The strong economy of recent years has brought increased growth to the equipment rental industry. Increased preference for rental over ownership (i.e., higher degree of rental penetration) has contributed to this growth. The industry has also experienced a high degree of acquisitive growth via consolidation of local, regional, and national companies.
Like many other highly fragmented industries, the equipment rental industry has been primed for consolidations. Since United Rentals acquired RSC in 2011, the industry has witnessed a significant amount of consolidation in both landmark deals and smaller bolt-on acquisitions.
Let’s take a closer look at the transaction environment since 2011, highlighting the transaction multiples observed across the various industry verticals. Rouse has evaluated more than 120 transactions between equipment rental companies from 2011 to 2019 to showcase their patterns and outcomes.
The common metric for deals in the sector is purchase price as a multiple of trailing 12 months’ EBITDA, or the EV/EBITDA multiple.
Across the industry, the average transaction multiple in the North American market (US and Canada) is 7.1x, with nearly 70% of deals trading at multiples between 5.0x and 8.0x. Within the European market (including the UK) the average is a little bit lower, at 6.4x, with the majority of deals trading at multiples between 4.5x and 7.5x.
Rouse sees companies that operate in a specialty vertical (traffic solutions, tanks/pumps, etc.) trading at higher multiples, in some cases reaching as high as 9.0x.
Many transactions take place outside the ranges stated above. Rouse has observed that transaction multiples can vary for a number of reasons, including strategic value, target profitability, and expected synergies via acquisition, as well as situational characteristics such as bankruptcies and market cycles.
No matter the circumstances of a sale, stakeholders across the industry should have a good understanding of the observed transaction multiples. This becomes important for business owners (buyers and sellers), asset-backed lenders, private equity owners, and corporate finance advisors.
For more information about transaction trends, please contact Raffi Aharonian at Rouse Services (Raffi.Aharonian@rouseservices.com).
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