Air Filtration HVAC Industry Report - INSIGHTS AND HAPPENINGS - Capstone Headwaters
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
INSIGHTS AND HAPPENINGS
Air Filtration HVAC Industry Report
Highlights
• Consistent Market Growth Expected
The global HVAC filter market is estimated to grow at a 7.3% CAGR between 2016 and 2021.
Air Filtration Overview and Macroeconomic drivers of the estimated $3.23 billion expansion include worldwide concern
about indoor air quality (IAQ) and hospital acquired illnesses (HAI), coupled with demands
Trends for HVAC energy efficiency and increasingly stringent air quality regulations across a variety
of end markets.
• Consolidation across Fragmented Landscape
Air Filtration M&A Trends Production of filtration media solutions remains highly fragmented. As global demand for
and Insight air filtration demand accelerates, smaller filtration media players will likely look to acquire
peers across filter media categories that have exposure to healthcare and general industrial
end markets.
Air Filters within the • Indoor Air Quality: Growth Opportunities within the Healthcare Setting
Combating the prevalence of hospital-acquired infections will require scrutiny of air
Hospital Setting filtration systems. The appropriate air filters extend the life of HVAC equipment and
improve hospitals’ ability to protect against airborne contaminants.
Australia Denmark Japan Russia Switzerland
Brazil France Mexico Slovenia Thailand
Caribbean Germany The Netherlands South Africa Turkey
Chile India Peru Spain UK
China Italy Poland Sweden USA
WWW.HEADWATERSMB.COM
Headwaters MB is an independent, middle market investment banking firm providing strategic merger and acquisition advice, capital raising and special situations
advisory. Named “Investment Bank of the Year” by major industry organizations for its third year in a row, Headwaters MB is headquartered in Denver, CO, with
seven regional offices across the United States and partnerships with 18 firms covering 30 countries.
• Established in 2001 • International reach 30 countries, 50
• Award-winning service offices, 250 professionals
• 90+ experienced professionals in 7 offices • Independent and highly experienced
across North America owner-managed advisory
• 200+ deals in the last 5 years, with a focus
on the mid-market
Air Filtration in Numbers
Estimated global market for HVAC air Estimated revenue growth for Air
filters by 2021 Filtration publicly traded index
$10.9 bn >10%
Forecasted CAGR for global HVAC air Average gross margin for Air Filtration
filter market between 2016 and 2022 publicly traded index
7.3% 32.8%
LTM EV/EBITDA valuation for Average EBITDA margin for Air
transactions since the beginning of Filtration publicly traded index
10.7X 2013 12.6%
Source: CapIQ and Technavio
Page | 3
HVAC Air Filter Market Overview
• The demand for HVAC filters is expected to reach $10.9 billion
Global HVAC Filter Market, 2016-2021E by 2022, up from $7.7 billion in 2016, according to research from
Technavio. The growth during the period represents an
estimated 7.3% CAGR.
7.3% CAGR • Main growth drivers for industrial filtration solutions include the
Revenue (USD Billions)
following:
• Widespread demand for HEPA filters that reduce over
99.99% of airborne contaminants
• Adoption of HEPA filters in high precision, critical
environments, including hospitals and clean rooms
• Innovations in filter media driven by advancements in
nanotechnology
• Non-residential demand is expected to power the market
expansion. Between 2016 and 2021, the non-residential segment
of the market is expected to register a 6.9% CAGR. Growth is
Source: Technavio expected to come from the expanding filter replacement
channel, which has received significant acquisitive interest from
Parker Hannifin and Flanders Corp.
Industrial Filters and Filter Media
Dust Spunbond
Collectors
Industrial Filter
Baghouse Mist Others Meltblown
Filters Collectors
Air Nonwoven Air Filtration
Filters Media HVAC Solution
Cartridge
HEPA
Collectors Needlepunch Wetlaid
Filters
and Filters
4
Page | 4
End Markets’ Growth Characteristics
Across filter media applications for transportation, Global Shares of Nonwoven Filter Media
water filtration, HVAC, healthcare and food processing,
healthcare filter media recorded a $508 million in 2015 25 Estimated HVAC Estimated
and is forecasted to grow at a 8.9% CAGR between Filter Media 2016 HVAC Filter
TAM: $644M Media 2021
2016 and 2021, according to BCC Research. 20 TAM: $813M
Millions of patients across the globe acquire and tens
15
of thousands die from hospital acquired infections
(HAI) because of inadequate protections against both
poor IAQ and surgical site infections (SSI), according 10
to the INDA.
5
Air filtration solutions within HVAC units are
increasingly utilized to thwart the worldwide HAI
0
epidemic. With an air replacement strategy, HVAC 2016 2021
systems typically replace the entire volume of air within
a hospital with fresh outdoor air twice per hour. While Transportation Water Filtration HVAC Healthcare Food Processing
deemed viable, air replacement is not cost-effective,
Source: BCC Research: Nonwoven Filter Media: Technologies and Global Markets – Nov. 2016
since the large volume of replacement outdoor air Note: 2016 HVAC TAM based on estimated 14% market share during 2016 and estimated 12.5% share during 2021
must be dehumidified, heated or cooled.
