Aggregates Manager Digital Magazine
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M&A REPORT • 20 and total debt levels have decreased by approximately 30 percent (see Chart 2 and Chart 3). All of these trends are good, but nec- essary, as the CMI companies collective EBITDA and EBIT declined by almost 37 percent and just over 49 percent, re- spectively, from 2007 to 2013, making things very challenging with debt hold- ers (see Chart 9 and Chart 10). The good news is that margins have ticked up for the CMI and, together with ex- pected overall growth, should result in operating performance. The improved outlook for the con- struction materials sector and the improved balance sheets of the CMI companies resulted in improved stock prices for the CMI, which has seen a year-to-date increase of 18.4 percent while the market as a whole has been relatively flat (Chart 1). The improved outlook for the market and the improved balance sheets for the industry's major buyers should bode well for M&A activity in the sector. We have seen a recent wave of private- equity backed buyers being active in the market. This capital typically invests with a 5- to10-year horizon, while the CMI companies are long-term inves- tors. This increased interest in private equity capital is another sign of the optimism for the future. After a year of cautious optimism, we expect a more aggressive approach to M&A by the ma- jor players in 2014 and beyond. AM Chart 8: Median net debt to EBITDA ratios 2.39x 2.53x 2.63x 2.72x 2.55x 1.91x 2.29x 1.84x 2.01x 3.59x 4.07x 3.80x 3.82x 3.15x 2.68x 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 0 5,000 10,000 15,000 20,000 25,000 30,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ millions of USD Total EBITDA Average Margin 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% - 5,000 10,000 15,000 20,000 25,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ millions of USD Total EBIT Average EBIT Margin Chart 10: EBIT and average margins (CMI companies) Chart 9: EBITDA and average margins (CMI companies) Source: CapIQ Source: CapIQ Source: CapIQ George H. Reddin is a principal in FMI's Investment Banking practice. He can be reached at 919- 785-9286 or at greddin@fminet. com.