A new trend for the Industrials sector will appear in 2023 – an increase in the number of mergers and acquisitions in the industrial manufacturing and automotive sectors (IM&A).
Global trends in mergers and acquisitions in the industrial production and automotive sectors: forecast for 2023
The slowdown in GDP growth, the geopolitical situation, the energy crisis, as well as the growth of interest rates and inflation, led to a reset of activity in the field of mergers and acquisitions of the industrial manufacturing and automotive IM&A sector in 2022 to a pre-pandemic level. It is expected that a new trend for the Industrials sector will appear in 2023 - an increase in the number of mergers and acquisitions in the industrial manufacturing and automotive sectors (IM&A).
What can we expect from the behavior of CEOs of enterprises in this sector?
Many CEOs are reviewing their portfolios and considering downsizing and asset sales as they shift their focus from growth to profitability and capital allocation. These deals will attract new capital to invest in more profitable areas.
Corporations with lower cash balances are likely to consider more defensive M&A strategies.
From a sector perspective, we remain cautiously optimistic about deal-making activities in the aerospace and defense (A&D) industries, mainly due to the recovery of tourism and the stability of defense budgets. Transactions in the automotive market will continue to be dominated by the transition to electric vehicles. In the engineering and construction (E&C) sector, increased appetite for infrastructure investments is likely to have a positive impact on transactions. A healthy level of transactions is expected in the business services sector due to the somewhat counter-cyclical nature of the sector, combined with the growing interest of investors in technological solutions. Finally, the industrial manufacturing sector is likely to show stable transaction activity, with small and medium-sized transactions driven by strategic priority areas and national consolidation in machinery and equipment niches.
Overall, what to expect from the sector in 2023
- Portfolio optimization (the growing trend of asset sales to free up capital for new investments aimed at sustainability and accelerate digital transformation);
- Digital conversion;
- Sector convergence (more mergers and acquisitions will involve businesses converging into different sectors or subsectors);
- ESG remains on the agenda.