Andrew Petryk

Friday, 22 November 2013 05:54

Market conditions are prime for sellers

Competitive dynamics in the current environment suggest it is a seller’s market for high-quality businesses. Buyers are flush with cash, credit markets are wide open for business and valuations are rising.

The capital markets are white hot, lifting valuations of publicly traded companies. Broad market indices are at record highs, with the Standard & Poor’s 500 index and Dow Jones Industrial Average up 21 percent and 18 percent, respectively, through the year-to-date period.

In the low interest rate environment, buyers can afford to pay more, and are, as lenders accommodate higher leverage and borrower-friendly terms.

Private equity database PitchBook reported in its 2H 2013 Middle Market Report that the middle market median enterprise value to EBITDA multiple reached 10.5x in June 2013, supported by a median debt multiple of 6.1x — both decade highs. Purchase price multiples for strategic and financial buyers reached their highest level since the market peak in 2007, according to October data reported by S&P Leveraged Commentary & Data.

Companies that weren’t ready to go to market in 2012 because they needed another year of seasoning may now be primed to take advantage of favorable conditions. Valuations continue to be very competitive, so it is a good time to be a seller. ●


Andrew K. 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



Nanofilm Ltd. of Valley View announced it was merging with Applied Nanotech Holdings Inc. in a stock swap transaction. Nanofilm is a leading developer in nanotechnology with a leading market position for specialty optical coatings, cleaners and nano-composite products.        

Empire Die Casting Co. Inc. of Macedonia received a letter of intent to be acquired by New Growth Capital Group. Empire Die Casting manufactures aluminum and zinc die cast parts for diverse applications including automotive, aerospace, medical equipment, home appliance and electronics. The company filed for Chapter 11 bankruptcy protection in October 2013.

The Riverside Co. acquired NJoy Baby S.L., expanding Riverside’s existing Baby Jogger platform. Based in Barcelona, Spain, NJoy is a designer and developer of strollers and related accessories that is best known for its innovative reversible umbrella stroller. Riverside also acquired employee-training company Catalyst Awareness, an add-on to Alchemy Systems platform. Riverside tallied 4 acquisitions in the month and 15year-to-date.

Linsalata Capital Partners and PNC Erieview Capital exited Royal Baths Manufacturing Co. Ltd. in a sale to Cotton Creek Capital Management LLC. Houston-based Royal makes acrylic and cultured marble bathroom products, including soaker and whirlpool bathtubs, vanity tops, sinks, shower walls and bases. Linsalata acquired the company in 2003.

Corporate acquisition activity is seeing a resurgence, signaling optimism for an uptick in the M&A market. Year-to-date, aggregate deal value exceeded the comparable period last year by more than 40 percent, supported by a solid flow of large cap deals, with September reining in Verizon-Vodafone and marking the second largest M&A deal on record.

The month saw several billion-dollar-plus transactions across diverse sectors, most notably Koch Industries-Molex in electronics; Jarden-Yankee Candle in consumer products; Packaging Corp. of America-Boise in paper and packaging; Stryker-MAKO Surgical in health care; and SKF-Kaydon in industrials. With acquisitions a primary means to return growth to shareholders, we can expect large corporates to continue to chip away at the cash stockpile on balance sheets.

The middle market is seeing steady deal flow where strong niche players continue to be attractive targets. Ohio corporates also are flexing their muscle with deal announcements in September:

RPM International Inc. of Medina acquired Exton, Pa.-based Expanko Inc. for its Performance Coatings Group. Expanko is a producer of terrazzo tile under the FritzTile brand, as well as cork, rubber and rubber/cork floor tiles serving the education, health care, hospitality and sports/entertainment markets. The company has annual sales of more than $12 million. Expanko will benefit from RPM’s marketing and distribution strength to expand beyond its strong east coast presence. 

Nordson Corp. completed the acquisition of the Kreyenborg GmbH and BKG Bruckmann & Kreyenborg Granuliertechnik GmbH companies from Kreyenborg Group. The Münster, Germany-based businesses will add to Nordson’s portfolio of engineered melt stream components and enhance its ability to serve OEM machine builder customers in plastic extrusion markets, as well as bring product solutions in plastic compounding, recycling and related applications.

