Heading into the third quarter, M&A activity in July continued to lag expectations with 15 percent fewer deals than a year ago, though the total value of deals increased by 27 percent. Fundamentals to support an active second half remain in place, namely eager buyers, a surplus of cash earmarked for acquisitions and a healthy capital markets environment.
The public equity markets rallied, gaining 4 percent in July, with broad market indices up over 15 percent year-to-date. The credit markets remain active, with lenders competing aggressively for quality deal opportunities. Aggressive financing structures and terms seen during the first half are expected to carry over even with an uptick in deal flow given the scarcity of deal flow in the marketplace. Senior leverage surpassed the 2007 high, reaching 4.7 times EBITDA in July, according to Standard & Poors Leveraged Commentary & Data.
July was an active month for private equity. Penda Corp. completed the acquisition of The Fabri-Form Co., a heavy-gauge thermoformer of engineered components and industrial packaging solutions. Cleveland-based Resilience Capital Partners and Littlejohn & Co. are co-investors in the Portage, Wis.-based Penda, a leading supplier of thermoformed accessories for the light truck market and tier one supplier of components to the automotive market. Post-acquisition, the company will operate as Penda Fabri-Form Corp.
Cleveland-based The Riverside Co. closed three deals, picking up Blue Microphones Inc., a leading innovator of microphone technology and design; ProSites Inc., a medical and dental website design firm; and Simcro Limited, a manufacturer of animal health-delivery systems located in New Zealand.
Taking advantage of market dynamics favoring sellers, Linsalata Capital Partners of Mayfield Heights announced the sale of The Tranzonic Cos. to Silver Oak Services Partners LLC. Cleveland-based Tranzonic manufactures consumable personal care products and has additional facilities in Tennessee, Nevada and Florida.
In strategic buyer news, CCL Industries Inc., of Toronto, acquired the Cleveland-based Office & Consumer Products and Designed & Engineered Solutions businessesof Avery Dennison Corp. in a $500 million transaction. The transformational acquisition is the largest in CCL’s history, expanding its Label Market sector with an entry to the North American durable goods market, and will take revenue above $2 billion for the first time.
ThyssenKrupp Elevator AG acquired Cleveland-based Edmonds Elevator Inc., a provider of elevator maintenance, repair and modernization services, strengthening its service business in the U.S. Edmonds is the second U.S. acquisition so far for TKE in 2013.
Kaman Industrial Technologies Corp., a subsidiary of Kaman Corp. announced it was acquiring Cleveland-based Ohio Gear & Transmission Inc. Ohio Gear distributes mechanical power transmission equipment, bearings and electric automation systems, as well as fabricates specialized gearing products for diverse industries.
Deal of the Month:
Health care M&A continues at a robust pace, with the Ohio market seeing its share of the action. Parma Community General Hospital Inc. announced its agreement to merge with Cleveland’s University Hospitals Health System Inc. Ongoing Medicare reimbursement pressure was a key driver in the hospital’s decision. Parma employs 2,000 people and has 500 physicians on its staff.