VALUE-ADDED SERVICES DRIVE OUTPERFORMANCE - VALUE-ADDED DISTRIBUTION INDUSTRY UPDATE | FEBRUARY 2021 - Capstone Headwaters
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VALUE-ADDED SERVICES DRIVE
OUTPERFORMANCE
VALUE-ADDED DISTRIBUTION INDUSTRY UPDATE | FEBRUARY 2021
3
Value-Added Distribution
Value-Added Services Drive Outperformance
TABLE OF CONTENTS KEY INDUSTRY TAKEAWAYS
Key Industry Takeaways Capstone Headwaters’ Business Services Group is pleased to share its Value-
Industry Outlook Added Distribution report. Through our ongoing conversations with active
industry players and analysis of trends during COVID-19, we have identified
2020 M&A Backdrop several key takeaways below:
Industry M&A Overview
1. Economic indicators for the Manufacturing and Services industries have
Notable Transactions
displayed a U.S. recovery and are poised for further growth in 2021.
Select Transactions
Capstone Deal Highlight 2. Distribution companies that offer valued added services such as supply
management, product assembly, product bundling, among others, are
Public Company Data viewed favorably relative to their peers.
Report Contributors
3. Distributors with the capability to bundle products and provide packaged kits
Firm Track Record foster increased purchasing power and relatively higher margins.
4. Specialized distributors that serve Healthcare, Aerospace, and other
regulatory-driven industries establish barriers to entry and are perceived
attractive in the M&A market, typically with relatively higher margins.
5. Distributors with specialized products and services often operate as a low-
run, high margin business and are expected to receive strong interest among
strategic and private equity buyers.
CONTACT 6. Private equity firms have amassed $1.3 trillion in dry powder and are
expected to resume buyout activity as debt availability and leverage levels
further normalize in 2021.
7. Capstone expects M&A activity to normalize in 2021 as sellers that placed
prospective exits on hold in 2020 resume sale processes and buyers
reengage in inorganic growth initiatives.
Capstone Headwaters has developed a full suite of corporate finance solutions,
including M&A advisory, debt advisory, financial advisory, equity capital
Todd McMahon
financing, and ESOP advisory, to help privately owned businesses and private
Head of Investment Banking
equity firmsSophea
through each stage of the company’s lifecycle, ranging from growth
Chau
617-619-3334
to an ultimate exit transaction.
Managing Director,
tmcmahon@capstoneheadwaters.com
Consumer & Retail
To learn more about Capstone’s wide breadth of advisory services and Value-
added Distribution industry expertise, please contact Head of Investment Banking
at Capstone Headwaters, Todd McMahon.
2
Value-Added Distribution | February 2021
INDUSTRY OUTLOOK
The U.S. economy has begun to see a recovery in Key Prospective Buyer Considerations
Manufacturing and Service industries following sharp
declines in activity and sentiment across all industries in Diverse and/or Specialized Customer Base
2020. The Institute For Supply Management’s (ISM) Buyers often view customer concentration as unfavorable
Purchasing Managers Index has indicated expansions in from a valuation perspective. Distributors that operate in
specialized, regulatory-driven industries that provide
the Manufacturing (January) and Service (December) barriers to entry often peak buyers’ interest.
industries, with readings of 58.7%1 and 57.2%,2
respectively (above 50% indicates expansionary Recurring Revenue
environment). The U.S. economy contracted in 2020 with Contract-based revenue promotes stable cash flows and
real GDP (gross domestic product) declining 3.5%, transparency into financial forecasts. Operators that
according to the Bureau of Economic Analysis.3 The provide recurring services are highly attractive to a
economy has begun to show signs of recovery in 2021 prospective buyer universe.
and is expected to display promising tailwinds.
Low-Run / High Margin Services
Low-run, high margin services will often be viewed more
The Distribution industry saw substantial COVID-induced attractively relative to their peers, as these distributors
supply chain disruptions and reduced demand. However, often have deeper and stickier customer and vendor
despite lingering macroeconomic challenges, the industry relationships.
is poised to see heightened demand for its services across Value-Added Services
many sectors, although the rate of recovery will vary Distributors that provide value-added services such as
depending on end market exposure. Capstone expects cable assembly, supply chain management, among others
allow distributor’s customers bases to access a one-stop-
distributors that serve Electrical and Connectivity
shop for their supply chain.
