February 2015 Sector Update
Specialty Materials Investment Banking
Elliot G. Farkas [email protected] +1 312 364 8157
Matthew B. Gooch [email protected] +44 20 7868 4478
In this Issue:
Specialty Materials – Specialty Materials Sector Update – Specialty Materials M&A Market Summary – Specialty Materials Public Comparables – Middle-Market M&A Summary – Debt Capital Markets
William Blair’s investment banking group combines signi�icant transaction experience, rich industry knowledge, and deep relationships to deliver successful advisory and �inancing solutions to our global base of corporate clients. We serve both publicly traded and privately held companies, executing mergers and acquisitions, growth �inancing, �inancial 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. About William Blair From 2010-2014, the investment banking group completed more than 330 merger-and- Investment Banking acquisition transactions worth $73 billion in value, involving parties in 36 countries and �ive continents, was an underwriter on more than 20% of all U.S. initial public offerings, and raised nearly $100 billion in public and private �inancing. William Blair & Company
Table of Contents
Specialty Materials Investment Banking – Executive Summary ...... 1 Specialty Materials Sector Update ...... 7 Specialty Materials Trends ...... 8 Specialty Materials Transformations ...... 8 Composites ...... 10 Elastomers/Rubber ...... 17 M&A Activity ...... 23 Recent Notable Specialty Materials Transactions ...... 28 Public Comparables ...... 33 Quarterly Market Update – All Industries...... 37 Debt Capital Markets Summary ...... 40 Notes ...... 41 Disclosures ...... 42
Specialty Materials Investment Banking Table of Contents
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Specialty Materials Investment Banking – Executive Summary Focus on High-Growth End-Markets Drives Surge in Transactions and Valuations
Sector sees increased M&A activity and valuations as buyers seek to capitalize on strong secular tailwinds and shift portfolios toward aerospace, medical, oil and gas, and other high-growth end- markets
Fueled by corporations looking externally for new sources of growth, record amounts of private equity “dry powder,” and accommodative debt markets, M&A activity surged in 2014 across most sectors. Even in this supercharged deal-making environment, specialty materials have stood out as a particularly active industry from an M&A perspective. For specialty materials in 2014 there were 304 transactions representing a cumulative $30.9 billion. These figures equate to a 20.2% M&A Snapshot – Specialty Materials increase in the number of transactions completed and a staggering Last 12 months
114.1% increase in total transaction value over 2013 totals. In addition to these impressive activity levels, the median EBITDA multiple for EBITDA multiples reach 2014 transactions of 9.8 times exceeds the previous 10-year high of 9.7 9.8x 10-year highs times set in 2005. This surge in activity has been driven by strategic and financial acquirers’ desire to increase their exposure to aerospace, medical, oil and gas, and other high-growth, high-margin end-markets, as well as +114% Increase in total transaction secular “megatrends” that drive increased adoption of composites and value from 2013 other specialty materials. In this report, we examine the trends that are shaping the deal-making environment for specialty materials. We also provide an in-depth look +20% Increase in number of transactions at the specific competitive landscape for composites and completed from 2013 elastomers/rubbers across various end-markets. Strategic acquirers – Corporates seek increased exposure to attractive end-markets Offering faster growth, greater product differentiation, superior pricing power (with concommitant higher margins), and lower earnings volatility, specialty materials have tremendous appeal for industrial companies. As a result, the specialty materials sector is drawing increasing attention from broad-based industrial companies intent on breaking into specialty materials, as well as from companies that are looking to increase their existing exposure to specialty materials. PolyOne and Cytec are two examples of companies that are transforming themselves into specialty materials businesses through a combination of M&A, divestitures, and increased research and development. Transformations such as these allow the companies to migrate their product portfolios and process capabilities from a focus on Increased M&A activity in specialty materials has been driven by commodities and other low value-added secular “mega-trends” and acquirers’ desire to increase exposure materials to faster growing, higher-margin to aerospace, medical, oil and gas, and other attractive end- specialty materials and products. markets In a muted growth environment for industrials as a whole, industrial consolidators are looking to expand their specialty materials exposure to the fastest-growing end-markets, particularly aerospace, medical, and oil and gas. Sumitomo Bakelite’s acquisition of Vaupell in April 2014 allowed the company to access the aerospace and medical end-markets. Citadel Plastics’ acquisition of The Composites Group in November 2014 and Wabtec’s acquisition of Longwood Industries in September 2013, two transactions where William Blair advised the seller, were driven in part by the buyers’ desire to increase their exposure to the oil and gas market.
Specialty Materials Investment Banking Specialty Materials Investment Banking – Executive Summary 1
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Financial sponsors – Secular megatrends, differentiation attract private equity The megatrends of increased lightweighting and demand for high-performance materials create a compelling secular growth environment for financial sponsors to invest. In addition to these megatrends, the specialty materials industry exhibits several other characteristics that make the space particularly attractive to financial buyers. Specialty materials companies tend to have highly defensible businesses because of their unique materials, technologies, or process capabilities. Relative to other industrial companies, specialty materials businesses tend to exhibit higher margins and stronger cash flows. This strong margin profile is especially true for companies in the aerospace, medical, and oil and gas end-markets. Opportunities for sellers, challenges for buyers The current M&A dynamics in specialty materials have created powerful opportunities for sellers and distinct challenges for buyers. The sellers that have received the strongest valuations have been the ones with 1) differentiated products, technologies, and processes that create increased protection from competition, and 2) significant exposure to aerospace, medical, oil and gas, and other high-growth end-markets where adoption of specialty materials is rapidly increasing. In the transactions William Blair recently completed for The Composites Group and Longwood, it was clear that these companies’ exposure to rapidly growing end-markets contributed significantly to the premium valuations they received.
From a buyer’s perspective, the challenge comes in the need to Megatrends Driving Specialty Materials Growth assess a target company’s differentiation in the marketplace. Are the company’s products, technologies, or processes truly • Lightweighting differentiated, or are they in danger of being replaced in the near • Cost reduction term? Nascent technologies may also be embedded within a target’s existing business or product lines, as they can often be • Performance demands outgrowths of older products or new applications of existing • Urbanization and healthy living technologies. It is also important to understand the adoption rates In this report: We examine how these trends are influencing for specialty materials across various end-markets—not only the adoption of composites and elastomers/rubber across where they are now but where they will be in 5 or 10 years. end-markets. We will continue to closely monitor these trends and keep you updated on what they mean for the deal-making landscape in specialty materials.
Sincerely,
Elliot Farkas Head of Specialty Materials Banking William Blair & Company
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What’s Driving the Specialty Materials Market
M&A Values Surge in Specialty Materials
($ in millions) The surge in M&A dollar volumes over the Median: $16,721 last 12 months was driven by an 18.6% $58,856 increase in the number of transactions and +114.1% the completion of several $1 billion-plus $42,240 $30,889 acquisitions in the space, including $25,529 $21,176 $16,721 Albemarle’s acquisition of Rockwood, $14,238 $11,246 $10,639 $12,898 $14,426 Blackstone’s acquisition of Pinafore (a.k.a. Gates Corporation), INEOS’s acquisition of 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Styrolution, and Continental’s acquisition of Veyance.
Note: Aggregate volume and value includes all announced deals through December 31, 2014. Sources: Dealogic and William Blair’s Mergers and Acquisitions market analysis.
Valuations Exceed 10-Year Highs for Specialty Materials
EV / EBITDA Multiple Median: 7.9x Companies displaying differentiation and 9.7x 9.8x access to attractive high-growth end- 8.6x 8.9x 8.3x 7.4x 7.1x 7.5x 7.9x 7.4x 7.4x markets, such as aerospace, oil and gas, and medical, have been able to command premium valuations as strategic and financial acquirers increasingly turn their 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 attention to specialty materials.
Note: Data represents global transactions announced in the respective sectors. Data as of December 31, 2014. Note: Transactions with multiples that are not meaningful are categorized as undisclosed. Sources: Capital IQ, Mergermarket, and William Blair & Company.
The need for improved fuel efficiency (via lightweighting) and more stringent carbon emissions regulations will drive demand for composites in the aerospace, automotive, and heavy truck markets. In the energy sector, increased fracking and wind energy production will result in increased composites demand.
Increased Penetration Into Attractive End-Markets Driving Composites Growth
Composites Penetration by Aircraft Model Automotive Composites Volumes
Identified Composites Volumes Potential New Models Unidentified Luxury Sedans Unidentified Supercars (1) 60.0% A350 B787 Advanced Composites Components (pounds) 50.0% 120.0 40.0% 100.0 80.0 30.0% A380
60.0 20.0% A320 A340/300 40.0 A310 10.0% A300 A340/600 20.0
0.0% 0.0
1970 1980 1990 2000 2010
2005 2006 2020 2021 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2022
Source: William Blair Research. Source: Composites Forecasts and Consulting (July 2013), www.compositesworld.com. (1) Unidentified supercars, at less than 1/10th of a percent of the total, are not visible in the chart.
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William Blair Spotlight – Recent Specialty Materials Transactions
William Blair represented Vetriceramici S.p.A., a portfolio company of Star Capital SGR S.p.A., in € 83,000,000 connection with its sale to Ferro Corporation (NYSE:FOE) Vetriceramici is a leading global supplier of specialty products that enhance the appearance and has been acquired by improve the durability of high-end ceramic tile; Vetriceramici operates manufacturing facilities in Italy and Mexico, a mixing plant in Poland, and research and development and sales offices in Italy and Ferro Corporation Turkey Ferro Corporation is a leading global supplier of technology-based performance materials, including December 2014 glass-based coatings, pigments and colors, and polishing materials
William Blair represented The Composites Group, a portfolio company of Highlander Partners, in Not Disclosed connection with its sale to Citadel Plastics, a portfolio company of HGGC and Charlesbank Capital Partners
has been acquired by The Composites Group is a leading North American total solutions provider of specialty composites Citadel Plastics including material compounding, molding, and value-added post-molding services Holdings, Inc Citadel Plastics is a leading provider of custom material solutions including thermoplastics and engineered composites products; Citadel’s end-markets include automotive, electrical, construction, November 2014 HVAC, home and garden, appliance, and energy
William Blair represented Vesta, a portfolio company of RoundTable Healthcare Partners, in Not Disclosed connection with its sale to The Lubrizol Corporation, a Berkshire Hathaway company Vesta is an ISO-13485 certified medical device contract manufacturer providing silicone molding, has been acquired by silicone extrusion, thermoplastic extrusion, tight tolerance silicone sheeting, and medical device The Lubrizol assembly Corporation Lubrizol is a specialty chemical company that produces and supplies technologies to customers in the July 2014 global transportation, industrial, and consumer markets
William Blair represented Tensar Corporation, a portfolio company of Arcapita, American Capital, and $400,000,000 PineBridge, in conjunction with its sale to Castle Harlan Tensar is a provider of highly engineered, polymer-based site-development solutions for roadway has been acquired by reinforcement, earth-retention structures, building foundations, and erosion and sediment control Castle Harlan is a global private equity firm focused on making control investments in middle-market Castle Harlan companies July 2014
William Blair represented Longwood Industries, Inc., a portfolio company of Norwest Equity Partners, Not Disclosed in conjunction with its sale to Wabtec (NYSE: WAB) Longwood is a leading manufacturer and distributor of a broad line of specialty elastomeric (rubber has been acquired by and rubber composite) and related products for oil and gas, transportation, and general industrial markets Wabtec Corporation Wabtec is a leading supplier of value-added, technology-based products and services for rail, transit, September 2013 and other global industries, with $2.5 billion in sales and $6 billion-plus market cap
William Blair represented Pexco, Inc., a portfolio company of Saw Mill Capital, in conjunction with its Not Disclosed sale to Odyssey Investment Partners Pexco is a leading specialty plastics processor and converter for the aerospace, medical, and other has been acquired by high-performance end-markets Odyssey Investment Odyssey, with offices in New York and Los Angeles, is a leading middle-market private equity firm with Partners, LLC more than $4.0 billion under management August 2012
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Selected William Blair Specialty Materials Transactions
€ 83,000,000 Not Disclosed Not Disclosed $400,000,000 Not Disclosed Not Disclosed
has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by
Citadel Plastics The Lubrizol VanDeMark Ferro Corporation Castle Harlan Chemical Inc. Wabtec Corporation Holdings, Inc Corporation
Ceramic Thermoset Medical High-Performance Phosgene/Phosgene Elastomeric Coatings Composites Tubing Infrastructure Materials Derivatives Composites
Not Disclosed Not Disclosed Not Disclosed Not Disclosed Not Disclosed Not Disclosed
a division of Pregis North American Operations has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by
Deutsche Monitor Odyssey Investment Schattdecor AG Beteiligungs AG Clipper Partners Graham Partners Partners, LLC Arclin, Inc.
