Joe said in his experience in past recessions he had seen weaker companies unable to weather the downturn get bought out by stronger companies at the bottom of the recession. On the other hand, I would hazard to guess that when you see market leaders with strong balance sheets for sale, it likely means the market is headed up. Otherwise the purchaser would not likely pay the premium such an acquisition requires.

In the following of 2010 acquisitions found on this site, you can find examples of both types of acquisitions, but there appears to be more quality companies, rather than distressed properties in the mix:

Malvern Acquires Assets of Reologica Instruments AB: The UK's Malvern Instruments Limited acquired assets of Swedish rheology company Reologica Instruments AB (Lund, Sweden), which went into "administration" on March 23, 2010. Paul Walker, Managing Director of Malvern Instruments, said, "This purchase gives Malvern access to additional technologies and intellectual property that will support the continued development of our own rheology business.”

Nederman acquires Dantherm Filtration: Sweden's Nederman Holding AB announced it has "doubled its business to become the global market leader in industrial air filtration.” Nederman acquired Dantherm Filtration, "one of the leading manufacturers of industrial air filtration equipment. Dantherm Filtration (excluding the business not taken over in France) had sales in 2009 of around SEK 980 million, a headcount of slightly over 900 and is a business area of the listed Danish Group, Dantherm A/S. The acquisition of Dantherm Filtration is in line with Nederman's strategy of acquiring businesses that complement existing products and systems in customer-focused areas. The acquisition is also in line with Nederman's strategy of expanding its customer base and their customer areas. The acquisition also continues Nederman's strategy of expanding in the value chain by selling systems and an increasing amount of aftermarket sales.”

Outotec acquires Ausmelt Ltd.: Finland's Outotec has completed acquisition of Australian listed company Ausmelt Ltd. In the transaction Ausmelt was valued at approximately AUD 50 million (EUR 31 million). "One of Outotec's strategic growth initiatives is acquisition of complementary technologies. Ausmelt has an excellent strategic fit with Outotec. This acquisition complements our technology portfolio in environmentally sound smelting technologies, and allows us to offer smaller scale copper and nickel smelters as well as solutions for ferrous metals, zinc, lead and tin concentrates, zinc bearing residues, recycling and various secondary and waste materials. We believe that within Outotec there are significant growth opportunities for the Ausmelt business," says Pertti Korhonen, President and CEO of Outotec.

Bemis acquires Alcan Packaging Food Americas: Bemis Company, Inc., a global supplier of flexible packaging and pressure sensitive label materials headquartered in Neenah, Wisconsin, announced acquisition of the Food Americas operations of Alcan Packaging, a business unit of international mining group Rio Tinto plc. Bemis has  sales of over $3.5 billion

Atlas Copco acquires Quincy Compressor: Sweden's Atlas Copco completed the acquisition of Quincy Compressor from EnPro Industries, with the exception of Quincy's Chinese operations, where regulatory approvals from local authorities are still pending. Quincy Compressor designs and manufactures reciprocating compressors, rotary screw compressors and vacuum pumps, primarily under the Quincy brand. Atlas Copco plans to further develop the Quincy brand independently, in line with the Group's brand portfolio strategy. The acquired business had revenues in 2009 of MUSD 125 (MSEK 900) and an operating profit margin of approximately 7%. "I am pleased that we have obtained the approvals in the United States and can now move forward to further develop the Quincy business,” says Stephan Kuhn, President of Atlas Copco's business area Compressor Technique.

ATEC Steel acquires new Manufacturing Plant: Tank Connection Affiliate Group (TCAG) announced that their affiliate company, ATEC Steel has acquired a 60,000 sq. ft. manufacturing facility in Baxter Springs, KS. ATEC Steel is an industry leader in field-weld tank fabrication, specialty steel construction and field construction services in North America. ATEC products and services are routinely specified in the power, petroleum, water and wastewater, minerals and mining industries. Tank Connection and ATEC Steel are vertically integrated companies. Starting with steel procurement at the mill and finishing with construction services in the field, all value-added design, manufacturing, project management, system integration and field installation services are performed by company personnel. "While other companies have been scaling back, we are investing in the future of U.S. manufactured storage products,” stated Noel Garrett, president of ATEC Steel.

