COVID-19 Impact on M&A
Total M&A activity for the diversified industrial industry between March 22 – December 31 is down nearly 26% (394 transactions) compared to the same period in 2019 (531 transactions). Strategic buyers drove over 86% of transactions between March 22 – December 31 (329 transactions). Similarly, 2019 saw nearly 87% of transactions (446 transactions) completed by strategic buyers within the same period. Transaction volume comprised of targets primarily engaged in trading and distribution continues to lead the industry with over 42% of transactions (166 transactions), followed by industrial machinery with nearly 37% of transactions (145 transactions).
Industrial Production Sees Further Gains in Q4
Industrial production increased by 0.4% in November. The gain in production is the most recent increase of the slow climb back to pre-pandemic production levels after hitting rock bottom in February and April. Since April, production has increased by 9%, leaving production 5.5% lower in November compared to last year at the same time. The slight gain in production was led by business equipment output increasing 2% and mining increasing 2.3%, which was offset by a decline in utilities of 4.3%. Other production areas such as consumer goods, construction, and materials saw slight increases and decreased to net a positive increase of 0.4%.1
GreatStar Tools USA Acquires Shop-Vac Corporation
GreatStar Industrials, one of the largest hand tool manufacturers in Asia, acquired the wet/dry vacuum systems company Shop-Vac Corporation. GreatStar plans to reopen Shop-Vac’s Williamsport, PA factory as well as rehire many employees who departed after the factory shut down this past September. GreatStar plans to reestablish the Shop-Vac brand through a combination of both Asian and U.S. based manufacturing to target the U.S. hand tool market further.2
Manufacturing Finishes 2020 on High Note
Rises in new manufacturing orders and bustling trade fueled a strong month for the U.S. manufacturing sector in December, despite a coronavirus resurgence. The U.S. Manufacturing Purchasing Managers Index (PMI) climbed to 57.1 in December from 56.7 in November. The gain represents the largest of eight straight months of improvement for the index after hitting its lowest in April during the most severe shutdowns. The improvement is largely a result of a strong pricing environment for the sector.3
Boeing 737 Max Cleared for Flight as More Orders Are Cancelled
Boeing has been logging more cancellations than orders for its Boeing 737 through November and December. Despite the plane being cleared for flight this quarter after a 20-month grounding, COVID restrictions straining the airline industry have not helped restore faith in the infamous plane. The most notable cancellations were 88 plane orders from Virgin Australia and Air Lease this quarter. Boeing’s backlog in November stands at 4,240 planes, 35 planes lower than the prior month.4 5
U.S. Auto Industry Fared Well Given The Pandemic
The U.S. auto industry is poised to end 2020 with new car sales down at least 15% compared to 2019. Although 2020 sales will likely be the fourth largest annual decline in the industry's history, the overwhelming sentiment holds that the decline could have been far worse. With Q2 2020 sales dropping by 34% and April forecasts for the year anticipating declines as low as 80%, the industry's resurgence during the 3rd and 4th quarters was a huge positive for one of the hardest hit industries in 2020.6
Aluminum Finishes 2020 at Year High
Aluminum prices have made more than 40% gains since the May 2020 low. The rebound results from automakers and other aluminum manufacturers recovering faster than expected in the second half of the year. Another product driving up demand for aluminum is beverage cans, which has outpaced expectations in the last two quarters of 2020. Aluminum prices for December gained 13% year-over-year.7
Investment in Plastics Outpace Demand
Petrochemical makers are reassessing many multibillion-dollar U.S. projects as the pandemic halts a growing demand for plastics. Though the pandemic accelerated the process, investments in ethylene and other plastic-making ingredients have outpaced demand consistently for the past five years. U.S. polyethylene production has grown by 39% since 2015, compared to a 17% and 2% rise in global and domestic demand over the period, respectively.8
Largest Transactions Closed
- Substantially All Assets of Briggs & Stratton Corporation
- The Home Depot, Inc.
- Construction & Industrial White Cap Business of HD Supply, HD Supply Holdings, and HD Supply GP
- Clayton, Dubilier, & Rice, LLC
- 149,000 Acres of Southern Oregon Timberlands
- Hancock Natural Resource Group, Inc.
- MVE Biological Solutions
- Cryoport, Inc.
- Kindred Systems, Inc/Haddington Dynamics, Inc.
- Ocado Group plc
- PalletOne, Inc.
- UFP Industries, Inc.
- Strata Materials, LLC
- Arocsa, Inc.
- 72,440 Acres of Forestland in Northern and Central Minnesota
- The Conservation Fund
- Applied Vision Corporation
- Antares Vision, Inc.
- All the Assets of Howell Tractor and Equipment, LLC
- Alta Equipment Groups, Inc.
This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.
EBIT - Earnings Before Interest and Taxes