Solutions end markets to perform relatively well in 2021,
as industries across the economy experience accelerated Source: Capstone Research
digital transformations.
Following its blockbuster acquisition of Anixter (closed June 2020, $4.5 billion), WESCO (NYSE:WCC) has positioned itself as a
North American leader in the Electrical Distribution space. WESCO indicated its Electrical & Electronic Solutions and
Communications & Security Solutions segments recorded sequential Q3 double-digit sales growth as momentum in
Industrial and Original Equipment Manufacturing markets improved.4 The company has indicated robust secular trends that
will stimulate favorable financial performance, noting that remote connectivity, supply chain relocation to U.S. and Canada,
Internet of Things (IoT) and automation, heightened bandwidth demand, and new fiber optic and 5G connectivity solutions
will drive future growth. As the industry recovers from the downturn, companies serving defensible end markets that can
differentiate and gain competitive advantages with technology and value-added services are expected to outperform peers.
ISM PMI – Manufacturing vs. Services ISM Services PMI Breakdown
ISM Manufacturing ISM Services
Services PMI
90%
Measure December November
80% Business Activity 59.4 58.0
New Orders 58.5 57.2
70%
Employment 48.2 51.5
60% Supplier Deliveries 62.8 57.0
50% Inventories 58.2 49.3
Above 50 indicates Prices 64.8 66.1
40% expansion, below 50
indicates contraction
Backlog of Orders 48.7 50.7
30% New Export Orders 57.3 50.4
20% Imports 51.8 55.0
Inventory Sentiment 47.7 49.9
01/18
04/18
07/18
10/18
01/19
04/19
07/19
10/19
01/20
04/20
07/20
10/20
01/21
Overall Services PMI 57.2 55.9
Source: Institute for Supply Management® Report On Business® and Capstone Research
3
Value-Added Distribution | February 2021
2020 M&A BACKDROP
Middle Market M&A Transactions (Disclosed Value) Transactions (Undisclosed Value) Total Value ($B)
Activity Resumes
Through New and 20,000 $500
Previous Deals 18,000
16,000 $400
While deal volume across the
entire market dropped 16.4% 14,000
Transactions
YOY, transactions increased 12,000 $300
$ in Billions
by nearly 39% in Q4 10,000
compared to the previous 8,000 $200
quarter. The increase in 6,000
activity is partially driven by 4,000 $100
deals which were on hold but 2,000
are now resuming while 0 $0
buyers are reengaging in 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
M&A growth strategies.
Source: Capital IQ and Capstone Research
Note: Enterprise Value < $500mm
Middle Market Average 14.0x
EBITDA Multiples in Q4
12.0x
Outperform Multiples
Enterprise Value / EBITDA
on Year-Over-Year Basis 9.3x 9.3x 9.2x 9.3x 9.6x
10.0x 8.9x 9.1x 8.6x 9.0x 8.6x 8.7x 8.8x 8.8x 9.0x 8.9x
The average EBITDA 7.6x
8.1x
multiple for Q4 2020 is 8.0x
9.6x EBITDA compared to
9.3x EBITDA in Q4 2019. 6.0x
Valuations have recovered
4.0x
since Q2, as demand for
companies that have 2.0x
remained resilient through
the pandemic trade at 0.0x
normalized multiples. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q4 Q4
2019 2020
Source: Capital IQ
Note: Includes multiples 3x-16x Enterprise Value < $500mm
$1,400 $1,280.2
Dry Powder For PE Deals
Reaches Historic Levels
$1,200
Dry powder has remained
elevated since the Great $1,000
Recession, reaching $1.3
$800
$ in Billions
trillion in the second half of
2020. The war chest of
$600
capital PE firms have
amassed will need to be $400
deployed. As a result,
Capstone expects PE firms to $200
resume traditional buyout
activity after sitting on the $0
sidelines in 2020. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: PitchBook
4
Value-Added Distribution | February 2021
INDUSTRY M&A OVERVIEW
Merger and acquisition (M&A) activity in the Value-Added M&A Volume Surges in 2H 2020
Distribution industry rebounded in the second half of While M&A volume remains lower year-over-year, deal
2020, rising 207% quarter-over-quarter (QoQ) in Q3 and activity improved significantly in the second half of 2020,
supporting optimism for the 2021 M&A market.
