Supply Chain Services Sector

Transcription

May 2015
Industry Update
Jeff Burtelow
+1 312 364 8651
[email protected]
Supply Chain Services Sector
Overview, Analysis, and Trends in the
Supply Chain Services Industry
-Logistics Overview
-Specialty Distribution Overview
-Selected William Blair Supply Chain Transactions
-M&A Activity and Notable Industry Transactions
-Public Comparable Companies
Jason Sunderson
+1 312 364 8752
[email protected]
William Blair & Company
Table of Contents
Supply Chain Services Update .................................................................................................................................................................................................................. 1
William Blair Spotlight – Recent Logistics & Specialty Distribution Transactions ......................................................................................................... 6
Selected Supply Chain Transaction Execution.................................................................................................................................................................................. 7
Supply Chain Services Equity Research Coverage .......................................................................................................................................................................... 8
Supply Chain Services Contacts ............................................................................................................................................................................................................... 9
Logistics Sector Overview ....................................................................................................................................................................................................................... 10
Selected M&A Activity – Logistics ........................................................................................................................................................................................... 13
Recent Notable Logistics Transactions................................................................................................................................................................................. 14
Public Comparables – Annual EBITDA Multiples ............................................................................................................................................................ 17
Public Comparables by Sector .................................................................................................................................................................................................. 19
Logistics Industry Insights ......................................................................................................................................................................................................... 25
Specialty Distribution Sector Overview ............................................................................................................................................................................................ 28
Selected M&A Activity – Specialty Distribution ............................................................................................................................................................... 31
Recent Notable Specialty Distribution Transactions ..................................................................................................................................................... 32
Public Comparables – Annual EBITDA Multiples ............................................................................................................................................................ 34
Public Comparables by Sector .................................................................................................................................................................................................. 36
Specialty Distribution Industry Insights .............................................................................................................................................................................. 43
Key Economic Data ..................................................................................................................................................................................................................................... 45
Notes .................................................................................................................................................................................................................................................................. 51
Disclosures ...................................................................................................................................................................................................................................................... 52
Supply Chain Services Investment Banking
Supply Chain Services Update
Supply Chain Services Update
Macro Tailwinds and Compelling Dynamics
Drive Strong Supply Chain Valuations
As customers increasingly demand next-day delivery, one-stop-shopping, and omnichannel experiences,
acquirers are aggressively pursuing logistics and specialty distribution providers that can address the
needs of the new supply chain landscape.
Driven by strong growth dynamics and macroeconomic tailwinds, 2014 saw strong M&A and capital-raising activity across supply
chain services. In addition to solid economic expansion in the United States, increasing onshore manufacturing momentum, and
growing customer demand for rapid fulfillment and delivery, the growth outlook for specialty distribution and logistics providers is
further bolstered by increased outsourcing, heightened demand for greater supply chain visibility, and the on-going globalization of
supply chains.
While specialty distribution and logistics are typically thought of as two distinct industry segments, in an era of increasing supply
chain integration and globalization, traditional lines have been blurred and a number of companies are providing more integrated
service offerings spanning both segments to their customers. In addition, similar macroeconomic and industry-specific dynamics
impact both specialty distribution and logistics, and so, as a result, are relevant to highlight in a combined report.
These forces led to robust M&A activity and strong valuations in 2014 and YTD 2015 as strategic acquirers and financial sponsors
aggressively sought exposure to higher-growth business models, attractive end markets and broader value-added services across the
supply chain ecosystem. In both segments, recurring themes of diversification and integrated service offerings are driving acquisition
activity, whether across end markets, geographies, or distinct components of the supply chain.
In 2014, approximately 550 supply chain service M&A transactions were completed, representing more than $125 billion in
aggregate value. Transaction volume increased by 6.8%, as the logistics sector exceeded its long-term average M&A activity level for
the first time since 2011. Beyond the macroeconomic tailwinds and higher-level trends that are fueling growth in supply chain
services as a whole, there are several more-nuanced, end-market-specific dynamics that are driving M&A activity in specialty
distribution and logistics. In this report, we examine the themes that are shaping the deal-making landscape in these sectors.
Logistics
Third-party logistics providers (3PLs) play a critical and growing role in the global supply chain. Although less than 10% of logistics
services are outsourced today, the 3PL market already exceeds $500 billion globally. Given the compelling value proposition of
outsourcing relative to maintaining an in-house logistics function, and the increasing pace at which technology advances are
transforming the supply chain, we expect the U.S. 3PL industry to expand two to three times faster than global GDP growth over the
next 10 years.
$142
$146
North America
& U.S.
2011
2012
Source: Armstrong & Associates, Inc.
$40 $44 $45
2013
Europe
South America
Source: Armstrong & Associates, Inc.
Supply Chain Services Update 1
$154.0
$146.4
$141.8
$133.8
$127.3
$113.6
$103.7
$89.4
$76.9
$156 $158
$71.1
$160
$65.3
$176
96'-14' CAGR: 9.4%
2-3x GDP Growth
$56.6
U.S.
$160 $171
$134
Asia Pacific
7%
$45.3
$256
(1%)
$39.6
$236
$191
5%
$34.2
11’-13’ CAGR: 16%
$119.0
($ in billions)
$30.8
($ in billions)
$127.0
U.S. 3PL 1996-2014
$107.1
Global 3PL Market Growth
In this broader growth story, there are several distinct industry trends that are driving business performance and M&A activity in the
logistics market:
•
Adding multi-modal solutions, end markets, and geographies: A primary driver of strategic acquisitions in logistics over the
past year has been the desire for companies to generate growth by expanding their multi-modal solutions offering or increasing
exposure to attractive end markets and geographies.
Logistics providers are looking to win a larger share of their
customers’ wallets by positioning themselves as one-stopshops, offering logistics capabilities across the spectrum of
transportation modes (e.g., over the road freight brokerage,
intermodal, freight forwarding, value-added warehousing and
distribution, reverse logistics, etc.) and serving customers in
multiple geographies and end markets. The need to expand its
intermodal capabilities was the driving force behind XPO’s
$335 million acquisition of Pacer in early 2014.
The benefits of offering a broader portfolio of logistics services
apply not only to the form of transportation but also to the
direction of product movement. As e-commerce continues to
reshape the retail experience (more on this later), reverse
logistics is becoming an increasingly important factor in the
logistics equation. FedEx’s December 2014 acquisition of
Genco, which specializes in handling product returns, was
designed to help FedEx better serve the needs of e-commerce
players that experience high return rates.
•
M&A SPOTLIGHT: SATELLITE LOGISTICS
Reverse-logistics capabilities and access to North
American beer market drive outstanding outcome
Several of the primary forces that are shaping the logistics
deal-making environment contributed to the premium
outcome William Blair & Company helped Satellite Logistics
Group achieve in its sale to JF Hillebrand.
•
•
•
Reverse logistics: Aggregating demand across
more than 140 beer brands, Satellite increased the
speed and efficiency of delivering empty kegs to its
brewer customers.
Attractive end market: Satellite’s broad client base
of beer brands served as the perfect complement to
Hillebrand’s strength in wine and spirits.
Access to North America: Satellite’s strong U.S.
presence gave Germany-based Hillebrand enhanced
scale and penetration in North America.
Strategic acquirers have also been very aggressive in
obtaining growth in attractive end markets and regions.
France-based Norbert Dentressangle acquired Des Moines,
Iowa-based Jacobson Companies in July 2014. The $750
million transaction gave Norbert a strong foothold in a U.S. market, which has more attractive growth prospects than Europe.
C.H. Robinson’s acquisition of Freightquote.com in December 2014 for $365 million greatly enhanced C.H. Robinson’s ability to
serve small and midsize businesses, as well as providing a more robust online platform and improving service delivery.
Same-day delivery, omnichannel experience, and other ecommerce repercussions: Not to put too fine a point on it,
but any aspect of the supply chain that touches e-commerce is
likely to have a compelling growth dynamic. As e-commerce
continues to create new opportunities and challenges in
supply chain, strategic acquirers are pursuing companies that
can facilitate the shift toward localized fulfillment, enhanced
online consumer experiences, and same-day delivery
facilitated by multi-modal logistics coordination.
Amazon’s aggressive push toward same-day delivery and
regional fulfillment is forcing eBay, other online retailers, and
smaller, traditional retailers to keep up. This push, in turn, has
created more demand for outsourced logistics providers that
can help retailers meet consumers’ new expectations for faster
delivery and make the product-return experience painless. To
compete more effectively with online competitors, many
traditional retailers have begun embracing omnichannel
strategies, where physical stores serve as hyper-local
warehouses that can stock product and deliver directly to
consumers. This omnichannel trend places increased
importance on technology which allows for heightened
visibility, integration, and better inventory management
across the supply chain.
2 Supply Chain Services Update
SUPPLY CHAIN VALUATION DRIVERS
What buyers look for when deciding what a logistics or
specialty distribution company is worth
With supply chain transactions, there is no single factor that
consistently emerges as the primary driver of the target
company’s valuation. Instead, bidders’ decisions are based on
a confluence of the following factors:
•
•
•
•
•
•
•
Size and growth dynamics of addressable end
markets
Role in the supply chain
Value proposition for customers and suppliers
Strength, consistency, and diversity of customer and
supplier bases
Breadth of value-added services
Strength and depth of management team
Organic and acquisition growth opportunities
•
•
Addressing the talent gap: The decentralization of
distribution networks and increased “on-shoring” of U.S.
manufacturing have created a shortage of skilled and semiskilled workers in supply chain services. Manufacturers and
distributors can no longer rely on a single central U.S. location
to service the entire country, which results in three and
sometimes four day deliveries, resulting in new facilities and
new jobs. This shortage of truck drivers, forklift operators,
warehouse employees, and other skilled and semi-skilled
transportation and logistics workers has been particularly
acute in the South and other regions where companies are
rapidly adding new manufacturing and distribution facilities.
EmployBridge’s ability to help transportation and logistics
companies address this talent gap is what made it such an
attractive acquisition target for Select Staffing. William Blair
advised EmployBridge on the $410 million transaction, which
closed in February 2015.
Human capital in the white collar ranks has been an important
driver of logistics M&A as well. Given the relationship-based
nature of sales and the complex coordination required to
manage a diversified supply chain, logistics companies have
traditionally found it difficult to expand their sales forces and
talent pool organically to new regions. As a result, 3PL
providers such as Echo Global Logistics often use acquisitions
as a tool for expanding the breadth and depth of their sales
force and services and client bases.
M&A SPOTLIGHT: EMPLOYBRIDGE
Differentiated and unique value-added flexible
workforce services merger delivers favorable outcome
for supply chain end markets.
William Blair’s advised on EmployBridge’s merger with Select
Staffing, which brought together the two largest U.S. human
capital management companies that provide skilled light
industrial personnel to specialized supply chain, logistics and
transportation verticals:.
•
•
•
Specialized services and branding: unique brands
tailored to each of the vertical specialties to address
industry-specific skill sets, ensuring delivery of the
highest-qualified candidates for specific positions
Favorable sector tailwinds: resurgence of U.S.
manufacturing, regionalized fulfillment, and truck
driver scarcity contributes significant momentum to
the company’s core supply chain brands
Efficient delivery model: ability to utilize state-ofthe-art IT/CRM tools and centralization of nonvalue add functions to drive operating leverage and
margin expansion
Impact of Lower Oil Prices: Another trend we are watching closely is the impact of lower oil prices on the logistics industry. As
the U.S. energy industry rapidly expanded over the past decade, an entire specialized ecosystem and infrastructure had to
develop alongside North America’s shale basins. Whether trucking in heavy equipment for drilling or investing in rail access for
movement of finished products, energy companies’ demand for outsourced transportation and logistics services has
skyrocketed.
We have seen the industry’s ability to rapidly respond to the growing demands of the U.S. energy boom. Now it will be
interesting to see how quickly these specialized providers adapt to lower oil prices and potentially depressed energy related
logistics activity. Whether we see widespread consolidation and contraction in the space depends largely on whether today’s oil
prices represent a temporary dip or a new long-term reality. Regardless, given current production levels and pent up demand
for infrastructure resulting from years of investment in wells which outpaced the development of adequate oil and natural gas
transport and pipeline services, the energy industry will continue to be an important driver of logistics activity.
Specialty Distribution
Many of the economic trends that are fueling growth and M&A activity in the logistics industry are playing out on the distribution
side of the supply chain as well. This growth dynamic and the attractive financial attributes of distribution businesses (e.g., assetlight, high free cash flow, and high return on invested capital) are being reflected in the valuations these companies receive through
competitive sales processes. Three or four years ago, high-quality distribution companies would typically achieve multiples of 8x to
9x EBITDA. Today, these companies are regularly receiving valuations of 10x or more as evidenced by the following table.
M&A Multiples – Specialty Distribution
($ in billions)
15.0x
10.0x
Median: 10.4x
9.3x
12.3x
10.9x
8.7x
10.7x
2007
2008
5.0x
0.0x
2004
Source: Dealogic.
2005
2006
5.7x
2009
7.5x
2010
9.0x
10.4x
10.6x
11.7x
2011
2012
2013
2014
Within this attractive environment for specialty distribution companies, business performance and acquisition strategies are often
driven by several trends:
•
•
•
Expansion of product portfolios and geographic reach: As a whole, the specialty distribution industry enters 2015 with
strong momentum and macroeconomic tailwinds. Many specific end markets, however, are seeing only modest secular growth,
which is causing players in these sectors to seek to acquire growth by expanding their product portfolios and geographic reach.
This dynamic was certainly at work in one of our distribution transactions that we completed in 2013 – KODA Distribution
Group’s (KDG) acquisition of herbicide and insecticide distributor Specialty Professional Products (SPP). SPP provided KDG
with a leading platform in new end markets, including mosquito control, forestry, range and pasture, and specialty agriculture,
and helped to diversify KDG’s overall end-market mix.
