Manufacturing M&A Is Booming Heading into 2021

Manufacturing M&A is booming
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We’ve been telling manufacturers during the course of 2020 that manufacturing M&A is booming and has not slowed. Now there’s national, 3rd party data to support what we’ve been telling potential clients since the start of Q2.

Manufacturing M&A is booming heading into 2021. The Market Pulse Report, by Pepperdine University, which tracks the M&A industry on a quarterly basis had some very interesting statistics as Q3 2020 closed out.

Here are some highlights from the report:

  • Pandemic resistant businesses are in high demand with the combination of Engineering and Manufacturing beating all other sectors. Manufacturing M&A is booming heading into 2021.
  • There was a 71% increase in completed transactions over Q2.
  • There was a 43% increase in completed transactions over Q3 last year.
  • Median sale prices are up year-over-year.
  • Larger businesses in the lower middle market are seeing unprecedented interest, with sale multiples increasing with larger businesses.
  • Lower middle-market companies in the $2-$50 million range sold at 100% of list price, with smaller companies averaging 90%.
  • Buyers of lower middle-market businesses are coming from more than 100 miles away to make acquisitions.

Many potential clients took a “wait and see” approach during the COVID-19 pandemic, thinking that those buying during this period would only be bargain hunting. The Market Pulse Report bears out that engineering and manufacturing companies in the lower middle market are not only selling, but they’re selling at great prices and are the most highly sought-after sectors.

The report also showed that retirement continues to be the top motivation to sell. Unfortunately, 60% of owners in the $2MM-$5MM price range and 38% of those in the $5 MM-$50MM did little to no exit planning before selling. Of those who did plan, most started less than a year before their business went on the market. A word of caution, planning early helps to achieve better results.

Manufacturing M&A is booming heading into 2021. We are still in a Seller’s market. Sale multiples and pricing is strong. It’s now time to act decisively while favorable taxation laws are still in place. You can learn more about how Biden’s tax plan will change the sale of your manufacturing company here: How Biden’s Tax Plan Will Change the Sale of Your Manufacturing Company.

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