If you are the owner of an M&E business, and are thinking towards an exit, here are some of the current industry trends that could impact your decision to sell or your attractiveness to a potential buyer...
Manufacturing and Engineering (M&E) has always been a vital industry for the UK economy and it’s one that continues to grow and develop – witness the recent news that the UK had surged past France to take eight place in the world manufacturing rankings.
As such, M&A activity has traditionally been high in the sector, particularly as foreign companies seek to add exemplary and innovative UK businesses to their offerings.
If you are the owner of an M&E business, and are thinking towards an exit, here are some of the current industry trends that could impact your decision to sell or your attractiveness to a potential buyer:
1) The need for technology
Now more than ever, buyers are looking to acquire companies with expertise in new technologies that will enable them to not only improve efficiency and productivity, but to develop new products and services that will generate a competitive advantage in today’s globalised marketplace. Either developing a new technology, or perfecting a new use of existing M&E processes, will set your business out from the crowd.
2) Focus on sustainability
ESG (Environmental, Social, and Governance) is firmly at the top of most company’s agendas. If you look at any listed company’s accounts, the ESG section is often one of, if not the longest, sections of all. Buyers are not going to want to purchase a company that has the potential to damage its carefully-crafted ESG image.
Positioning your business as being at the forefront of sustainability also drives commercial benefits through increased positive market perception, which further adds to the reasons an acquiror may have for purchasing your company.
3) Move towards near shoring
In recent years, many large M&E companies have sought to bring their operations home. In fact, by early 2022 over 60% of European and U.S. manufacturing companies had already declared their intention to re-shore part of their Far East production capacity by 2025*.
There are many reasons for this which you can read about in my article on the re-shoring trend. The implication is positive for M&E businesses already located in the UK. Larger companies seeking to move production back home is naturally going to increase the demand for UK businesses as acquiring an existing business is often cheaper than establishing a premises from scratch.
4) Political and economic challenges
Whilst there are lots of positives within the M&A market, there are also well known threats which could cause destructive headwinds. Brexit has led M&A firms to deal with new trade barriers and customs regulations which have thrown up increased intricacies for most businesses. The war in Ukraine has forced hikes in the prices of raw materials and reduced consumer demand as the cost of living crisis takes hold. Nevertheless, opportunities have presented itself for some businesses as they have been able to step in to fulfil demand for products no longer available for Ukrainian manufacturers.
The uncertainty within the UK political climate also presents potential threats. A looming general election may lead to policy shifts which could be positive or negative to the industry. As with all the challenges discussed, ensuring your business has a resilience plan is key to give buyers confidence that the business can thrive in the face of any challenges presented.
Despite the well-publicised challenges facing the industry, and the UK as a whole, M&A within the M&A market has performed admirably. The UK has always been at the forefront of efficiency and performance, and this continues to filter into the demand for businesses within this market.
If you'd like to discuss how we can help you fund, sell or buy a business, please contact me or book an informal chat via our website
Rob Starr is Partner - M&A at Shaw & Co
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