Although start-up costs are steep, the Dedicated During 2015, ASHRAE Standard 170 increased the ACH (air changes per hour) requirement to 20
Outside Air System (DOAS) provides energy savings for operating rooms. State regulations often differ from ASHRAE. For example, NYC Department
and the capacity to handle large air volumes of outdoor of Buildings requires 25 ACH for operating rooms that don’t utilize 100% outdoor air unit,
air. In essence, the DOAS functions as a dedicated according to 2015 guidance.
ventilation system separate from the other
components of an HVAC unit. Beyond applications in hospital HVAC units, nonwoven filter media solutions are represented in
bandages, surgical drapes, gowns and masks, as well as underpads, and swabs, and play a critical
Healthcare facility operators face a balancing act of role in reducing the transmission of bacteria and microbes that spawn SSI.
managing their HVAC energy consumption and
ensuring compliance with ASHRAE Standard 170, Separate from the healthcare end market, transportation’s share of nonwoven filter media
which spells out ventilation requirements for reached $922 million in 2015 and is forecasted to grow at a 7.2% CAGR between 2016 and 2021.
healthcare facilities. The growth of the automotive aftermarket, plus tighter automotive and commercial vehicle
emissions standards, will likely drive demand for replacement industrial filtration solutions during
the forecast period.
5
Page | 5
Air Filtration Market: Fragmented Production and Consumption
Demand for HEPA filters and increased levels of technological innovation to meet rigorous regulatory demands will likely pressure nonwoven filter
media producers to gain economies of scale across what is currently a highly fragmented competitive landscape.
• Top 10 global producers represent 31% of global production
• Approximately 50% of production facilities reside in the U.S., Western Europe and Japan
• Considerable pressure for smaller providers of nonwoven filter media solutions to consolidate in order to counteract growing influence of mega-
players that have ability to bundle air filters and nonwoven filter media.
Differentiation across fragmented landscape will remain key to long-term viability:
• Filter media solutions that demonstrate ability to provide energy efficiency that meets both consumer preferences and government regulations
• Exposure to aftermarket, service and repair that’s reflected in acquisitions completed by Parker-Hannifin, Hengst Group and Lydall
• Spunbond filter media and its applications in automotive and healthcare remain king in the U.S., with 40% of the market
Fragmented Global Production Historical Nonwovens Consumption, by Region
Freudenberg
5.0%
5.0% DuPont
5.0% 9,000
Kimberly-Clark
4.0%
8,000
Ahlstrom 436 RoW
4.0%
7,000 395
2.0% PGI 366
(000) tonnes
2.0% 346
Fiberweb 6,000 330 3,241 Asia
2.0% 320 2,947
1.0% 5,000 2,641
Johns Manville 2,316
1.0% 1,951 2,059
Fitesa 4,000 Europe
69.0%
Glatfelter 1,913 2,000
3,000 1,834
1,722 1,739 1,776
South America
Avgol 2,000 347
293 307 325
270 291
Producers outside of Top 10
1,000 1,705 1,795 1,912
1,556 1,592 1,640 North America
0
2008 2009 2010 2011 2012 2013
Sources: Future of Global Nonwoven Market, Smithers Apex 2014
Page | 6
Air Cleaning Tech. and Filters - Primer
Major Air Cleaning
Air Cleaning Pollutants Technical Solutions
Limitations
Technologies Addressed
Mechanical air filters, which include HEPA filters, remove particles
Ineffective in removing larger particles because
by trapping them on filter materials. The majority of mechanical Air filters Particles
most settle from the air quickly and never reach filters
filters effectively trap dust, pollen, dust mite, some molds and
Filtration
animal dander. Gas-phase
Gases
Used much less frequently in homes than particle air
filters filters. The
lifetime for removing pollutants may be short.
Electronic air cleaners rely on electrostatic attraction to capture
charged particles that accumulate on collector plates.
UVGI Biologicals Bacterial and mold spores tend to be resistant to UV
radiation
For gaseous pollutant removal, gas-phase filters utilize a sorbent, and require more light or longer time of exposure, or
such as activated carbon, adsorbs the gaseous pollutants. Other Air
both, to be killed
Cleaners Application for homes is limited because currently available
catalysts are ineffective in destroying gaseous pollutants
Some air cleaners are made to destroy pollutants. UVGI and PCO PCO Gases
from
cleaners filters use UV light to destroy air contaminants. indoor air
Ozone Particles, gases, Sold as air cleaners, they are not always safe and effective in
generators biologicals removing pollutants. By design they produce ozone, a lung
irritant.
