SPECIALTY DISTRIBUTION

Transcription

1 Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.

2 INDUSTRY UPDATE HW&CO. ADVISES DISTRIBUTION INTERNATIONAL IN SALE TO ADVENT INTERNATIONAL Harris Williams & Co. recently announced the sale of Distribution International, Inc. ( DI ), a portfolio company of Audax Private Equity and The CapStreet Group ( CapStreet ), to Advent International (Advent). Founded in 1986, DI is a leading distributor of mechanical insulation and related supplies for maintenance, repair, and operations (MRO) in North America. Based in Houston, TX, the Company has operations throughout the US and Canada to service thousands of customers across a broad footprint. What We re Reading IS IT TIME TO GO GREEN IN YOUR WAREHOUSE? There are a multitude of benefits to going green in your warehouse. The benefits run the gamut of reducing utility bills, reducing carbon footprint, increasing sustainability, and providing your employees with an environmentally responsible company they are proud to work for. Sometimes the simple phrase of going green can seem overwhelming but there are a few easy ways to go green quickly and efficiently including upgrading to energy efficient equipment for material handling, bringing in an HVAC specialist, building new facilities up instead of out, investing in technology that allows you to go paperless, and replacing light bulbs with energy efficient alternatives. Please read the article here. a portfolio company of has been acquired by HW&Co. s Perspective: Audax Private Equity, CapStreet, and DI s management have built an exceptional platform with an industry leading product offering and a demonstrated resiliency across economic cycles, said Bob Baltimore, managing director at Harris Williams & Co. It was an absolute pleasure working with the management team, and we look forward to watching the Company s continued success. Pairing DI s industry-leading products and services and focus on customer satisfaction with Advent s extensive distribution experience creates exciting opportunities for the Company. INDUSTRIAL DISTRIBUTORS LOOK TO EXPAND THEIR SCOPE In glancing through this year s Big 50 list, which was published in Industrial Distribution s September/October issue, there are a couple of major themes related to the M&A market for industrial distributors. A continuing and growing theme is that many of the larger distributors are going beyond their traditional core product base, targeting small and mid-size distributors that carry complementary product lines. Many of these larger distributors are looking to become a one stop supplier for their customers. With valuations at high levels, many small and mid-size distributors are looking to sell. In fact, 25% of industrial distributors said they would be agreeable to a buy-out, according to ID s Annual Survey of Distributor Operations. That is much higher than in previous years. The survey also showed that a third of the responding distributors are looking to make an acquisition. CONTENTS WHAT WE RE READING PUBLIC COMPARABLES DISTRIBUTION TRENDS M&A AND PUBLIC MARKET TRENDS NOTABLE M&A ACTIVITY ECONOMIC UPDATE GROUP OVERVIEW Harris Williams & Co. is a leading advisor to the specialty distribution market. Our significant experience covers a broad range of end markets, industries, and business models. This particular report focuses on trends and metrics in the following areas: Specialty Catalog and Direct Marketing Branch-Based Distributors Route-Based Distributors Automotive and Heavy Duty Aftermarket Building and Construction Products Consumer & Food Service Industrial, MRO, and Safety Healthcare Technology Electrical and Communications Alcohol, Tobacco, and Firearms CONTACTS Bob Baltimore Managing Director bbaltimore@harriswilliams.com +1 (804) Derek Lewis Managing Director dlewis@harriswilliams.com +1 (804) Dave Kennedy Director dkennedy@harriswilliams.com +1 (804) Marshall Croft Vice President mcroft@harriswilliams.com +1 (804) Please read the article here. PAGE 1

