Ingersoll Rand
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Ingersoll Rand’s M&A Machine Is Still Humming

Feb. 21, 2023
The company has signed letters of intent to buy 11 companies that would add at least $200 million to its top line.

The leaders of industrial giant Ingersoll Rand aren’t taking their foot off the gas when it comes to buying companies to add to their product and technology portfolios.

Speaking to analysts after presenting Ingersoll Rand’s fourth-quarter results, Chairman and CEO Vicente Reynal and CFO Vik Rini said their team has signed 11 letters of intent to buy businesses that, if brought into the fold, would add between $200 million and $300 million annually to the top line. Those numbers are right in line with 2022, when North Carolina-based Ingersoll Rand paid more than $800 million for 12 firms with annualized revenues of $270 million.

“We're seeing much stronger momentum as we talk to a lot of the sellers out there,” Reynal said, adding that many of Ingersoll Rand’s deals stem from relationships with business owners cultivated over long period. “The momentum continues to get accelerated […] We're very pleased with what we're seeing here.”

Ingersoll Rand already has two deals in the books to start 2023: It paid $525 million for a $180 million-revenue SPX Flow division that markets air dryers, filters and other air treatment products and three weeks ago picked Paragon Tank Truck, which has about $25 million in sales.

Reynal noted that the company’s funnel of possible deals remains about five times as large as it was three years ago and his optimism about wrapping up other deals throughout this year is a bit out of step with the M&A consensus. The predictions of many market participants and observers included a slowdown in the first part of 2023 as both buyers and sellers looked to see which way the economic winds would blow.

“There has to be agreement between the buyer and seller on the outlook and the multiple to pay for today’s cash flows,” Brian Healy, co-head of Morgan Stanley’s Americas M&A group, said in a recent report from the bank. “While that may take time to work itself out, I believe it will happen within the next couple of quarters.”

Ingersoll Rand posted a fourth-quarter profit of $217 million on sales of more than $1.6 billion. The earnings numbers were down from $293 million in the last three months of 2021 because the prior-year period included $130 million in income from discontinued operations versus only $15 million last quarter. The company’s operating profit for the three months ended Dec. 31 were $273 million versus $140 million in the corresponding period of 2021.

Looking ahead to the rest of this year, Reynal and his team are forecasting sales growth of 7% to 9% and adjusted EBITDA around $1.6 billion versus a little more than $1.4 billion in 2022.

Shares of Ingersoll Rand (Ticker: IR) fell about 2% Feb. 21, in line with the broader market, to $56.38. Over the past six months, they are still up more than 10%, a move that has grown the company’s market capitalization to nearly $23 billion.

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