15% QoQ in Q4. Despite a modest recovery in the second
half of 2020, annual deal volume declined by 160 2019 2020
approximately 44% year-over-year (YOY). The COVID-19
pandemic drove a sharp decline in deal activity in Q2 as
Number of Transactions
strategic buyers largely placed acquisitions on hold as 120
94
they assessed internal liquidity positions, supply chains, 84 81
and operational risks. Meanwhile, private equity (PE) firms 80 66 63
swiftly shifted focus from new investment opportunities to 53
46
portfolio-level liquidity and operational risks.
40
15
Despite the sharp slowdown in 2020 deal volume, 2021
presents favorable tailwinds as the economic recovery 0
continues. Strategic buyers, accounting for 58% of total Q1 Q2 Q3 Q4
deal activity, have displayed increasing appetite to resume
M&A initiatives to bolster geographic reach and value-
added distribution capabilities.
PE firms accounted for 42% of deal activity in 2020, largely 2020 Buyer Breakdown
consisting of add-on transactions to stimulate inorganic
growth in existing portfolio companies. For example,
ShoreView Industries-backed Monroe Engineering Group
completed its sixth add-on acquisition, investing in Titan STRATEGIC
Wire & Cable, a supplier of connectors, cable, and wire for Private 28.9%
Solar, Geothermal, Wind, Ski Lift, Telecom, and Industrial Public
markets. The company’s highly attractive value-added 43.9%
services that include cable assembly, consulting, material FINANCIAL
management, among others, expand Monroe’s Platform
geographic reach and product and service offerings. Add-on 12.8%
Capstone expects a resurgence in M&A activity in the 14.4%
Value-Added Distribution industry in 2021 as sellers that
placed prospective exits on hold in 2020 resume sale
processes. In addition, PE firms strapped with $1.3 trillion
in dry powder are expected to pursue a larger percentage Source: Capital IQ, PitchBook, FactSet, and Capstone Research
of acquisitions as debt availability and leverage levels
normalize, according to PitchBook.5
Todd McMahon, Head of Investment Banking
“2020 was an anomaly in many ways, and COVID certainly had an impact on deal making in
Q2 and Q3. The good news is Q4 saw some real resiliency and likewise the continued
economic recovery bodes well for 2021 activity. We expect both strategic and private equity
buyers to re-engage throughout the course of 2021.”
5
Value-Added Distribution | February 2021
NOTABLE TRANSACTIONS
Several notable transactions have been announced or completed in the industry in 2020. Select transactions are outlined below,
followed by a more comprehensive list on pages seven and eight.
Platinum Equity LLC to acquire Ingram Micro Inc.
(December 2020, $7.2 Billion)
Platinum Equity LLC, a private equity investment firm, announced the acquisition of the world’s largest
technology and information technology (IT) distribution and services provider, Ingram Micro Inc., for
$7.2 billion (6.9x EBITDA), according to a press release.6 The acquisition of Ingram Micro Inc. from HNA
Technology Co., Ltd., a subsidiary of HNA Group, is projected to close by the first half of 2021.
To Acquire Founded in 1979, Ingram Micro is a leading distributor of information technology (IT) products and
supply chain solutions, serving as an integral piece of the technology and commerce ecosystem.
Headquartered in Irvine, California, the company has over 35,000 employees and operations in 60
countries, generating over $47 billion in revenue in fiscal year 2019. The company serves a global
customer base, focusing on cloud, mobility, technology lifecycle, supply chain and technology solutions.
Among their distributed product lines are electrical components including, but not limited to cables,
switches, hubs, and routers. Ingram Micro will benefit from retaining current CEO, Alain Monié.
