M&A deal sizes continue to increase

M&A

Last updated on June 24th, 2019 at 03:51 pm

The Milwaukee market saw the announcement of some megadeals over the past 12 months that were among the largest in years.

Public corporations drove the majority of the largest area mergers and acquisitions, with Brookfield-based Fiserv Inc.’s $22 billion planned acquisition of New York City-based First Data Corp. leading the way (see cover story).

The second-largest deal announced in the past year was Johnson Controls International plc’s planned $13.2 billion sale of its Power Solutions division to Toronto-based private equity firm Brookfield Business Partner L.P. The deal is expected to close by June 30.

Power Solutions is a major segment of JCI, with $8 billion in revenue and about 500 employees in the Milwaukee region. Through a series of M&A transactions over the past several years, the company has narrowed its focus to only building solutions and technologies. The Power Solutions separation is expected to take some time, with the division retaining its headquarters in Milwaukee.

Sussex-based Quad/Graphics Inc. is also working on a large transaction – a $1.4 billion all-stock bid to acquire Chicago-based LSC Communications.

The acquisition, set to close in mid-2019, could nearly double the printing company’s revenue to $8 billion, while helping to further its strategy to mitigate industry disruption.

With the addition of LSC, Quad would also double its manufacturing and distribution plant count. But Quad plans to gain $60 million in cost savings through capacity rationalization, $50 million in savings on administrative efficiencies, and $25 million from supply chain management.

In August, the parent company of Fond du Lac-based outboard motor manufacturer Mercury Marine, Brunswick Corp., bought the global marine and mobile business of Menomonee Falls-based battery and power management manufacturer Power Products LLC for $910 million in cash. It was the largest acquisition Brunswick has ever made, and is expected to strengthen its parts and accessory business.

Parts and accessories accounted for about $1.3 billion in revenue for Brunswick in 2017, and Power Products was expected to add about $230 million in revenue for the company. In the end, Brunswick reported nearly $3 billion in 2018 sales for the segment.

The addition of Power Products’ global marine and mobile business added 11 new brands to Brunswick, and the company expects its Marine Engine segment will increase revenue at a rate of low-to-mid-teens percent as a result.

The size of the recent Milwaukee-area deals could be explained by the current state of the M&A market overall. Over the past several years, deal size and number of deals have been steadily accelerating to record levels nationally.

About 70 percent of corporate executives and private equity firms expect larger deals this year than in 2018, according to a recent report from Deloitte. And 76 percent of the executives and 87 percent of the private equity leaders expect to close a greater number of deals in 2019.

“In 2018, the average deal size for U.S. deals with a disclosed value was $509 million, a new record and up from $380 million in 2017,” said Joseph Packee, co-head of Global Industrial Investment Banking at Milwaukee-based Robert W. Baird & Co. Inc. “Of course, large deals pull up the average, but deal sizes were also higher in 2018 versus 2017 in the middle market (which we define as deals with disclosed value below $1 billion).”

Tom Kintis

It’s a seller’s market, with more buyers than sellers on the market, said Tom Kintis, president of CGK M&A Advisors in Milwaukee.

“I guess calling it a seller’s market is in the eye of the beholder, but sellers have done quite well in the recent M&A market environment,” Packee said. “Buyers have also been aggressive in kicking open doors and unlocking strategic add-on opportunities – many of which have done very well.” 

Companies seeking growth are turning to acquisitions, Kintis said.

“The market is still very strong,” he said. “When the economy is not growing at 3 or 4 percent and headed for a 2 percent year, the only place to get growth is acquisitions.”

Investors have started to include not just stocks and bonds, but also real estate and private equity in their portfolios, he said, which has driven a large influx of capital into private equity firms and family offices.

“The amount of buyers out there for us is exponential,” Kintis said.

Baird has seen a wave of capital being raised by traditional private equity funds, family offices and sovereign funds, Packee said.

“We’ve seen a continuation of this strong capital raising environment continue in 2019, and, as this capital needs to be invested, we’ve seen a high level of activity of these financial sponsors in our M&A processes,” he said.

Largest Milwaukee M&A deals in past year

  1. Fiserv Inc.-First Data Corp. ($22 billion)
  2. Johnson Controls International plc-Brookfield Business Partners L.P. ($13.2 billion)
  3. Quad/Graphics Inc.-LSC Communications ($1.4 billion)
  4. Mercury Marine Inc.-Power Products LLC ($910 million)
  5. Fiserv-Elan Financial Services Inc. ($690 million)
  6. OnCourse Learning-Bertelsmann (reported $500 million)
  7. Fiserv unit-Warburg Pincus LLC ($419 million)
  8. Quad/Graphics-Periscope Inc. ($132.5 million)
  9. Marcus Corp.-Movie Tavern Inc. ($126 million)
  10. TCI LLC-Allied Motion Technologies Inc. ($64.1 million)

*Includes only deals with announced prices.

Sign up for BizTimes Daily Alerts

Stay up-to-date on the people, companies and issues that impact business in Milwaukee and Southeast Wisconsin

Molly Dill, former BizTimes Milwaukee managing editor.

No posts to display