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Industrials Industry
Middle Market Deal Activity & Outlook
Mergers & Acquisitions 2021
Pandemic Tailwinds and End Market
Growth Fuel Elevated Deal Activity
Sector Insights
Chemicals
Environmental, Health & Safety
HVACR Equipment
HVACR Services
Metals and Metals Processing & Manufacturing
Packaging
Precision Manufacturing
Waste & Recycling
Industry Insights
M&A Overview
Public Market Valuations
Valuation Drivers
Macroeconomic Trends
3
Industrials Industry M&A Outlook | December 2021
Capstone Partners is one of the largest and most active independently-owned
investment banking firms in the United States. Over the past 20 years, thousands
of business owners, investors, and creditors have trusted us to help guide their
strategic decisions and maximize financial outcomes at every stage of the
Table of Contents
corporate lifecycle.
07 29 HVACR Services
Industrials M&A
Volume Proliferates
MIDDLE FULL SUPERIOR TOP ESTABLISHED
MARKET SERVICE CLIENT RANKED BRAND
09 Valuations
33 Metals and Metals
FOCUS CAPABILITIES RESULTS PERFORMANCE REPUTATION
Continue to Rise Processing &
Manufacturing
A DIFFERENT KIND OF FIRM. BUILT FOR THE MIDDLE MARKET.
Mergers &
Acquisitions
Capital
Advisory
Financial
Advisory
Special ESOP
Situations Advisory
&
Restructuring
11 Macroeconomic
Backdrop 37 Packaging
• Sell-side Advisory • Transaction Advisory • Special Situations
• Equity Advisory • Interim Management
• Buy-side Advisory • Debt Advisory • Turnaround
13 41
• Performance
•
•
Recapitalizations
Mergers & Joint
• Infrastructure Finance Improvement
• Valuation Advisory
•
•
Restructuring
Bankruptcy Key Trends and Precision
Ventures • Insolvency
• Litigation Support
M&A Drivers Manufacturing
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17 Chemicals 45 Waste & Recycling
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Acquirer and investor appetites
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Notable transactions
21 Environmental,
Health & Safety 49 Endnotes
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25 HVACR Equipment
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20
Industrials Industry M&A Outlook | December 2021
Connect with Capstone’s Industrials Capstone-Advised Transaction Highlights
Investment Banking Group Provider of commercial Comprises monomer and Provider of heating Distributor of Provider of
HVAC and MEP services polymer business assets equipment and services HVACR products energy services
Capstone Partners is the bank of choice for fast-growing entrepreneurs driving changes in the
marketplace. The majority of transactions completed by our Industrials Investment Banking group are
for privately-owned businesses accessing long-term investors for the first time. Our team knows HAS DIVESTED
strategic buyers drive the highest valuations and we are razor focused on getting to know each of their HAS BEEN ACQUIRED BY
HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY
sweet spots in M&A. Using that proprietary data, we will work closely with you to prep your company Onex Inc.
TO
and put you in the ideal position for the best possible outcome. A PORTFOLIO COMPANY OF Employee Stock
Ownership Plan
Provider of HVAC and Provider of auto Manufacturer of specialty Comprises sound Provider of precision
plumbing services maintenance services forgings and flanges masking business machined parts
Vijay Balasubramanian David Bench
Managing Director Managing Director
917-288-4564 949-734-7888
vbalasubramanian@capstonepartners.com dbench@capstonepartners.com
HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY
Chemicals & Plastics EH&S, Packaging, Precision
Manufacturing
a portfolio company of
Provider of precision Supplier of safety Provider of flexible Manufacturer of gel ice Distributor of
manufacturing services products ventilation solutions refrigerants cutting tools
Theodore Polk Mike Schumacher
Managing Director Managing Director
708-921-8961 314-285-5877 a portfolio company of
tpolk@capstonepartners.com mschumacher@capstonepartners.com
HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS COMPLETED AN
HVACR, Precision Manufacturing Metals and Metals Processing & OWNERSHIP TRANSITION
Manufacturing, Precision Manufacturing
a portfolio company of
Awards & Accolades
Doug Usifer Tracy Patch
Managing Director Director
908-432-7792 949-220-0540
dusifer@capstonepartners.com tpatch@capstonepartners.com
2021 2020 2020 2020 2020
MID-MARKET
Chemicals, Waste & Recycling EH&S, Packaging, Precision Manufacturing INVESTMENT INVESTMENT
INVESTMENT
MIDDLE MARKET CORPORATE
BANKING FIRM OF BANKING FIRM OF INVESTMENT BANK RESTRUCTURING
BANKING FIRM OF
THE YEAR THE YEAR OF THE YEAR FIRM OF THE YEAR
THE YEAR
Christopher Cardinale 2019 2019 2019 2019 2018
Vice President INVESTMENT INVESTMENT
GLOBAL M&A INDEPENDENT
US DEBT FINANCING
949-220-0537 MIDDLE MARKET INVESTMENT
BANKING FIRM OF BANKING FIRM OF ADVISORY OF THE
INVESTMENT BANK BANKING FIRM OF
ccardinale@capstonepartners.com THE YEAR THE YEAR YEAR
OF THE YEAR THE YEAR
EH&S, Packaging, Precision Manufacturing
INTERNATIONAL AWARDS INTERNATIONAL AWARDS
3 4
Industrials Industry M&A Outlook | December 2021
Industrials M&A Overview Public Market Valuation Breakdown
43% 75% EBITDA Multiples by Sector
Deal Volume Increase Deal Value Increase
25.0X
Transaction Statistics
20.0X
EH&S
Enterprise Value/EBITDA
10.8x 62% Metals and Metals
Processing &
Average EBITDA Strategic Buyers 15.0X Manufacturing
Packaging
Waste & Recycling
10.0X Precision
Manufacturing
$79M 38% HVACR
Average PE Platforms or Chemicals
Transaction Value Add-Ons
5.0X
Dow Jones Industrial
Average
0.0X
Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
Chemicals: AKZA,AKE, 3407, BAS, DOW, DD, EMN, 1301, A051910, LYB, PPG, 2010, 338; Environmental, Health & Safety: ALS, CLH, DLTA, 6745, ITRK, MSA, NVEE;
HVACR: AOS, CARR, 6367, DOV, FIX, HSC, IR, JCI, A066570, LII, MOD, NTK, TT, WSO; Metals and Metals Processing & Manufacturing: B, CMC, KALU, MLI, NUE, RS,
RYI, SCHN, STLD, TMST, WOR, ZEUS; Packaging: AMC, AVY, BLL, BERY, CCK, GPK, IP, MNDI, OI, PKG, SEE, SK3, SON, WRK; Precision Manufacturing: ATCO A, AME,
CFX, CLS, CMI, GWW, ITW, LECO, SAND; Waste & Recycling: CHRA, CLH, CVA, CWST, DAR, ECOL, GFL, RSG, SRCL, WCN, WM
Source: Capital IQ and Capstone Research
5 6
Industrials Industry M&A Outlook | December 2021
Industrials M&A
Volume Proliferates M&A Volume Increases 43% Year-over-Year
Transaction volume has proliferated in 2021 YTD with buyers seeking exposure to
Year-to-date (YTD), merger and acquisition markets with favorable pandemic tailwinds and business owners looking to
(M&A) activity in the Industrials sector has expedite liquidity event timelines ahead of potential capital gains tax increases.
