Cleveland Business Pulse: Merger momentum is building

In the broader M&A market, news of mega deals hitting the headlines is signaling that companies are aggressively pursuing acquisitions with transaction activity reflecting a mix of corporate and private equity buyers and diverse industries. Deal value in February was up more than twofold from January levels with Heinz, Dell and Virgin Media among the billion-dollar-plus deals.

Local corporate buyers are also flexing their muscle. If February transaction activity is any indicator, momentum is building for what is expected to be an active year for M&A in 2013.

An M&A highlight in the health care arena, Cincinnati’s Catholic Health Partners Inc. announced a strategic partnership with Summa Health System Inc. of Akron, whereby it will acquire a minority ownership stake in the health care provider. The move is reflective of the broader consolidation trend taking place in hospitals and health systems in anticipation of changes from health care reform. Summa announced last July that it was seeking a potential partner as part of a three-year strategic planning process.

The combination brings together two regional leaders and expands CHP’s market share. With $5.6 billion in assets, CHP operates more than 100 health facilities, including 24 hospitals throughout Ohio and Kentucky, and is the largest health system in Ohio. CHP reported $3.8 billion in net operating revenue in 2012.

In a highlight for the industrial market, Beachwood, Ohio-based private equity firm Rockwood Equity Partners completed the acquisition of TIM-CO (aka CAL-RF Inc.), its first strategic add-on for portfolio company Astrex Electronics, which it acquired in 2008. TIM-CO is a distributor of electrical and electronic components and value-added assembler of coaxial connectors and cable assemblies with a focus on the commercial aviation, space, oil and gas, industrial, and military markets.

Also in the industrial segment, Timken Co. announced its second acquisition this year with Roller Bearing Industries Inc. Roller Bearing manufactures balls and roller bearings for the railway and automotive industries. Timken purchased the company from The Greenbriar Cos. Inc.

 

Deal of the Month

The health care industry garners the spotlight this month with the announced $2.1 billion acquisition by Cardinal Health of AssuraMed Holding Inc. of Twinsburg. AssuraMed distributes disposable medical products for the home health market, with a product range than spans more than 30,000 SKUs from ostomy, diabetic and respiratory supplies to wound care and insulin infusion products.

The acquisition gives Cardinal Health an entry into the growing home health market, adding an estimated $1 billion to the top line. The company estimates synergies from the combination to reach $50 million by 2016. Cardinal Health reported EBITDA of $2.3 billion on revenue of $104.8 billion in 2012.

AssuraMed is backed by private equity firms Clayton, Dubilier & Rice and GS Capital Partners, which acquired the company in 2010. During their ownership AssuraMed completed the acquisition of Invacare Supply Group, the domestic medical supplies business of Invacare, in a $150 million transaction.

 

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]