The US industrial gas industry has the potential to see increased M&A activity in 2021, according to a column by Daniel Officer, Managing Director at New York investment banking firm Sperry Mitchell in the April issue of gasworld US.
Acquisitions coordinated by private equity investors could be on the rise and Officer explains why major industrial gas companies are no longer the only viable buyers, and that midsized independents “now have at least three viable transaction paths”.
“The industrial gas field has the potential to see an acceleration in roll-up efforts over the next few years, driven in part by a veritable treasure-chest of private equity capital eyeing the industry,” writes Officer of Sperry Mitchell, a leading middlemarket merger and acquisition advisor for private companies.
“2020 ended with one of the busiest fourth quarters for M&A in recent history, and 2021 is expected to be another vibrant year. The combination of significant capital and competition in the private equity system and a low interest rate environment is causing buyers to ‘pay up’ for acquisitions. These high valuations are prompting private equity investors to turn to ‘tried and true’ methods to create value and earn a sufficient return on investment.”
The newest private equity-backed player in the US industrial gas industry is Meritus Gas Partners, which outlined its goals in an interview in the March issue of gasworld US.
Meritus launched in early January with the goal of assembling a national federation of high-quality independent distributors of industrial, medical, and specialty gases and welding and safety supplies across North America. Backed by a growth investment from New York-based private investment firm AEA Investors’ Small Business Fund, Meritus has big ambitions for the US distributor landscape.
Two respected distributors have already been convinced about the merits of Meritus. La Porte, Texas-based Gas Innovations and Tuscaloosa, Alabama-based Atlas Welding Supply Co., Inc. have signed up to the new platform for packaged gas distributors, which is led by a team of experienced industry experts who have held executive level roles at Praxair Distribution, Inc. (PDI).
Scott Kaltrider, Chairman at Meritus, told gasworld US’s March issue, “The industry lacks a compelling alternative to the major gas suppliers, the ‘strategic’ acquirers. While this is a space that has undergone consolidation for some time, we felt there remained many strong independent organisations which were well-aligned with the value proposition that we are offering more so than what the majors provide. We believe our platform will fill that void nicely.”
Rob D’Alessandro, Vice-Chairman at Meritus, told gasworld US’s March issue, “Current market dynamics favor continued consolidation. Owners of distributors face increasing regulatory complexities and costs, rising costs of insurance, financing challenges, and vendor consolidation by larger customers. And all typically face succession issues. It’s challenging to transfer equity from generation to generation, and all of those dynamics are in play and create an opportunity for us.”
Meritus believes businesses will consider its platform after the change of administration in the US.
“The other backdrop that is driving Meritus is that the change in administration may not be as tax friendly and business friendly,” Kaltrider said. “We’ve already had indications from distributor owners that this could be a good time to join Meritus.”
Chart Industries, a leading manufacturer of cryogenic equipment, has been busy in recent months with acquisitions, including that of Sustainable Energy Solutions, Inc (SES).
Utah-based SES explains in an interview in the April issue of gasworld US how, with the help of Chart, its Cryogenic Carbon Capture™ technology is ready for commercialisation.