TKO Miller Market Analysis
- While tariffs, strained supply chains, and a tight labor supply continue to plague the industrial and construction services sector, production output and performance continue to rise to meet the demands of continued expansion of the economy.
- TKO Miller’s proprietary Industrial and Construction Services Index (see below) rebounded considerably in Q1 (7.5X to 8.7X TEV/EBITDA) following a sharp decline in Q4 2018, however valuations are still well-below recent levels.
- Optimism surrounding the industry’s short term outlook is partially attributable to broad macroeconomic factors, including the Federal Reserve signaling no rate hikes in 2019, a steady outlook for GDP growth, and rejuvenated public market strength. Persisting risk factors include supply chain issues and political uncertainty.
- TKO Miller maintains that a downturn is still possible in the short term, but has not seen the imbalances within the economy that precede a recession.
- Recent activity with industrial and construction services CEOs and business owners indicate strong bidding activity and an optimistic outlook for 2019.
Industrial and Construction Services News
The Benefits of Selling Used Equipment
Increasingly, rental customers expect newer machines and equipment from rental operators. Every rental operator must have a well-thought-out plan for keeping their fleet up-to-date. A lower average fleet age translates into a competitive advantage. Monitoring the fleet age suggests a strategy for roll-out and replacement. Make sure you are asking yourself the right questions when deciding to sell or not to sell. [LINK]
Construction Employment Increases Despite Early 2019 Slowdown
Thirty-seven states added construction jobs between February 2018 and February 2019, although construction employment increased in only 16 states between January and February, according to an analysis by the Associated General Contractors of America. Association officials said the slowdown may reflect the impact of widespread severe weather on construction, as well as a growing shortage of qualified workers, and they urged federal officials to allow contractors to hire year-round construction guest workers. [LINK]
US-China Trade Tensions Continue to Cloud US Construction Industry Outlook
Higher costs of imported building materials could result in slower growth and job creation in the construction industry and affect infrastructure spending. The immediate impacts of the tariffs that were imposed by the U.S. government last year on a wide range of Chinese products along with the tariffs on steel, aluminum, and Canadian lumber are already being felt by the industry. [LINK]
Industrial and Construction Services Valuation Index
Middle Market Valuation Multiples
Industrial and Construction Services Transactions
January 2019 – Liberty Steel USA Completes the Acquisition of Keystone Consolidated Industries Inc. from Contran Corporation
Based in Dallas, TX, Keystone Consolidated Industries Inc., produces and delivers steel fabricated wire products, industrial wires, and wire rods. Liberty Steel USA, a manufacturer of steel slabs, ingots, billets, blooms, rail, rail sleepers, and other related products acquired Keystone Consolidated Industries for $320 million.
January 2019 - H&E Equipment Services, Inc. Completes the Acquisition of Charles Mancuso, Inc.
Charles Mancuso, Inc., headquartered in Bryan, Texas, and doing business as We-Rent-It, rents and sells a wide variety of heavy equipment, including scissor lifts, compressors, hydraulic excavators, and water pumps. H&E Equipment Services, Inc. operates as an integrated equipment services company. H&E Equipment Services, Inc. acquired Charles Mancuso, Inc. for approximately $36 million.
February 2019 - Carmeuse S.A. Acquires Yager Materials, LLC
Based in Owensboro, Kentucky, Yager Materials, is a regional producer of aggregate, asphalt, and ready-mix concrete, in addition to operating concrete plants. Carmeuse S.A. produces and distributes lime and limestone related products for industrial and commercial customers. Yager will operate under the Carmeuse’s Pittsburgh-based group, which has 30 operations and over 1,800 employees in the United States.
March 2019 – Sunbelt Rentals, Inc. Completes the Acquisition of TEMP-AIR, Inc.
Headquartered in Burnsville, Minnesota, TEMP-AIR, Inc. is a national provider of temporary heating, cooling, dehumidifying, and air filtration systems and services for industrial, commercial, and institutional applications. Sunbelt Rentals, Inc. provides equipment rental services. Sunbelt Rentals acquired TEMP-AIR for approximately $120 million to form the nation’s largest provider of HVAC rental solutions.