The second quarter of 2017 showed positive indicators across M&A market transaction volume and value, public equity performance, and a host of economic indicators. Industrial distribution deal volume in Q2 rebounded from a slow start to the year, up 11.3% over Q2 2016, and 6.9% over YTD June 2016. Public valuation multiples also increased, with the median industrial distribution EV/EBITDA multiple rising from 10.6x in Q2 2016 to 11.4x in Q2 2017, and the mean multiple increasing from 11.5x to 12.3x.
Macroeconomic indicators for Q2 2017 were almost uniformly positive. The Industrial Supply Association Purchasing Manager’s Index closed the quarter at nearly a three year high of 57.8, marking the tenth consecutive month the index registered above 50 (indicating economic expansion). Likewise, the ISA Distributor’s Index measured 66.3 at quarter end, above the economic expansion mark for the eleventh consecutive month. The Institute for Supply Management’s Production Index rose 8.3% during Q2 2017 to close the quarter at 62.4. The Consumer Price Index rose 1.6% since June 2016, indicating that inflation continues to be moderate. Finally, the Chicago Fed Midwest Economy Index, measuring non-farm economic indicators, finished at 0.4 (above the 0.0 mark indicating expansion).
A number of additional data points indicate a healthy economy for manufacturing and industrial distributors. U.S. Factory Orders, as measured by the Institute for Supply Management New Orders Index, rose to 63.5% in June, up from 59.5% in May, with 15 of 18 industries polled reporting growth. The U.S. Cutting Tool Institute reported cutting tool consumption increased 5.8% in YTD June 2017 as compared to YTD June 2016. Additionally, the U.S. Bureau of Labor Statistics reported that manufacturing industries added 16,000 jobs in July, including 5,000 in metal fabrication, 3,800 in transportation equipment manufacturing, and 2,100 in machinery manufacturing.
Read Industrial Distributor M&A Pulse Q2 2017 Full Report
