Honeywell just announced the spin of their advanced materials business. Johnson Controls earlier this year, sold off two parts of their HVAC related segment. It’s M&A, but investors want people to focus on those areas that they should be focused on. Yeah, a large swath of industrials, and more broadly, all sectors are tied to interest rates. They’re definitely more interest rate sensitive sectors. Anything tied to housing, you know, clearly, people look at interest rates very closely.
Divestiture deals suggest the way forward
So yeah, people in the construction related sectors are very excited. And I, Josh, I agree with you on that sentiment. And even if you take out, sort of the buildup in cash on technology balance sheets, which is usually where the biggest ones are, it’s still on a per head basis, is significant. Boards and C-suites found themselves getting a little too close to the edge during the global financial crisis. They probably, you know, as the pendulum always goes, kind of overdid it in terms of building up cash and getting themselves ready. And so we’re going to see a bunch of that refinancing happening in the Debt Capital Markets in the coming years, just in terms of some of the Covid financings, but at the same time, they’re sitting in a much better position from a leveraged perspective, cash on balance sheets.
The Sterling Group Agrees to Sell ADG Artisan Design Group to Lowe’s Companies, Inc.
The aftermarket for commercial aerospace has also been very strong after pent-up demand from the pandemic and limited ability for OEMs to increase production of new plans as a result of supply chain and other operational issues. Sellers need to be willing to sell – and if they and their advisors are being more honest, in some cases maybe their expected prices have to come down, especially if it’s geared towards PE. If corporates deem it strategic and they have cash on hand and a cheaper cost of capital, they could stretch more. JOSHUA PEARL is the Founder and Chief Investment Officer of Hickory Lane Capital Management, a long/short equity asset manager. He focuses on public equity investments and special situations utilizing a fundamentals-based approach. From 2011–2020, he served as a Managing Director and Partner at Brahman Capital.
Access key insights from RBC Investor Day 2025 on strategic priorities, financial performance, and our long-term vision with the full presentation available on demand. I really feel that for a five-year hold, where you feel performance is going to be good, you’re going to see very innovative, smart people come up with structured solutions to get deals done. If joshua rosenbaum rbc you’re a private equity seller, the way you do that is to roll a portion of the equity, you maybe take something in the form of an earnout. You get creative to get to a headline price of multiple that works for you. RBC is one of Canada’s largest banks and one of the largest banks in the world, based on market capitalization.
Books
Our first edition was also released during a global financial crisis in Spring 2009, which actually turned out to mark the start of the next decade’s historic bull run. I think we all hope that history repeats itself. Also, LBOs have evolved in multiple ways, including the number and types of participants, structures and terms, sources of financing, and expected equity returns. In addition, M&A continues to progress in terms of valuations, process, and legal/contractual terms.
Master of Finance (MSc) l Frankfurt School of Finance & Management
While it’s a huge difference from last year, we are nowhere near the feeding frenzy of 2020 and 2021. There is private equity appetite, but it remains discerning. Industrial corporates may retain the edge in M&A, but smart solutions are allowing private equity to stay in the game. There have also been some notable divestitures, which I think is a really bullish sign. We’ve just helped a private equity firm buy an asset, Delrin, from DuPont – pure corporate divestiture to thread the needle.
- RBC is one of Canada’s largest banks and one of the largest banks in the world, based on market capitalization.
- And so now it becomes a capital allocation question.
- You know, once one person goes kind of clears the way.
- Our first edition was also released during a global financial crisis in Spring 2009, which actually turned out to mark the start of the next decade’s historic bull run.
- Their focus is on the larger conglomerates.
Industrial Deal-Making: What a Difference Transcript
But for the most part, this core, highly strategic M&A, you know that just goes on, but you manage your timelines accordingly, the election is highlighted in every deal timeline, but regards the election itself. The antitrust environment, for sure, and to the extent that the election outcome could change that favorably or keep the status quo. You know, where does that come into play on a practical level, if there is a deal where there are antitrust considerations, you know, maybe you are waiting to see what happens after the election. I think the other related ones, which are specific to various sectors are with regards to tariffs, depending on how the election goes. What if any tariffs are put in place, how deep and broad they go.
These advancements have also improved bankers’ work/life balance, as well as the effectiveness of remote working, which is obviously highly relevant for WFH.
Right now, residentials are holding in there. Non-residential people are worried about offices, but there’s a lot of need for suburbanization offices. There’s also onshoring – not just huge battery semiconductor plants, but all sorts of onshoring in the industrial manufacturing sector. So it’s actually been a pretty good market for building and construction. As long as you have low unemployment and people can cover their payments – 7% or otherwise – there’s going to be some activity. You also have a lot of people that are locked in at mortgage rates of 2.5 to 4%, and they’re not selling.
The Data Science Playbook for Private Equity and Venture Capital
- Previously, he worked at UBS Investment Bank and the International Finance Corporation, the direct investment division of the World Bank.
- In theory, this is nirvana for the housing sector and construction related sectors.
- So it’s actually been a pretty good market for building and construction.
- We’ve actually done two great IPOs in the sector, Loar and StandardAero.
- I feel like the appetite is as strong as I’ve seen, certainly in the past 15 years.
- Honeywell just announced the spin of their advanced materials business.
And I think that shadow, I won’t say it’s completely gone, but it’s a lot it’s a lot narrower, it’s a lot paler. And part of this is just, you could go look at the management teams and boards, and you could see that a lot of the people that were in those seats, you know, eight or nine, and they’re gone. And this is just the human element, that if the people have turned over, there’s been a transition. And by the way, no one is saying people should forget what happened during the GFC. I mean, obviously you have to manage risk accordingly, but I think it is a little bit of a different mindset in industrials, which I think bodes well for increased and larger M&A activity. I think it is a healthy M&A environment, a healthy M&A market, where corporates are still leading the way, but private equity is increasingly relevant.
Aerospace and defense has been a shining star in the IPO market. We’ve actually done two great IPOs in the sector, Loar and StandardAero. © RBC Dominion Securities Inc. 2001, 2003, 2010 rbccm.com is an online information service operated by RBC Dominion Securities Inc. and the other businesses and legal entities operating under the brand name RBC Capital Markets. Although the pandemic has created a lot of disruption and uncertainty around M&A and future market conditions, I don’t believe that it will change the fundamentals that we cover in the third edition. Visit Author Central to update your books, profile picture and biography. Please use the country locator to learn more about services specific to our Caribbean countries.
Some things certainly related to destocking and your higher rates, crimping spending expenditures a little bit. Where there are diversified capital goods businesses that play on data centers, water, electrification, technology infrastructure, there’s clearly a lot of demand and a lot of interest, and we’ve seen that, you know, for the public corporates, as well as from private equity. And I combined that with, you know, building and construction, which, if this easing cycle holds, combined with strong employment rates. I think in terms of rates and inflation, people are directionally getting comfort with where we’re going. So I’m not saying that’s completely off the table, but there’s confidence management teams in the field board level that we know where that’s going.
Josh, I’ve really enjoyed the conversation. I think we’ve got an interesting time frame ahead of us. I’m pretty excited about what’s ahead in the next 12-18, 24, months, because it feels like there’s a good level of activity to be had across your sector and others.
If there’s very little supply, demand doesn’t have to be through the charts to drive pricing. Armed with growth ambitions and strong balance sheets, industrials are well placed to lead an M&A revival. Josh and just kind of finishing up the conversation here.