Phenolic Resin Laminated Polyester Medical Films, Reagent Bottles and Specialty Medical and Phenolic Resin Laminates Fabrics Tapes, and Trays Test Tubes Aerospace Plastics Laminates
Not Disclosed $300,000,000 Not Disclosed $795,000,000 $181,700,000 $288,500,000 The Pritzker family has divested
A division of Old World Emerald Industries, Inc. (dba PEAK) has been acquired by has been acquired by has been acquired by has been acquired by to Snow Phipps First-Lien Term Sentinel Capital Partners Phillips Plastics TransDigm Group, LLC Loan B Facility and CITIC Capital Indorama Ventures PLC Corporation
Elastomeric Specialty Urethane and Rubber Ethylene Oxide/Ethylene Medical Thermoplastic Moldings Chemicals Casters/Wheels Glycol Plastics Aerospace Laminates
Not Disclosed Not Disclosed Not Disclosed Not Disclosed Not Disclosed $115,000,000
a portfolio company of Mason Wells a subsidiary of Filtrona plc has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by
Wynnchurch DuPont Highlander Partners Capital, Ltd. Filtrona plc Vesta Inc. Saw Mill Capital
Sulfuric Acid Thermoset Roof Rack Specialty Medical Specialty Process Technology Compounds Systems Adhesive Tapes Plastics Plastics
$63,000,000 Not Disclosed Not Disclosed Not Disclosed Not Disclosed $54,000,000
§363 sale to has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by
Dougherty American Securities Graham Partners Funding, LLC BASF AG Capital Partners The Carlyle Group
Ethanol Rodenticides Elastomeric Medical Sulfuric Acid Thermoplastic Aerospace Producer Components Process Technology Aerospace Laminates Composites
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William Blair & Company’s Specialty Materials Contacts
North America
Elliot G. Farkas Philip W. Reitz Head of Specialty Materials Banking Managing Director Education: Education: Michigan (M.B.A.), Ohio State (B.A.) Stanford (M.B.A.), Northwestern (B.A.) Contact Info: Contact Info: [email protected] [email protected] +1 312 364 8157 +1 312 364 8688 Joined Blair: Joined Blair: 2006 1989
Sam Tinaglia Managing Director, Head of Industrials Education: UCLA (M.B.A.), Chicago (A.B.) Contact Info: [email protected] +1 312 364 8086 Joined Blair: 1999
Europe
Matthew B. Gooch Matthew M. Zimmer Head of European Banking Managing Director Education: Education: Chicago (M.B.A.), Emory (B.A.), CFA Columbia (M.B.A.), Notre Dame (B.A.) Contact Info: Contact Info: [email protected] [email protected] +44 20 7868 4478 +44 20 7868 4502 Joined Blair: Joined Blair: 2000 2007
Specialty Materials Segment Focus
Composites High-Performance Plastics Elastomers/Rubber Specialty Chemicals Thermoplastics Compounding Compounding Raw Materials Thermosets Advanced Polymers Molding Intermediates
Carbon Fiber Additives Extrusion Additives Pultrusion Molding Coatings/Adhesives Filament Winding Extrusion
Specialty Materials Investment Banking 6 Specialty Materials Investment Banking – Executive Summary
Specialty Materials Sector Update
William Blair & Company
Specialty Materials Sector Update
Specialty materials include a wide variety of nontraditional materials that can enhance performance, structural, and/or process characteristics. Specialty materials can also reduce manufacturing and operating costs through lightweighting, reductions in waste, parts consolidation, faster cycle times, and/or extended shelf lives. Specialty materials include high performance polymer or alloy materials, engineered polymer structures, composites, matrix structures, custom coatings, claddings, adhesives, or additives. Examples of specialty materials include additives that extend shelf-life or preserve product quality, lightweight composite materials that reduce fuel consumption or other energy costs, antimicrobial materials that reduce the risk of infections, or ballistic resistant materials. Other examples include performance-enhancing or ecofriendly additives that provide differentiated colors or effects, such as consumer applications that glow in the dark, change color in light, provide color harmonization, or unique performance or process enhancing characteristics (e.g., antistatic, antioxidant, antisticking, flame retardant, resistant to UV light). Some specialty materials can be engineered to provide enhanced structural or functional performance (e.g., noise reduction) or deliver enhanced design or visual aesthetics. For example, in the aerospace and automotive markets, composite materials help OEMs reduce weight and lower fuel consumption by replacing heavier metal and aluminum. Compared with steel and aluminum, fiber reinforced composites can be 30% to 50% lighter. In the electronics market, specialty polymer compounds can be used to deliver higher functionality (electrostatic dissipation, EMI and RFI shielding, thermal conductivity, flame retardancy, or abrasion/wear resistance) that, in many cases, cannot be met by general, commodity-type materials. In the healthcare market, polymer-metal composites shield against radiation at the same levels as lead, enabling lead replacement in radiation-emitting devices such as CT scanners. Specialty materials can also be applied to traditional materials such as steel, wood, vinyl, polyester, aluminum, and others to enhance the properties of these materials, providing improved weatherability, weight characteristics, durability, color retention, stain or scratch resistance, flame retardancy, chemical resistance, or gloss control, for example.
Specialty Materials Industry Landscape
Raw Material Suppliers Compounders Converting / Processing
Composites
Elastomers / Rubber
High Performance Plastics(1)
Specialty Chemicals / Coatings / Additives(1) Key Specialty Material Types Material Specialty Key
Exotic Metals / Alloys (1)
(1) To be covered in detail in future issues of this report.
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Specialty Materials Trends
Industry growth in the specialty materials sector is being driven by a number of mega-trends. These trends, such as lightweighting or improved performance demands, are driving accelerated growth, particularly in certain end-markets such as aerospace, automotive, and energy. As an example, in the composites sector, lightweighting continues to drive substitution from heavier materials such as steel or aluminum, even while the relative cost of composites remains high. For example, carbon fiber, on average, is approximately 80% lighter than steel, but costs nearly 5 times as much as steel. Despite the relatively high cost, growth in carbon fiber is projected to be very strong, growing over 10% compounded annually between 2012 and 2020.
Mega-Trends Driving the Specialty Materials Market
Next-generation aerospace applications (e.g., Boeing 787 and Airbus 350 XWB) use composites, significantly reducing weight, extending range, and reducing fuel costs.
Automobiles are the current primary end-market beneficiaries of weight reduction, mitigating CO2 Lightweighting emissions and accelerating fuel efficiency trends into the future.
Other forms of transportation (e.g., spacecraft, bicycles, public transportation) will be growing beneficiaries of high performance specialty materials.
On a strength per cubic inch basis, many specialty materials have a lower cost than traditional products (e.g., wood, standard metals). Composites and other related specialty materials have reduced maintenance requirements due to high durability. Significant waste reduction during fabrication due to extreme flexibility in the design and Cost Reduction manufacturing process.
Near net shape molding reduces machining costs, allows for parts consolidation, and eliminates the need to piece together complex parts. From a total life cycle cost analysis, specialty materials are often significantly less expensive than traditional materials.
Specialty materials can be designed with almost unlimited flexibility and near net shape molding, giving designers true capability to combine multiple parts. Certain specialty materials may be chemical and corrosion resistant, highly flexible, noise Performance dampening, contain dielectric properties, or perform well at temperature extremes, making specialty Demands materials specifically attractive for harsh environments such as aerospace and oil and gas applications. Specialty materials are more resistant to fatigue than traditional products, with increased durability and product life.
Increased consciousness of environmental impact drives specialty material use in automobile, aviation, and marine applications (e.g., product life extension, reduced maintenance, less waste, and Urbanization and higher durability). Healthy Living Durability increases product lifetime, reducing waste and product degradation.
Specialty materials increase clean energy production by improving the efficiency of production methods such as wind energy capture.
Specialty Materials Transformations
Over the last several years, we have seen a number of examples (both public and private) of commodity materials businesses transforming themselves into specialty materials businesses. These transformations generally have involved migrating the product portfolio and process capabilities from a focus on commodity, lower value-added materials to a focus on faster-growing, higher- margin specialty materials and products. Specialty materials typically offer more product differentiation, better pricing power, and less earnings volatility. These transformations can occur through increased R&D spending, a refocus on new end–markets, and/or through M&A. New techniques of applying or using existing materials or employing them in new markets or applications is another transformative model, albeit less revolutionary or risky. Two powerful public company examples of specialty materials transformations are that of PolyOne and Cytec. As noted in the following charts, the results and value creation potential can be quite dramatic.
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Shift From Volume-Driven, Commodity Producer to Focus on Fast-Growing, High-Margin Specialty Products
Acquisitions Divestitures Shifted focus to segments with pricing power, differentiation, Mar-13 Spartech Mar-13 Vinyl Dispersion Business and competitive advantages Dec-12 Glasforms Feb-11 Sunbelt 50% JV Targeted less-cyclical segments Oct-11 ColorMatrix Interest Doubled R&D spending from $20 million in 2006 to $55 million in 2014 Targeting 80% to 90% of operating income from specialty products
EBITDA Margin LTM EBITDA Multiple Enterprise Value ($ in billions)
$4.6 12.0% 9.9x 7.1% 5.5x $1.4 2010 2014 2010 2014 2010 2014 Source: CapitalIQ.
Shift From Commodity Chemicals Producer to Aerospace Composites Supplier
Prior Now Divested four non-aerospace businesses aggregating over 12% 7% $1.5 billion of revenue → shrinking sales base by 45% 4% 7% Focused on specialty niche areas with pricing power 9% 15% 50% Reduced earnings volatility 51% Acquired composites supplier Umeco (10.0x LTM EBITDA) 24% 21% Shifted mix from 75% chemicals to 50% aerospace
Coatings and Ink Aerospace Materials Mineral Processing
Plastics Adhesives/ Other Industrial Materials
EBITDA Margin LTM EBITDA Multiple Enterprise Value
($ in billions)
21.2% 10.1x $4.4 13.4% 6.8x $3.0
2010 2014 2010 2014 2010 2014 Source: CapitalIQ.
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Composites
Overview The demand for composites is projected to increase significantly during the next decade. Composites are made from two or more Global Materials Market constituent materials with significantly different physical or chemical properties that, when combined, produce a material with characteristics different from the individual components. The individual components remain separate and distinct within 3% <1% the finished structure. The new material may be preferred over traditional materials for many reasons including increased strength, reduced weight, or higher corrosion and fatigue 14% resistance when compared with traditional materials. Typical engineered composite materials include: Composite Glass or fiber-reinforced polymers (thermoset or Steel thermoplastic) Plastics Composite building materials Aluminium Metal composites Rubber or elastomeric composites 83% Ceramic composites
Current production volumes for composites are low compared with conventional materials. As shown in the chart at right, the Source: Lucintel. global materials market is currently dominated by steel and plastics, although composites continue to take share. For example, 1.3 billion tons of steel are produced annually compared with only 5 million tons of glass fiber reinforced plastic, including only 46,000 tons of carbon fiber reinforced plastic. However, demand for carbon fiber is forecast to rise to over 100,000 tons by 2020, a CAGR of over 10%, while steel continues to lose market share to lighter-weight aluminum and composite plastics.
