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2018 U.S. Middle-Market Manufacturing M&A Deal Value Accelerates

Concentration and Cross Holdings of Chinese Banks

EMEA Struggles To Attract PE Investment As Year's End Approaches

Public Companies Going Private

Banking, Corporations, Insurance, Professional Services

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Capital Markets
2018 U.S. Middle-Market Manufacturing M&A Deal Value Accelerates

Apr. 16 2018 — U.S. merger and acquisition activity hit the ground running in 2018, with announced deal value accelerating to its fastest start since 2000. Middle-market manufacturing M&A activity is also off to a much better start than last year.

Year-to-date as of February 7, 2018, there have been about $1.28 billion of middle-market manufacturing M&A transactions announced, compared to $622.1 million as of the same date in 2017. The rebound in activity is welcome after middle-market M&A activity in the manufacturing space plunged last year, falling more than 25% from $13.55 billion in 2016. If 2018 continues as it has begun, announced middle-market manufacturing deal value could once again top $12 billion.

For the purposes of this analysis, S&P Global Market Intelligence defined middle-market M&A activity as deals valued at $25 million to $500 million. We included transactions for which deal value information is available through S&P Capital IQ, an offering of S&P Global Market Intelligence. The analysis captures transactions within the following sectors, as defined on S&P Capital IQ: aerospace and defense; building products; construction and engineering;  electrical equipment; industrial conglomerates; and machinery.

Within this M&A category, the largest deal of 2017 was private equity firm Lindsay Goldberg's $500 million investment in Lexington, Ky.-based fan manufacturer Delta T Corp. Another top middle-market manufacturing deal came when European aerospace firm Sonaca SA agreed to acquire St. Charles, Mo.-based LMI Aerospace Inc. (NasdaqGS:LMIA) from an investor group for approximately $432 million, including assumed debt. This transaction was one of several private equity exits from manufacturing company investments in 2017.

The third-largest middle-market manufacturing deal of 2017 also involved a European buyer and private equity seller. U.K.-based Spirax-Sarco Engineering plc (LSE:SPX) purchased Pittsburgh-based thermal technology company Chromalox Inc. from Irving Place Capital for $415 million in July. Irving Place Capital
and Chromalox management had acquired a controlling stake in the company in December 2012.

Another foreign buyer made the fourth-largest U.S. middle-market manufacturing M&A deal of last year, although this transaction did not involve a private equity firm. In August 2017, Japanese industrial machinery firm Tsubaki Nakashima Co. Ltd. (TSE:6464) acquired the global precision bearing components business of Tennessee-based diversified industry company NN Inc. (NasdaqGS:NNBR).

US middle-market manufacturing M&A

Like what you see? There’s more. Stay informed with more market data from S&P Global Market Intelligence — your single source for essential manufacturing insight.

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Capital Markets
Concentration and Cross Holdings of Chinese Banks

Highlights

This analysis was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global. This is not investment advice or a stock suggestion.

Mar. 01 2019 — Do you know out of the Big Four state-owned commercial banks in China, only one has three US institutions ranked as its top five largest holders and it is not the one with the largest market cap?

Do you know Temasek Holdings, the Singapore sovereign wealth fund, is one of the top five holders of another Big Four Chinese banks?

Do you know BlackRock Inc., the largest asset management company globally, has its relative % of equity of Chinese Banks in reverse order to their respective market cap rankings?

Do you know Standard Life Aberdeen, a European asset manager, has allocated over 10% of its asset towards global banks and close to 5% towards Chinese companies but only 0.33% of that invested in Chinese banks?

In this blog, we leveraged the newly exposed Ownership content and other features of the S&P Global Market Intelligence platform to gain insights into the above by analyzing the concentration and cross-board holdings of the largest publicly-traded banks. We also demonstrated how one can use the same content from the S&P Global Market Intelligence platform to replicate such results.

As of February 12, 2019, there were 28 global banks with a market capitalization greater than USD $50 billion as seen in Figure 1 below:

Figure 1: Screening Criteria for Global Banks with Market Capitalization of more than USD $50 billion

Source: S&P Global Market Intelligence as of 12 Feb 2019. For illustrative purposes only.

The top 10 are dominated by Chinese and US banks with one UK bank, HSBC Holdings Plc, placed at #7, and one Canadian bank, Royal Bank of Canada, made the 11th spot (Table 1).

Table 1: Top 11 Global Banks by Market Capitalization

Source: S&P Global Market Intelligence as of 12 Feb 2019. For illustrative purposes only.

HSBC made news¹ last year when a Chinese asset management firm, Ping An Asset Management, became its largest holder with 7.1%, overtaking its 2nd largest holder, BlackRock, with 5.8% of its holdings. This was due to the additional purchase of 166 million shares by Ping An and the sale of 182 mil shares by BlackRock (Table 2).

