Renewed optimism in the economy is fueling appetite, with acquisition growth a primary strategy in value creation, driving an active M&A market. Highlights in M&A and capital marketing activity include:
- Building Products M&A reached a record level in 2016, with activity signaling broad investor appetite across all industry subsectors. Boral Limited’s announced acquisition of Headwaters headlined deal activity, underscoring continuing strong interest from international buyers in U.S. assets. Melrose Industries (Nortek), dormakaba (Stanley Black & Decker assets, Mesker Openings), and aluplast (Chelsea Building Products) also participated in cross-border deals. In Materials, Cemex accelerated its divestiture activity with Eagle Materials, GCC, and Quikrete picking up strategic assets. Quikrete also made headlines with Contech Engineered Solutions, ramping up its position in the infrastructure market.
- Private equity remains active, with sponsors seeking new platforms and add-ons for existing investments. American Securities (Henry Company), Blue Wolf Capital Partners (Novo Building Products), Graycliff Partners (Oberfields), Madison Dearborn Partners (U.S. LUMBER), and Sun Capital Partners (Arrow Tru-Line) were among the announced platforms. Add-on activity included buys from Audax Private Equity (Fomo Products) and Arsenal Capital Partners (Covestro assets), among others, while private equity-backed distribution platforms of Kelso & Company (U.S. LBM Holdings) and The Sterling Group (Construction Supply Holdings) were acquisitive.
- The capital markets environment remains robust evidenced by rising public equity valuations, plentiful debt and equity capital, and valuation multiple expansion. M&A activity is expected to increase in 2017 supported by availability of capital, the expectation of growth, lower taxes, and potential regulatory changes. In 2016, middle market M&A activity1 was down 9.0 percent year-over-year, with a corresponding 5.1 percent decrease in value. Transaction activity is off to a slower start in 2017 with first quarter deal volume and value down 8.8 percent and 11.1 percent, respectively, from the year-ago period.
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