Diversified Industrials Q4 2022

Industry Trends

Manufacturing PMI Falls Despite Production Growth in Key Industries

The Manufacturing Purchasing Manager Index (PMI) registered 48.4%, a second straight month of contraction after 30 straight months of expansion. However, the Backlog of Orders Index was 1.4 percentage points higher than in November, although still at contraction levels. Despite the overall manufacturing contraction, four industries - Primary Metals; Electrical Equipment, Appliance & Components; Machinery; and Transportation Equipment - remained resilient and reported growth in the Production Index.¹

Caterpillar's Demand for Construction Equipment Increase Sales

Caterpillar’s sales in Q4 increased 21% due to rising demand for its engines and equipment for mining, construction, transportation, and energy generation. Machinery and engine sales in North America grew by 33% relative to Q4 2021. Demand remains strong across most of the company’s end markets, expanding sales to $15 billion in the quarter, primarily due to price increases aimed at mitigating rising costs.²

U.S. Car Makers Invest Billions into EV Factories

As of November, $33 billion is planned for investment into new U.S. factories producing electric vehicles and batteries. Car makers are planning the U.S. factories as electric vehicle demand grows and new federal subsidies promise lower manufacturing costs. A large portion of the investments in manufacturing are directed toward southern states. Apart from developable land, these states offer less expensive energy than traditional manufacturing states, a significant factor for this energy-intensive industry.³

Mining Costs Reach Highest Levels in Decades

Mining operational and capital expenditure costs are at 20-year highs due to record-high inflation. Mill and underground expenditures are a significant source of inflation for the industry due to expensive equipment, the use of fuel and explosives, and deeper mining. Although expenditures are at all-time highs, employment and labor costs have grown mildly, and demand for mining products continues to accelerate.⁴

Largest Transactions Closed

Target
Buyer
Value($mm)

Substantially All Assets of Ahern Rentals, Inc. and Xtreme Re-Rental, LLC
United Rentals (North America), Inc.
$2,000.00
Formerra
H.I.G. Capital, LLC
$950.00
Resolute Industrial, LLC
Aggreko, LLC
$440.00
Fori Automation, Inc.
Lincoln Electric Holdings, Inc.
$427.00
Durex Industries, Inc.
Spirax-Sarco Engineering plc
$342.20
GGB, Inc.
The Timken Company
$305.00
Lee Container Corporation, Inc.
Greif, Inc.
$300.00
Arcosa Tank, LLC
Black Diamond Capital Management, L.L.C.
$275.00
One Source Equipment Rentals, Inc.
H&E Equipment Services, Inc.
$130.00
Dosatron International, Inc.
Ingersoll Rand Inc.
$105.00

Other Financial Buyer Transactions Closed

Target
Buyer
Value($mm)

Quality Valve, Inc.
The Stephens Group, LLC
n/a
Bulk Lift International LLC/Bagwell Supply Ltd
New Water Capital, L.P.
n/a
Centric Machining Solutions LLC
Continuim Equity Partners
n/a
A. Stucki Company
Stellex Capital Management LLC; Eldridge Industries LLC
n/a
Algus Packaging, Inc.
Mereo Capital Partners, LLC; Hyperion Capital Partners
n/a
Tide Tamer Industries, Inc.
MPE Mgt. Co., Llc; Waterfront Brands, LLC
n/a
SixAxis, LLC
MiddleGround Management, LP
n/a

Other Strategic Buyer Transactions Closed

Target
Buyer
Value($mm)

Substantially All of the Assets of Spencer Aerospace Manufacturing, LLC
Park-Ohio Holdings Corp.
$100.00
Vandermeer Forest Products, Inc.
Senior plc
$67.00
Ecoverse Industries LLC
BlueLinx Corporation
$66.80
Peerless Machinery Corp.
Alta Equipment Group Inc.
$59.00
Municipal waterworks division of Trumbull Industries, Inc.
Hillenbrand, Inc.
$45.00
Substantially all the assets and operations of TowHaul Corporation
Core & Main, Inc.
$43.30
Substantially all of Circle 8 operating assets
Federal Signal Corporation
$42.10
Unimacts Global, LLC
Ault Alliance, Inc.
$39.00
VT Halter Marine/ST Engineering Halter Marine Offshore
Zetwerk Manufacturing Businesses Pvt. Ltd.
$15.00
skyTran, Inc.
Bollinger Shipyards, L.L.C.
$15.00

Served as advisor to Burkhalter Rigging on their growth capital raise

Served as advisor to W.W. Grainger, Inc. on their acquisition of Imperial

Served as advisor to Hisco, Inc. on their acquisition of All-Spec

Served as advisor to Kreuger International as they became 100% ESOP owned

Served as advisor to National Oak Distributors on their capital raise for ESOP purposes

Served as advisor to Zak Incorporated on their acquisition by LAI International and RLJ Equity Partners

Served as advisor to Crane Rental Corporation in their recapitalization by Hammond Kennedy Whitney

Data Assumptions

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.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

Cahill, K. “Manufacturing PMI® at 48.4%; December 2022 Manufacturing ISM® Report on Business.” ISM Report on Business. 1 December, 2022.
Tita, B. “Caterpillar Says Construction Equipment Remains in Demand, Boosting Sales, Profit.” Wall Street Journal. 27 October, 2022.
Eckert, N. “Shift to EVs Triggers Biggest Auto-Factory Building Boom in Decades.” Wall Street Journal. 1 January, 2023.
Lepan, N. “Inflation hits miners: ‘It has never been more expensive to build or operate a mine in the US” The Northern Miner. 26 December, 2022.

Diversified Industrials Q4 2022

Industry Trends

Manufacturing PMI Falls Despite Production Growth in Key Industries

Caterpillar's Demand for Construction Equipment Increase Sales

U.S. Car Makers Invest Billions into EV Factories

Mining Costs Reach Highest Levels in Decades

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

PCE Transactions

Contacts

Michael Poole

Michael Rosendahl

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Diversified Industrials Q4 2022

Industry Trends

Manufacturing PMI Falls Despite Production Growth in Key Industries

Caterpillar's Demand for Construction Equipment Increase Sales

U.S. Car Makers Invest Billions into EV Factories

Mining Costs Reach Highest Levels in Decades

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

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PCE Transactions

Contacts

Michael Poole

Michael Rosendahl

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