The first quarter of 2019 saw the pace of M&A activity taper from the highs of 2017 and 2018 to levels in line with what the industry experienced in 2013 - 2015. Although total transaction volume remained relatively light, the first quarter saw meaningful activity in the retail segment, as Monro further expanded its network to about 1,200 locations in 28 states. The commercial/off-the-road (OTR) segment, in line with our prior views on a reshuffle and consolidation, saw yet another notable divestiture as 46 Bridgestone GCR locations were acquired by Southern Tire Mart. Both the wholesale and manufacturing segments saw transaction volume consistent with prior quarters.

Key Takeaways:

• Consolidation trend continued within the retail segment as acquirers focused on footprint expansion and integrating e-commerce capabilities within traditional brick-and-mortar environments
• M&A engagement was active both domestically and abroad, with a majority of activity coming from strategic acquirers
• First-quarter transaction volume normalized compared with prior two years
• Domestic M&A activity was evident in the commercial/OTR segment as regional players expand and rationalize service networks

Historical M&A Trends by Period / Sector

Total Transaction Count

Note: Double-count of transactions, which are included in multiple industry sub-sectors/categories, have been removed.

Transactions per Sector

Note: For the three-month period from January 1 – March 31 for each of the years listed above.

Retail

Retail M&A Transactions - Q1 2019

Monro Inc. (NasdaqGS:MNRO)

In the first quarter, Monro announced its acquisition of California-based Certified Tire & Service, the nation’s 27th largest independent tire dealership. The acquisition of Certified adds 40 locations to Monro’s portfolio and deepens its reach within the West Coast retail market. In a spree of related first-quarter M&A activity, Monro acquired Florida-based Rick Johnson Auto & Tire (13 locations), Ohio-based Jeff Pohlman Tire & Auto Service (five locations), and an undisclosed Louisiana-based retail chain operating roughly a dozen locations. Monro’s first-quarter efforts are expected to add approximately $132 million in annualized sales and bring the company’s combined presence to 1,197 company-operated stores, 98 franchise locations, eight wholesale locations, and three retread facilities across 28 states.

True Capital Partners

In February 2019, private equity firm True Capital Partners announced its acquisition of Tyres On The Drive, a U.K.-based mobile tire fitter. Tyres On The Drive operates an online model whereby customers sort through tire choices specific to a particular vehicle and choose a time window and preferred location for tire fitting. This acquisition reinforces themes echoed in prior reports: bridging the gap between retail e-commerce and traditional brick-and-mortar services.

Wholesale

Wholesale M&A Transactions - Q1 2019

Trelleborg Wheel Systems

Trelleborg Wheel Systems announced its acquisition of Montreal-based Pneus ICM in January 2019. Pneus ICM is a main service provider to eastern Canada, and is the second-largest industrial tire dealer in the Montreal region. Trelleborg management cited the strong local presence of Pneus, as well as increased global reach and the opportunity to expand replacement service offerings, as primary drivers behind the transaction.

Commercial / OTR

Commercial / OTR M&A Transactions - Q1 2019

Bauer Built

In March, Wisconsin-based Bauer Built acquired the tire division of Allied Oil & Tire. The acquisition includes seven commercial outlets in five states, a Michelin Retread Technologies (MRT) retread plant, and a wheel refinishing location, extending Bauer’s commercial reach to 40 sales/service locations and eight retread plants across 10 states in the Midwest. Bauer’s management team called the acquisition a “perfect fit” noting significant product overlap between the two companies and that both companies are part of the Michelin Commercial Service Network and operate MRT retread plants. Furthermore, Bauer believes the acquisition strengthens its current geographic footprint, fills voids in existing markets, and provides expansion into new areas.

Southern Tire Mart

Southern Tire Mart announced its acquisition of 46 GCR Tires & Service stores and six retread plants, from Bridgestone Americas, in March. The pending deal will expand Southern Tire Mart’s reach to more than 135 commercial tire locations in 14 states, including entry into Alabama, New Mexico, Utah, and Virginia. This is the third deal involving the divestiture of GCR assets in recent years, bringing Bridgestone’s total GCR presence to about 130 stores, down from its peak of more than 200 total locations across the U.S. and Canada.

Manufacturing

Manufacturing M&A Transactions - Q1 2019

Coker Group

In January, Irving Place Capital-backed Coker Group announced its acquisition of two aluminum wheel manufacturers, PS Engineering and Vintage Wheel Works. PS Engineering offers aluminum wheels for vintage racing, motorsports, and muscle cars, and Vintage offers iconic aluminum wheel styles reminiscent of the 1960s and 1970s. Coker will become a distributor of both brands, as management calls the additions a “natural fit” representing a continued focus on the restoration market. This is Coker Group’s second acquisition since its purchase by Irving Place Capital in the fourth quarter of 2018.

Michelin (ENXTPA:ML)

Michelin announced in January 2019 its acquisition of Indonesian tire manufacturer PT Multistrada Arah Sarana TBK. The Multistrada acquisition adds production capacity of more than 180,000 tons and grants Michelin entrance into the highly promising Indonesian market, which is dominated almost entirely by local production. Michelin has expressed an interest in converting production at Multistrada’s facilities from Tier 3 passenger car tires to Tier 2 Michelin Group brands, thereby allowing more Tier 1 production at other Asian plants, while also supporting growth of demand in Tier 2 volumes across Europe, North America, and Asia.

Sources for all charts: S&P Capital IQ and Stout Research