Domestic mergers and acquisitions decreased 28 percent from October to November, according to S&P Capital IQ, but the transaction values made up for the lack of volume by increasing 21 percent across the same period.
The strong purchasing power capabilities of both financial and strategic buyers, aging baby boomers needing to transition their businesses, and financials needing to exit aging portfolio companies are positive signs for the M&A market. Despite these factors, the future seems as murky as ever.
The fiscal cliff is rapidly approaching and we may have already taken the proverbial plunge before you even read this story.
Regarding corporate buyers, Lincoln Electric Co. snatched up three businesses from ITT Corp. near Charleston, S.C. Applied Industrial Technologies Inc. acquired HyQuip Inc., a 19-employee company that is a distributor of hydraulic, rubber and plastic industrial hose and tubing. Nordson Corp. purchased certain assets of Kodama Chemical Industry Co. Ltd., a licensed distributor for Nordson’s EDI business in Japan. Nordson acquired EDI last June.
Cedar Fair LP, which owns the Cedar Point amusement park, sold Knott’s Soak City in California to SeaWorld. It will become SeaWorld’s third aquatic park in the United States.
Eaton Corp. completed the acquisition of the electrical equipment supplier Cooper Industries plc for $13 billion.
The Riverside Co. made a total of four acquisitions in November. It acquired Digital University, which is the sixth add-on since 2007 to OnCourse Learning. Riverside also purchased Learning Seat, an Australian-based provider of e-learning courses. The other two companies are in the transportation and health care industries.
Finally, Sherwin-Williams Co. announced plans to acquire Mexican competitor COMEX for $2.4 billion.
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. is going out with a bang in 2012 as it completed two acquisitions with combined sales of $215 million in November, earning them the Deal of the Month award.
The first acquisition was Velcon Filters from the private equity firm, The Sterling Group.
Velcon is a niche manufacturer of filtration systems with 300 employees.
Parker’s second purchase was Houston-based PGI International. PGI is manufacturer of specialized, high-pressure flow control components and systems.
PGI has 550 employees and approximate sales of $100 million. This marks Parker’s 13th M&A transaction in 2012. The company has increased its annual dividends paid to shareholders for 56 consecutive fiscal years, among the top five longest running dividend increase records in the S&P 500 index.
While the current number of closed U.S deals thus far in 2011 is less than the number of deals at the same time last year, the total dollar volume of 2011 transactions is much higher. Combining more investment money with fewer deals has elevated the average deal value and created higher valuations and stronger demand for healthy companies. Strategic buyers have started to use some of the excess cash on their balance sheets for synergistic opportunities. Private equity firms are using their capital for quality acquisitions. With higher corporate earnings and more liquidity in the debt markets, the overall outlook of the M&A market remains positive.
Ganeden Biotech’s probiotics have been under strong demand lately. On June 2, Schiff Nutrition purchased the Sustenex and Digestive Advantage brands and rights to GanedenBC30 technology, which has more than 95 U.S. and foreign patents. Ganeden, headquartered in Mayfield Heights, sold the brands for $40 million. The probiotics industry has grown recently at an annual rate of approximately 20 percent.
OfficeMax may have relocated its headquarters from Shaker Heights to Naperville, Ill., but the company still has an eye on the Cleveland region. OfficeMax acquired Cleveland-based Warren-Chaney Office Furniture and hopes to integrate the company into its contract office furniture dealership, OM Workspace. This will allow the furniture store to add more value to its customers and, more importantly, to stay in Cleveland.
The Riverside Co. closed multiple transactions in June. The company added to its medical supply platform, ActivStyle, with the acquisitions of Home Wellness Inc. and Stay Dry Products Inc. This makes the third acquisition to this platform this year. Riverside also added Alliance 1 to its platform, Express Courier, to give the delivery service company more access to the Tennessee market.
Finally, Eaton Corp. is strengthening its reach beyond U.S. borders with two international deals. The first is an acquisition of a reseller of industrial electrical equipment in Colombia, with sales of $8 million in 2010. The strategic objective is to establish strong relationships with electrical OEMs and distributors in Colombia. The second is an announcement of the acquisition of E. Begerow GmbH & Co. KG, a liquid filtration solutions target in Germany with sales of more than $84 million.
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 deals of the month belong to Blue Point Capital Partners for its sale of Packers Holdings LLC to Harvest Partners LLC, and second, for its recapitalization of Alco Manufacturing Corp. LLC. Blue Point’s success continues with the sale of Packers Holdings in which the firm received a return of six times invested capital and achieved a 250 percent increase in EBITDA during a four-year period. Packers Holdings, headquartered in Twinsburg, employs more than 9,000 people and is the largest nationwide provider of mission-critical outsourced cleaning and sanitation services to the food industry.
Blue Point’s second deal of the month will give the firm another platform company in the Cleveland area. Elyria-based Alco manufactures close-tolerance precision machined steel components for the North American hydraulic products market. Founded in 1971, Alco is looking to take advantage of serious untapped growth opportunities in addition to increasing its current annual production of 60 million components.