M&A Newsletter – June 2022
by Taureau Group
Market Summary
- Valuations averaged 7.3x, matching the mark for all of 2021, but down two-tenths of a turn from the 7.5x average recorded in Q3 and Q4.
- Senior and total debt for the quarter averaged 3.2x and 3.9x, respectively, down from 3.3x and 4.0x, respectively, against the 2021 figures. If this trend continues, we will look back on these figures as early evidence that rising interest rates have begun to outweigh the volume of dry powder to impact private equity backed transactions.
- The two industries showing the highest EBITDA multiples through Q1 2022 were technology and health care services at 7.8x. EBITDA multiples for all manufacturing companies averaged 7.4x, which is above historical averages.
- While down in total number of deals reported, Q1 2022 continued a trend of an unusually high percentage of deals meeting the standards for “above-average” financial performance underlying the calculation of a “quality premium”.
- Platform buyouts averaged slightly lower EBITDA multiples than add-ons through Q1 2022, 7.1x compared to 7.5x, respectively.
What’s New at Taureau Group
- March – Engaged by industrial machinery company for consideration of potential sale.
- March – Taureau Group proudly sponsored BizTimes Media 2022 M&A Forum – The M&A Boom: Are We Nearing the End?
- April – Nick Mydlach welcomed a healthy baby girl to the family.
- April – Taureau Group participated as a Gold Sponsor at Manufacturing Matters!.
- April – Ann Hanna is voted onto Third Ward Association Board.
- May – Completed the acquisition of Universal Separators, Inc. dba SmartSkim for Sentry Equipment Corp.
- May – Completed sale of infrastructure product manufacturer.
- May – Taureau Group hosted the ACG Wisconsin Women’s Network event.
- May – Ciara Jones graduated from Marquette University with a B.S. in Finance.
- June – Engaged by niche metal manufacturer for consideration of potential sale.
- June – Ann Hanna is appointed as an independent board member at Penrod, Inc., a leading Salesforce Expert Navigator in healthcare and life sciences.
The big story for the first quarter wasn’t about what buyers were paying, but rather what deals were getting done in the early months of 2022. While valuations held steady, a host of complicating factors has arisen, including Russia’s war in Ukraine, a surge in commodities prices, a significant interest rate increase and ongoing supply-chain issues, that are likely to continue to impact the deal environment over the next few quarters.
Active Broad Acquisition Searches
- ESOP client looking to establish new platforms in a broad variety of niche manufacturing and business service industries with EBITDA of $2 million or more and total enterprise values greater than $10 million.
- ESOP client looking to make acquisitions of highly engineered industrial product manufacturing or engineering companies with less than $20 million of revenue.
- Acquisition or partnership opportunities for buy-side client looking for automobile technology and power access companies with revenues less than $100 million.
- ESOP client looking to make acquisitions of metal fabricators with manufacturing facilities in Southeast U.S. with revenues between $5 million – $50 million.
- Acquisition opportunities for buy-side client looking for steel erectors focused on Southeast U.S. market with revenues less than $40 million.
- ESOP client looking to make acquisitions of highly engineered industrial equipment manufacturers with revenues between $10 million – $30 million.
Featured Insights
- 2022 Volume 1 Information Technology Services – Download the industry report here.
- We Know Metal Fabrication – Read the article here.
Market Statistics
Total Enterprise Value (TEV)/EBITDA*
| TEV | ’03-17 | ’18 | ’19 | ’20 | ’21 | YTD’22 | Total |
|---|---|---|---|---|---|---|---|
| 10-25 | 5.7 | 5.9 | 6.1 | 5.9 | 6.1 | 6.6 | 5.8 |
| 25-50 | 6.4 | 6.9 | 6.9 | 6.8 | 7.0 | 6.9 | 6.5 |
| 50-100 | 7.1 | 8.8 | 7.5 | 8.0 | 8.3 | 8.5 | 7.5 |
| 100-250 | 7.9 | 8.7 | 9.3 | 8.6 | 9.0 | 9.3 | 8.3 |
| Total | 6.4 | 7.2 | 7.0 | 7.0 | 7.3 | 7.3 | 6.7 |
TEV/EBITDA—By Industry Category*
| Industry | ’03-17 | ’18 | ’19 | ’20 | ’21 | YTD’22 | Total |
|---|---|---|---|---|---|---|---|
| Manufacturing | 6.1 | 6.9 | 6.5 | 6.7 | 7.1 | 7.4 | 6.3 |
| Business services | 6.5 | 7.1 | 7.1 | 7.0 | 7.3 | 7.0 | 6.7 |
| Health care services | 7.2 | 7.8 | 8.4 | 7.8 | 8.0 | 7.8 | 7.5 |
| Retail | 6.7 | 7.5 | 9.3 | 6.9 | 8.0 | 7.7 | 7.0 |
| Distribution | 6.5 | 6.9 | 7.0 | 7.5 | 7.3 | 7.1 | 6.7 |
| Media & Telecom | 7.4 | 7.8 | 7.0 | 8.3 | 6.3 | NA | 7.4 |
| Technology | 7.8 | 9.6 | 10.0 | 7.6 | 9.4 | 7.8 | 8.2 |
| Other | 6.1 | 7.0 | 6.5 | 6.2 | 6.5 | 7.4 | 6.3 |
Senior Debt/EBITDA—Splits by Period*
| TEV | Q220 | Q320 | Q420 | Q121 | Q221 | Q321 | Q421 | Q122 |
|---|---|---|---|---|---|---|---|---|
| 10-25 | 4.0 | 2.7 | 3.0 | 4.3 | 2.9 | 2.3 | 3.7 | 2.6 |
| 25-50 | 2.2 | 2.6 | 2.9 | 3.3 | 2.5 | 3.5 | 3.0 | 3.8 |
| 50-100 | 2.2 | 2.6 | 2.9 | 3.2 | 2.9 | 3.1 | 3.2 | 3.7 |
| 100-250 | 2.6 | 3.2 | 4.0 | 3.7 | 3.5 | 3.7 | 3.5 | 2.7 |
| Total | 2.7 | 2.7 | 3.1 | 3.7 | 2.8 | 3.1 | 3.3 | 3.2 |
*Source: GF Data®. Information included from GF Data may not be used or re-published without permission from GF Data or Taureau Group.
View the PDF version of M&A Quarterly