Mitigating the “Amazon threat” through multichannel sales and service: The need to develop broader digital strategies
represents both a threat and an opportunity for specialty distributors. Although AmazonSupply.com’s encroachment of the
traditional MRO market has not progressed as rapidly as many initially predicted, customers are demanding enhanced multichannel sales and service, including online functionality, rapid fulfillment capabilities, and 24/7 customer service.
The new multichannel environment has helped to expand customers’ perception of value beyond just price. Technical support,
value-added services, dedicated sales efforts, and IT security are more important than ever to customers. In the Excelligence and
Flinn sale processes, bidders closely evaluated Excelligence’s and Flinn’s ability to combat the e-commerce threat by
maintaining direct customer relationships and providing a compelling suite of value-added services such as technical support,
kitting, multimedia reference materials, as well as maintaining proprietary products and brands not available through other
channels.
Strengthening customer retention through deeper and broader product categories: As customers look to streamline their
operations and coordinate with fewer vendors, the ability to be a “one-stop-shop” is an increasingly important element of
customer retention for specialty distributors. As a result, acquirers are seeking “best-of-breed” companies that can dominate
specific niche markets through brand awareness and reputation, expansive product portfolios, and deep selection.
In our recent completed specialty distribution transactions, buyers have valued consistent product level performance over time
and have paid close attention to the depth and sustainability of the target’s SKUs. Excelligence’s and Flinn’s ability to position
themselves as the go-to, one-stop distributor in their respective education end markets with strong awareness and brand
recognition built over decades, and to demonstrate the power of their proprietary products and categories, were critical factors
in the premium valuations that these companies received.
4 Supply Chain Services Update
Outlook for 2015: Strong Tailwinds and Continued Blurring of Lines
We expect the robust M&A and capital-raising activity in supply chain services to continue in 2015. Strategic acquirers, financial
sponsors, and investors will continue to aggressively pursue high-quality companies that are well positioned relative to the strong
macroeconomic tailwinds and industry-specific dynamics previously described.
We also expect to see a continued blurring of the lines that have traditionally defined supply chain services. Whether this takes the
form of Amazon playing the role of both retailer and logistics provider, traditional forward logistics companies expanding their
reverse logistics capabilities, or retail storefronts acting more and more like regionalized distribution centers, the traditional lines of
demarcation and separation in the space are becoming less relevant every day.
In this dynamic environment, we are committed to helping companies evaluate their strategic opportunities for growth and liquidity. If
you have any questions about what these trends mean for your company, please do not hesitate to contact us.
Jeff Burtelow
Jason Sunderson
Managing Director
Head of Supply Chain Services
[email protected]
+1 312 364 8651
Director
Supply Chain Services
[email protected]
+1 312 364 8752
William Blair Spotlight – Recent Logistics & Specialty Distribution Transactions
•
•
has been acquired by
•
Feb 2015
2015
•
•
•
B R E N T W O O D A S S O C I AT E S
P
R
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V
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T
E
E
Q
U
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Y
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N
V
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S
T
M
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2014
T
S
•
•
Senior Secured Notes
2014
•
•
•
2014
•
•
•
2013
•
•
•
2013
•
•
•
2013
•
William Blair represented Employbridge, a portfolio company of Morgan Stanley Private Equity and
Constitution Capital Partners, in connection with its sale to Select Staffing, Inc.
Employbridge provides specific staffing solutions, human resource services, and workforce management
strategies to warehousing/logistics, transportation, and manufacturing markets
Select Staffing, formally known as Eastern Staffing, offers workforce management services, including
recruiting, screening, payroll and time attendance management, on-site supervision, and specialty
staffing solutions
William Blair represented Excelligence Learning Corporation, a portfolio company of Sterling Investment
Partners, in connection with its sale to Brentwood Associates
Excelligence is a leading value-added, multi-channel distributor of educational products to the large and
growing early childhood and elementary markets
Brentwood Associates is a private equity investment firm with over $1.2 billion assets under
management who invests in leading middle-market, growth-oriented consumer businesses
William Blair represented Encore Repair Services in connection with its senior secured notes debt
investment by Falcon Investment Advisors
Encore Repair Services is a leading provider of global reverse logistics and aftermarket supply chain
solutions for handheld electronic devices such as smartphones, tablets and MP3 players. Encore has
operations across the globe including in the U.S., Vietnam, China, Hong Kong and the Middle East
Falcon Investment Advisors is a private equity firm that invests subordinated debt and equity capital in
leading middle market companies
William Blair represented Flinn Scientific in connection with its sale to Windjammer Capital Investors
Flinn Scientific is the industry-leading specialty distributor and provider of unique value-added products,
services, and resources to the K-12 and post-secondary educational science supplies market
Windjammer Capital Investors invests in leading middle-market companies and supports management in
their initiatives to grow earnings and build shareholder value. The firm currently has approximately $2
billion assets under management
William Blair represented Satellite Logistics Group, a portfolio company of Morgenthaler Private Equity,
in connection with its sale to JF Hillebrand
Satellite Logistics Group is a category-creating provider of non-asset-based logistics and supply chain
management services to the North American beer and beverage market
JH Hillebrand is a leading global provider of logistics management solutions to the beer and beverage
industry
William Blair represented Specialty Professional Products, a portfolio company of Calvert Street Capital
Partners, in connection with its sale to KODA Distribution Group, a portfolio company of Audax Group
Specialty Professional Products is a value-added distributor of highly specialized herbicide and
insecticide products used in the forestry, industrial vegetation management, range and pasture, aquatics,
and mosquito control markets
KODA Distribution Group is a leader in specialty chemicals distribution, serving customers in the
coatings, adhesives, and sealants industries, as well as construction, home care, and industrial markets
William Blair represented EFC International in connection with its sale to Quad-C Management
EFC is an industry-leading, value-added specialty distributor providing specialty fastening, clamping and
electrical components primarily to the industrial OEM marketplace
Quad-C Management is a private investment firm who partners with owners and entrepreneurs of wellestablished, middle-market businesses for growth and equity opportunities for management teams
6 William Blair Spotlight – Recent Logistics & Specialty Distribution Transactions
Selected Supply Chain Transaction Execution
Follow-on Offering &
Initial Public Offering
Apr 2015 Oct 2009
3PL Provider
Feb 2015
STIRLING SQUARE
Jan 2015
CAPITAL PARTNERS
P
R
I
V
A
T
E
Dec 2014
E
Q
U
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Y
I
N
V
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S
T
M
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N
T
S
Senior Secured Notes
Dec 2014
Follow-on Offerings &
December 2014
HR Services to Supply
Chain Industry
Medical Products
Distributor
Educational Products
Distributor
Reverse Logistics and
After Market Services
Environmental
Services and Logistics
Sale of minority equity stake
& debt recapitalization
Nov 2014
October 2014
Jun 2014
May 2014
Industrial
Distributor
Beer / Beverage
Logistics Services
IT Supply
Chain Services
Science Educational
Supplies Distributor
Wheel & Tire
Distributor
Optical Products
Distributor
Recapitalization
November 2013
September 2013
September 2013
June 2013
May 2014 & June 2013
November 2013
May 2013
April 2013
Pharma / Med
Device Logistics
Mobile Refueling
Services
Specialty Chemicals
Distributor
Container / Cargo
Terminal Services
Aerospace Parts
Distributor
Specialty Fastener
Distributor
Follow-on Offerings &
PVF
Distributor
February 2013
Specialty Roofing
Distributor
December 2012
Retail Logistics
Management
October 2012
T&L Industry
Enterprise Software
October 2012
Optical Products
Distributor
May 2011
Marine Vessel
Operator
has acquired
August 2010
January 2010
October 2007
May 2005
MAY 2007
March 2013
a subsidiary of
Cold Chain
Logistics
Specialty Surgical
Products Distributor
IT Services /
Products Distributor
Industrial
Distributor
Landscape Equipment
Distributor
Mar 2007 & Jun 2006
Wire & Cable
Distributor
Selected Supply Chain Transaction Execution 7
Supply Chain Services Equity Research Coverage
Transportation and Logistics
Nate Brochmann, CFA
+1 312 364 5385
[email protected]
SM
Ryan Merkel, CFA
+1 312 364 8603
[email protected]
To receive research materials on any of the companies or sectors above please contact Lenora Harris ([email protected]).
8 Supply Chain Services Equity Research Coverage
Supply Chain Services Contacts
North America
Jeff Burtelow
Jason Sunderson
Education:
Education:
Managing Director
Head of Supply Chain Services
Director
Supply Chain Services
Chicago (MBA), St. Louis (BS)
Harvard (MBA), Harvard (BA)
Contact Info: [email protected]
+1 312 364 8651
+1 312 364 8752
Matthew B. Gooch
Matthew M. Zimmer
Education:
Education:
Joined Blair: 2004
Joined Blair: 2008
Europe
Managing Director
Managing Director
Chicago (MBA), Emory (BA), CFA
Columbia (MBA), Notre Dame (BA)
+44 20 7868 4502
+44 20 7868 4478
Joined Blair: 2007
Joined Blair: 2000
Supply Chain Services Sector Coverage
Transportation and Logistics Services
•
Third party logistics (3PL)
•
Intermodal services
•
Value-added warehousing and distribution
•
Rail services
•
•
•
•
•
•
•
•
Freight forwarding
•
Reverse logistics / returns management
•
Supply chain management
•
Marine Services
•
•
Industrial
MRO
Building products & construction
Aerospace
Transportation & heavy equipment
Technology
Specialty chemicals
Energy / oil & gas
Niche-end markets
Supply Chain Services Contacts 9
Logistics
Sector
Overview
Logistics Sector Overview
The logistics sector has experienced strong historical growth over the past 5 years, particularly in asset-light segments
such as third-party logistics (3PL), reflecting a continued outsourcing trend toward increased use of third-parties to
manage transportation and logistics needs. With technological advances driving interconnectivity of the supply chain, it
is more important now than ever before for companies to maintain competitiveness by efficiently managing their cost
structure and optimizing transportation and freight expenses.
3PL firms provide a compelling alternative to maintaining individual relationships with carriers and service providers,
leveraging scale and direct access to a vast network of transportation providers across a variety of modes to provide
significant savings and benefits to customers. In contrast to traditional carriers, 3PLs are non-asset or asset-light
business models, contracting the actual movement of goods to third parties while minimizing the need for significant
investment and capital expenditures. This segment has been one of the fastest growing logistics segments, with a 9.4%
CAGR since 1996, and is now sized at $146.4 billion in revenue in the U.S. alone.
Underpinning the success of these 3PLs is a network of U.S. transportation and freight carriers that has grown to a
market size of $653 billion. Trucking remains the largest transportation services segment and most commonly used
mode of freight movement. However intermodal service providers, which can utilize Truck Load (TL) / Less than Truck
Load (LTL) as well as rail, air and shipping carriers, can offer more efficient and cost-effective solutions for the
movement of goods both in the U.S. and internationally. We have seen a strong trend in recent M&A activity toward
acquiring additional diversified capabilities to create integrated, multi-modal solutions, such as XPO acquiring 3PD for
last mile logistics, Pacer International for intermodal, New Breed for value-added warehousing / distribution and
reverse logistics, and Norbert Dentressangle for significant international scale and reach.
While historically most transportation management and logistics services were focused on the forward movement of
goods, from manufacturer to retailer to customer, reverse logistics management is becoming an increasingly important
component of supply chain optimization. Trends such as the rise of e-commerce and online purchasing and more rapid
obsolescence of electronic devices has driven sharp growth in the volume of aftermarket returned, recycled and retired
goods. For example, the ease of purchases and returns at online apparel retailers facilitates consumers’ buying
multiple sizes, colors, and styles of products simultaneously, knowing that all but one will be immediately returned. In
the electronics segment, reverse logistics has evolved from the recycling and refilling of spent printer cartridges to the
repair, rebuilding and reselling of smartphones and tablets, spawning a growing international aftermarket for the sale
of refurbished devices. FedEx’s recent acquisition of GENCO demonstrates the strong interest with which larger, more
traditional forward carriers are adding reverse logistics services to expand their breadth of coverage of the supply
chain. In addition, Encore Repair Services debt financing from Falcon Investment Advisors to support the Company’s
growth initiatives represents recent activity in the reverse logistics and aftermarket services industry.
M&A activity in logistics remained strong in 2014, generating 119 closed transactions, representing $18.9 billion in
aggregate transaction value. This represented a 14.4% increase in transaction volume over 2013 metrics and exceeds
the median of the past 10 years. Asset-light and intermodal were the two largest segments by both volume and value,
highlighting both financial sponsor interest in higher ROIC, less-capital-intensive business models, as well as strategic
interest in expanding breadth of services and geographic coverage in the interest of developing more compelling multimodal solutions. The outlook for 2015 remains strong within logistics and transportation management, and we expect
many of the themes and trends highlighted above to continue.
10 Logistics Sector Overview
Transportation & Logistics Market Sizing
U.S. Freight Transportation Market
$653 Billion
Truckload
$127.0 Billion
Rail Intermodal
$70.9 Billion
Less-than-Truckload
$55.0 Billion
Outsourced 3PL Market
$146.4 Billion
Dedicated
Contract Carriage
$12.0 Billion
Domestic
Transportation
Management
$49.2 Billion
International
Transportation
Management
$46.2 Billion
Warehouse /
Distribution
Software
$35.9 Billion
$3.1 Billion
Source: Armstrong & Associates, Freedonia.
Note: 3PL market size based on 2013 Gross Revenue; U.S. freight transportation market size based on 2012 data.
US 3PL Market 1996-2014E
($ in billions)
$180
2 – 3x GDP Growth
$160
$140
$120
$100
$80
$60
$40
$20
$30.8
$34.2
$39.6
$45.3
$56.6
$65.3
$71.1
$76.9
$89.4
$103.7
$113.6
$119.0
$127.0
$107.1
$127.3
$133.8
$141.8 $146.4
$154.0
$0
Source: Armstrong & Associates.