Global Composites Market Forecast Global Carbon Fiber Demand
Volume (million pounds) (metric tons)
102,460 87,160 94,310 74,740 78,130 21,613 22,763 23,942 67,480 18,580 19,478 20,521 52,560 60,450 47,220
2014 2015 2016 2017 2018 2019 2012 2013 2014P 2015P 2016P 2017P 2018P 2019P 2020P
Source: Lucintel. Source: Composites Forecasts and Consulting LLC., www.compositesworld.com.
As noted in the chart above, over the next five years, the composite industry is forecast to grow to over $23 billion. Composites are expected to grow at a compound annual rate of approximately 5.2% through 2019, driven by both increased penetration into new end-markets and strong secular growth trends in the many of the end-markets served by composites. In particular, the need for improved fuel efficiency and more stringent carbon emissions regulations will drive composites demand in the aerospace, automotive, and heavy truck markets. Demand for higher strength, lighter-weight materials in the energy (i.e., wind and oil and gas), building, and general industrial markets will drive composites growth in these markets. Continued trends toward automation, streamlining of composite manufacturing methods, and the development of new material forms will make composites more user and environmentally friendly and cost-effective, driving increased demand in existing markets and making them even more attractive to industrial and consumer-driven end-markets. The greater availability of key materials, such as carbon fiber, and the resulting pricing stability will drive OEMs to increase commercial use of these materials. While penetration across many end-markets remains quite low (see the following chart), many underserved end-markets, such as medical, oil and gas, and construction, are now experiencing strong growth in composites penetration.
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Composites Penetration by End-Market
($ in billions)
Composite Materials Total Structural Materials Market (Steel, Aluminium and Composites)
$90.0 $75.0 $60.0 $45.0 $30.0 $15.0 $0.0 Aerospace Automotive and Rail Construction Consumer Goods Marine Pipe and Tanks Wind Energy Source: Lucintel.
The strong projected demand for composites drives both increased investment in production capacity and M&A activity. For example, the top five carbon fiber producers collectively account for more than 80% of global capacity and are investing heavily in additional capacity. Toray, a Japanese carbon fiber supplier, recently announced plans to build a new $865 million plant in South Carolina to supply Boeing’s new 777x platform. In addition, given the growth in composites, over the next five years, Hexcel is expected to invest nearly $1.2 billion into its business, including the construction of a new precursor and carbon fiber line in France. This new line will place Hexcel closer to one of its major customers, Airbus. The composites sector remains highly fragmented. The market consists of a number of resin, fiber, and additive producers, as well as compounders, processors, and fabricators. Leading compounders include PolyOne, RTP Company, and A. Schulman, who compete principally only at this level of the value chain. However, many players such as Hexcel and Cytec compete at multiple levels in the value chain, formulating their own base materials (prepregs or resin infusion systems), while also molding finished components. Some suppliers, such as Owens Corning, a glass reinforcement supplier, compete in a very limited segment of the value chain. As manufacturers and suppliers are increasingly positioning themselves to capitalize on the continued substitution of conventional materials for composites, we expect M&A activity to accelerate. For example, we expect raw materials producers, such as Owens Corning, to align themselves with downstream component manufacturers to secure captive off-take for their materials. In addition, we expect smaller composites players to use M&A to enhance their materials portfolio, process capabilities, and end-market mix. Citadel Plastics’ recent acquisition of The Composites Group is an example of this trend. With increasing pressure from OEMs to provide a complete, vertically integrated material/product solution, smaller composites players are looking to gain scale, broaden their end–markets, and provide an increasing proportion of the composites value chain. We expect larger strategic buyers may also use acquisitions to expand into higher-growth end-markets (e.g., medical, oil and gas, and aerospace), access new, unique materials and process technologies, and control more of the supply chain. For example, Sumitomo Bakelite’s recent acquisition of Vaupell provides it with enhanced access to the aerospace market and a captive molder of its phenolic materials. We expect that strategic acquirers will continue to look to strengthen their competitive position to further benefit from the strong anticipated growth in the composites market. Given the attractive growth rates and margins in the sector, private equity activity in the sector has also increased lately. Private equity firms, such as HGGC/Charlesbank (Citadel Plastics), Investindustrial (Polynt), and Scott Capital (Continental Structural Plastics) are establishing and growing platforms in the sector. In addition, many others are actively seeking platform opportunities to provide an entrée to the sector.
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Composites End-Market Trends
Composites are increasingly being used across a variety of end-markets. While composites have existed for decades, originally used in building products, aerospace, and wind industry applications, they continue to penetrate new end-markets.
Composites Growth by End-Market Key End-Markets for Composites
Aerospace Automotive 8.0% Aerospace Wind 7.0%
Energy 2019 - 6.0% Transportation
2014 Consumer Growing passenger traffic supporting major Regulations compelling better fuel efficiency, Building new aircraft programs and growing increasing demand for lightweight composites 5.0% Marine Products production rates OEMs, suppliers, and raw material
CAGR: OEMs need to increase fuel efficiency by manufacturers establishing joint ventures to reducing aircraft weight reduce composite production cycle times and Other Interiors include increasing number of secure supply 4.0% Electrical & composite components Electrification of vehicles requiring higher Trends relevant to both commercial and composite usage to offset increased battery Electronics military aerospace markets weight Building Products Energy 3.0% 0.0 5.0 10.0 15.0 ($ in billions) Value of Products (2013)
2014-2019P 2014-2019P Traditionally, the largest segment for Growth in fracking requiring higher End-Market CAGR End-Market CAGR composites, but penetration is still relatively performance and faster drill-out times well low suited to composites Aerospace 7.2% Marine 5.4% Expected growth in emerging markets due to Escalating operational demands associated increased investment in infrastructure and with offshore exploration and production Transportation 6.0% Wind Energy 6.5% residential construction including high strength to weight ratio, fatigue Building Products 5.1% Other 4.2% strength, and corrosion resistance Ongoing global growth in wind energy Electrical & Electronics 4.5% Consumer 5.8% Sources: Lucintel and William Blair research.
Aerospace Over the past 40 years, the volume of air traffic (as measured by revenue passenger miles) has increased by over 10 times, or three times faster than global GDP growth. Growing global population and the increased affordability of air travel, coupled with globalization, continue to drive strong demand for air travel. To support this growth, airlines are projected to add over 36,000 aircraft in the next 15 years. This demand is reflected in the record backlog of aircraft deliveries reported by both Boeing and Airbus. The current commercial aerospace demand cycle remains robust with key aircraft makers exhibiting eight-year-plus order backlogs. Notably, demand remains global in nature versus past cycles where aircraft demand had been dominated by domestic carriers.
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Air Traffic Growth Aircraft Deliveries by Year Aircraft Deliveries (2014-2033)
Middle East-Asia Pacific 7.4% 25,680 Within Latin America 6.9% 1,691 1,742 1,615 Within China 6.6% 1,465 1,518 Within Asia Pacific 6.3% 1,334 Europe-Asia Pacific 5.3% Europe-Latin America 4.9% Africa-Europe 4.9% North America-Latin America 4.7% 4,520 Within / to CIS 4.5% 3,460 2,490 Trans-Pacific 4.3% 620 Within Europe 3.5% North Atlantic 3.1% 2010 2011 2012 2013 2014P 2015E Regional Single- Small Medium Large Within North America 2.3% Jets aisle Wide- Wide- Wide- body body body
Source: Boeing. Source: AIA. Source: Boeing.
In addition to growing secular demand for air travel, composite materials continue to increase their penetration in the aerospace market, driven by the desire of aircraft makers to reduce aircraft weight, improve fuel efficiency, and lower operating costs. In aerospace, composites are used in the fuselage, wings, elevators, rudders, ailerons, landing gear doors, engine nacelles, and increasingly in other secondary components. Composites are also used on satellites and military aircraft. Aerospace composites provide high strength-to-weight ratios, excellent fatigue endurance, corrosion and wear resistance, and malleability, and can reduce the use of fasteners and subassemblies. Aerospace composites aid in keeping aircraft lighter and more fuel-efficient, as well as increasing flight time, speed, and distance. The benefits of composites continue to drive a shift in aerospace away from traditional materials such as steel, aluminum, and even titanium. According to Lucintel, global demand for aerospace composites is projected to grow at a compound annual rate of over 7.2% from 2014 to 2019. Although composites usage varies between aircraft types, the trend is toward greater use of composites in all aircraft. With each new aircraft or aircraft engine, the amount of composite material increases. Composite material is lighter and stronger than traditional material used on aircraft (it is 30% lighter than aluminum), and thus provides significant weight and cost savings. The Boeing 787 uses composites for roughly 50% of its total structural weight. Both the Airbus A380 and the 787 contain more than 100,000 pounds of composites per aircraft. New aircraft programs, such as Boeing’s 787 Dreamliner, Airbus’ A380 and A350 XWB, Bombardier’s C Series, and general aviation aircraft such as Cirrus and Diamond are all using higher amounts of composites than previous aircraft, driving composite materials’ growth. In addition to use as primary structural elements, composites are also increasingly being used in secondary applications such as for windows, canopies, galley furnishings, tray tables, arm rests, trim strips, and joint/edge coverings to provide high-impact strength, resistance to UV rays, flame and smoke compliance, and antimicrobial protection. Given the strong growth in aerospace composites, suppliers are Composite Penetration by Aircraft increasingly using M&A to safeguard their positions. Leading composite manufacturers and suppliers are vertically integrating the supply chain to ensure they can meet the demands of record 60.0% A350 OEM backlogs, strong order books, and ambitious production B787 rates for composite-intensive commercial aircraft. For example, 50.0% Cytec’s 2012 acquisition of Umeco for £348 million (about 10.0 40.0% times EBITDA) enables the company to move up the supply chain and capitalize on Umeco’s composite components manufacturing 30.0% A380 and process technologies. This includes the energy efficient and more cost effective out-of-autoclave technology Umeco is 20.0% A320 A340/300 developing to shorten thermoset production cycles. A310 10.0% A300 A340/600 As noted earlier, carbon fiber growth in the aerospace market has been particularly strong. Carbon fiber-reinforced composites 0.0% continue to grow in aerospace applications due to their lower 1970 1980 1990 2000 2010 weight; improved fatigue, damage, and corrosion resistance; and Source: William Blair Research. lack of significant thermal expansion. The carbon fiber industry structure in aerospace comprises just a few primary suppliers (e.g., Hexcel, Cytec, Teijin, and Toray). In this market, there are meaningful barriers to entry given the rigorous legacy specification data/schemes and the competitive incumbency that existing players possess. For example, Japan’s Toray Industries will be the sole
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supplier of carbon fiber for Boeing’s 777x passenger jet in addition to the 787 Dreamliner. A recent supply contract between Toray and Boeing will extend the current one for more than 10 years, bolstered by Toray’s $865 million investment in a new carbon fiber plant in South Carolina. Further, there is little incentive for risk-averse aircraft OEMs to consider and/or qualify alternative materials. Combined, these considerations translate into a significant competitive advantage for existing players, and serve as a formidable barrier to entry for new market entrants. Major aerospace composites players, whom we expect to continue to consolidate the industry, include Cytec, GKN Aerospace (GKN plc), Hexcel, Mitsubishi Rayon, and Toray Industries. Automotive The automotive end-market is one of the fastest-growing end-markets for composites. Demand for composites in the U.S. automotive market grew by 8.8% in 2013. The use of composites is steadily growing in applications that require fuel economy and other performance benefits and are expected to play an increasingly significant role in helping OEMs achieve targets for fuel efficiency and carbon dioxide emissions. In the automotive sector, composites can be used in both structural and nonstructural applications. Examples of applications for automotive composites include exterior body panels, under-the-hood applications (engine valve covers, forward lighting, front ends), interior lights, and trim and instrument panels. Composites allow engineers to downsize engines, transmissions, brakes, and batteries, reducing weight and increasing usable space. While composites are already well-known in the high-performance automotive sector, they have not yet penetrated the traditional automotive sector. Composites have long been used in racing and high-performance vehicle components, such as chassis, hoods, wheels, and roofs, but are now increasingly becoming a more important material for mainstream automotive OEMs in both structural and nonstructural applications. As automakers work to meet Corporate Average Fuel Efficiency (CAFE) standards of 36.6 mpg by 2017 and 54.5 mpg by 2025, vehicle weight reduction has become of critical importance. For example, Daimler is targeting to reduce its gross vehicle weight by 10% in all new models. Similarly, GM and Ford set targets of weight reductions of 15% by 2016 and 250 to 750 lbs (113 to 340 kg) by 2020, respectively. CO2 emissions legislation is becoming more stringent globally, leading to increasing demand for lightweight composites. By 2020 European automakers must decrease emissions by 40% from 2007 levels.
