Polestar’s latest report spotlights the UK manufacturing and industrial sector for H121, aggregate sector valuations and private market activity. We have summarised our report below to receive the full document, click here to read more.
Listed comparables can provide some indication of value. We have summarised UK listed companies in the sector, split down into:
The impact of the pandemic and concerns for trading relationships with the EU caused a 10% fall in output in 2020. As the successful vaccine program continues and markets recover, 2021 growth of 2.7% to 3.9% is expected. MAKE now forecasts that the sector will return to pre-pandemic levels by the end of 2022.
Industrial technology enjoys higher valuations linked to higher-growth and continuing demand for digitisation in the industrial sector. With the industrial sector’s focus on industry 4.0, there will be a high demand for companies that can offer technology in automation, machine learning, and real-time data.
With the Ministry of Defence indicating an investment of £85b in the UK defence sector within the next four years, the aerospace and defence subsector is also poised for above average growth, while specialist manufacturing continues to enjoy the higher valuations based on strong margins that their specialist nature commands.
The growth rates for the manufacturing and industrial subsectors were lower than other sectors, reflecting some of the effect of COVID now coming through in reported numbers.
Construction and engineering saw both low growth rates and depressed EBITDA margins due to a supply shortage in the timber and construction materials market, which heavily impacted production levels. There has been a nationwide shortage of timber since the first lockdown in March 2020.
Industrial technology saw the highest EBITDA margins, with continuing appetite from business to invest in the latest technology, with some signs this has been reinforced by recent tax support for investment activity.
With continuing focus by the government on meeting 2030 targets for carbon emissions and support for the switch to electric vehicles, the recycling and renewables subsector continues to see high EBITDA margins as investment continues into pure renewable energy generators. These high fixed cost infrastructure plays are seeing continued appetite from investors focusing on stable production volumes and low variable costs (such as hydro, wind, solar).
For operators in the manufacturing and industrial sector, the following leading players illustrate the high growth and valuation metrics that can be achieved across this space.
148 private sector were deals completed in H121 for the manufacturing and industrial sector.
The construction and engineering subsector had the highest activity during this time. The UK saw an increase consumers investing into their homes throughout lockdown with their patios, gardens, etc. This activity is reflected in what we have seen here at Polestar, with strong activity for clients in the waste sector – skip hire, and demand for garden products and DIY materials ultimately prompting a timber and materials shortage through the beginning of lockdown.
46% of the private sector deals were activity from British companies investing in the UK, followed by 31% international investment from foreign countries into the country and 23% of overseas investment from the UK.
For international investment, Sweden made up 45% of private sector deals in the UK, followed by the U.S with 20%.
The interest was reciprocated for the U.S with 32% of all overseas investment from the UK being American companies.
If you are interested in digging into the data, or seeing some of the key selected private transactions , the full report can be downloaded here.
Our data is sourced from a mixture of Capital IQ / Zephyr which are both reputable databases for M&A transactions across the globe. If you have any questions about our findings or would like to discuss how these trends may affect your business, feel free to reach out to us!
The impact of the pandemic and concerns for trading relationships
with the EU caused a 10% fall in output in 2020