INDUSTRIAL TECHNOLOGY INDUSTRY UPDATE │ FALL 2015 www.harriswilliams.de Harris Williams & Co. Ltd is a private limited company incorporated under English law having its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Christopher Williams, Mr. Ned Valentine, Mr. Paul Poggi and Mr. Thierry Monjauze, authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins. INDUSTRIAL TECHNOLOGY INDUSTRY UPDATE │ FALL 2015 SUMMARY CONTENTS M&A | SELECT RECENT ACTIVITY . RECENT M&A ACTIVITY OMRON Corporation (TSE:6645) has signed an agreement to purchase Adept . WHAT WE’RE READING Technology, Inc. (“Adept”), a leading provider of intelligent robots, autonomous . PUBLIC MARKETS mobile robotic solutions and services. The acquisition of Adept will enhance . M&A MARKET TRENDS OMRON’s advanced automation technology solutions offering. ECONOMIC UPDATE Source . PUBLIC COMPARABLES Honeywell International Inc. (NYSE:HON) has announced an agreement to acquire the Elster Division (“Elster”) of Melrose Industries plc (LSE:MRO) for $5.1 billion. Elster CONTACTS is a leading provider of gas, water, and electricity meters for residential, commercial, and industrial markets globally. Jeffery Perkins Source Managing Director [email protected] +49 (69) 3650638 13 Hillenbrand, Inc. (NYSE:HI) has completed the acquisition of ABEL Pumps LP and certain of its affiliates (“ABEL”) from Roper Technologies, Inc. (NYSE:ROP) for €95 Jay Hernandez million in cash. ABEL specializes in designing, developing, and manufacturing Director piston diaphragm and piston pumps for the power generation, wastewater [email protected] treatment, mining, general industry, oil and gas and marine markets. +1 (617) 654-2114 Source Lars Friemann Director Sentinel Capital Partners has announced the sale of IEP Technologies (“IEP”) to [email protected] HOERBIGER Group. IEP provides explosion protection systems and services that +49 (69) 3650638 12 suppress, isolate, and vent potential combustible dust or vapor explosions in process industries. The acquisition will make HOERBIGER one of the world’s leading Alex Murrill providers of highly engineered safety and explosion protection technology. Vice President Source [email protected] +44 (20) 7518 8918 Sensata Technologies Holding N.V. (NYSE:ST) has announced an agreement to Nicholas Dager acquire the sensing portfolio of Custom Sensors & Technologies, Inc. (“CST”) for Associate $1.0 billion. The acquisition includes the Kavlico, BEI, Crydom and Newall product [email protected] lines and brands and includes sales, engineering and manufacturing sites in the +1 (617) 654-2134 United States, United Kingdom, Germany, France, China, and Mexico. CST is a leading provider of sensors, controls, and actuators for the aerospace and defense, transportation, industrial, medical, and energy and infrastructure markets. The transaction is expected to close by the end of Q4 2015. Source PUBLIC MARKETS | KEY TRADING STATISTICS Stock Price % Change TEV / EBITDA TEV / LTM EBITDA LTM Margins Sub-Sector Median 1 Month 12 Month LTM 2015E Oct-14 Apr-15 Gross EBITDA Test and Measurement Instrumentation 2.2% 8.7% 12.7x 11.6x 11.2x 13.2x 38.5% 16.4% Sensors (1.4%) 1.6% 11.6x 10.5x 12.2x 12.5x 40.0% 20.1% Technology and Software 3.3% 12.6% 11.2x 10.5x 12.6x 16.0x 47.0% 17.6% Life Sciences and Laboratory (1.6%) 21.1% 15.7x 13.8x 13.1x 14.5x 49.1% 21.6% Flow Control Pumps and Filtration 0.8% (2.1%) 11.3x 11.3x 11.0x 12.2x 34.6% 16.1% Valves and Fittings (1.8%) (0.7%) 9.7x 10.2x 9.9x 11.6x 32.8% 14.6% Process / Motion Control Motion and Drives (0.0%) (7.4%) 10.4x 9.3x 10.8x 12.2x 35.4% 15.9% Intelligent Automation 0.6% (4.5%) 10.0x 9.3x 10.3x 11.6x 36.9% 12.8% Actuators and Positioners (1.0%) (7.3%) 8.8x 8.8x 9.0x 10.0x 30.9% 15.5% Condition Monitoring (2.5%) 0.9% 11.7x 9.2x 10.2x 13.3x 47.2% 18.3% Test Services Testing, Inspection, and Certification 4.2% 2.7% 10.7x 10.3x 10.4x 11.0x 34.0% 17.9% Engineering and Consulting 4.6% (13.2%) 10.6x 9.3x 10.5x 10.9x 17.5% 7.1% www.harriswilliams.de PAGE | 1 INDUSTRIAL TECHNOLOGY INDUSTRY UPDATE │ FALL 2015 WHAT WE’RE READING THE ROBOTICS REVOLUTION: THE NEXT GREAT LEAP IN MANUFACTURING Boston Consulting Group The use of advanced industrial robots is nearing the point of takeoff, a development that could power a new wave of productivity growth in many industries and lead to changes of up to 5 percentage points in the cost competitiveness of major export economies relative to the U.S., according to new research by The Boston Consulting Group. The study projects that investment in industrial robots will accelerate markedly over the next decade, aided by a combination of price and performance improvements, from annual growth that now averages 2 to 3 percent to around 10 percent. As a result, the total cost of manufacturing labor in 2025 could be 16 percent lower, on