The New Era of Industrial Manufacturing: M&A Strategies for Success

Industrial manufacturing M&A
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The industrial manufacturing world has seen a lot of changes in recent years, and this period of change doesn’t show any signs of stopping. 

In many ways, this makes a lot of business owners afraid of leveraging M&A at the moment. There’s certainly a lot of risk, and with everything changing so quickly, risks like that are daunting. 

However, it’s actually crucial to leverage M&A opportunities right now, and if done properly, you not only survive the changes going on but also thrive. 

Here’s an in-depth guide to M&A strategies for industrial manufacturing, why it’s so important, and some strategies you can use to make it work for your business’s best interests. 

How Can M&A Help in the Modern Manufacturing Environment?

Ever since the Covid-19 pandemic, the manufacturing world has been thrown for a loop. Suddenly, massive changes were thrust upon manufacturers, and scrambling to keep up with that led to complete operational reworks. In the years that have followed, there have been economic changes, global changes, and more that have forced the industry to adapt. 

All of that sounds negative, but it has produced some positive changes, as well. It has pushed innovation and efficiency in ways that likely wouldn’t have been adopted so quickly had those issues not presented themselves.

Implementing M&A with the strategies we’ll be talking about shortly will help you catch up to the leading examples in the industry, get ahead of the curve, and generally, better protect your manufacturing business against the ever-changing manufacturing environment around the world or sell your manufacturing business for greater profits. 

In a lot of ways, it’s the only practical way to implement major changes and get up to speed, because the tech, personnel, and expansion requirements thrust upon many middle-market manufacturers are so extensive that implementing them traditionally over time is more expensive and often doesn’t complete before it’s too late. 

Industrial Manufacturing M&A Strategies

There are several key industrial manufacturing M&A strategies you should focus on to ensure you’re getting the most out of the process.

Industrial manufacturing M&A strategies

This mostly focuses on looking at the purpose of an M&A process to meet your needs.

1: Leveraging M&A with Digitization in Mind

One of the biggest changes that we’ve seen in the industrial manufacturing sector is the explosion in digitization. This correlates with the larger dependency on tech in general around the world. 

Digitization includes things such as moving sales channels to the online space, leveraging online marketing strategies, adopting tech-based communications and operations within the facility, and most importantly, leveraging tech to make more accurate and actionable predictions of future trends, earnings, and more. 

Digitization isn’t anything new, either. The industry has been working toward it for a few years before everything started to rapidly change.

However, many companies, maybe even your own, either didn’t start digitizing or weren’t able to make significant progress before it became a truly required part of operating. The middle market specifically simply has a smaller pool of resources to implement such massive changes in comparison to the industry giants that could implement whatever they needed in a quick manner. 

When you’re able to merge, you gain access to the assets the other company has, and in turn, that company melds into yours. Hopefully, it produces a positive outcome. 

Using M&A to further your company’s digitization goals can streamline the process significantly

If you can target companies for a potential merger that already have digitization in place, or have the infrastructure necessary to greatly reduce the costs, an M&A process might be the perfect way to get your foot in the door and catch up to larger companies that already fulfilled their digitization needs. 

For example, if the infrastructure is in place to handle eCommerce, you can gain that ability, without starting from scratch, via M&A. 

2:  Shifting to ACES Technology

ACES, or Autonomous, Connectedness, Electrifications, and Shared Mobility, is another concept that the industrial manufacturing world has been trending toward, as well. It has accelerated in recent years, but it has been a commitment for nearly a decade. 

ACES includes lessening environmental impact via electrification of day-to-day operations over dependency purely on fossil fuels, creating more effective supply chains that are more resilient to domestic and global disruptions via tech, automating time-consuming and repetitive tasks, etc.

In essence, this is focusing on creating a more efficient and productive manufacturing world that produces higher-quality results.

Industrial manufacturing M&A - Autonomous, Connectedness, Electrifications, and Shared Mobility

The problem is that fully shifting to an ACES production mindset is extremely costly and time-consuming. There are so many aspects of your business that have to be adjusted that doing it on your own can take years. 

Leveraging M&A, whether it’s to merge with a company that already has ACES infrastructure in place and the experience to expand it, or acquiring the assets of a business to streamline it, can be the fastest way to get ahead of the curve with ACES before your company is so far behind that it’s struggling to keep up with the industry at large. 

3: Focus on Supply Chain Strengthening

If your supply chain is lacking, the modern world can chew it up. There are constantly new threats posed against supply chains in all industries, and it takes a truly well-developed supply line with minimal weaknesses to keep a business operating. After all, if you’re not getting products out, or you’re not getting manufacturing materials, you can’t operate. 

M&A can be a way to strategically enhance your supply chain because you gain access to the existing supply chain of the company you’re merging with or acquiring.

For example, if your company successfully merges with a company with an extensive supply chain network, whether they developed it themselves or simply streamlined their supply network with 3rd parties, you can go from high-cost, low-reliability, supply capabilities to leveraging the more developed one with minimal adjustments to your own company. 