surged, with transaction volume rising 43% Transactions Disclosed Value
year-over-year (YOY), a significant recovery 2,000 $30
Transaction Value in Billions of U.S. Dollars
from the COVID-impacted deal activity in
1,800
2020. The reopening of the economy, pent-up
$25
M&A demand, potential implications of a 1,600
1,418
Number of Transactions
capital gains tax increase, and frothy M&A 1,328 1,341
1,400
purchase multiples have encouraged many 1,170 1,211 $20
1,200 1,116
business owners to go to market and take
advantage of the seller-friendly environment. 936
1,000 $15
YTD, total deal values have increased 74.9%
800
YOY, with buyers paying premiums for quality $10
businesses in defensible end markets. This 600
contrasts with 2020’s environment when 400
many strategics refrained from engaging in $5
M&A to focus on protecting existing assets 200
and private equity (PE) firms focused on 0 $0
supporting portfolio companies. 2016 2017 2018 2019 2020 YTD 2020 YTD 2021
Strategic buyers have led deal activity in 2021
(61.7% of deals announced or completed to-
date) as buyers have pursued accretive
targets with complementary offerings and Private Strategic Buyers Comprise Majority of Transactions
exposure to growing end markets. Financial Private strategics continue to account for the greatest share of industrials
buyers have also remained active, with PE transactions. However, private equity buyers have become increasingly active,
firms pursuing add-on acquisitions (28.6%) to with add-on deals comprising a larger share every year since 2016.
bolster the market share of portfolio
companies or completing direct investments
(9.7%) to gain exposure to industries with Private Strategic Public Strategic PE Platform PE Add-on
strong growth dynamics. With historic dry
powder levels and favorable interest rate 100%
conditions, PE firms are expected to remain 90% 16.5% 18.2% 21.2% 24.9% 26.8% 28.6%
very active in 2022. 80%
Percent of Transactions
10.6% 13.0%
70% 11.7%
While it is possible that a potential increase in 11.5% 11.1% 9.7%
interest rates could hinder deal activity, it is 60% 29.6%
not yet evident to us. Due to the abundance 29.5% 28.5%
50% 25.2% 24.8% 25.7%
of assets going to market this year, “story
40%
deals,” or deals with complications were not
popular in 2021. However, we expect such 30%
deals will get more attention in 2022 as 20% 43.4% 39.3% 38.6% 38.4% 37.4% 36.1%
buyers work through their prioritized 10%
acquisition pipelines. Regardless, Capstone’s
0%
intricate knowledge of the buyer universe,
2016 2017 2018 2019 2020 YTD 2021
industry valuations, and coveted target
company characteristics will continue to
enable business owners to maximize financial
outcomes at every stage of the business
lifecycle. Click here to begin a conversation Year-to-date (YTD) ended October 26
with one of our experts. Source: Capital IQ and Capstone Research
7 8
Industrials Industry M&A Outlook | December 2021
Transaction Valuations
Continue to Rise Average Industrials M&A EBITDA Purchase Multiples
Average EBITDA purchase multiples have reached 10.8x in 2021 YTD, outperforming
Average EBITDA multiples for industrials historic levels as strategics and private equity buyers have demonstrated a
transactions have rebounded, surpassing willingness to pay elevated prices for high-quality targets.
historic levels to reach 10.8x in 2021. Buyers
have demonstrated a willingness to pay 20.0x
premiums for assets with healthy financials
that have proven resilient amid the 18.0x
pandemic-induced economic downturn. 16.0x
Average industrials transaction EBITDA
Enterprise Value/EBITDA
14.0x
multiples dipped to 9.2x in 2020 from 10.6x
in the previous year as buyers were 12.0x 10.8x 10.6x 10.8x
hesitant to pay premiums amid economic 9.5x 9.2x
10.0x
uncertainty, manufacturing shutdowns, 7.7x
8.0x
supply chain disruptions, and volatile profit
margins due to input price inflation. 6.0x
4.0x
To-date, strategic buyers have paid
premium prices for businesses that 2.0x
diversify offerings, enhance end market 0.0x
exposure, establish economies of scale, 2016 2017 2018 2019 2020 YTD 2021
create synergies, and strengthen supply
chains. PE buyers have demonstrated a
willingness to pay more for businesses that
align with their investment theses,
penetrate growing segments, or enhance
the market share of portfolio companies. Average Debt Multiple of Middle Market Manufacturing LBO Deals
Acquisition multiples are expected to Average debt multiples stand at 3.9x through Q2 2021, improving from 3.8x in
remain high in the near-term as the 2020 as the supply/demand imbalance of high-quality assets and debt availability
universe of buyers pursuing deals remains have allowed lenders to increase leverage to win deals.
extensive and debt capital continues to be
readily available at attractive rates.
Due to the surplus of coveted assets and 8.0x
record levels of capital overhang, lenders
7.0x
have increased leverage in order to win
deals, as evidenced by a rise in 6.0x
Manufacturing industry debt multiples from
Total Debt/EBITDA
3.5x in the prior year quarter to 3.9x in Q2 5.0x
4.0x 3.9x 3.9x
2021. Capstone expects bidders to 3.8x 3.6x
4.0x 3.5x
continue to utilize leverage to win deals in
the near-term, with the Fed expected to 3.0x
wait to raise interest rates until bond
purchases stop in the summer of 2022. 2.0x
1.0x
Capstone’s Debt Advisory Group helps
privately-owned and sponsor-backed 0.0x
companies secure debt capital or 2017 2018 2019 2020 Q2 2020 Q2 2021
leveraged finance for organic growth,
acquisitions, dividend recapitalizations, and
refinancings. Contact us to learn more
about the debt environment and how our Year-to-date (YTD) ended October 26
team can help your business. Source: Capital IQ, GF Data®, and Capstone Research
9 10
Industrials Industry M&A Outlook | December 2021
Macroeconomic Backdrop Macroeconomic Indicators
Consumer Confidence Index Consumer Price Index (Core)
At the onset of the pandemic, many manufacturers were forced to temporarily 150 300
shutdown or operate below full capacity and consumers reduced spending amid 120 280
economic uncertainty, hindering downstream demand for discretionary goods.
