Strategic buyers continue to be very active in the market, purchasing companies at very high values. Private-equity groups are having a difficult time competing with corporate buyers who maintain a bevy of cash on balance sheets.
As noted by the chart, private-equity groups appeared to be buyers on only four of the 23 disclosed transactions in the Northeast Ohio area. Private-equity firms will soon need to start buying more companies considering fundraising dollars are up almost 30 percent in the first seven months of 2012 when compared to 2011. Also, deal closings from PE firms are significantly lower in the first seven months of 2012 compared to 2011, according to Pitchbook.
In order to compete, these firms have continued to pursue add-on acquisitions rather than platform acquisitions as synergies allow for high purchase price multiples. The average deal size in the first seven months of 2012 is more than 30 percent higher than the corresponding periods in 2010 and 2011. The deal volume for the first seven months in 2012, however, has dropped by 11 percent compared to the corresponding period in 2011 and is relatively flat compared to 2010.
In July, Northeast Ohio’s typical M&A players showcased their buying power, all through international acquisitions. This includes Parker Hannifin Corp., Lubrizol Corp. and Eaton Corp.
Parker acquired three overseas companies. The first, the Olaer Group, which is headquartered in the United Kingdom, closed on July 2. Olaer has sales of about $200 million and employs 550 people with manufacturing and sales offices in 14 countries.
“Olaer has built a strong position in Europe and a growing presence in Asia,” says Jeff Cullman, president of Parker’s hydraulic group, “which targets growth markets such as oil and gas, power generation and renewable energy.”
The second Parker acquisition is a hydraulic division of PIX Transmissions Ltd. in Nagpur, India. The 470-employee unit will help strengthen Parker’s footprint in India. Finally, Parker acquired Kittiwake Developments Ltd. in the United Kingdom, a manufacturer of condition monitoring technology with $20 million in sales.
Also in the region, Steris Corp. and Chart Industries Inc. announced the acquisitions of US Endoscopy Inc. and AirSep Corp., respectively. Finally, Universal Rubber & Polymer Ltd. in Middlefield purchased Dybrook Products Inc., expanding its custom rubber product manufacturing operation and customer base.
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
The deal of the month is awarded to Eaton Corp. for its acquisition of substantially all of the shares of Jeil Hydraulics Co. Ltd, in Busan, South Korea. The transaction was announced April 20. Jeil Hydraulics is a manufacturer of track drive motors, swing drive motors, main control valves and remote control valves for the construction equipment market.
“The acquisition of Jeil Hydraulics provides Eaton with a well-established portfolio of hydraulic components for the construction equipment market in Asia,” says William R. VanArsdale, president of Eaton’s Hydraulics Group.
The company had 2011 sales of about $189 million. Eaton is a diversified power management company with 2011 sales of $16 billion employing 72,000 employees. Also, Eaton’s announcement to acquire Cooper Industries plc for $11.8 billion in May has passed the antitrust review process. The transaction still remains subject to approval by shareholders of both Eaton and Cooper.