Fuel-Efficiency Regulations by Country/Region Automotive Composites Volumes
Identified Composites Volumes Potential New Models 2010 2015 2020 2025 2030 Unidentified Luxury Sedans Unidentified Supercars (1) Advanced Composites Components (pounds) 120.0 Japan 39.5 mpg 47.7 mpg 100.0 80.0 EU 41.9 mpg 57.4 mpg 60.0 40.0 US 35.3 mpg 61.2 mpg 20.0 0.0
Canada 43.0 mpg
2005 2006 2020 2021 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2022
Source: GFEI. Source: Composites Forecasts and Consulting (July 2013), www.compositesworld.com. (1) Unidentified Supercars, at less than 1/10th of 1 percent of the total, are not visible in the chart.
Increasing fuel efficiency standards and the associated “lightweighting” of automotive vehicles are longer-term secular trends supporting the broader adoption of composites in the automotive industry. Average composite poundage per vehicle will continue to increase as these materials find use in a widening array of applications. While this remains an intriguing longer-term growth opportunity, the key for mass adoption will be a continued reduction in the cost and “cycle time” associated with automated part production. The relatively high cost, end-of-life regulations, and lack of suitable manufacturing processes for high-volume applications all continue to be limiting factors for consumption of composite materials in the automotive industry. The auto industry's adoption of composites has been protracted as traditional carmakers have been reluctant to pay for the superior performance characteristics of composites, despite the incremental weight reduction and associated fuel efficiency improvements. However, work is underway to develop higher-volume production processes that will allow for the more cost-effective production required to serve mainstream automotive OEMs. The development of technologies to reduce molding times has accelerated in recent years and production efficiency is improving. For example, resin transfer molding previously required approximately 160 minutes from the positioning of the preform to the release of the mold. High-cycle resin transfer molding has reduced this time to about 10 minutes, with further reductions in production time expected.
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While there are currently over 100 car models worldwide that include at least some parts made of carbon fiber, BMW’s new i3 and i8 are among the first to be made principally of carbon fiber. BMW’s recently introduced i3 model is an all-electric, four-door passenger car that features a carbon fiber passenger cell. It is the first mass production vehicle (40,000 units per year) to make such significant use of carbon fiber in a relatively high-volume manufacturing environment. The carbon fiber is sourced exclusively from a joint venture of BMW and SGL Group. Parts are molded via resin transfer molding at BMW’s vehicle manufacturing and assembly facility in Leipzig, Germany. Other OEMs have also entered joint ventures with carbon fiber suppliers to secure raw material supply. For example, Zoltek (Toray) entered a strategic alliance with a molder for the development of low-cost carbon fiber sheet molding compounds (SMC). Ford Motor Co. is working with carbon fiber supplier DowAksa to develop materials and processes for automotive composites manufacturing, and GM and Teijin are working along similar lines to develop a thermoplastic composites molding process for future vehicles. Suppliers that can provide a complete solution and can help navigate through the adoption cycle will be the most valued. Notably, automakers that may be inclined to deploy high-performance, lightweight carbon fiber composites in their car designs are also keenly interested in working with composite suppliers that are at least partly, if not fully, backward integrated into fiber production. For example, Cytec’s existing fiber capacity (including the recently completely expansion project in South Carolina) is dedicated to producing “low-tow” aerospace grade fibers, which will be used for servicing platforms Cytec has won in the commercial aerospace market. Moreover, the performance characteristics of low-tow fiber are overkill for demanding, but less-rigorous, automotive application needs. Thus, to address the automotive opportunity more meaningfully longer term, a composites supplier is likely to demonstrate its commitment to the industry by having in place ample (if not dedicated) “high-tow” fiber capacity. Given the benefits of composites and ongoing manufacturing advancements, many analysts project exceptionally strong growth in automotive composites. For example, Composites Forecasts and Consulting projects automotive composites to grow at a compound annual rate of 22% between 2013 and 2022. Energy (Oil and Gas/Wind) Composites have been used in the wind market for some time now. GE started using carbon fiber in its wind turbine models decades ago. Major Brazilian blade manufacturer, Tecsis, manufactures wind blades for GE using a large-tow carbon fiber prepreg supplied by Gurit. As wind turbine sizes increase, blades will get longer, driving manufacturers toward even lighter and less expensive materials. Low-cost carbon fiber and high-performance glass fiber are expected to see increased demand as a result. That said, composites growth in the wind turbine market is expected to be limited relative to the levels historically seen as wind turbine installations level off. 2013 saw the first decline in wind turbine installations since 1997.
Installment Volume of Wind Power Installment Volume of Wind Power by Country (2013)
(megawatts in thousands)
45.2 PR China 40.6 39.1 Germany 38.5 18.1% 35.3 2.0% U.K. 26.9 2.1% India 20.3 2.5% 45.6% Canada 14.7 USA 11.5 2.7% Brazil 6.5 7.3 8.1 8.2 3.1% 2.5 3.4 3.8 Poland 1.3 1.5 4.5% Sweden 4.9% Romania 9.2% 5.3% RoW
Source: Compiled by Earth Policy Institute with 1980-1995 data from Janet L. Source: Global Wind Energy Council. Sawin, “Wind Power Still Soaring,” in Worldwatch Institute, Vital Signs 2007-2008 (New York: W. W. Norton & Company, 2007); 1996-2013 data from Global Wind Energy Council, Global Wind Report: Annual Market Update 2013 (Brussels: April 2014). In the oil and gas market, composites are used in pipe and now increasingly in downhole and offshore applications, such as frac plugs. Significantly increased composites penetration in oil and gas applications, bolstered by secular growth in the overall U.S. oil and gas market, is expected to drive long-term growth in this sector. U.S. oil output has risen by almost 30% over the last decade, with U.S. oil and gas reserves still among the world’s largest. The relatively high margins achievable in this sector, combined with strong growth trends, are driving increased M&A activity in oil and gas composites. For example, Royal Ten Cate’s 2012 acquisition of U.S. thermoplastic producer PMC Baycomp extended the company’s customer base beyond aerospace into oil and gas. Citadel’s 2014 acquisition of The Composites Group provided Citadel with an enhanced presence in oil and gas composites. Wabtec’s 2013 acquisition of Longwood provided diversification from the railroad market and a strong presence in oil and gas and fracking.
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Building Products In the building products industry, composites demand grew 8.3% in 2013. Building products is the second-largest market (after transportation) for composite materials and is expected to continue to grow at accelerated rates. In this end–market, composites are used for building profiles, sanitary ware, structural applications (composite rebar, panels, and bridge decks), and decorative products, among others. The main drivers for strong composites growth in building products will be the continued rebound in new housing and remodeling due to the economic recovery. Strong growth will also be supported by the expanding use of fiberglass entry doors and tanks as opportunities arise based on cost, performance, and aesthetic advantages over traditional materials. Governments are also increasingly allocating funds for the retrofitting of old infrastructure, especially bridges and roads, further driving composites demand in this sector.
U.S. Total Construction Spending U.S. Residential Housing Starts
($ in billions) (homes in thousands)
$1,180 $1,252 1,463 $1,040 $1,109 $911 $971 1,162 $788 $861 925 993 781 609
2011 2012 2013 2014E 2015P 2016P 2017P 2018P 2011 2012 2013 2014E 2015P 2016P Sources: FMI Construction Outlook. Wall Street Research. U.S. Census Bureau.
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General Industrial and Consumer Composites are used across a host of other end-markets as well, such as general industrial and consumer/recreational products. In industrial markets, composites can be found in scrubbers, tanks, pipes, and capacitors to provide enhanced corrosion resistance, flame retardance, or other unique performance characteristics. In the consumer market, carbon fiber composites are the predominant material in golf shafts, fishing rods, and tennis rackets. Composites are also used in appliances, power tools, and toys. Increased consumer spending levels will bode well for composites in these markets. Growth in these markets is also driving M&A activity. For example, the 2012 acquisition of PMC Baycomp gave Royal Ten Cate increased affordable thermoplastic UD-tape capacity for industrial applications, while its 2013 acquisition of Amber Composites increased its presence in the market for other industrial composites.
Elastomers/Rubber
Overview The elastomers/rubber market comprises a broad range of compounded extruded, molded, or lathe-cut rubber products varying greatly in complexity and purpose. In most instances, these products are components sold to a number of end-markets, such as transportation, oil and gas/energy, construction, general industrial, and consumer. Many elastomeric products are critical to the end- function of the ultimate product; however, the unit price is a relatively small proportion of the total unit cost. IBISWorld estimates that total rubber product sales in the United States reached $17.5 billion in 2014. The chart below provides industry segmentation by product and end-market.
2014E U.S. Rubber Product Manufacturing Industry Size and Segmentation
Products Segmentation (2014E) End-Market Segmentation (2014E)
Automotive Rubber Other Manufacturing Parts Industries 19%
Other Rubber Products 28% 29% Automotive 30% for Mechanical Use Manufacturing
Rubber Compounds and Construction 9%
Mixtures
Industrial Rubber Industrial Machinery 11% Products Manufacturing 16% 17%
Other Other 27% 16%
Total: $17.5 billion Source: IBISWorld, May 2014. Note: Rubberized fabric, rubber clothing, rubber tires and tubes, rubber hoses and belts, rubber gloves, and rubber toys are excluded from industry definition.
After reaching $18.5 billion in 2007, the U.S. rubber product manufacturing industry went through a downturn during the recent global economic recession. As buyers in downstream industries—especially, those in the automotive and construction industries— experienced significant economic difficulties, total U.S. rubber product manufacturing industry sales bottomed out at $14.0 billion in 2009. However, over the past three years, industry sales have rebounded to prerecession levels. The following chart provides historical and projected industry sales.
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U.S. Rubber Product Manufacturing Industry
Sales ($ in billions)
$18.2 $18.4 $18.5 $17.9 $17.9 $16.6 $16.7 $17.3 $17.4 $17.5 $17.5 $17.6 $17.7 $17.8 $14.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: IBISWorld, May 2014.
Superior technical competencies, the ability to manufacture more complex products, highly mechanized production lines, fast turnaround times, significant R&D capabilities, value-added services, and superior customer service will continue to be key competitive advantages for manufacturers of elastomeric/rubber products. Successful industry participants rely heavily on innovation and technological change. In particular, those that focus on high-technology products/material science with greater chemical and composite complexities, tighter dimensional tolerances, superior performance characteristics, and a higher degree of technical collaboration with customers are likely to command higher valuation multiples. In addition, revenue earned from supplying replacement parts and services is an important element for many players in the elastomeric/rubber industry. Aftermarket revenue is generally less cyclical and carries a higher margin, dampening the potential effects of a recession. In the compounding segment of the market, successful compounders generally maintain a high degree of technical expertise and innovation. Volatile raw material prices may represent a challenge in managing operating margins. Customers moving production to emerging growth markets also present challenges for compounders, as often these materials have a defined shelf life that requires they be relatively close to customers. Compounding is a relatively low-cost-to-enter market, and as a result, compounders can face aggressive, upstart competitors in emerging markets, particularly as their technical competencies grow. Volume increases and product mix improvements are keys to enhancing profitability. In addition, R&D initiatives to develop improved rubber compounds that command a higher price, continued cost-cutting, and efficiency initiatives are all important drivers of value. The elastomer/rubber products industry is highly fragmented. Most industry participants are small because the industry produces a wide array of different products serving a broad spectrum of end-markets. Many companies supply products on a local or regional basis. In general, capital investment in the elastomer/rubber industry is a meaningful barrier to entry, although less so in the compounding segment. Firms require a significant amount of facility space and equipment to manufacture rubber products. In addition, to compete effectively in certain end-markets such as automotive, rail, oil and gas, and others, industry or customer certifications may be needed. The compounding market is also highly fragmented with many small competitors. The industry is fragmented partly because some large customers have historically mixed in-house and used small, local suppliers for overflow capacity or certain lower-volume compounds. In addition, because custom rubber compounds typically have a limited shelf life once mixed, customers want to buy from suppliers with production close to their own plants. Global suppliers in the rubber compounding market create value by consolidating smaller players to extend their geographic footprint and diversify their end-market exposure. This value is created primarily through 1) economies of scale in purchasing, 2) the transfer of know-how and R&D, and 3) the ability to serve large multinational customers with multiple production sites. As an example, Hexpol has acquired a number of smaller compounders since 2007. These acquisitions have strengthened Hexpol’s global footprint, enabling it to serve multinational customers better; have diversified the business by adding additional end-markets and expanding its geographic reach have increased purchasing power; and have enhanced the company’s capabilities.
