The beginning of a new year is often marked by renewed energy and optimism, and the world of mergers and acquisitions (M&A) is no exception. As we dive into 2024, the M&A landscape is showing promising signs of a robust and dynamic year ahead. In this January M&A roundup, we'll explore the highlights, trends, and insights that set the tone for what looks to be an exciting period of deal-making.
A Strong Start
The first month of 2024 has witnessed a flurry of M&A activity, setting the stage for a vibrant year ahead. According to MDM, companies across various sectors have been actively engaging in mergers and acquisitions, signifying a positive and proactive approach to growth and expansion. (Source: MDM)
The optimism surrounding M&A activities in 2024 is not merely anecdotal; it is supported by data and surveys. Deloitte's 2024 M&A Trends Survey predicts a rebound in M&A activity this year, with the value of deals expected to increase. The survey points towards a favorable environment for deal-making, emphasizing a renewed confidence in the market. Here are the key finding, summarized, from the news release:
Internal Transformation Focus: Corporations and private equity firms are actively restructuring, with 68% having undergone changes since 2020, and an additional 27% planning restructuring within the next six months.
Adaptability through Pivoting: Responding to a slower M&A market in 2023, 51% pursued alternative financing, while 46% embraced non-traditional deal structures like joint ventures and strategic partnerships.
Strategic Alignment with Enterprise Goals: Both corporate (44%) and private equity (47%) leaders prioritize defining a well-supported M&A strategy, with deal valuation ranking second for corporate leaders (41%) and third for private equity (39%).
Integration of Advanced Analytics and Generative AI: A remarkable 99% of respondents use advanced data analytics or Generative AI for enhancing M&A lifecycle tasks, including identification, valuation, integration, and divestiture.
Global Perspective in Deal-Making: Organizations increasingly seek international deals, with corporate and private equity interest in international targeting rising by 22% over the past two years, reaching 90% in 2023.
Knowledge Exchange and Collaboration: Knowledge exchange between corporate and private equity cohorts is growing, recognizing shared lessons for better returns; strategic sales become a more likely primary exit avenue, with 56% in 2023 compared to 33% in 2022, as private equity firms increasingly engage directly with corporate buyers.
Insights and Outlooks
Understanding the key drivers and factors influencing M&A decisions is crucial for interpreting the current landscape. Ernst & Young (EY) provides valuable insights into the M&A outlook, offering a comprehensive analysis of the trends shaping the global market. The EY-Parthenon Deal Barometer for January's M&A roundup presents a positive outlook for 2024, showcasing recovery based on economic and market indicators. The report highlights a 13% increase in US private equity deal volume and a 12% rise in corporate M&A. The barometer's predictive power, correlated with GDP growth, inflation, corporate profits, and interest rates, indicates a gradual rebound in the M&A market. CEOs' renewed enthusiasm for deals, particularly joint ventures and strategic alliances, aligns with a proactive approach to capturing growth opportunities amid a changing cost of capital environment. As the report anticipates a soft landing for 2024, the US economy is expected to outperform its peers, supporting a rebound in both private equity and corporate M&A activities. (Source: EY)
Highlighted Deals in December
Tampa-based distributor Seal & Rubber, renowned for its 45-year legacy in providing quality sealing products and customer service, has entered into an agreement with Wyatt Seal. The collaboration, driven by a shared vision and complementary strengths, is anticipated to bring significant growth opportunities. Seal & Rubber's President, Mike Nichols, expressed confidence in the partnership, citing it as a chance for mutual success. Wyatt Seal's Executive Vice President, Michael Wyatt, emphasized that the combined efforts, encompassing people, processes, and product lines, would position them as an unparalleled sealing technology distributor in the marketplace. Effective December 30, the collaboration will expand Wyatt Seal's geographic reach, adding Tampa to its existing locations, with Brittany Khorramian continuing as the general manager of the newly acquired location. Wyatt Seal's President, Doug Wyatt, looks forward to incorporating the expertise and experience of Florida Seal & Rubber into their operations.
Bridgestone HosePower, a subsidiary of Bridgestone Corporation, has successfully acquired Cline Hose & Hydraulics, a family-owned business established in 1948 with a strong reputation for quality. The acquisition, announced on January 11, 2024, bolsters Bridgestone HosePower's position as a premier provider of hydraulic and industrial hose solutions and services in the United States. The move is part of Bridgestone HosePower's strategic expansion plan, aiming to enhance capabilities and increase capacity for servicing a broader customer base. Cline Hose & Hydraulics, with two retail locations in Greenville and Augusta, Georgia, and a fleet of mobile service trucks, aligns well with Bridgestone HosePower's business model. Scott Cline, Co-Owner of Cline Hose & Hydraulics, expressed excitement about joining Bridgestone HosePower, emphasizing a shared commitment to customer service and a collective goal of providing enhanced opportunities for employees. The transaction, approved by both companies' boards of directors, was completed on December 29, 2023, with financial details remaining undisclosed. Bridgestone HosePower now boasts 47 locations across the U.S., including five OEM sales centers.
Thermal Technology Distribution Solutions (TTDS), a platform specializing in the distribution of industrial temperature management products, has successfully acquired Proheat Inc., a prominent distributor of heaters, sensors, controls, and technical support to manufacturers. The terms of the transaction, announced on January 23, 2024, were not disclosed. Proheat, based in La Grange, KY, will continue to operate with its experienced management team, including President and CEO Steven W. Button, who will retain a significant equity stake. TTDS, established in September 2023 by Gryphon Investors, marks this as its second investment, following the acquisition of Big Chief, Inc., a leading distributor in electric process heating and temperature control products. Jeff Collier, CEO of TTDS, expressed excitement about the addition of Proheat to the team, highlighting the company's contribution to the growing portfolio of leading thermal management distributors. Gryphon Investors, advised by Kirkland & Ellis LLP, continues to actively pursue organic and acquisition opportunities in the distribution sector.
Valin Corporation, a prominent provider of technical solutions across various industries, has successfully acquired Ad Tech Seal, Inc., based in Brea, Calif., effective from January 2, 2024. This strategic acquisition enhances Valin's robust product portfolio in process control and fluid handling. Anne Vranicic, President of Valin Corporation, expressed satisfaction with the acquisition, emphasizing the continual efforts to strengthen product offerings and services for customers. Ad Tech Seal, established in 1976, specializes in sealing products and O-rings, providing additional consulting and design services. George Laich, President of Ad Tech Seal, conveyed excitement about joining the Valin team, citing increased infrastructure and support for delivering enhanced customer service. Valin Corporation, a subsidiary of Graybar, remains a leading technical solutions provider, catering to industries such as technology, energy, life sciences, natural resources, and transportation.
January's M&A roundup paints an optimistic picture for the year 2024. The strong start, supported by data, surveys, and expert insights, indicates a robust and active M&A landscape. As companies strategically position themselves for growth and transformation, staying informed about the latest trends and market dynamics becomes imperative. With the momentum set in January, the rest of the year promises to be an exciting journey in the world of mergers and acquisitions.