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The BGL Industrials Insider is published by Brown Gibbons Lang & Company, a leading independent investment bank

serving middle market companies throughout the U.S. and internationally.

Insider

Industrials

Spotlight On: Page 4

Industrial FiltrationThe industrials M&A market continues to exhibit strong momentum, with Filtration Products and Systems seeing an uptick in deal flow as investor focus turns to engineered products and materials targeting specialized markets and applications.

Consolidation is expected as participants look to build scale in a fragmented landscape. Strategic acquisitions have centered on expanding technology and engineering resources, broadening product portfolios, and diversifying into growing end markets.

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Environmental Services Insider

M&A and Capital Markets Activity• Middle market1 M&A volume declined modestly during the first half of 2016

with the number of transactions down 7 percent over the comparable period last year. Deal value increased 4 percent over the same period.

• Credit market fundamentals continue to remain attractive for borrowers as weak supply dynamics foster a highly competitive market for financing opportunities. Middle market leveraged lending saw a leaner first half of 2016 with total issuance of $52.7 billion down 35 percent year-over-year, the lowest level since 1H09, according to Thomson Reuters LPC. Middle market new money issuance of $11.2 billion in 2Q16 was down 21 percent from 1Q16 and 36 percent from 2Q15. Uncertainty around the upcoming election has sidelined some issuers, said Thomson Reuters, contributing to lower volumes. Standard & Poors Leveraged Commentary & Data (S&P LCD) reported total leverage of 4.2x in August for middle market1 transactions, a contraction from 4.6x in July. Total leverage levels remained in the 4.6x to 4.8x range during the first half of 2016.

• The broader industrials deal market is active across all segments, with

notable transaction activity in Aerospace, TransDigm (ILC Holdings), J.F. Lehman & Company (API Technologies), and Liberty Hall Capital Partners (AIM Aerospace); in Building Products, Melrose Industries (Nortek); and Industrial Machinery, Komatsu (Joy Global), Kyocera (SGS Tool), Altus Capital Partners (Nichols Portland), and Wynnchurch Capital (Texas Hydraulics).

• The market for engineered consumables is seeing a rise in M&A activity, with Filtration Products and Systems among the active segments as buyers look to build scale and gain access to specialized markets and applications and new geographies. Notable strategic activity during the last six months includes AAF International (Flanders Holdings), CLARCOR (TDC Filter Manufacturing), and Hengst Holdings (Nordic Air Filtration).

1 Middle market defined as enterprise values between $25 million and $500 million.

For more information on how

BGL’s Global Industrials Practice can assist

your company, please contact:

Delivering Results to the Global Middle Market

Andrew K. Petryk Managing Director & PrincipalHead: Industrials216.920.6613

[email protected]

Kevin H. Sargent Director & Principal216.920.6639

[email protected]

Public Equity Markets• The equity markets rallied in August with broader indices reaching record

highs. The S&P 500 and DJIA are up 10.0 percent and 10.8 percent year-over-year, respectively, and 7.5 percent and 6.7 percent through the year-to-date period. Nearly all BGL Industrial composite indices outperformed the market year-over-year.

*As of September 21, 2016.

Operating Highlights• Commodity price volatility continues to persist. After falling below

$40/bbl in August, oil prices rebounded on news from the International Energy Agency that balances indicated “essentially no oversupply during the second half of the year.”

• The manufacturing sector contracted in August, evidenced by a PMI reading of 49.4, following five consecutive months of expansion according to the Institute for Supply Management. The general economy expanded for the 87th consecutive month.

• Housing starts increased in July to a SAAR of 1,211,000, up 2.1 percent over June, and finished 4.3 percent higher than the prior-year reading. Nonresidential construction spending declined a modest 0.3 percent in July but marked the second highest month in eight years, reported Associated Builders and Contractors. Overall growth in nonresidential building is projected to moderate at 5.6 percent in 2017, down slightly from 5.8 percent in 2016, according to the American Institute of Architects (AIA) semi-annual Consensus Construction Forecast. “Healthy job growth, strong consumer confidence, and low interest rates are several positive factors in the economy, which will allow some of the pent-up demand from the last downturn to go forward,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD.

• The Architecture Billings Index (ABI) was 51.5 in July marking the sixth consecutive month of positive readings according to the AIA. “Demand for residential projects has surged this year, greatly exceeding the pace set in 2015. This suggests strong future growth for housing in the coming year,” said Baker.

Industrials Insider

Spotlight On:

4

Industrial Filtration

Industrial consumables is seeing a rise in acquisition

activity as investor focus turns to custom-engineered

products and materials targeting specialized markets

and applications. Filtration products is among

the particularly active markets, with increased

manufacturing activity and strong end user demand

expected to sustain growth.

Economic expansion is boosting demand. The overall

economy grew for the 87th consecutive month in

August. The manufacturing sector registered a slight

dip in activity in August following five consecutive

months of expansion. In June, production rose to the

highest level since February 2015, according to the

Institute for Supply Management, which is forecasting a

stable outlook for the manufacturing sector through the

balance of the year.

Industrial production is projected to grow 3.2 percent

annually through 2020, in line with growth in the overall

economy, according to IBISWorld forecasts.

Steel

Domestic steel consumption returned to pre-

recessionary levels in 2014 (119 million tons) but saw

a subsequent decline in 2015 (108 million tons) due to

softness in the energy and heavy equipment sectors.

The steel industry should benefit from stronger

downstream demand and rebounding steel prices in the

coming years. A key driver to this industry is automotive

production, which has seen steady growth.

Automotive

Forecasts show that North American light vehicle

production will return to historic averages, reaching 19

million vehicles in 2018—equating to a 4-year CAGR

of 3.0 percent. The automobile engine and parts

manufacturing industry is projected to grow at a

3.7 percent CAGR over the next five years.

Aerospace

Aircraft manufacturers are reporting strong market

demand supported by gains in new orders and growing

backlogs. Growing air traffic will require the number of jet

airplanes in service to double over the next 20 years, from

approximately 22,510 in 2015 to 45,240 airplanes.

Construction

U.S. residential and non-residential fixed investment is

projected to grow at CAGRs of 10.7 percent and

4.1 percent, respectively, between 2014 and 2018.

FILTRATION PRODUCTS

Demand for filtration products is growing, driven by a

number of factors:

• Positive global manufacturing trends and growth in

end user markets such as automotive and aerospace,

among others. Pharmaceuticals, biotechnology,

and food processing have been cited as expanding

markets.

• Environmental and regulatory compliance and

increasing efforts to reduce air and water pollution.

With increasingly stringent environmental regulations

and enforcement worldwide, many initiatives have

been implemented globally to ensure that emissions

and pollutants are reduced from industrial activities

across all industries.

• Growing public awareness of indoor air quality which

is stimulating demand for high-performance filtration

products. In addition to improving indoor air quality,

environmentally friendly filtration solutions reduce

energy consumption and are integral to green building

design.

• Increasing investments in water, wastewater, and

power generation infrastructure worldwide, with

developing economies the beneficiaries of above-

average growth

Industrial

Industrials Insider

5

Spotlight On: Industrial Filtration

U.S. Air & Fluid Filter Demand

Total Demand: 2005 - 2020E ($ billions)

By Product, 2015

By Market ($ billions)

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

2010 2015 2020E

Other Markets

Industrial

Consumer

Utilities

61%

39%

Fluid Filters

Air Filters

$5.9$6.2

$6.6 $6.8$6.3

$6.7$7.2

$7.5 $7.7 $7.8 $8.1

$9.7

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020E

Source: The Freedonia Group.

The U.S. market for air and fluid filters is projected to

reach $9.7 billion in 2020, a 3.8 percent CAGR, reported

the Freedonia Group, citing advances from increased

manufacturing activity and construction expenditures, and

growing public awareness of indoor air and water quality

issues.

The largest product segment, fluid filters, will see the

biggest gains in air washer and cartridge air filters, as

increasingly stringent regulations governing water and

wastewater treatment boost sales, according to Freedonia.

“Advances in sales of air washer filters will be promoted

by environmental regulations regarding sulfur dioxide

and mercury emissions and the anticipated acceleration

in electric power utility construction spending, as newer

facilities use higher-value, state-of-the-art filters to

comply with EPA standards,” said analyst E. Reta Sober.

Public utilities, the largest market for air and fluid filters,

is expected to see the fastest gains through 2020, driven

by increased spending on pollution control equipment and

greater municipal water use.

Selected Transaction Activity

The M&A market has exhibited strong momentum.

Acquisitions are a primary growth engine as buyers look

to build scale and gain access to specialized markets and

applications and new geographies.

In April 2016, AAF International,

a subsidiary of Daikin Industries,

acquired Flanders Holdings in a

$430 million transaction.

Headquartered in Washington, North

Carolina, Flanders is a manufacturer of heating and air

conditioning filters, industrial and specialty filters, and high

purity filters and containment systems with applications

in diverse industries including commercial and residential

heating, semiconductor manufacturing, ultra-pure

materials, chemical, biological, radiological and material

processing, biotechnology, pharmaceuticals, synthetics,

nuclear power and nuclear materials processing.

