The big mergers and acquisitions (M&A) headlines right now are the potential knot-up between luxury goods makers LVMH and Tiffany (will they or won’t they?) and last week’s announcement that Google will buy Fitbit.
Regardless what happens with those particular deals, though, another big but lesser-known story is the continuing strength of the U.S. manufacturing M&A market. While the industrial segment of the economy has suffered a gradual slowdown from late 2018 to now, consolidation in this corner of the world continues apace. Total transactions are down slightly for 2019 year to date, but average deal valuations are on par with the big numbers posted the past couple of years. Why?
“It’s been a really active market,” said Matt Roberson, Director at SC&H Capital, a Baltimore investment bank specializing in M&A. “Interest rates are low, and companies and investors have cash to invest. Plus, there’s this sense that U.S. manufacturing is on the rise again, that offshoring is being reversed. Investors have been testing that thesis for a while already, and we see that they’re continuing this trend even in spite of recent trade headwinds vis-à-vis trade tariffs.”
Current market fundamentals aren’t the only factor driving the continued strength in M&A in manufacturing, though. A number of other considerations come into play, including build vs. buy, food market realignment, geographic and customer base expansions, and moves driven by hot markets.
Build vs. buy: When manufacturers want to supplement existing product lines, or move into whole new product areas, there’s always the question whether to build new