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 apetryk@bglco.com

Published in Cleveland

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 apetryk@bglco.com

Published in Cleveland

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 apetryk@bglco.com.

Published in Cleveland

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 apetryk@bglco.com

Published in Cleveland

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 GiveAnything.com 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 apetryk@bglco.com

Published in Cleveland

The last month of the year has historically been a prolific month for mergers and acquisitions, and December 2012 did not disappoint.

In the U.S. market, according to S&P CapitalIQ, the dollar value of closed transactions with disclosed values for December 2012, compared to December 2011, was up 4.4 percent, while the number of transactions was down 6.5 percent.

Likewise, for all of 2012, the number of transactions decreased 4.4 percent compared to 2011.  The transaction dollar values made up for the lack of volume with an increase of 7.8 percent across the same period.

Regarding the M&A industry, the purchasing power of private equity groups has been on a steady decline since 2007 as they seek to put money to work, while strategic purchasing power continues to climb. Conversely, private equity partnership commitments to all types of funds, according to Dow Jones, are up 30 percent from last year.

With respect to corporate buyers, Applied Industrial Technologies acquired Parts Associates Inc. of Cleveland. The distributor of maintenance supplies and solutions, including fasteners, fluid flow, chemicals and shop supplies has two locations, Cleveland and Atlanta, staffing an estimated 200 employees.

Gulfport Energy Corp. dug up $372 million to purchase 37,000 acres from Windsor, Ohio, in the Utica Shale region. This purchase increases Gulfport’s interests in the Utica Shale region to 137,000 acres.

DDR Corp. acquired two shopping centers for $151 million in December. This brings DDR’s total acquisitions in 2012 to $2.1 billion. First Communications Inc. in Akron sold subsidiary First Telecom Services for an electrifying $110 million to the Zayo Group. First Telecom Services is a provider of bandwidth infrastructure services.

With respect to private-equity-related transactions, Linsalata Capital Partners Inc. acquired Stag-Parkway Inc. from Ares Capital Corp. Stag is the largest aftermarket distributor of recreational vehicle parts and accessories in North America and is based in Atlanta. The Weinberg Capital Group, in conjunction with the The Riverside Co. and Hicks Equity Partners, acquired Overton Chicago Gear Corp., a manufacturer and distributor of large-diameter precision gears.

 

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

This month, the honor goes to the Cleveland Indians for the sale of SportsTime Ohio to News Corp.’s Fox Sports Media Group for $230 million. This acquisition is part of a push by media and entertainment companies that target regional sports channels, since broadcast rights for professional sports events are locked in for years. Fox Sports Ohio serves more than 5 million homes throughout the Midwest and is the exclusive regional TV home of the Cincinnati Reds, Cleveland Cavaliers, Columbus Blue Jackets, Columbus Crew, Xavier Musketeers and Cincinnati Bearcats.

“The acquisition of Sports Time Ohio solidifies our business in Ohio, and Fox Sports Media Group’s new long-term agreement with the Indians reunites the team with the Fox Sports family,” said Jeff Krolik, executive vice president of Fox Sports Networks. “We look forward to once again showcasing the Indians to their fans, as well as working with the Indians ownership to continue to enhance the value of this iconic franchise.”

Published in Cleveland

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.

Published in Cleveland

Domestic transactions in October increased 9 percent when compared to the previous month and the value of those deals increased 93 percent when compared to September, according to S&P CapitalIQ. This is a positive sign for the market, but it may not continue.

With the current tax hikes effective in 2013, the upcoming year could be a rocky road.  Of course, with trillions in cash and purchasing power available to both strategic corporate buyers and private equity groups, the unhealthy tax hikes may be counterbalanced with a need for higher yields, distribution of funds and accretive earnings.

On the private equity side, The Riverside Co. completed both an acquisition and an exit. Riverside’s portfolio company, SMS, completed the acquisition of a west coast respiratory equipment company in Premier Medical Corp. Riverside also sold Coeur Holding Co. to Illinois Tool Works.

Resilience Capital Partners completed two acquisitions, the first being the acquisition of CR Brands, a manufacturer of household cleaning and laundry products. Later in the month, Resilience acquired Advanced Communications Inc. through Aero Communications. Advanced Communications is a provider of telecom infrastructure services. Other notable private equity transactions for the month include Blue Point Capital Partners’ acquisition of California-based Smith-Cooper International, a producer and distributor of pipe, valves and fittings, and Morgenthaler’s sale of Avtron Industrial Automation Inc. to Japan’s Nidec Corp.

With respect to corporate buyers, both Steris Corp. and Parker Hannifin Corp. were very acquisitive in October. Steris closed two deals on Oct. 16 totaling $110 million. The businesses, Spectrum Surgical Instruments and Total Repair Express, are leading providers of surgical instrument repair services with combined revenues of approximately $72 million. Parker Hannifin also announced it would acquire two companies during the month and divest the automotive air conditioning portion of its Mobile Climate Systems Division to Germany’s ContiTech.

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 our beloved Cleveland Browns and new team owner Jimmy Haslam III. Randy Lerner, the previous controlling owner of the Browns, agreed to sell the team to Haslam at the beginning of training camp in August. The deal closed on Oct. 25 for $1.05 billion after the NFL owners voted in favor of the transaction 32-0. Approximately $700 million for the team was paid current, giving Haslam 70 percent ownership of the team. The other 30 percent will be purchased in four years by Pilot Flying J for more than $300 million. After the return of the Browns to Cleveland in 1999, the team has only made the playoffs once, a trend that will continue this season. Hopefully, Haslam can add value to his $1 billion investment and bring a Super Bowl to the city of Cleveland — or at least wins against the Ravens and the team Haslam was previously involved with, the Steelers.