Source: The Freedonia Group.

Industrials Insider

Spotlight On:

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The acquisition solidifies Daikin’s market leadership

position in the U.S. (combined with AAF, the filter business

has 13 domestic manufacturing facilities) while providing

an entry to the pharmaceutical market. With the addition

of Flanders, Daikin’s global filter business sales will exceed

$850 million. Daikin publicly stated its plans to more than

double sales by 2020 to become “…the leading global

company in the filter business.” Daikin acquired AAF with

the purchase of OYL Group in 2006.

“Our new company, doing business as AAF Flanders,

will offer the most complete spectrum of air filtration

products, ranging from furnace filters for homes, all the

way up to high-tech filtration housings used by the most

sophisticated of manufacturing operations,” said Philip

Whitaker, CEO of AAF International. “We will be perfectly

positioned to meet these growing demands for clean air.”

Flanders was the third acquisition for AAF over the last

twelve months. Grillo Filter Sales, acquired in December

2015, expanded AAF’s service capabilities in southern

California. Grillo is a distributor of AAF products and

manufactures panel and pleated style air filters focusing

on the commercial, government, and healthcare markets.

Air Filter Maintenance, acquired in August 2015, extends

AAF’s reach in the Mid-Atlantic region.

Whitaker continued, “This acquisition [Flanders]…

represents just another step in our journey to get closer to

our customers and to satisfy all of their air filtration needs.

Although this is our largest deal by far, it certainly won’t be

our last. We are committed to becoming the clear leader in

our industry, not just in North America but also globally.”

Flanders completed the acquisition of Pronamic Industries

in March 2015, serving to vertically integrate its operations

into fiberglass manufacturing. Flanders was acquired by

Insight Equity in May 2012 in a take private transaction for

$192 million. At the time of the Pronamic acquisition, Brad

Buser, a Principal at Insight Equity, said, “Insight Equity’s

long-term outlook on the air filtration sector remains very

positive.”

CLARCOR (NYSE:CLC) has

significantly broadened its

product offering and market

position through acquisitions. In February 2016, through a

subsidiary of its Industrial Air Division, CLARCOR acquired

the assets of TDC Filter Manufacturing from MFRI, Inc.

(NASDAQ: MFRI). TDC is a leading U.S. manufacturer

and supplier of pleated air filter bags and dust collection

cartridges, and gas turbine air filters. TDC’s products are

widely recognized in the industrial air filtration space and

complement CLARCOR’s existing BHA aftermarket filter

business.

Additional notable acquisitions include the 2014 purchase

of the Filtration Business of Stanadyne (nka CLARCOR

Engine Mobile Solutions) and the Air Filtration Business

of General Electric Company’s Power and Water Division

in 2013. Stanadyne’s fuel filtration product lines increased

CLARCOR’s breadth in the engine filtration business, while

the GE acquisition added a strong gas turbine business and

scale in the industrial dust collection market.

Commenting on the Stanadyne acquisition, CLARCOR CEO

Christopher Conway said, “Not only will this transaction

increase our OE capabilities, but we believe it will provide

us with even greater access to robust aftermarket

opportunities, as more than 70% of Stanadyne filtration’s

sales are to the aftermarket, predominantly through

original equipment services channels.” “This acquisition

also reflects our continued focus on innovative technology

and R&D. The majority of Stanadyne filtration’s current and

anticipated products embody proprietary and patented

technology that we believe is well-suited to meet the

challenges of increasing demand for cleaner fuel driven

by more stringent emission requirements.” CLARCOR

more than doubled the number of dedicated engineering

and R&D personnel in its Engine/Mobile segment with the

acquisition. CLARCOR acquired the Stanadyne Filtration

business from Kohlberg & Co.

Industrials Insider

7

Spotlight On: Industrial Filtration

With the GE acquisition, CLARCOR significantly increased

its IP by more than tripling the number of patents in

its product offering. “With this transaction, CLARCOR

will become a leading designer and supplier of air inlet

filtration products for natural gas turbines, a business

we believe is poised for long-term growth as the world

continues to shift toward natural gas as its energy source

of choice. CLARCOR traditionally has had little presence in

the gas turbine business, and we believe this transaction

will immediately position CLARCOR as a major player in

the space and provide a strong platform from which to

grow, both with respect to first-fit applications as well as

the aftermarket.”

In February 2016, Hengst Holdings

GmbH purchased Nordic Air

Filtration, A/S and related assets,

consisting of Nordic Air Filtration,

located in Nakskov, Denmark and Nordic Air Filtration,

located in Fujairah, UAE, from MFRI, Inc. (NASDAQ:

MFRI). Nordic Air is a leader in the industrial pleated air

filter market, particularly in gas turbine inlet air filtration.

With the acquisition, Hengst will further its strategy to

expand activities in the non-automotive market. Hengst

is a specialist in filtration and filtration management and

employs more than 2,000 people worldwide through

locations in Germany, Brazil, China, and the United States.

CECO Environmental Corp.

(NasdaqGS: CECE) has completed

nine acquisitions since 2012,

including its latest purchase of PMFG, Inc. in September

2015. PMFG manufactures air pollution control equipment,

natural gas separation and filtration equipment, and

industrial noise control equipment for the natural gas

infrastructure (~ 50 percent of sales), upstream and

downstream oil and gas (~25 percent), and power

generation (~25 percent) markets. The company has

manufacturing facilities in Texas and China. The acquisition

is expected to enhance CECO’s global footprint,

particularly in China and the Middle East. With the addition

of PMFG, the combined company will have sales of

approximately $486 million (+48 percent).

Filtration Group is

actively growing its

product portfolio

through acquisitions,

having completed 11 buys since 2012, including the latest

purchase of the Purafil and Kaydon Custom Filtration

businesses from AB SKF in June 2015. Purafil develops and

maintains gas phase air filtration systems and solutions for

diverse end markets ranging from industrial to wastewater

to consumer. Purafil is headquartered in Atlanta, Georgia.

Kaydon Custom Filtration is a supplier of specialized

diesel fuel and oil filtration systems and filter elements

for industrial applications. Kaydon Custom Filtration is

headquartered in LaGrange, Georgia. Combined, the Purafil

and Kaydon businesses had sales of approximately

$40 million in 2014 and operated as stand-alone businesses

within the SKF Group.

Filtration Group was acquired by Madison Industries in

2010 with backing from PNC Erieview Capital and Babson

Capital Management.

Micronics, backed by

Vance Street Capital,

completed add-on

acquisitions of C.P. Environmental (CPE) in March 2015 and

Southern Filter Media (SFM) in December 2014. CPE is a

supplier of industrial air pollution equipment and service/

refurbishment services to the air filtration market, specifically

the baghouse industry. Products and services include

industrial air replacement parts and filters, maintenance,

inspection services, and new equipment products. SFM

manufactures wet and dry filtration products, including filter

cloth, industrial filters and dust bags.

Micronics CEO Rick Weiler, said, “Combining CPE with

SFM helps us accomplish our goal of building an industry-

leading service capability that enables us to meet all of

our customers’ dry filtration needs; from new equipment

to consumables, replacement parts, repair and inspection

service.”

Commenting on the transaction, Jake Blumenthal, a partner

at Vance Street Capital, said, “CPE and SFM are highly

complementary and position the company to capitalize on

the growth opportunities in the industrial filtration market

which are increasingly being driven by more demanding

environmental regulations.”

Industrials Insider

Spotlight On:

8S o u r c e s : S & P C a p i t a l I Q , P i t c h B o o k , E q u i t y R e s e a r c h , p u b l i c d a t a .

EV/ EV/

Da te Ta rge t Ta rge t Busine ss Ac quire r Re ve nue EBITDA

Jul- 16 Valve and Filter Corporation Manufactures automatic self- c leaning water filters and control valves for a variety of industrial and municipal water applications.

Neptune- Benson, Inc. n/a n/a n/a

May- 16 Affinia Group Holdings Inc. Specializes in automotive filtration solutions for the oil, fuel, hydraulic, and coolant filter aftermarket.

Mann + Hummel Holding GmbH

$1,335.1 n/a n/a

Apr- 16 Neptune- Benson, Inc. Manufactures filtration and disinfection products for recreational, industrial, and municipal water markets.

Evoqua Water Technologies LLC

n/a n/a n/a

Apr- 16 F- Suotimet Oy Manufactures ventilation filters and air filter components Camfil AB n/a n/a n/a

Feb- 16 TDC Filter Manufacturing Inc. Manufactures air filtration products with applications in gas turbines and utilities, chemical and pharmaceutical, steel/foundries, and metal finishing/powder coating markets.

Clarcor $11.2 n/a 0.66x

Feb- 16 Nordic Air Filtration A/S Manufactures air inlets/gas turbines, industrial air filtration products, baghouse filters, and HVAC filters for OEMs, resellers, and end users worldwid

Hengst Automotive SE $11.0 n/a 0.68x

Sep- 15 PMFG, Inc.Provides custom- engineered systems and products primarily for the natural gas infrastructure, power generation, and oil refining and petrochemical processing markets worldwide.

