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  • Q3 & Q4 | 2017

    Industrials M&A Activity: Increasing Valuations Continue to Motivate Sellers

    Despite the overall number of transactions declining slightly in 2017, the M&A market for industrial manufacturing companies remains active. Buyers continue to purchase quality businesses at valuations attractive to sellers.

    Evolving technologies, such as electric vehicles, additive manu-facturing, robots, and the Internet of Things, are causing major disruption to industrial manufacturers. Acquisitions are an on-going source for manufacturers to onboard these critical tech-nologies and keep pace with market trends, and maintain their competitive positions. By turning to M&A, manufacturers are reducing dependence on products that are cyclical in nature as well, through acquisitions that bring diversification across their product portfolios and end markets.

    EdgePoint continues to track M&A activity across six industry subsectors: Engineered Products, Precision Manufacturing, In-dustrial Technology & Equipment, Polymers & Chemicals, Aero-space & Defense, and Automotive & Truck. The volume of deals was lower in the second half of 2017 at 300 transactions, com-pared to 360 transactions during the first half of the year. How-ever, the valuation sellers received increased for transactions in

    which reported financial metrics were available. The median Transaction Value / EBITDA multiple (a proxy for valuation) was 12.5x for transactions with a median value of $310 million. This multiple was three turns higher than 9.5x for transactions with a slightly smaller median value of $277 million that were reported during the first half of the year.

    The financial buyer community (including private equity firms and family offices) continues to deploy significant capital toward acquiring industrial manufacturing companies. There were 91 new platform investments made in 2017, compared to 86 in-vestments in 2016. Financial buyers are attracted to the long-term growth prospects and ability to finance companies in the sector, and continue to pursue strategic acquisitions as a major source of growth for their portfolio companies. In many cases, they are willing to pay prices similar to or higher than strategic buyers for attractive businesses. Whether a manufacturer pre-sents an add-on acquisition opportunity, or an attractive new platform investment, EdgePoint believes the financial buyer community, while representing only about 14% of tracked transactions, could be a viable exit option for business owners wishing to transition out of their company.

    Industrial Manufacturing M&A Transactions by Year

    Sources: CapIQ, News Releases.

    EdgePoint | 2000 Auburn Drive, Suite 330 | Beachwood, OH 44122 | (800) 217-7139 | www.edgepoint.com

    INDUSTRIAL MANUFACTURING

    741 673

    523 574

    641 654 567

    672 615 611

    569

    140

    104

    63

    69

    94 121

    97

    105

    115 86

    91

    200

    300

    400

    500

    600

    700

    800

    900

    2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

    # o

    f T

    ran

    sacti

    on

    s

    Strategic Buyer Financial/Private Equity Buyer

  • EdgePoint | 2000 Auburn Drive, Suite 330 | Beachwood, OH 44122 | (800) 217-7139 | www.edgepoint.com

    Noteworthy Home Health & Hospice Care Transactions | Q1 - Q2 2017 (continued) INDUSTRIAL MANUFACTURING Q3 & Q4 | 2017

    Notable Announced or Closed Transactions

    Announced: 9/4/2017

    The United Technologies acquisition of Rockwell Collins adds tremendous capabilities to its aerospace businesses. Rockwell Collins avionics and IT solutions for commercial and military customers strengthens United Technologies complementary offerings of tech-nically advanced aerospace systems.

    The addition of Rockwell Collins product offering will enhance United Technolo-gies customer value in a rapidly evolving aerospace industry by making aircraft more intelligent and connected.

    Its services are highly complementary to United Technologies existing capabili-ties, and the combination creates a premier aerospace systems supplier.

    Overview / Strategic Rationale: Aerospace & Defense

    Announced: 12/19/2017

    Signodes geographic and product mix provides a strong platform for value-creating growth, with operations in 40 countries across six continents and $2.3 billion in annual sales. This combination creates strategic enhancements to Crowns existing business along with adjacent products to complement its current protective packaging offerings.

    Signode offers a portfolio of premier transit and protective packaging production

    to extend Crowns existing metal packaging business.

    The acquisition broadens and diversifies Crowns customer base for critical in-transit protection to high-value, high-volume goods across a number of end mar-kets.

    Overview / Strategic Rationale:

    Closed: 9/27/2017

    The Wabash National acquisition of Supreme Industries, Inc., a leading manufacturer of truck bodies, leverages the urbanization and E-commerce trends that are fueling a con-sumer preference for home delivery vs. purchasing at brick and mortar stores. The ac-quisition also supports Wabash Nationals efforts to expand in the final mile space, and accelerates its objective of becoming a more diversified industrial manufacturer.