“Ingram Micro’s scale, diverse customer and vendor relationships and track record for innovation,
create the perfect platform for us to help accelerate growth, both organically and through additional
M&A. It also provides exciting opportunities in one of the fastest-growing sectors in technology as
corporations continue to migrate to cloud or hybrid solutions,” commented Matthew Louie, Managing
Director at Platinum Equity.
“Ingram Micro is an industry leader, one of the largest companies in the world and will be a
cornerstone investment in our portfolio. We have the resources and the experience to help the
company pursue an aggressive agenda of growth and transformation,” said Platinum Equity Chairman
and CEO Tom Gores.
IEWC Global Solutions acquires Jupiter Communications, LLC
(November 2020, Undisclosed)
IEWC Global Solutions, an international distributor and solutions provider, announced their acquisition
of Jupiter Communications, LLC, a leading supplier of telecommunications power and connectivity
solutions, for an undisclosed sum. The acquisition developed from a five-year partnership between the
two companies with IEWC being a long-time customer of Jupiter Communications. IEWC is an
international distributor of electronics, electrical wire, wire-bundling and protection products., serving
Acquires Aerospace & Defense, Automotive, and Broadcast and Communications markets.
Founded in 2004, Jupiter Communications is a contract manufacturer, distributor, value-added reseller,
and full-service integrator for the Telecommunications industry. Headquartered in Chandler, Arizona,
the company’s currently serves the U.S. market, providing products such as power solutions, fiber
optics, copper, safety and warning signs, test solutions & antenna alignment, and other tools and safety
gear. The company also offers premier value-added services that include bar coding, cable cutting and
stripping, labeling, contract warehousing, order fulfillment, sourcing, single and multi order
kitting/assembling, and supply chain management.
The strategic acquisition will foster operational synergies that are expected to increase product
availability and order fulfillment speeds while expanding IEWC’s product offerings. Jupiter
Communications will increase its geographic reach through IEWC’s global supply chain and logistics
capabilities in addition to IEWC’s domestic and international distribution centers through IEWC’s
international network of distribution centers.
6
Value-Added Distribution | February 2021
SELECT TRANSACTIONS
Enterprise EV / LTM
Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA
Total Equipment DXP Enterprises Distributes and provides services for pumps,
12/31/20 - - -
Company (Nasdaq:DXPE) compressors, blowers, and mixers.
Supplies connectors, cable, and wire for Solar,
12/31/20 Titan Wire & Cable Monroe Engineering - - -
Geothermal, Wind, Telecom, and Industrial markets.
Tundra Process Wajax Distributes boilers, motors, drives, pre-insulated pipe,
12/30/20 $99.1 1.5x -
Solutions (TSX:WJX) and instrumentation products and technical services.
12/23/20 Control Products Amcon Controls Supplies building control systems and components. - - -
Russel Metals Distributes carbon, stainless, aluminum, and copper
12/22/20 Sanborn Tube Sales - - -
(TSX:RUS) and brass tubing.
Industrial Electric Integrated Power Supplies new and used electric motors, reducers, and
12/15/20 - - -
Motor Works Services controls in the United States.
Motion Tech John Henry Foster Distributes motion control and electro-mechanical
12/14/20 - - -
Automation Company products and components.
Supplies information technology (IT) products and
12/09/20 Ingram Micro Platinum Equity $7,200.0 0.2x 6.9x
provides supply chain services.
OEM Parts S.W. Anderson Distributes specialty fasteners, custom components,
12/09/20 - - -
& Tools Company and application tools for Industrial and Power markets.
Midland Metal
12/07/20 Champion Brass Supplies machined brass fittings. - - -
Manufacturing
Southern Wire Southern Rigging Distributes industrial wire ropes, aircraft cables, and
12/02/20 $20.0 - -
Corporation Companies related hardware products.
Supplies pumps, mechanical brakes, electric motors,
12/02/20 McBroom Electric Northline Industrial - - -
servo controls, and variable speed drives,
Shingle & Gibb Graybar Electric Distributes industrial automation, motion control,
12/01/20 - - -
Company Company machine safety, and power transmission products.
