engineering & construction quarterly update q3 2018 library/mnp/pdf/corp corp... · announced...
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QUARTERLY UPDATE Q3 2018
ENGINEERING & CONSTRUCTION
Page 2
INDUSTRY OVERVIEWM&A TRANSACTIONS & PERFORMANCE
4.3 1.2 8.9 1.2 0.3 1.0 1.1 1.8 2.0 0.7
1.5 4.9 2.4 2.9 5.1
0.9
6.4 0.6
1.1
85
81
97
88
89
90
91 90
100 89
76 80
105
75 78
81
116 106 104
-
20
40
60
80
100
120
140
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Tran
sact
ion
Volu
me
(Num
ber o
f Dea
ls)
Tran
sact
ion
Valu
e ($
Bill
ions
)
NORTH AMERICANENGINEERING & CONSTRUCTION M&A ACTIVITY
Transaction Value Transaction Volume
Source: Capital IQ, canadainfrastructurebank.ca, Financial Post, Data as of Sep 30, 2018.*All figures are in $ USD unless otherwise stated.
• M&A activity in the engineering and construction industry remained strong over Q3 2018. Transaction volume increased by 33 percent compared to Q3 2017. There were more transactions in Q3 2018 than in any other third quarter over the past five years. This continues the trend for consolidation and deal making in the engineering and construction space throughout 2018, with substantially more deals announced than in the previous years.
• Transaction value increased by $500 million from Q2 2018. This was predominantly driven by the $550 million acquisition of the Plants and Paving division of the Lane Construction Corporation by Eurovia (SA).
• Edmonton based, Stantec Inc. continued to grow its global consulting services business through M&A. They announced their intent to acquire Canadian company True Grit Engineering Limited, Australian engineering company Wood and Grieve Engineers Limited and UK-based development and infrastructure consultancy Peter Brett Associates LLP. Stantec Inc also announced a deal to dispose of it’s construction division, MWH Global Inc, to funds managed by LA-based Oaktree Capital Management L.P. These transactions are expected to close in Q4 2018.
• Despite the rise in building material prices as a result of turbulent macroeconomic trade policies in North America, the underlying fundamental factors fueling growth in the industry remained strong; in particular there was continued demand for housing and high federal and municipal government infrastructure spend. In August 2018, it was announced that the Canada Infrastructure Bank (CIB) was investing C$1.28 billion in the Réseau express métropolitainproject in Montréal, the first CIB investment announced since the finalisation of it’s C$180 billion budget, indicating the government’s commitment to stimulate industry growth.
M&A MARKET UPDATE FOR Q3 2018
2014 2015 2016 2017 2018
Page 3
MACRO ECONOMIC INDICATORS
Source: IBISWorld Industry Reports.
-
20
40
60
80
100
120
140
$CAD
Bill
ions
VALUE OF NON-RESIDENTIAL CONSTRUCTION - CANADA
Historical Forecast
250
275
300
325
350
375
400
425
$CAD
Bill
ions
PRIVATE INVESTMENT- CANADA
Historical Forecast
300
325
350
375
400
425
450
475
500
$CAD
Bill
ions
GOVERNMENT EXPENDITURE& INVESTMENT - CANADA
Historical Forecast
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Rate
%
INTERBANK OVERNIGHTLENDING RATE
Historical Forecast
The key external drivers that affect the engineering and construction industry in Canada include; non-residential construction (expenditure on office buildings, hospitals, factories, power plants, mining shafts, communication lines, farms, railroads and schools), private investment (investment in gross fixed capital formation and inventories), government expenditure and investment (the total value of services produced by federal, provincial and local governments as well as investment in fixed assets), and the interbank overnight lending rate in Canada. An increase in non-residential construction, private investment and government expenditure and investment will fuel industry growth, while low lending rates will stimulate investment.
Page 4
SELECT RECENT M&A TRANSACTIONS
Source: Capital IQ.All figures are in $USD millions.
• Stantec Inc. provides professional consulting services in the area of infrastructure for clients in the public and private sectors in Canada, the U.S. and internationally. The company is listed on the TSX and is headquartered in Edmonton, Canada.