Logistics Sector Overview 11
Logistics M&A Market Summary
M&A Deal Volume – Transportation & Logistics
150
100
117
114
105
2004
2005
2006
140
130
2007
2008
50
0
Source: Dealogic as of January 2015.
83
2009
121
106
2010
2011
Median: 114
119
111
104
2012
2013
2014
M&A Deal Value (Aggregate Transaction Size) – Transportation & Logistics
($ in billions)
$50.0
$40.4
$40.0
$30.0
$20.0
$10.0
$0.0
$21.3
$13.6
2004
2005
2006
$36.4
$36.1
$12.5
2007
2008
2009
$25.7
2010
$38.5
2011
Median: $23.0
$22.9
$23.4
2012
2013
$18.9
2014
M&A Multiples – Transportation & Logistics
($ in billions)
M&A Deal Volume by T&L Sector
LTM, EV >$50 million
11.4%
18.2%
29.5%
20.5%
20.5%
12 Logistics Sector Overview
M&A Deal Value by T&L Sector
LTM, EV >$50 million (Aggregate Transaction Size)
Intermodal
TL
Asset-Light
Integrator
LTL
22.1%
37.4%
18.2%
11.1%
11.2%
Intermodal
TL
Asset-Light
Integrator
LTL
Selected M&A Activity – Logistics
Selected Logistics Transactions
($ in millions)
Date
Announced
04/28/15
Target
Norbert Dentressangle SA
04/07/15
TNT Express
04/21/15
02/24/15
Command Transportation
Freightliner Group Ltd.
02/18/15
Toll Holdings Limited
(ASX:TOL)
02/09/15
UX Specialized Logistics
02/17/15
APL Logistics
12/15/14
GENCO
08/11/14
Active Aero Group Inc.
12/01/14
07/31/14
07/29/14
07/24/14
06/02/14
Freightquote.com
Jacobson Holding Company
New Breed Holding Company
Contrans Group Inc
Target (Unit Sold) / Business
Description
Provider of contract logistics, freight
brokerage, and forwarding services
Largest privately held truckload brokers
and non-asset based provider
Provides express delivery services to
businesses and consumers worldwide
Rail freight services for blue-chip
organizations
Forwarding, express, and logistics
services
Air and ocean freight forwarding
Logistics services and single-item B2C
delivery
Third party logistics company
Operates as an online freight shipping
brokerage
Expedited transportation management
services
Warehousing and logistics services
Contract supply chain management
solutions
Freight transportation services
Transport Corp of America Inc Truckload carriage and logistics services
Buyer
XPO Logistics, Inc. (NYSE: XPO)
Echo Global Logistics (NASDAQ:
ECHO)
$4,800.0
Japan Post Holdings
$6,485.6
Genesee & Wyoming
Kintetsu World Express
XPO Logistics, Inc. (NYSE:XPO)
FedEx Corp (NYSE: FDX)
CH Robinson Worldwide Inc.
(NASDAQ: CHRW)
Roadrunner Transportation
Systems, Inc. (NYSE:RRTS)
Norbert Dentressangle
TransForce Inc (Canada)
TransForce Inc (Canada)
Unitrans International
Corporation
Airfreight services, including express and Roadrunner Transportation
door-to-door
Systems, Inc. (NYSE:RRTS)
01/06/14
Pacer International, Inc.
(NasdaqGS:PACR)
Asset-light transportation and logistics
service
11/11/13
Gordon Trucking, Inc.
Truckload transportation and
management services
12/10/13
08/16/13
06/23/13
05/28/13
11/01/12
08/01/12
02/23/11
Haas Group International Inc. Chemical management and product
distribution
Wesco Aircraft Holdings, Inc.
(NYSE: WAIR)
Landstar SCS
3PD, Inc. (XPO Last Mile)
Integrated transportation management
solutions
Last-mile logistics solutions
Clal Industries Ltd. (TASE:CII) Transportation, infrastructure, and
logistics service
Transplace
Third party logistics and technology
services
Caterpillar Logistics (Neovia)
Logistics and distribution services of
mining equipment
Phoenix International
Dynamex Inc.
Marine services contractor and
underwater operations
Same-day logistics and outsourced
transportation
$420.0
FedEx Corp (NYSE: FDX)
03/14/14
02/28/14
Enterprise
Value
$3,530.0
Heartland Express, Inc.
(NasdaqGS:HTLD)
Access Industries, Inc.
Greenbriar Equity Group
CH Robinson Worldwide
Platinum Equity
TransForce
$768.0
Enterprise Value/LTM
Revenue
0.62x
EBITDA
10.5x
0.60x
27.9x
0.75x
1.00x
11.9x
0.52x
7.2x
0.75x
$2,000.0
1.25x
$365.0
$115.0
$750.0
$615.0
$590.4
$310.0
$55.5
$706.7
NA
0.9x
$1,200.0
$59.0
11.5x
15.0x
9.8x
0.59x
10.7x
0.90x
9.8x
0.43x
1.00x
8.0x
8.0x
1.07x
13.0x
0.66x
NA
0.89x
NA
6.3x
NA
$336.5
0.30x
11.9x
$321.4
0.74x
5.0x
$2,285.9
1.31x
$87.0
$365.0
$350.0
NA
1.14x
10.1x
NA
11.7x
1.07x
6.0x
$635.0
0.79x
$226.3
0.54x
$750.0
7.5x
8.9x
12.5x
10.8x
Mean
0.81x
10.6x
Median
0.75x
10.0x
Sources: Capital IQ, MergerMarket, and William Blair data.
Selected M&A Activity – Logistics 13
Recent Notable Logistics Transactions
Date: 04/07/15
Target:
Hoofddorp, Netherlands
Key Metrics:
Implied Enterprise Value ($M):
EV/LTM Revenue:
EV/LTM EBITDA:
$4,800
0.60x
27.9x
Observations/Rationale:
TNT Express provides courier global express distribution, logistics and international
mail service of parcels and freight. The Company supports businesses and consumers
across the globe by delivering nearly one million shipments per day. TNT picks up,
transports, delivers documents, parcels, and palletized freight, and offers supply chain
solutions. The company operates road and air transportation networks in Europe, the
Middle East, Asia, Australia, and South America, with a fleet of 54 aircrafts.
•
•
•
•
Date: 12/15/14
Target:
Pittsburg, PA
Key Metrics:
EV/LTM Revenue:
EV/LTM EBITDA:
$2,0000
1.25x
9.8x
Memphis, TN
The transaction would extend FedEx’s presence in a fragmented and growing
European marketplace, as well as small parcel delivery
With TNT, FedEx will tie UPS for the No. 2 European position behind market
leader DHL; the two networks should overlap well given TNT's strong ground
presence with FedEx's better air express capabilities
Synergies will likely come from efficiency and productivity improvements as well
as scale and density benefits that would lower its overall cost per package, rather
than significant headcount or facility reductions
Genco operates as a third party logistics company, providing transportation logistics,
damage research, and sustainability services in North America and internationally. The
Company offers product lifecycle services, which include inbound logistics,
warehousing and distribution, contract packaging and managed transportation,
fulfillment, returns processing and disposition, and systems integration. Genco also
offers test, repair, and refurbishment services, product liquidation, and recycling
management. End markets for Genco include consumer and industrial manufacturers,
retailers, technology companies, healthcare services providers, and the U.S.
government.
•
•
Acquirer:
TNT’s small to medium-sized client base in the industrial, automotive, high-tech,
and healthcare industries, gives FedEx a new channel for growth
•
•
Allows FedEx to further expand its e-commerce business and related reverse
logistics processes
Bolsters FedEx’s global service portfolio through the addition of new best in class
supply chain management services
The customers of both companies will benefit from the broadened capabilities and
robust new combined services
The asset-light acquisition expands FedEx’s service offerings without a significant
infrastructure investment in transportation equipment
Sources: Capital IQ, MergerMarket, Press Releases, and Publicly Available Information.
14 Recent Notable Logistics Transactions
Date: 04/28/15
Target:
Lyon, France
Key Metrics:
EV/LTM Revenue:
EV/LTM EBITDA:
$3,530
0.62x
10.5x
Norbert Dentressangle provides transport, logistics, and global freight forwarding
services. Specifically, the Company offers national and international full load
transportation, 3PL, warehousing management, quality control, e-commerce solutions,
air and sea freight, and other logistics and transportation support services. The
Company has 662 locations and ~42,300 employees, and serves to some of the world’s
largest blue chip companies.
•
•
•
•
Date: 9/02/14
Target:
Key Metrics:
High Point, NC
EV/LTM Revenue:
EV/LTM EBITDA:
$615
1.00x
8.0x
•
•
Date: 1/6/14
Dublin, OH
Key Metrics:
EV/LTM Revenue:
EV/LTM EBITDA:
$336
0.30x
11.9x
XPO intends to keep Norbert’s headquarters in France and use the acquired
operation facilities to grow business in Europe; the transaction gives XPO access
to a European network of ~7,700 owned trucks, ~3,200 contracted trucks with
owner-operators and ~12,000 independent carriers
Both companies expect substantial cross-selling opportunities through the already
established customer partnerships and the consolidation of their supply chain
relationships to a single source global provider
With New Breed Holding Company, XPO Logistics will expand its prescense in a
desirable sector of contract logistics: customized services, which has attractive
margins, high contractual revenue renewal rates and is noncyclical
The acquisition is supports XPO’s innovative strategy of building a broad and
integrated logistics platform by parterning and acquiring leading companies
where it expects constant customers demand
The offerngs of each company are complementary, which should create significant
cross-selling opportunities, and further advance XPO’s technology
Pacer International, Inc. provides asset-light transportation and logistics services
worldwide, operating in two segments: Intermodal and Logistics. The Intermodal
segment offers container capacity, local transportation services, on-site operational
services, and door-to-door shipment management services, as well as intermodal rail
transportation and intermodal marketing services. The Logistics segment provides
highway brokerage, supply chain management, international freight forwarding, nonvessel-operating common carrier, warehousing and distribution, and international
ocean shipping services.
•
Acquirer:
Greenwich, CT
The acquisition of Norbert Dentressangle will make XPO Logistics a top ten global
logistics company’s and will greatly expand XPO’s footprint in Europe, especially
in freight brokerage and managed transportation
New Breed Holding Company provides contract supply chain management solutions to
corporations and government agencies. The company offers logistics services, which
include order fulfillment, lean manufacturing support, returns processing, and
distribution of service parts. New Breed focuses in services for omni-channel
distribution, reverse logistics, transportation management, freight bill audit and
payment, aftermarket, and optimization.
•
Target:
Norbert Dentressangle’s transport, logistics, and forwarding, services is
complementary to XPO’s supply chain service offerings (e.g., contract logistics, efulfillment, freight brokerage/management, asset-light, and palletized services),
global strategies, and long-term growth plans
•
Brings expanded capabilities for XPO’s intermodal transport business and
combines rail with other types of shipping, primarily trucking; trucking is known
to be one of the most rapidly growing areas of the freight transportation industry
With Pacer International, XPO Logistics will be the third largest provider of
intermodal services in North America and will be considered the largest crossborder Mexico provider of intermodal services
Recent Notable Logistics Transactions 15
Date: 7/31/14
Jacobson Companies provides warehousing and logistics services and offers
distribution and packaging services. The Company also provides transportation
services, including freight management, contract carriage, and road shipping.
Additionally, Jacobson Companies manufactures liquid products, which includes filling
liquid, paste, and gel in bottles, tubes, and jars. The Company caters to a variety of
industries, including food and beverage, chemical, agri-science, energy, oil and gas, and
retail/consumer.
Target:
Des Moines, IA
Acquirer:
Lyon, France
Key Metrics:
EV/LTM Revenue:
EV/LTM EBITDA:
$750
0.90x
9.8x
Date: 12/1/2014
Target:
Kansas City, MO
Key Metrics:
Implied Enterprise
($M):
EV/LTM Revenue:
EV/LTM EBITDA:
Value
$365
0.59x
10.7x
Freightquote.com, Inc. operates as an online freight shipping brokerage company,
offering truckload quotes, LTL quotes, expedited quotes, intermodal quotes, and real
time freight quotes in North America. The Company is one of the largest online freight
brokers. Freightquote.com is considered to be an innovative player in the industry by
offering a unique combination of dedicated service and U.S. Patented, solutions-driven
technology.
•
Date: 11/01/12
Wood Dale, IL
Implied Enterprise
($M):
EV/LTM Revenue:
EV/LTM EBITDA:
Value
Acquirer:
Eden Prairie, MN
$635
0.79x
12.5x
Strengthened Norbert’s brand, presence and footprint in selected vertical markets,
such as engineering, IT, automation processes, and reverse logistics
•
•
Target:
Created new cross-selling opportunities across the U.S. and internationally
•
•
Key Metrics:
Strengthened Norbert Dentressangle’s solutions and presence in the U.S. market
and provides additional exposure to the fast-growing U.S. logistics and transport
market
•
Freightquote.com brings synergies to C.H. Robinson’s LTL and TL businesses, as
well as a talented technology team with expertise in developing a powerful and
attractive e-commerce store front experience
The acquisition increases C.H. Robinson’s market share with small businesses
Gives C.H. Robinson a compelling proprietary e-commerce technology platform,
which is largely TMS-driven (transportation management system) and includes
online user-friendly tools, which tends to be more transactional, higher margin
freight
Phoenix International Freight Services Ltd. provides international freight forwarding,
air and ocean consolidation, customs house brokerage, and non-vessel operating
common carrier services worldwide. The Company’s solutions include air freight and
ocean freight forwarding, customs brokerage, cargo insurance, logistical prestige
services, textile logistics, information systems, and vendor management.