 

Published in Cleveland
Wednesday, 31 October 2012 20:00

Deals continue to happen as autumn takes hold

The conditions seem ripe for business activity as fundraising remains strong and recent sales of portfolio companies have bolstered buying power. Buyers, however, are still cautious of putting too much capital to work in any one deal since deals under $50 million now represent over half of all deal flow, according to Pitchbook

Despite the restraint nationwide, local M&A deals continue to get done.

Eaton Corp. completed the acquisition of Rolec Comercial e Industrial S.A. in Santiago, Chile, and RPM International Inc. acquired Kirker Enterprises Inc.

The Riverside Co. remained active in its technology and health care platforms in September by selling HEALTHCAREfirst in Ozark, Mo., to Pamlico Capital after quadrupling its revenue in four years with the help of two add-on acquisitions. Riverside’s portfolio company, OnCourse Learning Co., acquired CompuTaught, a provider of online training courses and print resources for real estate professionals. Riverside also purchased Future Medical Inc., a provider of rental respiratory equipment.

Cyprium Investment Partners LLC exited Convergint Technologies LLC based in Schaumburg, Ill. KRG Capital Partners helped in a recapitalization with Convergint’s senior management team. Morgenthaler unloaded Avtron Industrial Automation to Nidec Corp., a Japanese strategic buyer. Independence-based Avtron has 154 employees and generated sales of $33 million last year.

American Greetings Corp. is being taken private through the efforts and money of the CEO Zev Weiss and President and COO Jeffrey Weiss, respectively, on behalf of the Weiss family and related parties. The offer is 20 percent greater than the current Class A common shares as of Sept. 25. American Greetings has been a publicly traded company since 1958.

Finally, Akron-based FirstMerit Bank announced its agreement to purchase Citizens Republic Bancorp in a stock deal valued at approximately $952 million. This will expand FirstMerit’s presence in Michigan and Wisconsin. <<

Albert D. Melchiorreis 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

This month’s award goes to TransDigm Group Inc., which continued its M&A aerial attack by acquiring Aero-Instruments Co. LLC from the locally owned private equity company The Mifsud Group. Aero-instruments has been a supplier of proprietary and highly engineered components to the aerospace industry since 1925. It has components on tens of thousands of aircraft globally. More than 60 percent of Aero’s revenue comes from the aftermarket, whereas military revenues make up about 20 percent of the total revenue. Aero was purchased by The Mifsud Group in August 2001. It was bought for about $35 million in cash and employs about 60 people. This is Transdigm’s fourth acquisition in the last 13 months. Transdigm currently operates out of 23 business groups, with 3,800 employees. More than 90 percent of Transdigm’s sales are derived from proprietary products to which it owns the design.

Published in Cleveland
Sunday, 30 September 2012 20:00

October Cleveland Deals Page

There are no statistical indications that private equity groups are making a concerted effort to buy companies as the number of deals closed by PEGs in the first half of 2012 was approximately 650. This is considerably lower than last year’s total closings of 1,893, according to Pitchbook. Furthermore, the dollar value of invested capital by PEGs in the first two quarters of 2012 was the worst since the fourth quarter of 2009. Yet despite all of that, fundraising is showing better results in the first half of 2012 than it has over the same time period in the last three years.

Regarding the domestic M&A market, the number of closed transactions through July and August is on pace to be down 9 percent from the second quarter of the year and down 13 percent from the first quarter. Domestic M&A transaction dollar values are also on pace to be down 9 percent from this year’s second quarter and slightly down from the quarterly average since the beginning of 2010.

Despite the reduced investment activity of private equity groups, local strategic buyers put cash to use this month with the following acquisitions: Nordson Corp. acquired Sealant Equipment & Engineering Inc.; Parker Hannifin Corp. purchased SciLog Inc.; Applied Industrial Technologies Inc. acquired SKF Bearing Supplies and SKF New Zealand; and Aleris Corp. purchased a German company. 

As for local private equity groups, Linsalata Capital Partners completed the sale of Stanton Carpet Corp. The Riverside Co. exited its eighth company this year by selling Health & Safety Institute. Riverside also purchased the U.S. food ingredients distribution business of Centerchem and bought Orthodontic Design and Production in Vista, Calif. 

Supply Chain Equity Partners acquired a majority stake in Storage Battery Systems Inc., a specialty distributor of battery-backed critical power products based in Milwaukee. Evolution Capital Partners purchased Lewellyn Technology in Linton, Ind.

With respect to Northeast Ohio deal announcements, Eaton Corp. and A. Schulman Inc. announced acquisitions. Shearer’s Foods Inc. announced a sale to two private equity groups. TMW Systems Inc. announced its sale to Trimble Navigation Ltd. for $340 million. And finally, OrthoHelix Surgical Designs of Medina announced that it will be acquired by global medical device company Tornier N.V. for $135 million in cash and Tornier stock. <<

ALBERT D. MELCHIORRE is 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

Goldsmith & Eggleston Inc. of Wadsworth was sold to international company The Ravago Group through Ravago Holdings America. G&E was established in 1968 and operated as an employee-owned company. It manufactures and distributes reprocessed rubber raw materials and black masterbatch for a variety of diverse industries, mainly the global rubber industry. Included in the sale was Reliable Polymer Services, a reprocessing rubber facility in Port Arthur, Texas.

The combined revenue of G&E and Reliable Polymer Services is estimated to be under $90 million with an estimated 140 employees, according to Dun & Bradstreet. Ravago is a global leader in the distribution, resale and compounding of commodity, engineering and specialty plastic and rubber polymers. Ravago employs more than 4,500 people, controls more than 200 subsidiaries in 50 different countries and serves more than 40,000 customers. The Ravago Group is based in Brussels, Belgium.  <<

Published in Cleveland
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