3 PUBLIC COMPARABLES & TRADING VALUATIONS Key Trading Stats As of December 19, 2014 ($ in millions, except per share amounts) PUBLIC COMPARABLES Stock Performance Revenue Current 1-Month 1-Year % of LTM Margins TEV/EBITDA Growth TEV Price Change Change LTM High EBITDA Gross 2013 LTM 2014E 3-Yr. CAGR Automotive & Heavy Duty Aftermarket AutoZone, Inc. $23,681 $ % 30.8% 99.5% 22.0% 52.1% 11.2x 10.7x 5.5% O'Reilly Automotive Inc. 20, % 51.6% 98.8% 20.0% 51.1% 14.6x 14.2x 7.4% Genuine Parts Company 16, % 26.6% 98.4% 8.3% 30.2% 13.1x 12.3x 7.1% LKQ Corp. 10, (4.1%) (18.0%) 81.9% 12.0% 39.7% 13.2x 12.4x 28.5% Dorman Products, Inc. 1, % (8.8%) 81.6% 20.8% 38.3% 11.1x 10.9x 14.3% Uni-Select Inc % (0.3%) 96.8% 4.9% 29.7% 11.0x 8.8x 2.6% Median 5.5% 13.2% 97.6% 16.0% 39.0% 12.1x 11.6x 7.2% Mean 4.0% 13.7% 92.8% 14.7% 40.2% 12.3x 11.5x 10.9% Building & Construction Products CRH plc $21,231 $ % (3.8%) 81.6% 6.5% 28.1% 14.8x 10.7x 1.2% Wolseley plc 15, % 8.0% 94.3% 6.5% 28.0% 11.6x 10.7x (1.1%) Watsco Inc. 3, % 10.5% 97.1% 8.0% 24.1% 12.7x 12.9x 9.2% Beacon Roofing Supply, Inc. 1, (7.4%) (29.2%) 63.8% 5.6% 22.7% 11.8x 10.6x 8.6% Boise Cascade Company 1, (6.7%) 27.8% 91.0% 5.3% 14.1% 8.0x 7.4x 0.0% Builders FirstSource, Inc % (11.2%) 64.4% 3.8% 22.2% 15.1x 14.0x 29.1% Median 1.6% 2.1% 86.3% 6.0% 23.4% 12.2x 10.7x 4.9% Mean (0.6%) 0.4% 82.0% 5.9% 23.2% 12.3x 11.0x 7.8% Consumer & Food Service Sysco Corporation $25,810 $ % 8.6% 97.1% 4.9% 17.6% 11.2x 13.6x 5.6% United Natural Foods, Inc. 4, % 8.3% 94.2% 3.8% 16.4% 15.6x 15.0x 15.2% SpartanNash Company 1, % 10.2% 98.0% 2.7% 14.8% 7.4x 6.5x 0.0% Core-Mark Holding Company, Inc. 1, % 65.9% 97.7% 1.3% 7.0% 14.2x 12.3x 10.8% Median 3.2% 9.4% 97.4% 3.3% 15.6% 12.7x 13.0x 8.2% Mean 4.1% 23.2% 96.7% 3.2% 13.9% 12.1x 11.8x 7.9% Industrial, MRO & Safety W.W. Grainger, Inc. $16,992 $ (1.0%) (3.1%) 90.4% 15.8% 43.4% 10.9x 10.5x 7.9% Fastenal Company 13, % (1.9%) 86.9% 22.8% 50.9% 16.3x 15.7x 11.1% Airgas, Inc. 10, (3.9%) 3.3% 92.5% 18.4% 55.8% 11.2x 11.0x 4.9% MSC Industrial Direct Co. Inc. 5, (3.7%) 0.5% 80.4% 16.7% 46.1% 10.9x 11.0x 11.3% Applied Industrial Technologies, Inc. 2, (10.3%) (4.8%) 83.4% 7.9% 27.8% 10.3x 9.8x 4.1% United Stationers Inc. 2, (8.0%) (8.6%) 85.1% 4.9% 15.2% 8.1x 8.1x 1.5% DXP Enterprises, Inc. 1, (30.6%) (56.4%) 38.9% 9.5% 29.4% 8.0x 7.6x 23.6% Median (3.9%) (3.1%) 85.1% 15.8% 43.4% 10.9x 10.5x 7.9% Mean (8.0%) (10.1%) 79.7% 13.7% 38.4% 10.8x 10.5x 9.2% Healthcare McKesson Corporation $55,975 $ % 31.4% 96.5% 2.2% 6.3% 15.7x 11.8x 11.2% Cardinal Health, Inc. 27, (0.7%) 21.5% 95.7% 2.6% 5.8% 11.6x 10.8x (4.8%) Henry Schein, Inc. 12, % 18.0% 95.5% 8.3% 27.9% 14.7x 14.6x 7.5% Patterson Companies, Inc. 5, % 17.3% 95.6% 9.6% 28.3% 12.3x 12.1x 8.4% Owens & Minor Inc. 2, (1.6%) (6.6%) 87.6% 2.6% 12.4% 9.6x 8.9x 2.9% MWI Veterinary Supply, Inc. 2, % (2.2%) 87.5% 4.5% 12.5% 16.6x 16.7x 24.0% Median 1.2% 17.6% 95.6% 3.5% 12.4% 13.5x 11.9x 7.9% Mean 1.8% 13.2% 93.1% 5.0% 15.5% 13.4x 12.5x 8.2% PAGE 2