•
•
Similar to C.H. Robinson, Phoenix International has strong customer and carrier
relationships, a talented management team and employees, and a performancebased culture which has proven to mix well as a combiend entity
The acquisition strengthens C.H. Robinson’s international forwarding business and
advances the Company’s robust technology infrastructure
16 Recent Notable Logistics Transactions
Public Comparables – Annual EBITDA Multiples
Asset-Light Logistics
EV/LTM EBITDA
Key Statistics
Median: 13.3x
13.8x
2005
15.0x
2006
13.5x
2007
Note: See page 19 for comparable group.
9.9x
2008
14.6x
13.2x
2010
2011
8.9x
2009
11.1x
2012
12.2x
2013
13.6x
Median:
High:
Low:
13.3x
15.0x
8.9x
2014
Integrators
EV/LTM EBITDA
Key Statistics
Median: 7.6x
7.5x
7.7x
2005
2006
9.0x
2007
11.3x
7.2x
2008
5.1x
2009
2010
6.2x
6.0x
2011
2012
8.8x
2013
9.8x
Median:
High:
Low:
7.6x
11.3x
5.1x
2014
Less Than Truckload (LTL)
EV/LTM EBITDA
Key Statistics
Median: 6.3x
6.2x
5.3x
5.3x
5.4x
5.8x
2005
2006
2007
2008
2009
8.4x
8.0x
2010
2011
6.7x
6.4x
2012
2013
9.2x
Median:
High:
Low:
6.3x
9.2x
5.3x
2014
Public Comparables – Annual EBITDA Multiples 17
Truckload (TL)
EV/LTM EBITDA
Key Statistics
Median: 6.6x
5.6x
6.6x
6.9x
2005
2006
2007
5.8x
6.5x
2008
2009
8.5x
2010
6.4x
6.0x
2011
2012
7.0x
2013
8.3x
Median:
High:
Low:
6.6x
8.5x
5.6x
2014
Rail Carriers
EV/LTM EBITDA
Key Statistics
Median: 9.1x
9.2x
9.2x
8.7x
2005
2006
2007
8.5x
2008
7.4x
2009
Source: CapIQ.
18 Public Comparables – Annual EBITDA Multiples
9.4x
9.1x
9.0x
2010
2011
2012
10.0x
2013
11.6x
2014
Median:
High:
Low:
9.1x
11.6x
7.4x
Public Comparables by Sector
Asset-Light Logistics
($ in millions, except share price data)
Company
Exchange
Ticker
Current
Stock
Price
52-Week
Low
LTM
High
Equity
Value
Enterprise
Value (EV) Revenue EBITDA OCF
EBITDA OCF
EV/
EV/
Margin Margin EBITDA OCF
15F EV/
EBITDA
15F
P/E
ROIC
CH Robinson
Worldwide
NasdaqGS:CHRW
$73.45
$50.21
$77.49
$10,748
$11,724
$13,470
$797
$774.1
5.9%
5.7%
14.7x
15.1x
13.1x
21.6x
48.4%
Expeditors
International of
Washington
NasdaqGS:EXPD
$48.04
$38.14
$49.02
$9,212
$8,248
$6,565
$644
$606.5
9.8%
9.2%
12.8x
13.6x
11.6x
22.5x
31.8%
$781
$127
$87.1
16.2%
11.2%
12.6x
18.4x
10.0x
22.3x
20.9%
$987
$799.3
5.6%
4.5%
16.2x
20.0x
15.6x
26.3x
32.4%
$150
$130.7
20.3x
23.3x
Echo Global Logistics
NasdaqGS:ECHO
Forward Air Corp.
NasdaqGS:FWRD
Kuehne + Nagel
International AG
SWX:KNIN
Hub Group
Landstar System
NasdaqGS:HUBG
NasdaqGS:LSTR
Panalpina World
SWX:PWTN
Transport Holding Ltd.
$28.45
$1,599
$143.41
$112.66
$143.91
$17,203
$16,021
$17,618
$143.51
$108.68
$148.49
$3,406
$3,046
$6,752
$5.02
$2.72
$5.33
$67.83
$25.82
NasdaqGS:UTIW
$13.38
Median
NYSE:XPO
$1,173
$1,639
NYSE:RRTS
XPO Logistics
$645
$54.63
Roadrunner
Transportation
Systems
UTi Worldwide
$678
$42.09
$39.97
NasdaqGM:QLTY
AMEX:RLGT
$30.18
$53.77
Quality Distribution
Radiant Logistics
$16.34
$10.73
$46.48
$32.69
$57.39
$8.32
$51.47
$81.80
$15.83
$19.57
$29.02
$9.00
$14.75
$22.84
$46.85
$1,474
$3,038
$301
$174
$1,474
$2,983
$651
$181
$3,571
$3,186
$992
$392
$36
$135
$250
$70
$13
$982
$1,402
$1,873
$121
$1,411
$1,947
$4,291
$72
$1,639
$1,947
$3,689
$3,681
$2,357
$95
$3,186
$127
$20.8
$16.3
$239.3
$30.1
$11.4
$75.6
$40.1
$50.1
$75.6
3.1%
3.8%
7.8%
2.2%
7.1%
3.3%
6.4%
1.7%
4.0%
5.6%
1.8%
0.5%
7.5%
1.9%
3.0%
17.9x
10.9x
11.9x
9.3x
NMF
NMF
12.5x
21.6x
12.0x
10.7x
13.9x
7.5x
10.6x
52.8x
3.0%
12.8x
18.4x
11.6x
22.4x
NMF
16.8x
16.0%
13.2x
NMF
NMF
45.5%
28.6x
NMF
2.1%
9.5x
15.8%
19.6x
0.9%
18.5x
16.3%
21.1x
14.2x
11.6x
9.9x
29.1x
2.9%
4.0%
15.9x
11.8x
15.4%
38.6x
15.3%
15.7x
9.5%
1.6%
NMF
(0.0%)
16.0%
Source: CapIQ as of March 2015.
(1) OCF (Operating Cash Flow) represents EBITDA less Capital Expenditures.
Indexed Stock Performance – LTM
(Indexed Price)
120%
Asset-Light (18.8%)
100%
80%
Source: Factset.
Indexed Stock Performance – Last Three Years
S&P 500 (12.6%)
(Indexed Price)
170%
Asset-Light (16.6%)
S&P 500 (50.0%)
120%
70%
Source: Factset.
Asset-Light – EV/LTM EBITDA
Median: 12.4x
20.0x
15.0x
10.0x
13.5x
5.0x
0.0x
Source: Capital IQ.
Public Comparables by Sector 19
Integrators
Company
Exchange
Ticker
Deutsche Post AG
XTRA:DPW
FedEx Corporation
NYSE:FDX
United Parcel Service NYSE:UPS
Median
Current
Stock
Price
$30.63
$173.32
$98.53
52-Week
Low
$22.68
$130.64
$94.05
LTM
High
Equity
Value
Enterprise
EBITDA OCF
EV/
EV/
15F EV/
EBITDA
15F
P/E
ROIC
$32.39
$37,098
$39,250
$69,098
$4,424
$2,305.9
6.4%
3.3%
8.9x
17.0x
8.1x
16.3x
17.6%
$114.40
$88,927
$96,491
$58,232
$6,864
$4,536.0 11.8%
7.8%
14.1x
21.3x
10.0x
19.1x
17.6%
$183.51
$49,104
$49,104
$51,573
$51,573
$47,178
$58,232
$6,748
$6,748
$2,800.0 14.3%
$2,800.0 11.8%
5.9%
5.9%
7.6x
8.9x
18.4x
18.4x
6.8x
8.1x
17.3x
16.8%
42.6%
17.3x
(Indexed Price)
120%
Integrators (4.4%)
S&P 500 (12.6%)
100%
80%
Source: Factset.
(Indexed Price)
170%
Integrators (46.7%)
S&P 500 (50.0%)
120%
70%
Source: Factset.
Integrators – EV/LTM EBITDA
15.0x
10.0x
5.0x
0.0x
Source: Capital IQ.
20 Public Comparables by Sector
Median: 8.3x
10.5x
Less-Than-Truckload Carriers
Current
Stock
Price
52-Week
LTM
Company
Exchange
Ticker
Con-way
NYSE:CNW
$44.51
$39.12
$53.54
$2,563
$2,868
$5,806
$493
Saia
NasdaqGS:SAIA
$44.97
$35.19
$57.60
$1,110
$1,188
$1,272
$145
Old Dominion Freight NasdaqGS:ODFL
Line
YRC Worldwide
Median
NasdaqGS:YRCW
$78.19
$17.72
Low
High
$53.63
$14.03
Equity
Value
$81.48
$29.21
$6,719
$561
$1,836
Enterprise
$6,839
$1,500
$2,184
$2,788
$5,069
$3,928
$587
$197
$345
EBITDA OCF
EV/
EV/
$203.3
8.5%
3.5%
11.4%
3.7%
$219.4
21.1%
$128.0
3.9%
$47.0
$165.6
9.9%
5.8x
14.1x
8.2x
25.3x
7.9x
14.1x
7.9%
11.7x
2.5%
7.6x
3.6%
15F EV/
EBITDA
15F
P/E
ROIC
5.0x
16.0x
13.5%
6.8x
17.2x
20.1%
NMF
10.0x
11.7x
4.5x
5.9x
21.4x
27.3%
25.7x
10.3%
19.3x
16.8%
(Indexed Price)
140%
120%
Less-Than-Truckload (27.9%)
S&P 500 (12.6%)
(Indexed Price)
230%
S&P 500 (50.0%)
180%
100%
130%
Source: Factset.
Source: Factset.
80%
80%
Less-Than-Truckload – EV/LTM EBITDA
12.0x
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
Median: 7.0x
7.4x
Source: Capital IQ.
Truckload Carriers
Current
Stock
Price
52-Week
LTM
Company
Exchange
Ticker
Celadon Group
NYSE:CGI
$26.35
$18.12
$26.86
Heartland Express
NasdaqGS:HTLD
$24.47
$19.96
$27.96
Knight
Transportation
NYSE:KNX
$32.77
$21.62
Covenant
NasdaqGS:CVTI
Transportation Group
JB Hunt Transport
Services
NasdaqGS:JBHT
Marten Transport Ltd. NasdaqGS:MRTN
Swift Transportation
Company
Werner Enterprises
Median
NYSE:SWFT
NasdaqGS:WERN
$36.55
$86.76
$22.92
$28.33
$31.94
Low
High
$8.88
$69.33
$15.36
$18.53
$23.50
$36.70
$87.90
$34.69
$25.71
$29.44
$32.65
Equity
Value
$624
$663
$2,148
$10,109
$2,687
$767
Enterprise
$1,043
$844
$2,156
$11,036
$2,806
$791
$4,026
$5,422
$2,225
$2,255
$2,302
$2,355
$806
$107
$871
$208
$1,102
$239
($21.2)
$583
$272.6
$719
$6,165
$673
$2,139
$987
($4.1)
13.2%
$3.0
23.9%
$89
($75.0)
$926
$117.5
$115
$4,299
$318
$224
EBITDA OCF
EV/
EV/
($47.7)
$21.2
($0.6)
15F EV/
EBITDA
(0.5%)
9.8x
NA
0.3%
10.4x
NMF
21.7%
(1.9%)
11.7x
NA
13.6%
6.3%
12.3%
(10.4%)
15.0%
1.9%
17.1%
14.9%
14.9%
(7.1%)
1.0%
(0.1%)
9.5x
11.9x
6.9x
NA
17.3x
8.1x
22.7x
7.3x
10.6x
NA
5.7x
19.9x
9.6x
19.9.x
7.4x
7.3x
NMF
9.3x
NMF
15F
P/E
9.1x
7.9x
6.2x
7.6x
ROIC
9.5%
20.0x
12.1%
24.1x
33.4%
22.8x
20.4x
16.5x
20.1x
20.2x
19.6%
18.0%
11.3%
19.9%
15.5%
16.7%
(Indexed Price)
140%
120%
Truckoad (26.3%)
S&P 500 (12.6%)
100%
80%
Source: Factset.
(Indexed Price)
170%
Truckload (70.5%)
S&P 500 (50.0%)
120%
70%
Source: Factset.
Truckload – EV/LTM EBITDA
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
Source: Capital IQ.
Median: 7.0x
9.2x
Rail Carriers
Company
Exchange
Ticker
Canadian National
Railway Company
TSX:CNR
Genesee & Wyoming
CSX Corp.
Kansas City Southern
Norfolk Southern
Corporation
Union Pacific
Corporation
Median
Current
Stock
Price
52-Week
Low
LTM
High
Equity
Value
Enterprise
EBITDA OCF
EV/
EV/
15F EV/
EBITDA
15F
P/E
ROIC
$67.54
$46.65
$69.51
$54,628
$61,163
$10,478
$4,900
$2,916.1
46.8%
27.8%
12.5x
21.0x
12.4x
20.1x
22.3%
NYSE:GWR
$103.28
$80.61
$106.02
$5,574
$7,136
$1,639
$574
$242.1
35.0%
14.8%
12.4x
29.5x
10.2x
21.0x
10.7%
NYSE:NSC
$108.65
$91.91
$117.64
38.9%
20.7%
9.2x
17.4x
8.7x
40.9%
19.5%
11.4x
18.4x
NYSE:CSX
NYSE:KSU
NYSE:UNP
$34.13
$114.43
$114.52
$27.14
$95.41
$90.36
$37.99
$33,808
$42,613
$126.49
$12,634
$14,917
$124.52
$100,925
$110,819
$33,400
$33,604
$12,669
$4,764
$2,577
$1,106
$23,988
$10,657
$41,733
$11,624
$42,173
$11,051
$2,315.0
$135.2
$4,522
$2,404.0
$4,643
$2,359.5
$6,311.0
37.6%
42.9%
44.4%
18.3%
5.2%
26.3%
8.9x
13.5x
10.4x
18.4x
NMF
17.6x
8.3x
11.9x
9.4x
9.8x
15.8x
17.5%
21.2x
14.4%
15.9x
16.5%
17.4x
27.2%
18.7x
17.0%
(Indexed Price)
140%
Rail Carriers (21.3%)
120%
100%
80%
Source: Factset.
