2018 capped another strong year for M&A. The value of global M&A rose 11.5% while cross-border M&A was up 6.4%, making 2018 the third-largest year on record since 2001, according to Mergermarket. The year ended with dealmakers cautiously optimistic that 2019 could be even better, despite the complexities of global trade uncertainty, Brexit and the potentially tightening credit markets.
2018 was an exceptional year for industrial M&A in particular, characterized by megadeals in almost every industrial sector as companies aimed to create scale. Valuations remained high with the highest-quality and in-demand assets trading in the mid- and upper-teens. In terms of activity, industrial-sector M&A notched 2,746 deals (22%) of the 12,309 total completed transactions across all sectors, up slightly (5%) from last year’s industrial total of 2,605, according to Mergermarket. In fact, across all regions, industrial M&A activity was up. North America lead the way with 1,445 of the 2,746 total transactions closed (up from 1,404 in 2017), followed by Europe at 1,158 deals closed (up from 1,067 in 2017) and the China & India region with 143 (up from 134 in 2017).
Perhaps even more surprising were the gains that came out of the United Kingdom and Ireland despite Brexit concerns. Industrial M&A activity in the region rose by nearly 57% (with 293 industrial deals closed in 2018, up from 187 in 2017). Overall, much of the growth in the UK was fueled by foreign rather than local investors as the percentage of in-bound investment to total acquisitions rose in 2018, climbing to 44% from 29% in the prior year, a testament to the strength of the British mid-market and the temporary weakness of the pound.
With constant pressure for growth, availability of capital, and the increasingly common strategy of using M&A to improve, scale and transform industrial companies of all sizes, we expect 2019 to be another strong year. Large public industrial companies are still aggressively assessing their portfolios, and with valuations at high water marks, divestitures and spin-off activity should continue to be prevalent. This, in conjunction with both private business owners and private equity firms’ recognition of the market cycle, should result in a strong new wave of transactions coming to market in 2019.
The supply and demand imbalance for transactable assets is expected to prolong the current seller’s market into 2019 and will continue to put pressure on private equity firms to use their complete toolkit to maintain their return dynamics.
Livingstone’s Global Industrial Group completed 28 transactions in 2018. We provide strategic advice and seamless transaction execution to private business owners, financial sponsors, and corporations around the world. Our knowledge of the sector, strength of relationships, and access to global acquirers, financial sponsors, and other creative capital sources has led Livingstone to be the industrial M&A adviser of choice to innovative industrial manufacturing companies around the world.