Q1 2017 Manufacturing & Distribution M&A Review and Outlook
January 2017
M&A activity in the Manufacturing & Distribution (M&D) sector was down approximately 15 percent in 2016. A decline was expected after a record 2015, and amplified by the sluggish economy and a brutal election season, which delayed sale decisions.
Financial buyers made gains in the sector, backing nearly 40 percent of all closings, including platform and add-on investments, in 2016. This figure is up from 34 percent just two years ago.
Election results buoyed M&D investor optimism, given the new administration’s commitment to propelling the U.S. manufacturing industry. Although time will tell if optimism is warranted, our M&D Index beat the S&P 500 by more than 2x in the 3 weeks following Election Day.
The average EBITDA multiple in the sector is 9.0x. A buyer valuing a business at this level must bring significant synergies and/or a sound plan to grow profits quickly and dramatically, or ROI could suffer.