Top Four Trends Driving Mergers and Acquisitions in the Industrials Industry in 2024

Top Four Trends Driving Mergers and Acquisitions in the Industrials Industry in 2024

In the fourth video in our new IMAP M&A Industry Insights series, Henning Graw and Katja Schult take a deep dive into the Industrials Industry and outline the Four Key Trends affecting M&A activity in the sector this year. They also look at Valuations and the top performing sub-sectors.

Overview.

• Interest rate developments, geographical instability, & cost pressures caused headwinds, but despite the challenges, deal volume in the Industrials industry increased in 2023
• The interest rate trend is positive, appetite is high, and there is cash available
• Number of PE exits will increase, and a rising number of trade buyers will begin acquiring

Trend 1. Disruptive Technology Changing Business Models Driving New M&A Strategies

• Tech-enabling targets in demand
• Suppliers facing regulatory changes and pressure from OEMS to move from combustible to electrical engines
• Poly crisis affected traditional technology companies, mechanical and plant engineering
• Corporates facing banking pressures will drive distressed M&A and carve-outs

Trend 2. Increased Appetite from China, Japan, & USA

• Increasing number of small and mid-cap transactions - companies affected by high interest rates are targets for international buyers

Trend 3. Family-run Businesses Looking for Succession Solution

• Corporates facing banking pressures will drive distressed M&A and carve-outs
• Increasing number of small and mid-cap transactions - companies affected by high interest rates
• Estimated 200,000 unresolved corporate successions in Germany until 2026
• Succession will drive more M&A activity in the tractional Industrial sector in Germany
• Significant “Mittelstand” 3^rd generation family businesses looking to sell

Trend 4. Cross-Industry Transactions Will Increase Along the Value Chain

• Higher number of technology-driven M&A deals in 2024 by companies looking to survive or enter new markets
• Potentially double-digit multiples for “Tech-Industrial” deals compared to traditional Industrial deals
• Examples include Automotive companies now acquiring Software companies or Consumer companies acquiring E-commerce companies
• More companies will diversify to complete portfolios/value chain, increase profit margins, and offer full services

Valuation Forecast

• Industrials will recover over time – valuations are very target driven and volatile
• Telecommunications and Infrastructure company valuations higher
• Valuations for combustion engine automotive suppliers expected to remain constant (3.4x EBIDTA) but not increase
• Potentially higher premiums on last man standing acquisitions
• New technology driven companies (AI, robotics, sensors…) will achieve higher valuations than old technology driven companies