- Market uncertainties do not discourage transactions
- Six out of ten manufacturing companies are specifically looking for acquisition options with AI expertise
Despite significant uncertainties in terms of economic policy, supply chains or interest rate trends, executives in the manufacturing sector currently perceive the M&A market as dynamic in their industry, as indicated by a recent survey by management consultancy Horváth. Small and family-run businesses above all are making inroads into the market and triggering strong transactional activity among corporations. “Uncertainties have become the ‘New Normal’ from the companies’ point of view and therefore no reason to hold back,” says Philipp Duwald, study director and M&A expert at Horváth. On the contrary, market dynamics are forcing companies to become more adaptable and agile. “Strategic acquisitions can help companies make advances, for example, in the area of new technologies and digitalization,” says Duwald.
Transactions driven by technological necessity
The study also shows that acquisitions are mainly driven by technology. “From new electric drive systems to AI-enabled automation, many companies are unable to implement the necessary transformations at the required pace. Acquiring expertise is therefore essential,” explains the Horváth expert. Another Horváth survey conducted in January, involving more than 150 companies, also shows that about six out of ten companies are actively seeking companies with AI expertise, both across industries and within the manufacturing sector. “However, it is simply also size and market relevance that are also crucial factors in asserting oneself and securing future viability in the current climate.”
Acquisitions should be strategic – but are usually opportunistic
Precisely due to the existing uncertainties and high market dynamics, nine out of ten participants consider it important to examine their portfolios more intensively and to adjust them strategically. But there is still a gap between aspiration and reality. Only one in five companies initiate transactions that are clearly derived from the corporate strategy. In the case of a further 40 percent, strategic considerations come into play, while the rest tend to act opportunistically by taking advantage of new opportunities as they arise.
Hit or miss – how successful was the transaction?
For the most part, buyers measure the success of a transaction meticulously after completion. Above all, they analyze whether the strategic competitive situation was sustainably strengthened. This criterion takes precedence in the post-analysis. Furthermore, this process includes assessing whether synergies were realized as expected (ranked second). The extent to which an optimal purchase price was agreed also plays a major role in the evaluation. For the selling party, which typically conducts a comprehensive retrospective analysis as well, the achieved selling price, along with the avoidance of book losses, is the decisive success factor. Implementation speed is also an important performance metric in many cases. When it comes to choosing between two similarly attractive bidders, soft factors such as transaction security frequently determine the outcome. In addition, the continuation forecast and job security play a significant role.
Key factors for successful transactions
As the study indicates, a positive M&A process is dependent on certain key factors, which are deemed critical for both acquisitions and sales. “However, as a rule, there are no standardized lessons-learned processes among companies, even if the respondents consider these to be useful in principle,” says Philipp Duwald from Horváth. On the buy side, for example, a good so-called "why-us" story is indispensable. On the sell side, a solid business plan with comprehensible business development remains one of the most important factors. “Corporate entanglements are often complex. Realistically actionable carve-out conceptsare definitely a big plus,” says Duwald.
To achieve the desired synergy effects, 80 percent of respondents also view early planning of post-merger integration (PMI) as a key success factor. This has consequences: Many large companies are currently building their own PMI teams to standardize and efficiently implement integration issues.
“If you're looking at family businesses, you need a clear idea about the continuation and future direction of the business. In addition, aspects such as "cultural fit" play an important role in positioning oneself as the best owner," says the M&A expert.
About the study
For the study “Success factors for the M&A process in the manufacturing sector”, the management consultancy Horváth conducted a qualitative survey involving strategy and M&A executives from manufacturing companies with at least EUR 300 million in annual turnover. The interviews with selected experts from well-known companies took place at the end of 2023.
