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The industrials sector is expected to see a steady pace of deal activity throughout the remainder of 2024 and into 2025. Despite continued market challenges, strategic investments – particularly in innovative technologies, and electric mobility – coupled with portfolio reviews and divestitures will continue to drive mergers and acquisitions (M&A). Due to ongoing capital constraints and higher financing costs, companies may prioritise divesting non-core assets to free up capital for investment opportunities and smaller deals.

Optimising your industrial business for a transaction

When preparing an industrials business for sale, getting the company in good shape and understanding the differing focuses of trade buyers and private equity (PE) firms – and how you should align your preparation – is crucial to maximising its value and attracting the right buyer or investor. Trade buyers seek synergies to enhance EBITDA, focusing on efficiency and sustainability. In contrast, PE firms prioritise future growth and exit strategies.

In recent years, M&A activity in the industrial sector has experienced significant fluctuations due to macroeconomic and geopolitical factors. Therefore, it is ever more important to demonstrate that your business is resilient, innovative, sustainable, has a clear path for growth and is a competitive asset in a dynamic market. 

What should you consider when preparing for a sale or an investment for your industrials business?

Building resilience

Resilience is a critical factor for buyers or investors evaluating potential acquisitions. Given significant cost pressures from energy, staffing and raw materials, you must demonstrate proactive cost management strategies. Businesses should have a plan in progress or in the pipeline and a reliable management team to gain buyer or investor confidence – they can see future value even if everything isn’t in place yet. It’s crucial to monitor and report on implemented plans, price adjustments and value-added services, showing their impact on the business. Additionally, ensuring a strong cybersecurity posture, addressing labour shortages, and having robust disaster recovery and climate resilience plans are crucial. Buyers or investors value businesses that show agility and foresight in navigating economic challenges. 

The rising importance of sustainability

Sustainability is a hot topic for buyers and investors in the industrials sector, driven by government policies, stakeholder expectations, and the public’s green agenda. With rapid advancements in net-zero technologies and sustainable machinery, businesses are eager to meet environmental targets through acquisitions. Regulatory compliance and consumer pressure are also key drivers of investment decisions, making M&A a crucial route to accelerate innovation and decarbonise value chains. Buyers are on the lookout for companies with a proven track record in energy efficiency, waste reduction, and responsible sourcing. During due diligence, they scrutinise long-term sustainability strategies and business structures. Failing to meet environmental commitments can damage your reputation, harming the brand, company, and management team. Buyers or investors want to see companies showing a genuine commitment to environmental sustainability and that they can maintain these practices over the long term. 

Futureproofing through innovation

Innovation drives success and competitiveness in the industrials sector, making businesses highly attractive. Investment in research and development (R&D) and new manufacturing technologies has positioned the UK favourably globally. However, continued government support through incentives for apprenticeships, local industrials strategies, export support, R&D investment incentives and a competitive business rate regime is essential to maintain this momentum. Rapid technological advancements, such as AI, automation and digital transformation are strategic priorities, with M&A playing a significant role. Acquiring new technologies can ensure you stay competitive and expand your market presence. Having unique innovative offerings and a strong R&D team make you a prime target, enabling buyers or investors to accelerate innovation, reduce time to market, and stay ahead of competitors. A commitment to innovation signals to buyers that your business is forward-thinking, resilient, and capable of sustaining growth, making it a highly attractive acquisition target. 

Driving future growth and buyer interest

When considering future growth, it’s essential to identify where you can expand and capitalise on wider market opportunities. This involves exploring new markets and customer segments, developing innovative products, and leveraging existing advancements in technology, automation, and AI to enhance operations. Despite the challenging economic environment and waning consumer spending, a clear and deliverable growth plan can make you attractive to buyers or investors. This plan should outline potential market expansions, strategies for acquiring new customers and the introduction of next-generation products. Additionally, they will be interested in how you can build on the actions already taken, such as further technological advancements or increased automation, to drive future growth. Incorporating ESG principles and demonstrating resilience alongside a compelling vision for the future, backed by actionable steps, will excite buyers and demonstrate the business’s potential for sustained success.

Preparing an industrials business for sale requires a strategic approach that highlights resilience, sustainability, innovation, and future growth potential. By proactively managing operational costs, committing to sustainable practices, investing in cutting-edge technologies, and outlining a clear path for expansion, businesses can significantly enhance their attractiveness to buyers. A well-positioned company not only demonstrates its current strengths but also provides clear evidence of the impact of strategic decisions taken and its readiness to thrive in a competitive and evolving marketplace. With these elements in place, you can maximise value and ensure a smooth, successful transaction.

How our deal services team can support your industrials business

Considered planning and strategic positioning are essential to maximise the value, mitigate the risk of disruption to your business or value erosion and ensure the long-term success of the transaction.

We have advised on 70 transactions in the industrials industry over the last three years. As a full-service firm, we guide clients through the entire sale, fundraising or acquisition lifecycle – helping them prepare the necessary information and maximise value throughout the process.

For more information on how we can help you enhance and protect value, please see our guide.

If you would like to discuss your options, please get in touch with John Bryant or Philip Parkes.