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Elastomers/Rubber End-Market Trends
Automotive Automotive is the oldest and largest end-market for elastomeric products. Demand in this segment is driven principally by vehicle production. IHS’s North American light vehicle production forecast through 2019 indicates continued growth, which implies a healthy market for elastomeric producers with exposure to this market in the coming years. Growth is expected to be driven by three key factors: the replacement cycle coming to fruition; robust new product/model cycles; and acceleration of production schedules to rebuild low supply.
North American Light Vehicle Production Vehicle Age in the United States
(units in millions) (years)
+88.4% +12.3% 14 12 18.2 17.3 17.7 17.8 18.0 10 16.2 16.8 15.8 15.3 15.1 15.4 8 13.1 6 12.6 11.9 4 8.6 2
0
2005 2006 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2007 2008 2009 2010 2011 2012 2013 2014
2005 2006 2007 2008 2009 2010 2011 2012 2013
2015E 2017E 2019E
2015E 2016E 2017E 2018E 2019E 2014E
Source: Global Vehicle Production Summary, December 2014, IHS. Sources: U.S. Department of Transportation and IHS. In addition to increased global vehicle production rates, median vehicle age is accelerating rapidly, fueling the need for replacement parts and components. According to the U.S. Department of Transportation, the median age of vehicles in the U.S. fleet has risen from 8.4 years in 1995 to an estimated nearly 11.5 years in 2015, a total increase of 36% over the period.
Energy
The equipment used in horizontal drilling and hydraulic fracking contains high quality rubber. This segment requires highly customized and high-performance compounds used across a range of applications including stators in drilling motors, packers used for borehole seals, and zonal isolation. Growth in this segment has been strong and is expected to continue in the coming years as the industry deals with new types of rock formations, deeper wells, and more difficult offshore drilling.
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Up until the events of the most recent months, oil and gas activity stood at a near-record high, with rig counts close to levels experienced prior to the recession in 2008. Rig counts in the United States have steadily increased. Rig count growth has been skewed to oil-rich areas, such as the Permian Basin, Williston Basin, and Niobrara Formation, that collectively have seen over 100 rig additions.
U.S. Rig Count
2,500
2,000
1,500
1,000
500
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
U.S. Rig Oil/Gas Split U.S. Rig Drilling Type
2,500 Oil Gas 1,500 Directional Horizontal Vertical
2,000 1,200
1,500 900
1,000 600
500 300
0 0
Source: All U.S. and international rig count data provided by Baker Hughes.
Tight oil refers to hydrocarbons that are typically captured in rock sequences, including sandstone and limestone, characterized by low permeability and porosity. These rocks were created from compression of mineral substances including clay, quartz, and carbonates. The oil contained within these reservoir rocks typically will not flow to a wellbore at economic rates without assistance from technologically advanced drilling and completion processes. Tight oil production is enabled by the use of horizontal drilling in conjunction with multistage hydraulic fracturing—commonly referred to as fracking—which provides both high initial production rates and strong revenue at current oil prices. Over the last several years, increasingly advanced horizontal drilling and fracking technologies have enabled exponential growth in the production of tight oil in the United States. The production of tight oil grew from 0.3 million barrels per day (bbl/d) in 2009 to 2.0 million bbl/d in 2012 and is forecast to increase to 2.9 million bbl/d in 2014, for an estimated 2009-2014 CAGR of 57.4%. In parallel, total new horizontal wells drilled annually more than doubled from 6,800 in 2009 to 17,700 in 2012 and are forecast to increase to 27,400 in 2017, an estimated 2009-2017 CAGR of 19.0%. The following chart provides details on historical tight oil production and the growth of horizontal wells in the United States.
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U.S. Tight Oil Production
Horizontal Well Count Tight Oil Production (units in thousands) (million barrels per day)
1,350 1,167 1,111 1,146 2.7 2.5 2.6 947 2.3 2.0
564 1.2
2009 2010 2011 2012 2013 2014 2011 2012 2013 2014 2015F 2016F Source: Baker Hughes. Source: EIA. Tight oil represents resources in low-permeability reservoirs, including shale and chalk formations. Specific regions included in the tight oil category are Bakken/Three Forks/Sanish, Eagle Ford, Woodford, Austin Chalk, Spraberry, Niobrara, Avalon/Bone Spring, and Monterey.
Building Products
Elastomers/rubber products are also used in a variety of building-products-related applications. In this end-market, construction spending and housing starts, which in the United States are projected to increase in the coming years, will drive growth.
U.S. Total Construction Spending U.S. Residential Housing Starts
($ in billions) (homes in thousands )
$1,252 $1,180 1,463 $1,109 $1,040 $971 1,162 $861 $911 $788 925 993 781
609
2011 2012 2013 2014E 2015P 2016P 2017P 2018P 2011 2012 2013 2014E 2015P 2016P Source: FMI. Source: NAHB.
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General Industrial
Pumps Elastomeric products are also used in the production of diaphragm pumps, which are a type of positive displacement Positive Displacement Pump Sales Worldwide pump that use the recurring movement of an elastomeric diaphragm to create pressure. According to Freedonia, global ($ in billions) sales of positive displacement pumps amounted to $10.1 billion in 2011, up from $8.1 billion in 2008, and are expected to continue to grow by 7.7% annually to $14.6 billion in 2016. $14.6 Diaphragm pumps represent the fastest-growing group of positive displacement pumps, growing at 8.0% per year. $10.1 $8.1 Diaphragm pumps are used in a range of applications, such as chemical, sanitary, and oil and gas applications. Robust growth in the oil and gas industry and the resurgence of the chemicals industry in North America have been and are expected to remain key drivers of diaphragm pump use. 2006 2011 2016 Railroads Source: The Freedonia Group, 2013. In North America, railroads carry approximately 40% of intercity freight, as measured by ton-miles, which is more than any other mode of transportation. There are more than 560 freight railroads operating in the United States. Domestic rail traffic is influenced principally by the health of the U.S. economy. As manufacturers increase production, freight carriers are needed to transport raw materials, intermediate products, and finished goods. Favorable outlooks for manufacturer shipments, industrial production, and gross domestic product are bullish indicators for the rail industry. In addition, the transportation of crude oil via rail, from approximately 75,000 originated carloads in 2011 to over 400,000 in 2013, is a key industry driver. This trend has in turn led to increased production of newer and safer tank cars, often using specialty materials. On a micro-level, demand for freight related maintenance and related services is driven by a number of factors including rail freight traffic, capacity and demand, and fleet age. Rail freight traffic, commonly measured by revenue ton-miles, is a primary indicator of sector strength. According to estimates by AAR and the U.S. Department of Transportation, revenue ton-miles for Class I railroads grew from 1,037 billion in 1990 to 1,764 billion in 2008, a CAGR of 3%, before declining to 1,516 billion in 2009 due to the economic recession. However, over the last three years, the revenue ton-miles recovered rapidly to a total of 1,735 billion in 2011. The chart below illustrates total revenue ton-miles for Class I railroads since 1990.
Rail Freight Revenue Ton-Miles in the United States
(ton-miles in millions)
1,771,897 1,770,545 1,777,236 1,729,256 1,740,687 1,696,425 1,691,004 1,712,567 1,662,598
1,551,438 1,532,214
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013P
Sources: AAR, U.S. DOT.
As rail traffic increases, railroad operators tend to increase their level of spending on equipment and equipment maintenance. According to AAR, the average U.S. manufacturer spends approximately 3% of its revenue on capital expenditures. The comparable figure for U.S. freight railroads is nearly 17%, or over five times more. The four largest U.S. freight railroads spend more on their tracks and infrastructure each year than most states spend on their highways.
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M&A Activity
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M&A Activity
Transaction Volume and Value
M&A activity in the specialty materials sector increased substantially in 2014. Through December 2014, transaction volume increased 18.6% compared with 2013. Specialty materials sector transaction volume was notably better than overall global M&A volume, which increased roughly 6.9% (the middle market increased 1.9%) during the same period. Transaction activity was strongest during the second quarter of 2014, up 14% sequentially over the first quarter and up 56% over the second quarter of 2013. We noted a marked increase in overall market activity in 2014 and expect this momentum to carry into 2015.
Global Specialty Materials Sector Transaction Volume(1)
(number of deals) Median: 266 +20.2% 400 347 350 304 279 286 280 300 266 230 253 250 214 194 200 138 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Global Specialty Materials Sector Transaction Value(1)
($ in millions)
Median: $16,721 $70,000 $58,856 $60,000 +114.1% $50,000 $42,240 $40,000 $30,889 $27,176 $30,000 $25,529 $14,238 $10,639 $16,721 $14,426 $20,000 $11,246 $12,898 $10,000 $0 2004 2005 2006 2007 (2) 2008 2009 2010 2011 (3) 2012 2013 2014
(1) Aggregate volume and value includes all announced deals through December 31, 2014. (2) Includes Lyondell Chemical/Basell AF merger ($19.7 bil) and SABIC/GE merger ($11.6 bil). (3) Includes Rhodia/Solvay merger ($7.8 bil) and Vulcan Materials/Martin Marietta Materials merger ($7.6 bil). Sources: Dealogic and William Blair’s Mergers and Acquisitions market analysis.
Aggregate specialty materials transaction value also increased significantly in 2014 due to the increase in transaction volume and more importantly the increase in $1 billion-plus transactions. Transactions such as Albemarle’s acquisition of Rockwood Holdings ($7.6 billion), The Blackstone Group’s acquisition of Pinafore Holdings (a.k.a. Gates Corporation) ($7.3 billion), INEOS’s acquisition of Styrolution Group ($2.6 billion), and Continental’s acquisition of Veyance Technologies ($1.9 billion) all contributed to the meaningful increase in transaction value. Other notable transactions in 2014 were Nordson’s acquisition of Avalon ($180 million), Lubrizol’s acquisition of Vesta for an undisclosed amount, and Toray’s acquisition of Zoltek for $589 million. We believe that specialty materials M&A activity will remain strong in 2015 as the domestic and global economies continue to improve and as factors such as debt financing multiples, private-equity capital, and the need for strategic growth continue to drive M&A activity.
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Participant Trends
As a percentage of total specialty materials transactions, financial sponsor buyers have historically accounted for approximately 20% to 30% of all transactions. In 2014, financial sponsor buyers accounted for 21% of transactions, versus 19% in 2013. Financial sponsors, whether through existing portfolio companies or as new platform investments, continue to be active investors in the specialty materials sector.
Breakdown of Acquirers by Type
Percent of Deals Sponsor Strategic
Percent of Deals 100%
80%
60%
40% 100%80% 40%60% 20%0% 20%
0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sponsor 33% 31% 29% 23% 24% 26% 19% 23% 24% 19% 18% Strategic 67% 69% 71% 77% 76% 74% 81% 77% 76% 81% 82% Data as of December 31, 2014. Sources: Capital IQ, Mergermarket, and William Blair & Company, L.L.C.
