Is Manufacturing M&A
Poised for a Comeback?
It’s no secret that COVID-19 has upended businesses across the globe, with 62% implementing serious cost containing measures in March 2020. Deal activity also slowed. By the second half of 2020, it was becoming clear which companies would benefit from the pandemic, and deal activity slightly increased, driven by access to capital via private equity.
As we head into the new year, the challenges and uncertainty most businesses experienced will remain a reality. Dealmaking faces serious disruptions on the planning and execution side, even as deal activity continues to recover. A number of key factors will help play a role in a manufacturing M&A resurgence:
Changing Political Realities
The new administration may bring with it more regulations, higher income tax rates, and a shifting trade position. Government changes alongside COVID-19 spread could make for more volatile capital markets. This could be unfavorable to deals, but we don’t yet know exactly how things will play out.
SPACs had a big year in 2020, which were a driving force for half of all IPOs. They have ensured development-stage companies get more rapid access to capital, allowing them to scale operations. This increase in SPAC activity will continue in the new year, especially in areas such as power storage and 3D printing.
As companies seek opportunities to recover from the pandemic, they will likely invest more in digital factory and supply chain, sustainable technologies, and tech that allows them to work remotely. Supply chains took a huge hit. They must be come more adaptable. Investments in new technological capabilities could improve machine-based manufacturing, reducing the risk of disruptions like COVID-19 in the future.
Even before the pandemic, companies were interested in lowering supply chain costs and become more agile. COVID-19 has lit a fire under many, and companies that can adapt the fastest stand to gain the most.
An Ever-Shifting Industry
With rolling shutdowns across the globe, travel and spending dropped, decimating many industries. Companies in individual leisure are poised for ongoing success even in the face of lockdowns, though manufacturing end markets such as aerospace and defense and automotive must evaluate options to improve or maintain their current positions.
As companies find a path out of the pandemic, M&A activity will grow thanks to emergency sources of capital, innovative investments, and a desire to scale operations to meet new demands. The unprecedented challenges of COVID-19 present real opportunities for growth for companies that can learn and grow.
About NuVescor Group
At NuVescor, we align the interests of investors and business owners to enable the personal and financial goals of our clients. For over a decade, we have helped founders and owners of companies in the manufacturing sectors achieve maximum value for their companies. Together, we can provide business valuations, financial analysis, investment guidance, and business transaction advice for middle-market companies with revenues from $5 million to $500 million.
Industry stats show that 75% of business broker transactions fail. By implementing the exclusive Rua Transaction Process we’ve been able to turn that statistic upside down with a success rate of over 80%. Whether you’re considering buying or selling a manufacturing business, put us to work for you and experience the NuVescor difference.