Sell Side M&A

M&A Sell Side Phases and Steps:

            Mergers and acquisitions (M&A) occur for various reasons, but regardless of that, they are challenging for privately owned companies—especially those that are family owned. As a result, business owners that decide to sell their companies or are considering doing so can become easily overwhelmed. The process can be intimidating, especially for those owners that do not have experience with the M&A process. Furthermore, there is often an extensive economic connection between the owner and the company. Lastly, owners feel a deep sense of pride in a company they built through years of dedication, hard work, and sacrifice—as they should.

            There are necessary steps that all business owners engaged in the M&A process should take to prepare themselves for the process, form appropriate expectations, and successfully sell their business for the most money possible. Those steps are split into three phases: (1) prepare for the sale, (2) hold bidding rounds, and (3) negotiate.

Prepare For The Sale:

1.     Develop a winning strategy: You should work with an experienced investment banker to develop a winning strategy that includes goals that maximize the sale and are realistic. Next, you and your investment banker define the objectives of pursuing a sale, the benefits, and the drawbacks. You should also identify your ideal buyer or the qualities you want in a potential buyer.

2.     Put together a compelling CIM (confidential information memorandum): Once you hire an experienced investment banker you trust, you will need to develop a detailed CIM that includes essential details about your company, including its financials, market position, and products and services. Additionally, a CIM may contain a competitive landscape analysis and information highlighting how you differentiate yourself from those competitors. The CIM should also serve as the foundation of marketing materials, teasers, or other informative materials for potential buyers.

Hold Bidding Rounds:

1.     Make contact with buyers: Your first contact with a potential buyer will be made in one of two ways: you will contact them, or they will contact you. Your investment banker should stress the importance of contacting more than one buyer to maximize the sale price. Most importantly, don’t overwhelm yourself with many buyers or spend time contacting candidates unlikely to engage or who don’t fit your pre-defined desired buyer qualities.

2.     Starting bids: After you’ve made your initial contact with buyers and they’ve reviewed your CIM, you will begin to receive initial offers or starting bids. As the saying goes, never accept the first offer. Your investment banker should be strategic during this round, releasing more about your company but not so much that potential buyers gain an advantage. This round aims to maximize the sale price by ensuring that you maintain an advantage over the seller and are firm in your demands.

3.     Meet with desirable bidders: Your investment banker will set up meetings, virtual or in-person, with interested bidders so that you can learn more about the reasons they want to buy your company, their needs, and the specifics of their offers. You are under no obligation to accept any offer that you don’t feel comfortable with or doesn’t meet your pre-defined sale objectives.

4.     The LOI: After meeting with the buyer, interested buyers will send you a letter of intent (LOI). This letter is a formal way of expressing their interest in pursuing a sale in the form of a proposed deal. You should receive multiple LOIs from multiple bidders. At this junction, the investment banker you chose should review these letters in detail, pointing out the pros and cons, describing the implications of each proposed action, and ensuring that you receive proposals consistent with your mutual understanding of your company’s value.

Negotiate:

1.     Negotiate with buyers: Once you have received bids from interested companies, you and your investment banker start negotiations. During this process, referring back to your selling objectives and intent to drive the negotiation process is vital. Additionally, leveraging your investment banker’s expertise is critical at this stage in the process. Finally, you and your investment banker will ensure that all financial information is readily-available should you decide to move forward with a buyer.

2.     Develop the definitive agreement: You and your investment banker will work with the buyer’s team to draft a final deal.

3.     Sign the exclusivity agreement: If you decide to pursue the offer from the buyer, you sign an exclusivity agreement. Once you sign this agreement, you may no longer pursue other opportunities or continue negotiating with anyone, including the chosen buyer.

4.     Buyer’s due diligence: The buyer will start due diligence, ensuring that your portrayal of your company is accurate. You will receive a large number of document requests through your investment banker. Although this process is the buyer’s responsibility, you can expedite the process by preparing documentation before you receive the buyer’s requests. Your investment banker should anticipate specific requests for you to prepare. Therefore, you should maintain close contact with your investment banker. While the typical due diligence period lasts, on average, two months, the process can take much longer if you fail to provide the requested documentation quickly.

