Dealmaking expectations for the manufacturing sector remain bullish but have eased just a bit from the first half of the year, according to the latest reading of SourceMedia’s Mid-Market Pulse (MMP). The MMP, published by Mergers & Acquisitions in partnership with McGladrey LLP, is a forward-looking sentiment indicator that monitors near-and intermediate-term outlook for merger and acquisition activity within the middle market.
“M&A practitioners predict growth in manufacturing deals, but their expectations weren’t as high as they were earlier in 2014,” said Mary Kathleen Flynn, Editor-in-Chief of Mergers & Acquisitions.
The MMP results, Flynn said, show that dealmaking activity in the manufacturing sector is still expected to increase but suggest that the pace of increase has passed its peak. The three-month composite score of 77.3 for manufacturing beat the overall market score of 75.2. However, it was lower than an earlier reading this year of 80.6.
The 12-month score worked out similarly with a sector score of 76.6 against the overall M&A score of 73.6. The intermediate forecast for manufacturing was lower than the 81.8 attained at a previous reading this year.
“Among the high-growth industries measured, manufacturing dropped from second to third place, behind health care and TMT, but ahead of financial services and energy,” Flynn said.
Each month, the MMP index spotlights an individual industry and presents respondents’ expectations for deal activity within that specific sector. This month’s index focuses on the manufacturing sector.
For a complete analysis of the MMP’s most recent data, go to: http://www.themiddlemarket.com/mmp-manufacturing1014
Inside the MMP
The Mergers & Acquisitions Mid-Market Pulse (MMP) is a monthly barometer of sentiment in the mergers and acquisitions business derived from monthly surveys of approximately 250 executives in private equity firms, investment banks, lenders, and advisory firms in accounting, law, and consulting.
Based on a regular set of recurring questions about expectations and trends across a range of key issues in M&A, the MMP is a leading indicator for potential changes in momentum in M&A activity. Various indicators that make up the MMP include projected deal volumes and pricing, staffing resource utilization levels, and the expected impacts of economic conditions, taxes and regulatory policy on future M&A activity.
Survey responses describe expectations and outlooks for three- and 12-month forward periods to arrive at indicator scores. Respondents also are asked to elaborate on their responses and provide opinions about other conditions that affect their M&A outlook.
A Look at the Numbers
“Another sign that growth in manufacturing may be waning is found in the MMP results for deal value and multiples,” Flynn says.
The intermediate forecast for deal value in the manufacturing sector was 76.6 – dramatically lower than the MMP’s overall score of 86.7. Deal multiples also lagged the overall score, registering 52.7 for the 12-month forecast compared to the overall M&A industry score of 79.5.
What Respondents are Saying
Survey respondents are encouraged to add verbatim comments to their answers. Many expressed concern about the general health of the economy and international demand.
One respondent said, “increased regulation in the long run will continue to negatively affect manufacturing and private equity.” Another commented that there is “high competition in every deal we come across.”
“Deal volume and deal valuations will continue to be driven by overall growth in the manufacturing sector,” a dealmaker noted. “If the U.S. and global economy continues to sputter, and interest rates rise, it’s our view that deal volumes, as well as valuation will trend downward.”
SourceMedia, an Observer Capital company, is a diversified business-to-business digital media company serving senior professionals in the financial, technology, and healthcare sectors. Brands include American Banker, The Bond Buyer, Mergers & Acquisitions, Financial Planning, On Wall Street, Accounting Today, Health Data Management, and Employee Benefit News.
About SourceMedia Research
SourceMedia Research, a unit of SourceMedia, provides research solutions for marketers, agencies and others targeting business sectors such as banking, payments, mortgage, accounting, insurance, employee benefits and investment advisor / wealth management. SourceMedia Research specializes in reaching senior and C-level decision makers through access to its large proprietary opt-in databases and panels.
About Mergers & Acquisitions
Mergers & Acquisitions covers all aspects of middle-market dealmaking, including identifying acquisition targets, negotiating transactions, performing due diligence, and closing deals. Serving nearly 18,600 print subscribers, our monthly magazine is published in partnership with the Association for Corporate Growth (ACG), a global organization comprised of thousands of private equity firms, corporate officials and intermediaries. With more than 25,000 unique monthly visitors, themiddlemarket.com is continuously updated, providing real-time information and analysis of news and trends in M&A. Our online video series features interviews with high-profile dealmakers, including private equity partners, strategic buyers, investment bankers and other advisers.
McGladrey LLP is the leading U.S. provider of assurance, tax and consulting services focused on the middle market, with more than 7,000 people in 75 cities nationwide. McGladrey is a licensed CPA firm and serves clients around the world through RSM International, a global network of independent assurance, tax and consulting firms. McGladrey uses its deep understanding of the needs and aspirations of clients to help them succeed. McGladrey serves private equity firms and their portfolio companies with integrated transaction advisory, tax, assurance and consulting services. Clients benefit from a single-point-of-coordination service model and teams that operate as strategic partners throughout the private equity life cycle. For more information like us on Facebook at McGladrey News, follow us on Twitter @McGladreyPEand/or connect with us on LinkedIn.
For more information, please contact:
Mary Kathleen Flynn
Executive Director of Marketing