CECO Environmental Corp. $142.4 NM 0.96x

Sep- 15 Filtac ABProvides air, dust, and liquid filtration products and systems for the transportation, power, energy, food and beverage, packaging, forest, pharmaceuticals, electronics, and hospital sectors.

Nederman Holding AB n/a n/a n/a

Jun- 15 iFiL USA, LLC Manufactures pleated filter technology for the food processing, agricultural products and processing, cement, mining, petrochemical, and plastic industry.

Donaldson Company, Inc. (NYSE:DCI)

n/a n/a n/a

Aug- 15 Pall Corporation Manufactures and markets filtration, separation, and purification products; and integrated systems solutions worldwide.

Danaher Corp. $13,655.6 20.36x 4.79x

Mar- 15 Pronamic Industries, LLC Manufactures air filtration media. Flanders Corporation n/a n/a n/a

Mar- 15 C.P. ENVIRONMENTAL, Inc. Manufactures pollution and dust control equipment. Micronics, Inc. n/a 5.80x n/a

Feb- 15 Air Filter Service Company, Inc. Manufactures HVAC and specialty filtration products to utilities, commercial, and industrial customers in South Carolina, North Carolina, Georgia, and Alabama.

Camfil Farr, Inc. $265.0 n/a 1.20x

Dec- 14 Filter Resources, Inc., Filtration Inc. and Fabrication Specialties, Inc.

Manufactures and markets filters to the petrochemical and refining industries. PECOFacet (US) Inc. (CLARCOR)

n/a n/a n/a

Dec- 14 Avani Environmental Intl. Inc. Manufactures dust, fume, and smoke extraction and filtration equipment. Absolent Group AB n/a n/a n/a

Dec- 14 Jiangyin Zhongli Industrial Technology Company Ltd.

Manufactures power industry flue gas dampers and ball mill systems in China. CECO Environmental Corp. $24.0 n/a 0.86x

Dec- 14 Southern Filter Media, LLC Manufactures pollution and dust control equipment. Micronics, Inc. n/a 5.00x n/a

Nov- 14 Emtrol LLC Manufactures, installs, and supplies air pollution control and process gas treatment equipment.

CECO Environmental Corp. $38.0 8.64x 1.08x

Nov- 14 Con- Air Industries, Inc. Manufactures and distributes heating, ventilation, and air conditioning (HVAC) filtration products.

Filtration Group Corporation n/a n/a n/a

Sep- 14 Northern Technical L.L.C.Northern Technical L.L.C. designs, develops, manufactures, and supplies air filtration solutions for oil, gas, petrochemicals, and power generation industries in the United Arab Emirates and

Donaldson Europe, B.V.B.A. $98.0 n/a n/a

Sep- 14 Edco Sales, Inc. Manufactures and distributes filters for HVAC/R systems Purolator Advanced Filtration Group, Inc. (CLARCOR)

n/a n/a n/a

Ente rprise Va lue ($ mm)

SELECTED MERGERS & ACQUISITIONS ACTIVITY IN FILTRATION PRODUCTS


Industrials Insider

Spotlight On:

9

EV/ EV/

Da te Ta rge t Ta rge t Busine ss Ac quire r Re ve nue EBITDA

Aug- 14 HEE Environmental Engineering, LLC

Manufactures air pollution control scrubbers, biological scrubbers, fiberglass reinforced plastic tanks, carbon scrubbers, fans, andcustom equipment for noxious and corrosive gas and odor control.

Met- Pro Technologies LLC $9.0 n/a 0.95x

Jun- 14 Air Distribution Technologies, Inc.Manufactures air distribution and ventilation solutions for residential and nonresidential buildings; and air movement and control solutions for industrial and infrastructure applications.

Johnson Controls Inc. $1,600.0 13.50x 1.67x

May- 14Stanadyne Corporation, Filtration business (nka:Clarcor Engine Mobile Solutions, LLC)

Manufactures filtration systems and fuel additive products to OEMs for use in truck, automotive, heavy equipment, marine, industrial, and agricultural applications.

CLARCOR Inc. $325.0 8.20x 3.00x

May- 14 Filter Specialists, Inc. Manufactures liquid filtration products and solutions. Pall Corporation $124.0 n/a n/a

March- 14 Combustion Components Associates, Inc.

Provides in- furnace and post- combustion control technologies. PMFG Inc. $7.0 11.49x 0.55x

Feb- 14 Bonded Filter Co. LLC Manufacturer and servicer of air filtration systemsGemini Investors Inc.; Hermitage Equity Partners; Gemini Investors V, L.P.

n/a n/a n/a

Feb- 14 Vokes- Air Holding AB Manufactures and air filters designed for commercial and industrial applications. MANN+HUMMEL GMBH n/a 7.50x n/a

Jan- 14 Air- Nu of Baton Rouge, LLC Manufactures and distributes filtration products and services. Louisiana Capital Group, LLC n/a n/a n/a

Dec- 16 Air Filtration Business (General Electric Company)

Manufactures gas turbine filtration equipment and , industrial air filtration equipment. CLARCOR Inc. $265.0 8.00x 1.20x

Dec- 13Bekaert SA, Advanced Filtration Business (nka:Purolator Advanced Filtration)

Metal filters and systems for the polymer fiber and plastics industries. Purolator Advanced Filtration Group, Inc. (CLARCOR)

$8.0 n/a n/a

Nov- 13 Porex Corporation Manufactures molded sintered porous plastic products primarily for life science, healthcare, consumer, and industrial markets worldwide.


Sep- 13 TURBOFILTER GmbH Manufactures and installs air purification technology. ENTECCOgroup gmbh & Co. KG

n/a n/a n/a

Aug- 13 Met- Pro Corporation (nka:Met- Pro Technologies LLC)

Manufactures fluid handling equipment, product recovery and pollution control equipment, and filtration products.

CECO Environmental Corp. $210.0 11.72x 1.59x

May- 13 Clear Edge Filtration, Inc.Manufactures industrial process filtration products and filter media to companies engaged in filtering liquids from solids, dewatering, collecting and filtering dust, air filtration, filtering and purifying hot gases.


Apr- 13 Micronics, Inc. Manufactures custom filtration products and equipment. Vance Street Capital LLC n/a 6.50x n/a

Sep- 12 Environmental Filtration Technologies, LLC

Provides products and services for air pollution control, filtration, and separation in the U.S. and internationally.

Nederman Holding AB (publ)

May- 12 Flanders Corporation Manufactres air filters and related products. Insight Equity

Feb- 12 Universal Air Filter Company Produces air filters for electronics, telecom, medical, HVAC, computer, industrial, power generation, military, and broadband/CATV applications.

Filtration Group Corporation

Feb- 10 Koch Filter Corporation Manufactures commercial and industrial filters. Tomkins plc (nka:Pinafore Holdings B.V.)

38 7.80x 0.30x

Ente rprise Va lue ($ mm)

n/a n/a n/a

192 16.25x 0.78x

36 n/a 0.89x

SELECTED MERGERS & ACQUISITIONS ACTIVITY IN FILTRATION PRODUCTS


Industrials Insider

Spotlight On:

10


Source: S&P Capital IQ.As of 9/21/2016.

BGL Composite: ABSO, CECE, CLC, DCI, LDL, NMAN.

Index Performance

Relative Valuation Trends

29%

7% 7%

29%

10% 11%9%

27%

19%

52%

85%

64%

-20%

0%

20%

40%

60%

80%

100%

BGL Filtration Products S&P 500 DJIA

Re

turn

s

YTD 1 Year 3 Year 5Y

Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16

EV/EBITDA 6.0x 7.8x 10.7x 14.5x 16.6x 13.8x 12.0x 13.6x 11.8x 11.6x 8.9x 8.4x 8.3x 8.2x 9.5x 10.4x 11.4x 11.4x 12.2x 14.3x 13.3x 13.9x 11.9x 12.8x 12.4x 11.5x 10.2x 10.9x 11.4x 11.2x

EV/Revenue 0.6x 0.8x 0.7x 0.8x 1.0x 1.0x 1.2x 1.1x 1.0x 0.9x 0.8x 0.8x 0.9x 0.8x 1.0x 1.0x 1.5x 1.6x 1.7x 2.5x 2.5x 2.1x 1.7x 2.0x 1.8x 1.7x 1.5x 1.5x 1.5x 1.7x

0.0x

0.3x

0.5x

0.8x

1.0x

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Industrials Insider

Spotlight On:

11

acquired by

an MFRI business

acquired by

an MFRI business


“ BGL’s knowledge of our industry and the end markets we serve, as well as global capabilities,

added significant value throughout the transaction process.”

Bradley Mautner, CEO MFRI, Inc.

CASE STUDY

MetalsFood & Beverage MineralsChemicals

INDUSTRIES SERVED

PetroleumPharmaceuticalsWoodPower Generation

BGL’s Industrials team served as the exclusive financial advisor to MFRI, Inc. (NasdaqGM: MFRI) in the sale of its United States, European, and Middle East filtration businesses. The businesses manufacture pleated air filter bags and dust collection cartridges for a broad range of industrial manufacturing and process end markets to meet and achieve environmental and workplace safety requirements. The businesses also manufacture gas turbine air inlet filters that protect gas turbine blades and equipment.