Bucyrus to acquire Mining Division of Terex: US company Bucyrus International, Inc. announced that it has signed a definitive agreement to acquire the mining equipment business of Terex Corporation for US$1.3 billion in cash. Bucyrus will offer a comprehensive product portfolio comprised of walking draglines, electric rope shovels, hydraulic excavators, off-the-highway haul trucks, highwall miners, underground longwall, room and pillar and transport machinery and a full line of drills and belt systems for all mining applications. "We are extremely excited about acquiring Terex Mining and we believe that this is a unique opportunity to build an even stronger company for our customers, employees and shareholders,” said Tim Sullivan, CEO of Bucyrus.The company says that as a result of the transaction, Bucyrus will double its addressable market from roughly US$15 billion to over US$30 billion and create a team of approximately 10,000 people in nearly 100 locations around the world.

Hillenbrand acquires K-Tron International: Hillenbrand, Inc., headquarted in Batesville, IN, acquired K-Tron International, Inc. for $150 per share in cash. This price represents a 32.1 percent premium over the closing price of K-Tron's stock on January 8, 2010, and a 38.6 percent premium over the 20-day average closing stock price. K-Tron will operate as a wholly owned subsidiary of Hillenbrand. "Although K-Tron's products differ from ours, we are both manufacturing companies that share similar processes and core operational values,” said to Kenneth A. Camp, Hillenbrand's president and chief executive officer. "Like our Batesville Casket business, the K-Tron operating companies are leaders in their industries and have highly effective executive management teams. K-Tron has a strong track record of delivering superior financial performance and creating significant shareholder value.” Hillenbrand, Inc. is the holding company for Batesville Casket Company, a leader in the North American death care industry through the sale of funeral services products, including burial caskets, cremation caskets, containers and urns, selection room display fixturing, and other personalization and memorialization products. K-Tron is a recognized leader in the design, production, marketing and servicing of material handling equipment and systems. The company serves many different industrial markets through two separate business lines. The Process Group focuses primarily on feeding and pneumatic conveying equipment, doing business under two main brands: K-Tron Feeders and K-Tron Premier. The Size Reduction Group concentrates on size reduction equipment, conveying systems and screening equipment, operating under three brands: Pennsylvania Crusher, Gundlach and Jeffrey Rader.

FLSmidth acquires Summit Valley Equip & Engineering: FLSmidth (Copenhagen, Denmark) has acquired the assets of Summit Valley Equipment & Engineering, located in Salt Lake City in Utah, USA. Summit Valley Equipment & Engineering (SVEE) designs and fabricates modular plants and equipment used for the extraction of gold and silver. This includes the industry's highest capacity electrowinning cell used in precious metals recovery. "With the acquisition of SVEE FLSmidth adds unique refining expertise to our existing minerals business thereby increasing our offerings to the minerals processing industries and providing a more complete flow sheet in gold and silver extraction," Group CEO Jørgen Huno Rasmussen said.

Don Dunnington
Blog Moderator

Joe brings up a good point. If your only information about the economy comes from the nightly news, you might be persuaded that no one is doing business right now. But we're dealing with a very large world economy, and there are some significant sectors that continue to function quite well.

Comfort in the Food Industry
As Joe suggested, food (including pet food) is one of those sectors that tends to fare better than others in a recession.

K-Tron Process Group's Bob Barnett agrees. As vice president of sales and marketing, he has been through a number of economic ups and downs. He said, "People eat more comfort food when they're feeling bad about the economy. Companies that make snack foods, cereals and convenience foods tend to grow in recessions."

Barnett noted that food's robust growth even offers some sugar coating to an otherwise dismal plastics industry that is way down due to the auto and housing declines. Those industries making plastic film for food packaging or sheet for microwave food containers are adding process lines.

