Industrials

Broad and deep expertise across multiple
industrial sectors

How much are companies worth in the Industrials sector?

The following 3 graphs will give private business owners a broad indication of the value of their business:

1. The Enterprise Value to EBITDA* multiples on which comparable listed companies are trading

Industrials graph 1 reversed


A
t the end of H1 2019, the global, all market average Enterprise Value to EBITDA*  multiple for listed industrials companies was 11.2x. This was greater than for the previous six months and slightly up on the previous year, when listed industrials companies were trading on a multiple of 11.0x. Within the industrials sector, trading multiples varied between 8.7x and 13.1x across the range of sub-sectors. Smaller businesses generally traded on lower multiples.

* EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation

† Note, the Enterprise Value to EBITDA multiples above are for listed businesses, and it is generally the case that privately owned businesses are valued at a discount. Listed company data was accurate at 01/07/19.


2. The multiple of EBITDA paid by acquirers of comparable businesses

industrials graph 2 v2


The average multiple of EBITDA paid globally in industrials transactions has declined slightly over the past few years. It currently stands at 10.8x. When reviewing these  multiples we break out  businesses in the range $5-150m, as they  tend to have unique attributes which affect their valuation. Smaller businesses have generally been sold on lower multiples.

† Note, the transaction multiples above are calculated from raw data. This typically understates profits and therefore valuations actually achieved are generally at lower multiples of “normalised” profits.

3. The volume of M&A transactions and acquisitions

industrials graph 3 reversed


In H1 2019, there were 3,232 transactions globally in the industrials sector. This is down on the preceding 6 months, when there were 3,369 transactions. Although slightly declining over the last few years, the number in the last 6 months suggests demand for industrials businesses remains fairly buoyant.

 

For further information as to how these valuations and statistics are computed, and their impact on your transaction, please contact us.

Key industrials market themes:

1

Digitalisation and consolidation are key

In the second half of 2019 the key drivers of industrial M&A are centred around digitalisation and consolidation. In an industry that is heavily reliant on manufacturing processes, large scale operations and technology, digitalisation is crucial in remaining on the cutting edge and consolidation is key for achieving economics of scale as industry 4.0 takes centre stage.

2

New technology changing the industry

New technologies in the industrials sector highlight the opportunity for increased M&A activity. Growing markets of electric propulsion and autonomous vehicles alongside the continued growth in industries such as semiconductors points towards increased deal-flow in the coming period.

3

Challenging trade relations with China

The challenging US-China trade relations could have a serious effect on deals as we move into the second half of 2019. A survey by PWC shows 87% of CEOs are “concerned” regarding the current trade relationship with China, with many specifically referencing US-China relations.

4

Brexit poses planning problems

Brexit poses a threat to M&A transactions as continued uncertainty surrounding the UK’s exit from the EU leaves many businesses in limbo. With many industrials companies locked in and unable to change contracts, alter supply chains or transform business processes quickly enough to keep up with the moving political landscape, companies may be put off striking up a deal as we approach the 31st October 2019 leave date.

5

Petrol and diesel down as electric soars

According to the Society of Motor Manufacturers and Traders, automotive sales have fallen in July, the fifth successive monthly fall with a sales fall of 22.5% to business customers and 2% fall to individuals. Diesel car sales fell 22.1%, with tighter regulation imposed throughout Europe. The electric car market experienced a significant increase in demand and the market is predicted to double by 2020 according to SMMT.

6

Sustainability crucial for planet and profit

There has been a surge in publicity surrounding renewable energy, green living and cleaner manufacturing processes as a response to climate change. Firms in the energy, manufacturing and oil industries are discovering that positioning themselves as sustainable is aiding them in achieving their financial goals. M&A activity is likely to increase in this sector as businesses look to acquire new technology and services promoting these ideals.

Data sources compiled by Corbett Keeling