CLARCOR (NYSE: CLC), through a subsidiary of its Industrial Air division, acquired the operational and intangible assets of TDC Filter Manufacturing, Inc. Located in Bolingbrook, Illinois, TDC is a leading U.S. manufacturer and supplier of pleated air filter bags and dust collection cartridges, and gas turbine air filters. TDC’s products are widely recognized in the industrial air filtration space and complement CLARCOR’s existing BHA aftermarket filter business.

Hengst Holdings GmbH purchased Nordic Air Filtration, A/S and related assets, consisting of Nordic Air Filtration, located in Nakskov, Denmark and Nordic Air Filtration, Middle East located in Fujairah, UAE. Nordic Air is a leader in the industrial pleated air filter market, particularly in gas turbine inlet air filtration. With the acquisition, Hengst will further its strategy to expand activities in the non-automotive market. Hengst is a specialist in filtration and filtration management and employs more than 2,000 people worldwide through locations in Germany, Brazil, China, and the United States.

The transactions are representative of BGL’s global industrial transaction capabilities and reach.

Overall M&A Activity

12

Industrials Insider

Middle Market M&A Activity Private Equity Transaction Activity*

Mergers & Acquisitions Activity

Trends in Valuation

Acquisition Financing Trends

Total Leverage Equity Contribution

SOURCE: Standard & Poors LCD.

SOURCE: Standard & Poors LCD.*NA: Data not reported due to limited number of observations for period. *NA: Data not reported due to limited number of observations for period.SOURCE: Standard & Poors LCD.

SOURCE: Standard & Poors LCD.

Transactions with Strategic Buyers Transactions with Financial Buyers

Transaction Count by Deal Size

Middle market enterprise values between $25 million and $500 million. Middle market enterprise values between $25 million and $500 million.

EBIT

DA

Mul

tiple

Tota

l Deb

t to

EBIT

DA

EBIT

DA

Mul

tiple

Equi

ty C

ontr

ibut

ion

(%)

Middle Market M&A Activity

SOURCE: PitchBook.SOURCE: S&P Capital IQ.Based on announced deals, where the primary location of the target is in the United States.Middle market enterprise values between $25 million and $500 million. *Buyout activity only

119

148

125

151

106 14

115

614

510

713

214

811

458 97 96 13

110

012

214

113

412

0 166

163

154

137

160

164 23

514

716

119

219

916

1 217

231

250

232

227

240

228

183

199

207 21

921

4 240

207 22

221

1 268

191 20

7 233

113

9112

011

119

714

5 161 23

420

416

823

022

621

417

6 211

188

307

208 22

7 248 28

623

325

5 328 35

528

327

0 305

334

261 27

16566

5963

6267 63

6336

5843

1919

26 3540

3242

5861

5563 68

5342

54 5069

3946

6079

4982

7370

60 5377 68

5477

$0

$10

$20

$30

$40

$50

$60

$70

$80

0

100

200

300

400

500

600

700

800

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Transaction Value ($ in billions)

Num

ber o

f Tra

nsac

tions

$25M-$50M $50M-$250M $250M-$500M Trans Value

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun-15Jun-16

Under $25M $25M-$100M $100M-$500M $500M-$1B $1B-$2.5B $2.5B+

38%

35%

46%

51%

47%

43%41% 40%

37%

44%46%

25%

30%

35%

40%

45%

50%

55%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Aug-16

4.8x

5.4x

4.1x3.6x

4.1x 4.3x 4.5x4.7x 4.7x 4.8x

4.2x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Aug-16

8.2x

6.8x 7.

1x

9.8x

8.0x

7.6x 7.7x

8.6x 8.7x 9.

2x

8.3x8.

7x

9.4x

8.4x

7.6x

9.2x 9.

5x

8.9x

8.7x

10.1

x 10.7

x

10.0

x

9.1x

10.2

x

8.2x

9.5x 9.7x

9.7x

8.5x

9.1x

9.8x

11.1

x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

<$250 million $250-$499 million $500 million+

7.2x

8.3x

6.5x 6.6x

6.3x

8.2x

8.1x 8.

5x

8.2x

8.0x

8.0x

7.4x 7.

7x

7.7x

9.1x

9.0x

8.5x

9.9x

9.4x

7.5x

8.5x

9.1x

8.7x

8.7x

9.9x

10.1

x

10.2

x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

<$250 million $250-$499 million $500 million+

NA

*

NA

*

NA

*

NA

*

NA

*

NA

*N

A*

Industrials M&A ActivityMergers & AcquisitionsIndustrials Insider

13

AEROSPACE & DEFENSE

In August 2016, Liberty Hall Capital Partners completed the

acquisition of ZTM Inc., marking the fifth add-on acquisition

for platform Accurus Aerospace Corporation, formed in

2013. ZTM follows J&M Machine (acquired in 2016), LaCroix

Industries (2015), McCann Aerospace Machining (2014), and

Precise Machining & Manufacturing (2013). Accurus is a fully-

integrated Tier II aerostructures supplier.

Wichita, Kansas-based ZTM is a Tier II supplier of large,

complex metallic parts and assemblies for the global

aerospace industry. The company supplies several Boeing

commercial aerospace platforms, including the 737 and

787, and its largest customers are The Boeing Company

and Spirit AeroSystems. “ZTM not only expands Accurus’s

content on the key 737 and 787 platforms, reinforces our

strong relationships with our largest customers and extends

Accurus’s geographic presence into Wichita, but also,

importantly, provides Accurus with proven capabilities for

delivery of large complex assemblies,” said Rowan Taylor,

Liberty Hall’s founding Partner.

In July 2016, AE Industrial Partners, LLC (AEI) completed

the acquisition of Wixom, Michigan-based Moeller

Aerospace Technology, Inc. Founded in 1953, Moeller

specializes in the precision machining of complex hot-

and cold-section turbine hardware, including titanium-

aluminide, low-pressure turbine blades, for the commercial

aviation and power generation turbine engine industries.

AEI invests in aerospace, power generation, and specialty

industrial companies. “Moeller Aerospace is virtually unique

in its products, technology, and reputation,” said Michael

Greene, Managing Partner of AEI. “The company is a proven

innovator in developing new products and processes

that support the development and production of turbine

engines for their key OEM customers, and has the potential

to expand this expertise across its target markets.”

In July 2016, AGC AeroComposites acquired Cleveland,

Ohio-based North Coast Composites, Inc. Founded in

1976, North Coast Composites manufactures advanced

composites for the aerospace industry using Resin Transfer

Molded (RTM) and Vacuum-Assisted Resin Transfer Molded

(VARTM) components. Its partner company, North Coast

Tool and Mold, designs and manufactures molds and tools

for the aerospace industry, including resin transfer molds,

lay-up molds, compression molds, and plastic injection

molds.

“The North Coast companies are an excellent complement

to the AGC AeroComposites’ family as they are industry

experts in liquid-molding RTM and VARTM,” said Wayne

Exton, CEO of AGC AeroComposites. “They also have deep

experience with engine composites, a market segment

which we are excited to expand to. We look forward

to offering an expanded, more comprehensive set of

capabilities and technologies to our customers.”

AGC AeroComposites is a global composites and

metal components and assemblies manufacturer for

the aerospace and defense industry. The company was

acquired by Acorn Growth Company, Mesa Capital

Partners, and Peninsula Capital Partners in 2008. North

Coast is the first add-on acquisition for the platform.

In June 2016, TransDigm Group Inc. (NYSE: TDG) acquired

ILC Holdings, Inc., the parent company of Data Device

Corporation (DDC), in an all-cash transaction valued at

$1.0 billion. DDC is a supplier of databus and power supply

products for the military (75 percent of revenue) and

commercial aerospace (25 percent of revenue) markets.

Approximately 70 percent of revenue comes from the

aftermarket, with the majority proprietary and sole source

products. Approximately 45 percent of revenue is derived

from customers outside of the United States. DDC is

forecasting revenue of $200 million in 2016.

Behrman Capital acquired DDC in 2003, and under its

ownership completed the add-on acquisitions of Maxwell

Technologies in 2016, Emrise Electronics in 2015, and

National Hybrid in 2013. Transaction Multiples: 5.0x

Revenue and 14.3x EBITDA (E)

In April 2016, J.F. Lehman & Company acquired API

Technologies Corp. in a take private transaction valued

at $305.9 million. The company provides systems and

components for applications in radio frequency, microwave,

millimeterwave, electromagnetic, power, and security

technology. The company’s products are used by global

defense, industrial, and commercial customers in the

Industrials M&A Activity

14

Industrials Insider

Mergers & Acquisitions

areas of commercial aerospace, wireless communications,

medical, oil and gas, electronic warfare, unmanned systems,

C4ISR, missile defense, harsh environments, satellites, and

space. Transaction Multiples: Revenue 1.3x and EBITDA

15.11x

In February 2016, Liberty Hall Capital Partners acquired

AIM Aerospace, which will serve as a growth platform for

the sponsor’s “newly launched strategy to build a fully-

integrated, diversified composites supplier through organic

investments and strategic acquisitions.” AIM supplies

composite ducting, substructural, and interiors parts for

the commercial aerospace industry, focused on the highest

value Boeing platforms, including the 737, 777, and 787.