Major Types of Filters Source: U.S. EPA – “Guide to Air Cleaners in the Home”
Panel Pleated Pocket Rigid Cell
• Made with meltblown polypropylene • Composed of air-laid
• Frequently called “throw • Larger filtering surface area than panel
media or air-laid fiberglass media fiberglass or bi-
away” filters filters
• Thick structure of meltblown component spunbond
• Lower-priced and typically • Made with polyester, cotton/polyester,
polypropylene media makes it difficult media, which offers
made with fiberglass media needlefelt media, or spunbond media
for dust, dirt, germs and water droplets cost-effective particle
• Provides temperature • Bi-component spunbond media is more
to pass through capture
resiliency, but low filtration durable and tear-resistant than
• High-efficiency pocket filters can also • Bi-component
efficiencies, meaning little fiberglass and meltblown filter media,
be composed of synthetic meltblown spunbond media resists
trapping of micron particles and is cheaper than cotton/polyester
filter media, which is resistant to shedding and does not
and needlefelt media absorb moisture
shedding
7
Page | 7
Filter Media and HVACR Energy Consumption Relationship
• Proper air filtration equipment defends building occupants and HVACR equipment against contaminants generated by activities
within the building and pollutants drawn in from outside the building by the HVACR system
• Beyond their role regulating IAQ, filters drive significant energy consumption within HVACR units
─ An estimated 81% of the filter systems’ lifecycle cost is attributed to energy costs, according to a report from the
Nonwovens Industry Magazine
• Air flow in HVAC system creates velocity pressure – as the pressure increases along a surface, so does the resistance; when the
surface area is increased, the velocity pressure is distributed more thinly and the resistance drops; many filters are pleated to
increase their surface area and thus improve operational efficiency
─ Deep-filter boxes are increasingly installed on both retrofits and new applications to increase efficiency without hindering
air flow and to extend the air filter’s life
• The airflow resistance grade of the filter media embedded within a filter system directly influences the amount of energy
expended. HVACR units that utilize filter media with less resistance to airflow enables the HVACR units to more efficiently deliver
airflow with less energy consumed by the unit’s fan motor or blower
HVAC and Refrigeration Energy Consumption
Lighting
20.0%
25.0% HVAC
2.0% Office Equipment
4.0% Water Heating
6.0%
Refrigeration
11.0% Cooking
32.0%
Other
Source: Partner Energy - Building Energy Data Book, US Department of Energy Page | 8
Air Filtration in Healthcare Facilities
To combat the spread of airborne infectious diseases, hospitals and other healthcare settings utilize negative air pressure rooms, also
known as airborne infection containment rooms (AICR), to thwart the spread of airborne infections, which include:
Negative pressure is created when more air is removed from the room than
is supplied. Air removed from the AICR is either routed to the exterior of the
building or filtered prior to expulsion from the building
─ Guidelines call for AICRs to typically use 10-12 air changes per
hour (ACH), two of which must be outdoor air
─ Rooms constructed pre-1994 may have 6 ACH
With the appropriate high efficiency particulate respirator (HEPA) filters and
procedures, air may be recirculated within the AICR, the isolation ward or
back into general use areas of a hospital
─ Recirculated air through HEPA filters is accomplished by a
permanently mounted system or portable self-contained unit
─ Main benefits of recirculated air are lower energy costs and
lower installation costs
Page | 9
Source: National Air Filtration Association Guidelines - 2016
Air Filtration in Healthcare Facilities – cont.
• HEPA filters have >99.97% removal efficiency for particles
0.3µm and above in size, thus making them highly sought
after for removing harmful respirable particles
─ Upstream pre-filters are used to remove larger
particles and extend the life of the HEPA filer; a
MERV 14 filter, which has >90% efficiency and is
upstream of the HEPA filter may extend the life of
the HEPA filter by as much as 900%¹
• Conventional practice is to install the HEPA filter as close
as possible to the AICR’s air removal point
• Sealing of the HEPA filer housing is accomplished using of one of two mechanisms – gasket seal or fluid seal
─ Gasket seal: attached to the HEPA filter; filter compresses the housing so that it forms an air-tight seal
─ Fluid seal system: utilizes filter with a channel carved into the face of the filter frame into which Newtonian gel is loaded.
