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Manufacturers – making deals happen

 

Posted on 2 December 2014

Despite being labelled a service economy, the UK is the 11th largest manufacturing nation in the world. And the sector, which makes up 11% of UK GVA, 54% of UK exports and directly employs 2.6 million people, is looking particularly buoyant.

Following the economic downturn, we (as you can imagine) found that the number of significant deals in the UK dropped dramatically. In 2014, we have seen a huge change in the volume and value of deals. A more stable UK market environment and more confidence in the overall economy has been a huge contributing factor to the pursuit of inorganic growth and the expansion of core business functions through acquisitions. And we expect this to continue.

This is particularly true in relation to the manufacturing sector. According to a recent M&A report, more than nine in ten UK-based manufacturing businesses describe themselves as acquisitive with 56% stating that they are very acquisitive.

The improvement in the availability and cost of funding from traditional organisations such as banks, as well as newer sources such as crowd surfing, mean that the strong appetite for acquisitions and deal flow now have more chance of being backed.  

But why do we think that manufacturers in particular are choosing to partake in M&As? Major reasons for these deals include the potential to introduce new products and diversify, and to enhance their intellectual property. Cost savings through synergies also drive deals as directors seek to improve profits.

With 2015 just around the corner, I predict that there will be an upsurge of interest in UK manufacturing from US buyers in particular, looking for a bridgehead into Europe and beyond. 

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