Baird Capital exec sees fewer gems for industrial M&A

  • High prices reduce the margin for error on deals
  • The well of great companies to buy has been greatly tapped
  • Most GPs have sold their best companies in last two years

Andrew Brickman, a partner at Baird Capital, said he’s seeing purchase price multiples in the middle market industrial space often around 10x EBITDA. Years ago, he thought 7x EBITDA was lofty.

As the private equity arm of Robert W. Baird & Co, Baird Capital has been looking at a couple of fresh acquisitions of late, but other firms have bid higher.

“We’re very specific on what we spend our time on,” Brickman said. “It’s very hard to get comfortable enough to stretch and really succeed on these deals. It’s just hard. Prices are high. The margin for error is very, very low.”

It takes a lot of work and conviction to pursue deals at that level, but it can still be done, he said.

“If you think you know enough about the business, you’ve got the right resources, and believe you can drive incremental growth or change, then you do end up stretching a bit [on purchase prices],” Brickman said in a phone interview.

While it’s been a good exit market, Brickman said it feels like the choice companies in the middle market have been put on the block in the last 18 to 24 months and the quality has been slipping a bit of late.

“The M&A cycle has kind of gone through a lot of its best deals,” Brickman said. “There are still gems out there. But it’s a tighter market right now. People are bidding strong, but everything has to line up. It does drive up pricing.”

While trying to hold the line on price as much as possible, Baird Capital has been focusing on improving efficiency and performance at portfolio companies such as Digi-Star, which the firm sold about 18 months ago to Topcon Positioning Group.

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Photo of Andrew Brickman courtesy of Baird Capital