The knife edge of the filter is connected to the gel and provides the fluid seal. Typically, fasteners are used to keep the
filter in-place inside its holding frame
• Bag-in / Bag-out (BiBo) containment systems for hospital rooms have historically been used to reduce collection of live
organisms on filters that ultimately become airborne during filter replacement
(1) Conference of Governmental Industrial Hygienists Guidelines – 2016
Source: National Air Filtration Association Guidelines - 2016
Page | 10Public Comparables
Air Filtration Media Public Comparables
$ in millions, except per share data
LTM LTM
Stock Price % of 52-Week Enterprise LTM LTM Rev EBITDA Gross LTM NTM
EV / EV / EV / EV /
4/12/2017 High Low Value Revenue EBITDA Growth Margin Margin
Company Name Rev EBITDA Rev EBITDA
Imerys SA $ 81.33 96.2% 138.0% $ 8,080 $ 4,397 $ 845 1.9% 19.2% 68.7% 1.8x 9.6x 1.6x 9.0x
Cabot Corporation $ 60.17 99.1% 142.3% $ 4,591 $ 2,419 $ 477 -9.1% 19.7% 26.1% 1.9x 9.6x 1.8x 8.8x
Schweitzer-Mauduit International, Inc. $ 42.49 90.4% 141.5% $ 1,638 $ 840 $ 176 9.9% 20.9% 30.6% 2.0x 9.3x 1.8x 8.1x
P. H. Glatfelter Company $ 22.07 86.2% 126.1% $ 1,278 $ 1,611 $ 92 -3.3% 5.7% 13.6% 0.8x 13.8x 0.8x 7.2x
Calgon Carbon Corporation $ 14.40 76.6% 113.4% $ 916 $ 514 $ 78 -3.9% 15.2% 32.9% 1.8x 11.7x 1.5x 8.7x
Avgol Industries 1953 Ltd $ 1.24 90.8% 121.3% $ 620 $ 339 $ 65 -0.4% 19.3% 22.5% 1.8x 9.5x NA NA
High 9.9% 20.9% 68.7% 2.0x 13.8x 1.8x 9.0x
Low -9.1% 5.7% 13.6% 0.8x 9.3x 0.8x 7.2x
Median -1.9% 19.3% 28.3% 1.8x 9.6x 1.6x 8.7x
Mean -0.8% 16.7% 32.4% 1.7x 10.6x 1.5x 8.4x
Air Filtration Public Comparables
$ in millions, except per share data
LTM LTM
Stock Price % of 52-Week Enterprise LTM LTM Rev EBITDA Gross LTM NTM
EV / EV / EV / EV /
4/12/2017 High Low Value Revenue EBITDA Growth Margin Margin
Company Name Rev EBITDA Rev EBITDA
Parker-Hannifin Corporation $ 159.10 99.3% 160.5% $ 22,240 $ 11,200 $ 1,604 -5.7% 14.3% 23.4% 2.0x 13.9x 1.8x 10.7x
Donaldson Company, Inc. $ 45.12 94.6% 149.2% $ 6,243 $ 2,269 $ 391 1.2% 17.2% 34.8% 2.8x 16.0x 2.7x 15.3x
Colfax Corporation $ 39.58 94.3% 160.7% $ 6,130 $ 3,647 $ 444 -8.1% 12.2% 31.4% 1.7x 13.8x 1.7x 12.7x
Munksjö Oyj $ 15.82 89.9% 163.0% $ 989 $ 1,206 $ 141 1.1% 11.7% 52.6% 0.8x 7.0x 0.5x 0.4x
Lydall, Inc. $ 54.15 83.5% 169.5% $ 989 $ 567 $ 80 8.1% 14.1% 24.8% 1.7x 12.4x 1.5x 10.2x
Lindab International AB $ 8.59 84.6% 123.8% $ 797 $ 865 $ 72 3.4% 8.4% 27.3% 0.9x 11.0x 0.9x 1.1x
CECO Environmental Corp. $ 10.33 69.4% 184.5% $ 450 $ 417 $ 56 13.5% 13.4% 32.5% 1.1x 8.1x 1.1x 7.7x
Nederman Holding AB (publ) $ 26.52 96.3% 132.6% $ 357 $ 342 $ 30 -2.8% 8.8% 35.8% 1.0x 11.8x 1.0x 1.3x
High 13.5% 17.2% 52.6% 2.8x 16.0x 2.7x 15.3x
Low -8.1% 8.4% 23.4% 0.8x 7.0x 0.5x 0.4x
Median 1.1% 12.8% 32.0% 1.4x 12.1x 1.3x 9.0x
Mean 1.3% 12.5% 32.8% 1.5x 11.7x 1.4x 7.4x
Source: Capital IQ
Page | 11Public Comparables
Filtration: LTM Margins and Multiples Analysis
LTM EBITDA Margin LTM Gross Margin
60% 52.6%
20% 17.2%
16% 14.3% 14.1% 13.4% 48%
12.2% 11.7% Average 12.5% Average 32.8% 35.8%
34.8% 32.5%
12% 36% 31.4%
8.4% 8.8% 27.3%
23.4% 24.8%
8% 24%
4%
12%
0%
0%
TEV/ LTM Rev TEV / LTM EBITDA
3.0x 2.8x 17.5x 16.0x
13.9x 13.8x
2.4x 14.0x
2.0x 12.4x Average 11.7x 11.8x
1.7x 11.0x
1.7x Average 1.5x
1.8x 10.5x
8.1x
1.1x 1.0x 7.0x
1.2x 0.9x
0.8x 7.0x
0.6x
3.5x
0.0x
0.0x
Source: Capital IQ
Page | 12Public Comparables
Filtration Media: LTM Margins and Multiples Analysis
LTM EBITDA Margin LTM Gross Margin
75% 68.7%
24% 20.9%
19.2% 19.7% 19.3%
20% Average 16.7% 60%
15.2%
16% 45%
Average 32.4% 32.9%
30.6%
12% 26.1%
30% 22.5%
8% 5.7% 13.6%
15%
4%
0%
0%
TEV/ LTM Rev TEV / LTM EBITDA
2.4x 16.3x
2.0x 13.8x
1.8x 1.9x 1.8x
2.0x Average 1.7x 1.8x 11.7x Average 10.6x
13.0x
1.6x 9.6x 9.6x 9.3x 9.5x
9.8x
1.2x
0.8x 6.5x
0.8x
0.4x 3.3x
0.0x 0.0x
Source: Capital IQ
Page | 13Attractive Multiples and Competitive Tension for Air Filtration
• Since 2014, large public companies, including Parker-Hannifin and Unilever, have flexed their financial capacity to complete
transactions, adding to competitive tension for attractive filtration businesses.
