Mergers & Acquisitions Update: Manufacturing

The consequences of Covid-19 were inevitably felt in mergers & acquisitions (‘M&A’) activity in the manufacturing sector during the first half of 2020. 

According to the H1 2020 Experian M&A Review, the UK manufacturing sector deal volumes fell by 29% when compared to H1 2019, from 785 deals down to 568 deals. 

Manufacturing has however remained the most active industry for M&A in both the South West and Midlands, although deals in H1 2020 were down 33% and 44% on H1 2019 respectively. 

The global lockdown had had a disruptive effect on supply chains, hampering M&A activity. 

The total value of UK manufacturing deals did however increase by 15% in H1 2020 as a result of a number of ‘mega deals’ going through in the period. 

Data on private company enterprise value multiples for Q2 2020 suggests that overall valuations have held firm at pre-COVID19 levels which is good news for owner managers seeking to exit and realise value.

As lockdowns have been eased during Q3, deal volumes in the manufacturing sector are set to increase. 

Whilst demand from trade buyers remains very much sector dependant, private equity backed buyers have been active with significant cash reserves ready to deploy. PE funds have been seeking bolt-on acquisitions for their existing portfolio companies. 

Manufacturers in sectors performing well through the pandemic, for instance food & drink, are currently very sought after. 

Buyers are increasingly seeking acquisition opportunities in businesses that have been able to weather the lockdown period and are now returning to pre-COVID19 trading performance.

Now could therefore be an ideal time for owner-managers to start planning their exit strategy and ultimately realise the value in their business. 

As ever, demonstrating the business’s value proposition, understanding the market dynamics and a strong management team will all be key to securing an optimal deal. 

Bishop Fleming has a team of corporate finance experts who provide a life-cycle service for people wishing to sell their business. 

We can assist in assessing strategic options, preparing the business for sale, researching the market, and finding potential buyers, negotiating the best deal, providing commercial and financial input to the legal process and project managing the transaction to completion.