Major customers include The Boeing Company, Kawasaki

Heavy Industries, Spirit AeroSystems, and B/E Aerospace.

The transaction was valued at $220 million.

“The commercial aerospace market continues to enjoy

strong, long-term secular growth, driven by demand for

next generation aircraft,” said Rowan Taylor, Liberty Hall’s

founding Partner. “With this unprecedented growth in

aircraft deliveries, aircraft manufacturers are increasingly

transitioning from metallic to composite materials that

provide weight savings and other beneficial properties that

increase fuel efficiency and durability. As a private equity

firm focused exclusively on the aerospace and defense

industry, we see significant opportunities in this segment

of the industry and believe that AIM Aerospace possesses

an ideal combination of capabilities, customer relationships,

and a proven track record of success. The growing demand

for composites provides an opportunity for AIM to serve

as the platform investment for Liberty Hall to build a fully-

integrated, diversified composites supplier.”

ELECTRONIC COMPONENTS AND EQUIPMENT

In June 2016, IES Holdings, Inc. (NASDAQ:IESC) completed

the acquisition of Technibus, Inc. in a $45 million all-

cash transaction. The Canton, Ohio-based company

manufactures custom-engineered, metal enclosed bus

duct solutions for the power generation, petrochemical,

commercial, transit, data center, and industrial markets.

Technibus will operate as a subsidiary in IES’s Infrastructure

Solutions segment.

Technibus was backed by Pfingsten Partners, which

acquired the company in 2008.

In March 2016, WEG S.A. acquired Bluffton Motor Works,

a leading manufacturer of sub-five horsepower motors for

diverse applications in the food and beverage processing,

industrial and commercial equipment manufacturing, and

pumps and ventilation markets. Founded in 1944 and based

in Bluffton, Indiana, Bluffton employs over 400 people and

reported net revenue of approximately $64 million in 2015.

Commenting on the acquisition, WEG’s Motors Managing

Director Luis Alberto Tiefensee said, “This acquisition

is strategic to expand and to provide greater flexibility

to WEG’s capabilities in the world’s largest market for

fractional electric motors. It also brings major product

line expansion, which complements our current product

portfolio for North America.” Based in Jaraguá do Sul,

Brazil, WEG S.A. (BOVESPA: WEGE3) manufactures and

sells electric motors, drives, controls, and electrical panels

in Brazil and internationally. The company employs more

than 31,000 people from manufacturing facilities in 11

countries and reported revenue of $2.7 billion in 2015.

Bluffton Motor Works was a portfolio company of

Beachwood, Ohio-based private equity firm CapitalWorks,

which acquired the company in 2006 in a corporate

carve-out from Franklin Electric Corporation (NasdaqGS:

FELE). CapitalWorks recruited industry veteran David

Nussear as CEO with the strategy to more than double the

size of the business, completing three strategic add-on

acquisitions during its ownership: Toledo Gear Motor in

2011, Electric Motors North in 2012, and RAE Corporation

in 2013.

In February 2016, DNS Capital acquired IMI Holding Corp,

a magnet and electromagnet manufacturer, from River

Associates Investments LLC. Boyne City, Michigan-based

IMI provides highly engineered solutions for magnetic

separation and material handling, particle processing, and

process automation applications. Industries served include

food processing, industrial MRO, conveying, bulk material,

and aggregate handling and recycling, among others. River

Associates acquired IMI in 2012 and under its ownership,

completed the add-on acquisition of Prater-Sterling

in 2014. Prater-Sterling develops particle processing

equipment and control systems used in a variety of

https://globenewswire.com/News/Listing?symbol=IESC&exchange=2


15

industries such as food processing, chemical, agriculture,

minerals, and pharmaceuticals.

INDUSTRIAL MACHINERY

In July 2016, Komatsu Ltd. (TSE:6301) announced it was

acquiring mining machinery and services company Joy

Global, Inc. (NYSE:JOY) in a transaction valued at

$3.7 billion, the largest acquisition in the company’s

history. Komatsu intends to operate Joy Global as a

separate subsidiary of Komatsu. Founded in 1884, Joy

Global manufactures and services equipment and parts for

underground and surface mining applications, as well as

material handling systems and components for a variety of

applications.

In addition to gaining a complementary product line, the

acquisition will allow Komatsu to expand into underground

mining equipment, which has been a key strategic goal for

the company. According to analyst estimates, underground

mining equipment represents roughly 37 percent of the

overall mining equipment market. Transaction Multiples:

1.3x Revenue and 14.6x EBITDA

In June 2016, Stabilus S.A. (DB:STM) acquired the ACE,

Hahn Gasfedern, and Fabreeka/Tech Products businesses

from SKF AB (OM:SKF B) in a transaction valued at

$339 million. Operating from locations in Europe, the

United States, and Asia, the companies produce gas

springs, dampers, and products for vibration reduction

with applications in automation technology, machinery

and plant engineering, utility and rail vehicles, and medical

equipment. Combined, the businesses generated sales of

approximately $120 million and EBIT of $30 million in 2015.

Stabilus CEO Dietmar Siemssen, said: “The planned

acquisition marks an important step for Stabilus to further

expand our position as a global provider of motion

control and damping solutions. The companies are well-

established in the market, innovative, fast-growing, and

have outstanding development opportunities…and will

immediately increase the earnings power and profitability

of Stabilus.” Transaction Multiple: 2.8x Revenue

In June 2016, Rexnord Corporation (NYSE:RXN) completed

the acquisition of Cambridge International, Inc. in a

$210 million transaction. Cambridge is a supplier of metal

conveying and engineered woven metal solutions for

food processing, architectural, packaging, and filtration

applications. “Cambridge aligns well with our strategy to

expand our presence in consumer-driven end markets,”

said Rexnord CEO Todd Adams. “The acquisition, when

completed, will bring our total sales to water, aerospace,

and food and beverage end markets to more than 70

percent of total revenues that should, over time, generate a

better balanced, overall growth profile.”

“The combination of Cambridge’s leadership in food

applications and Rexnord’s strength across the global

beverage industry yields an unequaled portfolio of food

and beverage conveying solutions that we are confident

will create additional value for customers, associates, and

shareholders,” said Kevin Zaba, President Rexnord Process

and Motion Control platform.

Cambridge International was a portfolio company of

Industrial Growth Partners since 2012.

In June 2016, Brunswick, Ohio-based Precision Made

Products (PMP) was acquired by Alpha Sintered Metals

(ASM), a portfolio company of O2 Investment Partners.

ASM plans to leverage its expertise in powder metal

manufacturing with PMP’s proprietary technology and deep

expertise in metal injection molding (MIM). Founded in

2002 by Majid Daneshvar, PMP is a MIM business with CNC

machining capability serving the medical, aerospace, and

firearms markets.

Commenting on the transaction, JoAnne Ryan, CEO of

Alpha Sintered Metals said, “Partnering with PMP will allow

us to expand our capabilities, enhance our market position,

and enter new markets. MIM is an important part of our

growth strategy and we are very excited to be partnering

with Majid and the PMP team.” Jay Hansen, Managing

Partner of O2 Investment Partners, added, “Majid and his

team are well respected within the industry, and we are

excited to work with them going forward. PMP’s continuous

innovation made it an excellent fit for the Alpha platform

and our long-term strategic plan.”

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16

Industrials Insider


Precision Made Products is the first add-on acquisition for

Alpha Sintered Metals. O2 Investment Partners acquired

ASM in 2013 in partnership with management.

In May 2016, Lincoln Electric Holdings, Inc. (Nasdaq:LECO)

completed the acquisition of Vizient Manufacturing

Solutions, a robotic integrator specializing in custom

engineered tooling and automated arc welding systems

for general and heavy fabrication applications. Vizient has

operations in Iowa and Brazil and reported sale of

approximately $40 million. Commenting on the transaction,

Lincoln CEO, said, “We are excited to welcome Vizient into

our growing automation portfolio. Their system design

capabilities not only complement our current offering, but

their focus on quality and customer service aligns with our

values at Lincoln Electric. Vizient will also help diversify our

end market exposure and broaden growth opportunities

globally.”

In May 2016, Kyocera Corporation (TSE: 6971) acquired

SGS Tool Company of Munroe Falls, a manufacturer of solid

carbide and stainless steel cutting tools for the automotive,

aerospace, energy, and medical industries. The company is

best known for its solid carbide high performance endmills,

drills, stainless steel medical tools, and subsequent PVD

coatings. In addition to its Munroe Falls headquarters, SGS

Tool operates manufacturing facilities in Cuyahoga Falls,

Ohio and Columbia City, Indiana, as well as the United

Kingdom. Over 30 percent of SGS’ sales result from exports

to more than 60 countries. The business will be renamed

Kyocera SGS Precision Tools.