S&P 500 (12.6%)
(Indexed Price)
170%
S&P 500 (50.0%)
120%
70%
Source: Factset.
Asset-Light – EV/LTM EBITDA
Median: 9.2x
15.0x
10.0x
10.8x
5.0x
0.0x
Source: Capital IQ.
Stock Price Performance – LTM
Asset-Light (18.8%)
Truckoad (26.3%)
(Indexed Price)
140
Integrators (4.4%)
S&P 500 (12.6%)
135
130
27.9%
26.3%
125
21.3%
120
18.8%
115
12.6%
110
105
4.4%
100
95
90
Source: FactSet.
Stock Price Performance – Last Three Years
Asset-Light (16.6%)
Truckload (70.5%)
(Indexed Price)
300
250
200
150
100
50
Source: FactSet.
Integrators (46.7%)
S&P 500 (50.0)
108.6%
80.0%
70.5%
50.0%
46.7%
16.6%
Logistics Industry Insights
Top 20 U.S. Domestic and Global 3PL Providers
($ in millions)
U.S. Domestic
Rank
Company
1
C. H. Robinson Worldwide
3
Expeditors International of Washington
2
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
UPS Supply Chain Solutions
Kuehne + Nagel (The Americas)
UTi Worldwide
Exel (DHL Supply Chain - Americas)
Global
2013 Gross
Logistics
Revenue
$12,752
$8,935
$6,080
$5,140
$4,441
$3,851
DB Schenker Logistics
~$4,000
Burris Logistics
~$2,900
Schneider Logistics & Dedicated
~$2,700
Hub Group
CEVA Logistics (The Americas)
Ryder Supply Chain Solutions
Panalpina (The Americas)
$3,374
$2,673
$2,383
$2,595
BDP International
~$2,200
Menlo Worldwide Logistics
~$1,730
Neovia Logistics Services
Americold
J.B. Hunt Dedicated Contract Services & Integrated
Capacity Solutions
GENCO
Total Quality Logistics
~$1,730
~$1,580
$1,768
~$1,600
$1,600
Sources: Armstrong & Associates, trade publications, Capital IQ, and public filings.
2013 Gross
Logistics
Revenue
Company
DHL Supply Chain & Global Forwarding
$31,432
DB Schenker Logistics
$19,732
Kuehne + Nagel
Nippon Express
C.H. Robinson Worldwide
CEVA Logistics
DSV
Sinotrans
$17,317
$12,752
$8,517
$8,140
$7,738
Panalpina
SDV (Bolloré Group)
DACHSER
Toll Holdings
Expeditors International of Washington
Geodis
UPS Supply Chain Solutions
GEFCO
J.B. Hunt (JBI, DCS & ICS)
UTi Worldwide
Agility
$22,587
Yusen Logistics
$7,293
$7,263
$6,627
$6,266
$6,080
$5,828
$5,492
$5,300
$5,224
$4,441
$4,415
$4,042
Logistics Industry Insights 25
Top 20 Truckload and LTL Carriers
($ in millions)
Truckload
LTL
2013
Revenue
Company
1
Swift Transportation
$3,052
FedEx Freight
$5,095
3
Werner Enterprises
$1,642
YRC Freight
$3,127
2
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Schneider National
J.B. Hunt Transport Services
Landstar System
U.S. Xpress Enterprises
Prime
C.R. England
CRST International
Crete Carrier
Knight Transportation
Cardinal/Greatwide Logistics
Ruan Transportation Management Services
Ryder Systems
Covenant Transport
Con-way Truckload
Stevens Transport
Celadon Group
Anderson Trucking Service
Central Refrigerated Service
Source: The Journal of Commerce.
26 Logistics Industry Insights
$2,320
$1,622
$1,606
$1,480
$1,478
$1,203
$1,070
$1,008
$822
$780
$712
$709
$634
$630
$621
$601
$567
$534
Company
2013
Revenue
Rank
Con-Way Freight
UPS Freight
Old Dominion Freight Line
ESTES Express Lines
ABF Freight Systems
R+L Carriers
SAIA Motor Freight Line
Holland
Southeastern Freight Lines
TransForce
Averitt Express
Roadrunner Transportation
AAA Cooper Transportation
Central Transport International
Manitoulin Transport
Day & Ross Group
Dayton Freight Lines
Reddaway
$3,466
$2,502
$2,126
$1,835
$1,721
$1,298
$1,139
$1,010
$914
$619
$606
$559
$500
$488
$435
$390
$386
$367
Transportation Statistics
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sept-14
Oct-14
Nov-14
Dec-14
Jan-15
Truck
Volume (ATA Truck Tonnage)
127.27
127.84
127.18
127.36
129.84
128.84
130.16
131.36
131.09
133.11
134.02
134.13
135.82
Seq. growth
(0.6%)
0.4%
(0.5%)
0.1%
1.9%
(0.8%)
1.0%
0.9%
(0.2%)
1.5%
0.7%
0.1%
1.3%
YOY growth
1.9%
2.6%
3.9%
5.2%
3.8%
4.5%
3.8%
YOY growth
Price (Rev/mile ex-fuel)
Seq. growth
Intermodal
Volume (Originated vol.)
YOY growth
Seq. growth
Price (Cass Intermodal Linehaul Index)
YOY growth
Seq. growth
Air
Volume (Intl. FTKs) YOY growth
Price (Drewry Air Freight Price Index)
YOY growth
Seq. growth
Ocean
Volume (Asia-NA TEUs)
YOY growth
Seq. growth
Price (Ocean Container Rate Index)
YOY growth
Seq. growth
Source: Bloomberg.
2.6%
1.58
(1.9%)
6.8%
1.59
0.6%
3.3%
1.61
1.3%
3.6%
1.61
3.9%
0.0%
2.6%
1.63
1.2%
2.8%
1.62
(0.6%)
3.5%
1.64
5.1%
1.2%
3.4%
1.64
0.0%
3.4%
1.64
0.0%
5.7%
1.65
4.4%
0.6%
2.5%
1.67
5.0%
1.2%
4.8%
1.69
5.0%
1.2%
6.7%
1.66
5.1%
(1.8%)
1,169,331 1,231,240 1,600,443 1,323,578 1,670,267 1,357,410 1,298,337 1,711,393 1,361,315 1,386,178 1,653,314 1,263,097 1,522,524
1.2%
0.1%
133.20
132.10
135.40
2.1%
(0.8%)
2.5%
(1.8%)
1.8%
5.2%
98.91
(1.4%)
(10.4%)
1,326,200
(4.2%)
5.3%
1.4%
2.8%
33.8%
(12.7%)
136.80
133.10
126.60
130.40
130.60
1.0%
(2.7%)
(4.9%)
3.0%
0.2%
1.8%
1.4%
6.7%
3.1%
26.2%
2.5%
5.1%
(18.7%)
3.9%
2.9%
6.3%
(4.4%)
3.5%
6.4%
5.7%
31.8%
3.5%
4.8%
4.9%
4.4%
128.00
134.30
128.50
(2.0%)
4.9%
(4.3%)
(20.5%)
2.6%
5.1%
1.8%
3.9%
5.6%
3.4%
6.1%
30.2%
132.30
132.80
3.0%
0.4%
19.3%
(23.6%)
3.0%
1.5%
4.6%
5.1%
20.5%
(0.3%)
3.9%
102.78
103.78
99.30
101.59
102.49
102.98
103.58
115.51
120.78
107.95
99.60
(2.7%)
6.8%
1.0%
(4.3%)
2.3%
0.9%
0.5%
0.6%
11.5%
4.6%
(10.6%)
(7.7%)
(5.8%)
6.0%
5.0%
2.4%
7.7%
8.8%
6.5%
3.7%
0.6%
2.9%
(2.2%)
0.7%
861,100 1,231,100 1,344,300 1,352,700 1,310,000 1,392,100 1,418,900 1,433,500 1,374,100 1,230,000 1,290,800 1,343,100
(6.2%)
2.2%
2.1%
0.3%
1986.00
1886.00
1850.00
(4.8%)
(5.0%)
(1.9%)
(35.1%)
(14.4%)
(18.5%)
10.6%
8.8%
(17.3%)
96.22
8.7%
2086.00
8.0%
30.0%
43.0%
(13.4%)
9.2%
(12.8%)
1.5%
5.4%
7.6%
9.0%
1800.00
1650.00
1800.00
2075.00
1875.00
1975.00
(2.7%)
(8.3%)
9.1%
15.3%
(9.6%)
5.3%
0.6%
(16.3%)
(3.2%)
(10.1%)
6.3%
(15.7%)
1.9%
13.0%
1.0%
(0.6%)
5.4%
(4.1%)
13.8%
3.3%
5.8%
1.3%
1925.00
1978.00
1953.00
(2.5%)
2.8%
(1.3%)
(10.5%)
2.1%
4.9%
4.9%
4.1%
(6.4%)
Logistics Industry Insights 27
Specialty
Distribution
Sector
Overview
Specialty Distribution Sector Overview
Consistent with U.S. GDP growth and production indices, the total wholesale distribution market in the U.S. has shown
consistent, modest growth over the past five years, growing at a CAGR of 4.9% and reaching a market size of $5.4
trillion in 2014. Supported by continued market trends of outsourcing non-core functions, supply chain integration and
coordination, and streamlining inventory and working capital dynamics, growth across all sectors remains strong, led
by the building products and construction segment, which has grown revenue in excess of 10% in each of the last two
years. This segment has been supported by the ongoing recovery in residential construction, as well as the more
nascent beginnings of a recovery in the non-residential channel.
One common success factor among all of the various distribution end markets is the ability to differentiate. Whether
that comes in the form of proprietary products, exclusive supplier relationships, or a strong technical support staff,
understanding and being able to articulate this “secret sauce” is critical to driving value, both in terms of business
performance and in achieving successful sale outcomes. Similarly, the addition of value-added services to enhance the
core product distribution value proposition for customers drives additional value and increases customer loyalty and
stickiness. Strong customer service and technical support capabilities also help mitigate the competitive threat from
purely online retailers and e-commerce entrants to the market. However they do not eliminate the need to maintain a
sophisticated multi-channel platform (including online) to accommodate growing customer demand for online-order
channel capabilities – even in segments where the majority of orders are still processed via phone or fax.
In a related trend, accessibility of information and data, along with robust analytics capabilities, are also increasingly
becoming a requirement to staying competitive. Customers expect their sales and customer service representatives to
know (or quickly be able to access) everything possible about their orders and products: dimensions, modifications,
cost, availability, etc.), which requires robust platform and data analysis capabilities. However, from an
operations/fulfillment perspective, too much data and information without the ability to properly synthesize into useful
analysis can be counterproductive and inefficient. A sophisticated technology platform and data capabilities are only
useful to the extent that they can drive improvements to customer interactions or create an ability to better manage
operational processes.
Specialty distributors are actively working to expand product portfolios and redefine traditional markets through
acquisition, which also helps supplement limited organic growth opportunities in some sectors. Against a backdrop of a
relatively stable and growing market environment, distributors are more willing to aggressively expand outside of their
core comfort zone and into adjacent new markets or product categories to increase customer penetration or cross-sell
services into different end markets. An example of these dynamics can be found in Fastenal’s acquisition of Av-Tech
Industries, which provided new product categories with which to cross-sell into its core customer base.
M&A activity in distribution remained strong in 2014, generating 428 closed transactions, representing $106.4 billion
in aggregate transaction value. This represented an increase of 4.9% in transaction volume over 2013 metrics.
Consumer and industrial distribution were the two largest segments, comprising 62% by total number of deals and
70% by transaction value.
The outlook for 2015 remains strong in the distribution industry, which is expected to grow at ~5% in 2015 in
aggregate, bolstered by continued broad-based strength in U.S. industrial activity and improvements in nonresidential
construction. In addition, 27% of publicly traded companies in the distribution industry are estimated to grow +10% in
2015, while 54% are estimated to grow 5% to 10%.
28 Specialty Distribution Sector Overview
U.S. Distribution Market 1996-2014
($ in billions)
$6,000
$5,000
$4,000
$3,000
$2,000
$2,427
$2,284 $2,378
$2,599
$2,815 $2,785 $2,836
$2,976
$3,325
$3,629
$3,927
$4,202
$4,460
$3,726
$4,181
$4,702
$4,918
$5,135
$5,366
$1,000
$0
1996
1997
Source: US Census Bureau.
1998
1999
2000
2001
2002
2003
2004
2015 Revenue Outlook
11%
7%
2006
2007
2008
2009
2010
2011
2012
2013 2014E
Plans for Building Revenue in 2015
Adding New Products or Product
Categories
1%
27%
Up More than 10%
Up 5%-10%
Up Less than 5%
Flat
54%
2005
Down Less than 5%
Source: NetSuite / Modern Distribution Management survey results. According to
the survey, respondents expect growth in 2015, specifically with 27% expecting
sales growth of more than 10% in 2015, while 54% are expecting growth 5%-10%
growth. Additionally, another 11% forecast growth of less than 5% in 2015.
53.1%
Growing Revenue from Existing
Customers
49.7%
Expanding Sales Team
40.0%
Improving E-Commerce
Capabilities
37.9%
Adding New Sales Channels
Adding New Geographies /
Territories
Improving Product Availability
Adding New Locations
(Greenfield or Acquisition)
Expanding Internationally
29.7%
21.4%
14.5%
13.8%
6.2%
Source: NetSuite / Modern Distribution Management survey. Responses above
were provided to the question “How are you planning to build revenue over the
next 12 months?” Respondents were allowed to choose up to two responses.
