Metal forming M&A activity in 2019 almost kept pace with 2018’s record volumes with private equity firms driving over half of announced transactions. While public company valuations and margins generally remained strong through the end of the year, the ultimate economic impact of the Covid-19 virus outbreak and resulting equity market sell-off is still unknown.
Metal forming M&A activity finished strong in 2019, nearly matching record volumes in 2018. Financial buyers represented almost two-thirds of transaction volume. Outside of the broad Industrial sector, Aerospace and Building/Infrastructure companies accounted for a third of transactions last year.
Notable transactions announced in the fourth quarter of 2019 include:
Valuations and margins for publicly traded metal forming companies fared well during 2019. The Building/Infrastructure sector had the highest relative average forward EV/EBITDA multiple at year-end while Automotive had the lowest. Valuations have since contracted alongside the market sell-off associated with the Covid-19 virus outbreak. It remains to be seen what impact the virus will have on metal forming company earnings over the coming quarters.
Fueled by strong performance in the broader equity markets last year, share prices in the Building/Infrastructure and Medical sectors continued to outperform other metal forming sectors. However, all indices have been negatively impacted by recent market volatility surrounding Covid-19.
Domestic finished steel and aluminum prices retreated from 2018 highs driven by Section 232 tariffs. Meanwhile, spreads between hot-rolled steel coil and scrap widened in the second half of the year, suggesting there could be some downward pressure on steel prices in 2020. Overall, market participants are anticipating a more stable metals pricing environment in 2020 absent the volatility caused by Section 232 tariffs over the past two years.
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.