_{DEAL OF THE MONTH}

Shingle All The Way

Roofing accessories and rainware aren’t exactly subjects that light up Wall Street chat rooms. I mean, how many people do you know getting excited about another generic industrials deal? But they’re solid businesses when the housing market holds up (someone hold my Jenga blocks).

Gibraltar is making a bet that the housing market remains rock solid (good thing Michael Burry just retired) and has agreed to buy OmniMax International from Strategic Value Partners for $1.335 billion in cash.

OmniMax sells the gutters, flashing, and trims that keep your house dry and your HOA happy. Its estimated 2025 adjusted EBITDA of $110 million, so the purchase price reflects an effective multiple of 8.4x when you consider the $35 million of cost savings and ~$100 million of tax benefits. That is certainly a full valuation. 

To bring the companies under one (shingled) roof, Gibraltar is levering tf up. The financing includes a $1.3 billion new term loan and an upsized $500 million revolving credit facility, juicing leverage up to 3.7x EBITDA.

Like all good management teams though Gibraltar claims to have a path to deleverage in 2 years. It just might be a bit…rocky.

Gibraltar’s shareholders were less than bullish on the thesis and the story, causing shares to slide 37.5% over the month and are down ~25% since announcement.

All in all, it looks like it was a better day to be a banker than the head of Corp Dev at Gibraltar, so a good job to all the advisors on the deal who got this one out of the pitch deck and into the board room… although the 25% share price drop was probably not in the market materials.

PS: I would like to give a special shout out to the BofA GIG analyst who worked tirelessly to see this one through. Good effort.

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_{STRATEGIC DEAL OF THE MONTH}

The Little Search Engine that Could

After a massive fumble with Figma, Adobe is back in the M&A world this time targeting SEO.

The software giant has agreed to buy digital marketing platform Semrush for $12/share in cash, valuing the company at $1.9 billion, or 77.5% premium to its pre-announcement price. Someone wanted to make up for missing out on Figma…

Semrush has had a good run admittedly, with massive revenue growth over the past few years culminating in a 30% CAGR since Q3’19.

Adobe is paying roughly 21x ARR. Fun fact, it is also paying 1x per use of the word “AI” in Semrush’s latest presentation…but I am sure that fact didn’t make the board meeting.

Adobe shareholders responded a bit less positively (maybe because they knew they were overpaying), with its stock falling 6% over the past 5 days, down almost 2% on announcement day.

Whether this take ages like milk or like a fine wine remains to be seen, but generally speaking, paying 21x for anything certainly means the business must perform perfectly to hit your underwriting model. What is clear is that Adobe’s head of Corp Dev does not want to miss out on the next Figma, and they are willing to pay up to get there.

_{INT’L DEAL OF THE MONTH}

Power to the Chips

If you own shares of a company that makes heat sinks, you may want to sink into your nearest chair.

Eaton just announced a deal to buy Boyd Corporation’s thermal business from Goldman for $9.5 billion, or a MIND BOGGLING 22.5x Boyd’s 2026E EBITDA. I don’t know about you, but I have never met a seller model that had a conservative NTM EBITDA estimate…

This is Eaton’s fourth deal this year - guys, if you are just looking to deploy some dry power, I know a newsletter that is open to a 22.5x valuation - and its largest to-date.

Goldman bought Boyd alongside Chinese sovereign fund CIC for ~$3 billion in 2018, so this has been a long hold already. With that in mind, carving off the thermal business and clearing north of a 3x on your all-in purchase price has to feel pretty good.

What this deal does make clear is that even if you want to debate the multiple, in a world where kids will use ChatGPT to figure out if they should tie their shoes today, GPUs are running hotter than your laptop after a day of modeling. That means liquid cooling isn’t just a luxury anymore, it’s a necessity.

Is there an AI bubble? Maybe. Nvidia just beat earnings so everyone is out there asking what bubble, but we have two deals in this newsletter clocking in over a 20x multiple because they say AI … so you tell me what bubble.

_{NEWS ROUNDUP}

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• Monarch makes first European investment with 38% stake in FC Viktoria Berlin

• Chryscapital raises $2.2 billion in India’s largest homegrown PE vehicle

• xAI looks to raise $15 billion at $230 billion valuation