Mergers & Acquisitions in the Global Valves Industry – March 2009


The end of the first quarter of 2009 is an opportunity to review how the economic landscape is impacting on the valves industry.

Eight of the top ten global economies are now officially in recession and the other two, Canada and France, are likely to shortly follow suit. At the same time, BRIC countries are predicting lower growth in 2009, with India’s growth predicted to be down to 5%. In this environment M&A transactions have to be strategic and immediately earnings enhancing, the fundamental measure of successful acquisitions. Gone are the days of Bolton acquisitions being made simply for volume growth, geographic spread or market share.

Another feature is that private shareholders are finally accepting that the days of high multiples on M&A deals are now over. Those that can are postponing any sale plans or accepting that multiples of five to six times EBITDA are now the norm. On the flip side this represents an ideal buying opportunity as large groups can pick up strategic assets at the price that they always wanted to pay. Without private equity competitors driving up the multiples they can now go about their M&A programme in a more cautious manner. Without the frenzy of an auction process and strict timetables they can conduct all the commercial and financial due diligence that is needed whilst also planning a well thought-out integration process, rather than the forced post-deal process that has been the downfall of so many M&A deals.

Whilst acquisitions will always represent a key element of corporate strategy there was a clear need for a dose of realism in M&A. The lack of available credit for leveraged transactions has brought an immediate halt to excessively debt-laden deals and will bring a return to sensible pricing across all industries. The few private

equity transactions taking place are already seeing a return to more normal levels of debt to equity ratios. In leveraged transactions a ratio of 50:50 debt to equity or less is once again standard, with even sub-$100m deals seeing so-called “club deals” between the debt providers as they seek to minimise their exposure.

Naturally, the more savvy and sophisticated corporate acquirers recognise the buying opportunity that exists and the process industries remain active for M&A deals.

In this vein, Emerson has launched a recommend public offer for Roxar ASA, a Norwegian supplier of measurement technologies and software solutions for the oil and gas and other process industries. The deal is valued at $179m plus the assumption of $212m of Roxar’s debt.The target will be integrated into Emerson’s Process Management division and will expand the group’s range of metering and monitoring equipment. The deals is part of Emerson’s strategy of expanding its suite of services aimed at maintaining theperformance of offshore and process tools. Roxar’s flow measurement and downhole instrumentation solutions improve capacity and performance throughout the product life cycle. Emerson Process Management will naturally maximize the cross-selling opportunities from Roxar’s customer relationships given its increasing focus on installation, commissioning, maintenance, data analysis and reporting services. With automation, field instrumentation and wireless control becoming increasingly important parts of plant management programmes, there remains a steady stream of deals in these areas.

Rockwell Automation has acquired Rutter Hinz Inc from Rutter Inc. Rutter Hinz is a Canadian supplier of integrated project control systems for the food and beverages, forestry, manufacturing, minerals processing, mining, oil and gas, pipeline and utilities industries. The business will be added to Rockwell’s Systems & Solutions division in order to broaden its engineered solutions in the areas of industrial automation, process control and power distribution services. Rutter Hinz will also give the group immediate exposure to the heavy industries and oil and gas market in Canada and give it immediate access to the Canadian oil sands market. The deal is the latest in a series of deals completed by Rockwell with its regionally targeted acquisitions of Caribbean Integration Engineers Inc in Puerto Rico, ICS Triplex Group Ltd in the UK, ProScon Holdings Ltd.

For more information on mergers and acquisitions activity in the valve industry, contact Constantine Biller our industrial product analyst who has unparalleled links to corporate decision-makers in the worldwide flow technologies and valves industry.

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