– December 2016: Parker-Hannifin paid 3.1x Clarcor’s LTM Revenue and 17.2x LTM EBITDA – attractive multiples for an
estimated EBITDA margin slightly above 18%
– August 2016: Deep-pocketed and highly acquisitive Unilever acquired Blueair, a Swedish manufacturer of premium air
purifiers with $106 million in revenue, for an undisclosed amount, in order to bolster its water purification business
– February 2016: Flanders Corp. paid 1.4x American Air Filter Company’s LTM Revenue of $298 million
– September 2015: Aggreko plc paid $28 million for portable climate control rental solutions provider ICS Group at 2.03x
revenue
– May 2015: Melrose plc paid $2.5 billion for Nortek, Inc. at 1.0x Nortek’s LTM revenue of $2.5 billion
(1) Conference of Governmental Industrial Hygienists Guidelines – 2016
Source: National Air Filtration Association Guidelines - 2016
Page | 14Relevant Air Filtration M&A
($ millions)
# of
Transactions as Headquarters
Transaction Parties Enterprise Financials Enterprise Val / Buyer Country
EV / LTM LTM (last three (Target)
Date Target Business Description Buyer(s) / Investor(s) Value LTM Rev. EBITDA LTM. Rev. EBITDA years)
1. 1/18/2017 KBAK, Inc. KBAK, Inc., doing business as Aire Filter Products, Inc. American Air Filter - - - - - 4 United States
(Aire Filter distributes and services heating, ventilation, and air Company, Inc.
Products, Inc.) conditioning air filters for industrial,
commercial/institutional, and residential clients.
2. 12/1/2016 CLARCOR Inc. CLARCOR Inc. provides filtration products, and filtration Parker-Hannifin $4,312.7 $1,385.2 $251.2 3.1x 17.2x 3 United States
(NYSE:CLC) systems and services worldwide. Corporation (NYSE:PH)
3. 11/30/2016 MGF Gutsche MGF Gutsche GmbH & Co. KG manufactures and Lydall, Inc. (NYSE:LDL) $58.0 $50.0 $9.7 1.2x 6.0x 1 Germany
GmbH & Co. KG distributes needle felts and filter media. It offers high
performance filtration products, such as filter bags for
chemical and pharmaceutical applications.
4. 11/7/2016 Ahlstrom Oyj Ahlstrom Oyj develops, manufactures, and markets Munksjö Oyj (HLSE:MUNK1) $842.1 $1,208.0 $128.4 0.7x 6.6x 2 Finland
(HLSE:AHL1V) fiber-based materials worldwide. It operates through
two segments, Filtration & Performance and Specialties.
5. 8/16/2016 Blueair AB Blueair AB designs, manufactures, and sells air Unilever PLC (LSE:ULVR) - $106.0 - - - 6 Sweden
purification systems for homes and workplaces in
Sweden and internationally.
6. 7/8/2016 Texel Inc. Texel Inc. engages in the development, manufacture, and Lydall, Inc. (NYSE:LDL) $96.0 $72.0 $12.0 1.3x 8.0x - Germany
marketing of needle punch non-woven fabrics for
technical use in North America.
7. 7/6/2016 Nortek Inc. Nortek, Inc. manufactures and sells products for Melrose Industries PLC $2,673.0 $2,548.5 $277.1 1.0x 9.6x - United States
remodeling and replacement, residential and (LSE:MRO)
commercial new construction, and personal and
enterprise computer markets primarily in the United
States, Canada, and Europe.
8. 4/6/2016 Rentschler REVEN Rentschler REVEN GmbH manufactures industrial air SCHAKO Holding AG - - - - - 1 Germany
GmbH cleaners.
9. 2/9/2016 Flanders American Air Filter Company, Inc., doing business as AAF American Air Filter $430.0 $298.0 - 1.4x - - United States
Corporation International, designs, develops, manufactures, and Company
(Daikin Industries, markets filtration products.
Ltd.)
10. 2/1/2016 TDC Filter TDC Filter Manufacturing Inc. manufactures and BHA Altair, LLC $11.2 - - - - 1 United States
Manufacturing Inc. supplies air filtration products and services. dba Clarcor (NYSE: CLC)
11. 2/1/2016 Nordic Air Nordic Air Filtration A/S manufactures and sells filters Hengst Automotive SE $11.0 $16.3 $1.5 0.7x 7.1x - Denmark
Filtration A/S for OEMs, resellers, and end users worldwide.
