Coming soon to a factory near you: A mergers and acquisitions boom?
One headline number suggests a deal upswing is already underway: Research firm PitchBook counted 438 transactions in the “traditional industrials” subsector during the first six months of this year, which was 18% more than in all of 2023 and only barely below 2022’s total.
On top of that, the second half of summer has brought notable deals such as packaging manufacturer Silgan Holdings paying more than $900 million to buy Weener Plastics Holdings BV or agricultural equipment maker Agco Corp. selling most of its grain and protein business to investment firm American Industrial Partners for $700 million. And on July 22, Dover Corp. was both a buyer and a seller, with executives saying they’ll unload their refuse collection vehicle group for $2 billion and acquire a Michigan flow control parts maker for $395 million.
“Confidence continues to build for both corporate and private equity players to pursue more aggressive acquisition efforts,” the investment bankers and consultants at Florida-based Harbor View Advisors wrote in a mid-year report. “M&A momentum is anticipated to carry forward into 2025, with buyers keen to strengthen their market positions through acquisitions of innovation and market share.”
The flurry of transactions so far in 2024 is also likely to grow in the coming months as several macro clouds clear. Todd Dubner, principal of strategy at KPMG US, said there’s a lot of pent-up activity among buyers and sellers still adjusting to the higher level of interest rates and the uncertain economic picture more broadly.
“People are waiting for some more forecastability,” Dubner said.
Heading into fall, Dubner said, clients see too much uncertainty in too many areas to fully jump into the M&A arena. Chief among the fuzzy factors is the upcoming election and the clarity it will (hopefully) bring to regulatory regimes—think tariffs and antitrust attitudes, among other things—as well as the scope and cadence of government investments in energy transition and infrastructure projects.
Executives and investors should have a better sense of where things stand late this year or in early 2025. By then, the Federal Reserve’s rate-cutting pace also should be clearer. That, Dubner said, will help release some of the energy that’s being built up.
“I don’t know what the unlock is going to be,” he said. “But I think I see on the horizon some more of that forecastability.”
Contributing Factors
A sense of stasis stemming from the ballot box was also on the mind of Dubner’s KPMG colleague Diane Swonk Sept. 3. Commenting on X after the Institute for Supply Management’s latest—and pretty dour—reading of factory purchasing managers' sentiment, KPMG’s chief U.S. economist said simply, “Election paralysis sets in.”
Time will resolve most of that paralysis. But the ongoing malaise in much of manufacturing also will spur more M&A activity, the Harbor View team said, as leaders of struggling small and mid-sized firms throw in the towel.
Also likely to contribute are private-equity firms reaching the end of funds’ investment life cycles and needing to monetize holdings. Both of those dynamics play into the strategy of consolidators such as Ingersoll Rand Inc. or TransDigm Group Inc. On his team’s mid-August earnings conference call, Transdigm President and CEO Kevin Stein said his team is “adding resources” to prepare for more deals and is on track to put up its second-best M&A year.
“We see some good businesses possibly coming to the market next year,” Stein told analysts. “There’s a good collection of stuff we’re evaluating.”
Another factor set to help stoke deal fires is the old adage that the cure for high prices is high prices. Matt Missad, chairman and CEO of building products manufacturer UFP Industries Inc., said in late July that “more companies are accepting the fact that pandemic-generated returns from excess deficit spending are not realistic gauges of future performance.” Some aspiring sellers, he added, are still above price UFP is willing to pay but “there appears to be some softening as buyers and sellers acknowledge the lower demand environment.”
Realistic expectations. Regulatory clarity. Rates that are falling. All are set to be coals on the deal-making fire.
