Mcilvaine Insights

No. 201   June 13, 2022

·        The Role of Private Equity for Small and Mid-Sized Pump and Valve Companies

·        Value of Acquisitions in the Pump Industry

·        Acquisition Tracking in AWE Markets

The Role of Private Equity for Small and Mid-Sized Pump and Valve Companies

There is a sea change in the pump and valve industry which will greatly increase EBITA for companies which adapt but will negatively impact those who do not. Small and midsized companies will be at a disadvantage if they continue business as usual.

One solution is to join a private equity firm with a compatible portfolio. An analysis exploring the ramifications and options for addressing this option has been published by the McIlvaine Company.

The activities of five private equity firms are analyzed.

• May River Capital
• Warburg Pincus
• First Reserve
• Audax
• Clearlake

The conclusions are:

1. Midsized and small pump and valve companies will need to address the sea change primarily created by IIoT and Remote O&M and secondarily by international political instability.

2. Much of the potential EBITA opportunity will come from the sale of high performance products.

3. Success will depend on creating products with lower total cost of ownership in selected niches which will result  in the greatest profits.

4. The millions of analyses needed for this effort will be made possible by utilizing all the available intelligence.

5. The cost of creating an Internet of Wisdom is beyond the means of a single mid-sized company.

6.  A private equity firm with a compatible portfolio is a logical solution to the cost sharing and collaboration needed to navigate this sea change.

The complete analysis is found at http://home.mcilvainecompany.com/index.php/other-services/free-news/news-releases/2-uncategorised/1719-private-equity-and-pump-and-valve-markets

Value of Acquisitions in the Pump Industry

There are firms who acquire companies based on their standalone profit potential. This is a strategy that works for general service pumps which are sold more on price and delivery. For high performance pumps success depends on having better products, knowledge of customer needs, and a route to convince them of the product superiority.

EBITA as high as 30% is achievable with this strategy. However the investment in gathering needed knowledge and converting it to wisdom is substantial. By acquiring companies with unique and synergistic wisdom the goals can be achieved more quickly than through organic growth.

The wisdom to be acquired includes the following

Wisdom Benefits

1.     complimentary products with lower total cost of ownership than competitors

2.     synergistic application and industry knowledge

3.     customer access by geography and industry

4.     new products and industries

A review of recent pump company transactions shows that one or more of these wisdom benefits has been acquired in each case.

Atlas Copco has acquired Idustie Pumpen Vertriebs Gmbh. The company has sales of less than $10 million but is a significant player in the European chemical industry. So customer access was an important wisdom gain. (3)

Atlas Copco also purchased Pumpenfabrik Wangen, a German manufacturer of progressive cavity pumps used for transferring fluids mainly in the biogas and wastewater sectors. The company also manufactures twin-screw pumps used in sectors like food and beverage and cosmetics. Revenues are $50 million.(1) (2) (3)

The Ingersoll Rand purchase of Albin pumps was based on the belief that Electric peristaltic pumps are one of the fastest growing positive displacement technologies and yield strong aftermarket opportunities. The conclusion was that the business possesses strong technological expertise in niche applications and end markets.

Another justification was products commonly used in the same strategic markets as other Ingersoll Rand products, including water (municipal and industrial), chemical processing, food and beverage and mining. Albin will complement the product lines of ARO^®, Milton Roy^® and other Ingersoll Rand brands. (1) (2)

Tuthill manufacturers lubrication pumps which fit well with the compressor products sold by the company. (1) (2) (3

Gardner Denver purchased Oina due to “strong history of delivering innovative products and building excellent customer relationships. This acquisition complements and expands their existing peristaltic pump offering and provides increased access to and expertise in the market. (1) (2) (3

The McIlvaine Pumps: World Market report has been reporting pump acquisitions on a monthly basis since May 2003 when the following the following was reported.

May 2003 Pump Acquisitions Updates

Wilo Acquires EMU Unterwasserpumpen

January 1, 2003, the Etschel & Meyer GmbH + Co. KG, Hof/Saale has sold its shares in the EMU Unterwasserpumpen GmbH (founded in 1949), as well as its shares in the three German and eight foreign subsidiaries and in its sister company, EMU Anlagenbau GmbH, Hof, to the family company WILO AG, a joint stock company not listed on the stock exchange. EMU Unterwasserpumpen GmbH belongs to the leading worldwide suppliers of submersible pumps and sewage plant technique for municipal and industrial water supply, sewage disposal and sewage purification. Contractor’s pumps for dewatering and for flood control are another part of the EMU manufacturing program. EMU Anlagenbau GmbH specializes in Germany in projecting and installation of complete water supply systems and booster plants. The transaction still needs to be approved by the Monopolies Commission.