Russell Reid Waste Supplies stainless steel products such as fittings, valves,
11/26/20 Sanitary Solutions - - -
Hauling & Disposal accessories, and custom fabrications.
Kyocera
11/24/20 Manor Hardware Distributes construction tools. - - -
(TSE:6971)
Supplies pumps, regulators, valves, sensors,
11/17/20 M-I-C SemiTorr Group - - -
and flow meters.
The Home Depot Distributes industrial products, operating in Facilities
11/16/20 HD Supply $8,000.4 1.3x 8.8x
(NYSE:HD) Maintenance and Construction & Industrial segments.
Jupiter
11/10/20 IEWC Supplies and markets telecommunications equipment. - - -
Communications
Powrmatic du Distributes heating, air conditioning, ventilation
11/03/20 Groupe Deschênes CF CF CF
Canada products, and electrical products.
11/02/20 Delta Distributors AD Supplies valves, fittings, and other industrial products. - - -
Note: CF = confidential; highlighted deals are Capstone’s transactions
Source: Capital IQ, PtichBook, FactSet, and Capstone Research
7
Value-Added Distribution | February 2021
SELECT TRANSACTIONS (CONTINUED)
Enterprise EV / LTM
Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA
Supplies cable products for applications such as
10/21/20 DERYtelecom Cogeco Connexion $405.0 3.9x 9.2x
internet access and phone services.
Aircraft Fasteners Distributes aerospace fasteners and hardware products
10/20/20 SOCIETE AHE - - -
International for the Rotorcraft market.
Advanced Control Applied Industrial Supplies automation products and provides value-
10/07/20 - - -
Solutions Tech. (NYSE:AIT) added services.
Rotunda Capital Distributes hardware technologies such as cables,
10/01/20 FireFly Computers - - -
Partners adaptors, monitors, and charging carts.
Central Janitors’ Perrin Bernard
09/15/20 Supplies janitorial, cleaning, and facility supplies. - - -
Supply Supowitz
Applied Machine & Provides full-service distribution of industrial motion,
09/01/20 Motion Industries - - -
Motion Control machine control, and robotics products.
Distributes garage door fasteners, aircraft cable,
08/28/20 Master Distribution AFC Industries - - -
connecting fasteners, hardware and channel fittings.
BMC Stock Builders FirstSource Supplies building products and provides services for
08/27/20 $2,785.5 0.7x 9.4x
Holdings (Nasdaq:BLDR) homebuilder and contractor customers.
Werner Electric Distributes Rockwell Automation products in
08/27/20 Assets of WESCO - - -
Supply Company Sheboygan Falls, WI.
Excel Industrial Integrates, distributes, and repairs speed drive and
08/13/20 Benshaw - - -
Electronics motion control systems.
White Cap Business Clayton, Dubilier Comprises a concrete and construction products
08/11/20 $2,900.0 - -
of HD Supply & Rice distribution business.
Comprises Rexel’s distribution assets in Pittston, PA
07/31/20 Assets of Rexel USA Schaedler Yesco - - -
and Johnson City, NY.
Advanced Controls Distributes industrial automation controls including
07/31/20 Adcon Engineering - - -
& Distribution motor controls, and industrial wireless products.
Assets of Baynes Granite City Electric Supplies electrical fittings, equipment, and lighting
07/14/20 - - -
Electric Supply Supply Company products in the United States.
Dakota Supply Distributes electrical, heating, industrial,
06/24/20 Honold & LaPage - - -
Group pipe/valves/fitting, and plumbing products.
Assets of Dicon Monroe
06/06/20 Provides turnkey assembly and custom wire harnessing. - - -
Connections Engineering
Assets of Apex Fastenal Comprises assets related to industrial vending products
03/30/20 - - -
Industrial Tech. (Nasdaq:FAST) that include patents, designs, software, and licenses.
DXP
03/06/20 Pumping Systems Distributes industrial pumps and systems. $13.0 0.7x -
(Nasdaq:DXPE)
Distributes and supplies building automation products,
02/25/20 Kele The Stephens Group - - -
electrical wiring materials and sensors.
Galco Industrial Distributes industrial and commercial electrical and
01/22/20 Freeman Spogli - - -
Electronics electronic control, automation, and motion products..
