Datasite expects busy small & mid-market

We’re taking a look today at a new report from Datasite on the dealmaking outlook for the rest of the year and into 2024 and which trends to look out for.

Then we will look at some industrial and manufacturing sector deals that caught my attention this week. This includes Axcel acquiring two Danish electric control and power distribution panel manufacturers, IK Partners taking a co-controlling stake in a temperature and humidity monitoring device producer from Naxicap Partners, Wise Equity agreeing to sell a scanner and printer manufacturer to Durst Group, AIP-backed CES Power’s acquisition of an electrical equipment and air conditioning rental provider and Mutares’ exit from a steel and nickel-based super alloy manufacturer to CAS.

Spate of kickoffs

It looks like a mixed bag for global dealmaking in the rest of the year, according to M&A figures from Datasite, a virtual data room provider.

“Going into 2023, the big question on dealmakers’ mind was whether the M&A market would reset after the rollercoaster of 2021 and 2022,” the report said.

“Based on summer activity and deal success rates, the answer seems to be ‘yes’ and ‘no’. Yes, in that dealmakers are renewing their focus on quality deals not quantity. No, in that long-term trends like covid appear to have fundamentally changed how dealmakers do deals for the long term.”

Looking at ‘kickoffs’, which it defines as the day a new sell-side data room is created on its Diligence or Acquire systems, there was a “healthy uptick” over the summer in asset sales kickoffs, up 13 percent from summer 2022. That “signals a busy time ahead for dealmakers in the low- to -mid-market, where asset sales predominate”, said the report.

But there was a slump of 70 percent in merger kickoffs, which “suggests that tighter financing and regulatory conditions continue to take a toll on large-cap dealmaking”.

Looking at specific months – Datasite defines summer as June to August – a climb in kickoffs in July points to a “robust November”, the report said, but a slowdown in August tempers the outlook for the fourth quarter.

Switching to specific sectors, and the report expects a flurry of industrial deals to close in late third quarter or early fourth quarter following a spike of kickoffs in June, while TMT kickoff volume stayed high over the summer, “painting a rosy picture” for the fourth quarter and early 2024. Meanwhile, healthcare had been slow but is steadily coming back from a quiet 2022.

Third investment

The industrial sector was the star of this week as we reported five deals in the sector.

First is Axcel’s acquisition of Tic Elkas and Eegholm Group, two Danish electric control and power distribution panel manufacturers.

Axcel will acquire Tic Elkas from Dansk Ejerkapital and the company’s management team, and Eegholm from a group of private investors.

This transaction is Axcel’s third investment from Axcel Fund VII.

Together, the two companies will reach a turnover of over DKr700 million ($100 million; €93.9 million), according to a release.

“We see great potential in a Northern European consolidation of the electric panel market, which today consists of a lot of small businesses,” said Lars Cordt, Axcel Partner. “With the acquisitions of Tic Elkas and Eegholm Group, we’re building a platform that combines high-quality complex solutions and local presence with effective European production capabilities.”

Humidity sensors

IK Partners acquired a co-controlling stake in Metrology & Monitoring Solutions Group (MMS), a temperature and humidity monitoring device producer, from Naxicap Partners.

MMS’ CEO and management team will reinvest in the company.

IK will invest from its dedicated pool of development capital, according to a release.

“Having closely monitored the industry since our prior investment in Ellab, we believe that the MMS platform is in a strong position to ambitiously pursue market consolidation in the IoT, metrology and validation services space within the healthcare and food industries,” said Pierre Gallix, partner at IK Partners and advisor to the IK Small Cap III Fund.

Industrials exiting

Then we have Wise Equity agreeing to sell Aleph, a scanner and printer manufacturer to Durst Group.

Wise Equity invested in Aleph in 2017 via its Wisequity IV fund. Aleph will be the fifth divestment of Wisequity IV, following Corob, Trime, Tapì, and Tatuus.

Expansion plan

Next up is an add-on acquisition by AIP-backed CES Power which bought Euro Touring Power (ETP), an electrical equipment and air conditioning rental provider.

ETP’s addition will expand CES Power’s footprint overseas, giving it a new hub in Ireland with access to all of Europe.

Vincent Campion, ETP’s MD, and the management team will remain with the company.

Adieu alloy!

On Tuesday, Mutares announced its exit from Special Melted Products (SMP), a steel and nickel-based super alloy manufacturer, to Cogne Acciai Speciali (CAS).

The proceeds of the sale will be around €150 million, considering customary deduction items, variable compensation and transaction costs, according to a release.

SMP is expected to generate revenues of around €140 million in 2023.

“The successful completion of the sale of SMP to Cogne Acciai Speciali is another impressive example of value creation by the entire Mutares team,” said Robin Laik, CEO and founder of Mutares. “Our shareholders will also participate in this very successful exit.”