• True Grit Engineering Limited provides civil engineering, environmental engineering, and planning and development services. The company was founded in 2005 and is based in Sioux Lookout, Canada.
• Eurovia (SA), a subsidiary of VINCI, builds roads, highways, railways, airport platforms, and tramways, as well as industrial and business sites. The Company is based in Paris, France.
• The Lane Construction Corporation provides construction services for transportation, infrastructure, and energy projects worldwide. The Plants & Paving Division produces hot-mix asphalt. The asset is located in the United States.
• WSP Global Inc. operates as a professional services company internationally. Among other services, it offers a range of consulting and engineering services to plan, design, build, and operate new plants. WSP Global is headquartered in Montreal, Canada.
• Berger Group Holdings, Inc. offers engineering consulting services, as well as construction inspection services for a wide range of projects, including bridges, highways and airports. The company is based in New Jersey.
• Oldcastle Infrastructure provides engineered building product solutions and services for North American infrastructure projects. The company was founded in 1957 and is based in Colorado. Oldcastle Infrastructure operates as a subsidiary of CRH Americas, Inc.
• Concrete Specialties, Inc. manufactures and markets precast concrete products. The company was founded in 1963 and is based in Illinois.
Announced Aug 28, 2018
TEV Not disclosed
TEV/EBITDA Not disclosed
TEV/Revenue Not disclosed
Announced Aug 20, 2018
TEV $555 million
TEV/EBITDA Not disclosed
TEV/Revenue 0.9x
Announced Jul 30, 2018
TEV $400.0 million
TEV/EBITDA 8.89x
TEV/Revenue 1.0x
Closed Sep 09, 2018
TEV $46.6 million
TEV/EBITDA Not disclosed
TEV/Revenue Not disclosed
Announced intentionto acquire
Acquired
PLANTS & PAVING DIVISION OF
Acquired
Acquired
Page 5
PUBLIC COMPARABLE ANALYSISTRADING MULTIPLES & OPERATING STATISTICS
Source: Capital IQ. Data as of September 30, 2018.“LTM” refers to last twelve months. “NTM” refers to next twelve months.
(Figures In $USD Millions, except percentages and ratios)
LTM Operating Figures NTM Consensus Estimates Valuation
CompanyMarket
CapitalizationEnterprise
Value RevenueRevenue Growth EBITDA
EBITDA Margin
Revenue Growth
EBITDA Margin
NTM EV/EBITDA
LTM EV/EBITDA
LTM EV/REV
Heavy Civil
Granite Construction Incorporated $2,088 $2,154 $3,129 15.8% $207 6.6% 22.9% 7.7% 7.2x 10.4x 0.7x
Primoris Services Corporation $1,279 $1,572 $2,340 1.6% $156 6.7% 30.6% 7.6% 6.2x 10.1x 0.7x
Tutor Perini Corporation $940 $1,601 $4,541 (8.2%) $205 4.5% 16.4% 6.4% 4.7x 7.8x 0.4x
Aecon Group Inc. $752 $940 $2,085 (9.9%) $124 5.9% 9.9% 6.6% 5.9x 7.5x 0.4x
Median $1,110 $1,586 $2,735 (3.3%) $180 6.3% 19.7% 7.1% 6.0x 8.9x 0.6x
Mean $1,265 $1,567 $3,024 (0.2%) $173 5.9% 20.0% 7.1% 6.0x 8.9x 0.5x
Aggregate Supplier
Vulcan Materials Company $14,708 $17,790 $4,127 11.6% $1,003 24.3% 10.5% 26.8% 14.0x 17.7x 4.3x