The EMU companies complement without any conflict the portfolio of WILO AG. With 3050 staff members and an annual turnover of 535 million Euro, WILO is one of the world market leaders in the field of pumps and pump systems for application in the building services segment. The EMU group of companies with its roughly 500 employees worldwide achieved in FY2002 its historically highest turnover of almost 50 million Euro. At the company’s headquarters in Hof, Germany, EMU employs 440 people.

KSB Plans to Acquire Dutch Pump Manufacturer

KSB AG plans to acquire Dutch pump manufacturing company DP Industries B. V., based in Alphen a/d Rijn. An agreement to this effect is planned to be signed in mid-May. DP Industries has 280 employees and would be turned into a KSB Group sheet metal competence center. KSB Group aims to strengthen its positioning in the sheet steel and stainless sheet steel pump markets and will sell DP Industries products worldwide.

There have been hundreds of pump acquisitions since 2003. Even this 19 year old data is valuable because it has the sales revenue and employees for what is now a division where results for the segment are not available.

A review of these acquisitions over the last 20 years reveals the areas of acquired wisdom over time along with the perceived value at the time of purchase

All this historic data plus current periodic updates are included  in Pumps: World Market. Details are found at http://home.mcilvainecompany.com/index.php/markets/water-and-flow/n019-pumps-world-market

Acquisition Tracking in AWE Markets

McIlvaine has been tracking acquisitions for more than 20 years in

·        Air Filtration

·        Fabric Filters

·        Scrubbers and Absorbers

·        Electrostatic Precipitators

·        Flue Gas Desulfurization

·        DeNOx

·        Sedimentation and Centrifugation

·        Liquid Microfiltration

·        Liquid Cartridges

·        Crossflow Membranes

·        IIoT and Remote O&M

·        Cleanrooms

·        Pumps

·        Valves

In each of these market reports we will be adding a tab labeled Acquisitions with periodic updates.  A database will link to the analysis as per the following example for fabric filters.

Fabric Filter Acquisitions  2002 - Present

CECO Environmental Acquires Index Water - April 2022

CECO Environmental Corp., announced the acquisition of substantially all of the assets of Index Water, expanding its water treatment solutions portfolio serving the Middle East region. Terms of the deal were not disclosed.

CECO's deep experience in high-efficiency, processing, separation, and filtration solutions is further enhanced with the addition of Index Water's intellectual property, technologies, and other assets that support systems including process and potable water treatment, ultrafiltration, desalination, and demineralization technologies, in addition to effluent and sewage water treatment including biological and reuse technologies.

Over the last three years, CECO has been aggressively expanding its presence in the produced water, process and potable water, effluent and sewage and wastewater treatment markets. Through organic innovation and acquisition, CECO has quickly become a technology leader in liquid coalescing, de-aeration, ferrate-based advanced oxidation, dissolved gas flotation, reverse osmosis, and several other produced and process water technologies.

Micronics Engineered Filtration Group Announces Strategic Acquisition of
National Filter Media (NFM)  February  2022

The Micronics Engineered Filtration Group announced the acquisition of filtration industry leader, National Filter Media (“NFM”).

The strategic acquisition of National Filter Media significantly expands Micronics’ portfolio of engineered filtration solutions to better serve customers’ advanced filtration needs.

“I am excited to welcome NFM and FilterFab to the Micronics family of trusted wet and dry filtration brands! I am very much looking forward to working with our talented new NFM and FilterFab teammates as we bring our combined talents and capabilities to our valued global customers,” said Chris Cummins, President and CEO of the Micronics Engineered Filtration Group. Mr. Cummins will head up the newly combined company going forward.

“Together, we bring over 400 years of combined expertise to the marketplace. I am fully confident that we will offer our global customers an unparalleled combination of problem-solving along with filter media, advanced filtration equipment, filtration services, and aftermarket parts,” Mr. Cummins added.

