In this M&D M&A Industry Update, we explore the M&A activity and projections for the Engineered Components sector within the M&D industry. In this M&D M&A Industry Update, our experts share their insights on the current state of the Engineered Components M&A market and look at the factors influencing the broader M&D industry.
- M&A deal volume in the Engineered Components (“EC”) vertical was down approximately 25 percent in the YTD period (through September). The down trend has persisted due to uncertainty about the economy, inflation, interest rates, availability of deal capital, consumer spending, and political friction. That said, higher performing targets with clear prospects for growth continue to trade at historically high multiples and command a lot of attention from prospective buyers, given the thinner M&A market currently.
- Valuation multiples in the EC vertical have been settling in the mid-7s, rebounding from the mid-6s in late 2022. We expect things to stay at current levels for quite a while.
- Publicly traded EC companies continue to outperform the broader market. Our Objective EC Index has far surpassed the Russell 2000 over the last five years (see Chart III, p3 and Table I, p4), showing that EC companies can be an attractive vertical in which to invest.
- The advance estimate of Real GDP growth in Q3 2023 was surprising at 4.9 percent, up from 2.1 percent in Q2. However, the Conference Board continues to predict a “short and shallow recession” in the next few quarters, resulting in real GDP readings of 2.2 percent and 0.8 percent, respectively, in 2023 and 2024. ISM’s Purchasing Managers Index for October 2023 suggests that our manufacturing base continues to contract, with surveyed business executives undoubtedly echoing the sentiments of the Conference Board.
If you are interested in discussing any of the analysis from this report, or if you would like to discuss your own transaction goals contact the Managing Directors from our M&D Industry Group below, or reach out at (800) 849-7010 or [email protected] to be directed to the appropriate team member.
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