TKO Miller Market Analysis
- TKO Miller’s proprietary Industrial and Construction Services Index (see below) has continued to trend upwards after a sharp decline in Q4 2018. M&A activity within the industrial sector remains strong as strategic acquirers pursue roll-up acquisition strategies to expand geographic footprints, fleet size, and service capabilities. Private equity activity has contributed to strong deal volume as financial buyers seek out both platform investments and add-on acquisitions to diversify portfolio company capabilities.
- Despite the strong M&A activity, international trade conflicts have led to concerns of a potential slow-down among heavy equipment manufacturers, and, in turn, rental and construction firms. In September, the PMI index (Purchasing Manager’s Index), an index of the direction of economic trends in the manufacturing and services sector, continued a six-month decline and reached its lowest reading since June 2009.
- Tight labor markets, rising material costs, and a particularly poor performance from the residential building sector is expected to lead to relatively flat growth for North America’s construction industry (0.4% - GlobalData) in the short term. However, the industry’s region is expected to regain momentum in the coming years through ongoing investments in national infrastructure development.
Industrial and Construction Services News
Growth Continues for Rental Equipment
Despite some industry experts anticipating a slowdown, the American Rental Association expects the U.S. equipment rental industry to continue to grow consistently over the next few years, with total revenue for 2019 forecasted to surpass $61.3 billion, with increases of 5.0 percent for both the United States and Canada compared to 2018. Similar steady growth is expected in each of the successive years of the forecast to reach $69.8 billion by 2022 in North America while being expected to outpace the overall economy. [Link]
Sunbelt Rentals' Revenue Jumps 18.3% in Fiscal First Quarter
Sunbelt Rentals U.S. posted revenue of $1,380.9 million for the fiscal first quarter ended July 31, compared to $1,167.5 million for the same period last year, an 18.3-percent year-over-year increase. The whole equipment rental group at Ashtead plc totaled £1,278.2 million (about U.S. $1,579.1 million), compared to £1,047.4 million in the year-ago quarter, a 22-percent leap. EBITDA jumped to £626.6 compared to £503.7 million a year ago, a 24.4-percent hike. [Link]
Dodge Data Shows Mixed Results on Starts and Multifamily Construction
On July 19, the American Institute of Architects reported that the residential (mainly multifamily) sub-index of its Architecture Billings Index showed responding architecture firms with a primarily residential practice had a decline in billings, on balance, for the fourth month in a row in June. Construction consultancy Rider Levett Bucknall reported on July 18 that its U.S. National Construction Cost Index increased by 1.1% from January 1 to April 1 and 5.7% from April 2018. [LINK]
Industrial and Construction Services Valuation Index
Middle Market Valuation Multiples
TKO Miller Transaction
TKO Miller Advises Henry G. Meigs on its Sale to Asphalt Materials, Inc., a Division of The Heritage Group
TKO Miller is pleased to announce the successful sale of Henry G. Meigs, LLC (H.G. Meigs), a premier specialty chemical, material, and additive supplier to the asphalt and emulsion industry, to Asphalt Materials, Inc., a leading provider of bituminous products serving the Central Midwest. Asphalt Materials is part of The Heritage Group, a privately held, family-owned holding company with operations in infrastructure, environmental services, and specialty chemicals and materials. H.G. Meigs operates as a manufacturer and supplier of specialty materials that include liquid asphalt cement, cutbacks, and emulsions. The company is headquartered in Portage, WI, and operates two additional terminal locations in Abbotsford and Eau Claire, WI. Founded in 1935, H.G. Meigs has grown to be a leading, trusted provider of high-quality chemical and material products and related services to municipal and contractor customers in the Upper Midwest. [LINK]
Other Industrial and Construction Services Transactions
August 2019 – Cross Country Infrastructure Inc. Acquires Five Star Equipment Rental LLC
Cross Country Infrastructure Services Inc. has acquired Five Star Equipment Leasing and Rental LLC. Cross Country Infrastructure Services provides equipment and supplies to the construction industry. Five Star provides equipment rental solutions and service for all of Oklahoma and its bordering states for the construction, energy, industrial and infrastructure markets.
September 2019 – Maxim Crane Acquires Solley Equipment & Rigging
Maxim Crane Works and Solley Equipment & Rigging LLC jointly announced that the companies have entered into an agreement for Maxim Crane to acquire Solley Crane. Maxim Crane provides engineering, equipment rental, turnkey lift services, rigging and heavy haul and transportation services across the U.S. Solley Crane has operated in Central Tennessee and Northern Alabama since 1972.
September 2019 – Brookfield Business Partners to Invest in BrandSafway
Brookfield Business Partners announced a definitive agreement to acquire half of Clayton, Dubilier & Rice’s, ownership interest in Brand Industrial Services. As a result of the investment, Brookfield and funds managed by CD&R will each own approximately 45% of the Company. BrandSafway management will continue to own a minority interest in the business. BrandSafway is a leading provider of infrastructure services to industrial and commercial facilities on a global basis. The Company delivers scaffolding and other work access solutions, forming and shoring equipment, and numerous specialty industrial services to more than 30,000 customers in more than 30 countries. Brookfield Business Partners is a business services and industrials company focused on owning and operating high-quality businesses that benefit from barriers to entry and/or low production costs.