Early signs, notably positive economic indicators and rising corporate earnings, point to an M&A market poised for strong deal flow in 2013. Sustained improvement in these trends will bolster confidence and bring more buyers and sellers to market. Buyer cash reserves and an accommodative credit market should lend further support.
January deal volume was light, down nearly 20 percent from a year ago, but not atypical of a seasonally slow month for M&A. Behind the numbers are several billion-dollar-plus deals, including ConAgra’s $6.7 billion acquisition of RalCorp Holdings. Other mega deals announced in recent weeks were Liberty Global’s pending $24 billion acquisition of Virgin Media, Reliance Steel’s $1.2 billion acquisition of Metals USA, and Dell’s $22 billion take-private by Silver Lake Partners, marking the largest LBO since 2007. These are strong signals that buyer confidence is returning and likely harbingers of more M&A activity on the horizon.
Local corporate buyers are on the hunt for deals. Timken Co. acquired Denver-based Wazee Companies LLC, a $30 million provider of motor, generator, wind and industrial crane services to the aerospace, mining, power generation, and oil and gas markets. Lincoln Electric Holdings Inc. acquired Tennessee Rand Inc., a $35 million manufacturer of tooling and robotic systems for welding applications in Tennessee, complementing its purchase of Wayne Trail Technologies last May. CBIZ Inc. purchased Diversified Industries Inc., a Minnesota company that provides payroll and human resource solutions to small and midsized businesses nationwide, making it its ninth acquisition in the last 12 months.
Notable private equity activity includes five deals from The Riverside Co., including Operating Tax Systems, which provides driver and vehicle compliance services primarily for the commercial motor vehicle industry. Other buys include Austin, Texas-based Alchemy Systems LP; Houston-based Jacosoft LLC; Bohemia Interactive Simulations s.r.o. of Australia, and GiveAnything.com Inc., a N.Y.-based company.
Deal of the Month
Global environmental consulting, engineering and technical services company Tetra Tech Inc. acquired American Environmental Group Ltd. of Richfield, a provider of specialty environmental, design, construction and maintenance services to solid and hazardous waste, environmental, energy and industrial clients. Founded in 2002, AEG employs 500 with annual revenue of approximately $95 million. Tetra Tech adds an East Coast presence with AEG, complementing its comparable legacy operations in Southern California, enhancing its ability to assist landfill operators, mining and power clients with disposal challenges.
AEG is Tetra Tech’s fifth acquisition announced in the last 12 months. Including AEG, the company completed two acquisitions in the U.S., two in Brazil and one in Canada. Tetra Tech employs 13,000 people worldwide and reported sales of $2.0 billion in fiscal year 2012.
Andrew K. 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]