Press release

30 Apr 2020 London, GB

Manufacturing sector grapples with effects of COVID-19 as new reality takes hold

LONDON, 30 APRIL 2020. In the wake of the economic effects of COVID-19, the focus for manufacturers is on the immediate pressure on global supply chains, according to the 22nd edition of the EY Global Capital Confidence Barometer (CCB).

  • More than half (52%) of global sector executives are taking steps to reconfigure supply chains as exposures revealed, with 45% re-evaluating 
  • Most manufacturers (82%) expect hostile M&A activity to rise on the back of lower valuations
  • A majority (53%) also expect a “U-shaped” recovery extending into 2021

In the wake of the economic effects of COVID-19, the focus for manufacturers is on the immediate pressure on global supply chains, according to the 22nd edition of the EY Global Capital Confidence Barometer (CCB).

The economic shutdown seen in many parts of the world has increased the urgency of supply chain for manufacturers. The survey found that more than half of manufacturing business leaders (52%) are already taking steps to change their supply chains, while 45% are actively re-evaluating their processes.

COVID-19 is also shaping global manufacturing leaders’ strategy when it comes to the management of people and processes. More than two-thirds (69%) are already taking steps to change the way they manage their workforce or are re-evaluating their current approach. Meanwhile, the speed of automation and digital transformation in the sector is set to increase considerably, with more than two-thirds of manufacturers evaluating or already taking steps toward transformation on both fronts (78% and 67%, respectively).

David Gale, EY Global Advanced Manufacturing Transactions Leader, says:

“Manufacturers are working rapidly to limit the impact of the already tragic human cost of COVID-19 on livelihoods. The first step is going to be tackling supply chains, which have been left dangerously over-exposed in many industries.

“As this unfolds we can expect a shrinking of supply chains for the long-term, with more key components made locally. The term ’unprecedented’ can be overused, but I think it is perfectly apt in this situation.”

Post-crisis boost for manufacturing M&A

While boards continue to deal with the immediate situation, many are also looking beyond the crisis with more than half (53%) of all responding manufacturers expecting the global economy to enter a “U-shaped” dip that will extend into 2021.

In previous versions of the CCB, high valuations were called out as a barrier to M&A activity in the manufacturing sector. That is expected to change. The vast majority of those polled (82%) expect an increase in hostile and competitive M&A activity in the wake of the crisis. At the same time, 47% of respondents predict a drop in valuations, which is likely to increase competition for targets.

The survey also shows an expectation that the crisis will reshape what is considered an attractive target, with nearly a third (32%) saying they will prioritize business resilience when evaluating a transaction.

Gale says: “M&A drivers on both sides of manufacturing deals are likely to be transformed in the post-COVID environment. Sellers are looking to rebuild depleted cash reserves, while buyers may be looking for a bargain with valuations dropping. Any buyer, however, will be looking closely at the resilience of a business when it comes to assessing a deal in the post-COVID world.

“We can certainly expect a more hostile environment in the coming year, and perhaps beyond, which will see as much activity from private equity as it will from corporate buyers.”


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About EY's Global Advanced Manufacturing & Mobility Sector

Urbanization, changing consumer expectations and emerging digital technologies are reshaping what’s possible, from the production and distribution of goods to the transportation of people. To succeed in this new world of mobility and smart manufacturing, incumbents must transform themselves at unprecedented speed — to think like an innovative startup, tap into new talent and engage the customer. With experience across the value chain and key technology alliances, our teams show clients how to create efficiencies now while adopting digitization and optionality for long-term growth. Automotive, transportation, aerospace, defense, chemicals and industrial products companies can draw on the strength of our network of cross-industry players and put our diverse range of approaches to use today to equip their businesses for tomorrow.

About the survey

The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom practices in the way companies manage their Capital Agendas — EY framework for strategically managing capital. It is a regular survey of senior executives from large companies around the world, conducted by Thought Leadership Consulting, a Euromoney Institutional Investor company. The panel comprises select EY clients and contacts across the globe and regular Thought Leadership Consulting contributors.

  • In February and March, Thought Leadership Consulting surveyed on behalf of EY a panel of more than 2,900 executives in 45 countries; 70% were CEOs, CFOs and other C-suit-level executives.
  • The manufacturing cut of this data is based on responses from 406 advanced manufacturing executives.
  • From this surveyed companies’ annual global revenues were as follows: less than US$500m (23%), US$500m–US$999.9m (21%), US$1b–US$2.9b (19%), US$3b–US$4.9b (12%) and greater than US$5b (25%).
  • Global company ownership was as follows: publicly listed (63%), privately owned (6%), Private -family controls more than 50% of the voting rights (2%) Publicly listed - family controls more than 35% of the voting rights (24%) and private equity portfolio company (5%).