Liquidity remains high, with corporate balance sheets flush with cash and debt financing capacity ample to fund acquisitions. The need for acquisition-driven growth among public buyers is keeping M&A multiples for healthy companies strong.
Recent tax legislation has incentivized corporations and other strategic buyers to “buy” versus “build”. Buyers are taking advantage of today’s tax savings window to tap cash flows from acquisitions sooner, and with lower after-tax return hurdles can pay more for quality assets, potentially increasing valuations.
Manufacturing has been particularly active as participants seek value-added capabilities to capture margin. AK Steel’s $360 million acquisition of Precision Partners, which specializes in lightweighting and complex metal components, expands its value proposition in the automotive market, fetching a premium valuation at approximately 7x adjusted 2017 EBITDA. Park-Ohio acquired Canton Drop Forge, a maker of custom closed die forgings and components, to increase its presence in the global aerospace market. Service centers continue to pursue service line and geographic expansion. Ryerson, Olympic Steel, Russel Metals, and Samuel, Son & Co. each announced bolt-on acquisitions during the last six months.
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