Capstone Partners Reports: Industrials M&A Remains Resilient Amid Economic and Geopolitical Uncertainty

Rhea-AI Summary

Capstone Partners released its Annual Industrials M&A Report, offering insights into merger and acquisition activity, public market valuations, and economic forecasts for 2023. The report highlights that while EBITDA multiples in the industrial sectors were stable at the start of 2022, challenges emerged in Q1 due to rising interest rates and recession fears. By late summer, valuations saw a significant decline before rebounding by fall 2022. The report indicates overall strong performance in the industrial sector compared to other industries, with the Dow Jones Industrial Average's EBITDA ending at 13.9x EV/EBITDA. Capstone anticipates ongoing M&A demand in the industry with key insights on sectors poised for buyer interest in 2023.

Positive

• Strong performance in the Industrials sector relative to broader economy.
• EBITDA multiples at 13.9x EV/EBITDA for Dow Jones Industrial Average firms.
• Anticipation of continued M&A demand in the Industrials sector.

Negative

• Weakness in multiples and average transaction values observed in Q1 2022.
• Valuations significantly depressed by late summer 2022 due to economic uncertainty.

BOSTON, April 20, 2023 /PRNewswire/ -- Capstone Partners, a leading middle market investment banking firm, released its Annual Industrials M&A Report, which shares insights into merger and acquisition (M&A) activity, public market valuations, the macroeconomic climate, and provides an outlook for 2023 industry activity. With extensive knowledge and transaction experience, Capstone's Industrials Investment Banking Group provides unique commentary on seven key sectors: Chemicals & Plastics, Engineered Products, Environmental, Health & Safety, HVACR, Packaging, Precision Manufacturing, and Waste & Recycling.

Exclusive insights into Industrials M&A activity and market valuations across seven key sectors.

Consistent with the general economic outlook and overall public market performance, valuations and EBITDA multiples in the Industrial sectors for 2022 were a tale of two halves. To start the year, valuations remained steady at or near peak levels experienced in the tail end of 2021. However, multiples and average transaction values began to demonstrate weakness in Q1 of 2022. By the late summer, valuations were meaningfully depressed compared to the year before as interest rates began to rise and fears of a recession loomed. By the end of fall, valuations began to rebound as uncertainty around the economic environment began to subside.

Overall, the Industrials industry performed strong in 2022 relative to broader segments of the economy. EBITDA multiples for companies in the Dow Jones Industrial Average ended the year at 13.9x EV/EBITDA, while sectors such as Technology, Consumer, and Construction struggled to regain momentum throughout the year. Within Industrials, certain sectors fared better than others. Those markets that are more impacted by rising interest rates, lower consumer spending, and the significant volatility in commodity prices in recent years experienced a sharper decline. Capstone's Industrials team anticipates continued M&A demand for quality companies operating in the industry.

Capstone remains a highly active advisor to Industrials companies, with recent clients including Paterson Pacific Parchment Company on its sale to Hoffmaster Group, Inc. (Packaging sector, March 2023) and Garlock Pipeline Technologies (GPT) on its sale to Branford Castle Fund II (Engineered Products, February 2023).

Also included in this report:

• Which sectors outperformed the broader Industrials industry and are poised to capture the most buyer interest in 2023.
• How the average Industrials EBITDA purchase multiple has fluctuated over the past several years.
• What trends are driving M&A activity across the Industrials industry, as well as specific trends impacting each of the seven highlighted subsectors. 

To access to full report, click here.

ABOUT CAPSTONE PARTNERS

For over 20 years, the firm has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company's lifecycle. Capstone's services include M&A advisory, debt and equity placement, corporate restructuring, special situations, valuation and fairness opinions and financial advisory services. Headquartered in Boston, the firm has 175+ professionals in multiple offices across the U.S. With 12 dedicated industry groups, Capstone delivers sector-specific expertise through large, cross-functional teams. Capstone is a subsidiary of Huntington Bancshares Incorporated (NASDAQ:HBAN). For more information, visit www.capstonepartners.com.

For More Information Contact:

David Bench
Managing Director
Co-Head of Industrials
949-734-7888
dbench@capstonepartners.com

Theodore Polk
Managing Director
Co-Head of Industrials
708-921-8961
tpolk@capstonepartners.com

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SOURCE Capstone Partners

FAQ

What does Capstone Partners' Annual Industrials M&A Report cover?

The report covers M&A activity, public market valuations, and the economic outlook for the Industrials sector in 2023.

What was the EBITDA multiple for the Dow Jones Industrial Average in 2022?

The EBITDA multiple ended at 13.9x EV/EBITDA for the Dow Jones Industrial Average in 2022.

How did economic conditions affect the Industrials sector in 2022?

Rising interest rates led to a decline in valuations and transaction values in Q1 2022, though a rebound occurred by late summer.

Which sectors are expected to capture buyer interest in 2023?

The report details which sectors outperformed and are poised for buyer interest, including Chemicals & Plastics and Engineered Products.