    The acquisition delivers on Wabash Nationals strategy of reducing dependence

    on the Class 8 dry van market by providing critical mass in the higher margin, less cyclical medium and light body truck body segment.

    Wabash National should benefit from synergies created by Supreme Industries product portfolio, manufacturing footprint, and enhanced economies of scale.

    Overview / Strategic Rationale: Automotive & Truck

    Announced: 12/14/2017

    The W.R. Grace and Co. acquisition of the Polyolefin Catalysts business of Albermarle Corporation expands its leadership position in the market. Polyolefin Catalyst is a global leader in proprietary and custom-manufactured single-site catalysts, as well as metallo-cenes and activators.

    The acquisition strengthens Graces catalysts technology portfolio, commercial relationships, and manufacturing network.

    The Polyolefin Catalysts business also enhances Graces overall manufacturing platform through additional acquired capabilities, along with a significant avoid-ance of future capital spending.

    Overview / Strategic Rationale: Polymers & Chemicals

    Acquirer:

    Key Metrics: Implied Enterprise Value (mm USD) EV/LTM EBITDA EV/LTM Revenue

    Target:

    $30,943 22.6x

    5.0x

    Acquirer:

    Key Metrics: Implied Enterprise Value (mm USD) EV/LTM EBITDA EV/LTM Revenue

    Target:

    $3,910 10.4x

    1.7x

    Acquirer:

    Key Metrics:

    Implied Enterprise Value (mm USD) EV/LTM EBITDA EV/LTM Revenue

    Target:

    $416 12.8x

    N/A

    Acquirer:

    Key Metrics: Implied Enterprise Value (mm USD) EV/LTM EBITDA EV/LTM Revenue

    Target:

    $367 15.4x

    1.1x

    (Albermarle CorporationPolyolefin Catalysts Business)

    Sources: Company Filings, CapIQ, News Releases

    Engineered Products

  • EdgePoint | 2000 Auburn Drive, Suite 330 | Beachwood, OH 44122 | (800) 217-7139 | www.edgepoint.com

    Select Announced Or Closed Transactions (Not intended to be all-inclusive)

    Noteworthy Home Health & Hospice Care Transactions | Q1 - Q2 2017 (continued) INDUSTRIAL MANUFACTURING

    Sources: EdgePoint Proprietary Database, Company Filings, CapIQ, News Releases

    Announced Sep 18 Orbital ATK, Inc. Northrop Grumman Corporation $9,429 15.4x - Aerospace & Defense

    Announced Sep 4 Rockwell Collins, Inc. United Technologies Corporation 30,943 22.6x - Aerospace & Defense

    Announced Dec 25 Small Industrial Business of General Electric Company Wolong Electric Group Co.,Ltd. 142 - Yes Automotive & Truck

    Closed Dec 1 ARBOC Specialty Vehicles, LLC Transit Holdings, Inc. 95 - - Automotive & Truck

    Announced Nov 23 Evatran, LLC Zhejiang VIE Science & Technology Co., Ltd. 11 - Yes Automotive & Truck

    Closed Nov 1 Warn Industries, Inc., Aftermarket Business Keystone Automotive Operations, Inc. 250 - - Automotive & Truck

    Closed Nov 1 Circle 5 Tool and Mold LP Mosaic Capital Corporation 27 - - Automotive & Truck

    Closed Oct 17 InEvit Inc. SF Motors Inc. 33 - - Automotive & Truck

    Closed Oct 1 Remaining 50% Stake in 3 Companies WABCO Automotive & Vehicle Control Systems, Inc 250 - Yes Automotive & Truck

    Closed Sep 27 Supreme Industries, Inc. Wabash National Corporation 367 13.2x - Automotive & Truck

    Closed Sep 19 R. H. Sheppard Co., Inc. WABCO Holdings Inc. 145 - Yes Automotive & Truck

    Announced Sep 6 Element Fleet Management Corp., Heavy-Duty U.S. Truck Portfolio Undisclosed Buyer 138 - Yes Automotive & Truck

    Closed Feb 1 Bimba Manufacturing Company, Inc. Norgren Inc 198 14.9x - Engineered Products

    Announced Dec 20 Metathesis Catalyst IP and Business portfolio of Materia, Inc. Umicore Precious Metals Chemistry USA, LLC 27 - - Engineered Products

    Announced Dec 19 Signode Industrial Group LLC Crown Holdings, Inc.