Looking back at the first quarter of 2012, M&A activity slowed down more than anticipated. According to S&P Capital IQ, disclosed deals during this time period showed a decrease of 12.7 percent in deal value and a 23.9 percent drop in the number of deals completed when compared to the first quarter of 2011. The number of disclosed deals in April was down 25.4 percent in deal volume and 18.6 percent in total deal value from April 2011.
Although deal volume and total deal value remained lower, purchase price per transaction increased over 9 percent April 2011 to April 2012. This is in accordance with the overall M&A environment where large cash sums available from both strategic buyers and private equity for investment and more availability of debt have driven multiples higher. The deal volume over the past few months should not be indicative of the entire year as the current slowdown in deal flow is partially driven by last year’s slowdown in new deal activity. Startup activity for many M&A firms has been very strong since the beginning of the year. For some firms, new deal activity is up over 50 percent.
Some of the startup activity is tax driven, but most of the activity is driven by a very propitious M&A environment with high valuations and ample buyers. This high level of activity should translate into more activity later in the year. The old adage is that April showers bring May flowers. In terms of M&A, we are seeing many more showers now than we did at the end of last year.
One company that has remained very active is the The Riverside Co., which completed two acquisitions and two exits in April. The first acquisition was for Cincinnati-based Galaxy Associates Inc., a specialty chemical company which will be added on to another Cincinnati-based chemical company, Dubois Chemicals. Galaxy is expected to improve and increase the metal finishing business for Dubois.
Riverside’s second acquisition was The Baby Jogger Co., which manufactures and markets baby strollers and other mobile baby products sold in over 50 countries.
Finally, BASF, a $75 billion German-based company, acquired Cleveland-based Novolyte Technologies Inc. Novolyte, a manufacturer of electrolyte formulations for lithium-ion batteries, will expand BASF’s lithium-battery electrolyte production globally and add to BASF’s long-term objective of becoming the leader in materials and components for cell and battery manufacturers worldwide.
ALBERT D. MELCHIORRE is the President of MelCap Partners LLC, a middle-market investment banking firm. He is also a director on the ACG Cleveland board. For more information on MelCap Partners, please visit www.melcap.co. For more information about the Association for Corporate Growth, please visit www.acg.org/cleveland.
Deal of the Month Parker Hannifin Corp. takes the honors this month for the closed acquisition of Snap-tite Inc. on April 3. The acquisition will strengthen the instrumentation and fluid connector groups within Parker, especially in the oil and gas markets. Parker will now be able to offer high-pressure applications along with Parker’s previous suite of options. Snap-tite, located in Erie, Pa., is a manufacturer of high-pressure fluid power components for oil, gas, industrial and research markets.