How to Approach M&A for These Strategic Regions

Now, you know some of the areas where M&A can help, but you also need to know how to approach the M&A process to actually achieve your goals. It can be complicated, but with a few strategic moves, you can find the right target, process, and integration method possible.

1: Start with Due Diligence and Screen Targets for Your End Goals

You have a specific goal in mind for your M&A attempt. So, the companies you target need to be capable of furthering that goal. When looking at companies to merge with during the due diligence phase, you should have your end goal in mind.

Industrial manufacturing M&A and post-merger integration process

This move will help smooth out the often-complicated post-merger integration plan, and it will help keep the deal on track with your end goal. 

2: Leverage a Clean Team

A “clean team” is a unique team of experts who essentially keep everything fair and ensure there’s no risk of fraudulent activity during the M&A process. 

While this doesn’t directly further your M&A goals, it does help ensure that your M&A attempt isn’t a major mistake. Given the challenges facing manufacturing companies already, one failed M&A attempt, or one that goes through under false pretenses, can be devastating enough to force your doors closed for good. 

A clean team should be a part of your overall M&A strategy going forward to protect you and the other party. 

3: Leverage Multiple M&A Deals in Targeted Areas

We talked about three key trends the industrial manufacturing world is dealing with, and it’s likely that your company will need to work toward multiple goals at once to align with those trends and more. 

One successful strategy that has been used recently has been to initiate multiple targeted deals rather than a single massive merger or acquisition

This might be outside of the realm of possibilities for middle-market companies at the lower end of the middle-market profit range, but it’s still a valid strategy for many, and if you pick and choose your transactions well, the payoff can be dramatic. 

This strategy mostly revolves around trying to acquire specific assets from multiple companies. Acquiring shipping assets, merging with a tech-heavy manufacturer, and sourcing top tech-related talent to help with goals, patents, and more are all goals with these deals. 

These deals are typically smaller in nature due to being targeted at specific facets of a company rather than simply buying entire companies left and right. So, it can be a manageable strategy even in the middle-market space. 

4: Scaling Up

This is another strategy that is optimal. Using M&A to increase the overall scale of your company rather than adjusting what’s already there can help build your business, make it more resilient against ongoing trends, and set you up for an easier time implementing some of the concepts we talked about earlier. After all, when a company grows its profits grow, and when its profits grow, there’s more money to put toward major changes. 

This is a fairly traditional route to take in all industries and at all times, but even with the manufacturing world’s unique challenges and trends, it’s still a relevant strategy for bolstering your ability to stay ahead and grow in the long term.

Scaling up in industrial manufacturing M&A

Depending on your company’s specific situation, making transactions specifically to grow in size, rather than focusing on more targeted goals, might not be the right choice, though. 

Is Industrial Manufacturing M&A Worth it?

Right now, this can seem like a complicated question to answer. With various challenges threatening manufacturers and their ability to thrive, taking on the risk of M&A can seem like it’s pushing things too far. That can be true, but M&A has also been the driving factor behind the majority of success in the industrial manufacturing world for the last 3 years

This major trend started around the start of the shutdowns and global regulation changes that accompanied our recent pandemic. In essence, it was a response to facilitate the rapidly changing industry and overcome obstacles. 

That’s still the case. 

Whether or not M&A is worthwhile is a personal decision based on your specific situation. If you’re in a great position, growing quickly, and able to keep up with the modern trends affecting the manufacturing world, M&A might be a worthwhile opportunity to take that even further. If you’re struggling to stay afloat, M&A might be an exit strategy, relief, or a way to catch up with the trends that will help you succeed, but it might also be a surefire way to push you further away from success. 

In general, and statistically speaking, M&A has helped the industrial manufacturing world significantly. It’s certainly a worthwhile opportunity to consider even if it turns out that you’re not in a position to go through with it at the moment. 

Determining Whether M&A Can Help and What Approach to Take

M&A can help you dramatically, or it can be a mistake. To make things worse, it can sometimes be difficult to figure out which route to take even if it is a good idea for you. 

That’s why professional guidance is absolutely necessary. 

At Final Ascent, we help middle-market businesses in all industries, including industrial manufacturing, to navigate the complex world of M&A in a manner that will further their goals. 

We start at the very beginning of the process when you’re just starting to think about the opportunity, and we get to know you as a trusted partner. We can help you make decisions that will benefit you in the future whether that’s acquiring assets from other companies, merging with another company, or exiting the business world entirely.

Then, we can guide you through the process and point you toward the resources you need to help you make the transaction a successful one. Our M&A advisors don’t stop there, though. Post-transaction support such as guidance with integration strategies, taxes, and even retirement plans are all in our wheelhouse. 
If you’re considering leveraging M&A to benefit your industrial manufacturing business, contact Final Ascent, today.

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