Private Equity Investments in Manufacturing Companies
Historically, manufacturing was the predominant industry of interest for private equity acquisitions. However, as PE firms increasingly looked for more scalable companies with lower CapEx requirements, over time, manufacturing acquisitions declined as a percentage of the total private equity investments.
To be clear, the entire private equity market has grown considerably over this same time. Consequently, the absolute number of manufacturing acquisitions by private equity firms has grown, but not at the same pace as the private equity industry.
Most recently, with the effects of the coronavirus, private equity investments in manufacturing companies has dropped from 15% of transactions in 2019 to 13% in 2020 YTD. The effects are likely more profound considering January and February of 2020 were largely unaffected by the coronavirus.
So, while the total number of PE acquisitions declined substantially in recent months due to the coronavirus, the impact on manufacturing acquisitions has been even more acute as demand for goods suddenly weakened, creating a less favorable outlook for manufacturing companies compared to other sectors such as technology, healthcare and software companies, for example.