PwC's Michelle Ritchie
PwC recently released its Industrial manufacturing: Deals 2022 midyear outlook, which found slow, but steady growth in the industrial manufacturing sector despite continued economic and geopolitical uncertainties. The report recognized a 3% decrease in industrial production in April 2022 alone, spurred from COVID-19 restrictions, resulting in further delay of global backlogs and increased supply costs.
We wanted to dive deeper, so we connected with PwC Deals Partner Michelle Ritchie. Take a look…
Smart Industry: What are the key takeaways in this report?
Michelle: We’ve seen stability in the industrial manufacturing sector despite economic and geopolitical uncertainties. While the average deal value decreased by 30% in the first half of 2022 in comparison to the second half of 2021, we’re expecting M&A activity to remain broadly consistent as companies focus on business transformation through divestitures of non-core assets and supply chain resilience through acquisitions.
Based on PwC’s mid-year deals report, business leaders will need to get back to fundamentals in order to navigate uncertainty in the marketplace. The industry experienced a 3% decrease in industrial production in April 2022, which was spurred by pandemic restrictions resulting in further delays of global backlogs and increased supply costs. Buyers and sellers will need to develop realistic projection plans, and factor in the potential impact from inflationary pressures and other dynamic market conditions to ensure success.
Smart Industry: What most surprised you in the report findings?
Michelle: One item that emerged in the last few months is the impact that regulatory pressures are having on the deal market. After the government started exerting influence, this topic is coming up in many strategic discussions. This is likely going to become a regular topic during strategic reviews and deal assessments, at least during the current administration.
Smart Industry: What is most encouraging?
Michelle: The continued resilience in the marketplace despite the ongoing challenges that industrial manufacturing leaders are facing is encouraging. From battling a global pandemic to rising inflation and global uncertainty, industry leaders are finding ways to survive, innovate and thrive.
As the market looks forward to the second half of 2022, we expect M&A activity to remain broadly stable, with divestitures of non core assets and acquisitions of strategically focused assets driving activity.
Smart Industry: This is an unprecedented period of volatility. How will manufacturing rebound once these challenges are resolved?
Michelle: Many industry leaders are focused on business transformation through the targeting of smaller strategic acquisitions to build out the platform and capabilities, as well as considering divestitures of non core assets that may be distracting the business. This approach is going to position those companies to leverage the growth in the marketplace.
Supply chain disruptions will remain critical in the near term as the industry navigates the ever-changing geopolitical landscape. However, where there is uncertainty there is also opportunity. Supply chain shortages are leading companies to dive into M&A to mitigate risk and shore up their supply chains, including by partnering and collaborating to ensure their customer needs are met.
