1H 2019 Distribution & Logistics M&A Report

Transcat, a value-add distributor of test and measurement equipment, went public on January 13, 1978. Like many companies, its stock had peaked in the late 1990s on June 30th, 1997 at $9.75 per share before the internet bubble. Transcat’s stock didn’t return to its late 1990s peak until April 20th, 2011 and briefly reached as high as $13.40 in 2012 before retreating between $5.73 – $10.79 from 2013 through 2015. From 2012 – 2014 Transcat completed just one acquisition per year but accelerated its inorganic strategy and completed five deals in 2015 and five more since then, including its most recent acquisition – Gauge Repair Services – in April 2019. While none of these acquisitions were very large, by targeting ancillary test & measurement equipment services companies (calibration, repair, and rental) Transcat has been able to build a compelling suite of services to its core distribution business. As of June 30, 2019 Transcat’s stock was trading at $25.59 and a 12.5x TEV/EBITDA multiple, whereas on Jan 1, 2017 it was only trading at 7.8x. The following page illustrates the historic ebb and flow of Transcat’s stock price along with its recent surge correlating with its increased M&A activity. SDR believes that Transcat’s continued success is contingent upon finding ways to improve its EBITDA margin (~10%) significantly by unlocking more operating efficiencies within its increased value add service capabilities…