Table 2: Top Two Shareholders of HSBC Holdings and Their Change in Shares

Source: S&P Global Market Intelligence as of 12 Feb 2019. For illustrative purposes only.

Grouping those 28 banks by country and sorting in descending order by their largest holder concentration, we can see that the BRIC countries (Brazil, Russia, India, China) have the highest holder concentration, followed by Spain and USA, with Canada and Japan having the lowest holder concentration as seen in Table 3.

Table 3: Top 28 Global Banks Grouped by Country, Sorted in Descending Order by Top Owner Concentration

Source: S&P Global Market Intelligence as of 12 Feb 2019. For illustrative purposes only.

Expanding on those seven Chinese banks, we see that Central Huijin Investment Ltd. is the largest holder for four of those banks and that the Ministry of Finance is either the largest or the second largest for three of those banks (Table 4). However, it is interesting to see these varied cross-board ownerships of selective Chinese banks.

  • Three US institutions, BlackRock, Vanguard Group, and Capital Research are the second, third, and fourth largest holders, respectively, of China Construction Bank. The combined ownership of these three institutions is 4.1%, and is not replicable for the remaining banks (Table 4).
  • With 19% ownership of Bank of Communication, HSBC is the second largest shareholder of a bank with one of the smallest market capitalization in the region (Table 4).
  • Temasek Holdings’ 2.0% share made it the fifth largest owner of the largest bank in terms of market cap, Industrial and Commercial Bank of China (not shown in table).


Table 4: Top Shareholders of the Seven Largest Chinese Banks

Source: S&P Global Market Intelligence as of 12 Feb 2019. For illustrative purposes only.

For other BRIC banks, we also noted cross-ownership. For example,

  • American institutions placed second to fourth in ownership of PAO Sberbank of Russia with a combined total of 6.6% after Central Bank of the Russian Federation’s 52% share.
  • JP Morgan was the top holder of the Indian HDFC Bank with its 17.4% share.
  • Standard Life Aberdeen’s 4.6% ownership of Banco Bradesco and Dodge & Cox’s 1.9% ownership of Itaúsa placed both respectively as the third largest holder of these Brazilian banks.


In addition to analyzing ownership of both public and private companies, the S&P Global Market Intelligence platform can also be used to look at holdings by institutions, filtering by additional factors like industry and region.

Here is an example of all the BlackRock holdings filtered just for US and Chinese banks in descending market value (Table 5). From this list, we can see that out of its top 10 holdings, three were Chinese banks: China Construction Bank, Industrial & Commercial Bank of China, and Bank of China, ranked as its 6th, 8th and 9th positions. However when filtered based on % of Shares Outstanding of those banks, the respective orders are reversed: 1.66%, 5.06%, and 7.09%.

Table 5: BlackRock, Inc’s Holdings of Public Chinese and US Banks

Source: S&P Global Market Intelligence as of 12 Feb 2019. For illustrative purposes only.

For an Asian sovereign wealth fund like Temasek Holdings, all of its holdings of public bank shares are non-US banks. Singapore’s DBS Group Holdings is its largest bank holdings followed by Industrial and Commercial Bank of China as its second largest bank holding (Table 6).

Table 6: Temasek’s Holdings of Public Global Banks

Source: S&P Global Market Intelligence as of 12 Feb 2019. For illustrative purposes only.

Lastly, we looked at ownership of a European asset manager, Standard Life Aberdeen Plc. China Construction Bank and Industrial and Commercial Bank of China are its 4th and 6th largest holdings among its Asian bank holdings (Table 7). The percentages are relatively small when compared to its holdings of banks in the ASEAN region:

Table 7: Standard Life Aberdeen Plc’s Holdings of Public Asia-Pacific Banks

Source: S&P Global Market Intelligence as of 12 Feb 2019. For illustrative purposes only.

… Or other sectors of the Chinese equity market:

Table 8: Standard Life Aberdeen Plc’s Holdings of Public Chinese Companies

Source: S&P Global Market Intelligence as of 12 Feb 2019. For illustrative purposes only.

In summary, based on the above Ownership and Holder analysis from the S&P Global Market Intelligence platform, we are able to obtain deeper insights by showing you examples on the holdings of specific asset managers, sovereign wealth fund, commercial banks on some of the largest publicly-traded banks in China. By using the same content from the platform, we also demonstrated how we can easily replicate such results by industries, geographies etc.

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¹Source: South China Morning Post: China’s Ping An Insurance overtakes BlackRock to become HSBC’s biggest shareholder, 7 Nov 2018

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Capital Markets
EMEA Struggles To Attract PE Investment As Year's End Approaches

Highlights

Our latest report has all the details you need to dive deeper and understand PE investment winners and losers by region.