5.     Board Approval: Once the buyer has completed their due diligence and intends on moving forward with the sale, you should solicit your board’s approval. Your investment banker will advise you when to convene a board meeting and how to present the final sale to the board.

6.     Sign the definitive agreement: This step closes the deal. Once you sign the definitive agreement that you previously drafted with the buyer’s team, the deal is sealed.

M&A Metals Industry: Sell-side

            While nearly all M&As follow the steps above, some unique distinctions in the metals industry are worth noting:

1.     The metals industry’s economic cycle can shift abruptly. A boom in the industry can often be followed by a quick downturn, especially when supply chains are disrupted. We don’t have other options for complementary products. Our product is often THE fundamental product and rarely has substitutions.

2.     Large metals industry actors understand that acquisitions mitigate economic downturns. These large companies will be shopping for reliable private metals companies to help them sustain these downturns. Sellers have more of an advantage than they think. Our industry is so specialized that there are few reliable private companies to choose from. Therefore, sellers are in a great position to negotiate. A knowledgeable banker with metals industry experience knows who these players are and understands the current and coming economic cycles to optimize your advantage when you choose to sell your company.

3.     More stringent lending criteria from traditional funding sources and a shrinking pool of commercial lenders make it difficult to get the capital that large companies need to grow. Therefore, acquiring private metals companies is incredibly important to survival. Their need is your opportunity. Your investment banker should leverage your position throughout the deal to ensure that you get exactly what your company is worth.

Learn more about Southland Advisors Sell-Side Advisory services.

