22 Jul 2024


UK automation sector remains ‘attractive for investors’

Industrial automation accounted for 8% of M&A deals in the UK manufacturing sector in 2022

There were almost 800 acquisitions or mergers involving UK manufacturing businesses in 2022, according to data released by the accountancy and business advisory firm BDO. The 793 deals recorded represent a small increase on the 779 completed in 2021.

Industrial automation accounted for about 8% of the M&A (mergers and acquisitions) deals in 2022, putting the sector behind other such as engineering services (which accounted for 29% of M&A deals), manufactured materials (on 13%), building products (12%), food and drink (10%) and life sciences (10%).

But BDO M&A director Matthew Goodliffe, says that he industrial automation sector is “an attractive one for investors, given the size of the market and its significant growth potential, coupled with typical business traits of secured orderbooks, recurring software or service revenues, IP ownership, high barriers to entry and impressive margins. M&A activity has therefore been high in the sector for several years, and we think it is likely that deal-making activity will remain buoyant in 2023 and beyond.”

He adds that M&A activity in the automation sector will be bolstered by OEMs from a wide range of end-markets investing in additional technologies, as well as private equity investors attracted by the high growth and opportunities to buy and expand businesses.

“We expect to see the sector develop at pace over the coming year as more and more solutions and technologies are developed,” Matthew Goodliffe continues. “One significant area of development currently relates to force torque sensing in conjunction with AI, allowing robotic systems to have a sense of touch and feel, as well as the already well-established visual systems, which will expand the uses and capabilities further. Business models will also continue to evolve such as robots-as-a-service and the resulting data-as-a-service, which will help accelerate adoption for companies deterred by the headaches of ownership and the investment burden of purchasing expensive equipment.”

Inward investment in UK manufacturing declined by 14% in 2022, with 184 UK businesses being sold to overseas acquirers, while outward investment from the UK grew by 14% with 115 overseas businesses being acquired. Investment from North America dropped by 34%, but still accounted for 29% of all overseas buyers.

BDO’s Manufacturing Deals Review reveals that private equity has maintained a strong interest in the UK manufacturing market, with buy-outs accounting for 19% of M&A deals.

“The UK manufacturing M&A market has been surprisingly resilient despite considerable headwinds,” says Roger Buckley, BDO’s UK Industrials M&A partner. “Investors, corporates and entrepreneurs are still active, making the most of strategic M&A opportunities to safeguard the future and position for growth. Major themes facing the market include cost pressures, supply chain resilience, the drive to net-zero, innovation, and sustainability, alongside a wide range of political and economic macro factors.

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