4 PUBLIC COMPARABLES & TRADING VALUATIONS Key Trading Stats As of December 19, 2014 ($ in millions, except per share amounts) PUBLIC COMPARABLES Stock Performance Revenue Current 1-Month 1-Year % of LTM Margins TEV/EBITDA Growth TEV Price Change Change LTM High EBITDA Gross 2013 LTM 2014E 3-Yr. CAGR Technology Arrow Electronics, Inc. $7,408 $55.42 (3.4%) 8.4% 86.9% 4.5% 13.2% 7.2x 7.1x 2.1% Avnet, Inc. 7, (0.6%) 4.8% 88.5% 3.7% 11.7% 6.9x 6.6x 1.5% Ingram Micro Inc. 4, (3.2%) 12.7% 84.3% 1.6% 5.9% 6.4x 6.0x 7.0% SYNNEX Corp. 3, (1.8%) 7.5% 87.9% 2.9% 7.4% 9.3x 7.6x 9.2% Tech Data Corp. 2, (5.3%) 18.7% 82.2% 1.1% 5.0% 6.9x 5.9x 2.2% ScanSource, Inc % (4.8%) 88.4% 4.0% 10.2% 8.3x 8.4x 2.0% Median (2.5%) 8.0% 87.4% 3.3% 8.8% 7.1x 6.8x 2.1% Mean (2.3%) 7.9% 86.4% 3.0% 8.9% 7.5x 6.9x 4.0% Electrical & Communications Rexel SA $8,487 $ % (28.4%) 69.8% 5.4% 24.7% 9.8x 7.7x 0.9% WESCO International Inc. 4, (15.9%) (16.3%) 76.2% 6.6% 20.4% 9.0x 8.5x 9.8% Anixter International Inc. 3, (4.3%) (1.9%) 71.7% 6.3% 23.0% 9.6x 9.4x 1.8% Houston Wire & Cable Company (8.8%) (6.2%) 82.9% 7.0% 21.7% 9.6x 9.4x (0.6%) Median (6.6%) (11.2%) 74.0% 6.4% 22.4% 9.6x 8.9x 1.4% Mean (6.2%) (13.2%) 75.2% 6.3% 22.4% 9.5x 8.8x 3.0% Stock Prices As of December 19, 2014 TRAILING TWELVE MONTHS STOCK PRICE PERFORMANCE 40% Automotive & Heavy Duty Aftermarket 30% Healthcare 20% S&P % Consumer & Food Service 0% (10%) Technology Building and Construction Industrial, MRO, & Safety (20%) Electrical & Communications (30%) PAGE 3

5 M&A AND PUBLIC MARKET TRENDS Distribution Trends LTM EBITDA as of December 19, 2014 TEV / EBITDA MULTIPLES FOR PUBLIC COMPARABLES 20x TEV / EBITDA 15x 10x 11x 13x 13x 13x 14x 11x 13x 11x 11x 11x 10x 10x 10x 10x 8x 7x 8x 8x 5x 0x Aug-14 Sep-14 Oct-14 Nov-14 Automotive & Heavy Duty Aftermarket Building & Construction Products Consumer & Food Service Industrial, MRO & Safety Healthcare Technology Electrical & Communications NET DEBT / EBITDA EBITDA MARGINS 4x 20% Net Debt / EBITDA 3x 2x 1x 2.0x 1.3x 1.9x 1.7x 0.8x 1.6x 2.9x EBITDA Margin 15% 10% 5% 14.7% 5.9% 2.9% 13.7% 5.0% 3.0% 6.3% 0x 0% M&A Trends RECENT M&A AND PRIVATE EQUITY TRENDS US PE CAPITAL EXITED COULD BREAK RECORD IN 2014 Valuations remain high and sellers are capitalizing on the current market climate, completing 193 exits in 3Q 2014 $159.2 billion was exited YTD through 3Q 2014, already eclipsing 2013's total of $155.3 billion Due to lofty valuations in the upper end, middle-market activity is strong; A historically high amount of deals and capital invested were in transactions between $100 million and $1 billion THE YEAR OF THE ADD-ON The buy-and-build strategy has been in full force for PE firms this year on pace to smash even 2013's decade-high tally 43% of add-ons are valued at $100 million or greater, a high point for the past 10 years The most active sponsors over the past 12 months have been Audax Group (50), ABRY Partners (49), GTCR (38), The Carlyle Group (36) and Kohlberg Kravis Roberts (28) PAGE 4

