The following is an analysis of global industrial manufacturing deals with disclosed values greater than $50 million.
As anticipated in our Q1 deals insights report, Q2 industrial manufacturing deal activity remains relatively subdued. The $15.9 billion of deal value was the lowest since Q2 2016 ($12.1 billion) and the second lowest quarter in more than three years. The lack of deals greater than $5 billion in value is the main driver of lower than historical average aggregate deal value.
In spite of the fact that cross sector global and US M&A value and volume increased in Q2 2017 compared with Q1 2017, industrial manufacturing experienced declines in both deal value and volume over the same period. This may reflect the sector’s conservative sentiment given the continued geopolitical uncertainty.
Although industrial manufacturing deal volume was down quarter on quarter, the 53 deals announced in Q2 2017 is consistent with the trailing six quarters’ average. Further, even though average deal size is on a downward trend, the volume of industrial manufacturing deals in the first half of 2017 is an indication of market participants’ desire to use M&A to achieve their strategic objectives.
Industrial manufacturing dealmakers continue to face headwinds resulting from the continued uncertainty primarily driven from the US Administration’s inability to shine a clear light on the future of trade, regulatory and tax reform. The risk this creates in the deals market appears to be keeping certain dealmakers in the sector on the sidelines or looking at smaller sized investment opportunities.
"Without a meaningful catalyst such as tax reform, M&A activity in the industrial manufacturing sector will likely continue to be constrained in the second half of 2017."