Oct. 23 2018 — Europe, Middle East and Africa (EMEA) region as a destination for new global private equity (PE) investments saw a shift in positive trend which was highlighted previously in Issue 18 of Private Equity Market Snapshot.

During the study period of July 1, 2018 to August 31, 2018, total capital deployed into the region fell by 26% compared to the same period last year, falling from €23.4bn to €17.4bn. At the same time, global PE firms engaged in just 9% less deals in 2018 period, meaning that 2018 investments were of smaller size than those done in 2017. In fact, the average entry deal size declined quite significantly, from €63.1m in 2017 to €44.1m in 2018.

Despite the slowdown in overall PE activity within EMEA, the UK continues to shine1. The UK represented 67% of the total capital invested (€17.4bn), with 158 new deals – the highest number of deals completed during the 2018 study timeframe. Global GPs invested €11.7bn of new money into the UK during the study period, an astonishing twofold increase compared to 2017. It is worth noting that 82% of invested €11.7bn is attributed to two largest deals of the period, which saw Information Technology (IT) and Consumer Staples targets being acquired for €2.9bn and €6.8bn, respectively2.

Within the UK, London led the way with €3.8bn of new money from global GPs across 72 deals. The majority of these investments were aimed at London-based IT companies, a trend we have been observing since the beginning of the year. London IT targets took €3.1bn of capital across 34 new deals during the 2018 study period.

On a sector basis, after removing the outlier deal within Consumer Staples of €6.8bn, Information Technology yet again emerges as the leader. The IT sector attracted €4.3bn of new money across 251 deals, resulting in an 89% growth in capital and 9% in deal count. Interestingly, the majority of the investments were private placements as opposed to pure buyouts, representing 91% of the total 251 deals. This points to a strong preference for start-up investments by global GPs within the IT sector. After a closer look at the private placements, data shows that the majority of funding was in Venture funding type and Series A, with €314m across 73 deals and €255m across 45 deals, respectively.

Global PE divestment activity also showcased negative trends during the 2018 period. Global PE firms realised 55% less capital from EMEA-based target’ exits across 186 deals, going from €51.5bn in 2017 to €23.2bn in 2018. In-line with PE entry activity, the UK also leads the pack when it comes to PE exits. Over the 2018 study period, global PE firms exited €8.2bn from UK-based targets, followed by Southern Europe with €5.2bn.

EMEA Private Equity Market Snapshot Issue 17 (2018, April). S&P Global Market Intelligence. Retrieved from https://www.spglobal.com/marketintelligence/en/news-insights/research/emea-private-equity-market-snapshot-issue-17 and Issue 18 (2018, July). S&P Global Market Intelligence. Retrieved from https://www.spglobal.com/marketintelligence/en/news-insights/research/emea-private-equity-market-snapshot-issue-18
2 Silver Lake acquired ZPG Plc for €2.9bn (As of 2018, August 31). S&P Capital Platform. Retrieved from https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=564134278&companyId=10255072 and KKR & Co. LP (NYSE:KKR) acquired Upfield Foods for €6.8bn (As of 2018, August 31). S&P Capital IQ Platform. Retrieved from https://www.capitaliq.com/CIQDotNet/Transactions/TransactionDetail.aspx?transactionId=546954145&companyId=546954102

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EMEA Private Equity Market Snapshot Issue 19

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Public Companies Going Private

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Capital Markets
Public Companies Going Private

Sep. 14 2018 — The recent tweet from Elon Musk has understandably made big news, but it is worth pointing out that the appetite for taking public companies private has been a key area of activity this year. S&P Global Market Intelligence’s data shows that 2018YTD is already at 39% of 2017 numbers, standing at €17.8bn of deal value across 32 completed deals, globally. Going-private closed deal count is at a healthy 49% compared to full 2017 numbers.

In terms of most popular sectors for going-private deals, since 2013 - Information Technology has been leading the pack with €108.9bn of aggregate deal value recorded across 104 deals, while Consumer Discretionary* is trending as a distant second with €49.7bn of total deal value.

The top target location for going private deals is the US, and interestingly – China comes in at second place, with UK following. The three regions have seen total deal size of €218.8 during the period of 2013 through 2018YTD. The popularity of these locations is further supported by the fact that after going private, average target’s EBITDA values have increased compared to when those companies were public. The US-based going private targets grew their EBITDA by average of 56% since leaving the public market, while Chinese and the UK-located companies grew EBITDA by 10% and 38%, respectively. Overall, the going private moves proved to be successful for ex-public companies globally within the 2013 – 2018YTD deals’ time frame, where their average Net Income values grew by 58% while EBITDA values grew by a smaller but yet attractive 29%.

In terms of the deal pipeline, 18 going-private deals were announced globally since 1st January 2018 and would add €25.8bn of aggregate deal value to already closed €17.8bn.

The following was originally published on Angel News on August 16, 2018: Public companies going private, S&P Global comment

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