Source: Capital IQ, PtichBook, FactSet, and Capstone Research
8Value-Added Distribution | February 2021
CAPSTONE DEAL HIGHLIGHT
Premier Provider of In-Patient Substance Abuse Treatment Program
Acquired by NewSpring Capital – April 2020
A portfolio company of Capstone Headwaters advised Powrmatic of Canada Ltd. (“Powrmatic”), a
portfolio company of Stamm International Corporation (“Stamm”), on its sale to
Deschenes Group Inc. (“DGI”). Terms of the deal are confidential.
has been acquired by Powrmatic of Canada, founded in 1945 and owned by Stamm International
Corp., is headquartered in Montreal, Quebec, Canada. It is a distributor of
residential, commercial and industrial supplies to the HVACR, Electrical, and
Hearth (Chimneys and Fireplaces) industries.
It operates six branches in the Canadian provinces of Nova Scotia, Quebec
and Ontario. Powrmatic is a member of the marketing / buying group AD
Canada Electrical.
“It is with great pride and enthusiasm that the people at Powrmatic are
joining the DGI family, a leader in our industry. A page of history is turning
after 75 years with the Stamm family. We believe that DGI, with all of its
resources and expertise, will help us continue to grow and reach new
heights.” commented Claude Lapierre, President of Powrmatic.
François Deschênes, President and CEO of DGI, stated, “This acquisition fits
well with our development and growth strategy across Canada. We are very
happy to welcome the talented and experienced team of Powrmatic. With
customer experience being a priority for our organization, the addition of
this company with a customer-centric entrepreneurial culture will tie in well
with our own culture. This will allow Powrmatic and DGI to develop and
grow further. As the company is already successful, no changes are expected
in the short term in its strategy, its operations or the way it does business.
We therefore aim for a smooth transition, both internally for new members
of our family and externally for its customers and suppliers.”
David Bench, Capstone’s Managing Director, reports, “Powrmatic represents
a very strategic add-on for DGI on many fronts - complementary product
line, office locations, management, and company culture - and Capstone is
excited for the future of this business combination.” Managing Director Ted
Polk adds, “The synergistic potential for bringing two such well-run
enterprises together is quite high.”
9Value-Added Distribution | February 2021
PUBLIC COMPANY DATA: GENERAL INDUSTRIAL
Price % 52 Wk Market Enterprise LTM EV / LTM
Company 02/02/21 High Cap Value Revenue EBITDA Margin Revenue EBITDA
Air Liquide SA $164.43 94.2% $77,633.5 $95,674.5 $23,903.7 $6,417.5 26.8% 4.0x 14.9x
Applied Industrial Technologies $71.99 83.7% $2,790.3 $3,348.1 $3,055.0 $274.8 9.0% 1.1x 12.2
DXP Enterprises, Inc. $24.61 67.6% $437.8 $611.7 $1,068.0 $73.5 6.9% 0.6x 8.3x
Fastenal Company $46.42 89.5% $26,652.5 $27,056.9 $5,647.3 $1,460.2 25.9% 4.8x 18.5x
Genuine Parts Company $94.69 87.2% $13,660.4 $16,467.9 $18,435.8 $1,457.2 7.9% 0.9x 11.3x
MSC Industrial Direct Co., Inc. $79.67 90.7% $4,446.8 $4,946.8 $3,140.7 $455.1 14.5% 1.6x 10.9x
Park-Ohio Holdings Corp. $29.25 85.0% $349.1 $930.9 $1,314.3 $66.9 5.1% 0.7x 13.9x
W.W. Grainger, Inc. $370.32 86.5% $19,874.4 $21,659.4 $11,703.0 $1,553.0 13.3% 1.9x 13.9x
Mean 13.7% 1.9x 13.0x