With the acquisition, Kyocera expands its offering with

solid tools and enhances its ability to provide value-added

solutions to customers. Kyocera plans to increase sales of

its cutting tool business in North America by 2.5 times by

fiscal year ending March 31, 2019.

“By incorporating SGS Tool into the Kyocera Group,

Kyocera will create a business structure capable of

providing total solutions and strengthen its business

globally as a valuable comprehensive cutting tool

manufacturer,” Kyocera said in a statement. Kyocera is

based in Kyoto, Japan and reported revenue of $14.6 billion

in fiscal 2015.

In March 2016, Altus Capital Partners acquired Nichols

Portland from Parker Hannifin Corporation (NYSE:PH).

Nichols Portland manufactures precision powder metal

fixed and variable displacement gears including gerotor

gears and smart pumps for automotive and on-off highway

and other industrial markets. The need for increased

fuel and motor efficiency is expected to fuel demand for

smart pump and advanced variable vane gears, according

to Altus. Russell Greenberg, Managing Partner of Altus

Capital, commented, “Altus is enthusiastic to partner

with Nichols Portland’s management team in acquiring

an industry leader in the designing and manufacturing

powder metal gerotor gears and a growing developer of

innovative smart pumps for fuel applications. We recognize

and value management’s depth of capabilities along with

the Company’s exceptional technological advancements,

which has earned Nichols Portland its industry leadership

position.”

In March 2016, Rockwell Automation Inc. (NYSE:ROK)

acquired MagneMotion, Inc., a manufacturer of intelligent

conveying systems used in automotive and general

assembly, packaging, and material handling applications.

The acquisition will complement Rockwell Automation’s

iTRAK to “…create the broadest portfolio of independent

cart solutions in this emerging technology area” according

to a company statement. MagneMotion is being integrated

into the Architecture & Software segment of Rockwell

Automation’s motion business.

“This acquisition continues our strategy to build a

portfolio of smart manufacturing technologies that

brings next generation performance to our customers

today,” said Marco Wishart, vice president and general

manager of Rockwell Automation’s motion control

business. “MagneMotion expands our existing capabilities

in independent cart technology. Our recent acquisition

of Jacobs Automation and its iTRAK technology is

complementary to MagneMotion’s portfolio. We see

a future where the transportation of products within

the factory, whether inside of a particular machine or

between machines, will be fully controlled to optimize the

productivity and flexibility of the entire process.” Jacobs

Automation was acquired in 2014.

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http://www.altuscapitalpartners.com/


17

MagneMotion received development capital from an

investor consortium that included Massachusetts Capital

Resource Company and Delta Group in 2011.

In February 2016, Wynnchurch Capital, LLC acquired Texas

Hydraulics, Inc. from Dover Corporation (NYSE:DOV).

Founded in 1968, Texas Hydraulics manufactures highly

engineered, custom-designed hydraulic cylinders, swivels,

and related components for mobile equipment applications

in diverse end markets including infrastructure, utilities,

natural resources, and transportation.

Commenting on the investment, Frank Hayes, Partner at

Wynnchurch, said “Texas Hydraulics has a long, established

track record of working with its global customer base to

design custom solutions for the most complex applications.

We are excited to partner with management to help

expand this thought leadership, position the Company

for continued growth and drive operational excellence

throughout the business.

Greg Gleason, Managing Director at Wynnchurch, added,

“We look forward to helping the Company provide

value to its customers with a focus on industry leading

quality, delivery and service. Texas Hydraulics is also

well positioned to leverage its engineering expertise to

grow into new end-markets, geographies and product

adjacencies.”

BUILDING PRODUCTS

In July 2016, Melrose Industries plc (LSE:MRO) announced

it was acquiring Nortek Inc. (NasdaqGS:NTK) in a $2.7

billion transaction. Nortek’s product offerings include

ventilation products such as range hoods and bathroom

fans, security and audio/video solutions, heating

and cooling products, air management systems, and

ergonomic and productivity solutions. “Nortek is a high

quality manufacturing business with over 90 percent of

its turnover in North America and product penetration

into 80 percent of US households. It serves attractive end

markets at good points in their cycle, with strong brands

and market positions,” said Melrose CEO Simon Peckham.

“Nonetheless there remains solid potential for further

improvement under Melrose’s guidance. Our ability to apply

our industrial experience and investment expertise, as

well as to liberate Nortek from its current capital structure

will transform the prospects of the business. Our team is

excited about getting to work to achieve these results as

soon as possible.” Transaction Multiples: 1.1x Revenue and

10.0x EBITDA

In June 2016, In June 2016, Insight Equity acquired

Panolam Surface Systems from Apollo Global

Management, LLC (NYSE:APO). Panolam manufactures

integrated surface solutions for commercial, institutional

and residential applications, including high-pressure

laminates, thermally-fused laminates, fiberglass reinforced

laminates, and other specialty products. Products are

sold under the Panolam, Nevamar, Pionite, Pluswood,

and Conolite brands. “Panolam is a key supplier of high

quality laminates to companies across multiple attractive

end-markets. The Company has strong brands, extensive

customer diversification, and a strategic footprint across

North America,” remarked Andrew Boisseau, a Principal

at Insight Equity. “We look forward to partnering with

Panolam and believe our hands-on, collaborative approach

will allow us to complement the team, driving additional

growth and innovation for Panolam’s customers.”

In June 2016, Novik Inc. purchased Miami, Florida-based

Exteria Building Products, LLC, a manufacturer of

polypropylene shake, stone, and accessory products. The

company is recognized for its “weathered series” and

color match shake offerings as well as its masonry line. The

transaction represents an exit for Graham Partners, which

acquired Exteria in 2009.

Novik has been backed by Clearview Capital since 2014.

Clearview Capital is credited in the building products

industry with creating the AZEK® brand of cellular PVC

trim, deck, and railing products. Commenting on the

acquisition, Novik President Ralph Bruno, said, “The power

of bringing together these two industry leaders will give

us the size, scale and breadth of products to accelerate

growth and demand throughout our existing channels.”

The deal will expand Exteria’s network of builders and

contractors, said Frank McCormack, senior vice president

of sales for Exteria. “We have long felt the combination

of Novik and Exteria was the perfect strategic move for

us to make to accelerate an already rapid rate of growth

by Novik in the polypropylene siding market,” said James


18

Industrials Insider


G. Andersen, Managing Partner of Clearview Capital. “We

believe the addition of great products, well-established

distribution and the strong team at Exteria will allow us to

build the business rapidly into an industry powerhouse.”

In March 2016, The Jordan Company announced it was

acquiring Top Knobs, a manufacturer of decorative

kitchen hardware. The company provides pulls, handles,

and knobs to homeowners, contractors, architects, and

designers. The company offers its products through

kitchen, bath, and decorative hardware dealers as well

as through cabinet manufacturers and distributors. Top

Knobs has been backed by Harbour Group since 2008.

During its ownership, Harbour Group completed the add-

on acquisition of Atlas Homewares in 2014, a designer of

decorative hardware products, including cabinet knobs,

cabinet pulls, bath accessories, house numbers, and switch

plates.

In February 2016, CenterOak Partners acquired vinyl

window and patio door manufacturer Cascade Windows.

Cascade is based in Spokane, Washington and is regionally

focused in the western United States, serving dealers,

builders, and distributors in Arizona, California, Colorado,

Idaho, Montana, Nevada, New Mexico, Oregon, Utah,

Washington, and Wyoming. The company’s customizable

products are used in residential and commercial

applications. Cascade has broadened its footprint through

acquisitions, completing the purchase of Paramount

Windows (2014), Empire Pacific Windows (2011), and

LbL Windows (2009). Cascade was previously backed by

Altamont Capital Partners, which acquired the company in

2012.

In January 2016, CapitalWorks, LLC acquired Paradigm

Windows Solutions (PWS), a manufacturer of premium

quality custom vinyl windows in the Northeast.

Management continuity was key to the acquisition,

according to a CapitalWorks press release. John Brunett,

who joined PWS in 2010, will serve as Chairman. The former

President of Simonton Building Products helped build

the company from a regional to a national leader in vinyl

windows. Andy Sevier has been with PWS for nearly three

decades and will serve as President. “We are excited to

partner with the Paradigm team to continue to expand their

market presence,” said CapitalWorks Managing Partner and

CEO Dick Hollington. “The delivered and installed quality

of their premium vinyl windows and doors along with their

warranty and support programs are unmatched in the

industry.” The transaction represents an exit for White Oak

Partners, which acquired PWS in 2009.

