Manufacturers’ M&A Outlook Perseveres Through Headwinds

All signs should point to the manufacturing industry having a hard time. With a litany of issues exacerbated by the global pandemic these past few years, it wouldn’t be surprising for the beleaguered industry to be in dire straits. And yet, a recent survey from Marcum National Manufacturing found that 95% of manufacturers anticipate revenue from 2022 to exceed 2021.

Manufacturing industry challenges

There are several standout challenges within manufacturing this year. Labor sourcing, issues with supply chains, and cybersecurity threats combine to form the biggest current challenges within the industry.

Employment has been an issue for the country, and even the world, since the 2020 pandemic. In fact, 83% of respondents to the aforementioned survey agreed that replacing skilled workers since the Great Resignation has been difficult. As a solution, many businesses are turning to packages that include increased benefits and flexibility to incentivize workers to stay. However, this is a barrier within manufacturing, where businesses can’t always provide flexibility to employees simply due to the nature of the job.

Supply chain issues have included and continue to include material shortages and delays that can affect manufacturers’ bottom lines. And cybersecurity issues are on the rise, especially phishing and ransomware schemes that trick employees into surrendering important company info and require payment to return data safely.

Perseverance through it all

While these challenges aren’t making work any easier in manufacturing, the industry remains optimistic for the future. This positivity comes from a few different places.

For one thing, the pipeline for manufacturing shows no sign of slowing, and high demand has allowed manufacturers to combat labor shortages with new machines and automation. Additionally, they have gotten creative with work perks. Though it’s often impossible to offer a work-from-home option, they can offer flexible hours to meet employees’ needs for work-life balance and better labor policies and benefits.

In terms of supply chain disruptions, there are strategies being put in place to specifically mitigate the risk involved. According to a recent analysis from Deloitte, manufacturers are looking for ways to future-proof supply chain issues. New strategies are projected to be multifaceted, with a stronger reliance on digital networks and data analytics. This way, response to disruption can be more fluid and quickly resolved.

And to remedy problems with cybersecurity, many are turning to move advanced training to deter employees from opening suspicious-looking emails. For those who aren’t comfortable conducting these trainings themselves, there is always the option to hire outside experts for a more comprehensive understanding.

What does it all mean for M&A?

The optimism of those in the industry signals positive outcomes for manufacturing, and those in M&A should keep an eye out for emerging opportunities with businesses that are able to mitigate their risk.

Many executives are looking to update current facilities, and strategic acquisitions are a great way to push forward growth initiatives that are already underway. M&A is also a great option for businesses run by owners who are on their way to retirement. For those who don’t have a plan in place for succession, M&A is a great option to ensure a continued legacy, and the time could be ripe to sell.

If you’re interested in your options in the manufacturing industry, please contact us for a confidential discussion of your specific situation. We have experience helping business owners across a variety of industries to sell their businesses, as well as relationships with buyers who are interested in new opportunities.

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