Mergers and acquisitions activity points to UK manufacturing resilience

Law firm Irwin Mitchell has examined Experian’s Market IQ database and found that 1,344 UK manufacturing businesses were the target of M&A activity in 2022 compared to 1,285 in 2021 and 1,231 in 2020.

Deal volumes in 2022 were at the second highest level in the last 10 years with activity levels in 2022 beaten by 2016 when 1,537 deals were completed.

In 2022, 57 per cent of transactions were acquisitions whilst management buyouts (MBOs) accounted for four per cent of deals. One per cent of deals were restructuring transactions compared to nine per cent in the previous year.

Findings show that in 2022, 30 per cent of deals with a UK-based target business involved an overseas bidder. Eight per cent of these bidders were based in the US with Sweden accounting for 3.5 per cent of deals. Germany and France both accounted for 2.3 per cent of activity.

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In 2021 overseas bidders accounted for 31 per cent of deals with the US again being the most active. In 2020 the figure was 27 per cent.

Furthermore, in 2022 303 (22.6 per cent) of transactions were backed by venture capital (VC) compared to 295 deals in 2021.

London and south-east based manufacturing businesses generated 316 transactions, with over a third of deals (36 per cent) in the capital backed by VC compared to the national figure of 22 per cent. In the north-west, 12 per cent of manufacturing deals were backed by venture capital, while in Yorkshire the figure was 27 per cent.

In a statement, Emma Callow, corporate partner at Irwin Mitchell, said: “This latest analysis may look surprising, bearing in mind the challenges faced by the economy last year. Although activity dipped in the last quarter of 2022, these figures certainly reflect how resilient the manufacturing sector is.

“It’s clear that UK manufacturers are highly attractive to overseas buyers and venture capital. At Irwin Mitchell we have recently advised a US PE client in the sector on an acquisition in the UK as well as a South African listed company on a substantial UK acquisition, so the statistics are borne out by what we are seeing in practice.”

Callow continued: “We have seen deal flow in the sector continue to be strong and early signs show that activity in 2023 may be even stronger than 2022.”