Manufacturing and industrial M&A activity expected to grow
Supported by continued business confidence and private equity activity
- 94% of industry M&A leaders now describe themselves as acquisitive
- Acquisition focus shifts from emerging to more traditional markets and private equity owned targets
- 87% expect deal multiples to remain consistent or increase in 2015
Over nine in ten UK-listed manufacturing and industrial companies now describe themselves as acquisitive, with 56% describing themselves as very acquisitive, according to Deloitte’s latest Manufacturing and Industrials M&A (mergers and acquisitions) Predictions report.
Appetite for M&A in all sectors appears robust at a global level. As Deloitte’s recent M&A Index revealed, more than $2.5 trillion worth of M&A deals globally have been announced so far in 2014, a 30% increase on $1.9 trillion for the whole of 2013. This is set to make 2014 the best year for M&A deals by value since 2007. In the manufacturing sector alone, $247 billion of deals were announced during the first three quarters of 2014, up from $108 billion for the same period in 2013.
In the United Kingdom, Deloitte’s Manufacturing and Industrials M&A Predictions reflect companies’ expectations that this trend will continue into 2015. With continued positive sentiment in the sector, the majority of industry M&A leaders expect an increase of deal activity in the next 12 months (56%), with no respondents expecting a decrease.
This is consistent with both the current levels of activity and a more stable UK market environment which has developed in recent months. Such confidence is further underpinned by respondents’ expectations of valuations, with 87% predicting deal multiples to either remain similar or increase in 2015.
Additionally, although we have already seen strong improvement in the availability and cost of financing for M&A activity, 44% of respondent still expect this trend to improve further in the next 12 months.
Mark Adams, UK corporate finance advisory industrials partner at Deloitte explains: “There is very strong appetite for acquisitions, but we are seeing a shift away from targeting businesses in emerging markets, down 32%. As growth expectations in these territories soften, there is a stronger focus on more established markets and private equity owned businesses, with the latter now identified by the majority of our respondents (56%) as a key source of deal flow.”
The majority of respondents (57%) notice an increase in competitive tension, which underpins the importance of identifying their competitive edge when competing for assets. This is also, in part, a reflection of private equity’s ongoing activity in the sector.
Ross James, UK corporate finance manufacturing industry leader at Deloitte, concludes: “The last six months has shown signs of returning to a more stable M&A environment, particularly in the UK; with strong debt markets, robust activity levels across most industrial sub-sectors and good levels of confidence among industry participants. As we move into 2015, we believe that this positive sentiment is likely to continue, with the pipeline of deals looking strong, albeit with some caution expressed as a result of international macro-economic risks.”
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The information contained in this press release is correct at the time of going to press.
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