With the addition of National Filter Media, The Micronics Engineered Filtration Group now combines strong, trusted wet and dry filtration brand names including Micronics, Southern Filter Media (“SFM”), C.P. Environmental (“CPE”), United Process Control (“UPC”), AeroPulse, National Filter Media (“NFM”), FilterFab, Midwesco Filter Resources (“Midwesco”), and Fabricated Filters.

Added filter media that the Micronics Engineered Filtration Group will now manufacture in-house with the addition of NFM include Belt Press Dewatering Belts, Pressure Leaf Filter Media, Horizontal Vacuum Belt Filter Media, Rotary Vacuum Drum Filter Media, Rotary Vacuum Belt Filter Media, Rotary Vacuum Disc Filter Media, and Vacuum Pan/Table Filter Media.

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The fabric filter database has acquisitions going back  more than 20 year on line and 42 years with the older printed versions.

To understand the Microics-NFM significance it is good to see the past acquisitions such as.

Micronics Dry Filtration Group Acquires Certain Assets of
Midwesco Filter Resources - July 2016

The Micronics Engineered Filtration group — consisting of leading wet and dry engineered filtration companies including Micronics, Inc., Southern Filter Media (SFM), C.P. Environmental (CPE), United Process Control (UPC) and AeroPulse — is pleased to announce the acquisition of certain filter media production equipment and product inventory assets of Midwesco Filter Resources (MFRI)/

From 1978 through 2012, both CPE and UPC supported MFRI’s customers with industry-leading baghouse services including:  inspections, field maintenance, mechanical repair/rebuild services,

changeouts, troubleshooting and baghouse parts and accessories. CPE and UPC’s expert service crews executed some of the largest bag installation, maintenance and service projects — under the Midwesco name — for a host of customers across North America. Their service crews and sales professionals have extensive experience servicing the utility, coal-fired power plants, industrial boilers, steel, energy-from-waste, cement, lime, coatings, chemicals and food, to name a few industries served.

“Our dry filtration companies have provided products and services for many of Midwesco’s customers for many years, whether through our services at CPE and UPC or with high-quality filter bags outsourced to SFM by Midwesco,” according to Don Eldert, President, Micronics Dry Filtration Group & Executive VP, Micronics Filtration Holdings, Inc. “These purchases further underscore the commitment of the Micronics Engineered Filtration family of companies to continuing the legacy of providing industrial baghouse/dust collector customers across North America with unrivaled dry filtration product and service offerings,” said Mr. Eldert.

In 2014 and 2015, CPE, UPC, AeroPulse and SFM all joined the Micronics Engineered Filtration family and collectively strengthened its dry filtration offerings to better serve customers’ pollution control needs.

SFM has designed and produced high-quality filter bags for baghouses in North America since 1973. SFM produces high-temperature felts, fiberglass, polyester and polypropylene filter media in a variety of finishes including ePTFE membrane, all in a state-of-the-art bag manufacturing facility.

Over the last 30+ years, SFM has produced thousands of bags of MFRI to ensure that MFRI could meet the delivery and quality expectations of their customers. SFM continued to support MFRI’s production needs up until the day they closed their doors (in June 2016); SFM recently shipped the last orders they received from MFRI.

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Other useful data: The searchable database also has hundreds of technical, articles and news about orders from the companies now part of Micronics.

The only time that much of the data on revenues, employees, and market value is provided is at the time of an acquisition. So 20 year old information still has value but is difficult to find.

The BHA Example:   The fabric filter industry has been built by small companies. When Choppy Reinfrank called McIlvaine 40 some years ago he proposed the novel idea of creating a third party company to sell bags directly. Success seemed implausible. 20 some years later he sold BHA to GE for $240 million. The company then became part of Clarcor and now with the Clarcor  acquisition by Parker it is part of a multibillion dollar operation.

The basis for BHA success was use of computers to help owners decide when they needed to replace bags and to be able to provide bags for any design. The personal knowledge and high level contacts also were important. BHA executives dealt directly with top management at Cemex and other large bag purchasers. Regular training courses were conducted for personnel at cement and other user companies.

With new condition monitoring software this approach can be expanded  to supply bags as needed and to provide remote O&M. The knowledge of the early efforts is very valuable in pursuing this IIoT and Remote O&M opportunity.

Bob McIlvaine can answer your questions at 847 226 2391 or rmcilvaine@mcilvainecompny.com

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