Acquisitions Shape the Hose & Coupling Market

    An analysis of thousands of acquisitions over the last 30 years shows that the hose market is built on the niche achievements of several small companies who were acquired by publicly traded companies or private equity firms. The many benefits of mergers have recently increased due to the advent of IIoT and remote O&M which allow suppliers to provide solutions and not just products.

    By Robert McIlvaine, President and Founder, the McIlvaine Company

    There are several motivations that can cause a hose company to seek acquisitions. The four most prevalent causes are depicted in Figure 1.

    For example, one can look at the benefit for a hose company to acquire a company with complimentary products. Typically, hose & couplings are tied, in some manner, to valves, pumps, and process equipment. To some extent remote monitoring is needed for leakage detection. Of more importance is the fact that solutions providers are a new group of customers.


    Figure 1.                                                Figure 2.

    Total Solutions Market

    The total solutions market for hoses & couplings can be defined in different ways. One is a pragmatic approach based on the capabilities and interests of a group of suppliers. This approach excludes most discrete and mobile applications. The reason for this exclusion is that a different group of suppliers typically pursue this high volume, but small, hose market. Most residential and commercial markets are also excluded. Each of the market niches in a pragmatic approach are defined in one umbrella market report.1

    Hoses & couplings themselves, represent a USD $25 billion segment of this Solutions Market.2 Dryers, kilns, and furnaces are not included in the total, even though the hose and couplings used with them are. If they were to be included the hose percentage of the market drops from 3% to 2%. In general, hose & couplings represent about 0.3% of the total installed cost of process systems.

    The most successful acquirers have been focused on specific market niches. The largest acquisitions to take place recently have covered several market niches, while the successful smaller acquisitions have often been focused on narrow market niches, see Figure 2.

    Acquisitions

    Much of the acquisition activity that takes place in the hose & coupling market is at the distribution level. Some combine distribution and fabrication while others focus on acquiring unique products. Geographic and application niches are also pursued, see Figure 3.

    For example, the Hyda-Zorb acquisition illustrates the expansion of a major supplier over time with acquisitions, and eventual sale to a private equity firm.

    In 2020, ZSi-Foster, Inc., an Ideal Tridon company, acquired Hydra-Zorb Company headquartered in Auburn Hills, MI. Founded in 1972, Hydra-Zorb is an industry leader in pipe, hose, and tube clamping for the hydraulic, HVAC, plumbing, and refrigeration markets. It is widely recognized for the invention of the cushioned clamp.


    Figure 3.

    Ideal Tridon, headquartered in Smyrna, Tennessee, is a leading global designer and manufacturer of engineered components supporting and connecting the movement of air, fluid, and electricity. Ideal’s clamps division designs and manufacturers stainless steel and specialty clamps for a broad range of fastening and sealing applications across diverse end markets and channels, including: Original Equipment Manufacturing (OEM) operations and Replacement Market warehouses, distributors, and retail businesses.

    Through the acquisition of ZSi-Foster in June of 2019 Ideal expanded its clamps and support systems offerings to include additional highly engineered, mission-critical clamps, fittings, couplers, and strut and metal support systems. These products are found in demanding environments across diversified end markets, including: general industrial, fluid power, HVAC, refrigeration, and electrical markets. The company manufactures and distributes its products globally from facilities in North America, Europe, and Asia.

    Ideal Tridon is also a portfolio company of Snow Phipps Group. This private equity firm focused on lower middle-market control investments with USD $2.4 billion of total capital commitments raised since its founding in 2005. The firm generally focuses on companies in attractive sub-sectors across the Industrials, Services, and Consumer industries; it targets platform investments with enterprise values ranging from USD $100 million to USD $500 million. The Snow Phipps investment team collaborates with its Operating Partners and portfolio management teams to create value through an operationally focused strategy often led by organic or acquisition-driven growth.


    Figure 4.

    Further Considerations

    There are a few alternative options for companies looking to transition to the total solutions market. One option is to become part of a private equity portfolio which has complementary solution products. Another option is to become part of a collaborative group. Independent cleanroom laundries around the world have banded together as Micronclean. The Star Pump Alliance, for example, is a collaboration of pump users and manufacturers. A third option for mid-sized hose and coupling manufacturers is to be acquired by a larger company.

    With the international political situation as well as the advent of IIoT and Remote O&M hose & couplings suppliers will need to continually assess the opportunities and make critical decisions on a timely basis.

    Reference

    Air/Gas/Water/Fluid Treatment and Control: World Market published by the McIlvaine Company Hose & Couplings: World Markets published by the McIlvaine Company

    ABOUT THE AUTHOR

    Bob McIlvaine founded the McIlvaine Company in 1974 and oversees the work of 30 analysts and researchers. He has a BA degree from Princeton University.

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    Sara Mathov is a feature editor contributing to Valve World Americas, Stainless steel World Americas and other related print & online media.