Domestic specialty materials transactions as a percentage of total specialty materials transactions have increased from a low of 54% in 2011 to 70% in 2014. Notable cross-border transactions include Continental’s (Hanover, Germany) acquisition of Veyance (Fairlawn, Ohio) for $1.9 billion, Toray Industries’ (Tokyo, Japan) acquisition of Zoltek (St. Louis, Missouri) for $587 million, and Sumitomo Bakelite’s (Tokyo, Japan) acquisition of Vaupell (Seattle, Washington). While we expect demand for cross-border transactions to remain strong, we anticipate the percentage of cross-border transactions to level off or increase slightly in 2015.
Breakdown of Acquirers by Location
Percent of Deals Domestic Cross-Border
100% Percent of Deals 100%80%
80%60%
60%40%
40%20%
20% 0%
0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Domestic 59% 50% 53% 59% 58% 59% 59% 54% 62% 60% 69% Cross-Border 41% 50% 47% 41% 42% 41% 41% 46% 38% 40% 31% Data as of December 31, 2014. Sources: Capital IQ, Mergermarket, and William Blair & Company, L.L.C.
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Specialty Materials Consolidators
As noted in the chart on page 25, approximately 82% of the transactions in this sector involve strategic buyers. There are a number of large, public consolidators in the sector (e.g., Parker Hannifin, PolyOne, Sumitomo Bakelite), as well as numerous private equity- backed strategics (e.g., Citadel Plastics, UTEX Industries, Pexco, Continental Structural Plastics) that are aggressively looking to expand their materials portfolio or process capabilities or to accelerate growth, often through increased exposure to fast-growing end-markets. In particular, we have noted that specialty materials businesses with exposure to higher-growth end-markets such as oil and gas, aerospace, and medical are the most attractive targets, garnering meaningful attention and high multiples.
Selected Specialty Materials Consolidators
High Performance / Engineered Plastics Composites Rubber / Elastomers
Specialty Materials Investment Banking 25 M&A Activity
William Blair & Company
Financial Sponsors in the Specialty Materials Market
In addition to the large number of strategic consolidators in the sector, specialty materials is an attractive sector for financial buyers. Financial sponsors tend to be attracted to the defensible nature of these businesses given the unique materials, technology, or process capabilities. Many of these businesses can also have exposure to relatively higher-growth or higher-margin end-markets, such as oil and gas, medical, or aerospace. In addition, given that the margin profile of these businesses is generally higher than the average industrial business, cash flow tends to be strong. The chart below highlights selected financial sponsors that we have noted to be more active in the specialty materials sector, along with current and former relevant investments.
Active Financial Sponsors in Specialty Materials
(in millions)
Firm Fund Size Specialty Materials Experience Firm Fund Size Specialty Materials Experience
€8,200 $500 (1) (1)
$2,850 $1,600 (1) (1) (1)
$875 $2,000
$1,250 $1,500 (1) (1) (1)
$516 / $350 (1)
$425 (1) $1,200 (1) (1)
$1,750 $2,000 (1) (1)
$600 (1) $1,000
$511 $700 (1)
$425 $270 (1) (1) (1)
$250 $1,300 (1) (1)
$600 $1,000
$1,000 $844
$500 $820 (1)
$500 $380 (1)
$275 $300 (1)
$600 (1) (1) $1,200
$525 $725 (1)
$700 (1) $915 (1) (1) Denotes former portfolio investment.
Specialty Materials Investment Banking M&A Activity 26
William Blair & Company
Valuation Trends
Specialty Materials Transactions—Target Median Revenue Multiples
EV/Revenue Multiple Median: 0.76x 1.40x 1.20x 1.20x 0.99x 1.00x 0.83x 0.85x 0.79x 0.70x 0.76x 0.70x 0.80x 0.67x 0.55x 0.60x 0.57x 0.40x 0.20x 0.00x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Data as of December 31, 2014. Sources: Capital IQ, Mergermarket, and William Blair & Company, L.L.C.
As illustrated in the following exhibit, median M&A transaction multiples for the specialty materials sector trended higher in both 2013 and 2014. From median multiples in 2012 and 2013 of 7.4 times and 8.3 times, respectively, multiples trended higher to 9.8 times in 2014, above the 10-year median of 7.9 times. The 2014 multiple has exceeded its 10-year high in 2005 of 9.7 times.
Specialty Materials Transactions—Target Median EBITDA Multiples
EV/EBITDA Multiple Median: 7.9x
12.0x 9.7x 9.8x 8.9x 10.0x 8.6x 7.9x 8.3x 7.4x 7.1x 7.5x 7.4x 7.4x 8.0x 6.0x 4.0x 2.0x 0.0x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: Data represents global transactions announced in the respective sectors. Note: Transactions with multiples that are not meaningful are categorized as undisclosed. Data as of December 31, 2014. Sources: Capital IQ, Mergermarket, and William Blair & Company, L.L.C.
Specialty Materials Investment Banking 27 M&A Activity
William Blair & Company
Recent Notable Specialty Materials Transactions
Announced: 9/26/13 Observations/Rationale: Zoltek manufactures carbon fiber in the United States, Europe, and Asia. Its products Target: are used in composite materials, acrylic fibers, aircraft brake pads, and heat and fiber St. Louis, MO barriers. Toray Industries manufactures and sells chemical products in Japan, North America, and Europe. Its divisions include fibers and textiles, plastics and chemicals, IT-related products, carbon fiber composites, environment and engineering, and life Acquirer: sciences. Zoltek manufactures large tow carbon fiber. Toray, the world’s largest producer of Tokyo, Japan carbon fiber, focuses on regular tow carbon fiber principally for the aerospace Key Metrics: market. Implied Enterprise Value ($M): $586.9 Acquisition provides Toray with access to the large tow market, allowing it to EV/LTM Revenue: 4.1x diversify into windmill blades and automotive parts. EV/LTM EBITDA: 19.6x Strengthens Toray’s sales presence in the United States.
Allows Toray the opportunity to improve the quality of Zoltek’s products through the use of Toray’s technology.
Announced: 2/10/2014 Observations/Rationale: Veyance Technologies, Inc. manufactures and markets engineered rubber products for Target: heavy duty industrial, automotive, and military applications. The company provides automotive and commercial truck aftermarket parts, air springs, conveyor belts, home (Carlyle Group) Fairlawn, OH and garden products, hydraulics, industrial hoses, molded products, power transmission products, rubber tracks, power sports products, and transportation OE products. Continental Aktiengesellschaft provides various products and services Acquirer: primarily for the automotive industry worldwide.
Hanover, Germany Veyance Technologies, previously owned by Carlyle Group, will be integrated into the ContiTech division of Continental.
Key Metrics: With this acquisition, ContiTech gains significant North American exposure and Implied Enterprise Value ($M): $1,910.1 creates less dependency on Europe. EV/LTM Revenue: 0.96x EV/LTM EBITDA: 7.3x In addition, the acquisition of Veyance gives ContiTech greater exposure to other end-markets outside automotive OE.
Announced: 4/21/14 Observations/Rationale: Vaupell produces thermoplastic interior parts and assemblies for the commercial Target: aerospace, medical, and industrial markets. Sumitomo Bakelite is one of the largest providers of thermoset materials in the world, with an extensive portfolio including a (HIG Capital) large range of phenolic and epoxy resins and other compounds. Seattle, WA Acquisition enables Sumitomo Bakelite to extend its High Performance Plastic (HPP) division in automotive components into the dynamic aircraft interiors Acquirer: market. Allows Sumitomo Bakelite to be an integrated supplier in aerospace interiors, Tokyo, Japan from raw materials to molding to finishing and assembly. Key Metrics: Ability to leverage Sumitomo Bakelite’s phenol resin capabilities while also Implied Enterprise Value ($M): $265.0 expanding its medical presence. EV/LTM Revenue: 2.15x EV/LTM EBITDA: ~10.0x
Specialty Materials Investment Banking Recent Notable Specialty Materials Transactions 28
William Blair & Company
Announced: 5/1/14 Observations/Rationale: RTH produces colored EPDM granules used for playground surfacing, running tracks, Target: & and other rubber goods. RTD manufactures rolled rubber products such as athletic and Delphos, OH commercial flooring, acoustical underlay, and load containment matting. Accella manufactures polyurethanes, plastics, and recycled rubber products. Acquisition brings expanded capabilities and colored EPDM technology to Acquirer: Accella’s recycled rubber products business. (Arsenal Capital Partners) Allows for cross-selling opportunities with Accella’s polyurethane business in the Maryland Heights, MO athletic surfacing market. Key Metrics: Makes Accella the only vertically integrated manufacturer producing recycled tire Implied Enterprise Value ($M): ND crumb, a wide variety of colored EPDM granules, and urethane binder. EV/LTM Revenue: ND EV/LTM EBITDA: ND
Announced: 6/2/2014 Observations/Rationale: Scepter Corporation manufactures and markets plastics products for the consumer, Target: industrial, and military products industries. Myers Industries manufactures and sells
Scarborough, ON, Canada polymer products for the industrial, agricultural, automotive, and consumer end- markets, among others. Bolsters Myers’ in-house product engineering and mold art capabilities. Acquirer: Scepter is the third bolt-on acquisition to Myers’ material handling segment in the past two years, furthering the company’s strategic initiatives to grow this Akron, OH segment. Key Metrics: The acquisition adds 350 employees and manufacturing plants in Toronto and Implied Enterprise Value ($M): $157 Miami, OK. EV/LTM Revenue: 1.57x EV/LTM EBITDA: 6.7x
Announced: 6/4/2014 Observations/Rationale: Ferro’s specialty plastics division produces and sells specialty materials and chemicals Target: in the United States and internationally. A. Schulman supplies plastic compounds and Specialty Plastics Division resins for packaging, automotive, consumer products, and industrial applications. Mayfield Heights, OH The acquisition allows A. Schulman to obtain more balanced geographic coverage. Also enables A. Schulman to provide existing customers of its specialty plastics Acquirer: segment with an expanded product portfolio.
Fairlawn, OH Key Metrics: Implied Enterprise Value ($M): $91.0 EV/LTM Revenue: 0.60x EV/LTM EBITDA: ND
Specialty Materials Investment Banking 29 Recent Notable Specialty Materials Transactions
William Blair & Company
Announced: 7/7/2014 Observations/Rationale: CCP Composites produces and distributes gel coatings, resins, and industrial cleaners. Polynt S.p.A. conducts R&D, production, and marketing of organic anhydrides, Target: derivatives, and esters. Its end-markets include paint production, electrical cable
(Total SA) coating, synthetic leather, tubing, textiles, and automotive. Courbevoie, France CCP Composites transforms Polynt into the leading integrated specialty chemicals player focused on unsaturated polyester resins (USR) used in industrial/manufacturing end–markets. Acquirer: With CCP’s presence in Europe and the United States, Polynt can further its strategy of international growth and European consolidation. (Investindustrial) Polynt also becomes more vertically integrated across the whole value chain, from Scanzorosciate, Italy the production of raw materials to the manufacture of downstream resin-fiber Key Metrics: composites. Implied Enterprise Value ($M): $100.0 EV/LTM Revenue: 0.18x EV/LTM EBITDA: ND
Announced: 7/9/2014 Observations/Rationale: Tensar is the leading producer of proprietary georigid and geotextile products used in Target: civil engineering projects including roads, runways, railways, ports, and real estate development. Castle Harlan is a leading private equity firm specializing in buyouts, acquisitions, and restructurings of middle-market private companies. (Arcapita/American Capital/PineBridge) Tensar’s proprietary technologies are widely used in soil stabilization, earth Alpharetta, GA retention, foundation support, and erosion control. The target’s global footprint currently serves customers in 80 countries. Acquirer: Castle Harlan This acquisition provides the Castle Harlan team a unique platform in the nontraditional site development industry. New York, NY Key Metrics: Implied Enterprise Value ($M): $400.0 EV/LTM Revenue: Proprietary EV/LTM EBITDA: Proprietary
Announced: 7/11/14 Observations/Rationale: Kardoes specializes in custom rubber mixing. Hexpol Compounding develops, produces, and supplies rubber compounds for applications in transportation, Target: consumer goods, industrial, construction, oil and gas, and roller markets.