Akron-based A. Schulman Inc. acquired Perrite Group, a thermoplastics manufacturing business serving the electronics, appliance and niche automotive markets. With operations in Malaysia, the U.K. and France, the acquisition is expected to increase Schulman’s Asia Pacific revenues by 35 percent, and will double the size of the company's existing Engineered Plastics business in the region.

Akron Brass Co. acquired Reach Engineering LLC, a provider of specialized electronics to the emergency and industrial vehicle markets. The Wooster-based fire industry manufacturer expands its product offering with Reach, which has expertise in emergency vehicle products and services, and is recognized as an innovator of solutions specifically addressing the needs of the fire service.

Monday, 30 September 2013 20:00

Less than robust M&A activity

The market is waiting on deal flow, which is the prevailing theme from seven months of less than robust M&A activity in 2013. Fundamentals are supporting a favorable exit window for sellers. Increased deal activity has not yet shown up in the data, but there is pent up demand in the market from buyers and capital providers. Debt financing appetite continues to remain robust with borrowers able to secure favorable terms as lenders compete aggressively for quality deals. All of these factors are pushing up valuations.


August Deal Highlights

Cleveland-based private equity firm Resilience Capital Partners and co-investor Littlejohn & Co. completed the acquisition of The Fabri-Form Co. of New Concord, Ohio. Fabri-Form is a plastic thermoformer serving the automotive, grocery and heavy-duty trucking industry.

Akron-based electrical contractor J.W. Didado Electric Inc. was acquired by Quanta Services Inc. becoming part of Quanta subsidiary PAR Electrical Contractors. J.W. Didado provides commercial, residential, industrial and high voltage electrical services. Houston-based Quanta specializes in electric, natural gas and pipeline contracting, and reported revenue of $5.9 billion in 2012.

For-profit Community Health Systems Inc. of Nashville, Tenn., acquired Akron General Health System. With the addition of the 532-bed hospital, CHS will add to its growing network of hospitals in Ohio, which also includes a total of four hospitals in Youngstown, Warren and Massillon.


Deal of the month

The take-private of American Greetings Corp. was completed by majority shareholders the Weiss family, led by Chairman Morry Weiss, CEO Zev Weiss, and President and COO Jeffrey Weiss, with a subsidiary of Koch Industries Inc. also making an investment. The $19.00 per share cash offer valued the company at $851 million.

Headquartered in Brooklyn, Ohio, the 107-year-old company is the nation’s second largest manufacturer of greeting cards after privately held Hallmark Cards Inc. The digital age has impacted American Greetings’ primary market of print greeting cards, which is seeing electronic greetings gain favor.

The Weiss family estimates that the company needs to spend as much as $446 million during the next five years with some of the funds earmarked to upgrade technology, according to a press release. American Greetings reported revenues of $1.87 billion in fiscal 2013.


Andrew K. 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

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 Highlights:

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.

Aggregate value of domestic M&A transactions continues to swell despite a reduced number of announced deals, with dollars committed in May surpassing last year’s pace, supported by several billion-dollar-plus strategic buys.

Strategic buyers are actively pursuing acquisitions, incentivized by a slow organic growth environment and abundant cash reserves. S&P 500 companies are sitting on $1.7 trillion in cash and need to put money to work in higher earning assets. Competition for quality acquisition opportunities remains fierce, with industry buyers showing an increased willingness to pay premium valuations for growth and quantifiable synergies.

May highlights support a healthy strategic buyer appetite:

A. Schulman Inc. announced it was acquiring Akron-based Network Polymers Inc., a niche compounder of thermoplastic resins and alloys, bringing complementary business in specialty engineered plastics ABS and ASA. The deal is expected to strengthen its U.S. market presence by increasing penetration in key end markets such as building and construction, agricultural products and lawn and garden, as well as expand its distribution business. Schulman intends to continue an aggressive bolt-on acquisition strategy in its specialty plastics business, as well as other opportunities for transformational acquisitions.

The Timken Co. acquired Standard Machine Ltd., its fifth acquisition in 2013. The Saskatoon, Saskatchewan, Canada-based company provides new gearboxes, gearbox service and repair, open gearing, large fabrication, machining, and field technical services to the mining, oil and gas, and pulp and paper markets. The acquisition will expand Timken’s industrial services capabilities.

