In case you haven't been paying attention, the mergers and acquisitions scene has been in full gear this year. With the U.S. economy seemingly in good shape, buyers and sellers haven't been shy on pulling the trigger on what they hope will be the proverbial "win-win" deal for all parties.
And companies tied to the tire and rubber product industries haven't been left out of the fun. In recent months, there have been a spate of deals announced, from multibillion dollar global firms adding technology or filling in business gaps, to medium and small firms taking in other businesses to add to their portfolios.
No part of the industry has been untouched, from material suppliers to rubber product manufacturers, even onto the distribution arm of the supply chain.
This outbreak of M&A activity hasn't been unexpected. Observers have cited the cut in the corporate tax rates as one contributing factor. The tax cuts, as the reasoning goes, leads to higher earnings, which gives companies more to spend on acquisitions and—from the seller's standpoints—can also lead to higher selling prices.
In its annual look at M&A trends earlier this year, Deloitte & Touche L.L.P. said the vast majority of respondents to its survey expected an acceleration in deals this year. Nearly 70 percent of executives from U.S.-based corporations and 76 percent of officials from private equity firms looked for more M&A deals this year, and expected the size of the deals to be the same or larger than those from the past year. And more companies reported having higher cash holdings, and that M&A was the top choice to use those funds.
Interestingly, technology advances was ranked No. 1 in what purchasing businesses are looking for, ahead of expanding a customer base in existing markets or adding products and services. That's the tactic followed by Dana Inc. as it looks to shed its reputation as a Rust Belt firm. It closed on two acquisitions in recent months to boost its growing electric driveline portfolio, piggybacking on five other deals the past three years that Dana's CEO says position it as a high-tech company.
That's not to say some buyers aren't looking for deals that bring that elusive synergy. Michelin was looking for just that with its pending purchase of Camso Solideal as well as its earlier acquisition of conveyor belt specialist Fenner P.L.C. That also was the case with TransDigm Group's pending purchase of Esterline Technologies and, on a smaller scale, Trelleborg Sealing Solutions' bid to buy Sil-Pro L.L.C.
Another main driver in M&A has been companies looking to shed a business line or operation, as is the case with Cooper Standard divesting its anti-vibration business—the smallest of its main segments—so it can use the proceeds on operations where it holds market leading positions.
A bit of caution, though, is in order. Some wild cards that could impact M&A going forward include the concern surrounding tariffs, interest rates that are starting to trend up and an economic expansion that, while lasting longer than most in history, will have to end at some point.