average, in the world's 25 largest goods-exporting nations than they would be otherwise. Depending on the industry and country, output per worker could rise by an estimated 10 to 30 percent over and above productivity gains that typically come from other measures. Read the full article here. GLOBAL MACHINE CONDITIONING MARKET INSTRUMENTATION MARKET TO REACH $2.3 BILLION BY 2020 Mordor Intelligence As companies are increasingly focusing on asset utilization and increasing productivity, the global machine condition monitoring market is expected to grow from $1.7 billion in 2015 to $2.3 billion by 2020, representing a compounded annual growth rate of 6.5%. Predictive maintenance, through technology such as corrosion monitoring equipment, lubricating oil analysis equipment, motor current signature analysis, thermography equipment, ultrasound emission equipment, and vibration monitoring equipment, are expected to be utilized in harsh environments, such as energy & power, aerospace, chemicals and heavy industrials, to further prevent major damage or even total failure of the equipment. Read the full article here. FED DOUBTS GROW ON 2015 RATE HIKE Wall Street Journal The chances of a Federal Reserve rate increase in 2015 are diminishing amid new signs of anemic economic activity, a disappointing development for central bank officials who have been hoping to move this year after a prolonged period of easy-money policies. Lackluster readings on consumer spending, inflation and jobs have virtually eliminated the chances of a move in October. The recent trove of data hasn’t reassured top officials about the economic outlook, with two Fed governors expressing doubts about whether the timing will be right this year. The Commerce Department has reported seasonally adjusted retail sales rose just 0.1% in September, and actually fell from August’s levels once car sales were stripped out. The Labor Department also reported producer prices—an indication of inflation at the wholesale level—fell 0.5% in September and were down 1.1% from a year earlier, the largest 12-month decline during this expansion. Read the full article here. LABORATORY ANALYTICAL INSTRUMENTATION MARKET TO REACH $11.4 BILLION BY 2021 Frost & Sullivan Driven by increasingly stringent regulatory safety requirements, the global laboratory analytical instrumentation market is expected to increase from $7.5 billion in 2014 to over $11.3 billion in 2015 according to a recent study by Frost & Sullivan. The food industry is anticipated to continue to be the prominent user for these instruments, particularly with sophisticated chromatographic and spectroscopic techniques designed to improve the quality of testing, as well as mass spectrometry products due to sensitive detection capabilities. Industries ranging from environmental to biopharmaceuticals to clinical research and diagnostics are also expected to further drive global demand for laboratory analytical instruments. Read the full article here. PAGE | 2 INDUSTRIAL TECHNOLOGY INDUSTRY UPDATE │ FALL 2015 M&A TRANSACTIONS RECENT M&A TRANSACTIONS Date Target Vertical Business Description Acquirer 10/14/2015 Professional Service Test Services Provides building materials testing, geotechnical services, and property Intertek Group plc Industries, Inc. and environmental assurance to commercial and civil construction markets. 10/1/2015 Automated Quality Test and Measurement Manufactures sensors and measurement equipment for Motion Tech Automation, Technologies, Inc. semiconductor, automotive, packaging, and laboratory research LLC applications. 10/1/2015 PRIAMUS SYSTEM Process / Motion Control Provides quality assurance systems for injection moldings applications. Barnes Group Inc. TECHNOLOGIES AG 9/28/2015 President Engineering Flow Control Offers cryogenic valves, flow measurement and control products for oil Parker-Hannifin Group Limited & gas applications. Corporation 9/24/2015 Clearlogx, Inc. Flow Control Manufactures water treatment chemical feed automation and control H2O Innovation Inc. products for municipal drinking water, wastewater treatment, and water reuse applications. 9/24/2015 Outreach Technologies, Test Services Provides radiochemical analysis and environmental test services. Environmental Science Inc. Corp. 9/16/2015 Adept Technology Inc. Process / Motion Control Manufactures industrial and mobile robots for electronics, food, OMRON Corporation semiconductor, warehouse/logistics, medical, and automotive markets. 9/14/2015 Dansk Institut for Test Services Provides quality assurance and certification services for the Intertek Group plc Certificering A/S transportation, energy, steel, and engineering sectors. 9/9/2015 Seahorse Bioscience, Inc. Test and Measurement Manufactures analytical instruments, biomanufacturing systems, and Agilent Technologies Inc.