EV = enterprise value; LTM = last twelve months Median 11.1% 1.3x 13.0x
$ in millions, except per share data
NM = Not Meaningful Harmonic Mean 10.0% 1.2x 12.4x
PUBLIC COMPANY DATA: ELECTRICAL & ELECTRONICS
Price % 52 Wk Market Enterprise LTM EV / LTM
Company 02/02/21 High Cap Value Revenue EBITDA Margin Revenue EBITDA
Arrow Electronics, Inc. $100.33 92.7% $7,597.8 $9,691.8 $27,557.4 $954.0 3.5% 0.4x 10.2x
Avnet, Inc. $36.83 87.1% $3,641.1 $4,790.2 $17,860.8 $451.0 2.5% 0.3x 10.6x
Houston Wire & Cable Company $3.42 72.0% $56.6 $133.6 $302.8 $10.0 3.3% 0.4x 13.3x
Rexel S.A. $15.63 91.0% $4,739.5 $8,004.0 $14,616.7 $880.3 6.0% 0.5x 9.1x
WESCO International, Inc. $80.92 92.1% $4,049.5 $9,016.3 $10.,296.6 $650.1 6.3% 0.9x 13.9x
Mean 4.3% 0.5x 11.4x
EV = enterprise value; LTM = last twelve months Median 3.5% 0.4x 10.6x
$ in millions, except per share data
NM = Not Meaningful Harmonic Mean 3.8% 0.4x 11.1x
Source: Capital IQ and Capstone Headwaters Research as of February 2, 2021
10Value-Added Distribution | February 2021
PUBLIC COMPANY DATA: CONSTRUCTION
Price % 52 Wk Market Enterprise LTM EV / LTM
Company 02/02/21 High Cap Value Revenue EBITDA Margin Revenue EBITDA
Beacon Roofing Supply, Inc. $40.67 91.7% $2,822.2 $5,810.3 $6,943.9 $577.2 8.3% 0.8x 10.1x
Builders FirstSource, Inc. $39.42 90.7% $4,604.6 $6,151.5 $7,791.7 $620.9 8.0% 0.8x 9.9x
Ferguson plc $119.26 91.8% $26,702.8 $29,192.1 $21,819.0 $1,836.0 8.4% 1.3x 15.9x
NOW Inc. $8.32 78.3% $910.0 $652.0 $1,939.0 $15.8 0.8% 0.3x NM
Pool Corporation $359.82 89.7% $14,449.9 $14,911.9 $3,679.6 $523.5 14.2% 4.1x NM
Universal Forest Products, Inc. $56.80 88.5% $3,475.4 $3,516.4 $4,758.3 $412.8 8.7% 0.7x 8.5
Watsco, Inc. $244.42 92.3% $8,729.8 $9,182.0 $4,972.5 $495.5 10.0% 1.8x 18.5x
Mean 8.3% 1.4x 12.6x
EV = enterprise value; LTM = last twelve months Median 8.4% 0.8x 10.1x
$ in millions, except per share data
NM = Not Meaningful Harmonic Mean 3.7% 0.8x 11.5x
Last Twelve Month Margin Performance
Gross Margin % EBITDA Margin %
80%
60%
36.5%
40%
24.0%
20% 13.7% 17.8%
8.3%
4.3%
0%
General Industrial Electrical & Electronics Construction
Historical EBITDA Multiple Performance
Construction General Industrial Electrical & Electronics
20x
18x
16x 14.6x
14x 14.4x
EV/EBITDA
12x
10.8x
10x
8x
6x
4x
Note: Index is aggregated through a weighted average
Source: Capital IQ and Capstone Research as of February 2, 2021
11Value-Added Distribution | February 2021
VALUE-ADDED DISTRIBUTION REPORT CONTRIBUTORS
Todd McMahon
Head of Investment Banking
tmcmahon@capstoneheadwaters.com | 617-619-3334
Todd possesses over 20 years of transaction, financial services and corporate executive experience.
Prior to Capstone, Todd was President of Array Financial Services, a Boston based boutique M&A
advisory firm he founded in 2002. He began his career at Putnam Investments, later moving to Bank
Boston’s investment banking group. Later, Todd served as Managing Director at Ross Crossland
Weston/RCW Mirus, where he was responsible for managing the firm’s technology investment banking
practice. Todd’s investment banking experience is complemented by his involvement as an
entrepreneur and investor where he was involved in various consolidation transactions, raised over
$30mm of debt and equity financing and was responsible for managing all aspects of operations.