Industrials Insider

Industry Valuations


BGL Industrials indices de�ned on Page 27.SOURCE: S&P Capital IQ

Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216

EV/EBITDA 8.2x 6.8x 7.2x 7.9x 7.3x 6.8x 7.2x 7.8x 8.7x 8.8x 10.1x 9.7x 9.8x 10.0x 10.4x 10.4x 10.0x 10.0x 10.7x 11.3x 11.3x

EV/Revenue 0.9x 0.7x 0.9x 0.8x 0.8x 0.8x 0.8x 0.8x 0.9x 1.0x 1.1x 1.2x 1.3x 1.3x 1.4x 1.4x 1.4x 1.5x 1.6x 1.7x 1.8x

0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

2.50x

0.0x

1.5x

3.0x

4.5x

6.0x

7.5x

9.0x

10.5x

12.0x

13.5x

15.0x




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

2.50x

2.75x

3.00x

0.0x

1.5x

3.0x

4.5x

6.0x

7.5x

9.0x

10.5x

12.0x

13.5x

15.0x

16.5x

18.0x

Construction and Farm Equipment

Distribution

Electrical Components and Equipment

Diversified Industrials

Building Products

Industrial Machinery

Aerospace & Defense




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

2.50x

0.0x

1.5x

3.0x

4.5x

6.0x

7.5x

9.0x

10.5x

12.0x

13.5x

15.0x




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

2.50x

0.0x

1.5x

3.0x

4.5x

6.0x

7.5x

9.0x

10.5x

12.0x

13.5x

15.0x




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

2.50x

0.0x

1.5x

3.0x

4.5x

6.0x

7.5x

9.0x

10.5x

12.0x

13.5x

15.0x




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

2.50x

0.0x

1.5x

3.0x

4.5x

6.0x

7.5x

9.0x

10.5x

12.0x

13.5x

15.0x

26

Industrials Insider

Industry Valuations


($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTMCompany Name Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDADIVERSIFIED INDUSTRIALSGeneral Electric Company NYSE:GE $29.85 90.5% $267,492.8 $418,766.8 3.4x 23.6x 8.8x $121,921.0 21.1% 14.5%3M Company NYSE:MMM 179.59 98.5% 108,544.2 118,476.2 3.9x 13.7x 1.4x 30,081.0 49.7% 28.6%Honeywell International Inc. NYSE:HON 115.93 96.6% 88,208.2 95,446.2 2.4x 11.9x 1.8x 39,106.0 31.1% 20.4%United Technologies Corporation NYSE:UTX 101.96 92.8% 85,333.1 102,957.1 1.8x 9.9x 2.2x 56,319.0 28.0% 18.1%Eaton Corporation plc NYSE:ETN 63.73 93.4% 28,978.0 36,985.0 1.8x 11.6x 2.6x 20,153.0 32.0% 15.9%Fortive Corporation NYSE:FTV 50.98 93.8% 17,617.5 20,508.2 3.3x 14.4x 2.4x 6,130.2 48.4% 23.3%Ingersoll-Rand Plc NYSE:IR 65.52 95.0% 16,904.1 20,124.9 1.5x 10.5x 2.1x 13,395.0 30.8% 14.3%Parker-Hanni�n Corporation NYSE:PH 123.45 98.8% 16,530.1 17,466.4 1.5x 10.9x 1.9x 11,360.8 23.0% 13.9%Dover Corporation NYSE:DOV 70.54 94.2% 10,948.9 13,645.0 2.0x 11.2x 2.4x 6,790.8 37.2% 17.9%Textron Inc. NYSE:TXT 39.28 89.4% 10,584.5 13,835.5 1.0x 8.5x 2.4x 13,815.0 17.6% 11.8%Carlisle Companies Incorporated NYSE:CSL 100.69 92.3% 6,506.6 6,854.7 1.9x 9.6x 1.0x 3,640.2 30.6% 19.6%ITT Inc. NYSE:ITT 35.51 87.6% 3,181.7 2,948.9 1.2x 7.4x 0.6x 2,504.0 31.8% 15.9%Median $68.03 93.6% $17,260.8 $20,316.5 1.9x 11.0x 2.1x $13,605.0 31.0% 16.9%Mean $81.42 93.6% $55,069.1 $72,334.6 2.2x 11.9x 1.9x $27,101.3 31.8% 17.8%AEROSPACE AND DEFENSEUnited Technologies Corporation NYSE:UTX $101.96 92.8% $85,333.1 $102,957.1 1.8x 9.9x 2.2x $56,319.0 28.0% 18.1%The Boeing Company NYSE:BA 130.56 86.7% 81,446.7 83,296.7 0.9x 10.6x 1.4x 96,809.0 13.6% 8.1%Lockheed Martin Corporation NYSE:LMT 243.82 91.3% 71,570.0 85,110.0 1.7x 12.3x 2.3x 48,994.0 11.3% 13.3%General Dynamics Corporation NYSE:GD 153.10 98.8% 46,738.2 48,275.2 1.5x 10.4x 0.7x 31,192.0 19.6% 15.0%Raytheon Company NYSE:RTN 139.12 97.0% 41,053.6 44,010.6 1.8x 12.4x 1.5x 23,909.0 24.7% 14.8%Northrop Grumman Corporation NYSE:NOC 215.85 96.3% 38,545.3 43,796.3 1.9x 12.6x 1.8x 23,629.0 23.6% 14.7%TransDigm Group Incorporated NYSE:TDG 282.69 96.0% 15,057.6 23,690.2 7.6x 17.0x 7.4x 3,106.0 54.6% 44.9%L-3 Communications Holdings Inc. NYSE:LLL 149.71 96.9% 11,563.6 14,624.6 1.4x 11.7x 2.7x 10,452.0 10.0% 12.0%Rockwell Collins Inc. NYSE:COL 83.47 87.8% 10,845.4 13,043.4 2.5x 11.0x 2.1x 5,198.0 31.3% 22.8%Spirit AeroSystems Holdings, Inc. NYSE:SPR 43.04 76.6% 5,554.3 5,952.7 0.9x 6.6x 1.3x 6,714.5 14.6% 13.3%Moog Inc. NYSE:MOG.A 55.55 81.8% 1,991.1 2,714.9 1.1x 8.4x 3.4x 2,416.1 29.5% 13.3%Median $139.12 92.8% $38,545.3 $43,796.3 1.7x 11.0x 2.1x $23,629.0 23.6% 14.7%Mean $145.35 91.1% $37,245.4 $42,497.4 2.1x 11.2x 2.4x $28,067.1 23.7% 17.3%ELECTRICAL COMPONENTS AND EQUIPMENTJohnson Controls International plc NYSE:JCI $44.55 91.0% $41,689.5 $50,403.5 1.4x 13.1x 2.4x $36,225.0 18.8% 9.3%Emerson Electric Co. NYSE:EMR 51.77 91.1% 33,315.9 37,135.9 1.8x 9.4x 1.8x 20,581.0 40.6% 19.1%Roper Technologies, Inc. NYSE:ROP 178.05 90.9% 18,043.7 20,513.5 5.6x 16.3x 2.5x 3,661.6 61.2% 34.4%Rockwell Automation Inc. NYSE:ROK 117.03 96.9% 15,143.7 14,586.8 2.5x 12.3x 1.6x 5,948.4 41.8% 19.9%Acuity Brands, Inc. NYSE:AYI 258.92 92.2% 11,364.0 11,381.4 3.6x 21.2x 0.7x 3,125.4 43.5% 17.2%Ametek Inc. NYSE:AME 47.33 83.0% 11,000.4 12,686.4 3.2x 12.1x 2.0x 3,908.6 36.4% 26.9%Hubbell Inc. NYSE:HUBB 104.82 94.2% 5,800.1 6,508.9 1.9x 11.0x 1.8x 3,450.3 32.6% 17.2%Regal Beloit Corporation NYSE:RBC 58.11 84.9% 2,600.6 3,987.1 1.2x 7.8x 3.2x 3,312.6 27.4% 15.4%Median $81.47 91.0% $13,253.8 $13,636.6 2.2x 12.2x 1.9x $3,785.1 38.5% 18.2%Mean $107.57 90.5% $17,369.7 $19,650.4 2.7x 12.9x 2.0x $10,026.6 37.8% 19.9%

TTM MarginsTTM Enterprise Value /

NOTE: Figures in bold and italic type were excluded from median and mean calculation.(1) As of 9/21/2016.(2) Market Capitalization is the aggregate value of a �rm's outstanding common stock.(3) Enterprise Value is the total value of a �rm (including all debt and equity).Source: S&P Capital IQ.

27

Industrials Insider

Industry Valuations


NOTE: Figures in bold and italic type were excluded from median and mean calculation.(1) As of 9/21/2016.(2) Market Capitalization is the aggregate value of a �rm's outstanding common stock.(3) Enterprise Value is the total value of a �rm (including all debt and equity).Source: S&P Capital IQ.

