M&A practitioners predict growth in manufacturing deals, but their expectations aren't as high as they were earlier in 2014, according to the Mergers & Acquisitions' Mid-Market Pulse (MMP), a forward-looking sentiment indicator derived from monthly surveys published in partnership with McGladrey LLP. (See related graphic.)
The latest MMP results suggest that transactions in the sector may have peaked. Among the high-growth industries measured, manufacturing dropped from second to third place, behind health care and TMT but ahead of financial services and energy.
While the 3-month manufacturing composite score of 77.3 beat the overall market score of 75.2, it was lower than the 80.6 score the sector garnered earlier in the year. Similarly, the 12-month composite score of 76.6 for the sector was higher than the 73.6 score for overall M&A but lower than the earlier 81.8. Another sign that growth in manufacturing may be waning is found in the MMP results for deal value and multiples. The 12-month deal value score of 76.6 for manufacturing is significantly lower than the 86.7 overall score. Similarly, the 12-month deal multiples score of 52.7 lags dramatically behind the 79.5 overall score.
The MMP is derived from monthly surveys of approximately 250 executives at private equity firms, investment banks, lending institutions and advisory firms in accounting, law and consulting. The results were published in six previous editions: Dealmakers Still Bullish on Health Care; Expansion in Energy M&A Lags Overall Market and Other High-Growth Sectors; Dealmakers Expect Gains in TMT M&A; M&A in Financial Services to Expand Over Next Year; Manufacturing M&A Expected to Surge Over Next 12 Months; and Optimism on M&A Activity, Particularly in Health Care.