Ask the Network: The Outlook for Industrials and Manufacturing M&A

Welcome to “Ask the Network,” where we leverage the expertise of Axial members to answer questions submitted by middle market CEOs.

This week, we posed an industry-specific question to advisors and investors on the network:

“What’s your outlook for industrials and manufacturing M&A for the rest of the year?”

Pitt Means, Exvere

“The M&A market for manufacturing companies remains very strong, and I believe will continue to be competitive as long as both private equity buyers and strategics are well capitalized. PEs are flexing to get deals, including stretching multiples, looking at smaller deals, and exploring minority purchases. But especially for niche manufacturers, strategics seem to be winning most competitive processes because of the inherent synergies.”

Thomas Dyszkiewicz, Twelve Rolling Capital, LLC

“In the defense market particularly, we expect the elevated level of M&A activity to continue to be driven by several factors. Many of the primes are looking to exit slower growing businesses, particularly certain areas of their services portfolios, while stand-alone services providers are looking to enhance their scale to boost profitability. In addition, many defense companies are looking for opportunities to acquire businesses that provide access to new customers or product offerings, both of which in areas that present higher levels of organic growth within the defense budget.”

Stephen Cook, LFM Capital

“My outlook for M&A in manufacturing and industrials is that we have reached a plateau and that both sellers and buyers are acting more cautiously in case we are headed into another downturn. I would say that average selling prices will start to come back down to historical multiples. Lastly, the strength of the U.S. dollar is hurting manufacturers who export, but we are still seeing year on year growth in smaller manufacturers.”

Want more info on the state of manufacturing? Read Manufacturing Private Equity: Strong and Gaining Steam in Q4 2015.