TransDigm Group Inc. announced it was acquiring Arkwin Industries Inc., a Westbury, New York-based manufacturer of hydraulic and fuel system components for commercial and military aircraft, helicopters and other specialty applications. Arkwin is TransDigm’s second acquisition this year, following Aerosonic Corp. in April, a Clearwater, Florida-based manufacturer of proprietary air data sensing, test and display components for use primarily in the business jet, helicopter and military markets. Both transactions were completed in June.

PolyOne Corp. completed the sale of its vinyl dispersion, blending and suspension resin assets to Mexichem SAB de CV. Assets acquired include manufacturing plants in Pedricktown, New Jersey; Henry, Illinois; and a resin research facility in Avon Lake, Ohio.


Deal of the Month

Its second major strategic partnership in the last four months, Cincinnati’s Catholic Health Partners announced an agreement with Kaiser Permanente of Ohio to acquire its existing health plan, medical group practice and care delivery operations in Northeast Ohio, which services more than 80,000 members. The transaction follows CHP’s February purchase of a minority ownership stake in Akron’s Summa Health System Inc., one of the largest integrated health care delivery systems in Ohio.

CHP is the largest health system in Ohio, serving the metropolitan markets of Cincinnati, Toledo, Youngstown, Lima, Lorain, Springfield, and Tiffin. Through its integrated health care delivery network, comprised of hospitals, long-term care facilities, home health agencies, wellness centers, and hospice programs, the company is estimated to service 38 percent of Ohio’s residents throughout 28 counties.


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

With demand robust and capital chasing deals, the market is primed for increased M&A activity. Through the April year-to-date period, deal value is ahead of last year’s pace by more than 20 percent, despite a seasonal lull in deal flow. While pending tax changes had the effect to pull more sellers into 2012, contributing to a softer first quarter, the drivers are present to support a healthy transaction environment.

For sellers, it’s a better sales environment today than all of last year. Quality companies are commanding the time and attention of buyers. With fewer differentiated businesses in a less than robust M&A market, valuations for those assets are high. Competition is pushing up purchase multiples, driving a seller’s market for the best companies.

It is a borrower’s market for companies on the hunt for acquisitions. Interest rates are at record lows, and lenders are aggressively supporting acquisition financing. Buyers are able to secure more favorable pricing and flexible terms as lenders compete for new M&A opportunities.

To create value and boost the topline in the slow growth environment, companies will need to make acquisitions. Company financial performance has improved and rising purchase multiples should propel more exit activity.

April Highlights:

International Business Machines Corp. acquired Cleveland-based Starbelly Productions Inc. (dba UrbanCode). UrbanCode automates the delivery of software, helping businesses quickly release and update mobile, social, big data, and cloud applications.

Timken Co. completed its fourth acquisition this year with the purchase of Smith Services Inc. Based in Princeton, W. Va., Smith provides electric motor repair and field technical services in a wide variety of markets including power generation, petrochemical, paper, steel, nuclear, and mining. The acquisition will expand Timken’s industrial services capabilities.

TransDigm Group Inc. acquired Aerosonic Corp. (AIM). The Clearwater, Fla.-based company is a manufacturer and marketer of aircraft instrumentation and sensor systems worldwide.

Cleveland- based Evolution Capital acquired new platform AXIOM Sales Force Development. The Richardson, Texas-based company provides sales coaching and integrated software solutions and implementation services. The Riverside Co. added on with the purchase of TerraSim of Pittsburgh, a terrain-generation software provider. The transaction represents the first tuck-in acquisition for Bohemia Interactive Simulations, which received development capital from the Cleveland-based sponsor in January 2013. Bohemia is based in Australia and provides simulation technologies for military and civilian organizations.


Deal of the Month

Measurement Specialties Inc. (MEAS) acquired Akron-based Spectrum Sensors and Controls from API Technologies Corp. (ATNY) in a $51.4 million transaction. Spectrum manufactures custom temperature probes, high reliability encoders and inertial sensors. The company was formed through the acquisitions of Advanced Thermal Products, a producer of HVAC and refrigeration temperature probes and assemblies, JDK Controls, a manufacturer of high-reliability encoders for aerospace and military applications, and Summit Instruments, a supplier of inertial test systems for aerospace and military markets. Spectrum is the third acquisition for MEAS in the last 12 months.

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

In a market hungry for deal flow, high-quality companies are in demand and valuation multiples are rising. Private equity firms continue to be active bidders at the table with the middle market being fertile ground for buying activity.