6 NOTABLE M&A ACTIVITY Announced M&A Transactions Date Private Equity Announced Target Description Acquirer Involvement 12/15/2014 Distribution International Distributor of thermal insulation Advent International P (Both) 12/12/2014 All American Rentals Inc. Distributor of industrial equipment Heavy Equipment Rentals & Sales, LLC 12/11/2014 Ohlheiser Corporation Distributor of tools Ohio Transmission Corporation 12/10/2014 OCR Canada, Ltd. Distributor of technology products BarcodesInc 12/9/2014 Standard Roofings, Inc. Distributor of roofing supplies American Builders & Contractors Supply Co., Inc. 12/8/2014 American Masons' & Building Supply Co. Distributor of building materials US LBM Holdings, LLC P (Buyer) 12/5/2014 Information Systems Associates Inc. Distributor of software Duos Technologies, Inc. P (Seller) 12/5/2014 Dutech Matériel D'Art Appliqué Inc. Distributor of office supplies Cansel Survey Equipment Inc. 12/5/2014 Honsador Holding, LLC Distributor of building products Grey Mountain Partners P (Both) 12/5/2014 Powertrack International, Inc. Distributor of hoses and fittings F.N.B. Capital Partners, LP; Tecum Capital Management; Regent 12/5/2014 Buffalo Hotel Supply Company, Inc. Distributor of food supplies Lorraine Capital LLC P (Buyer) 12/4/2014 Albion Rental Distributor of home equipment Cooper Equipment Rentals Limited 12/3/2014 Allied 100, LLC Distributor of healthcare products Ridgemont Equity Partners P (Both) 12/3/2014 L.M. Temperature Control Inc. Distributor of climate control equipment GAL Power Systems Ltd. 12/2/2014 Fox Metals And Alloys, Inc. Distributor of steel products Reliance Steel & Aluminum Co. 12/2/2014 Pitbull Containers, Inc. Distributor of ship containers Cardiff International Inc. 12/2/2014 HD Supply Distribution Services, LLC Distributor of home supplies The Home Depot, Inc. 12/1/2014 PIMD International LLC Distributor of medical supplies ScripsAmerica, Inc. 12/1/2014 Frontier Radio Communications Inc. Distributor of radio equipment BearCom Group, Inc. 11/30/2014 Granite Electrical Supply Inc. Distributor of electrical supplies Electrical Distributors Co. 11/25/2014 Wallboard Supply Company, Inc. Distributor of building materials US LBM Holdings, LLC P (Both) 11/21/2014 Specialty Pipe & Tube, Inc. Distributor of steel pipes Synalloy Corporation 11/19/2014 Ketdarina Corp. Distributor of bedding products Western Highlands Minerals Ltd. 11/18/2014 Revolvo Limited Distributor of tools The Timken Company 11/18/2014 Advantage Machine & Tool LLC Distributor of tools Stellar Industrial Supply, Inc. 11/17/2014 SAET S.p.A. Distributor of heating solutions Park-Ohio Holdings Corp. P (Seller) 11/17/2014 International Publishers Marketing Inc. Distributor of books 11/17/2014 NicOx Inc. Distributor of medical supplies Casemate Publishers and Book Distributors, L.L.C. Valeant Pharmaceuticals International, Inc. 11/13/2014 Evergreen Tank Solutions, Inc. Distributor of pumping supplies Mobile Mini, Inc. P (Seller) 11/10/2014 Southern Fastening Systems, Inc. Distributor of tools and fasteners Carlson Systems, LLC 11/10/2014 Texas Crane Services, Inc. Distributor of crane supplies NCSG Crane & Heavy Haul Services Ltd. 11/1/2014 Branding U LLC Distributor of promotional products American Business Forms, Inc. P (Buyer) PAGE 5

