CLEVELAND, April 14, 2020 /PRNewswire/ -- In the wake of coronavirus-induced economic uncertainty, metals companies are evaluating strategic alternatives, with many looking externally to bolster growth, according to the Metals Insider, an industry report released by Brown Gibbons Lang & Company (BGL). Access the full report here.
Economic forecasts are in flux in today's rapidly -changing environment, but many reflect outlooks of a "U"-shaped or "V"-shaped recovery within the next six to 12 months. M&A will remain integral for competitive positioning heading into an economic recovery.
Corporate and private equity buyers were active across the metals value chain before the market dislocation, illustrated in Q1 2020 transaction activity. Notably, acquisitions by Acerinox, S.A. (VDM Metals), Cleveland-Cliffs (AK Steel), and SFS Group AG (Truelove & Maclean) indicate strong corporate appetite for deal-making. In addition, private equity funds continued to pursue growth platforms and add-on acquisitions, with Palladium Equity Partners (Reading Alloys), The Jordan Company (Arundel Machine Tool), Wynnchurch Capital (Pennsylvania Machine Works), AEA Investors (Texas Metal Printing), and Audax Group (Rockford Fastener) among the deals completed during the quarter.
M&A will continue to be a primary lever to achieve growth targets, with some investors seeing the current environment as a buying opportunity to acquire capabilities and enter new markets. Well-capitalized buyers will continue to be opportunistic at the "tuck-in" level, seeking capabilities that fit into forward strategies.
Also anchoring the M&A market is the significant volume of dry powder on the sidelines that will need to be deployed into growth acquisitions.
- Asset selectivity is higher, but the credit markets are open. Pricing and leverage reflect greater downside protection for lenders to compensate for market risk. However, bank balance sheets are healthy, and private debt funds are plentiful and eager to invest capital.
- Private equity funds are coming off years of record fund raising. Sponsors will be creative in how they deploy capital in the current market, with more seeking minority equity stakes and looking at sharing risk opportunistically.
About Brown Gibbons Lang & Company
Brown Gibbons Lang & Company is a leading independent investment bank and financial advisory firm focused on the global middle market. The firm advises private and public corporations and private equity groups on mergers and acquisitions, divestitures, capital markets, financial restructurings, valuations and opinions, and other strategic matters. BGL has investment banking offices in Chicago, Cleveland, and Philadelphia, and real estate offices in Chicago, Cleveland, Denver, San Antonio, and San Diego. The firm is also a founding member of Global M&A Partners, enabling BGL to service clients in more than 30 countries around the world. Securities transactions are conducted through Brown, Gibbons, Lang & Company Securities, Inc., an affiliate of Brown Gibbons Lang & Company LLC and a registered broker-dealer and member of FINRA and SIPC. For more information, please visit www.bglco.com.
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