12. 12/17/2015 Grillo Filter Sales, Grillo Filter Sales, Inc. manufactures and distributes American Air Filter - - - - - 4 United States
Inc. HVAC filtration products. Company, Inc.
13. 9/1/2015 Filtac AB Filtac AB provides air, dust, and liquid filtration products Nederman Holding AB - $5.9 - - - 2 Sweden
and systems. (publ) (OM:NMAN)
Source: S&P Capital IQ
15
Page | 15Relevant Air Filtration M&A – cont.
($ millions)
# of
Transactions as Headquarters
Transaction Parties Enterprise Financials Enterprise Value / Buyer Country
EV / LTM LTM (last three (Target)
Date Target Business Description Buyer(s) / Investor(s) Value LTM Rev. EBITDA LTM. Rev. EBITDA years)
14. 5/13/2015 Pall Corporation Pall Corporation manufactures and markets filtration, Danaher Corporation $13,655.6 $2,851.4 $670.2 4.8x 20.4x 4 United States
separation, and purification products; and integrated (NYSE:DHR)
systems solutions worldwide.
15. 3/16/2015 C.P. Environmental, C.P. Environmental, Inc. manufactures baghouse Micronics, Inc. - - - - - 2 United States
Inc. replacement parts and filters.
16. 3/3/2015 Air Filter Service Air Filter Service Company, Inc. manufactures and Camfil Farr, Inc. - - - - - 2 United States
Company, Inc. distributes HVAC and specialty filtration products to
utilities, commercial, and industrial customers in South
Carolina, North Carolina, Georgia, and Alabama.
17. 12/16/2014 MP3 srl MP3 srl, an indoor climate solutions company, Lindab International AB $18.5 $30.2 $2.0 0.6x 9.1x 5 Italy
manufactures components for air conditioning, (OM:LIAB)
ventilation, fire fighting, filtration, and acoustic
applications.
18. 11/4/2014 Emtrol LLC Emtrol LLC designs, manufactures, installs, and supplies Fisher-Klosterman, Inc. $29.5 $37.4 - 0.8x - - United States
air pollution control and process gas treatment
equipment.
19. 10/28/2014 Edco Sales, Inc. Edco Sales, Inc. manufactures and distributes filters for Camfil Farr, Inc. - - - - - 2 United States
HVAC/R systems.
20. 1/16/2014 Air-Nu of Baton Air-Nu of Baton Rouge, LLC manufactures and Louisiana Capital Group, - - - - - - United States
Rouge, LLC distributes filtration products and services. LLC
21. 6/14/2013 Luft- und Luft- und Thermotechnik Bayreuth GmbH, an Dürr Aktiengesellschaft $15.0 $32.0 - 0.5x - 4 Germany
Thermotechnik engineering and manufacturing company, provides air (DB:DUE)
Bayreuth pollution control systems for various industries.
22. 6/5/2013 Pullman-Holt HEPA Business of Pullman-Holt Corporation was Ermator LLC - - - - - - United States
Corporation, HEPA acquired by Ermator LLC. HEPA Business of Pullman-
Business Holt Corporation comprises high efficiency particulate
air dust extraction and vacuum cleaner business line for
commercial applications.
23. 4/22/2013 Met-Pro Met-Pro Technologies LLC manufactures and sells fluid CECO Environmental $175.4 $109.9 $14.6 1.6x 12.0x - United States
Technologies LLC handling equipment, product recovery and pollution (NasdaqGS:CECE)
control equipment, and filtration products.
High $13,655.6 $2,851.4 $670.2 4.8x 20.4x 6.0
Low $11.0 $5.9 $1.5 0.5x 6.0x 1.0
Median $96.0 $89.0 $14.6 1.1x 9.1x 2.0
Mean $1,717.5 $625.1 $151.9 1.5x 10.7x 2.9
Source: S&P Capital IQ
16
Page | 16Case Study: Lydall Maintains Leadership Position in Filtration Through Acquisition
Filtration business of Transaction Overview:
• Since 2008, Lydall , Inc. (NYSE: LDL) (“Lydall” and the “Company”) has demonstrated leadership in
DSM Solutech B.V the filtration business by selectively acquiring niche filtration businesses that have deepened its
experience in microporous membranes (DSM Solutech B.V.) and expanded brand breadth in Europe
and China (industrial filtration businesses of Andrew Industries). During 2016, the Company
HAS BEEN ACQUIRED HAS BEEN ACQUIRED bolstered its offerings in needlepunch materials by completing deals for Canada-based Texel and
BY BY Germany-based Gutsche.
─ Texel – Paid $96 million for Texel, or 1.3x Texel’s revenue of $72 million and 8.0x Texel’s
EBITDA of $12 million
─ Gutsche – Paid $58 million in cash, or roughly 1.2x revenue of roughly $50 million and
9.7x EBITDA of $6 million
Gutsche’s End Markets Texel’s End Markets
Advanced Other Asphalt Coated Products
HAS BEEN ACQUIRED HAS BEEN ACQUIRED Materials: ~20%
Medical
BY BY Various Other
Steel
Auto
Filtration
Power ~80% Industrial
Geosynthetics
Incineration
Cement Filtration
Buyer:
• Lydall is based in Manchester, CT and manages global operations across Canada, China, France,
Germany, Netherlands, and the United Kingdom.