Specialty Distribution Sector Overview 29
M&A Deal Volume – Distribution
800
600
400
567
571
582
616
2005
2006
2007
2008
425
200
0
2004
Median: 465
381
2009
387
465
480
408
2010
2011
2012
2013
428
2014
M&A Deal Value (Aggregate Transaction Size) – Distribution
($ in billions)
$300.0
$200.0
$100.0
$0.0
$154.1
$48.3
2004
$202.3
2005
2006
$269.1
2007
Median: $122.6
$216.6
2008
$97.1
2009
$120.1
$92.5
2010
2011
$133.8
$122.6
$106.4
2012
2013
2014
M&A Multiples – Distribution
($ in billions)
15.0x
10.0x
Median: 10.4x
12.3x
9.3x
10.9x
8.7x
10.7x
2007
2008
5.0x
0.0x
2005
2004
2006
M&A Deal Volume by Distribution Sector
LTM, EV >$50 million
3.8%
8.7%
24.6%
15.8%
43.9%
Source: Dealogic as of March January 2015.
3.2%
Construction
Consumer
Industrial
Technology
Transportation & Heavy
Equipment
Healthcare
30 Specialty Distribution Sector Overview
7.5x
5.7x
2009
2010
9.0x
10.4x
10.6x
2011
2012
2013
11.7x
2014
M&A Deal Value by Distribution Sector
LTM, EV >$50 million (Aggregate Transaction Size)
6.3%
7.4%
5.7%
13.1%
33.1%
34.3%
Source: Dealogic as of March January 2015.
Construction
Consumer
Industrial
Technology
Transportation & Heavy
Equipment
Healthcare
Selected M&A Activity – Specialty Distribution
Select Specialty Distribution Transactions
($ in millions)
Target
Revenue
EBITDA
04/13/15
ProBuild
Distributor of building materials to
Builders FirstSource
professional builders and contractors
$ 1,930
0.40x
NA
01/14/15
Anixter (OEM Supply Fastener segment)
Distributor fasteners and supplies
$380.0
0.40x
8.2x
NA
NA
03/19/15
01/13/15
12/30/14
12/18/14
10/24/14
08/25/14
08/08/14
07/01/14
05/29/14
05/19/14
05/01/14
04/01/14
02/11/14
01/31/14
01/02/14
12/09/13
07/31/13
06/27/13
10/15/12
07/03/12
01/30/12
12/30/11
08/31/11
OverDrive
MWI Veterinary Supply
Excelligence Learning Corporation
Bumble Bee Foods LLC
Flinn Scientific
Berlin Packaging
Tri-Ed Distribution
Knox Oil Field Supply
Interline Brands
The Hillman Companies
Reliance Industrial Investments
Archway Sales and Jacaab
Coleman Cable, Inc.
Hercules Tire & Rubber Company
B27, LLC
Molex Inc
Indura S.A. Industria y Comercio
CH Energy Group Inc.
Brightpoint Inc.
Interfast Inc.
UFC Aerospace Corp.
Barnes Group (North America)
FABORY Group
Target (Unit Sold) / Business
Description
Buyer
Enterprise
Value
Enterprise Value/LTM
Date
Announced
Distributor of eBooks, audio-books,
music, and video content
Rakuten
Distributor of veterinary products
AmerisourceBergen
$2,560.8
Distributor of canned seafood
Thai Union Frozen Products pcl
Distributes plastic, glass, and metal
containers
Oak Hill Capital Partners
American Industrial Partners
Specialty distributor and marketer of Brentwood Associates
educational products
Provider of products and services to
educational science market
Distribution and integration of
security and access controls
Fluid handling and distribution
Distributor of janitorial, repair, and
operations products
Windjammer Capital Investors
Anixter
Applied Industrial Technologies
Goldman Sachs
Provides hardware-related products CCMP Capital Advisors
Fluid handling and distribution
Supplies electrical wire and cable
products for consumer
Southwire Company, Inc.
Distributes specialty chemical
products
Nexeo Solutions
Distributing and selling after-market America Tire Distributors Holdings
replacement tires
Distributes pumps and integrated
flow control solutions
DXP Enterprises, Inc.
Industrial gas production and
distribution
Air Products & Chemicals Inc.
Distributes electrical and electronic
devices
Electric natural gas utility and fuel
distribution
Device lifecycle services to the
wireless and high-tech industries
Distributor of fasteners to the
commercial and military
Distributes fasteners, tools, and
industrial supplies
$1,510.0
1.53x
10.5x
$1,430.0
NA
NA
NA
W.W. Grainger
NA
0.74x
11.7x
$1,134.0
0.80x
9.9x
$133.0
$1,475.0
1.33x
NA
2.10x
12.8x
$129.0
0.60x
9.9x
$321.5
0.64x
10.7x
1.87x
18.4x
$189.0
$781.4
$326.4
$1,485.1
MSC Industrial Supply Co.
NA
NA
$420.0
Fortis Inc.
Wesco Aircraft Europe, Ltd.
NA
19.3x
$6,759.0
Ingram Micro Inc.
NA
0.86x
Koch Industries Inc
Aerospace logistics integrated supply BE Aerospace Inc.
chain solutions
Distributor of fasteners and other
low cost consumables
$410.0
$1,273.3
$826.9
$130.6
$400.0
NA
0.85x
1.88x
2.39x
1.51x
0.15x
1.80x
NA
8.2x
8.6x
12.0x
11.6x
10.6x
6.8x
7.3x
9.5x
$550.0
2.00x
16.0x
Mean
1.26x
11.3x
Median
1.24x
10.6x
$344.0
1.15x
11.0x
Sources: Capital IQ, MergerMarket, and William Blair data.
Selected M&A Activity – Specialty Distribution 31
Recent Notable Specialty Distribution Transactions
Date: 4/13/2015
With $4.5 billion in revenue, ProBuild is one of the largest distributors of building
materials to professional builders, contractors and project-oriented consumers in the
U.S. Headquartered in Denver, the company operates approximately 400 lumber and
building product distribution, manufacturing and assembly centers serving 40 states.
Target:
Denver, CO
Dallas, TX
Key Metrics:
EV/LTM Revenue:
EV/LTM EBITDA:
Date: : 2/12/15
Opportunity to realize $100-$120 million in annual run-rate cost synergies during
the first two years
•
$ 1,930
0.40x
NA
Target:
Acquirer:
The combination creates a diversified national pro dealer with 2014 combined
revenue of ~$6.1 billion, with enhanced diversification of products and services
•
Acquirer:
New York, NY
Improved geographic footprint and scale to capitalize on continued recovery in the
housing market
•
Anixter Inc. distributes communication products, electrical/electronic wire and cable,
fasteners and other inventory parts to original equipment manufacturers. The
Fasteners division is a global distributor and manufacturer of highly-engineered
fasteners for customers in the heavy truck, power train, luxury automotive, agriculture,
construction, recreational vehicles and other verticals.
The divestiture allows Anixter to have a sharper strategic focus on its Enterprise
Cabling & Security Solutions and Wire & Cable segments, additional financial
flexibility to build on these global platforms through organic investments or
strategic acquisitions.
•
(OEM Supply-Fasteners business,
“Fasteners”)
Glenview, IL
Key Metrics:
EV/LTM Revenue:
EV/LTM EBITDA:
Date: 1/12/15
$380
0.40x
9.7x
Target:
Chesterbrook, PA
Key Metrics:
Implied Enterprise Value ($M)
EV/LTM Revenue:
EV/LTM EBITDA:
MWI Veterinary Supply distributes animal health products (specifically,
pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, supplies,
specialty products, veterinary pet food, capital equipment, and nutritional products)
to veterinarians in the United States and the United Kingdom.
•
Acquirer:
Boise, ID
The affiliation with American Industrial Partners allows Fasteners access to
operational expertise and additional financial resources for growth.
•
•
$2,523
0.82x
18.5x
•
Significantly extends Amerisource’s pharmaceutical distribution and services
business into the growing companion and production markets.
Amerisource provides MWI with significant knowledge of manufacturer and
provider services, as well as an expanded global reach.
With the scale and volume from Amerisource, synergies are expected to come
from stronger procurement sourcing and lower expenses, primarily through
shipping, freight, and insurance acitivites.
32 Recent Notable Specialty Distribution Transactions
Date: 12/30/14
Target:
Monterey, CA
Acquirer:
P
R
I
V
A
T
E
E
Q
U
I
T
Y
I
Los Angeles, CA
Key Metrics:
EV/LTM Revenue:
EV/LTM EBITDA:
N
V
E
S
T
M
E
N
T
S
Excelligence Learning Corporation is a multi-channel specialty distributor and direct
marketer of educational products to the early childhood and elementary markets. The
company has 20,000+ proprietary and consumable product offerings across 25+
product categories. Excelligence serves 200,000+ customers, including public and
private preschools and elementary schools.
•
•
ND
ND
ND
Date: 11/06/14
•
United Kingdom
Acquirer:
•
Key Metrics:
EV/LTM Revenue:
EV/LTM EBITDA:
$341
N/A
N/A
Date: 10/24/14
Batavia, IL
Acquirer:
Key Metrics:
EV/LTM Revenue:
EV/LTM EBITDA:
International sourcing capabilities drive supply chain efficiencies and strong profit
margins.
•
•
The investment will enable CDW to serve new and existing multi-national
customers, and provide a more comprehensive solution offering with improved
international capabilities through Kelway’s global supply chain relationships.
Kelway provides CDW with an opportunity expand their geographic footprint and
enhance their diverse customer base; customers should benefit from reliable
procurement and deployment services from the combined entity.
Both companies have similar customer objectives and aligned cultures, which
strengthens the brand recognition for each company.
Flinn Scientific is an industry-leading provider of unique value-added products,
services and resources to the K-12 educational science market. The company’s value
proposition is driven by a number of proprietary products, value-added teacher
resources, and dedication to quality and safety. Representative products include
packaged chemicals and solutions, safety products, glassware, laboratory equipment
and supplies, and ready-to-use laboratory activity kits
Target:
Newport Beach, CA
Long-term focus on building a strong portfolio of proprietary brands and
consumable products drives high degree of recurring revenue and predictability in
a fragmented, hard to access customer base.
Kelway provides international IT services and solutions to private and public sectors,
through their global supply chain in over 130 countries with focus on the midmarket.
The Company offers managerial services, including service management, field
engineering, and service desk, as well as professional services, including consulting,
project and program management, engineering, training, and onsite deployment.
Kelway also provides supply chain software solutions and cloud-based services.
Target:
Vernon Hills, IL
Brentwood was excited about the company’s deep management team as well as
the long-term growth prospects of the early childhood industry.
•
ND
ND
ND
•
•
Windjammer was attracted to the company’s market position, defensible barriers
to entry, tangible growth opportunities, and strong management team.
Very difficult to access customer base of teachers and school administrators; Flinn
has a uqniue capability to help address this
Exceptional brand reputation among educators and a focus on value-added
services (safety, reference manuals, online resources and content, etc.) drove
strong interest in the business and ultimately a premium valuation
Sources: Capital IQ, MergerMarket, Press Releases, and Publicly Available Information
Recent Notable Specialty Distribution Transactions 33
Public Comparables – Annual EBITDA Multiples
Industrial Distribution
EV/LTM EBITDA
Key Statistics
Median: 10.3x
9.6x
2005
13.5x
2006
10.5x
2007
8.5x
2008
7.2x
2009
10.4x
9.6x
10.1x
10.5x
2010
2011
2012
2013
11.4x
Median:
High:
Low:
10.3x
13.5x
7.2x
2014
Transportation & Heavy Equipment
EV/LTM EBITDA
Key Statistics
Median: 11.4x
11.6x
2005
12.8x
2006
11.3x
2007
8.3x
2008
6.8x
2009
10.5x
11.7x
2010
2011
10.8x
2012
11.9x
2013
13.5x
Median:
High:
Low:
11.4x
13.5x
6.8x
2014
Building Products & Construction Distribution
EV/LTM EBITDA
Key Statistics
Median: 11.4x
11.9x
2005
12.3x
2006
9.0x
8.6x
2007
2008
12.9x
7.3x
2009
34 Public Comparables – Annual EBITDA Multiples
2010
10.9x
2011
9.5x
2012
12.8x
12.6x
2013
2014
Median:
High:
Low:
11.4x
12.9x
7.3x
Technology Distribution
EV/LTM EBITDA
Key Statistics
Median: 7.2x
9.3x
9.5x
2005
2006
Median:
High:
Low:
8.9x
2007
6.1x
6.3x
7.3x
5.9x
6.0x
7.1x
2008
2009
2010
2011
2012
2013
7.8x
7.2x
9.5x
5.9x
2014
Energy / Oil & Gas Distribution
EV/LTM EBITDA
Key Statistics
Median: 13.2x
13.7x
2005
12.1x
12.7x
2006
2007
10.9x
2008
9.8x
2009
12.8x
2010
13.8x
2011
15.1x
15.8x
16.3x
2012
2013
2014
Median:
High:
Low:
13.2x
16.3x
9.8x
Specialty Chemicals Distribution
EV/LTM EBITDA
Key Statistics
Median: 9.3x
9.0x
9.4x
2005
2006
10.3x
2007
8.6x
2008
7.6x
2009
9.7x
2010
8.8x
9.2x
2011
2012
10.3x
10.6x
2013
2014
Median:
High:
Low:
9.3x
10.6x
7.6x
Source: CapIQ.
Public Comparables – Annual EBITDA Multiples 35
Public Comparables by Sector
Industrial Distribution
Company
Exchange
Ticker
Current
Stock
Price
52-Week
Low
Applied Industrial
Technologies, Inc.
NYSE:AIT
$43.47
$39.76
Fastenal Company
NasdaqGS:FAST
$40.83
$39.46
DXP Enterprises, Inc.
