A dramatic uptick in manufacturing M&A is expected, according to Mergers & Acquisitions’ Mid-Market Pulse (MMP). Dealmakers surveyed in April gave the manufacturing industry a score of 80.3 for the 3-month outlook and 79.0 for the 12-month outlook, significantly higher than the respective scores for overall M&A.
Regulations in the manufacturing industry are becoming “more business-friendly,” said one participant. “The expectation of lower taxes due to most companies will improve operating cash flow and improve valuations,” said another. Most respondents expressed optimism about the overall economy, although some expressed concerns about global politics and the delay in healthcare legislation.
The scores were significantly higher than the ones the manufacturing sector received in September, the last time we featured the sector in our MMP reports. At that time, the manufacturing sector received a score of 59.5 for the three-month outlook and 57.9 for the 12-month outlook, outpacing the scores for overall M&A, which were 56.2 and 57.0 respectively back then.
Technological advances and high demand for products in the automotive, aerospace and other industries are driving M&A in manufacturing industry. “Advanced manufacturing is creating a lot of new opportunities in many different sectors for many different companies,” said Steve Karol, the founder of Watermill Group, a private equity that backs companies in the sector. In our May cover story, we examined five areas that are benefiting from breakthroughs in manufacturing and their impact on M&A.
Apple Inc. (Nasdaq: AAPL) CEO Tim Cook said during a CNBC interview on May 4 that the company plans to create a $1 billion fund to invest in U.S. companies that do advanced manufacturing.
Other industries that fared well on the April survey included: technology, media and telecom (TMT), with 81.1 for the three-month forecast and 77.8 for the 12-month; and energy, with 77.4 and 78.4.
The MMP is a forward-looking sentiment indicator, published in partnership with CT, a provider of business compliance and deal support services.