Index Value
Index Value
90 260
However, after the initial shock at the height of the pandemic, businesses began to
60 240
reopen fueling a resurgence of economic activity, evidenced by the 33.8% rise in gross
domestic product (GDP) in Q3 2020 from Q2, according to the Bureau of Economic 30 220
Analysis (BEA).1 Personal consumption expenditures through September 2021 0 200
increased 10.9% YOY (BEA)2 supported by rising per capita income and the issuance
of direct stimulus aid from the Internal Revenue Service (IRS). The rise in consumption Source: The Conference Board Source: Bureau of Labor Statistics
has translated to a surge in downstream demand, illustrated by a 14.9% YOY rise in
manufacturers’ new orders in September 2021, according to the U.S. Census Bureau.3 Personal Consumption Expenditures Index Gross Domestic Product
40%
$20
Trillions of U.S. Dollars
While the continued reopening of the economy provides a favorable outlook for the
Percentage Growth
$16 20%
Industrials industry, several factors are expected to limit near-term growth, including $12
labor shortages, supply chain disruptions, and continued uncertainty surrounding 0%
$8
COVID-19. Notably, the consumer confidence index fell 9.4% YOY in September 2021 -20%
(BEA)4, likely due to concerns over the delta variant and inflation. Sourcing raw $4
materials and retaining employees have proved to be substantial challenges for $0 -40%
Industrials & Manufacturing companies in 2021, with 50.6% of respondents in
Capstone’s Middle Market Business Owner Survey indicating that supply chain Source: Bureau of Economic Analysis Source: Bureau of Economic Analysis
disruptions were the top challenge over the past three months (ended August).
Manufacturers will continue to struggle to maximize output due to labor shortages, Manufacturers’ New Orders Unemployment Rate
with the unemployment rate remaining above pre-pandemic levels at 4.6% in October, $800 20%
Trillions of U.S. Dollars
Percent Unemployed
according to the Bureau of Labor Statistics (BLS).5 Rising material prices, as evidenced
$600 15%
by a 15.2% increase in the Manufacturing producer price index (BLS),6 have also limited
growth, narrowing profit margins for industry participants. $400 10%
In March 2020, the U.S. Federal Reserve cut its short-term benchmark rate to near $200 5%
zero and began buying at least $80 billion in treasury bonds and $40 billion in $0 0%
mortgage-backed securities to stabilize financial markets and hold down longer-term
interest rates, according to The Wall Street Journal.7 However, due to bottlenecks and
prices rising faster than anticipated, evidenced by a 4% rise in the core consumer Source: U.S. Census Bureau Source: Bureau of Labor Statistics
price index in September YOY (BLS)8, the Federal Reserve announced that it plans to
Manufacturing Price Index Industrial Production Index
reduce its bond purchases by $15 billion per month beginning in November and ending
$240
the expansion of its $8.6 trillion asset portfolio by June 2022. With its goal of 120
maximum employment and a 2% annual inflation rate top of mind, the central bank has Index Value
Index Value
$210 100
indicated that it does not plan to begin raising interest rates before its bond
purchases expire in the summer of 2022. Capstone expects elevated M&A activity
$180 80
leading up to the rate hike as lenders aim to capitalize on the current debt
environment. Continued economic growth and the recovery of battered end markets
$150 60
provide a favorable outlook for the Industrials industry in the near-term.
Source: U.S. Census Bureau Source: Bureau of Labor Statistics
11 12
Industrials Industry M&A Outlook | December 2021
Key Trends and
M&A Drivers Trend #1: Trend #3:
Capitalizing on Shedding Non-core
Pandemic Tailwinds Assets & Businesses
The pandemic has impacted consumer Divestiture activity is expected to continue
behavior as increased time at home has at a healthy pace as industrials companies
shifted consumer preferences towards continuously reassess their portfolios in
goods and away from services. Exposure to order to ensure that all assets align with
growing end markets is expected to drive their long-term growth strategy. In addition,
industrials M&A activity as companies aim carveout activity is expected to be
to establish platforms in market segments bolstered by a favorable deal environment
that have performed well amid the with strategics leveraging improved
economic downturn. balance sheets and financial buyers, with
record levels of capital overhang, looking to
Means of consumption also shifted as put their money to use.
consumers utilized e-commerce platforms
as an alternative to in-person shopping. In addition, sellers are expected to
Acquirers are expected to pursue target continue to expedite their exit timelines to
companies with exposure to online maximize up-front consideration ahead of
shopping activity. any potential capital gains tax increases.
Trend #2: Trend #4:
Strengthening Supply Bolstering
Chains & Reshoring Sustainable Offerings
COVID-19 has tested global supply chains, Elevated consumer awareness of
with government-imposed shutdowns sustainability practices, rising
resulting in dislocations and decreased environmental, social, and corporate
visibility. In addition, manufacturers in governance (ESG) interest, and the
sectors such as Disinfectants and Personal prospect of more stringent environmental
Protective Equipment (PPE) were unable to regulations under the Biden administration
meet the unprecedented demand. are expected to continue to increase
demand for sustainable solutions.
As the economic impacts of the pandemic
subside, manufacturers are expected to Industrials companies that support in the
fortify supply chains and enhance visibility expansion of sustainable products and
by investing in advanced automation practices, both organically and through
technology, moving production closer to M&A, are expected to experience elevated
headquarters, and leveraging M&A to demand in the foreseeable future. We also
integrate operations and create a expect that companies in higher-polluting
competitive advantage in their markets. sectors will be increasingly pushed to pivot
investment towards sustainable solutions
that align with growing calls for green
production methods.
13 14
Industrials Industry M&A Outlook | December 2021
Trend #5:
Improving Margins
Amid Rising Prices
Across nearly all segments, industrials
businesses are experiencing input price inflation,
putting downward pressure on the profit margins
for intermediate and final goods. Due to the high
demand backdrop, some companies have been
able to pass elevated input costs onto the
consumer by increasing the price of the good.
However, input prices often rise faster than
adjustments to the price of the end-good,
resulting in immediate margin leakage. In
addition, consumers are expected to pushback
on manufacturers for non-essential goods if
prices for such items continue to increase.
Companies can reduce input costs through
horizontal integration, leveraging economies of
scale to increase profit margins; or through
vertical integration, acquiring material suppliers
to reduce overhead and streamline processes.
Trend #6:
Meeting Labor
Force Needs
Federal stimulus checks exacerbated labor force
challenges as many workers opted to collect
unemployment rather than work. Despite the
economic recovery, the unemployment rate
remains at 4.6%, just slightly above pre-
pandemic levels.
Many manufacturers are experiencing
supply/demand imbalances attributed to rising
demand and lower production due to labor force
shortages. In addition to paying higher wages,
industrials companies are expected to address
labor challenges by consolidating competitors to
gain skilled workers and adding automation
technology that reduces the number of
employees necessary for production.
15 16
18
Industrials Industry M&A Outlook | December 2021
Doug Usifer, Managing Director
Chemicals “Companies that have proprietary capabilities and provide critical roles within
Divestitures and End Market Exposure Propel Elevated M&A Activity their client’s supply chains remain in strong demand and are likely to command
premium valuations. End market outlook is also critical and for many it was
temporarily masked in 2020.”
