Manufacturing M&A to Move from Jitters to Jolts in 2017

February 2017

After a record 2015, manufacturing deal volume declined 15 percent in 2016—marking the lowest level of transactions since 2013. While both strategic and financial buyers were armed with cash and access to capital, they were more cautious. Fewer sellers entered the market, citing the slower economy and uncertainty around the election. Interestingly, financial buyers were more forward leaning than strategic buyers when possible, accounting for 40 percent of closed sector deals in 2016, up from 34 percent in 2014.

Similarly, middle market manufacturing valuations dipped from a high of 10.1x EBITDA in 2014 to an average of 9.0x EBITDA in 2016. Despite the decline, that multiple remains very strong for sellers, meaning buyers looking at the manufacturing sector should expect to bring significant synergies or plans to dramatically increase profits, or risk sub-standard ROI outcomes.