avon Lake, Ohio.
Deal of the Month
Its second major strategic partnership in the last four months, Cincinnati’s Catholic Health Partners announced an agreement with Kaiser Permanente of Ohio to acquire its existing health plan, medical group practice and care delivery operations in Northeast Ohio, which services more than 80,000 members. The transaction follows CHP’s February purchase of a minority ownership stake in Akron’s Summa Health System Inc., one of the largest integrated health care delivery systems in Ohio.
CHP is the largest health system in Ohio, serving the metropolitan markets of Cincinnati, Toledo, Youngstown, Lima, Lorain, Springfield, and Tiffin. Through its integrated health care delivery network, comprised of hospitals, long-term care facilities, home health agencies, wellness centers, and hospice programs, the company is estimated to service 38 percent of Ohio’s residents throughout 28 counties.
Andrew Petryk is managing director and principal of Brown Gibbons Lang & Co. LLC, an investment bank serving the middle market. Contact him at (216) 920-6613 or [email protected]