He earned his MBA from Boston University and his BA from the University of Massachusetts.
Benjamin Kelly
Research Analyst
bkelly@capstoneheadwaters.com | 617-619-3390
Ben joined Capstone Headwaters in 2018 and serves as an Analyst on the Boston Research Team. He
works directly with senior investment bankers, utilizing data and market analysis to deliver key industry
insights to C-suite executives. Ben has a primary focus in the Industrial & Manufacturing and Business
Services sectors.
Prior to joining Capstone Headwaters, Ben worked as an intern at The Baupost Group within its
Portfolio Valuation department. Ben earned a BA in Economics from Providence College and is a
Series 79 Registered Investment Banking Representative.
2020 2020 2019 2019 2019
MIDDLE MARKET US MIDDLE MARKET
INVESTMENT BANKING FIRM INVESTMENT BANKING FIRM INVESTMENT BANKING FIRM
INVESTMENT BANK INVESTMENT BANK
OF THE YEAR OF THE YEAR OF THE YEAR
OF THE YEAR OF THE YEAR
INTERNATIONAL AWARDS TURNAROUND AWARDS
12Value-Added Distribution | February 2021
FIRM TRACK RECORD
A portfolio company of
has been acquired by has acquired certain has recapitalized with
has been acquired by
assets of
a subsidiary of
has been acquired by has been acquired by has sold certain assets to has been acquired by
has been acquired by has been acquired by has been acquired by has recapitalized with
has been acquired by has been acquired by has been acquired by has been acquired by
13Value-Added Distribution | February 2021
CITATIONS
1. ISM, “Manufacturing PMI at 57.7%,” https://www.ismworld.org/globalassets/pub/research-and-
surveys/rob/pmi/rob202102pmi.pdf, accessed February 1, 2021.
2. ISM, “Services PMI at 57.2%,” https://www.ismworld.org/globalassets/pub/research-and-
surveys/rob/nmi/rob202012svcs.pdf, accessed February 1, 2021.
3. Bureau of Economic Analysis, “Gross Domestic Product, 4th Quarter and Year 2020 (Advance Estimate),”
https://www.bea.gov/news/2021/gross-domestic-product-4th-quarter-and-year-2020-advance-estimate, accessed
February 1, 2021.
4. WESCO, “WESCO 3Q 2020 Earnings Presentation,” http://wesco.investorroom.com/events-and-webcasts, accessed
February 1, 2021.
5. PitchBook, “Private Fund Strategies Report Q2 2021,”
https://files.pitchbook.com/website/files/pdf/PitchBook_Q3_2020_Private_Fund_Strategies_
Report.pdf, accessed February 1, 2021.
6. Platinum Equity, “Platinum Equity to Acquire Ingram Micro for $7.2 Billion,”
https://www.platinumequity.com/news/news-articles/2020/ingram-micro-announcement, accessed February 1, 2021.
Disclosure: This report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisi-
tion activity. Information contained in this report 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 report 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 report. The report is published solely for the
general information of clients and friends of Capstone Headwaters. 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 report 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 report. 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 report may be clients of Capstone Headwaters.
The decisions to include any company in this report is unrelated in all respects to any service that Capstone Headwaters may provide to such company. This
report may not be copied or reproduced in any form, or redistributed without the prior written consent of Capstone Headwaters. The information contained
herein should not be construed as legal advice.
14BUILT FOR THE MIDDLE MARKET
Capstone Headwaters is one of the largest and most active independent investment banking firms in the United States. The
firm has a rich, 20-year history of achieving extraordinary results for middle market entrepreneurs, business owners, investors,
and creditors. Capstone offers a fully integrated suite of corporate finance services, including M&A, debt and equity
placement, corporate restructuring, valuation and fairness opinions, financial advisory, and ESOP advisory services.
Headquartered in Boston, the firm has 175+ professionals across 16 offices in the U.S., and an international presence
including over 450 professionals in 40 countries. With 16 dedicated industry groups, the firm delivers sector-specific expertise
through large, cross-functional teams on a global basis.
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