The manufacturing M&A market will remain active in 2021, with many deals likely to be driven by a desire to make supply chains more resilient, according the latest report from accounting and business advisory firm BDO – the most active M&A adviser in 2020 in the UK, Europe and globally.
BDO’s Manufacturing Deal Review 2020, published today, suggests that the supply chain vulnerabilities exposed as a result of the pandemic and the transition out of the EU trading bloc could increase appetite for deals that allow businesses to onshore, re-shore or near-shore their supply.
Many corporates are also expected to reposition themselves by embarking on strategic acquisitions to diversify into new growth markets and technologies. Subsectors that have been impacted hard by the events of 2020 are also ripe for consolidation.
BDO’s report found that the appetite for M&A in the manufacturing sector proved remarkably resilient in 2020, with nearly 600 deals completed during the year. Although this was a 13% decrease on 2019, this was almost wholly attributable to the Q2 lockdown which saw deal volumes plunge by 55% on the previous quarter. However, deal numbers climbed by 45% in Q3 and an impressive 91% in Q4 as stalled M&A processes restarted and corporates saw opportunities to accelerate strategic plans.
Engineering continued to be the most active subsector during the year accounting for 26% of deals, followed by food and drink (13%), building products (12%) and life sciences (12%). Life sciences was the fastest growing subsector during the year, with deal volumes rising by 68%.
Buy-outs continued to represent around one in five UK manufacturing deals in 2020, with private equity firms taking an increased interest in subsectors such as life sciences, food and drink, industrial automation, and test and measurement.
