Transaction Activity Strong Out of the Gate for First Half of 2019

July 25, 2019

The industrial services sector started out the first half of 2019 with strong transaction volume domestically and internationally. Following a volatile end to 2018, public markets activity gained positive traction in the first two quarters of 2019, with most segments realizing positive gains over the fourth quarter of 2018. Trading multiples also trended positively in comparison with the end of 2018, with LTM EBITDA margins remaining strong across the board.

Digitization and automation continue to drive growth through innovation in the transportation and logistics segment with strong consumer spending and commercial infrastructure development bolstering construction/contracting and ancillary services segments. Private equity firms continue to be seen active on both sides of the transaction, exiting successful portfolio companies and putting “dry powder” to work in new attractive investment opportunities. Cross-border transaction activity from large strategic buyers continued to be prominent as geographic and end market diversification remains a competitive differentiator.

Geopolitical activity and infrastructure spending will be headlines to watch throughout the rest of 2019 with respect to expected performance in industrial services.

Key Takeaways

  • Continued strong overall industrial services M&A activity, with international strength in certain segments
  • Increased emphasis on sustainability and automation drive change across key industrial services segments
  • Public equity performance grows consistently in the first half of 2019 following volatility period at the end of 2018
  • Valuation multiples up from 2018 three-year low but still down from 2017 highs
  • Gradual uptick in valuation multiples from the fourth quarter 2018 indicates continued industry strength

Historical Enterprise Value / EBITDA Multiples1

Industrial Services 1H 2019 - Historical Enterprise Value EBITDA Multiples

(1) Multiples above 20x are excluded from the mean/median calculation; data represents the overall median of all nine sub-segment benchmarks presented in this report

Industry Statistics

5 –Year Historical Share Price Performance

Industrial Services 1H 2019 - 5 Year Historical Share Price Performance  

Operating and Market Performance

LTM EBITDA Margin

Industrial Services 1H 2019 - LTM EBITDA Margin

Enterprise Value / LTM EBITDA 1,2

Industrial Services 1H 2019 - Enterprise Value LTM EBITDA

(1) Multiples above 20x are excluded from the mean/median calculation
(2) Median from public comp sets featured in report

Construction & Contracting Services

The construction and contracting services segment saw a handful of strategic transactions poised towards expanding scale and geographical reach and diversification, as businesses continue to adapt to changes in technology, automation, and federal policy. Private equity is seeing more and more opportunity investing in the segment given the infrastructure pipeline in North America presenting significant opportunities for upgrades, renewal, rehabilitation, repair, and retrofit work. Notable transactions include:

  • The Pace Companies was acquired by Aterian Investment Partners in April. Pace is a full-service plumbing, fire-protection, and mechanical contractor headquartered in Brooklyn, NY
  • Concrete Pumping Holdings, Inc. has announced it will be acquiring Capital Pumping LP, a concrete pumping and construction services company, in a transaction valued at approximately $129.0 million. Bruce Young, CEO of Concrete Pumping Holdings, noted that the acquisition will expand the combined entities’ presence in the South, most notably in Texas
  • The Blackstone Group (NYSE:BX), has agreed to acquire a majority stake in Hong Kong International Construction Management Group Co. Ltd (HKICIM) for $894.8 million. HKICIM is the construction services subsidiary of China’s HNA Group

Public Comparables1

Industrial Services 1H 2019 - Construction & Contracting Services  - Public Comps

(1) Multiples above 20x are excluded from the mean/median calculation

Select M&A Transactions

Industrial Services 1H 2019 - Construction & Contracting Services  - Select MA Transactions

Diversified Services

The diversified services segment saw a mixture of large strategic acquisition activity as industry players pursue complimentary service offerings and capabilities, as well as private equity buyers diversifying industrials-oriented portfolios. Notable transactions include:

  • EQT Partners’ Infrastructure Private Equity Fund announced that it has acquired Osmose Utilities Services, Inc., a leading provider of inspection, maintenance, restoration, and other ancillary services for utility and telecommunications infrastructure
  • Valmont Industries, Inc. (NYSE:VMI) has acquired the operational assets of Larson Camouflage, a market leader in architectural and concealment solutions for the wireless telecommunication and industrial services markets. Valmont, a global leader in designing and manufacturing engineered products that support global infrastructure development, notes that the acquisition advances its growth strategy in the wireless communication market