Seller:
• Royal DSM N.V. (Solutech), Andrew Industries (Filtration Business), ADS Inc. (Texel), and Gutsche
Group
Transaction background and rationale:
• By building out its filtration and engineered materials business and shedding its non-core Vital Fluids
business, the Company has positioned itself to drive orders in sectors facing tighter regulations,
including power generation and energy.
Page | 17Case Study: Lydall Maintains Leadership Position in Filtration Through Acquisition – cont.
2012 Business Mix
Transaction Overview:
• Between 2014 and 2016, Lydall has bolstered its top-line operating
margin by increasing the filtration unit’s slice of the total business mix.
Filtration and ─ Filtration & Engineered Materials represented 31% of business
Engineered mix during 2012, but now represents 43% of business mix
Materials
Automotive 31%
─ Management has cited plans to support profitable growth in
69% the automotive segment but invest at a greater rate organically
in Filtration & Engineered Materials
• Continued acquisition and integration of filtration businesses has been
tailwind to Lydall’s operating margin.
2015 Business Mix • Management believes that the Technical Nonwovens unit will likely
benefit from stabilization in the power generation and energy space,
which has shown softness since early 2016.
Filtration and
Automotive ─ Management is particularly encouraged by order activity and an
Engineered
57% Materials expanding backlog in industrial filtration applications
43%
Technical Nonwovens Unit Lydall Operating Margin
Operating Income ($ millions)
Operating Income ($ millions)
$20.0 12.5% $70.0 12.5%
10.0% 10.0% 9.7%
$16.0 9.7% 10.0% $56.0 10.0%
$12.0 7.5% $42.0 6.4% 7.5%
$8.0 5.7% 5.0% $28.0 5.0%
$4.0 2.5% $14.0 2.5%
$0.0 0.0% $0.0 0.0%
2014 2015 2016 2014 2015 2016
Operating Income EBIT Margin Operating Income Operating Margin
Page | 18Case Study: Parker Hannifin’s Acquisition of Clarcor
Transaction Overview:
• In December 2016, Parker Hannifin Corporation (“Parker Hannifin” or the “Company”) (NYSE: PH)
announced its $4.3 billion acquisition of Clarcor, representing an 18% premium to the target’s pre-
announcement share price.
Buyer:
• Parker Hannfin Corporation is an industrial conglomerate that specializes in motion and control
technologies across automation, engineered materials, filtration, fluid connectors and hydraulics.
HAS BEEN ACQUIRED BY
Seller:
• Clarcor designs, manufactures, and markets filters for automotive and heavy industrial applications.
The Company generated approximately $1.4 billion in annual revenue at the time of the acquisition.
An estimated 58% of its revenue comes from the industrial and environmental filtration business; the
remaining 42% of its revenues is from sales of products used for construction, auto and tractor
equipment.
Transaction background and rationale:
• Parker Hannifin adds Clarcor’s aftermarket product portfolio, which is responsible for 80% of
Clarcor’s sales, to minimize the Company’s exposure to overall business cyclicality .
• The addition of Clarcor will double the Company’s filtration business and add depth in filters
designed for buildings, including hospitals, airplanes and trucks.
• The Company executed its largest transaction since the 1990s. The transaction’s funding and
multiples paid reflect the Company’s large, long-term bet on filtration. The Company paid 3.1x
Clarcor’s LTM Rev. and 17.2x Clarcor’s LTM EBITDA.
Page | 19Case Study: Hengst Group’s Acquisition of Nordic Air Filtration
Transaction Overview:
• In February 2016, Hengst Group (“Hengst” or the “Company”) announced its $11 million acquisition
of Nordic Air Filtration (“Nordic”) at .7x Nordic’s LTM revenue of $16.3 million and 7.2x Nordic’s LTM
EBITDA.
Buyer:
• With more than 3,000 employees on four continents, Hengst develops and manufactures filtration
and fluid management solutions for automakers, service parts wholesalers, and related industrial
HAS BEEN ACQUIRED BY customers.
Seller:
• Former parent of Nordic, MFRI, Inc. (NYSE: MFRI), divested its filtration businesses, including its
February 2016 sale of TDC Filter Manufacturing to Clarcor, in order to focus on its specialty piping
operations.
• Nordic Air Filtration (Nordic) manufactures and markets filters for OEMs, distributors, and end-
users. Its product portfolio of about 4,000 filters and more than 20 different filter media includes
filters for HVAC equipment, air inlets/gas turbines, as well as baghouse filters and other industrial air
filtration solutions.
Transaction background and rationale:
• Leveraging its technology platform behind its automotive offerings, Hengst plans to expand its
activities in the non-automotive market.