Lafayette, AL The acquisition of Kardoes allows Hexpol to broaden and strengthen its offerings in the rubber compound market. The transaction extends Hexpol’s reach into end-markets such as industrial Acquirer: materials handling, agricultural equipment, and off-road tires.
The transaction is expected to create an immediate positive impact on earnings Burton, OH per share. Key Metrics: Implied Enterprise Value ($M): $31.8 EV/LTM Revenue: 0.70x EV/LTM EBITDA: ND
Specialty Materials Investment Banking Recent Notable Specialty Materials Transactions 30
William Blair & Company
Announced: 8/1/2014 Observations/Rationale: Vesta contract manufactures and supports medical devices. It specializes in precision Target: thermoplastic extrusion and silicone fabrication. Lubrizol produces and supplies specialty chemicals for the transportation, industrial, and consumer end-markets.
(RoundTable Healthcare The Vesta acquisition expands Lubrizol’s footprint into the life sciences space, Partners) specifically around silicone and a variety of other thermoplastics used in medical Franklin, WI devices. Vesta’s three manufacturing locations in the United States offer Lubrizol enhanced Acquirer: capabilities in disposable silicone medical components, sheeting, and dip casting, (Berkshire Hathaway) among others. Wickliffe, OH Lubrizol remains an industry leader providing a total solution to medical device companies, from proprietary design and manufacturing capabilities to
Key Metrics: distribution. Implied Enterprise Value ($M): Proprietary EV/LTM Revenue: Proprietary EV/LTM EBITDA: Proprietary
Announced: 8/4/2014 Observations/Rationale: Avalon designs and manufactures medical devices used in surgery settings as well as minimally invasive procedures. Products serve customers in valve replacement, bypass Target: surgeries, urology, and lung support, among others. Nordson is a publicly traded engineering, marketing, and manufacturing firm for adhesives, polymers, biomaterials, and other specialty materials. Rancho Dominguez, CA Avalon, as a leading designer and manufacturer of highly specialized catheters and medical tubing, gives Nordson a further foothold into the highly attractive Acquirer: healthcare sector. Avalon’s double-digit EBITDA growth, unique intellectual property, strong Westlake, OH customer relationships, and manufacturing technology were highly attractive to Nordson. Key Metrics: The acquisition provides Nordson with access to both blue-chip healthcare OEM Implied Enterprise Value ($M): Proprietary EV/LTM Revenue: Proprietary customers and a strong product pipeline into the adjacent bariatric, tracheostomy, EV/LTM EBITDA: Proprietary endoscope, and stent markets.
Announced: 9/3/2014 Observations/Rationale: First Engineering Limited manufactures ultra-precision moulds and plastic injection FIRST ENGINEERING molded components for performance-critical engineering applications. It offers Target: Think precision engineering, Think FIRST ENGINEERING product design, tooling, production, and assembly services for hard disk drives, PC
Singapore peripherals, optical related products, medical equipment, business machines, and automotive industries. Sunningdale Tech Ltd. is an Asian tooling, plastics injection moulding, and precision assembly company offering a wide range of services to the global market, including inter alia, tooling, plastics injection moulding with decorative Acquirer: finishing processes, and precision assembly. Together, First Engineering and Sunningdale Tech have annual revenues of more Singapore than USD 500 million, with some 10,000 employees located in manufacturing and corporate facilities across Asia, Australia, Europe, South America, and North
Key Metrics: America. Implied Enterprise Value ($M): $80.0 EV/LTM Revenue: 0.60x Through the acquisition, Sunningdale will be able to expand its blue-chip EV/LTM EBITDA: 4.7x customer base and offer a wider product offering for its customers. Acquisition further strengthens Sunningdale’s existing footprint and provides immediate access to the Indian market.
Specialty Materials Investment Banking 31 Recent Notable Specialty Materials Transactions
William Blair & Company
Announced: 9/24/14 Observations/Rationale: Engineered Polymers designs and manufactures large and complex plastic components Target: for customers. The company’s products include injection molded parts and assemblies.
Mora, MN Imperial Plastics manufactures and supplies engineered plastic injection molded components. In addition, it offers automated assembly, hand assembly, warehousing, and systems package and drop ship services. Acquirer: Imperial Plastics expands its portfolio with Engineered Polymers’ structural foam (Goldner Hawn) technology, allowing for a more differentiated customer offering. Lakeville, MN Acquisition allows Imperial to gain injection press capacity up to 3,300 tons plus Key Metrics: structural foam machines up to 1,500 tons. Implied Enterprise Value ($M): ND Acquisition will help Imperial gain more exposure and growth within the EV/LTM Revenue: ND recreational vehicle market. EV/LTM EBITDA: ND
Announced: 10/20/2014 Observations/Rationale: Cool Polymers is a leading compounder of conductive polymers. Celanese Corporation Target: is a global technology and specialty materials company that manufactures and sells value-added chemicals, thermoplastic polymers, and other chemical-based products
North Kingstown, RI worldwide. The acquisition of Cool Polymers will help accelerate Celanese’s conductive Acquirer: polymers business segment by building on Cool Polymers’ already strong product
Irving, TX portfolio and technical capabilities. Cool Polymers’ technical capabilities in the LED market will allow for immediate customer growth and unlock value for customers through its specialized product Key Metrics: portfolio. Implied Enterprise Value ($M): ND EV/LTM Revenue: ND Cool Polymers’ formulation and prototyping capabilities will additionally help EV/LTM EBITDA: ND develop further innovative products.
Specialty Materials Investment Banking Recent Notable Specialty Materials Transactions 32
Public Comparables
William Blair & Company
Public Comparables
Compounders/Material Suppliers
Selected Comparable Public Company Metrics
($ in millions) LTM Financials LTM Margins 3-Year Valuation Stock Price Historical Change Since OCF Revenue Enterprise EV/LTM EV/LTM Net Debt/ Company 12/31/13 Revenue EBITDA Gross Profit EBITDA Margin(1) CAGR Value Revenue EBITDA EBITDA
A. Schulman, Inc. 14.9% $2,357 $151 13.4% 6.4% 4.9% 8.3% $1,396 0.59x 9.3x 1.4x
Airboss of America Corp. 44.6% 295 26 14.1% 8.6% 7.3% 0.1% 292 0.99x 11.4x 2.0x
Celanese Corporation 8.4% 6,726 1,335 22.4% 19.8% 11.3% 3.2% 11,465 1.70x 8.6x 1.4x
Ferro Corporation 1.0% 1,610 239 21.5% 14.8% 11.1% (8.0%) 1,465 0.91x 6.1x 1.3x
Hexpol AB (Publ) 52.8% 1,283 239 21.7% 18.6% 17.1% 28.4% 3,245 2.98x 16.0x NMF
Kraton Performance Polymers Inc. (9.8%) 1,264 125 19.2% 9.9% 1.6% 1.7% 990 0.78x 7.9x 2.1x
PolyOne Corporation 7.2% 3,940 484 19.7% 12.3% 9.9% 12.4% 4,293 1.09x 8.9x 1.5x
Mean 17.0% $2,496 $371 18.9% 12.9% 9.0% 6.6% $3,306 1.29x 9.7x 1.4x
Median 8.4% $1,610 $239 19.7% 12.3% 9.9% 3.2% $1,465 0.99x 8.9x 1.4x (1) Operating cash flow (OCF) calculated as EBITDA less capital expenditures. Source: Capital IQ as of December 31, 2014.
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Compounders +160.5% (Indexed Price) Compounders +17.6% 350% S&P 500 +84.6% 120% S&P 500 +11.4%
275% 110%
200% 100%
125% 90%
50% 80%
Source: FactSet Research Systems as of December 31, 2014. Source: FactSet Research Systems as of December 31, 2014.
Valuation Multiples – LTM EBITDA
Median: 7.9x 13.0x 11.4x 11.0x 10.1x 8.8x 8.7x 8.9x 7.9x 7.8x 9.0x 7.1x 7.0x 7.0x 4.6x 4.4x 5.0x 3.0x 1.0x -1.0x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: FactSet Research Systems as of December 31, 2014.
Specialty Materials Investment Banking 33 Public Comparables
William Blair & Company
Composites
Selected Comparable Public Company Metrics
($ in millions) LTM Financials LTM Margins 3-Year Valuation Stock Price Historical Change Since OCF Revenue Enterprise EV/LTM EV/LTM Net Debt/ Company 12/31/13 Revenue EBITDA Gross Profit EBITDA Margin(1) CAGR Value Revenue EBITDA EBITDA
Core Molding Technologies Inc. 2.2% $151 $16 16.1% 10.6% 2.9% 12.9% $116 0.77x 7.2x 0.5x
Cytec Industries Inc. (0.9%) 2,003 424 34.0% 21.2% 8.7% 16.5% 3,895 1.94x 9.2x 1.3x
FACC AG N/A 771 85 40.2% 11.0% (0.3%) 20.4% 576 0.82x 7.4x 2.2x
Gurit Holding AG (14.7%) 352 25 47.7% 7.1% 5.0% (3.4%) 182 0.57x 8.0x NMF
Hexcel Corp. (7.2%) 1,811 371 27.3% 20.5% 6.3% 12.7% 4,353 2.40x 11.7x 1.1x
Koninklijke Ten Cate nv (18.4%) 1,355 101 19.7% 7.5% 5.8% 0.9% 893 0.71x 9.5x 2.9x
Toray Industries, Inc. 33.0% 18,884 1,934 19.3% 10.2% 3.9% 5.5% 19,517 1.18x 11.5x 3.2x
Trex Co. Inc. 7.1% 334 48 28.9% 14.3% 10.4% 2.4% 1,527 4.58x NMF 1.6x
Mean 0.2% $3,207 $376 29.2% 12.8% 5.3% 8.5% $3,882 1.62x 9.2x 1.6x
Median (0.9%) $1,063 $93 28.1% 10.8% 5.4% 9.1% $1,210 1.00x 9.2x 1.5x (1) Operating cash flow (OCF) calculated as EBITDA less capital expenditures. Source: Capital IQ as of December 31, 2014.
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Composites +90.1% (Indexed Price) Composites +4.5% 250% S&P 500 +84.6% 120% S&P 500 +11.4%
200% 110%
150% 100%
100% 90%
50% 80%
Source: FactSet Research Systems as of December 31, 2014. Source: FactSet Research Systems as of December 31, 2014.
Valuation Multiples – LTM EBITDA
12.0x 10.4x 10.6x Median: 9.2x 9.4x 10.0x 8.8x 9.0x 9.5x 9.3x 9.2x 7.6x 8.0x 6.4x 6.3x 6.0x 4.0x 2.0x 0.0x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: FactSet Research Systems as of December 31, 2014.
Specialty Materials Investment Banking Public Comparables 34
William Blair & Company
High-Performance Plastics
Selected Comparable Public Company Metrics
($ in millions) LTM Financials LTM Margins 3-Year Valuation Stock Price Historical Change Since OCF Revenue Enterprise EV/LTM EV/LTM Net Debt/ Company 12/31/13 Revenue EBITDA Gross Profit EBITDA Margin(1) CAGR Value Revenue EBITDA EBITDA
Carclo plc (68.6%) $167 $18 53.7% 10.9% 4.1% 3.1% $130 0.82x 7.5x 2.0x
Essentra plc (14.8%) 1,298 265 57.4% 20.5% 16.4% 17.7% 3,147 2.50x 12.2x 1.3x
Nifco Inc. 40.7% 2,002 292 28.4% 14.6% 2.7% 12.1% 1,960 1.14x 7.8x 0.8x
Nolato AB 21.5% 633 80 15.0% 12.7% 9.1% 10.2% 580 1.08x 8.6x NMF
Rogers Corporation 32.4% 599 110 37.8% 18.4% 14.7% 12.9% 1,334 2.22x 12.1x NMF
Sumitomo Bakelite Co. Ltd. 24.6% 2,075 212 27.2% 10.2% 4.8% (0.4%) 1,136 0.63x 6.2x 0.9x
Victrex plc 13.3% 418 186 64.6% 44.4% 18.4% 4.8% 2,610 6.65x 15.0x NMF
Mean 7.0% $1,027 $166 40.6% 18.8% 10.0% 8.6% $1,557 2.15x 9.9x 1.3x
Median 21.5% $633 $186 37.8% 14.6% 9.1% 10.2% $1,334 1.14x 8.6x 1.1x (1) Operating cash flow (OCF) calculated as EBITDA less capital expenditures. Source: Capital IQ as of December 31, 2014.