Public Comparables1

Industrial Services 1H 2019 - Diversified Services - Public Comps

(1) Multiples above 20x are excluded from the mean/median calculation

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Industrial Services 1H 2019 - Diversified Services - Select MA Transactions

Engineering & Architectural Services

The engineering and architectural services segment traded at the highest multiples in the group. Transaction activity was dominated by strategic acquirers consolidating on an international scale and private equity funds exiting successful portfolio companies. Notable transactions include:

  • WSP Global Inc., one of the world’s largest engineering professional services firms, announced that it has entered into a definitive agreement to acquire Indigo Planning Ltd., an award-winning development planning company based in the United Kingdom
    • In a related transaction, WSP Global Inc. acquired Leach Wallace Associates, an engineering services business focused on the healthcare sector. The transaction creates the largest North American provider offering healthcare engineering services
  • Goldbeck Bauelemente Bielefeld (“Goldbeck”) announced it has taken over GSE Groupe SA from Towerbrook Capital Partners in a transaction valued at approximately $143.0 million. Goldbeck and GSE representatives noted that the business combination is complementary and will strengthen the combined entities’ service capabilities and geographic reach

Public Comparables1

Industrial Services 1H 2019 - Engineering and Architectural Services - Public comps

(1) Multiples above 20x are excluded from the mean/median calculation

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Industrial Services 1H 2019 - Engineering and Architectural Services - Select MA Transactions

Environmental Services

Environmental services continues to be a strong segment for acquisition activity as private equity firms seek to take advantage of changes in regulation and technology, as well as an increased emphasis on sustainability. Strategic buyers remain active in the space, consolidating regional players and expanding service offerings. Notable transactions include:

  • Waste Management, Inc. (NYSE:WM), agreed to acquire Advanced Disposal Services in a transaction valued at approximately $4.9 billion. The transaction is expected to be immediately accretive to Waste Management’s earnings and cash flow and will result in more than $100 million of projected cost and capital expenditure synergies
  • GenNx360 Capital Partners, a private equity firm headquartered in New York City, announced that it has acquired a majority stake in Miller Environmental Group, Inc., an environmental services provider for the utility, transportation, and petrochemical industries
  • Republic Services, Inc. (NYSE:RSG) has entered into an agreement to acquire High Country Disposal and Deschutes Recycling from Bend Garbage Co. The acquired subsidiaries provide waste management, recycling, and environmental services in Oregon

Public Comparables1

Industrial Services 1H 2019 - Environmental Services - Public Comps

(1) Multiples above 20x are excluded from the mean/median calculation

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Industrial Services 1H 2019 - Environmental Services - Select MA Transactions

Equipment Rental & Leasing

The equipment rental and leasing segment continued to benefit from industry consolidation among large strategic serial acquirers pursuing roll-up acquisitions to expand geographic footprint, fleet size, and service capabilities. Notable transactions include:

  • Cooper Equipment Rentals, a portfolio company of SeaFort Capital, acquired Prime Rentals Ltd. An Alberta, Canada-based provider of heavy construction and industrial equipment. The acquisition expands Cooper Equipment Rentals’ fleet and strengthens its presence in Southern Alberta
  • Maxim Crane Works, L.P., a portfolio company of Apollo Global, has entered into a definitive agreement to acquire Gulf Coast Region-based B&G Crane Service, LLC, one of the largest crane rental and related lift equipment servicing providers in its region. Maxim will integrate B&G with its existing operating business
    • Maxim Crane Works also announced after the B&G Crane Service acquisition that it has acquired Shaughnessy Companies, one of the oldest crane rental and aerial lift solutions providers servicing the greater Boston area

Public Comparables1

Industrial Services 1H 2019 - Equipment Rental & Leasing - Public Comps

(1) Multiples above 20x are excluded from the mean/median calculation

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Industrial Services 1H 2019 - Equipment Rental & Leasing - Select MA Transaction

Facilities Services

Ongoing demand for integrated facility management continued to drive transaction volume in the first quarter for the facilities services segment. Aggressive platform and add-on acquisition activity from financial sponsors led activity in the segment this quarter. Notable transaction details include:

  • The Blackstone Group (NYSE:BX) has announced its acquisition of Servpro Industries, a provider of commercial and residential facilities services, including facility management, cleaning, and restoration services. The transaction is reportedly worth $1 billion
  • Affinity Equity Partners, a Hong Kong-based private equity firm, entered into a contract to acquire a majority stake in SERVEONE Co., Ltd., a South Korean provider of facilities repair and operation services, in a transaction valued at approximately $551.5 million 

Public Comparables1

Industrial Services 1H 2019 - Facilities Services - Public Comps

(1) Multiples above 20x are excluded from the mean/median calculation

Select M&A Transactions

Industrial Services 1H 2019 - Facilities Services - Select MA Transactions

Industrial Services

Private equity add-on acquisition activity led industrial services’ strong deal volume in the first half as financial buyers seek to diversify portfolio company service capabilities through a roll-up strategy. Private equity platform activity and strategic buyer consolidation also remained present. Notable transactions include:

  • Audax Private Equity, a leading global private equity firm, has acquired Reedy Industries, a leading provider of industrial services, including HVAC, mechanical, and energy solutions
  • Brand Industrial Services (BrandSafway), a portfolio company of Clayton, Dubilier & Rice, announced that it has entered into a definitive agreement to acquire Century Elevators, a leading industrial services company that provides construction and industrial elevators, hoists, and transport systems
    • In a related transaction, BrandSafway announced it acquired Lyndon Scaffolding, an access solutions company for commercial construction and industrial markets
  • CenterGate Capital announced its acquisition of Mid-State Industrial Maintenance, a provider of on and off-site industrial maintenance and repair services for the chemical processing, power generation, and building products industries

Public Comparables1

Industrial Services 1H 2019 - Industrial Services - Public Comps

(1) Multiples above 20x are excluded from the mean/median calculation

Select M&A Transactions

Industrial Services 1H 2019 - Industrial Services - Select MA Transactions

Mining Services

Strong international M&A activity from strategic buyers seeking to expand geographic coverage drove deal volume in mining services in the first quarter. Notable transactions include:

  • Qube Holdings Ltd. has entered into a definitive agreement to acquire LCR Group, a specialized provider of logistics and industrial services for the mining and renewable energy industries, for $135 million. The acquisition enables Qube with the ability to enhance its broad mining services offering and grow its customer base
  • CVF Capital Partners, a private equity fund headquartered in California, announced that it has acquired BEKS Acquisition, Inc. (dba BC2 Environmental), a leading provider of geotechnical drilling and mining solutions
  • Asahi Holdings, LLC has announced that it has won an auction to acquire the assets of Republic Metals Corp. (RMC), a Miami-based special metals refining service company. The assets reportedly were acquired out of bankruptcy for $26.0 million

Public Comparables1

Industrial Services 1H 2019 - Mining Services - Public Comps

(1) Multiples above 20x are excluded from the mean/median calculation

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Industrial Services 1H 2019 - Industrial Services - Select MA Transactions

Transportation & Logistics

M&A activity in the transportation and logistics segment continued to flourish as strategic buyers seek to grow geographic footprint through acquisition and private equity firms pursue investments in technologically advanced leaders. Notable transactions include:

  • Wind Point Partners, a Chicago-based private equity firm, has acquired A&R Logistics from private equity firm Mason Wells. A&R Logistics is a specialized provider of dry bulk hauling for producers and distributors of chemicals and plastics
  • C.H. Robinson Worldwide, Inc. acquired The Space Cargo Group, a leading provider of freight forwarding and logistics services in Spain and Colombia, in a deal valued at approximately $47.3 million. C.H. Robinson officials note that the acquisition expands the company’s global presence with an enhanced footprint in new markets
  • J.B. Hunt Transport, Inc. (NASDAQ:JBHT) completed its acquisition of Joseph Cory Warehouses, Inc., a final mile delivery and ancillary logistics services provider, for $100 million. The deal will strengthen J.B. Hunt’s final mile delivery capabilities and furniture delivery platform

Public Comparables1

Industrial Services 1H 2019 - Transportation & Logistics - Public Comps

(1) Multiples above 20x are excluded from the mean/median calculation

Select M&A Transactions

Industrial Services 1H 2019 - Transportation & Logistics - Select MA Transactions

 

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