─ The acquisition of Nordic Air solidifies the Company’s entry into the following end-markets:
cement; metals/aluminum; food & beverage; paper, pulp & woodwork; chemicals; powder
coating; plasma/laser cutting; sandblasting; textile; and HVAC/ventilation
• Hengst gains Nordic’s three locations in Denmark and its facility in the UAE.
Page | 20Case Study: AAF Flanders’ Acquisition of Aire Filter Products
Transaction Overview:
• In January 2017, AAF Flanders (“AAF Flanders” or the “Company”) announced its acquisition of Aire
Filter Products (“AFP”) for an undisclosed amount.
Buyer:
• Across its residential, commercial & industrial, and power business units, the Company operates as a
designer and developer of filtration products, which include air filters, dust collection equipment and
cartridges, environmental systems, and HVAC equipment.
HAS BEEN ACQUIRED BY
Seller:
• Family-owned and owning a track record of serving customers since the 1950s, AFP distributes and
services HVAC air filters. Before the transaction, AFP served as AAF Flanders’ largest distributor.
Transaction background and rationale:
• Bolsters the Company’s presence in the western United States, where AFP operates offices in
Arizona, California, Idaho, New Mexico, Utah and Washington.
• Ensures tighter control of distribution capabilities and customer service by bringing in-house a long-
time distributor.
• Expands the Company’s offerings within the healthcare facilities end-market, which complements the
Company’s existing focus on commercial & industrial applications.
• Deepens exposure to healthcare, which complements the Company’s existing commercial and
industrial focus.
─ AFP provides assessment of hospital’s HVAC air filtration systems and subsequent
recommendation specific to each area of that hospital that must meet highly stringent
requirements
Page | 21To learn more about how the Headwaters MB team can help you grow from
opportunities in the HVAC sector, please contact:
Len LaPorta Horacio Facca Darin Good
Managing Director Managing Director Managing Director
Industrials / Manufacturing Industrials / Manufacturing Building Products & Construction
llaporta@headwatersmb.com hfacca@headwatersmb.com Services
203.813.3880 x203 617.312.3420 dgood@headwatersmb.com
303.549.5674
Todd Bomberg Burke Smith Lars Knorr
Managing Director Managing Director Director
Transportation & Logistics Transportation & Logistics Industrials / Manufacturing
tbomberg@headwatersmb.com bsmith@headwatersmb.com lknorr@headwatersmb.com
310.920.9949 310.872.0038 650.331.0188
Hilary Morrison
Vice President
Industrials / Manufacturing
hmorrison@headwatersmb.com
203.813.3880 x204
Page | 22Contact Us
Headwaters MB is an independent, middle market investment banking firm providing strategic merger and acquisition advice, capital raising and special situations
advisory. Named “Investment Bank of the Year” by major industry organizations for its third consecutive year, Headwaters MB is headquartered in Denver, CO, with
seven regional offices across the United States and partnerships with 18 firms covering 30 countries. For more information, visit www.headwatersmb.com.
Our team has extensive operational and transaction experience for middle-market companies in the Industrials sector.
Arthur J. Bentley Horacio Facca Grant Garbers
Managing Director Managing Director Managing Director
Agricultural Products Industrials / Manufacturing Industrial Technology
abentley@headwatersmb.com hfacca@headwatersmb.com ggarbers@headwatersmb.com
203.813.3880 x 211 617.312.3420 949.706.8440 x 10
Darin Good Samrat Karnik Len LaPorta
Managing Director Managing Director Managing Director
Building Products & Construction Industrial Technology Industrials / Manufacturing
Services skarnik@headwatersmb.com llaporta@headwatersmb.com
dgood@headwatersmb.com 203.813.3880 x 208 203.813.3880 x 203
303.549.5674
Peter Nam Michael Schumacher Doug Usifer
Managing Director Managing Director
Managing Director
Industrial Technology Industrials / Manufacturing Chemicals & Plastics
pnam@headwatersmb.com dusifer@headwatersmb.com
mschumacher@headwatersmb.com
949.706.6682 908.432.7792
917.789.2513
Disclosure: This newsletter is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisition activity. Information contained in this newsletter should not be construed as a
recommendation to sell or buy any security. Any reference to or omission of any reference to any company in this newsletter should not be construed as a recommendation to buy, sell or take any other action with respect to any security of any such
company. We are not soliciting any action with respect to any security or company based on this newsletter. The newsletter is published solely for the general information of clients and friends of Headwaters MB, LLC. It does not take into account the
particular investment objectives, financial situation or needs of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all investors. This newsletter is based upon
information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may
cause actual results to vary materially. We are under no obligation to update the information contained in this newsletter. Opinions expressed are our present opinions only and are subject to change without notice. Additional information is available
upon request. The companies mentioned in this newsletter may be clients of Headwaters MB, LLC. The decisions to include any company in this newsletter is unrelated in all respects to any service that Headwaters MB, LLC may provide to such
company. This newsletter may not be copied or reproduced in any form, or redistributed without the prior written consent of Headwaters MB, LLC. The information contained herein should not be construed as legal advice.
Page | 23You can also read
