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.