BDO: supply chain resilience key for M&A in manufacturing
M&A trends in manufacturing
Within the report details that as a result of the supply chain vulnerabilities exposed following the pandemic and BREXIT, there is likely to be an increased appetite for deals that allows organisations to onshore, re-shore or near-shore supply.
Other driving forces identified include corporations expecting to reposition themselves by making strategic acquisitions that diversify their markets and technologies, as well as the impact 2020 has had on sub-sectors that are ready for consolidation.
“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,” commented , UK Industrials Mergers & Acquisitions Partner at BDO.
Interests in M&A activity in manufacturing was resilient in 2020, with almost 600 deals completed. Whilst a 13% decrease compared to 2019, BDO attributes the decline to the Q2 lockdown where deals dropped by 55% compared to Q1. M&A activity did however increase by 45% in Q3 and 91% in Q4.
During 2020, engineering remained the most active sub-sector, accounting for 26% of deals, followed by food and drink (13%), building products (12%) and life science (12%), which was the fastest growing sub-sector with deal volumes rising 68%.
“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,” added Buckley.
Gartner: Leaders Lack Skilled Smart Manufacturing Workers
With organisations rapidly adopting industry 4.0 capabilities to increase productivity, efficiency, transparency, and quality as well as reduce cost, manufacturers “are under pressure to bring their workforce into the 21st century,” says Gartner.
While more connected factory workers are leveraging digital tools and data management techniques to improve decision accuracy, increase knowledge and lessen variability, 57% of manufacturing leaders feel that their organisations lack the skilled workers needed to support their smart manufacturing digitalisation plans.
“Our survey revealed that manufacturers are currently going through a difficult phase in their digitisation journey toward smart manufacturing,” said Simon Jacobson, Vice President analyst, Gartner Supply Chain practice.
“They accept that changing from a break-fix mentality and culture to a data-driven workforce is a must. However, intuition, efficiency and engagement cannot be sacrificed. New workers might be tech-savvy but lack access to best practices and know-how — and tenured workers might have the knowledge, but not the digital skills. A truly connected factory worker in a smart manufacturing environment needs both.”
Surveying 439 respondents from North America, Western Europe and APAC, Gartner found that “organisational complexity, integration and process reengineering are the most prevalent challenges for executing smart manufacturing initiatives.” Combined they represent “the largest change management obstacle [for manufacturers],” adds Gartner.
“It’s interesting to see that leadership commitment is frequently cited as not being a challenge. Across all respondents, 83% agree that their leadership understands and accepts the need to invest in smart manufacturing. However, it does not reflect whether or not the majority of leaders understand the magnitude of change in front of them – regarding technology, as well as talent,” added Jacobson.
Technology and People
While the value and opportunities smart manufacturing can provide an organisation is being recognised, introducing technology alone isn’t enough. Gartner emphasises the importance of evolving factory workers alongside the technology, ensuring that they are on board in order for the change to be successful.
“The most immediate action is for organisations to realize that this is more than digitisation. It requires synchronising activities for capability building, capability enablement and empowering people. Taking a ‘how to improve a day in the life’ approach will increase engagement, continuous learning and ultimately foster a pull-based approach that will attract tenured workers. They are the best points of contact to identify the best starting points for automation and the required data and digital tools for better decision-making,” said Jacobson.
Long term, “it is important to establish a data-driven culture in manufacturing operations that is rooted in governance and training - without stifling employee creativity and ingenuity,” concluded Gartner.