Behind the materials handling M&A boom
On Friday, I wrote a column about the M&A boom in the materials handling industry.
I also had a chance to talk to Robin Bear, vice president of the DAK Group, an investment bank that specializes in mergers and acquisitions for the mid-market. Although Bear did not discuss specifics of the recent acquisition of Retrotech by Savoye, the DAK Group was involved in that deal.
Bear identified five trends for the recent interest in our space, which she expects to continue.
The deal is strategic: By that, Bear is referring to a combination of products, services or geography where the two companies together are greater than the sum of their parts. “A strategic acquirer will pay more for your company than a private equity shop because there’s more intrinsic value and the return is so much better for both companies,” Bear says.
The world is flat: With apologies to Thomas Friedman, the globalization of business is having an effect on our industry. “You’ve got foreign companies that are keenly interested in investing in US companies,” says Bear. “The US firm gains access to foreign capital and the foreign acquirer gains immediate access to the US market without having to send someone over to open a US office. That’s really important to them.”
Service is king: Bear sees a continued interest by manufacturing companies in acquiring service-oriented businesses to create new streams of revenue and to become even more important to their customers.
Niche expertise is a close second to service: According to Bear, companies with a niche expertise that can open up new areas of business for the acquiring company are valued. “Companies that have significant market share in a segmented portion of the market are valuable to acquiring companies,” she says.
End users now understand the value of materials handling: “An industry with bright prospects is going to attract M&A activity,” says Bear. “Some overall business trends such as the greater emphasis on the distribution network, the emphasis on greener and more efficient warehousing all point to continued growth in the materials handling industry. That’s going to lead to M&A activity.”