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) High Performance Plastics +170.3% (Indexed Price) High Performance Plastics +8.6% 275% S&P 500 +84.6% 120% S&P 500 +11.4%
225% 110%
175% 100%
125% 90%
75% 80%
Source: FactSet Research Systems as of December 31, 2014. Source: FactSet Research Systems as of December 31, 2014.
Valuation Multiples – LTM EBITDA
14.0x 12.3x Median: 8.3x 11.5x 12.0x 11.2x
10.0x 8.5x 8.3x 7.2x 7.0x 8.2x 8.6x 8.0x 6.5x 6.0x 4.2x 4.0x 2.0x 0.0x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: FactSet Research Systems as of December 31, 2014.
Specialty Materials Investment Banking 35 Public Comparables
William Blair & Company
Elastomers
Selected Comparable Public Company Metrics
($ in millions) LTM Financials LTM Margins 3-Year Valuation Stock Price Historical Change Since OCF Revenue Enterprise EV/LTM EV/LTM Net Debt/ Company 12/31/13 Revenue EBITDA Gross Profit EBITDA Margin(1) CAGR Value Revenue EBITDA EBITDA
Anhui Zhongding Sealing Parts Co., Ltd. 71.4% $843 $124 27.6% 14.7% 10.6% 17.5% $2,621 3.13x 21.3x 0.9x
Dätwyler Holding Inc. 3.1% 1,344 199 24.8% 14.8% 9.2% (2.3%) 1,935 1.59x 10.7x N/A
EnPro Industries, Inc. 8.9% 1,178 152 33.7% 12.9% 10.4% 9.8% 1,923 1.63x 12.7x 2.8x
Fenner PLC (55.4%) 1,205 132 31.0% 11.0% 7.5% 10.6% 869 0.75x 6.9x 1.5x
Parker-Hannifin Corporation 0.2% 13,216 1,936 23.4% 14.6% 13.0% 5.6% 19,849 1.50x 10.3x 0.1x
Trelleborg AB 3.2% 3,329 525 35.5% 15.8% 11.8% (7.6%) 5,490 1.92x 12.2x 1.9x
Mean 5.2% $3,519 $511 29.3% 14.0% 10.4% 5.6% $5,448 1.76x 12.3x 1.4x
Median 3.1% $1,275 $176 29.3% 14.7% 10.5% 7.7% $2,278 1.61x 11.5x 1.5x (1) Operating cash flow (OCF) calculated as EBITDA less capital expenditures. Source: Capital IQ as of December 31, 2014.
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Elastomers +124.7% (Indexed Price) Elastomers +8.5% 275% S&P 500 +84.6% 120% S&P 500 +11.4%
225% 110%
175% 100%
125% 90%
75% 80%
Source: FactSet Research Systems as of December 31, 2014. Source: FactSet Research Systems as of December 31, 2014.
Valuation Multiples – LTM EBITDA
Median: 8.0x 15.0x 13.0x 11.1x 11.6x 11.5x 11.0x 9.4x 8.2x 9.0x 6.7x 7.6x 7.8x 7.4x 8.0x 7.0x 4.4x 5.0x 3.0x 1.0x -1.0x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: FactSet Research Systems as of December 31, 2014.
Specialty Materials Investment Banking Public Comparables 36
Quarterly Market Update – All Industries
William Blair & Company
Quarterly Market Update – All Industries
U.S. Activity Trends
M&A Activity
Number of Deals Undisclosed Middle Market >$750M Deal Value Deal Value ($ in billions) 12,420 13,340 12,749 13,397 14,643 12,198 12,713 18,000 8,792 9,934 10,087 11,488 9,375 $1,800 12,000 $1,200 6,000 $600 0 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Number of Deals >$750M 147 233 281 362 460 228 156 287 262 301 310 372 Middle Market 4,239 4,527 4,453 4,548 4,537 4,766 4,144 6,224 5,360 5,153 4,258 3,880 Undisclosed 4,406 5,174 5,353 7,510 8,343 6,494 5,075 6,238 7,775 9,189 7,630 8,461 Deal Value $688 $992 $1,297 $1,647 $1,750 $1,075 $886 $1,048 $1,174 $1,080 $1,242 $1,806
Middle-Market M&A Activity
Deal Value Number of Deals <$50M $50-250M $250 -750M Deal Value ($ in millions) 4,537 4,766 6,224 9,000 4,548 4,144 5,360 $600 4,239 4,527 4,453 5,153 4,258 3,880 6,000 $400 3,000 $200 0 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Number of Deals
$250M-$750M 314 402 424 536 627 417 269 457 475 463 523 504 $50M-$250M 1,065 1,218 1,265 1,294 1,333 1,195 791 1,138 1,148 1,148 1,094 1,137 <$50M 2,860 2,907 2,764 2,718 2,577 3,154 3,084 4,629 3,737 3,542 2,641 2,239 Deal Value $292 $351 $364 $421 $466 $355 $239 $370 $383 $378 $386 $381
Private-Equity Activity
Number of Deals Undisclosed Middle Market >$750M Deal Value Deal Value ($ in billions)
3,000 2,316 1,976 2,035 2,164 2,156 $900 1,646 1,812 2,247 1,821 1,888 2,000 1,200 1,462 $600 1,000 $300
0 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Number of Deals >$750M 33 61 84 106 149 64 34 94 88 92 93 115 Middle Market 626 906 859 998 826 788 742 869 698 688 557 534 Undisclosed 541 679 869 1,143 1,341 969 686 1,013 1,249 1,384 1,238 1,507 Deal Value $120.4 $224.6 $287.6 $523.7 $644.3 $243.7 $149.3 $272.3 $268.6 $262.1 $307.5 $382.5 Note: Year-to-date as of December 31, 2014 Sources: Dealogic and William Blair’s mergers-and-acquisitions market analysis. Data represents announced deals only.
Specialty Materials Investment Banking 37 Quarterly Market Update – All Industries
William Blair & Company
U.S. Valuation Trends
Median EV/EBITDA Multiples
Middle Market Overall Market
15.0x 12.0x 9.0x 6.0x
3.0x 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2104
Middle Market 7.5x 7.4x 8.7x 10.1x 10.0x 9.5x 7.9x 6.4x 9.3x 10.0x 9.1x 9.9x 10.2x
Overall Market 7.9x 8.0x 9.1x 10.3x 11.0x 11.2x 9.0x 7.4x 9.9x 10.8x 9.6x 10.0x 11.2x
Median EV/EBITDA Middle-Market Multiples
< $50M $50M-$250M $250M-$750M 16.0x 12.0x 8.0x 4.0x
0.0x 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 < $50M 4.1x 7.1x 6.4x 7.2x 10.2x 7.8x 4.9x 3.9x 8.8x 9.0x 6.8x 8.1x 7.7x $50M-$250M 7.5x 6.9x 8.7x 11.3x 9.5x 10.4x 9.1x 7.1x 9.3x 10.0x 9.2x 11.3x 10.1x $250M-$750M 9.7x 9.2x 9.1x 10.0x 11.0x 9.4x 8.3x 7.9x 9.7x 10.7x 10.2x 12.9x 10.5x
Average Acquisition Premiums
1-Week Premium 4-Week Premium 50%
40%
30%
20% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1-Week Premium 36% 32% 28% 26% 26% 27% 36% 38% 34% 36% 36% 23% 31% 4-Week Premium 38% 40% 32% 31% 31% 29% 37% 41% 38% 39% 39% 30% 34% Notes: Year-to-date as of December 31, 2014 Sources: Dealogic and William Blair’s mergers-and-acquisitions market analysis. Data represents announced deals only.
Specialty Materials Investment Banking Quarterly Market Update – All Industries 38
William Blair & Company
U.S. Equity Capital Markets Summary
Historical IPO Issuance
243 250
200 175 139 150 95 105 100 70 54 56 63 54 56 39 50 48 28 35 25 50 13 19 20 21 21 0 2009 2010 2011 2012 2013 2014 1Q 11 2Q 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
Historical Follow-on Issuance
657 700 612 564 600 506 470 500 399 400 300 173 193 198 183 200 135 128 130 127 152 139 120 86 98 115 111 100 50 0 2009 2010 2011 2012 2013 2014 1Q 11 2Q 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
Note: Excludes follow-on offerings for CLEFs, REITs, and SPACs
IPO Pricings by Sector – Last 4 Quarters: Follow-on Pricings by Sector – Last 4 Quarters:
243 Total Deals 612 Total Deals
11 60 16 Business Services 107 Business Services 59 48 31 Consumer Consumer 58 Financial Financial
26 Healthcare Healthcare 177 Industrial Industrial 162 100 Technology Technology
Sources: Dealogic and William Blair’s mergers-and-acquisitions market analysis.
Specialty Materials Investment Banking 39 Quarterly Market Update – All Industries
William Blair & Company
Debt Capital Markets Summary
Average Equity Contribution
Less than $50 million EBITDA More than $50 million EBITDA 50% 47% 46% 46% 45% 41% 43% 41% 40% 40% 41% 38% 38% 40% 40% 36% 37% 35% 37% 37% 36% 34% 33% 31% 32% 32% 32% 30% 29% 30% 30%
20%
10%
0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Quarterly LBO Debt Multiples – Less Than $50 Million EBITDA
Total Debt/EBITDA Senior Debt/EBITDA 7.0x 7.0x 7.0x 6.0x 4.8x 6.0x 6.0x5.1x 4.2x 4.9x 4.8x 5.0x 4.0x 4.9x 4.4x 5.0x 5.1x 5.0x 5.0x 4.2x 4.4x 5.0x 4.2x 4.2x 4.4x 3.8x3.8x 4.4x 4.0x 5.0x 5.1x 3.8x 3.8x3.7x 4.8x 3.4x 5.1x 3.6x 3.6x 3.7x 4.8x 4.0x 4.0x 4.5x4.5x 3.4x 5.0x 4.0x 3.8x 4.0x 4.0x 3.8x 3.0x 3.7x 3.8x 3.7x 3.0x 3.0x 3.3x 3.2x 3.7x 3.3x 3.1x 3.8x3.0x 2.2x 3.1x 3.7x 3.2x 3.0x 2.0x 2.2x 2.0x 2.0x 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Quarterly LBO Debt Multiples – Greater Than $50 Million EBITDA
7.0x 6.8x 7.0x 5.5x 6.6x 6.0x 5.3x 6.0x 5.1x 4.8x 4.9x 5.7x 5.3x 5.0x 4.5x 5.0x 4.8x 4.3x 5.0x 4.1x 4.4x 5.5x 4.0x 4.9x 4.0x 4.0x 4.4x 3.1x 3.9x 4.0x 2.6x 3.0x 3.5x 3.0x 3.1x 2.9x 2.6x 2.9x 2.0x 2.0x 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sources: Dealogic and Standard & Poor’s as of December 31, 2014.
Specialty Materials Investment Banking Debt Capital Markets Summary 40
William Blair & Company
Notes
Specialty Materials Investment Banking 41 Notes
William Blair & Company
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 February 10, 2015 Specialty Materials Investment Banking Disclosures 42
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. About William Blair From 2010-2014, the investment banking group completed more than 330 merger-and- Investment Banking acquisition 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.