Capstone Partners Reports: Industrials M&A Demonstrates Defensibility Amid Macroeconomic Headwinds

BOSTON, March 13, 2024 /PRNewswire/ -- Capstone Partners, a leading middle market investment banking firm, released its 2023 Annual Industrials M&A Report, which shares insights into public market valuations, the macroeconomic climate, merger and acquisition (M&A) activity, and an outlook for 2024 industry activity. With extensive knowledge and transaction experience, Capstone Partners' Industrials Investment Banking Team provides unique commentary on nine key sectors: Chemicals, Engineered Products, Environmental Health & Safety, HVAC, Industrial & Environmental Services, Metals & Metals Processing, Packaging, Precision Manufacturing, and Waste & Recycling.

Public market valuations in the Industrials industry for 2023 were relatively muted to begin the year, as interest rates rose, and the prospect of a hard landing caused a continued pullback. By Q3 2023, public market valuations ticked up to 11.3x EV/EBITDA from 10.9x in Q2 and normalized by the end of Q4 to 11.1x as activity picked up and uncertainty around the health of the economy abated. These higher rates forced companies to shift their focus to debt reduction rather than acquisitions as a heightened rate environment persisted. The Dow Jones Industrial Average ended the year at 14.7x, capitalizing on upward market trends.

Financial markets and U.S. business owners are hopeful that the Federal Reserve has guided the U.S. economy to a soft landing with interest rate cuts on the horizon. Manufacturing demand fluctuated with the January 2024 Manufacturing PMI rising 2.0% compared to December, indicating market contraction, meanwhile new orders grew 5.5% indicating strong end market demand and a robust overall economy. Despite the year being plagued with volatility in the markets and input price fluctuations, the Industrials industry proved to be recession-resilient with many subsectors outperforming the Dow Jones Industrial Average YOY. Gross domestic product (GDP) rose 3.3% in Q4 2023 compared to a 1.9% increase in the prior year, while manufacturers' new orders rose 2.3% YOY. Additionally, services held up well as the Producers' Price Index (PPI) for final demand services grew 2.8% YOY.

Inflation trends have cooled but are likely to remain above the Federal Reserve's 2% target in the near term, while labor markets have normalized, with unemployment rates remaining steady YOY at 3.7%. The Housing market stalled in 2023, as housing starts fell 8.8% YOY, and existing home sales decreased even more (-19.3%) as outsized mortgage rates and borrowing costs sidelined buyers. Activity in the Housing sector is expected to rebound as rates fall, and pent-up demand for products and services is forecasted to materialize and drive innovation in the Industrials space, therefore M&A markets in 2024.

Also included in this report:

• How M&A volumes and public market valuations in the Industrials industry fared in 2023.
• Which sectors outperformed the broader Industrials industry and are poised to garner buyer interest in 2024.
• What trends are driving M&A activity across the Industrials industry and a breakdown of each of the nine highlighted sectors.

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
[email protected]

Ted Polk
Managing Director, Co-Head of Industrials
708-921-8961
[email protected]

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SOURCE Capstone Partners