Engineering news
Almost three quarters of UK-listed manufacturing and industrial companies are expecting an increase in merger and acquisition activity over the next 12 months, according to a new survey.
The bi-annual report from financial consultancy Deloitte, called Manufacturing and Industrials M&A Predictions, found that 70% of respondents continue to describe themselves as acquisitive. Since Deloitte’s autumn 2013 survey there has been a slight shift towards a focus on managing the existing portfolio of assets.
Ross James, UK corporate finance manufacturing industry leader at Deloitte, said: “Our manufacturing and industrial predictions mirror the trends we are seeing in M&A activity across industries. The start of 2014 has seen the much anticipated return of strong activity. In just the first four months of 2014, $1.2 trillion worth of deals have been announced globally. Deloitte’s latest M&A Index forecasts the strong resurgence to continue and by the end of H1 we expect a 10% increase in global deal volumes, compared to the same period last year.
“According to our conversations with M&A chiefs, we certainly expect this trend to be reflected in the manufacturing and industrials sector, and indeed, a number of very large potential transactions have been announced in recent weeks. We also anticipate a focus on maximising the value of existing assets, either through divestments and portfolio rationalisation or expansion into adjacent products and services,” James said.
The research also found that almost 50% of respondents believe an increase in M&A activity is primarily a result of an increase in private equity activity.
James said: “A significant trend in this survey is the increase of private equity activity in the industry. Nearly 44% of M&A chiefs named this as a primary driver for mergers or acquisitions in the coming months, up 12% from our spring 2013 study. It is clear that CFO’s increased confidence, coupled with the strong availability of debt, allows for more competition for the available assets – which could push valuations up.”
A similar number of responses (44%) also identified private equity-owned companies as a primary source of target businesses, up from 28% last autumn. “The same private equity portfolios have been looking for exits in the market, so we could expect more assets to be available for sale.”
The research found that 62% of manufacturing executives questioned are considering emerging markets when sourcing potential acquisitions.