With demand robust and capital chasing deals, the market is primed for increased M&A activity. Through the April year-to-date period, deal value is ahead of last year’s pace by more than 20 percent, despite a seasonal lull in deal flow. While pending tax changes had the effect to pull more sellers into 2012, contributing to a softer first quarter, the drivers are present to support a healthy transaction environment.
For sellers, it’s a better sales environment today than all of last year. Quality companies are commanding the time and attention of buyers. With fewer differentiated businesses in a less than robust M&A market, valuations for those assets are high. Competition is pushing up purchase multiples, driving a seller’s market for the best companies.
It is a borrower’s market for companies on the hunt for acquisitions. Interest rates are at record lows, and lenders are aggressively supporting acquisition financing. Buyers are able to secure more favorable pricing and flexible terms as lenders compete for new M&A opportunities.
To create value and boost the topline in the slow growth environment, companies will need to make acquisitions. Company financial performance has improved and rising purchase multiples should propel more exit activity.
International Business Machines Corp. acquired Cleveland-based Starbelly Productions Inc. (dba UrbanCode). UrbanCode automates the delivery of software, helping businesses quickly release and update mobile, social, big data, and cloud applications.
Timken Co. completed its fourth acquisition this year with the purchase of Smith Services Inc. Based in Princeton, W. Va., Smith provides electric motor repair and field technical services in a wide variety of markets including power generation, petrochemical, paper, steel, nuclear, and mining. The acquisition will expand Timken’s industrial services capabilities.
TransDigm Group Inc. acquired Aerosonic Corp. (AIM). The Clearwater, Fla.-based company is a manufacturer and marketer of aircraft instrumentation and sensor systems worldwide.
Cleveland- based Evolution Capital acquired new platform AXIOM Sales Force Development. The Richardson, Texas-based company provides sales coaching and integrated software solutions and implementation services. The Riverside Co. added on with the purchase of TerraSim of Pittsburgh, a terrain-generation software provider. The transaction represents the first tuck-in acquisition for Bohemia Interactive Simulations, which received development capital from the Cleveland-based sponsor in January 2013. Bohemia is based in Australia and provides simulation technologies for military and civilian organizations.
Deal of the Month
Measurement Specialties Inc. (MEAS) acquired Akron-based Spectrum Sensors and Controls from API Technologies Corp. (ATNY) in a $51.4 million transaction. Spectrum manufactures custom temperature probes, high reliability encoders and inertial sensors. The company was formed through the acquisitions of Advanced Thermal Products, a producer of HVAC and refrigeration temperature probes and assemblies, JDK Controls, a manufacturer of high-reliability encoders for aerospace and military applications, and Summit Instruments, a supplier of inertial test systems for aerospace and military markets. Spectrum is the third acquisition for MEAS in the last 12 months.
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]