Merger and acquisition activity will remain strong in the test & measurement market despite the current credit crunch in the United States and Europe, according to a report by Baird’s Investment Banking Department ( The free report, titled Test & Measurement M&A Report, highlights capital markets and trends and events that impact middle-market companies within this sector.

Key trends highlighted in the report include:

  • The T&M M&A market continues to remain active despite the impact of the credit crunch. While transactions within this market are generally smaller, private-company transactions, there have recently been a few larger transactions such as Danaher’s ( acquisition of Tektronix (, Honeywell’s ( acquisition of Metrologic Instruments (, and Teradyne’s ( acquisition of Nextest Systems (
  • Strategy is king. The slowdown in private-equity activity has been offset in large part by strong strategic buyer interest. The industry consolidators are focused on acquiring differentiated technology serving attractive end markets with international expansion opportunities. Representative transactions that are illustrative of these trends include ESCO Technologies’ ( acquisition of Doble Engineering (, Honeywell’s acquisition of Enraf ( and IDEX’s ( acquisition of Nova Technologies (
  • Added value = higher profit margins. Generally, the T&M industry participants who offer customers differentiated, value-added products and services — such as patented or proprietary features, integrated systems, high software content, and aftermarket support — while also executing on manufacturing excellence and global sourcing programs, generate gross margins in excess of 50 percent and EBITDA margins in excess of 20 percent.
  • Growth-oriented companies will attract M&A activity. While equity offering transactions within the T&M sector have been limited in recent months, attractive growth-oriented companies, such as FARO Technologies (, which raised equity capital last year, continue to attract strong interest from the institutional investor community. T&M companies serving higher-growth end markets — such as infrastructure, oil & gas, and environmental — exhibit the growth characteristics that could facilitate a public offering.
  • Amidst an uncertain economic environment overall, public equity market valuations for the T&M sector generally remain strong. On average, valuations have come down slightly relative to six months ago in line with the broader equity indices. Baird attributes much of the decline to the trends in the overall stock market rather than sector-specific issues, as many of the industry participants continue to grow at above-GDP growth rates and their margins remain strong.

EDITOR”S NOTE: A link to Baird”s full Test & Measurement M&A Report was removed from this story at Baird”s request. To request a copy of the full report, please contact Baird directly at