m&a and capital markets themes in the e&c industryfile/... · 2017-09-26 · private and...

September 2017

Strictly Private & Confidential

M&A and Capital Markets Themes in the E&C Industry

Private and Confidential | 2

This presentation, and any oral or video presentation that supplements it, have been developed by and are proprietary to D.A. Davidson & Co., member SIPC, and were prepared exclusively for the benefit and use of the recipient. Neither the printed presentation nor any oral or video presentation that supplements it, nor any of their contents, may be reproduced, distributed or used for any other purpose without the prior written consent of D.A. Davidson & Co. The analyses contained herein rely upon information obtained from the recipient or from public sources, the accuracy of which has not been verified, and cannot be assured, by D.A. Davidson & Co. Moreover, many of the projections and financial analyses herein are based on estimated financial performance prepared by or in consultation with the recipient and are intended only to suggest reasonable ranges of results. Finally, the printed presentation is incomplete without any oral or video presentation that supplements it. This material is protected under applicable copyright laws and does not carry any rights of publication or disclosure.

Information & Limitations


24%

15%

(10%)

(5%)

–

5%

10%

15%

20%

25%

30%

35%

Sep '16 Nov '16 Jan '17 Mar '17 May '17 Jul '17 Sep '17

E&C IndexS&P 500

What’s Going On In The Market

Note: E&C Index includes AECOM, Aegion, Argan, Chicago Bridge & Iron, Comfort Systems, Dycom, EMCOR, Fluor, Granite, Great Lakes, Jacobs, KBR, Layne, Limbach, MasTec, Matrix, McDermott, MYR, NV5, Orion, Primoris, Quanta, Stantec, Sterling, Tetra Tech, Tutor Perini and Willbros.

Sources: Company filings and Davidson institutional research.

1 year Share Price Performance


24%

15%

(10%)

(5%)

–

5%

10%

15%

20%

25%

30%

35%


E&C IndexS&P 500

What’s Going On In The Market 1 year Share Price Performance

Broader Markets Election Geopolitics Natural Disasters Fed Unwinding

Note: E&C Index includes AECOM, Aegion, Argan, Chicago Bridge & Iron, Comfort Systems, Dycom, EMCOR, Fluor, Granite, Great Lakes, Jacobs, KBR, Layne, Limbach,

MasTec, Matrix, McDermott, MYR, NV5, Orion, Primoris, Quanta, Stantec, Sterling, Tetra Tech, Tutor Perini and Willbros. Sources: Company filings and Davidson institutional research.


24%

15%

(10%)

(5%)

–

5%

10%

15%

20%

25%

30%

35%


E&C IndexS&P 500

What’s Going On In The Market 1 year Share Price Performance

Broader Markets Election Geopolitics Natural Disasters Fed Unwinding

E&C $1 Trillion Local Markets Energy Shifts More Mega Deals

Note: E&C Index includes AECOM, Aegion, Argan, Chicago Bridge & Iron, Comfort Systems, Dycom, EMCOR, Fluor, Granite, Great Lakes, Jacobs, KBR, Layne, Limbach,

MasTec, Matrix, McDermott, MYR, NV5, Orion, Primoris, Quanta, Stantec, Sterling, Tetra Tech, Tutor Perini and Willbros. Sources: Company filings and Davidson institutional research.


Share Price Performance Divergence

Sources: CapitalIQ as of 9/22/2017.

129%

65%60% 56%

49%44%

37% 35% 35%24% 23% 23% 22% 22% 20% 20% 18% 18% 17%

11% 11%

(1%)(4%)(7%)(18%)

(21%)

(45%)

24%15%

(50%)

-

50%

100%

150%

STR

L

NV

EE

WG

MTZ

PR

IM

PW

R

LAY

N

AG

X

MD

R

TTEK

KB

R

AE

GN

GLD

D

FIX

GV

A

EM

E

TPC

LMB

AC

M

STN

JEC

DY

OR

N

MY

RG

MTR

X

FLR

CB

I

E&

C

S&

P


Forward EBITDA Valuations (vs. Last Year)

Note: Diversified EPC includes AECOM, CBI, Fluor, Jacobs, KBR and McDermott. Civil & Industrial Construction includes Aegion, Granite, Great Lakes, Layne Christensen, Matrix, Orion Marine, Primoris, Sterling and Tutor Perini. Building Specialty Contractors includes Emcor, Comfort Systems and Limbach. Utility Contractors includes Dycom, MasTec, Quanta, MYR and Willbros. Design & Engineering includes Aecom, Stantec, Tetra Tech and NV5.

2016

2017E


Growth and Margins by Sector

Growth Rates By Sector Operating Margin By Sector(1)

(1) Design/Engineering includes AECOM, Jacobs, Stantec and Tetra Tech. Contractors include Granite, Primoris and Tutor Perini. Specialty Contractors includes Comfort Systems, EMCOR, MasTec and Quanta.

Sources: ENR.com, company filings and CapitalIQ.


Domestic Construction Trends

Sources: Census Bureau, Davidson equity research.

($ in billions) Non-Residential Construction Put in Place & E&C Backlog

E&C Backlog Put In Place

-

20

40

60

80

100

120

140

160

180

$ 200

-

50

100

150

200

250

300

350

400

$ 450

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


CEO Confidence % of Firms Reporting YoY Higher Backlog

% of Firms Reporting Increase in Domestic Hiring

Sources: ENR.

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Contractors Design/Engineering

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Contractors Design/Engineering


-

10%

20%

30%

40%

50%

-

10

20

30

40

50

60

70

80

90

100

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2

2008 2009 2010 2011 2012 2013 2014 2015 2016 '17

# Deals % PEG

Sources: CapitalIQ and Pitchbook.

E&C M&A Trend

E&C M&A Deal Count and %PEG


Notable Deals

Deal size: $4 bn 100% stock $134 mm estimated cost

synergies Pre/Post synergies EBITDA

multiple: 10.6x / 7.4x

$175mm Enterprise Value Estimated 7x EBITDA Integrated delivery strategy

Deal size: $793 mm 100% cash $233mm debt raised $25mm annual synergies Pre/Post synergies EBITDA

multiple: 9.5x / 7.3x Integrated design /

construction

Deal size: $2.7bn 100% cash $1.5bn debt raised $100 mm annual synergies Pre/Post synergies EBITDA


Deal size: $3.3 bn 60% cash, 40% stock $150 mm cost synergies $2.4bn in debt used to fund

transaction Pre/Post synergy EBITDA


Deal size: $600mm 100% cash 9.1x NTM EBITDA, 14.6x

LTM


Anecdotal M&A Themes

Best of times / worst of times

Good deals

oversubscribed Peak earnings x peak

multiples? Tough sectors and

situations have hope

Private Equity a seller International interest

from Asia The SPAC is back Good capabilities &

management always in style

m&a and capital markets themes in the e&c industryfile/... · 2017-09-26 · private and...

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