The focus on bolt-on acquisitions may point to the formidable deal competition from private equity funds’ dry powder that built up during the pandemic. Manufacturing executives indicated they expect increasing competition from private capital (60%) relative to corporate buyers (40%), whose resources may be limited by the pandemic, precluding payment of premium prices for digital or tech assets.
International strategy and geopolitics
Government policies enhancing domestic production and national competitiveness play a key role in manufacturers' decisions about global development and M&A.
Among manufacturers, 65% say such policies affect their international footprint, 63% cited the impact on entering an international market, 59% pointed to the impact on domestic M&A and 56% noted the impact on cross-border M&A.
When it comes to acquisitions, investments and geography, manufacturers pointed to regulation, tariffs, trade changes and a secure supply chain as strategic drivers in their decisions. For the near term, the survey shows manufacturers’ top domestic and cross-border M&A destination is the United States, reflecting some manufacturers’ desire to be closer to customers, followed by India. Looking out over the next three years, manufacturers are eyeing parts of Asia and Europe for growth and opportunities.
For some manufacturers, the drive to pursue M&A deals may be tempered by price premiums and continuing supply chain challenges, as well as concerns about national policies and the location of operations. For others, a return to profitability sooner than expected may boost M&A sentiment.