M&A activity in manufacturing sector set to remain buoyant in 2021
BDO’s Manufacturing Deal Review discovered that the appetite for M&A deals in the sector was resilient throughout 2020 – with almost 600 deals completed last year – and that the level of activity is set to remain strong throughout 2021. For the reasons behind this trend and for more detailed information on this subject please read the bulletin below which was issued today by Insider Media Ltd.
Roger Mundy, Managing Director, Beardsley Theobalds, 11th March 2021
Manufacturing M&A activity set to remain strong in 2021 - BDO
The market for M&A activity in the manufacturing sector is set to remain active in 2021, with many deals likely to be driven by a desire to make supply chains more resilient, according to a report from accounting and business advisory firm BDO.
The firm's Manufacturing Deal Review 2020 suggested that the supply chain vulnerabilities exposed as a result of the pandemic and the transition out of the EU trading bloc could increase appetite for deals that allow businesses to onshore, re-shore or near-shore their supply.
It found that the appetite for M&A in the manufacturing sector had remained resilient in 2020, with nearly 600 deals completed during the year. The figure was down 13 per cent on 2019, but this was almost wholly attributable to the Q2 lockdown when deal volumes fell by 55 per cent on the previous quarter.
Deal numbers climbed by 45 per cent in Q3 and 91 per cent in Q4 as stalled M&A processes restarted and corporates began to accelerate strategic plans.
Engineering continued to be the most active subsector during the year, accounting for 26 per cent of deals, followed by food and drink (13 per cent), building products (12 per cent) and life sciences (12 per cent). Life sciences was the fastest growing subsector during the year, with deal volumes rising by 68 per cent.
Roger Buckley, UK industrials mergers and acquisitions partner at BDO, said: "Deal activity held up remarkably well in 2020, and the market looks set to remain active in 2021. Many corporates have significant cash reserves to invest and private equity firms sitting on considerable stores of dry powder are competing to acquire quality manufacturing businesses that have proven their resilience over the last year.
"After the challenges of 2020, it’s unsurprising that many manufacturers are reviewing their supply base and we anticipate market movement as operators take steps to reshape supply chains."The pandemic has also focused minds on how markets will develop over the longer term, with corporates positioning themselves for a different future in which digitalisation, automation, sustainability and ESG appear higher on the agenda."