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Analysis

Industrials M&A update: Q1 2018

Amongst uncertainty in the steel and aluminum markets, the application of advanced technologies, such as digital supply networks, in the industrial manufacturing sector continues to grow. At the same time, increased US government defense spending is fueling inorganic growth in the aerospace & defense sector. This 'Industrials M&A update' provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the industrial products industry.

Industrials trends

  • Aerospace & Defense (A&D) spending on inorganic growth1: In 2017, the A&D sector experienced record levels of M&A deal value. M&A activity in the sector is expected to remain strong through 2018, as global tensions remain high and US government defense spending ramps up at the fastest pace since 2011, providing industry operators with the cash flow needed to make acquisitions.
  • Section 232 and steel2: The Trump administration’s section 232 probe determined that US steel and aluminum imports are a threat to national security, resulting in the proposal for 25 percent tariffs on the import of steel and 10 percent tariffs on imports of aluminum. The full effects of these tariffs are uncertain as US trade partners are only beginning to respond. Domestic metal prices have already begun to rise.
  • Exponential growth in Industry 4.03: The application of the Internet of Things (IoT) and advanced technologies to the manufacturing sector is becoming exponential, disruptive, and non-linear. The use of sensors, artificial intelligence (AI), cloud computing, and predictive analytics is becoming widely adopted as the industrials sector changes the way it designs, manufactures, distributes, and services products.
  • Digital supply networks4: Digital supply networks (DSNs) are among the most common manifestations of the shifts happening in the Industry 4.0 revolution. DSNs allow for the integration of data from disparate sources to drive more efficient and effective physical production and distribution of manufactured goods. An executive self-assessment survey placed 64 percent of those interviewed at average or above average levels of DSN maturity relative to competitors.

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References

1 Robin S. Lineberger, “A record year for aerospace and defense deals leads into a positive 2018 outlook,” Deloitte Consulting, 2018, https://www2.deloitte.com/us/en/pages/manufacturing/articles/a-and-d-outlook.html, accessed April 6, 2018.

2 Robert Shapiro, “Section 232 tariffs on steel & aluminum,” Thompson Coburn, March 9, 2018, https://www.thompsoncoburn.com/insights/publications/item/2018-03-09/section-232-tariffs-on-steel-aluminum, accessed March 10, 2018.

3 Michelle Drew Rodriguez, “Exponential technologies in manufacturing: Technology, talent, and innovation transforming manufacturing,” Deloitte Consulting, 2018, https://www2.deloitte.com/us/en/pages/manufacturing/articles/advanced-manufacturing-technologies-report.html, accessed March 7, 2018.

4 Aditi Rao, “Embracing a digital future: How manufactures can unlock the transformative benefits of digital supply networks,” Deloitte Consulting, 2018, https://www2.deloitte.com/content/dam/insights/us/articles/4181_embracing-a-digital-future/embracing-a-digital-future.pdf, accessed March 8, 2018.

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