Martin Marietta Materials, Inc. $11,465 $14,662 $3,814 2.6% $1,040 27.3% 18.1% 26.9% 11.3x 14.1x 3.8x
Eagle Materials Inc. $4,073 $4,710 $1,414 10.5% $463 32.7% 9.1% 33.7% 9.0x 10.2x 3.3x
Summit Materials, Inc. $2,029 $3,821 $2,040 15.8% $404 19.8% (0.5%) 23.4% 7.8x 9.5x 1.9x
U.S. Concrete, Inc. $771 $1,521 $1,428 10.9% $163 11.4% 9.4% 14.2% 6.5x 9.3x 1.1x
Median $4,073 $4,710 $2,040 10.9% $463 24.3% 9.4% 26.8% 9.0x 10.2x 3.3x
Mean $6,609 $8,501 $2,565 10.3% $615 23.1% 9.3% 25.0% 9.7x 12.2x 2.9x
Engineering
SNC-Lavalin Group Inc. $7,153 $9,162 $7,990 28.7% $747 9.4% 4.3% 11.1% 9.8x 12.0x 1.1x
Jacobs Engineering Group Inc. $10,856 $12,464 $13,496 34.8% $946 7.0% 25.2% 7.4% 9.9x 13.2x 0.9x
AECOM $5,251 $8,512 $19,706 11.5% $839 4.3% 4.8% 4.9% 8.4x 10.2x 0.4x
Stantec Inc. $2,831 $3,377 $2,617 (0.3%) $256 9.8% 5.8% 11.8% 10.2x 13.0x 1.3x
Median $6,202 $8,837 $10,743 20.1% $793 8.2% 5.3% 9.2% 9.9x 12.5x 1.0x
Mean $6,523 $8,379 $10,952 18.7% $697 7.6% 10.0% 8.8% 9.6x 12.1x 0.9x
Page 6
PUBLIC COMPARABLE ANALYSISGROWTH, MARGINS & MULTIPLES
Source: Capital IQ. Data as of September 30, 2018.“LTM” refers to last 12 months. “NTM” refers to next 12 months.Valuation details provided on page 5. Red dotted line denotes average.
10.9%
20.1%
-3.3%
-10.0% 0.0% 10.0% 20.0% 30.0%
Aggregate Supplier
Engineering
Heavy Civil
LTM REVENUE GROWTH
24.3%
8.2%
6.3%
0.0% 10.0% 20.0% 30.0%
Aggregate Supplier
Engineering
Heavy Civil
LTM EBITDA MARGIN
10.2x
12.5x
8.9x
0.0x 5.0x 10.0x 15.0x
Aggregate Supplier
Engineering
Heavy Civil
LTM EV/EBITDA
9.4%
6.8%
19.7%
0.0% 10.0% 20.0% 30.0%
Aggregate Supplier
Engineering
Heavy Civil
NTM REVENUE GROWTH
26.8%
9.3%
7.1%
0.0% 10.0% 20.0% 30.0%
Aggregate Supplier
Engineering
Heavy Civil
NTM EBITDA MARGIN
9.0x
9.9x
6.0x
0.0x 5.0x 10.0x 15.0x
Aggregate Supplier
Engineering
Heavy Civil
NTM EV/EBITDA
9.3%
11.4%
12.9% 14.4%
10.5x 8.3x
Page 7
PUBLIC COMPARABLE ANALYSISPERFORMANCE ANALYSIS
Source: Capital IQ. Data as of September 30, 2018.Further details provided on page 5.
9.1x
13.8x
12.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
Heavy Civil Aggregate Supplier Engineering
-9.3%
-16.6%
4.7%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Heavy Civil Aggregate Supplier Engineering
ENGINEERING & CONSTRUCTION PEER GROUP EV/EBITDA MULTIPLES
ENGINEERING & CONSTRUCTION PEER GROUP STOCK PRICE PERFORMANCE
Page 8
MNPCF – LEADERSHIP TEAM
DUE DILIGENCE LEADERSHIP
TRANSACTION LEADERSHIP
Aleem BandaliManaging Director
Dale AntonsenManaging Director
Wilma BraatManaging Director
John CaggianielloManaging Director
[email protected] 416.513.4177
Brett FranklinPresident
Mike ReynoldsManaging Director
Johnny EarlManaging Director
[email protected] 604.637.1514
Dan PorterManaging Director
Stephen ShawManaging Director
Jason BurgessManaging Director
Mark RegehrManaging Director
Craig MaloneyManaging Director
Patrick KhouzamManaging Director
Page 9
MNPCF – RECENT TRANSACTIONS
NATIONAL