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Transaction
Case Studies

Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail [email protected] with your contact information.

Archives > Transaction Case Study 69

SOKOLOFF & COMPANY CASE STUDY
Honeywell International, Inc. (NYSE: HON)
acquires RAE Systems, Inc.

DATE ANNOUNCED:  April 23, 2013
BUYER:  Honeywell International, Inc. (NYSE: HON)  
SELLER:  RAE Systems, Inc. taken private in 2012 and owned by Vector Capital     
PURCHASE PRICE:  $340M
FORM OF PURCHASE PRICE: Cash

SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES

Year 2010 2011 Forward Twelve Months
Calendar 2013

Revenue

$87M

$100M est

$107M

EBITDA

$7.7M

$18M est

$26M

Cash

 

 

0

Debt

 

 

0

Purchase Price

 

 

$340M

Enterprise Value

 

 

$340M

Multiple of Revenue

 

 

3.18

Multiple of EBITDA

 

 

13

TRANSACTION DRIVERS
RAE Systems is a manufacturer of fixed and portable gas and radiation detections systems and software.  President/CEO of Honeywell Life & Safety, Mark Levy commented "Their strong presence in hazardous material, first responder, and government complements our existing business very well, and their expertise in photo-ionization detection, wireless, and radiation detection represent terrific opportunities to expand our reach.  RAE Systems' geographic, manufacturing and distribution footprint, especially in high-growth countries like China, will help to make our already-strong gas detection portfolio an even greater global franchise in a very good industry. RAE Systems is a very compelling strategic fit for Honeywell."

The acquisition further builds on other successful transactions including Zellweger Analytics in 2005, First Technology in 2006, the gas detection businesses of Sperian in 2010, and Fire Sentry in 2012.

SOKOLOFF COMMENTARY:
Formerly publicly held, RAE was taken private in June of 2011 by Vector Capital who acquired the company for $138 Million.  The EBITDA multiple at the time was about 8x.  We estimate that, in just 16 months, RAE management was able to increase EBITDA by about 30% from the Trailing Twelve Months (TTM) EBITDA at the time the prior sale to Vector was announced.   That, plus the 63% bump in EBITDA multiple, made for a very nice, quick payday for Vector and the other RAE shareholders.

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