M&A Overview & Outlook Key Subsector Trends
Several specialty chemical product categories The Global Biocides market size is
benefited from increased demand amid the expected to reach $20.7 billion by 2027,
pandemic, with inputs for disinfection and expanding at a CAGR of 6.8%, driven by
sanitation, protective equipment, and medical mounting concerns surrounding Carveouts Drive Elevated M&A Activity LANXESS Acquires Emerald
supplies and equipment playing a critical role environmental protection and public Kalama Chemical
in fighting the spread of COVID-19. However, health, according to Allied Market
400
total chemical production volume, excluding Research.10 Biocides are used to control
pharmaceuticals, decreased by 3.6% in 2020 microorganisms in water, household & 350
YOY due to manufacturing slowdowns and personal care, coatings and various other 296
300
Number of Transactions
demand shocks, according to the American product categories. COVID-19 has raised
In August, global specialty chemicals company
Chemistry Council.9 Through YTD, the industry awareness regarding the importance of 250 227
219 LANXESS (XTRA:LXS) acquired Emerald Kalama
has recovered with increases in consumer sanitation, presenting an opportunity for 190
200 181 Chemical from PE firm American Securities for $1.1
spending, industrial production, and disinfectant producers. Capstone expects
billion, equivalent to 2.5x last twelve months (LTM)
construction activity driving demand across elevated demand for antimicrobial 150 Revenue or 11.9x LTM EBITDA. Emerald Kalama
nearly all segments. This trend is expected to products to continue, driven by hygiene
100
provides chemicals uses in flavor, fragrances and
continue through year end and into 2022. and cleanliness megatrends, albeit not at
other consumer products. By acquiring Emerald
the exceptionally high levels experienced 50 Kalama, LANXESS has strengthened its position in
The Chemicals industry has experienced a at the height of the pandemic.
the Food & Beverage, Cleaning, and Cosmetics
frenzy of deal activity, with 296 transactions 0
industries. The transaction is the second largest
announced or closed through November 3, Chemical companies are typically able to 2018 2019 2020 YTD '20 YTD '21
acquisition that LANXESS has completed,
compared to 190 in the same period in 2020. pass rising production costs onto
according to the transaction press release.11
Deal volume has been buttressed by consumers by increasing the prices of
strategics (71.3% of deals) divesting non-core goods. However, input costs that rise at a
assets or expanding into attractive end faster pace than product prices hinder Year-To-Date Buyer Breakdown Average Public Company Stock Price
markets through M&A. Carveout activity is profit margins. With chemical demand Chemicals Index S&P 500 Chemicals DJIA
forecasted to continue as companies currently remaining strong despite
reassess their portfolios, shedding businesses elevated prices, producers are expected to 50%
that no longer align with their growth strategy. continue to increase the price of their
40%
Stock Price % Change
In July, The Chemours Company (NYSE:CC) goods to mitigate against rising raw STRATEGIC 20.3%
entered a definitive agreement to sell its material prices. Public 30%
Mining Solutions business to Draslovka Private 37.5% 20%
Holding for $520 million. The divestiture will Rising environmental concerns and an
FINANCIAL 8.5% 10%
allow Chemours to focus on the growth of its increasingly stringent regulatory
three principal businesses, Titanium environment have presented an Platform 0%
Technologies, Thermal & Specialized Solutions, opportunity for renewable chemical Add-on
and Advanced Performance Materials. manufacturers. Historically, renewable -10%
33.8%
chemical inputs serving as substitutes for -20%
Companies have also acquired businesses petrochemicals are sold at high prices, Nov-20 Feb-21 May-21 Aug-21 Nov-21
serving attractive end markets to foster limiting the growth potential of the market.
growth. This is evidenced by LANXESS AG’s However, rising crude oil prices along with
(XTRA:LXS) acquisition of Emerald Kalama escalating climate concerns are expected
Chemical, a leading manufacturer of to drive demand for renewable chemicals Index includes: AKZA, AKE, BAS, BAYN, DOW, DD, EMN, XOM, LYB, PPG, A051910, 338, 1301, 2010, 3407
Year-to-date (YTD) ended November 3
chemicals for Consumer industries. in the long term. Source: Capital IQ, PitchBook, FactSet, and Capstone Research
17 18Industrials Industry M&A Outlook | December 2021
Select Chemicals Transactions Capstone Partners Advises Deltech Holdings on
the Sale of its Monomers, Polymers, and European
Enterprise EV / LTM Business to SK Capital Partners
Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA
Water and Waste Hawkins
11/01/21 Distributes water treatment chemicals. - - - Capstone Partners advised Deltech Holdings LLC
Specialties (Nasdaq:HWKN)
(Deltech), a producer of enhanced performance
Assets of Eastman Synthomer Comprises adhesive resins manufacturing business. aromatic monomers and performance polymers, on
10/28/21 $1,000.0 1.7x 10.3x
(NYSE:EMN) (LSE:SYNT)
the sale of its Monomers, Polymers, and European
10/28/21 Flyers Energy
World Fuel
Supplies fuels and related lubricants in the U.S. $775.0 - - Businesses to SK Capital Partners, LP (SK Capital).
Services
Synalloy Manufactures specialty chemical products.
Deltech began operations in 1988, producing PMS
10/25/21 DTI $33.0 - -
(Nasdaq:SYNL) (para-methylstyrene) using a process licensed only to
Key Polymer HAS BEEN ACQUIRED BY Deltech. In 1992, the plant was expanded to allow
10/14/21 Unichem Manufactures specialty adhesives and chemicals. - - -
Corporation production of the complementary methyl styrene
product, VT (vinyl toluene). PMS contains 95% para
Clean Harbors Provides industrial cleaning and plant
10/08/21 HydroChemPSC maintenance services. $1,250.0 1.7x 10.9x isomer, while VT is a mixture of the meta and para
(NYSE:CLH)
isomers. Methyl styrene monomers provide improved
Wholesale Fuels Colonial Oil Provides consignment and wholesale fuel services
10/01/21 - - - performance in resins and plastics for specialty paints,
Business of Lykins Industries intended for the Residential and Commercial sector.
hydrocarbon resins for adhesives, specialty polymers
10/01/21 PremiumShield
Eastman Chemical Manufactures paint protection films intended to
- - - and unsaturated polyester resins. Read more about
(NYSE: EMN) provide maximum protection for vehicles.
the transaction here.
Repligen Develops a molecule-specific affinity purification
09/30/21 Avitide $150.0 - -
(Nasdaq:RGEN) technology designed to improve drug safety.
Assets of ALTIVIA Comprises chemical manufacturing business facility
09/30/21 USALCO - - -
Chemicals for water treatment.
Sherwin-Williams
09/28/21 Specialty Polymers Offers emulsion polymers for the Coatings industry. - - -
(NYSE:SHW)
“
Distributes chemicals for the Performance and Life
09/27/21 Rit-Chem CHEMSPEC
Science sectors.
- - -
SK Capital is the ideal partner for Deltech given its track record of
09/27/21 Kraton (NYSE:KRA) DL Chemical
Manufactures and sells styrenic block copolymers,
$2,568.0 1.5x 8.8x successfully supporting the growth of entrepreneur-owned businesses
specialty polymers, and other products.
in the specialty chemicals industry. We have a shared vision for the
Manufactures pest control systems intended to kill
09/27/21 Inert Gas Injection Liphatech burrowing rodents. - - - future of Deltech, built upon the Company’s unique product portfolio
and long-term commitment to serving our customers.
