Industrial markets

Industrial markets

After a blistering 2015, the industrial markets sector had another very active year for M&A transactions in 2016, well up on the levels of activity seen between 2009 and 2014.

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After a blistering 2015, the industrial markets sector had another very active year for M&A transactions in 2016, well up on the levels of activity seen between 2009 and 2014.

There were not as many ‘megadeals’ as 2015, but activity at the sub US$3 billion level remained high.

“There have been some global factors that affected the market over the course of 2016, particularly at the top end. But despite that, the appetite for ‘bread-and-butter’ deals was very strong,” says Danny Bosker, KPMG Corporate Finance partner.

“One of the main factors driving M&A activity in industrial markets in 2016 was the hunt for technological innovation. Companies recognise that to remain competitive, they need to invest in technology to transform their businesses. Sitting back and waiting is not an option. They need to go out and either develop new business models or technologies, or acquire them.”

The acquisition of German robotics company Kuka by Chinese household goods manufacturer Midea is a case in point. Midea gains robotics expertise to transform its manufacturing capabilities, while at the same time strengthening Kuka’s position in Asia.

The deal also typifies the continuing trend of Chinese buyers acquiring established Western businesses, something the Chinese Government has taken steps to facilitate.

“The Chinese Government relaxed the rules for acquisitions, so Chinese buyers no longer have to go through such a drawn-out approvals process to make an acquisition. For deals under a certain level, they can just go ahead and do it, which is a tremendous help and has helped the number of deals coming out of China stay strong,” says Bosker.

Looking ahead to 2017, Bosker expects M&A activity to remain high, particularly at the sub-US$1 billion level, and with continuing strong interest from Asia.

“Technology businesses are expected to remain popular targets for acquirers. Another key sector could be environmental technologies – heating, ventilation, insulation, anything to do with CO2 reduction. Interest has been growing quite rapidly over the past year. Combined with increasing interest from Asian buyers in this sector of the market, it looks set to be another strong year for industrial markets deals,” says Bosker.

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