GF Data, which reports on private equity transaction activity in the lower middle market (deal values between $10 and $250 million), recently cited valuation statistics from 2012 that point to a market premium paid for quality, size and desirable industry, which, when combined, the sum of the parts can achieve a multiple of EBITDA in excess of eight times for a well-performing business, according to Private Equity Professional Digest.

PitchBook, another reporting firm focused exclusively on the private equity market, cited that more than a third of deals in 2012 had an EBITDA multiple of seven and a half times or greater, lending further support to healthy valuations in the marketplace.

With nearly $100 billion (private equity funds of $100 to $1 billion according to PitchBook) in uninvested equity capital, motivated sellers with companies that possess strong management, have shown solid performance and are in attractive industries can feel confident that the private equity radar is up for those businesses. With ample debt financing today, sponsors are open to a myriad of strategic options — from a dividend recapitalization to a partial or outright sale — for quality companies.

Local private equity firms were active in March. Linsalata Capital Partners completed its first acquisition of 2013 with Signature Systems Group, a New York-based manufacturer of specialty ground surfaces and coverings selling to more than 3,000 domestic and international customers. Signature’s founder and CEO reinvested alongside LinCap in the transaction. Financial sponsor Dubin Clark & Co. exited its investment in the sale. The sponsor completed two add-on acquisitions after purchasing the company in 2007.

Resilience Capital Partners acquired a majority interest in Memphis-based Aerospace Products International, a global aviation parts and equipment distribution and supply chain management firm. Its parent company, First Aviation Services, retained a minority equity interest in the company. The Cleveland sponsor completed five deals in 2012, including CR Brands, a manufacturer of branded and private label laundry and household cleaning products based in West Chester, Ohio, acquired from Juggernaut Capital Partners. ?

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

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

Early signs, notably positive economic indicators and rising corporate earnings, point to an M&A market poised for strong deal flow in 2013. Sustained improvement in these trends will bolster confidence and bring more buyers and sellers to market. Buyer cash reserves and an accommodative credit market should lend further support.

January deal volume was light, down nearly 20 percent from a year ago, but not atypical of a seasonally slow month for M&A. Behind the numbers are several billion-dollar-plus deals, including ConAgra’s $6.7 billion acquisition of RalCorp Holdings. Other mega deals announced in recent weeks were Liberty Global’s pending $24 billion acquisition of Virgin Media, Reliance Steel’s $1.2 billion acquisition of Metals USA, and Dell’s $22 billion take-private by Silver Lake Partners, marking the largest LBO since 2007. These are strong signals that buyer confidence is returning and likely harbingers of more M&A activity on the horizon.

Local corporate buyers are on the hunt for deals. Timken Co. acquired Denver-based Wazee Companies LLC, a $30 million provider of motor, generator, wind and industrial crane services to the aerospace, mining, power generation, and oil and gas markets. Lincoln Electric Holdings Inc. acquired Tennessee Rand Inc., a $35 million manufacturer of tooling and robotic systems for welding applications in Tennessee, complementing its purchase of Wayne Trail Technologies last May. CBIZ Inc. purchased Diversified Industries Inc., a Minnesota company that provides payroll and human resource solutions to small and midsized businesses nationwide, making it its ninth acquisition in the last 12 months.

Notable private equity activity includes five deals from The Riverside Co., including Operating Tax Systems, which provides driver and vehicle compliance services primarily for the commercial motor vehicle industry. Other buys include Austin, Texas-based Alchemy Systems LP; Houston-based Jacosoft LLC; Bohemia Interactive Simulations s.r.o. of Australia, and Inc., a N.Y.-based company.


Deal of the Month


Global environmental consulting, engineering and technical services company Tetra Tech Inc. acquired American Environmental Group Ltd. of Richfield, a provider of specialty environmental, design, construction and maintenance services to solid and hazardous waste, environmental, energy and industrial clients. Founded in 2002, AEG employs 500 with annual revenue of approximately $95 million. Tetra Tech adds an East Coast presence with AEG, complementing its comparable legacy operations in Southern California, enhancing its ability to assist landfill operators, mining and power clients with disposal challenges.

AEG is Tetra Tech’s fifth acquisition announced in the last 12 months. Including AEG, the company completed two acquisitions in the U.S., two in Brazil and one in Canada. Tetra Tech employs 13,000 people worldwide and reported sales of $2.0 billion in fiscal year 2012.

Andrew K. 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