Healthy Business in the Pharmaceutical Industry
The Pharmaceutical Industry is another sector that keeps investing in production improvements in recessions. K-Tron's Barnett told me the pharmaceutical industry has a very long development process that tends to keep on track despite the mergers and consolidation the industry is experiencing.

On April 30, I'll be attending a seminar in King of Prussia, PA where I'll learn more about the growing momentum for conversion from batch to continuous processing of pharmaceuticals. The seminar, Innovations in Pharmaceutical Processing, is hosted by K-Tron Process Group, Leistritz, Howorth Air Technology, Hosokawa Micron Powder Systems, K-Tron Premier and Quadro Engineering Corp.

At the Resume Bear, a blog for job seekers, a recent article listed medicinal and biological products as number 3 of the top 50 recession-proof industries with 7%, 2%, and 5% growth in the 1990, 2001, and 2007 recessions according to the US Bureau of Labor Statistics.

Many of those top 50 recession-proof industries in the Resume Bear article (especially in Part 2 which lists numbers 26-50) are actually government or educational institutions, but there are some additional industrial sectors that are worth noting. In my next post, I'll look at another industry that remains strong in the face of recession.

Don Dunnington
Blog Moderator

A good example was recently brought to our attention by Gerardo Méndez, the quality manager at Geometrica, builders of large column-free enclosures based on efficient geometric shapes. The company has posted an article that narrates their journey to ISO 9001 certification and describes how a wiki can actually help not only to comply with ISO's requirements, but to capture volumes of tacit knowledge in an organization and manage it effectively.

Geometrica has its headquarters in Houston, Texas and its main plant in Monterrey, Mexico. Through seventeen years, the organization has provided affordable and environmentally-friendly dome and space frame structures worldwide.   

Don Dunnington
Moderator

In 1948 the U.S. had recently come out of the two great dislocations of the 20th century--the Great Depression and WWII. There was a booming market for coal sized to fit automated coal stokers, but most mines couldn't supply the properly sized coal. Gundlach responded to that need with the first two-stage roll crusher that could size coal at the mine to fit in all three dimensions, delivering valuable stoker coal precisely sized at ¾ in. x ¾ in. x ¾ in.

Jump forward to the late 60s and early 70s, and it's a plastics boom. Anyone who has seen 1967's hit movie "The Graduate," remembers this prophetic cocktail party scene: 

Mr. McGuire (played by Walter Brooke): I want to say one word to you. Just one word.
Benjamin (Dustin Hoffman): Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.

Benjamin (the recent graduate) greets this revelation with a puzzled look, but those who figured out how to meet the needs for the capital equipment that make plastic production possible forged businesses that remain leaders in the world today.

Take for example the world's first digitally controlled weigh belt feeder, introduced by K-Tron in 1972. Plastic compounders needed a feeder that could deliver material continuously and accurately to their extruders. The new extruders of the era demanded accuracy that previous feeders simply couldn't deliver.

As the demands grew for greater process speed, more flexibility and ever more accurate feed ratios, the innovations continued. In 1976, K-Tron introduced the first loss-in-weight feeders with digital weighing. In 1989 they introduced the first modular feeders that let processors quickly reconfigure their K-Tron feeders for different materials. These ground-breaking modular feeders also featured the first Smart Force Transducer weighing technology, which delivered even greater feed accuracy.

The innovation at K-Tron goes on to this day with a wide array of gravimetric feeders, many of them fine tuned to feed minor and micro-ingredients, meter at high rates, or provide precise multi-stream ratio control.

Whether it's growth in productivity for existing markets or growth in capacity for new markets, you'll find capital equipment makers making it possible. Economies go up and down. But thanks in part to the innovations of our equipment makers, and the vision of the buyers of that equipment, the long term trend continues upward. That's how real wealth is created.

We need to tell the stories of these creators of the small yet vital single pieces of equipment, the suppliers and designers of massive complete systems, and the manufacturers who invest in this productive capacity so they can finish the job of producing something of value for the world. We need to tell and re-tell these stories so that others can understand. If you have a story to share, send it to me here at the powderandbulk.com blog.

Don Dunnington
Moderator