Future Manufacturing M&A: What to Expect

Manufacturing M&A activity in the U.S. is on the rise again after a bit of a slump in recent years, according to experts. At a recent forum in Chicago, industry insiders shared their thoughts on the future of manufacturing mergers and acquisitions. The general mood is one of “cautious optimism,” with Veena Lakkundi from Rockwell Automation mentioning a bullish environment for dealmaking in the coming months.

While M&A activity took a hit in the second half of 2021, recent trends show a promising 25 percent increase by public companies. Joel Cohen, managing director at Baird’s Global Industrial Investment Banking Group, highlighted that while policy changes post-election could pose challenges, interest rate cuts are expected to push activity forward.

Companies are under pressure to grow, leading to an imperative to engage in more M&A deals. With significant cash on corporate balance sheets and trillions in private equity dry powder waiting to be deployed, there is a strong demand for new deals. The slowdown in the Chinese economy has impacted industrial businesses globally, resulting in a decline in exit multiples in the industrial sector. However, experts believe that a rebound in growth will drive multiples back up.

Certain sectors like aerospace and defense manufacturing, semiconductors, and automation are expected to be hot areas for investment. On the flip side, contract manufacturing without recurring revenue streams may face challenges. Overall, companies willing to invest in innovation, automation, and supply chain improvements are likely to see success in the long run.