Overseas M&A Interest In UK Based Manufacturers Continues To Rise

Manufacturing deal activity data for 2021 highlights an increase in acquisitions and a fall in the number of restructuring and refinancing transactions compared to the previous 12 months, according to analysis by Irwin Mitchell.

The law firm has examined Experian’s comprehensive database of corporate transactions and revealed there were 1,457 manufacturing deals completed in the UK during 2021 with a total value of £101.7bn. Out of these completed transactions, 1,253 involved a UK target.

The 1,457 figure compares to 1,425 sector deals completed in the UK during 2020 with a total value of £113.2bn.

Although the analysis reveals the total value of deals in the sector reduced last year, the high number of transactions together with the type of deal being completed highlights a more positive picture for the industry.

For example, in 2021, 698 UK manufacturing businesses were acquired compared to 517 in previous 12 months.

In 2020, almost 10% of deals involving UK targets were restructuring and refinancing deals whilst in the most recent 12 months period, this fell to just 1%.

The last 12 months also saw an increase in the number of UK manufacturing businesses being targeted by overseas based businesses.

America remains the most active bidder for UK-based manufacturing businesses and in 2021, 125 UK businesses were recorded to have been the target of US-led M&A activity. In the previous 12 months, the figure stood at 98.

According to Experian, in 2021 there were 45 UK manufacturing businesses targeted by businesses based in Sweden followed by France (25), Germany (22) Japan (21) and Netherlands (18).

In 2020, Germany was the 2^nd most active buyer of UK manufacturing businesses with 37 deals. Germany was followed by Sweden (30), Ireland (18), with France, Japan and Netherlands all on 16.

Irwin Mitchell’s corporate team has been active in cross-border manufacturing transactions having advised Acorn Growth Companies, a US based private equity firm, on a number of opportunities in the UK, including its acquisition of a majority interest in Aerospares 2000 Ltd, and Vulcain Engineering, a French based private equity backed business, on several acquisitions in the UK during 2021.

The latest analysis from Irwin Mitchell coincides with numerous announcements about the health of the manufacturing sector in the UK.

A recent survey by the CBI found about output volumes increased in 10 out of 17th sub sectors. Another CBI study found that amongst SME manufacturers, output growth had picked up slightly from the previous quarter and was expected to grow at a similar level in February, March and April.

According to the 2022 Make UK/PwC Senior Executive Survey released in January, 73% of UK manufacturers said they thought conditions for the sector would improve in 2022. The same proportion thought opportunities for their business currently outweigh the risks.

Expert Opinion

“The manufacturing sector continues to face pressures in relation to cost, price and skills but this analysis does point to a more positive picture for the manufacturing sector. Although many challenges lie ahead, it’s certainly encouraging to see the levels and type of transactions increasing.

“Deal volumes haven’t quite recovered to the levels seen in 2018 when 1,600 transactions completed in the UK, however the strong appetite to complete deals does once again highlight the resilience of the sector.

“I would like to see a balancing up in the levels of overseas deal activity. Last year UK businesses were the subject of 125 deals involving US buyers, however there were just 81 deals where the bidder was UK-based and the target was in the US.

“Although it doesn’t surprise me that UK businesses continue to be a very attractive proposition, it’s crucial for the sector as a whole that UK-based manufacturers with strong ambitions to grow continue to reassess their strategic options and consider overseas M&A activity.”
Emma Callow - Partner