7 ($ in billions) ECONOMIC UPDATE A Snapshot of Key Economic Indicators As of December 17, 2014 PMI INDEX 1 ISM NEW ORDERS INDEX A PMI Index figure greater than 50 indicates expansion. INDUSTRY PRODUCTION INDEX An ISM Index figure greater than 50 indicates expansion. U.S. MANUFACTURING CAPACITY UTILIZATION 100% 90% 80% 70% 60% 50% 3. A Production Index figure greater than 50 indicates expansion. MANUFACTURING INVENTORIES & BACKLOG 4,5 DURABLE GOODS NEW ORDERS 6 70 $ $ $ $ $ Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Inventories Backlog of Orders 4. A Manufacturing Inventory Index figure greater than 50 indicates expansion. 5. A Backlog Index figure greater than 50 indicates expansion. $ Durable Goods New Orders for October November release on December 23. PAGE 6

8 OUR GROUP Harris Williams & Co. has a broad range of industry expertise which translates into value for our clients. Our clients benefit from our deep-sector experience, integrated industry intelligence, and firm-wide collaboration. For more information, visit our website at Aerospace, Defense & Government Services Building Products & Materials Business Services Consumer Industrials Energy & Power Healthcare & Lifesciences Specialty Distribution Technology, Media & Telecom Transportation & Logistics HARRIS WILLIAMS & CO. OFFICE LOCATIONS Boston Two International Place 24th Floor Boston, Massachusetts Phone: +1 (617) Fax: +1 (617) Cleveland 1900 East 9th Street 20th Floor Cleveland, Ohio Phone: +1 (216) Fax: +1 (216) Minneapolis 222 South 9th Street Suite 3350 Minneapolis, Minnesota Phone: +1 (612) Fax: +1 (612) UNITED STATES Philadelphia 1600 Market Street 21st Floor Philadelphia, Pennsylvania Phone: +1 (267) Fax: +1 (267) Richmond (U.S. Headquarters) 1001 Haxall Point 9th Floor Richmond, Virginia Phone: +1 (804) Fax: +1 (804) San Francisco 575 Market Street 31st Floor San Francisco, California 94105, USA Phone: +1 (415) Fax: +1 (415) EUROPE Frankfurt Bockenheimer Landstrasse Frankfurt Germany Phone: Fax: London 63 Brook Street London W1K 4HS, England Phone: +44 (0) Fax: +44 (0) Beijing Hong Kong Mumbai NETWORK OFFICES New Delhi Shanghai PAGE 7

9 HARRIS WILLIAMS & CO. SOURCES Federal Reserve Industrial Distribution The Electrical Distributor Magazine The Wall Street Journal PNC Economic Outlook S&P Capital IQ Thomson Financial SDC Database United States Census Bureau PitchBook DISCLOSURES Harris Williams & Co. ( is a preeminent middle market investment bank focused on the advisory needs of clients worldwide. The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams & Co. provides sell-side and acquisition advisory, restructuring advisory, board advisory, private placements, and capital markets advisory services. Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business. THIS REPORT MAY CONTAIN REFERENCES TO REGISTERED TRADEMARKS, SERVICE MARKS AND COPYRIGHTS OWNED BY THIRD-PARTY INFORMATION PROVIDERS. NONE OF THE THIRD-PARTY INFORMATION PROVIDERS IS ENDORSING THE OFFERING OF, AND SHALL NOT IN ANY WAY BE DEEMED AN ISSUER OR UNDERWRITER OF, THE SECURITIES, FINANCIAL INSTRUMENTS OR OTHER INVESTMENTS DISCUSSED IN THIS REPORT, AND SHALL NOT HAVE ANY LIABILITY OR RESPONSIBILITY FOR ANY STATEMENTS MADE IN THE REPORT OR FOR ANY FINANCIAL STATEMENTS, FINANCIAL PROJECTIONS OR OTHER FINANCIAL INFORMATION CONTAINED OR ATTACHED AS AN EXHIBIT TO THE REPORT. FOR MORE INFORMATION ABOUT THE MATERIALS PROVIDED BY SUCH THIRD PARTIES, PLEASE CONTACT US AT THE ABOVE ADDRESSES OR NUMBERS. The information and views contained in this report were prepared by Harris Williams & Co. ( Harris Williams ). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable, but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams judgment and are subject to change without notice. The financial instruments discussed in this report may not be suitable for all investors, and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams prior written consent. Copyright 2014 Harris Williams & Co., all rights reserved. PAGE 8