HD Supply Holdings,
Inc.
Kaman Corporation
Lawson Products Inc.
MRC Global Inc.
MSC Industrial Direct
Co. Inc.
NasdaqGS:DXPE
NasdaqGS:HDS
NYSE:KAMN
NasdaqGS:LAWS
NYSE:MRC
NYSE:MSM
Vallourec SA
ENXTPA:VK
W.W. Grainger, Inc.
NYSE:GWW
Median
$29.87
$41.62
$24.54
$12.07
$71.04
National Oilwell Varco, NYSE:NOV
Inc.
Veritiv Corporation
$44.56
NYSE:VRTV
$49.07
$22.93
$47.83
$230.72
LTM
High
$190
8.0%
7.1%
9.8x
11.1x
8.4x
14.0x
15.8%
$52.21
$12,065
$12,040
$3,734
$859
$670
23.0%
17.9%
14.0x
18.0x
12.6x
21.9x
41.1%
$44.60
$1,130
$1,398
$119
8.2%
6.6%
9.5x
11.8x
$31.94
$223.92
$645
$5,848
$214
$1,084
$11,249
$220
$1,500
$136
$9,025
$136
$811
$1,795
$684
$147
$286
$4
$1
$29.67
$1,232
$2,661
$5,933
$400
$380
$86.55
$20,116
$19,826
$21,440
$4,495
$3,796
$54.50
$765
$1,745
$7,407
$86
$69
$96.62
$18.93
ROIC
$214
$28.30
$48.07
15F
P/E
$2,667
$30.88
$70.80
15F EV/
EBITDA
$2,104
$22.18
$10.20
EBITDA OCF
EV/
EV/
$1,787
$115.18
$13.11
Enterprise
$52.62
$38.94
$37.43
Equity
Value
$45.53
$269.69
$4,395
$2,967
$15,560
$2,377
$4,844
$5,044
$15,895
$3,753
$2,840
$466
$6,901
$9,965
-$301
$4,833
$1,594
$307
9.1%
9.1%
9.0%
7.6%
1.3%
6.7%
NMF
10.4x
6.4%
16.4%
13.9%
($804)
(4.4%)
(11.6%)
$1,207
16.0%
12.1%
$285
17.7%
1.2%
8.6%
13.9x
0.4%
$395
21.0%
8.0x
6.7x
4.4x
NA
8.0x
16.4x
8.6x
11.3x
8.6x
NMF
15.0x
12.3x
9.8x
7.0x
5.2x
NA
10.4x
6.2x
8.5x
0.9%
20.2x
25.2x
10.9x
7.4%
9.9x
12.0x
9.6x
10.0x
13.2x
9.5x
13.7x
31.0%
14.5x
10.3%
16.1x
14.0%
97.6x
(1.8%)
16.8x
27.5%
17.9x
10.9%
13.3x
15.6%
28.3x
(11.1%)
17.8x
38.5%
14.5x
3.8%
16.5x
14.8%
(Indexed Price)
130%
110%
Industrial Distribution (-18.6%)
90%
70%
50%
Source: Factset.
S&P 500 (12.6%)
(Indexed Price)
170%
Industrial Distribution (-19.0%)
S&P 500 (50.0%)
120%
70%
Source: Factset.
Industrial Distribution – EV/LTM EBITDA
20.0x
15.0x
10.0x
5.0x
0.0x
Source: Capital IQ.
Median: 9.9x
9.7x
Transportation & Heavy Equipment Distribution
Current
Stock
Price
52-Week
Company
Exchange
Ticker
AAR Corp.
NYSE:AIR
$32.99
$22.37
Finning International
Inc.
TSX:FTT
$18.87
$16.05
B/E Aerospace Inc.
Genuine Parts
Company
HEICO Corporation
LKQ Corp.
Titan Machinery, Inc.
Triumph Group, Inc.
Wesco Aircraft
Holdings, Inc.
Median
NasdaqGS:BEAV
NYSE:GPC
$94.47
NYSE:HEI
NasdaqGS:LKQ
NasdaqGS:TITN
NYSE:TGI
NYSE:WAIR
$61.23
$59.76
$24.42
$12.77
$58.17
$15.35
Low
LTM
High
Equity
Value
Enterprise
EBITDA OCF
EV/
EV/
$33.05
$1,313
$1,823
$1,939
$204
$174.3
10.5%
9.0%
$26.85
$3,253
$4,030
$5,974
$620
$549.9
10.4%
9.2%
$53.30
$101.13
$82.15
$109.00
$14,425
$15,104
$15,342
$1,273
$1,164.9
$22.90
$29.84
$7,426
$9,181
$6,740
$790
$649.2
$46.03
$10.69
$51.18
$11.98
$64.38
$20.40
$72.31
$22.98
$6,488
$3,490
$267
$2,935
$1,485
$3,253
$8,385
$3,968
$2,599
$1,192
$4,343
$2,477
$4,030
$465
$1,134
$268
$2,118
$84
$3,745
$1,505
$428
$2,599
$210
$428
$209.2
17.9%
8.3%
9.6%
$68.7
4.0%
3.2%
$199.6
$251.4
13.9%
11.4%
7.3x
7.6%
22.2%
11.4%
6.5x
18.0x
23.6%
$297.8
10.5x
8.0%
$251.4
11.7%
9.0x
8.0%
13.3%
9.0%
15F EV/
EBITDA
8.0x
20.5x
7.4x
13.5x
NMF
13.7x
11.9x
13.0x
10.9x
11.6x
14.1x
10.1x
14.8x
14.2x
10.2x
11.8x
11.8x
15.8x
17.4x
14.6x
12.4x
13.6x
15F
P/E
13.8x
23.5x
6.7x
10.0x
10.1x
ROIC
8.0%
19.9x
17.6%
19.4x
29.5%
14.5%
29.5x
18.4%
16.7x
14.7%
NMF
8.9%
9.6x
8.6%
11.4x
8.9%
18.0x
14.5%
(Indexed Price)
120%
Transportation & Heavy (-2.2%)
S&P 500 (12.6%)
100%
80%
Source: Factset.
(Indexed Price)
170%
Transportation & Heavy (32.5%)
S&P 500 (50.0%)
120%
70%
Source: Factset.
Transportation & Heavy Equipment – EV/LTM EBITDA
Median: 11.2x
20.0x
15.0x
10.0x
5.0x
0.0x
12.0x
Source: Capital IQ.
Building Products & Construction Distribution
Company
Exchange
Ticker
52-Week
Current
Stock
Price
Low
LTM
High
Equity
Value
Enterprise
EBITDA OCF
EV/
EV/
Beacon Roofing Supply NasdaqGS:BECN
$28.34
$23.04
$40.10
$1,403
$1,628
$2,371
$126
$91.1
5.3%
3.8%
12.9x
17.9x
Houston Wire & Cable NasdaqGS:HWCC
Company
$9.37
$9.29
$14.00
$163
$220
$390
$28
$26.2
7.3%
6.7%
7.8x
8.4x
$84.28
$121.66
$43.74
$60.81
Builders FirstSource.
NasdaqGS:BLDR
Pool Corp.
NasdaqGS:POOL
WESCO International
NYSE:WCC
Watsco
Wolseley plc
Median
NYSE:WSO
LSE:WOS
$6.00
$4.85
$69.33
$51.61
$68.19
$65.38
$120.39
$60.48
$9.40
$589
$955
$1,604
$61
$34.9
$70.69
$3,024
$3,333
$2,247
$204
$186.9
$93.07
$3,039
$4,362
$7,890
$524
$503.2
$3,897
$15,549
$3,024
$4,424
$16,644
$3,333
$3,945
$22,170
$324
$2,371
$1,430
$204
$302.2
$1,122.8
$186.9
3.8%
9.1%
8.2%
6.6%
6.5%
6.6%
2.2%
15.8x
6.4%
8.3x
8.7x
5.1%
6.4%
11.6x
12.9x
10.7x
15.6x
14.5x
17.8x
13.7x
19.9x
10.7x
16.3x
14.6x
14.8x
14.8x
15F
P/E
9.8x
27.4x
8.3%
7.7%
15F EV/
EBITDA
12.6x
8.0x
11.0x
10.7x
ROIC
9.2%
17.4x
13.0%
24.6x
33.3%
15.4%
23.8x
21.3%
12.8x
14.2%
17.0x
18.8%
17.4x
15.4%
(Indexed Price)
120%
Construction (5.8%)
S&P 500 (12.6%)
100%
80%
Source: Factset.
(Indexed Price)
170%
Construction (44.4%)
S&P 500 (50.0%)
120%
70%
Source: Factset.
Construction – EV/LTM EBITDA
20.0x
15.0x
10.0x
5.0x
0.0x
Source: Capital IQ.
Median: 10.6x
14.1x
Technology Distribution
Current
Stock
Price
52-Week
LTM
Company
Exchange
Ticker
Anixter International
NYSE:AXE
$76.82
$73.34
$105.84
$2,525
$3,640
Avnet
NYSE:AVT
$44.39
$35.53
$48.18
$6,054
$7,252
Arrow Electronics
NYSE:ARW
$59.68
Black Box Corporation NasdaqGS:BBOX
Ingram Micro
NYSE:IM
Premier Farnell plc
LSE:PFL
Insight Enterprises
ScanSource
Tech Data Corp.
Universal Power
Group
Median
NasdaqGS:NSIT
NasdaqGS:SCSC
NasdaqGS:TECD
OTCPK:UPGI
$21.60
$23.28
$27.25
$2.80
Low
$45.47
High
$19.34
$22.22
$21.59
$2.17
$63.78
$26.60
$332
$6,446
5.6%
9.1x
10.1x
8.7x
13.0x
15.8%
$1,050
$890.4
3.7%
3.2%
6.9x
8.1x
6.4x
NA
14.2%
$22,769
$1,036
$476
$986
$56
$913.6
$47.8
4.6%
$674.8
$3.57
$1,028
$1,397
$1,597
$164
$152.5
10.3%
$301.0
1.1%
$42.99
$2.00
$1.41
$2.48
$71.31
$1,078
$962
$2,089
$2,023
$1,586
$1,710
$10
$16
$5,316
$180
$3,040
$119
$28,304
$87
$318
$5,881
$2
$249
$170.3
$93.9
$1.4
$235.7
4.0%
5.7%
$763
$1,105
ROIC
6.2%
$46,487
$1,083
15F
P/E
$361.3
$4,357
$31.94
15F EV/
EBITDA
$402
$7,402
$28,124
EBITDA OCF
EV/
EV/
$3,637
$31.32
$52.22
$5,708
Enterprise
$30.96
$37.63
$54.60
Equity
Value
4.9%
1.6%
1.5%
3.4%
3.2%
9.5%
3.9%
1.7%
3.1%
1.1%
3.8%
1.6%
3.2%
7.1x
8.5x
5.7x
6.1x
8.5x
8.1x
9.9x
6.5x
6.5x
9.2x
8.1x
10.2x
10.7x
11.4x
6.4x
7.6x
6.7x
8.7x
6.9x
9.5x
7.5x
11.0x
5.8x
12.5x
7.4x
13.7x
4.9x
8.7x
5.4x
NA
6.9x
14.1%
7.4%
8.2x
11.7%
12.9x
24.8%
17.9%
13.4%
10.4x
7.9%
NA
1.8%
11.8x
13.8%
(Indexed Price)
120%
Tecnology Distribution (-3.0%)
100%
80%
Source: Factset.
S&P 500 (12.6%)
(Indexed Price)
170%
Tecnology Distribution (24.0%)
S&P 500 (50.0%)
120%
70%
Source: Factset.
Technology – EV/LTM EBITDA
12.0x
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
Median: 7.1x
7.5x
Source: Capital IQ.
Energy / Oil & Gas Distribution
Company
52-Week
Current
Stock
Price
Low
Exchange
Ticker
LTM
High
DCP Midstream
Partners LP
NYSE:DPM
$36.20
$35.10
$57.98
Energy Transfer
Partners, L.P.
NYSE:ETP
$54.41
$53.01
$69.66
Enbridge Inc.
Global Partners LP
Martin Midstream
Partners LP
Suburban Propane
Partners, L.P.
Median
TSX:ENB
NYSE:GLP
$46.22
NasdaqGS:MMLP
NYSE:SPH
$35.07
$32.29
$44.00
$36.82
$30.45
$24.03
$39.91
Equity
Value
$4,125
Enterprise
$6,462
$3,488
$567
EBITDA OCF
EV/
EV/
$229.0
16.3%
($553.0)
7.0%
$50.93
$39,367
$75,729
$32,503
$4,125
($4,962.6)
$45.75
$1,073
$1,727
$17,270
$254
$158.7
$43.89
$48.61
$19,451
$1,145
$2,660
$3,393
$44,545
$2,061
$3,842
$5,152
$51,158
$3,605
$1,642
$1,835
$141
$10,379
$332
$449
$57.2
$303.3
$107.9
28.2x
10.1x
13.2x
9.0%
(1.1%)
12.4x
NA
9.1x
17.8x
6.8%
1.5%
0.9%
10.7%
ROIC
11.4x
(15.3%)
18.1%
15F
P/E
6.6%
12.7%
8.6%
15F EV/
EBITDA
18.4x
6.8x
10.9x
11.6x
12.7x
3.5%
14.6x
2.2%
12.0x
16.5%
NA
15.7x
7.7x
NMF
10.6x
12.7x
10.3x
11.2x
26.4x
5.8%
15.2x
13.4%
17.3x
8.7%
26.1x
5.2%
17.5x
7.7%
(Indexed Price)
120%
Energy, Oil, & Gas (4.5%)
S&P 500 (12.6%)
100%
80%
Source: Factset.
(Indexed Price)
170%
Energy, Oil, & Gas (19.6%)
S&P 500 (50.0%)
120%
70%
Source: Factset.