M&A Transactions in the Metals Industry

May 22	Roca Acero	SDI Steel Dynamics	Acquisition advances SDI’s North American raw material procurement strategy, adding four scrap processing facilities in Mexico. Transaction is expected to further solidify its Southwest U.S. and Mexico growth strategy.
May 22	Teale Machine	ALCO MiddleGround Capital	Acquisition strengthens New York footprint and diversifies capabilities around brass, steel, and aluminum materials. Teale manufactures high-tolerance and high-volume machined parts for valve, aerospace, appliance, building products, electronics, pump, automotive, and medical end markets and applications.
Apr 22	Tensar Castle Harlan	CMC Commercial Metals	Expands CMC’s penetration in engineered construction ground reinforcement and creates global growth platform, complementing concrete reinforcement markets.	Enterprise Value (EV): $550M EV/EBITDA: 8.4x* (E) *inclusive of synergies
Apr 22	Elite Storage Solutions	Nucor	Acquisition expands Nucor’s steel racking capabilities and builds on the company’s acquisition of Hannibal Industries in August 2021. The transaction also establishes a manufacturing presence in the southeast.	Enterprise Value (EV): $75M
Mar 22	Golden State Assembly	AUXO	Platform acquisition of vertically integrated wire/cable assembly and harness manufacturer serving the automotive, aerospace, industrial equipment, medical device, electronics, specialty vehicle, and energy industries.
Mar 22	Winsert	Altus Capital Partners	Acquisition establishes specialty materials and precision metal engine components industries. Winsert manufactures metal parts for the trucking, transportation, infrastructure, power generation, and aerospace sectors.
Mar 22	Apogee	Ryerson	Acquisition strengthens Ryerson’s network of value-added service centers in Canada, adds to its processing capabilities and grows its full-service fabrication business. Apogee provides complex fabrication assemblies in stainless steel, aluminum, and carbon sheet.
Feb 22	CSI California Steel Industries	Nucor	Acquisition of 51% stake from Vale Canada Limited and JFE Steel Corporation. The transaction expands Nucor’s portfolio of value-added sheet products and gives the company a strong presence on the West Coast. CSI serves customers in the construction, service center, and energy industries.	Enterprise Value (EV): $400M
Jan 22	New Process Steel	SDI Steel Dynamics	Acquisition of 45% equity stake. The transaction is expected to grow SDI’s exposure to value-added manufacturing opportunities. New Process Steel is currently SDI’s largest flat-roll steel customer.
Jan 22	Atlantic Recycling	SIMS Limited	Acquisition expands East Coast operational footprint to extend from South Carolina to New England, a new and complementary market.	Enterprise Value (EV): $37M EV/EBITDA: 4.2x
Dec 21	Unreco	Vesuvius	Acquisition significantly expands Vesuvius’ North American presence among EAF steel producers in focus area of steel tundish applications, while also further strengthening Foundry business.	Enterprise Value (EV): $57.1M EV/Revenue: 1.4x EV/EBITDA: 6.6x
Dec 21	Busby	Wieland	Acquisition expands Wieland’s global aerospace product portfolio and service network. Busby is a supplier of copper-based alloy products and other value-added services with a focus on the aerospace and oil and gas industries.
Dec 21	Nook	Altra Motion	Acquisition advances strategy to focus on highly engineered products in the motion control and power transmission markets and expands presence in the medical, factory automation, and defense markets.	Enterprise Value (EV): $135.3M
Dec 21	REGO Windjammer Capital	Dover	Supplier of engineered components such as valves, regulators, vacuum jacketed piping, fittings, safety devices, liquefied natural gas fueling components, and other specialty flow control devices.	Enterprise Value (EV): $631M
Dec 21	Admiral Metals	Reliance Steel & Aluminum	Acquisition increases product breadth in specialty non-ferrous products. Admiral serves customers in the semiconductor, automotive, medical, infrastructure, aerospace, and industrial markets through eight service center locations.
Dec 21	Nu-tech Precision Metals	Reliance Steel & Aluminum	Nu-Tech is a custom manufacturer of specialty extruded metals, fabricated parts, and welded components for the nuclear, aerospace, and military markets, among others. Nu-Tech increases Reliance’s product breadth in specialty metals, and with its high levels of value-added processing, advances its strategy to invest in high quality, high margin businesses.
Dec 21	Precision	CGI Automated Manufacturing Inc Core Industrial	PMF specializes in CNC laser cutting, stamping, metal die formation, welding, and assembly for various end-market applications, including warehouse automation, food equipment, HVAC, and utilities.
Dec 21	PSC Metals LLC	SA Recycling	Ohio-based PSC operates more than 30 scrap metal processing and trading locations in Ohio, Pennsylvania, Indiana, Illinois, Missouri, Kentucky, Georgia, and Alabama.	Enterprise Value (EV): $323M EV/EBITDA: 5.4x
Dec 21	MetalX	BlueScope	Acquistion strengthens U.S. position and supply chain securing scrap feed for Ohio mini-mill business. The acquired ferrous scrap steel recycling business is largest supplier to Ohio operation.	Enterprise Value (EV): $240M
