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Manufacturing M&A dipped in 2023 but strong comeback expected
BDO’s Manufacturing Deals Review found that 706 UK manufacturing deals were completed in 2023, down 11% from 793 reported in 2022. The dip was attributed to inflationary pressures, protected cashflow and prioritised stability.
Despite the decline, slower M&A activity was mostly confined to the first half of the year and the last six months saw more than 400 deals completed. BDO expected this momentum to continue into the next 12 months.
Deal makers
Food and drink businesses were the second most prolific deal makers in 2023, representing 14% of all transactions. Deal volumes increased from 79 in 2022 to 102 in 2023.
Additional research by BDO and Make UK revealed that more than a quarter of UK manufacturers (26.8%) were looking to make acquisitions in the next two years as they look to scale operations and access new products and markets. This rose to 38% over a three-to-five-year period.
Of the deals completed in 2023, 16% involved private equity investors and one in five (20%) manufacturers said they were likely to seek private equity investment in the next one to five years.
‘Encouraging resurgence’
Roger Buckley, UK industrials M&A partner at BDO, said: “For many manufacturers, 2023 was about protecting cashflow and prioritising stability. The second half of the year saw an encouraging resurgence in M&A despite ongoing economic challenges, with the lower- and mid-market continuing to transact at volume.
“Looking ahead, digital transformation, automation and the green transition will remain high on the agenda, with sustainability now playing an integral role in almost every deal we see. Private equity still has huge quantities of cash to deploy, and opportunities in the capital markets could well open up towards the end of 2024.
“Another year of post-Covid trading should help reassure buyers and encourage them to take stock of the huge opportunities an acquisition can bring.”
Meanwhile, the Vegan Food Group is set to acquire plant-based manufacturer TOFUTOWN, the firm’s chief mission officer Matthew Glover has confirmed.
