Brown Gibbons Lang: Downstream Diversification Boosts Metals M&A

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Apr 27, 2017, 09:37 ET

CHICAGO and CLEVELAND, April 27, 2017 /PRNewswire/ -- The Metals market has exhibited signs of recovery, with secular trends indicative of pricing stabilization and strengthening demand, according to the Metals Insider, an industry report released by Brown Gibbons Lang & Company (BGL) www.bglco.com. Diversification is driving growth strategies, illustrated by a continuing shift to higher value-add in the product mix, which is fueling acquisition activity.

The BGL report, now available online, highlights continued consolidation across the metals value chain as companies look to reduce exposure to commodity-oriented products and markets and shift resources toward value-added products and services to boost margins and navigate demand volatility. Acquisitions are accelerating that shift, aided by surplus liquidity and the need to demonstrate growth.

Examples of the industry's downstream migration are numerous. The tubing market has seen increasing momentum over the last six months, with recent acquisitions by Nucor Corporation (Independence Tube, Southland Tube, and Republic Conduit) and Zekelman Industries (American Tube Manufacturing and Western Tube & Conduit). Transaction activity involving service centers has been robust, with Reliance Steel & Aluminum (Alaska Steel, Best Manufacturing, and Tubular Steel) and Ryerson (Guy Metals and The Laserflex Corporation) particularly active and consolidating the industry.

Liquidity will be a key driver of deal flow. Metals companies are looking to leverage their buying power and synergies in search of accretive acquisitions to offset meager organic growth, according to Vince Pappalardo, head of BGL's Metals investment banking practice. "Companies are saying "'I'm big enough that I'm going to grow with the GDP growth rate. How am I going to show further growth for my shareholders?' It's acquisitions. I've had at least half a dozen large corporates call me up. 'Vince, we have $300, $400, maybe $500 million in cash available to us to buy companies. Where can we go, what new platforms can we find?"

Operationally-focused "strategic" private equity funds also bring considerable dry powder and are looking to deploy capital into attractive buy-and-build platforms. The private equity capital overhang stood at more than $750 billion in December 2016. Acquisitive growth is central to Dynacast's expansion strategy in precision component manufacturing; the company has completed four add-ons, including Signicast this April, with the backing of Partners Group and Kenner and Company.

About Brown Gibbons Lang & Company

Brown Gibbons Lang is a leading independent investment bank serving the middle market. BGL specializes in mergers and acquisitions advisory services, debt and equity placements, financial restructuring advice, and valuations and fairness opinions, with global industry teams in Business Services, Consumer, Environmental & Energy Services, Healthcare & Life Sciences, Industrials, and Real Estate. BGL has offices in Chicago and Cleveland and real estate offices in Chicago, Cleveland, Irvine, and San Antonio, in addition to Global M&A partner offices in more than 50 countries across 5 continents. BGL is able to deliver to our clients unparalleled access to strategic relationships, investors, and opportunities globally. For more information, please visit www.bglco.com.

SOURCE Brown Gibbons Lang & Company