”
Plain Sight Produces cellulosic ethanol, renewable diesel and
09/09/21 Comstock Mining crystalline graphite products. $26.0 - -
Innovations
Thompson Street Provides innovative labeling and detection
09/07/21 Vector Laboratories $124.0 - -
Capital Managers solutions to the scientific community. Bob Elefante
Arkema President and CEO, Deltech
08/31/21 Assets of Ashland Comprises performance adhesive business. $1,650.0 - 20.1x
(ENXTPA:AKE)
Assets of IFF Comprises microbial control business.
08/23/21 Lanxess $1,300.0 - 13.0x
(NYSE:IFF)
Assets of Deltech Comprises manufacturing business of
08/23/21 SK Capital Partners monomers and polymers. CF CF CF
Holdings
Danimer Scientific Manufactures polyhydroxyalkanoate-based
07/28/21 Novomer resins and other biodegradable materials. $152.0 - -
(NYSE:DNMR)
Assets of The
07/26/21 Draslovka Holding Comprises sodium cyanide business. $520.0 - -
Chemours Co.
Blue indicates Capstone advised transaction; CF = Confidential
Source: Capital IQ, PitchBook, FactSet, and Capstone Research
19 20Industrials Industry M&A Outlook | December 2021
David Bench, Managing Director
Environmental, Health & Safety “M&A activity in the EH&S space remains robust in 2021. The regulatory
EH&S Service Providers Poised to Benefit from Pandemic Tailwinds tailwinds that bolstered investment in this market over the past decade have
accelerated as corporate executives seek to further protect employees and
customers in a pandemic environment. This demand has led to continued
corporate consolidation for additional health and safety capabilities, which in
turn has attracted private equity interest”
M&A Overview & Outlook Key Subsector Trends
While industry performance was mixed in Environmental consulting service providers
2020, environmental, health & safety (EH&S) suffered from reduced demand during the
service providers are forecasted to benefit pandemic due to government-imposed
from favorable tailwinds as the pandemic shutdowns in high pollution sectors. Transaction Volume Rebounds Target Company Breakdown
dissipates and battered end markets recover. However, industry participants are poised to From 2020 by Segment
M&A activity in the EH&S industry has capture a resurgence in demand with
250
remained robust in 2021 YTD, evidenced by a battered end markets continuing to recover
38.3% increase in transaction volume YOY. and potential environmental policy changes
13.3%
Product manufacturers (27.7% of targets) and under the Biden administration. The 200
175
Number of Transactions
distributors (13.3%) experienced a significant normalization of the Industrial Production 166
150 Distributors
uptick in demand for personal protective Index bodes well for the industry as
150 Products 47.0%
equipment (PPE) throughout the pandemic elevated activity in Manufacturing, Mining, 120 Software
and have attracted interest from both Electric, and Gas sectors coincides with 106 27.7%
Services
financial and strategic buyers. This is heightened pollution levels, necessitating 100
evidenced by Innova Medical Group, Inc., a environmental consulting services.
leading manufacturer of rapid antigen tests 12.0%
50
and provider of COVID-19 testing solutions, Elevated demand for PPE is anticipated due
acquiring Pacific PPE Corporation (3PE) in to heightened corporate awareness
April for an undisclosed sum. 3PE surrounding health and wellness. PPE 0
manufactures N95 and other personal spending is forecasted to nearly triple by 2018 2019 2020 YTD '20 YTD '21
protection masks Through the transaction, 2027, according to Research and Markets.12
Innova has enhanced its total solution offering Similarly, the Global Surface Disinfectant
for COVID-19 and other air-borne diseases. market size is forecasted to reach $1.0
billion by 2025, expanding at a compound Year-To-Date Buyer Breakdown Average Public Company EBITDA Multiples
Private equity firms have demonstrated a annual growth rate (CAGR) of 9.1% from
S&P 500 EH&S Index DJIA
strong appetite for EH&S providers, largely 2021-2025, according to 360 Market
utilizing add-on acquisitions (39.2% of deals) Updates.13 Workplace safety will be a focal 25x
to bolster sector portfolios. Environmental point for employers, particularly as workers
consulting companies are expected to begin to return to the office, bolstering STRATEGIC 15.7% 20x
continue to attract sponsor interest with demand for PPE and disinfectants. Public
EV/EBITDA
corporations increasingly prioritizing Private 39.2% 15x
sustainability amid elevated pressure from Employees and job-seekers have
FINANCIAL 10x
consumers as well as state and local increasingly utilized online safety and
governments. In addition, global investment professional training programs in order to Platform 30.1% 5x
firms have continued to pursue businesses learn about safety in the workplace and Add-on
that consider environmental, social, and meet Occupational Safety and Health 0x
15.1%
corporate governance (ESG) impacts. Administration (OSHA) and Environmental
Recently, KKR & Co. Inc. (NYSE:KKR) entered a Protection Agency (EPA) requirements.
definitive agreement to acquire ERM EH&S companies leveraging online training
Worldwide Group Limited, an environmental platforms are expected to continue to
consulting firm committed to helping experience high demand with consumers
companies achieve their sustainability goals. permanently adopting digital learning Index includes: ALQ, CLH, DLTA, 6745, ITRK, MSA, NVEE
Year-to-date (YTD) ended October 21
Terms of the transaction were not disclosed. methods as a result of COVID-19. Source: Capital IQ, PitchBook, FactSet, and Capstone Research
21 22Industrials Industry M&A Outlook | December 2021
Select Environmental, Health & Safety Transactions Select Capstone Partners Active and
Closed Engagements
Enterprise EV / LTM
Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA
All Pro Fire National Fire & Provides fire and life safety services to high-rise
10/21/21 - - -
Protection Safety buildings, hospitals, and warehouses.
Onsite Swca
10/12/21 Provides environmental analytical testing services. - - -
Environmental Environmental
WestLand
CONFIDENTIAL
10/01/21 EM Strategies Provides environmental consulting services. - - -
Engineering
Edwards-Pitman Provides environmental compliance consulting
09/30/21 Braun Intertec services serving Public and Private sector clients. - - -
Environmental CORPORATE SALE HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY
Provides PPE and fall protection equipment through
09/14/21 Gearcor GMES - - -
e-commerce and directly to businesses.
SANITATION
Develops a suite of apps for workforce and personal
09/13/21 Tidyware Becklar - - - PRODUCTS PROVIDER
safety solutions.
09/01/21 RPB Safety GVS (BIT:GVS) Offers respiratory protection equipment. $194.4 5.2x -
09/01/21 G-Logics Atlas Geosciences Provides environmental consulting services. - - -
Tidewater Artesian Provides environmental consulting and engineering
08/30/21 - - -
Environmental Wastewater services for environmental regulation compliance.
Triumvirate Provides environmental, health, and
08/24/21 Emilcott Associates safety consulting. - - -
Environmental
Chicago Protective Manufactures personal protective apparel for
08/17/21 Mechanix Wear various industries. - - -
Apparel
Equifax Workforce Offers data analytics solutions to improve
08/10/21 Appriss Insights community and workplace safety. $1,825 - -
Solutions
Gordon R. Provides civil and environmental engineering
08/06/21 GM2 Associates - - -
Archibald consulting services.
Vita Mobile Offers artificial intelligence-based health and
08/05/21 My2Tum - - -
(OTCPK:VMSI) safety software.