Dec 21	ACE Steel Supply	Alro Steel	Acquisition expands customer base and provides improved service for cut-to-size metals and plastics. Steel distributor Ace Steel serves the Roanoke Valley in Virginia.
Dec 21	Union Corrugating Company Industrial Opportunity Partners	Cornerstone Building Brands	Acquisition expands solutions offerings to customers in the residential metal roofing market. UCC provides metal roofing, roofing components, and accessories.	Enterprise Value (EV): $216.8M
Dec 21	Tempel	Worthington Industries	Acquisition extends reach into the electrical steel market. Tempel manufactures precision magnetic steel laminations for the automotive, motor, generator, transformer, and lighting industries.	Enterprise Value (EV): $255M EV/Revenue: .68x EV/EBITDA: 7.29x
Nov 21	Boyd Metals	Russel Metals	Acquisition broadens footprint in the southern U.S. adding five service center locations (Arkansas, Missouri, Oklahoma, Texas).	Enterprise Value (EV): $110M EV/Revenue: .45x EV/EBITDA: 2.82x
Nov 21	Aarrowcast Inc	Charter	Acquisition expands metals manufacturing offerings and further diversifies customer base and end markets. Aarrowcast manufactures gray and ductile iron castings for OEMs and Tier 1 supplier customers in the agricultural equipment, compressors/ hydraulics, defense contractors, construction and mining, heavy-duty off-road vehicles, and other industries.
Nov 21	Ferrous Processing & Trading Co	Cliffs	Acquisition establishes entry into the scrap business and secures access to a significant source of prime ferrous scrap. FPT is among the largest processors and distributors of prime ferrous scrap in the U.S., representing approximately 15 percent of the domestic merchant prime scrap market, according to miningconnection.com.	Enterprise Value (EV): $775M EV/EBITDA: 7.75x
Nov 21	Metalcraft Technologies	Arch MDP	Acquisition expands reach and capacity in the aerospace and defense market. Metalcraft manufactures complex aircraft components and structural assemblies used in aircraft. The company specializes in sheet metal fabrication, machining, and chemical processing.
Nov 21	HC Starck	Materion	Acquisition expands electronic materials portfolio, increasing access to the semiconductor market.	Enterprise Value (EV): $392.2M EV/Revenue: 2.7x (E) EV/EBITDA: 13.5x (E)
Oct 21	Agmet	Undisclosed Buyer	Specialty processor of industrial by-products, including electric vehicle batteries, that recovers nickel, cobalt, and other valuable metals.
Oct 21	Nelson-Miller	New Water Capital	Acquisition establishes growth platform focused on serving the manufacturing needs of medical and industrial technologies. Nelson-Miller provides components and assemblies going into critical applications across the medical, aerospace and defense, and industrial end markets.
Oct 21	Advanced Laser	CGI Automated Manufacturing Core Industrial	Acquisition offers increased scale and capacity, along with complementary manufacturing capabilities and diversification across customers and end markets. AL provides metals-focused contract manufacturing solutions for the supercomputing, aerospace and defense, medical, transportation, and industrials end markets.
Oct 21	Advance Fittings	Blackwell Capitl Group	Manufacturer of stainless-steel fittings and components for the process industries: food and dairy, personal care, pharmaceutical, biotech, and semiconductor.
Oct 21	Oregon Tool American Securities	Platinum Equity	Oregon Tool (fka Blount International) manufactures saw chain and guide bars for chainsaws, and is a leading manufacturer of lawn mower blades, agricultural tractor attachments, and other products for the forestry, lawn and garden, and agricultural end markets.
Oct 21	BMG Metals Inc	Triple-S Steel	BMG is an established distributor serving the Mid-Atlantic region. The company operates four locations in Virginia and one in Maryland, supplying carbon steel, stainless, and aluminum. BMG offers plasma cutting and burning services, in addition to sawing and shearing.
Oct 21	Dexko Global KPS Capital Partners	Brookfield Business Partners	DexKo produces parts for trailers and towable vehicles including axels, chassis, shock absorbers, and brakes.	Enterprise Value (EV): $3.4B
Oct 21	Stainless Alloy & Piping	Olympic Steel	Acquisition expands specialty metals footprint and continues strategic growth into metal-intensive end-use products. Shaw is a full-line distributor of stainless-steel sheet, pipe, tube, bar and angles. The company also manufactures and distributes stainless steel bollards and water treatment systems.
Oct 21	Columbus Recycling	Schnitzer	Acquisition expands platform and offerings in a robust regional market with immediate scale and meaningful synergies, said Schnitzer. CRC provides ferrous and nonferrous metal recycling products and services, operating eight facilities across several states in the Southeast, including Mississippi, Tennessee, and Kentucky.
Oct 21	Merfish United One Equity Partners	Reliance Steel & Aluminum Co.	Acquisition supports diversification efforts and increases exposure to copper and plastic products. Additionally, Reliance establishes a growth platform in the adjacent industrial distribution space. Merfish United is a leading master distributor of tubular building products in the U.S.