($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTMCompany Name Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDAINDUSTRIAL MACHINERYIllinois Tool Works Inc. NYSE:ITW $119.06 96.4% $42,261.6 $47,074.6 3.5x 13.8x 2.1x $13,334.0 41.8% 25.7%Pentair plc NYSE:PNR 60.51 90.3% 10,958.4 15,336.8 2.3x 13.1x 3.9x 6,621.6 34.4% 17.7%IDEX Corporation NYSE:IEX 91.99 96.5% 7,003.3 7,697.4 3.7x 14.8x 2.0x 2,055.9 44.9% 25.3%Flowserve Corp. NYSE:FLS 47.12 89.8% 6,143.5 7,510.0 1.7x 10.8x 2.4x 4,357.6 33.8% 15.7%Nordson Corporation NasdaqGS:NDSN 98.75 96.6% 5,647.7 6,632.3 3.8x 15.2x 2.4x 1,745.9 54.6% 25.0%Donaldson Company, Inc. NYSE:DCI 36.95 95.6% 4,919.1 5,244.4 2.4x 15.0x 1.6x 2,220.3 34.0% 15.7%Lincoln Electric Holdings Inc. NasdaqGS:LECO 61.79 94.6% 4,156.3 4,441.1 1.9x 11.2x 1.3x 2,356.3 34.4% 16.6%Trinity Industries Inc. NYSE:TRN 24.07 79.2% 3,668.1 6,379.9 1.2x 5.1x 2.5x 5,462.0 26.5% 23.0%Crane Co. NYSE:CR 62.17 94.4% 3,630.7 4,079.4 1.5x 8.9x 1.9x 2,722.7 35.8% 16.7%CLARCOR Inc. NYSE:CLC 63.91 96.0% 3,107.0 3,305.9 2.4x 13.1x 1.3x 1,385.2 33.4% 18.2%The Timken Company NYSE:TKR 32.93 88.8% 2,577.9 3,080.3 1.1x 7.4x 1.5x 2,779.4 27.2% 15.0%SPX Corporation NYSE:SPXC 20.01 39.5% 835.6 1,107.5 0.7x NM NM 1,685.8 18.2% -2.3%Median $61.15 94.5% $4,537.7 $5,812.1 2.1x 13.1x 2.0x $2,539.5 34.2% 17.2%Mean $59.94 88.1% $7,909.1 $9,324.1 2.2x 11.7x 2.1x $3,893.9 34.9% 17.7%CONSTRUCTION, FARM, AND OTHER INDUSTRIAL EQUIPMENTCaterpillar Inc. NYSE:CAT $83.47 98.5% $48,765.8 $81,584.8 2.0x 14.5x 6.8x $41,795.0 21.4% 13.5%Deere & Company NYSE:DE 83.05 93.7% 26,112.8 59,717.8 2.2x 16.1x 10.0x 26,724.7 22.9% 13.9%Cummins Inc. NYSE:CMI 120.92 94.7% 20,314.6 21,239.6 1.2x 8.0x 0.8x 18,205.0 25.7% 12.9%PACCAR Inc. NasdaqGS:PCAR 57.78 94.9% 20,253.5 25,353.9 1.4x 9.7x 3.2x 17,915.7 15.9% 14.7%CNH Industrial N.V. BIT:CNHI 7.44 94.2% 9,816.3 32,082.3 1.3x 13.9x 11.5x 25,612.0 17.5% 9.1%Oshkosh Corporation NYSE:OSK 56.33 97.5% 4,139.4 5,061.8 0.8x 10.5x 2.0x 6,102.1 16.5% 7.8%AGCO Corporation NYSE:AGCO 47.81 85.4% 3,878.1 5,094.7 0.7x 8.0x 2.6x 7,250.3 20.8% 8.0%Joy Global, Inc. NYSE:JOY 27.61 96.7% 2,710.3 3,534.2 1.4x 20.1x 5.7x 2,580.4 21.9% 6.8%Terex Corporation NYSE:TEX 24.19 94.6% 2,627.0 4,145.9 0.7x 9.1x 3.7x 6,356.4 19.7% 7.1%Navistar International Corporation NYSE:NAV 22.45 95.7% 1,832.3 6,262.3 0.7x 14.7x 11.9x 8,536.0 14.6% 5.0%Federal Signal Corp. NYSE:FSS 13.25 76.9% 794.1 822.3 1.2x 8.6x 0.7x 711.2 28.5% 13.4%Median $47.81 94.7% $4,139.4 $6,262.3 1.2x 10.5x 2.9x $8,536.0 20.8% 9.1%Mean $49.48 93.0% $12,840.4 $22,263.6 1.2x 12.1x 3.2x $14,708.1 20.5% 10.2%BUILDING PRODUCTSMasco Corporation NYSE:MAS $33.39 89.3% $11,025.9 $13,105.9 1.8x 11.1x 2.5x $7,275.0 32.9% 16.2%Fortune Brands Home & Security, Inc. NYSE:FBHS 57.03 88.5% 8,777.0 10,103.5 2.1x 13.8x 2.2x 4,867.8 35.2% 15.0%Lennox International, Inc. NYSE:LII 157.65 96.1% 6,853.5 7,874.4 2.2x 16.3x 2.3x 3,523.5 28.5% 13.2%Owens Corning NYSE:OC 51.73 88.1% 5,936.0 8,188.0 1.5x 8.1x 2.3x 5,520.0 24.3% 18.3%USG Corporation NYSE:USG 26.19 84.9% 3,822.5 5,174.5 1.3x 7.9x 3.4x 3,869.0 19.7% 15.6%Armstrong World Industries, Inc. NYSE:AWI 40.77 77.8% 2,262.6 3,044.6 1.3x 8.3x 3.0x 2,423.6 25.2% 12.1%Simpson Manufacturing Co., Inc. NYSE:SSD 45.00 99.1% 2,177.5 1,931.1 2.3x 12.3x 0.0x 830.4 46.6% 18.9%Universal Forest Products Inc. NasdaqGS:UFPI 102.49 92.4% 2,081.3 2,080.7 0.7x 10.3x 0.4x 2,970.1 14.9% 6.8%Gri�on Corporation NYSE:GFF 16.62 86.4% 710.8 1,572.5 0.8x 8.9x 5.3x 1,958.6 24.0% 9.0%Quanex Building Products Corporation NYSE:NX 17.17 79.3% 587.5 857.4 1.0x 9.3x 3.3x 874.5 23.6% 10.5%Median $42.89 88.3% $3,042.6 $4,109.6 1.4x 9.8x 2.4x $3,246.8 24.7% 14.1%Mean $54.80 88.2% $4,423.5 $5,393.3 1.5x 10.6x 2.5x $3,411.3 27.5% 13.6%DISTRIBUTIONW.W. Grainger, Inc. NYSE:GWW $218.42 91.0% $13,197.5 $15,261.8 1.5x 10.5x 1.5x $10,081.4 41.2% 14.6%Fastenal Company NasdaqGS:FAST 40.24 80.5% 11,628.0 11,902.5 3.0x 13.2x 0.5x 3,919.0 49.9% 23.1%Watsco Inc. NYSE:WSO 140.16 93.4% 4,587.4 5,095.5 1.2x 14.5x 0.8x 4,146.7 24.4% 8.5%MSC Industrial Direct Co. Inc. NYSE:MSM 71.37 91.1% 4,303.8 4,534.0 1.6x 10.1x 0.6x 2,845.8 45.0% 15.7%WESCO International Inc. NYSE:WCC 59.00 92.3% 2,494.5 3,776.0 0.5x 9.2x 3.5x 7,473.0 19.8% 5.5%Beacon Roo�ng Supply, Inc. NasdaqGS:BECN 41.03 83.8% 2,452.0 3,605.6 1.0x 12.6x 4.2x 3,740.5 24.1% 7.6%Anixter International Inc. NYSE:AXE 60.14 85.6% 1,987.7 3,368.9 0.5x 9.5x 4.3x 7,096.9 20.7% 5.0%Applied Industrial Technologies, Inc. NYSE:AIT 45.98 94.6% 1,797.4 2,065.8 0.8x 10.1x 1.6x 2,519.4 28.2% 8.1%Median $59.57 91.1% $3,399.2 $4,155.0 1.1x 10.3x 1.6x $4,032.8 26.3% 8.3%Mean $84.54 89.0% $5,306.0 $6,201.3 1.3x 11.2x 2.1x $5,227.8 31.7% 11.0%

TTM MarginsTTM Enterprise Value /

28

Industrials Insider

Industry Valuations

Sector Performance

Source: S&P Capital IQ.As of 9/21/2016.

By Sector

Overall Market

7% 7%2%

27%22%

14%9%

19%12% 10%

27%

10% 13%7%

20%

38%

1%

15%

-9%

42%

-14%

92%

133%

70%

111%

12%

222%

37%

-20%

30%

80%

130%

180%

230%

280%

Diversified Industrials Aerospace and Defense Electrical Componentsand Equipment

Industrial Machinery Construction and FarmEquipment

Building Products Distribution

Retu

rns


7.5%10.0% 10.8%

27.1%

18.8%

85.4%

64.4%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

S&P 500 DJIA


29

For questions about content and circulation, please contact editor, Rebecca Dickenscheidt, at [email protected] or 312-513-7476.

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recapitalized by

ZS Fund L.P.

E C S R E F I N I N G

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CCPI Inc. recapitalized in a change of control

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Lauren International, Inc. acquired by

merged with

a portfolio company of

which has been acquired by

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divested

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acquired by

an MFRI business

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a subsidiary of

Gulf Oil International Ltd

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