Pure Air Control Weatherproofing Offers environmental consulting services to indoor
08/02/21 environmental and indoor air quality concerns. - - -
Services Technologies
Pacific Mott MacDonald Provides environmental consulting services to
07/21/21 solve complex water resource challenges. - - -
Groundwater GroupGroup
Rapid Fire Pye-Barker Fire & Provides environmental consulting solutions for the
07/20/21 Energy, Construction, and Transportation industries. - - -
Protection Safety
Ambipar Group Provides environmental consulting services.
07/06/21 SWAT Consulting - - -
(BVMF: AMBP3)
Environmental Montrose Offers environmental and regulatory
07/06/21 compliance services. - - -
Intelligence (NYS: MEG)
The Blackstone Provides integrated environmental, health, and
07/06/21 Sphera Solutions safety risk management software. $1,400 - -
Group (NYSE:BX)
Oak Hill Capital Provides environmental consulting services.
06/29/21 Trinity Consultants - - -
Partners
Source: Capital IQ, PitchBook, FactSet, and Capstone Research
23 24Industrials Industry M&A Outlook | December 2021
Ted Polk, Managing Director
HVACR Equipment
“M&A activity is expected to remain strong for niche technology providers of
Upgrade and Retrofit Activity Drive Industry Demand energy efficient HVACR equipment.”
M&A Overview & Outlook Key Subsector Trends
Amid the pandemic, companies in the HVACR As consumers shift preferences towards
Equipment industry endured significant sustainable and less-costly systems,
challenges as supply chains were disrupted HVACR manufacturers have invested
and contractors were unable to install significant resources into the development Transaction Volume Outpaces Prior Year Notable Transactions
equipment due to government-imposed of tech-enabled equipment to reduce Levels Through Year-to-Date
lockdowns. However, manufacturers and energy use. Industry participants that have Q1 Q2 Q3 Q4
distributors that have displayed defensibility developed green building systems and
180
are forecasted to experience heightened smart technologies offering
Number of Transactions
demand as consumer spending continues to interconnectivity between equipment such 150 144 In July, private equity firm Arcline Investment
rise, evidenced by U.S. personal consumption as Johnson Controls (NYSE:JCI) and 16 Management acquired a controlling stake in Dwyer
expenditures increasing 10.9% YOY through Schneider Electric (ENXTPA:SU) are 117 Instruments, a manufacturer of innovative sensors
120
September. Operators providing retrofits and positioned to capitalize on heightened and controls for building automation and HVAC
90 53
upgrades are well-positioned to capitalize on demand from building owners looking to 90 46 industries. Terms of the transaction were not
rising demand as consumer preferences shift benefit from government incentives, 30 disclosed. Through the transaction, Arcline will
toward efficient equipment due to climate reduce their environmental footprint, and 60 27 35 capitalize on Dwyer’s deep sector expertise and
concerns, cost-saving efficiencies, and cut energy costs. HVACR manufacturers 18 relationships, process and execution excellence,
11
elevated awareness surrounding the are expected to continue to invest in the 30 22 and bespoke position amid a major inflection in
32 40
importance of air quality. development of tech-enabled equipment 20 demand for air/pressure measurement and control
to optimize energy use and meet the rising 0 due to COVID-19, according to a press release.17
M&A activity has been robust through YTD demand for sustainable systems. 2019 2020 YTD '21
2021 with 144 deals announced or completed
through October 26, compared to 80 and 64 The pandemic has demonstrated the
during the same period in 2020 and 2019, importance of effective HVAC systems
respectively. Strategic buyers comprised with the risk of transmission of COVID-19 Strategics Lead Year-to-Date
72.2% of deals to-date, with public and private greatest in poorly ventilated indoor or Deal Activity
companies utilizing M&A to expand offerings confined spaces, according to the Centers
and improve equipment efficiency. The U.S. for Disease Control and Prevention.15 This
Heating & Air Conditioning Equipment has brought attention to antiquated HVACR equipment provider Rheem Manufacturing
Manufacturing industry remains fairly technology in residential and commercial STRATEGIC 13.2% Company acquired Friedrich Air Conditioning from
concentrated with the top four companies, buildings. A nationally representative Public Monomoy Capital Partners in August (undisclosed).
Trane Technologies (NYSE:TT), Carrier Global school districts survey conducted by the Private 38.2% Friedrich, which provides air conditioning solutions,
14.6%
Corporation (NYSE:CARR), Johnson Controls U.S. Government Accountability Office will operate as a standalone unit within the Rheem
(NYSE:JCI), and Lennox International (NYSE:LII) (GAO) found that 41% of districts need to FINANCIAL Global Air business, according to a press release.18
expected to account for more than 50% of update or replace HVAC systems in at Platform “Growth by acquisition is part of our ongoing
industry revenue in 2021, according to IBIS least half of their schools, representing Add-on strategy. The addition of Friedrich to the Rheem
World.14 However, this concentration is offset 36,000 schools nationwide, according to family of brands will complement our existing
34.0%
by the quantity of smaller companies in the GAO.16 Capstone believes that HVACR business lines, increase our commercial and
industry, presenting a unique consolidation equipment companies that provide residential air conditioning offerings, and expand
opportunity for PE firms and PE-backed upgrades and retrofits will be aided by our presence in the hospitality and multi-family
companies. Capstone expects deal activity to heightened consumer awareness regarding segments of our market,” said Chris Peel, President
continue at an accelerated pace in 2022 the importance of air quality. and CEO of Rheem, in the press release.
driven by consolidation.
Year-to-date (YTD) ended October 26
Source: Capital IQ, PitchBook, FactSet, and Capstone Research
25 26Industrials Industry M&A Outlook | December 2021
Select HVACR Equipment Transactions Select Capstone Partners Closed Engagements
Enterprise EV / LTM
Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA
Manufactures sheet metal accessories and
11/19/21 Duro Dyne NSi Industries - - -
equipment for the HVAC industry.
EZ-FLO Reliance Worldwide Manufactures and distributes plumbing products
10/26/21 $325.0 1.9x 12.0x
International (ASX:RWC) and HVAC supplies.
a portfolio company of
Daikin Applied Manufactures equipment for the applications of A portfolio of
10/11/21 Dynamic Controls ventilation, air treatment, and climate comfort. - - -
Americas HAS DIVESTED
State Mechanical Provides engineering, design, installation, and
10/07/21
Services
MechanAir Holding maintenance services to HVAC businesses. - - - Metro Energy HAS BEEN ACQUIRED BY
HAS BEEN ACQUIRED BY
TO
Manufactures and supplies HVAC products for
10/05/21 Hart & Cooley DuraVent - - -
Residential and Commercial markets.
Greystone Energy Manufactures HVAC sensors and transducers for
09/29/21 Bemsiq - - -
Systems building automation management systems.
Manufactures and sells air comfort solutions through
09/28/21 Lanair Products WILsquare Capital - - -
resellers and online.
Protect Plus Air Freudenberg Manufactures and sells air comfort solutions
09/22/21 - - -
Holdings Filtration in Wisconsin.
