Manufacturers set sights on PE investment in 2022

Manufacturers are turning their attention to private equity (PE) investment as the sector makes a strong post-pandemic recovery and sets its sights on growth.

According to research* by Make UK and business advisory firm BDO, a third (34%) of manufacturers are considering private equity investment to help fund the growth of their business. 

70% of respondents said their company had a good understanding of how private equity works – a jump of 10% compared to 2019 when respondents were asked a similar question – with manufacturers increasingly realising the broader benefits PE investment can bring to their business.

While 45% believe private equity would be more attractive if investors had longer-term investment intentions, more than half (51%) concur that PE investors bring much more to the table than an injection of money, saying they would also benefit from the additional skills, expertise and credibility that such investment brings.

BDO says the figures demonstrate the appetite for growth among UK manufacturers. Following a difficult few years and despite escalating cost pressures, firms are gearing themselves up for a future centred on digitalisation, automation and sustainability. 

Roger Buckley, UK Industrials M&A Partner at BDO, said: “Manufacturers faced a brutal 10% decline in output in 2020 due to the pandemic but rebounded proudly with some record-breaking figures in 2021. 

“They have entered the year with their eyes wide open to the challenges ahead, most notably the intense costs pressures they are facing. However, they are doing so with a renewed sense of confidence, knowing they have battled the last few years with unrivalled resilience.”

In 2021, UK deal completions rose to their highest level since 2008**. The 2,782 deals completed by both trade and private equity buyers last year marked a robust recovery from the activity levels seen in 2020 – up 42%.

BDO says there is an abundance of ‘dry powder’ and a desire to invest, with strong competition from buyers for quality assets and resilient businesses.

Roger Buckley adds: “As manufacturers warm up to the idea of PE investment to help fund the growth their business, the fundamental drivers for strong deal activity are in place. 

“We would expect the pent-up appetite and sheer quantity of dry powder to convert to some serious deal flow in the manufacturing sector this year, particularly among mid-sized businesses with strong growth ambitions.”

- ENDS

* Survey conducted in Q4 2021 with 215 Make UK members
** BDO’s PCPI/PEPI analysis published February 2022 (available to download)

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