Despite a substantial decline in metal forming transaction activity during the second and third quarters of 2020, overall transaction volume saw an increase year-over-year from 2019, largely attributable to very robust first and fourth quarters. Quarterly transaction volume increased approximately 110% from the third quarter of 2020 and approximately 40% from the same quarter last year. The significant recovery in transaction activity within the latter part of the year illustrates positive economic tailwinds heading into 2021, pent-up buyer demand for deals, and anticipation of tax rate increases for sellers.

Key Takeaways

• After a substantial decline in activity within the second and third quarters, North American metal forming M&A volume reached a near record high of 42 recorded transactions within the fourth quarter of 2020
• Financial buyers still have abundant capital to invest and continue to dominate metal forming transaction volume
• Strategic buyers have taken advantage of accommodating debt markets to refinance and have ample liquidity to support transactions
• New transactions are attracting significant buyer interest
• Private credit providers are supporting transactions in the absence of more cautious bank lenders
• Public company share prices and valuations suffered in the first quarter due to historic declines in the stock market but have since bounced back in the market rally that began toward the beginning of the second quarter

Quarterly Metal Forming M&A Volume (through December 31st, 2020)

Source: Stout Research

Stout Proprietary Metal Forming M&A Database Highlights

Financial buyers accounted for nearly three-quarters of metal forming transaction volume, roughly in line with 2019. Driven by a robust residential construction sector, the number of Building / Infrastructure transactions increased 28.7% over 2019 and represented approximately 19% of deals announced in 2020. Industrials continue to comprise the bulk of transaction activity, accounting for about 41% of total deals announced in 2020. Volumes in the remaining metal forming sectors were relatively flat versus the prior year.

Share of Transactions by Buyer Type (through December 31st, 2020)

Source: Stout Research

2020 Transaction Volume by Sector

Source: Stout Research

Notable 2020 transactions announced include:

• Zimmer Biomet Holdings Inc.’s (NYSE:ZBH) acquisition of A&E Medical Corp., a portfolio company of Vance Street Capital, for a total consideration of $250 million
• Fortune Brands Home & Security Inc.’s (NYSE:FBHS) acquisition of Larson Manufacturing Company for approximately $740 million, or 8.8x estimated last twelve months EBITDA
• MiddleGround Capital, LLC’s acquisition of Shiloh Industries, Inc. for $218 million
• NN Inc.’s (Nasdaq:NNBR) divestiture of the company’s Life Sciences business to MW Industries, a portfolio company of American Securities, LLC for a total consideration of $825 million (about 12.5x 2020E adjusted EBITDA)
• Stanley Black & Decker Inc.’s (NYSE:SWK) acquisition of Consolidated Aerospace Manufacturing, LLC from Tinicum L.P. for approximately $1.5 billion, or 4.0x 2019 revenue
• RTI Surgical Holdings, Inc.’s (Nasdaq: RTIX) divestiture of the company’s OEM business to Montagu Private Equity LLP for a total consideration of $490 million
• Kymera International’s, a portfolio company of Palladium Equity Partners, LLC, acquisition of Reading Alloys from AMETEK, Inc. (NYSE:AME) for approximately $250 million, or 1.6x annual revenue
• Placements CMI Inc. (Marcel Dutil family), Fonds de solidarité FTQ, and Caisse de dépôt et placement du Québec’s acquisition of the Canadian operations and certain assets in the United States and Overseas of Canam Group Inc. for C$840 million
• Bendix Commercial Vehicle Systems LLC’s acquisition of R. H. Sheppard Co., Inc. from WABCO Holdings Inc. (NYSE:WBC) for approximately $150 million

Select Transaction EV/EBITDA Multiples

Source: Stout Research

Public Company Performance

After a major downturn in the public markets associated with the economic ramifications of COVID-19, a strong rally beginning in the second quarter of 2020 brought the Dow up approximately 10% within 2020, while the S&P 500 and NASDAQ were up 18% and 45%, respectively. Within the metal forming industry, EV/EBITDA multiples for all sectors as of December were above or near year-end 2019 trading multiples.

Public Companies: Last Twelve Months (“LTM”) EV/EBITDA Multiples (December 31, 2014 to December 31, 2020)

Source: S&P CapIQ

Public Companies: LTM EBITDA Margins (December 31, 2014 to December 31, 2020)

Source: S&P CapIQ

As expected, all metal forming share price indices saw negative impacts within the first quarter from market volatility surrounding COVID-19. Despite the initial downward pressure, the historic market rally in the second, third, and fourth quarters of 2020 produced significant increases across all metal forming sectors, with Building & Infrastructure, Industrial, Aerospace, and Medical trading well above December 2015 levels.

Public Companies: Relative Share Price Performance (December 31, 2015 to December 31, 2020)

Source: S&P CapIQ

Metal Pricing 

Domestic metals prices recovered well in the second half of the year to near multi-year highs due to a rapid rebound in demand, lack of imports and low inventories throughout the supply chain. 

Steel

Source: S&P CapIQ

Copper

Source: S&P CapIQ

Nickel

Source: S&P CapIQ

Aluminum

Source: S&P CapIQ

This industry update analyzes Stout’s custom public company indices and proprietary M&A transaction database of North American metal forming transactions. Targeted companies include casting, extrusion, finishing, forging, machining, stamping, and various other processing and fabrication businesses across a wide range of end markets.