Manufacturing M&A in 2021 – The Market Pulse Report

M&A in 2021
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I’ve previously written about how COVID will affect the sale of manufacturing companies.  As we rounded out the first quarter of 2021 I opined on the state of the market, which you can read HERE. Now there’s third-party evidence on the state of Manufacturing M&A in 2021 with the Market Pulse Report, by Pepperdine University.

This report covers ALL businesses, not just manufacturing companies, which typically rank highest in these reports. Here are some interesting highlights that manufacturers should be aware of

What’s Selling?

Manufacturing & Engineering made up 32% of the sales in the $1MM-$2MM business size.

Manufacturing & Engineering made up 48% of the sales in the $2MM-$5MM business size.

Manufacturing & Engineering made up 46% of the sales in the $5MM-$50MM business size.

This is great news for manufacturers. Respondents report a lack of quality businesses on the market, so private equities are participating in competition to acquire smaller companies.

Where are Prices Trending?

At the close of Q1, lower middle-market companies were trending at 107% of benchmark pricing. Larger companies commanded higher prices. Overall, across all size companies and sectors, businesses sold at 91% of benchmark pricing.

Lower middle market EBITDA multiples jumped to 5x from 4.3x in the same quarter for 2020.  This is for ALL sectors – manufacturing companies usually rank higher.

Who is Buying?

In the $2MM – $5MM range – first-time buyers, serial entrepreneurs, and existing companies led the way

For companies in the $5MM – $50MM range, PE firms and strategics were most often buying.

In both cases, the majority of buyers came from more than 100 miles away. This has been very consistent in the sale of lower middle-market manufacturing companies for some time and why it’s important that you work with someone who has a national audience.

This is all great news for manufacturers who were afraid of pricing due to the pandemic. The other major concern we’re hearing from potential clients is whether they can sell before the tax hikes and the answer is YES. You can read more about that HERE.

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