Oct 21	Garden St Iron & Metaling	Nucor	Company operates three full-service ferrous and nonferrous scrap metal recycling facilities, including an automobile shredder and a self-serve used auto parts store in Southwest Florida.
Sep 21	Grossmn Iron & Steel Co	Nucor	Operates a full-service ferrous and nonferrous scrap metal recycling facility, which includes an automobile shredder and a metal recovery facility in St. Louis, Missouri.
Sep 21	Arrow Tru-Line Inc Sun Capital Partners	MiddleGround Capital	Arrow is a manufacturer and supplier of overhead garage door hardware components, selling into residential and commercial markets. Garage door hardware includes hinges, brackets, angles, tubes, springs, and pre-assembled track sets.
Sep 21	Detroit Division Olympic Steel	Venture Steel	Acquisition strengthens offerings and reach to flat-rolled metal consuming end-markets, particularly automotive.	Enterprise Value (EV): $58.4M
Aug 21	Metal Stock	Alro Steel	Acquisition grows customer base while providing improved service for cut-to-size metals and plastics. Metal Stock is a full-service metal distributor serving Eastern Pennsylvania, New Jersey, and Delaware.
Aug 21	Hannibal Industries Inc	Nucor	Acquisition establishes new growth platform and broadens offering to the warehouse channel, and complements current product capabilities, including beams, joists and deck, metal buildings, and insulated metal panels. Hannibal is a leading national provider of racking solutions to warehouses and serves the eCommerce, industrial, food storage, and retail segments.	Enterprise Value (EV): $370M EV/EBITDA: 6.9x
Aug 21	Southern Recycling Houchens Industries	SA Recycling	Acquisition deepens footprint in the southeast U.S. SA Recycling by increasing shredding, metals operations, and scrap purchasing volumes in the region.
Aug 21	Doors & Building Components Inc Cornerstone Building Brands	Janus International Group	Acquisition broadens Janus’s customer set by gaining direct access to DBCI’s core general contractor and distributor base. DBCI manufactures steel roll-up doors and building products for the commercial and self-storage industries.	Enterprise Value (EV): $168M EV/Revenue: 1.98x EV/EBITDA: 12.0x
Aug 21	CGI Automated Manufacturing	Core Industrial	Provider of custom precision sheet metal fabrication solutions for the medical, food, lighting, and industrials end markets. In-house manufacturing capabilities include laser cutting, CNC punching, forming, CNC machining, robotic welding, fastener insertion, and assembly.
Aug 21	Insulated Metal Panels Business Cornerstone Building Brands	Nuco	Acquisition broadens value-added solutions offering. The business manufactures insulated metal panels for the non-residential market and operates seven manufacturing facilities located throughout North America.	Enterprise Value (EV): $1.0B EV/Revenue: 2.99x EV/EBITDA: 10.0x
Aug 21	Crimson Steel Supply	Argonaut Privte Equity	Full-service rebar fabricator, wire mesh supplier, and highway/roadway structural steel fabricator
Jul 21	Golden Tech Industries	Graycliff Partners	Provider of metal finishing and plating services for the semiconductor and aerospace industries.
Jun 21	RSP Rolled Steel Products	Triple-S Steel	Acquisition broadens flat-rolled offering and expands footprint in California, particularly in the Southern California specialty market.
May 21	Banker Steel Company	DBM Globl	Provides fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market.	Enterprise Value (EV): $145M
Feb 21	Colson Group	Blue Wolf	Manufactures caster and wheel products.	Enterprise Value (EV): $230M
Feb 21	Alumisource	SIMS Limited	Alumisource provides specialized raw materials, material processing, and blending solutions to the aluminum and steel industries.	Enterprise Value (EV): $22.5M
Feb 21	Electrochem Solutions	Pioneeer Metal Finishing Aterian Investment Partners	Acquisition offers product and capability expansion and broadens geographic scope with a Silicon Valley footprint. Electrochem provide critical components to high-tech industries such as semiconductor and electronic component manufacturing, aerospace/defense, and medical technology.
Feb 21	Ballymore Safety Products	Graycliff Partners	Manufacturer of safety-centric equipment for use by retailers, OEMs, and distribution customers. Products include electric lifts, ladders, work platforms, portable loading docks, and other related material handling equipment.
Feb 21	FlamCo	OmniMax International Inc	Manufacturer of residential roofing products throughout the Southeast and Southwest markets.
Jan 21	Almo Iron Works Sonepar USA	Triple-S Steel	Acquisition expands footprint Texas, especially in the San Antonio and South Texas market. Alamo is based in San Antonio with additional Texas locations in Brownsville and Pharr.
Jan 21	Terrasmart	Gibraltar Industries	Acquisition further expands solar energy portfolio and accelerates stated plans to become a one-stop-shop in the solar development value chain. TerraSmart provides screw-based, ground-mount solar racking technology, particularly used for solar projects installed on challenging terrain.	Enterprise Value (EV): $220M EV/Revenue: 1.42x-1.47x (E) EV/EBITDA: 7.9x-8.5x (E)