Specialty Insurance
As we close in on third quarter results, the insurance sectors once again are gaining momentum from consolidation and continued specialization, despite their steep tumble in August within the broader financial markets.
While formerly tracking with the S&P 500, recent credit market scares have battered those associated with the mortgage industry while rewarding diversifieds well above 10% YTD. The SNL Small and Large Cap index companies are recovering nicely, and the landscape remains flush with healthy operating and well-niched companies as lucrative tuck-in candidates across a variety of asset classes. With prices remaining attractive, we expect M&A activities to quickly regain their earlier pace. Read More.
Wednesday, October 31, 2007
Food & Beverage industry review Q3-2007; RSM EquiCo Capital Markets
Private Label Goods Gaining on Brands in Supermarkets
As retailers' private labels increase in numbers, quality and sophistication, consumers are increasingly choosing store-branded products over other consumer brands. An article in the on August 29 quoted Neilson data that indicated private label food and non-alcoholic beverage sales rose 4.3%year-over-year in mass-market outlets for the 52 weeks ended July 14, while sales of branded products in the same categories rose only 2.2%. Retailers are continuing to show strong sales of traditional “knock-off” products, though much of the gain in sales is coming from retailer-exclusive brands (products only available at a specific retailer's stores, with names and logos completely separated from the retailer). Major brand companies are expected to strongly defend their market positions with improved product quality and packaging, as well as greater convenience. Read More.
As retailers' private labels increase in numbers, quality and sophistication, consumers are increasingly choosing store-branded products over other consumer brands. An article in the on August 29 quoted Neilson data that indicated private label food and non-alcoholic beverage sales rose 4.3%year-over-year in mass-market outlets for the 52 weeks ended July 14, while sales of branded products in the same categories rose only 2.2%. Retailers are continuing to show strong sales of traditional “knock-off” products, though much of the gain in sales is coming from retailer-exclusive brands (products only available at a specific retailer's stores, with names and logos completely separated from the retailer). Major brand companies are expected to strongly defend their market positions with improved product quality and packaging, as well as greater convenience. Read More.
Monday, October 22, 2007
Energy Services industry review Q3-2007; RSM EquiCo Capital Markets
Focus on Geophysics
Over the past five years, the global geophysics industry has doubled in size from $6 billion in 2002 to more than $12 billion in 2007, as declining spare oil production capacity, driven by growing demand for oil and gas and coupled with underinvestment over the previous decade, spurred a boom in oil and gas exploration activity. Concurrently, the industry has seen significant advancements in technology, allowing oil and gas firms to be more successful in their exploration and production activities. The increased profitability of the industry; demand for new technologies; shortage of equipment—and, more importantly, qualified personnel—have resulted in a very active mergers and acquisitions market. Read More.
Engineering, Construction & Building Materials industry review Q3-2007; RSM EquiCo Capital Markets
Construction Overview
According to the McGraw Hill Construction Outlook, overall new construction in the United States is expected to drop by 6% to $641.4 billion in 2007. Single-family housing is likely to decline, with renewed expansion not expected until 2008. Institutional buildings are expected to gain 7%in value, with biggest gains in the public-building category and continued strengthening of education and healthcare facilities. However, the 2007 infrastructure and public construction markets continue to be helped by relatively healthy state and local finances, as well as appropriations by the federal government. Read More.
According to the McGraw Hill Construction Outlook, overall new construction in the United States is expected to drop by 6% to $641.4 billion in 2007. Single-family housing is likely to decline, with renewed expansion not expected until 2008. Institutional buildings are expected to gain 7%in value, with biggest gains in the public-building category and continued strengthening of education and healthcare facilities. However, the 2007 infrastructure and public construction markets continue to be helped by relatively healthy state and local finances, as well as appropriations by the federal government. Read More.
Chemicals industry review Q3-2007; RSM EquiCo Capital Markets
Change in the Old Guard
The chemical industry M&A landscape continues to undergo a major transformation this year with the announcement of several multi-billion dollar deals. The string of large deals has led to the emergence of several new names among top chemical companies globally. Some, such as Ineos, built their way up through several smaller transactions, while others such as Access Industries, which owns the polyolefins producer Basell and is purchasing Lyondell, are making a one-time large bet after having failed at two previous attempts. It is interesting to note that of the top ten names in the chemical industry ten years ago, only three remain today. Read More.
Friday, October 19, 2007
RSM EquiCo Capital Markets Q3-2007 Basic Industries review
A Tale of Two Markets
While much of the current focus is on the slump in the residential markets, non-residential construction, particularly within the lodging, communication and power sectors, continues to experience robust growth. In July, private non-residential construction grew 15.7% over July of 2006 at a seasonally adjusted annual rate of $346 billion. Over the same period, five of the eleven non-residential sectors (representing 72% of total nonresidential construction), grew an average of 10.6%. Other smaller sectors of note include the lodging and communication industries, up 58% and 23%, respectively. By comparison, new construction in the residential sector declined 16.1% over the same period. Read More.
While much of the current focus is on the slump in the residential markets, non-residential construction, particularly within the lodging, communication and power sectors, continues to experience robust growth. In July, private non-residential construction grew 15.7% over July of 2006 at a seasonally adjusted annual rate of $346 billion. Over the same period, five of the eleven non-residential sectors (representing 72% of total nonresidential construction), grew an average of 10.6%. Other smaller sectors of note include the lodging and communication industries, up 58% and 23%, respectively. By comparison, new construction in the residential sector declined 16.1% over the same period. Read More.
RSM EquiCo Capital Markets Q3-2007 Aerospace & Defense industry review
Key Trends
Despite volatile financing conditions throughout the summer, M&A activity in the aerospace and defense sector continues to be strong as both private equity and strategic buyers have confidence in the long-term growth prospects of the sector. Re-pricing of risk in the global credit markets has increased financing costs and put some downward pressure on enterprise values; however, valuations in the sector remain near historic highs supported by robust dealmaking appetite from both strategic and financial buyers. Financial buyers remain active, despite slightly higher borrowing costs, and are expected to actively pursue attractive opportunities in the space driven by high levels of committed capital. Read More.
Despite volatile financing conditions throughout the summer, M&A activity in the aerospace and defense sector continues to be strong as both private equity and strategic buyers have confidence in the long-term growth prospects of the sector. Re-pricing of risk in the global credit markets has increased financing costs and put some downward pressure on enterprise values; however, valuations in the sector remain near historic highs supported by robust dealmaking appetite from both strategic and financial buyers. Financial buyers remain active, despite slightly higher borrowing costs, and are expected to actively pursue attractive opportunities in the space driven by high levels of committed capital. Read More.
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