Energy / Oil & Gas – EV/LTM EBITDA
Median: 13.0x
25.0x
20.0x
15.0x
10.0x
5.0x
0.0x
Source: Capital IQ.
11.6x
Specialty Chemicals Distribution
Current
Stock
Price
Company
Exchange
Ticker
Aceto Corp.
NasdaqGS:ACET
Air Products &
Chemicals
NYSE:APD
Airgas
AmeriGas Partners LP
Brenntag AG
$21.25
$119.00
NYSE:APU
$47.50
$40.96
$52.72
$152.00
XTRA:BNR
$58.05
$22.98
L'Air Liquide SA
ENXTPA:AI
$126.99
NYSE:PX
$123.80
Median
$23.78
$101.36
NasdaqGS:HWKN
Praxair
$16.52
High
$114.84
Hawkins
Linde
Aktiengesellschaft
Low
LTM
NYSE:ARG
Ferrellgas Partners LP NYSE:FGP
Innophos Holdings
52-Week
NasdaqGS:IPHS
DB:LIN
$38.29
$55.29
$198.62
$114.28
$619
$8,627
$158.20
$32,570
$58.32
$36.25
$21.24
$28.70
$32.98
$50.96
Equity
Value
$45.13
$63.29
Enterprise
$688
$11,030
$519
$49
$5,271
$373
$356
$242
$41
$839
$142
$922.5
$750.3
17.0%
13.6%
22.5%
11.0%
$50,712
$18,866
$4,688
$2,386.0
$117.32
$134.84
$35,752
$10,535
$45,447
$12,273
$3,885
$2,196.0
$8,627
$46,963
$20,634
$4,638
$5,271
$879
6.1%
$114.3
$43,768
$36,878
7.1%
10.8%
$29.1
$127.73
$203.09
25.5%
$182.5
$90.65
$145.57
NMF
9.9%
$408
$1,287
14.6x
13.3%
$879
$1,188
8.8%
$351.9
$12,394
$2,230
14.3x
$473
$10,535
$3,416
14.0x
10.1%
$8,969
$1,901
9.3%
18.4%
$2,662
$3,556
9.5%
$533.7
$10,454
$6,994
$48.0
$970
$38,866
$4,412
EBITDA OCF
EV/
EV/
$2,269.6
$533.7
8.2%
11.5%
8.2%
24.8%
31.7%
17.0%
11.4x
11.4%
13.0x
22.5x
13.6%
14.8x
19.9x
10.7x
14.1x
18.7x
9.1x
9.1x
10.8x
17.9%
11.7x
10.1x
11.7x
14.0x
12.8x
11.3x
12.5x
11.1x
NA
9.0x
21.3x
11.4x
20.7x
11.1x
20.7x
19.3x
ROIC
18.0x
10.4x
12.0x
15F
P/E
NA
20.7x
12.6%
9.9%
15F EV/
EBITDA
10.7x
11.6x
21.3x
16.8%
17.4x
7.9%
21.2x
15.7%
17.8x
15.3%
23.3x
12.4%
17.3x
17.9%
22.5x
14.9%
22.1x
8.2%
19.6x
18.3%
21.2x
14.9%
(Indexed Price)
120%
Specialty Chemicals (6.5%)
100%
80%
Source: Factset.
S&P 500 (12.6%)
(Indexed Price)
170%
S&P 500 (50.0%)
120%
70%
Source: Factset.
Specialty Chemicals – EV/LTM EBITDA
Median: 9.6x
15.0x
10.0x
12.6x
5.0x
0.0x
Source: Capital IQ.
Stock Price Performance – LTM
Construction (5.6%)
S&P 500 (12.6%)
(Indexed Price)
125
Energy / Oil & Gas (4.5%)
Technology (-3.0%)
120
115
Industrial (-18.6%)
Transportation & Heavy Equip (-2.2%)
12.6%
110
6.5%
5.6%
4.5%
105
100
(2.2%)
(3.0%)
95
90
85
(18.6%)
80
75
Source: FactSet.
Stock Price Performance – Last Three Years
Construction (47.5%)
Technology (18.8%)
(Indexed Price)
170
Energy / Oil & Gas (23.6%)
Transportation (34.2%)
160
150
140
130
120
Industrial (-8.0%)
S&P 500 (50.0%)
50.0%
47.5%
34.2%
26.0%
23.6%
18.8%
110
100
90
80
70
Source: FactSet.
(8.0)%
Specialty Distribution Industry Insights
Top Distributors – Industrial & Building Material/Construction
($ in billions)
Industrial
Building Material/Construction
2013
Revenue
2013
Revenue
Rank
Company
1
Wolseley Industrial Group
$12.6
ABC Supply Co
$5.0
3
HD Supply
$8.5
Allied Building Products
$2.3
2
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
W. W. Grainger
MRC Global Corp.
Airgas
Motion Industries
DistributionNOW
The Fastenal Company
MSC Industrial Supply
McMaster-Carr
WinWholesale Inc.
Sonepar Industrial
Edgen Group
Interline Brands
Wurth Group
DXP Enterprises
Kaman Industrial Technologies
F.W. Webb
ERIKS North America
Source: Modern Distribution Management and industry sources.
$9.4
$5.2
$5.1
$4.4
$4.3
$3.3
$2.5
$2.5
$2.1
Company
ProBuild Holdings
Beacon Roofing Supply
BlueLinx Corp.
84 Lumber
Builders FirstSource
HD Supply
L&W Supply
Roofing Supply Group
$4.3
$2.2
$2.2
$2.1
$1.5
$1.3
$1.3
$1.0
$2.2
~$2.0
~$1.8
$1.6
$1.5
$1.2
$1.1
$0.9
$0.8
Specialty Distribution Industry Insights 43
2015 Revenue Outlook by Subsector
Up More than 10%
Up 5%-10%
Up Less than 5%
Flat
Down Less than 5%
Down 5%-10%
Building Materials
29.8%
46.8%
19.2%
4.3%
0.0%
0.0%
Consumer Products
33.3%
61.2%
0.0%
4.8%
0.0%
0.0%
Chemicals & Plastics
23.8%
Electrical / Electronics
71.4%
30.8%
Grocery/ Foodservice*
56.4%
10.3%
54.6%
12.1%
58.3%
12.5%
0.0%
100.0%
0.0%
33.3%
47.1%
55.6%
HVACR / Plumbing
44.4%
33.3%
Industrial
26.0%
Janitorial Supplies
58.3%
25.0%
Oil & Gas Products
29.6%
Pharmaceutical*
Pulp & Paper
63.0%
26.1%
Safety Products
4.8%
73.9%
0.0%
2.3%
0.0%
2.3% 1.8%
2.3%
2.4%
2.5%
2.8%
1.2%
3.8%
11.5%
4.4%
4.9%
5.0%
8.5%
5.0%
7.7%
8.2%
8.3%
2. Grocery &
Foodservice
3. Pharmaceutical
9. Agricultural
Products
10. Misc. Durable
Goods
11. Commercial Equipment 12. Metal Service
& Supplies
Centers
13. Apparel & Piece
Goods
17. Hardware,
Plumbing &
Heating
6. Motor Vehicles
& Parts
14. Beer, Wine &
Liquor
18. Office Products
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
7.8%
0.0%
1.2%
7. Computer Equipment
& Software
15. Chemicals & Plastics
19. Furniture & Home
Furnishings
Source: Modern Distribution Management.
44 Specialty Distribution Industry Insights
14.0%
12.0%
2014 Growth
2013 Industry Average
0.0%
2013 Growth
2014 Industry Average
12.8%
11.9%
10.0%
11.8%
9.0%
8.0%
8.4%
6.4%
6.0%
1. Oil & Gas
Products
5. Electrical &
Electronics
0.0%
Top 5 Sectors by Revenue Growth (2014 Growth)
14.6%
3.0%
0.0%
4.2%
3.8%
9.8%
0.0%
2.1%
0.0%
0.0%
0.0%
0.0%
7.3%
3.8%
0.0%
0.0%
0.0%
6.3%
0.0%
0.0%
0.0%
Source: Modern Distribution Management. * Denotes few than 20 respondents in the sample.
Distribution Industry by Sector – 2013
0.0%
4. Industrial
8. Other Consumer
Products
16. Building Material
& Construction
4.0%
0.0%
Building
Material &
Construction
Motor
Vehicles
& Parts
6.5%
4.5%
2.9%
2.0%
7.7%
Hardware,
Oil &
Industrial
Plumbing Gas Products Distributors
& Heating
Source: Modern Distribution Management.
Key Economic
Data
Key Economic Data
Production Metrics
Industrial Production Index
120
100
80
60
40
20
0
ISM Manufacturing: PMI Composite Index
70
60
50
40
30
20
10
0
Source: Federal Reserve Board/Haver Analytics.
Source: Institute for Supply Management/Haver Analytics.
Manufacturers’ Inventories: All Industries
Merchant Wholesalers: Total Inventories
($ in millions)
($ in millions)
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
Source: Census Bureau/Haver Analytics.
45 Key Economic Data
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
Construction Metrics
Housing Starts
Total Residential Construction
(thousands of units)
($ in millions)
2,500
2,000
1,500
1,000
500
0
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
Total Nonresidential Construction
Architectural Billings Index (ABI)
($ in millions)
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
70
Current: 50.9
60
Expansion
50
40
Contraction
30
Source: American Institute of Architects/Haver Analytics.
Key Economic Data 46
Global Market Data
Top 10 Countries’ Annual GDP Growth
Global Economic Data Points – Top 10 Countries (Ranked by GDP)
($ in millions)
Country
United States
China
Japan
Germany
France
United Kingdom
Brazil
Italy
Russian Federation
India
2013 GDP
GDP
Annual Growth
Imports of Goods
and Services
(% of GDP, 2013)
Exports of Goods
and Services
(% of GDP, 2013)
$16,768,100
2.22%
16.52%
13.49%
$4,919,563
1.61%
18.99%
16.15%
$9,240,270
$3,730,261
$2,806,428
$2,678,455
$2,245,673
7.67%
0.11%
0.29%
1.73%
2.49%
$2,149,485
-1.93%
$1,876,797
5.02%
$2,096,777
1.32%
Source: World DataBank/Haver Analytics, as of December 19, 2014.
23.85%
39.75%
29.77%
31.72%
15.04%
26.28%
22.49%
28.41%
Annual Growth in
Imports of Goods
and Services
1.14%
3.04%
3.09%
1.53%
26.41%
10.77%
45.56%
3.13%
28.28%
29.84%
12.55%
1.71%
0.54%
8.34%
28.56%
-2.71%
24.82%
-2.55%
28.37%
Annual Growth in
Exports of Goods
and Services
3.70%
8.67%
1.58%
2.18%
0.54%
2.53%
0.59%
4.20%
8.44%
Sales / Consumer Metrics
Total Retail Sales
Merchant Wholesalers Sales
($ in millions)
($ in millions)
$400,000
$400,000
$500,000
$300,000
$200,000
$100,000
$0
$500,000
$300,000
$200,000
$100,000
$0
Retail E-Commerce Sales
Total Retail Inventories
($ in millions)
($ in millions)
$100,000
$80,000
$60,000
$40,000
$20,000
$0
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
Commodity Prices
Steel Prices
Copper Prices
($/ton)
($/ton)
$1,000
$800
$600
$400
$200
$0
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
Source: Factset Research Systems.
Oil Prices
Natural Gas
($/bbl)
($/million btu)
$160
$140
$120
$100
$80
$60
$40
$20
$0
$20
$15
$10
$5
$0
Key Economic Data
U.S. GDP Growth Rate
7.5%
5.0%
2.5%
0.0%
-2.5%
-5.0%
-7.5%
U.S. Unemployment Rate
Current: 5.0%
12.0%
Current: 5.6%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Index of Consumer Sentiment
10-Year U.S. Treasuries Yield and CPI
120
100
80
60
40
20
0
Source: University of Michigan.
7.0%
5.0%
Yield
Inflation
3.0%
1.0%
(1.0%)
(3.0%)
Current Yield: 2.5%
Current Inflation: 1.4%
Notes
51 Notes
Disclosures
William Blair is a trade name for William Blair & Company, L.L.C. and William Blair International, Limited. William Blair & Company, L.L.C., is a Delaware company and is regulated by the Securities and
Exchange Commission, The Financial Industry Regulatory Authority, and other principal exchanges. William Blair International Limited is authorised and regulated by the Financial Conduct Authority
("FCA") in the United Kingdom. William Blair & Company® only offers products and services where it is permitted to do so. Some of these products and services are only offered to persons or
institutions situated within the United States and are not offered to persons or institutions outside of the United States.
This material has been approved for distribution in the United Kingdom by William Blair International Limited, Regulated by the Financial Conduct Authority (FCA), and is directed only at, and is only
made available to, persons falling within COB 3.5 and 3.6 of the FCA Handbook (being “Eligible Counterparties” and Professional Clients). This Document is not to be distributed or passed on to any
“Retail Clients.” No persons other than persons to whom this document is directed should rely on it or its contents or use it as the basis to make an investment decision.
William Blair & Company | 222 West Adams Street | Chicago, Illinois 60606 | +1 312 236 1600 | williamblair.com
Disclosures 52
About William Blair
Investment Banking
William Blair’s investment banking group combines significant transaction experience,
rich industry knowledge, and deep relationships to deliver successful advisory and
financing solutions to our global base of corporate clients. We serve both publicly traded
and privately held companies, executing mergers and acquisitions, growth financing,
financial restructuring, and general advisory projects. This comprehensive suite of
services allows us to be a long-term partner to our clients as they grow and evolve.
From 2010-2014, the investment banking group completed more than 330 merger-andacquisition transactions worth $73 billion in value, involving parties in 36 countries and
five continents, was an underwriter on more than 20% of all U.S. initial public offerings,
and raised nearly $100 billion in public and private financing.

Supply Chain Services Sector

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