Assets of Farrar Trane Technologies Comprises refrigeration equipment
09/13/21 manufacturing business. $365.0 - -
Scientific (NYSE:TT)
QBD Cooling Ronin Equity
09/07/21 Manufactures refrigeration products. - - -
Systems Partners
RV Group Thor Industries Comprises air conditioning, heating, ventilation, and
09/01/21 $750.0 - -
of Airxcel (NYSE:THO) related appliances manufacturing business units.
TerraVest Manufactures heating and cooling products.
08/20/21 ECR International - - -
(TSX:TVK)
GreenTech City Capital Provides air purification systems, zone
08/11/21 heaters, and energy management solutions. - - -
Environmental Ventures
Distributes HVACR parts and supplies to
08/02/21 Wittichen Supply Gryphon Investors contractors in the Southeastern U.S. - - -
Lincoln Electric Provides brazed manifolds for manufacturers of
07/28/21 Shoals Tubular residential heating and air conditioning units. - - -
(Nasdaq:LECO)
Provides pre-construction, mechanical/HVAC,
07/26/21 CS3 Reedy Industries - - -
piping, plumbing, and custom fabrication services.
Friedrich Air Rheem Manufactures air conditioners for Residential and
07/22/21 - - -
Conditioning Manufacturing Commercial markets.
Haven Home Offers residential heating, ventilation, and air
07/16/21 Right Time Group - - -
ClimateCare conditioning contracting services.
Distributes industrial and commercial HVAC
07/02/21 Lathrop-Trotter Koch Air - - -
products, industrial fans, and blowers.
Nortek Global Manufactures and supplies energy efficient
06/22/21 Madison Industries - - -
HVAC heating systems.
Strikepoint Group Provides residential HVAC maintenance services
06/16/21 First Class HVAC - - -
Holdings based in Millsboro, Delaware.
Source: Capital IQ, PitchBook, FactSet, and Capstone Research
27 28Industrials Industry M&A Outlook | December 2021
Ted Polk, Managing Director
HVACR Services
“The rapid consolidation of the HVAC Services market continued throughout
Installation, Upgrade, and Retrofit Demand Benefit Service Providers the height of the pandemic and is expected to continue for years to come.”
M&A Overview & Outlook Key Subsector Trends
Many HVACR service providers struggled at New residential construction has aided
the onset of the pandemic as routine installation demand for residential HVACR
maintenance and installations were put on services providers. Privately-owned
hold due to government-imposed lockdowns. housing starts in August were at a HVACR Services M&A Activity Surges in Active Buyer Spotlight
However, as the economy has continued to seasonally adjusted annual rate of 2021 To-Date
recover, industry participants have benefited 1, 580,000, rising 9.1% from August 2020, Q1 Q2 Q3 Q4
from heightened demand for the installation according to the U.S. Census Bureau.19 Both
250
of new HVACR equipment fueled by elevated residential starts and spending are at all-
Founded: 2014
demand for building renovations and healthy time highs with residential construction
Number of Transactions
200 Chief Executive Officer: Jeremy Hetherington
demand for new construction. Contractors are spending forecasted to increase by 20% 176 172 Ownership: Private, PE-backed
also benefitting from an increased focus on after rising 15% in 2020, according to
Headquartered: Saint Catharines, Ontario
effective air filtration systems and rising Economics Behind the Headlines.20 150 57
69 Employees: ~600
demand for more connected and energy Capstone expects increasing residential 107
efficient equipment. construction activity to continue bolstering 100 15 Right Time Group, is an HVAC service provider
demand for HVACR services. 30 51 63
focused on the Residential market that currently
The HVACR Services industry has experienced
50 32 15 comprises over 16 brands throughout Ontario,
elevated transaction volume in 2021 YTD, with In addition to installations related to new
52 Manitoba, Alberta, and British Columbia. The
deal activity outpacing the same period in construction, HVACR service providers are 30 41
0 company has grown significantly since its 2014
2020 and 2019 by 53.3% and 98.9%, more importantly capturing heightened
2019 2020 2021 inception, utilizing M&A to bolster its geographic
respectively. Strategic buyers accounted for retrofit demand as consumers increasingly
presence. In December 2020, Right Time Group
55% of deals announced or completed upgrade existing equipment to add energy
was acquired by Gryphon Investors, a leading
through October 25 with private and public efficient and/or green components. Both
middle-market private equity fund, for an
companies consolidating competitors to consumers and building owners are shifting
Add-on Volume Proliferates in Year-To- undisclosed sum. “Right Time has quickly made a
expand into lucrative geographies. preferences towards more tech-enabled
name for itself in this industry with solid organic
systems that offer interconnectivity Date Deal Activity growth and a clear acquisition strategy that is
Attracted to the fragmented nature of the between equipment. Industry participants
achieving scale and propelling its expansion in a
industry, numerous financial buyers have providing retrofit and upgrade services are
highly fragmented market,” said Jeff Balagna,
employed buy-and-build strategies, getting a lot of market attention due to
STRATEGIC Exclusive Executive Advisor to Gryphon Investors,
establishing platforms through direct predictable revenue streams.
23.0% in a press release.21
acquisitions (10.2%) which are expanded Public
34.8%
upon through tuck-in deals. Tuck-ins have HVACR service providers increasingly Private
Under Gryphon’s ownership, Right Time Group
comprised the largest share of transactions prioritized client safety and customer
FINANCIAL has continued to pursue target companies in
to-date (34.8%) as platform companies have service amid the pandemic. This trend is
Platform attractive geographies, acquiring Anchor Home
used PE funding to enhance the scale and expected to continue after the pandemic
Add-on Comfort in August, Haven Home ClimateCare in
reach of portfolio companies. This is subsides, as companies that provide air
10.2% 32.0% July, and Comfort Masters in June (terms of
exemplified by Service Champions, a portfolio purification and other safety protocols and
transactions were not disclosed). The company
company of Odyssey Investment Partners established a positive reputation with
has benefited from industry fragmentation,
that acquired SWAN Heating & Air clients are expected to outperform
utilizing consolidation to spur growth.
Conditioning in August (undisclosed). Through competitors. In addition, industry
the acquisition, Service Champions has participants with strong client retention
expanded its U.S. footprint to the Mountain can benefit from expanding service
West and bolstered its capabilities. offerings, acting as a one-stop-shop for
Year-to-date (YTD) ended October 25
maintenance and repair services. Source: Capital IQ, PitchBook, FactSet, and Capstone Research
29 30Industrials Industry M&A Outlook | December 2021
Select HVACR Services Transactions Select Capstone Partners Active and
Closed Engagements
Enterprise EV / LTM
Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA
South Coast Provides commercial HVAC, electrical, building
12/10/21 Service Logic CF CF CF
Facility Services automation, plumbing, and energy services.
Premium Home Offers HVAC repair, plumbing, and electrical services
11/18/21 NearU Services - - -
Services for residential and commercial customers.
Provides HVACR services based in the greater
CONFIDENTIAL
11/16/21 Arctic Services CMS Nextech - - -
Las Vegas area.
Provides HVACR services headquartered in
11/16/21 Patriot Mechanical CMS Nextech
Ashland, Virginia.
- - - HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY
DEBT RECAPITALIZATION
Offers a range of mechanical services including
11/09/21 Fidelity Engineering Onex (TSX:ONEX) - - -
HVAC maintenance.
A PORTFOLIO COMPANY OF
HVAC SERVICES
Done Service Radiant Plumbing &
10/29/21
Group Air Conditioning
Offers plumbing and HVAC services. - - - PROVIDER
backed by
Howard Provides home cleaning and heating services, which
10/20/21 Service Champions - - -
Enterprises including installation, and indoor air quality services.
Scottsdale Air Provides heating and air conditioning repairs
10/20/21 Service Champions and services. - - -
Heating & Cooling
Provides residential heating, cooling, air quality, and
10/18/21 Furnace Guys Right Time Group - - -
hot water services to homeowners.
The Plumbing & Southern HVAC Offers plumbing, heating, ventilation, and air
10/15/21 conditioning repairing services. - - -
Air Service Corporation
Granite Comfort Provides air conditioning, heating, roofing, and
10/05/21 Strittmatter - - -
Holdings plumbing services on contract basis.
Southern HVAC North American Provides AC repair, furnace repair, HVAC sales, and
10/04/21 - - -
Corporation Essential Home installation services.
Provides heating and air conditioning services for
10/01/21 Fahrenheit HVAC Sila Services residents of Philadelphia. - - -
The Pimlico Offers heating, plumbing, bathrooms, drainage,
09/20/21 Neighborly electrics, and other services. $220.3 - -
Plumbers Group
Thompson of Strikepoint Group Provides heating, air conditioning, and
09/17/21 plumbing services. - - -
Manatee II Holdings
Chiller Systems The Arcticom Provides commercial HVAC services.
09/14/21 - - -
Service Group
Provides HVAC repairs, services,
09/13/21 Timo's Air Service Champions and installation. - - -
Big Air Heating & Offers heating, ventilation, and air conditioning
09/10/21 Bonney Plumbing installation and repair services. - - -
Air Conditioning
Frontier Service Provides heating, cooling, plumbing, electrical, and
09/09/21 Haley Mechanical - - -
Partners geothermal services.
Air Conditioning Hidden Harbor
09/08/21 Offers HVAC and air conditioning services. - - -
Specialist Capital
The Sterling Group, Operates as a construction plumbing contractor,
09/02/21 L&S Mechanical - - -
Current Capital serving builders and contractors.
Blue indicates Capstone advised transaction; CF = Confidential
Source: Capital IQ, PitchBook, FactSet, and Capstone Research
31 32Industrials Industry M&A Outlook | December 2021
Mike Schumacher, Managing Director
Metals and Metals Processing & “Early stages of economic expansion typically see industrial metals price
Manufacturing increases, but the flash crash from the early stages of COVID-19 to snap back
of economic expansion has caused inflation to reach 60-year highs for certain
Metal and Metal Component Demand Soars as Manufacturing Activity Increases metals. Upstream materials providers are hitting record profitability while many
downstream processers struggle to find material or fully pass through price
increases.”
M&A Overview & Outlook Key Subsector Trends
At the onset of the pandemic, companies in The continued recovery of the Industrial
the Metals and Metals Processing & Production Index forecasts sustained
Manufacturing industry were challenged as demand for metals and metals processing
key customers in downstream markets such services. Rising business investment and To-Date Deal Activity Outpaces Nucor Expands Product Offerings Through
as Automotive Manufacturing, Construction, consumer spending are projected to Prior Year Level the Acquisition of Hannibal Industries
and Oil & Gas faced demand shortfalls and support the recovery of customers in
350
temporary shutdowns. However, as battered end markets that utilize metal and
manufacturing activity has continued to rise metal components including Nonresidential 300
with the reopening of the economy, metal Construction and Automotive
Number of Transactions
consumption has increased significantly with Manufacturing. Of note, the Personal 250 234
217 In August, leading steel and steel product
fabricators struggling to meet unprecedented Consumption Expenditures index has 205
manufacturer Nucor Corporation (NYSE:NUE)
demand. This has resulted in a significant surpassed record levels, reaching nearly 200
162 acquired Hannibal Industries for an enterprise
spike in metal prices as evidenced by the $1.6 trillion in September, rising 10.9% YOY.
150 value of $370 million, equivalent to 6.9x LTM
producer price index for iron and steel
EBITDA. Hannibal Industries manufactures carbon
increasing 101.5% YOY, according to the U.S. Rising input prices are expected to 100 steel tubing and pallet racking systems. Through
Bureau of Labor Statistics.22 While volatile continue to limit profit margins for metal
the acquisition, Nucor has enhanced its
input prices are expected to hinder profit processing companies and component 50 capabilities in the growing Warehouse and
margins for manufacturers further down the manufacturers. As a result, industry
Distribution market. In addition, Hannibal Industries
supply chain, Capstone expects demand for participants are forecasted to utilize M&A 0
utilizes a variety of steel products to produce its
metal and metal processing services to to gain exposure to higher margin product 2019 2020 YTD '20 YTD '21
racking solutions, providing potential supply chain
remain high as consumer spending in key end categories such as Aerospace and Medical
efficiencies with other Nucor businesses.
markets continues to proliferate. Devices. This is exemplified by Re:Build
Manufacturing’s acquisition of Cutting
Strategic buyers have accounted for 61.3% of Dynamics, a metal and thermoplastic Strategics Comprise a Majority of Public Companies Record Strong
deals announced or closed through November component manufacturer. Through the Transaction Volume To-Date Stock Price Growth
4 with public and private companies creating acquisition, Re:Build, an industrial Capstone Metals Index
economies of scale through vertical automation company and component
S&P 500 Industrials Index
integration. In addition, strategics have utilized manufacturer, has established a platform 110%
Stock Price % Change
M&A to diversify product portfolios, enhance to bring disruptive technologies to STRATEGIC 21.2% 20.3% 90%
exposure to growing end markets, and expand Aerospace and Defense markets. Public
geographically. This is exemplified by Triple-S Private 70%
Steel Holdings’ acquisitions of Rolled Steel Existing labor shortages in the Metals and
Products (June, undisclosed) and Alamo Iron Metals Processing & Manufacturing FINANCIAL 50%
Works (January, undisclosed). The industry have been exacerbated by the Platform 17.5%
30%
transactions expand Triple-S Holdings’ pandemic with many workers opting to Add-on
footprint and metal processing capabilities. collect stimulus checks rather than work. 41.0% 10%
Financial buyers have also remained Even as additional unemployment benefits -10%
acquisitive, comprising 38.7% of deals to- wind down, Capstone expects companies
date. Capitalizing on favorable debt market to continue to struggle to find skilled labor
conditions and elevated dry powder, PE firms amid lingering hesitancy to return to in-
have utilized M&A to establish portfolios in person work environments.
high-growth segments. Index includes: B, CMC, KALU, MLI, NUE,RS, RYI, SCHN, STLD, TMST, WOR, ZEUS
Year-to-date (YTD) ended November 4
Source: Capital IQ, PitchBook, FactSet, and Capstone Research
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