Focus on Manufacturing | Irwin Mitchell | M&A Trends in Manufacturing

Manufacturers have faced a challenging period of late, but corporate deal activity within the sector increased 5% last year, with businesses based in the UK being increasingly targeted by overseas-based organisations.

Our analysis of data provided by Experian, the global information services company, shows that mergers and acquisition (M&A) activity across the sector increased from 933 deals in 2014 to 981 deals in 2015.

In corporate deals where UK manufacturing companies were the target, one third (33.7%) of completed transactions were led by bidders based overseas, with 12% being based in the United States.

In 2014, just over a quarter (27%) of deals involving UK based manufacturing firms involved an overseas buyer. According to the data, 11% were from the US.

Regional trends

Signifying that the current dominance of London and the South-East, manufacturers based here were a target for 27% of all M&A activity in 2015 within the UK.

Despite deal numbers across the UK rising by 5%, activity levels in Yorkshire fell from 124 transactions to 105 in 2015. Out of all these deals, 54 involved a local company being targeted either by an organisation from within the UK or based overseas. This number is down on the figure recorded in 2014 and 2013.

In a year which saw the Yorkshire region see its share of deals in the sector fall to 8.2% from 12.3%, the study revealed that manufacturers in the region attracted less interest from overseas based bidders.

Indeed, out of all the completed deals in the sector where a Yorkshire manufacturer was the target, one quarter (24%) involved a bidder from outside of the UK. This is 35% down on last year’s figure in the region.

The picture was quite different in other parts of the UK. In the West Midlands, deal activity remained static but over a third (36%) of the transactions in the region where a West Midlands-based business was the target involved a bidder based from outside of the UK. This is significantly above the national average and also last year’s figure in the region of 24.7%.

Private equity

Interest within the sector from private equity backers fell however in 2015 compared to 2014.

Out of all the manufacturing deals where UK companies were the target, 71 transactions were financed through private equity. Almost half of these completed deals involved businesses based in London or the South East.
It is of course pleasing to see an overall increase in manufacturing M&A and it is encouraging that UK based firms continue to generate interest from overseas.

Although this is credit to our reputation across the world, it’s important that more UK companies review their strategic options and look to grow through overseas’ acquisition.

Businesses here simply can’t afford to miss out on opportunities abroad. Despite a challenging economic climate and the uncertainty surrounding a possible Brexit, businesses in the sector should continue to assess their strategic options and whilst they do so look at options not just here in the UK, but further afield.

Private equity interest is still lagging behind where it was in 2014, but there are encouraging signs and it will be interesting to see if this changes during the rest of 2016.

Experian’s analysis also ranked Irwin Mitchell as the fourth most active legal adviser for M&A work in the UK during Q1 of 2016 as part of our team’s continued growth and success in this area.

Key Contact

Andrea Cropley