Manufacturing M&A expected to see strong end to 2024

M&A activity in the UK manufacturing sector is set to be strong during the final quarter of the year. According to a new report from BDO, dealmaking in the sector is expected to gain momentum for the remainder of 2024, providing the political and tax landscape remains conducive to activity.

While the Labour party’s victory in the July General Election has been seen as delivering greater stability that could help drive a wider recovery in dealmaking, it has also been noted that reports of a potential capital gains tax increase in the upcoming Autumn Budget could dent M&A sentiment. BDO’s Roger Buckley stated that the market would be “keeping a watchful eye” on next month's Budget announcement.

In its latest Manufacturing Deals Review, BDO found that 307 deals were completed in the UK manufacturing sector during the first half of the year, with strong activity seen in sub-sectors such as food and drink, building products and engineering services. 18 per cent of deals were buy-outs, while 34 per cent were cross-border transactions.

Roger Buckley, BDO Deal Advisory Partner, Industrials and Manufacturing, stated that, while M&A volumes during H1 had “remained relatively steady compared to 2023 figures”, the firm expects to see “see strong levels of M&A activity over the coming months”.

Buckley continued: "Manufacturing remains one of the most resilient sectors, with a wide range of market drivers motivating M&A activity. This includes ESG, with the circular economy becoming a growing feature in manufacturing deals, reaching across all sub-sectors. Unsurprisingly, for the third year in a row, the sector has attracted the most circular economy-related investment, accounting for over a third of total deals by volume."

There was a 25 per cent increase in circular economy deal volumes in the UK manufacturing sector last year, with total deal value increasing to more than £400 million of invested capital and average disclosed deal value soaring from £6.7 million to £12.2 million.

Buckley continued: "The correlation between manufacturers making their businesses more sustainable and higher circular economy deal volumes is clear to see. More and more UK manufacturers are embracing circularity – a trend that is accelerating due to strong consumer attitudes towards sustainability and investors showing a significant interest in businesses addressing this issue."

A BDO/Make UK survey of more than 200 UK manufacturing SMEs found that 40 per cent of respondents believe that operating with a circular business model will be more profitable than a linear model. 56 per cent of respondents, meanwhile, said that they planned to make circular changes over the next three years and 32 per cent stated that circular or sustainability credentials helped to differentiate them from their competitors.

BDO Deal Advisory Partner Rory McPherson commented: “Given the pace at which society’s attitude towards sustainability continues to change, it won’t be long before positive environmental credentials are seen as a minimum standard as opposed to a cherry on the top.”

“For those who resist change without good reason, the lack of circular and sustainable practices will inevitably become a negative differentiator and dissuade customers from engaging. At the point the customer stops buying, it might be too late.”


Despite a drop in M&A volume, UK deal value increased by two-thirds in the first half of 2024

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