Manufacturing M&A hits six-year high

15-Jul-2014 - Last updated on 16-Jul-2014 at 11:20 GMT

M&A in the manufacturing sector is at a six-year high

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Mergers and acquisitions (M&A) activity reached its highest level in six years in the last quarter amongst UK manufacturing firms, a report from Experian Corpfin and law firm Irwin Mitchell claims.

According to the data, manufacturers in the UK were the target of 200 deals during the second quarter (Q2) of 2014. This compared with 183 in the first quarter and took the total number of deals this year to 383 – 28% more than the same period in 2013, the report states.

The report highlighted that not since 2008 had the number of manufacturing deals completed in a three month period stood at 200 or more.

‘Significant amount’

Chris Rawstron, partner and head of corporate & commercial at Irwin Mitchell said: “The message is clear. The manufacturing sector is driving a significant amount of M&A activity and with deal flow now 28% higher than at the same time last year, the signs are that we are in for a very strong year.

“There was a slight improvement in Q2 in terms of the number of deals backed by private equity, but the percentage figure is still well down on what we have seen in previous years.”

Despite “very encouraging signs” for the manufacturing sector, Rawstron warned firms to take the right professional advice before negotiating deals.

“It is vital that any company currently considering their strategic options ensures that they take the appropriate professional advice to ensure their position in the market ahead of any sale or purchase is optimised,” he added.

Last month, Associated British Foods acquired Dorset Cereals from Wellness Foods in a deal reportedly worth £50M.

April was a busy month for acquisitions with chilled food distributor NFT snapping up private equity investor EmergeVest in a deal valuing the business at more than £60M; Euro Foods completing its takeover of Brown Bear Foods and Carr’s Milling securing its buyout of Chirton Engineering for an initial payment of £2.7M.

In February, Carr’s Milling acquired Belgium frozen potato brand Lutosa Retail for an undisclosed amount.

Increase

There was a slight increase in the percentage of manufacturing deals which involved private equity, the report found.

Nationally in the first quarter of 2014, the figure stood at 15.3%, but this increased to 16% in Q2. It was still below levels seen in 2013 when 28.5% of manufacturing M&A was private equity backed.

The south east of England strengthened its number one position with 32.4% of the total volume of manufacturing M&A, whilst the north west claimed 14.6% of deals. This percentage was higher than Yorkshire, the West Midlands, the south west, the East Midlands and East Anglia.

Meanwhile, view our photogallery of the M&A activity in the first two months of the year.