Date published: 01.09.08 - not release date

Overseas buyers in pursuite of UK manufacturing businesses

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CW577/08
10 June 2008

Engineering and manufacturing companies serving sectors such as energy or infrastructure are defying the credit squeeze to become popular acquisition targets, say advisors Clearwater Corporate Finance.

The firm says that while merger and acquisition activity has all but evaporated in some consumer-facing sectors, reflecting the difficult market conditions, the outlook in many industrial sectors remains positive, buoyed by demand from developing countries.

As a result, industrial businesses are keenly sought after, both by multinationals looking to enter these fast-growing markets and by companies from emerging economies which want to access new products and technologies.

According to Constantine Biller, industrial products analysts at Clearwater, engineering and manufacturing companies serving the aerospace and defence, capital equipment, chemicals, industrial gas, marine, off highway, offshore, oil and gas, petrochemical, pharmaceutical, transportation and utility industries are all on the radars of strategic purchasers.

Biller says: “A major factor in this stream of deals is the relentless demand for ever more sophisticated products and services, particularly from developing economies. As countries such as Brazil, Russia, India and China commit to future large-scale expenditure on infrastructure, suppliers of critical components and systems in the UK are feeling the benefit.

“In order to meet this demand, major multinational are on the hunt for engineering resources and market-leading technologies. Many of these global players are still sitting on strong balance sheets and are prepared to hunt out niche players that give them immediate access to new and fast-developing markets.

“The likes of BAE, Danaher, Dover, GE, Ingersoll-Rand, ITW, Parker Hannifin, Philips and Schneider Electric have an established acquisition strategy and even a downturn in wider economic conditions has not stopped them using their cash piles for mergers and acquisitions.”

Whilst private equity buyers have become less active in the manufacturing and engineering sector, a new pool of purchasers has emerged in the shape of companies from developing countries, says Biller. Indian companies such as Essar, Larsen & Toubro, Mahindra and Tata have all been on the acquisitions trail and many others are following suit.

“Buyers from the Asia-Pacific region and other emerging markets are developing an appetite for industrial businesses,” adds Biller. “Having been largely unaffected by credit woes, these players are becoming increasingly attracted to European and North American assets to speed up the process of technology transfer back to their fast-growing domestic markets.

“Many overseas purchasers are using the strong demand in their domestic markets and their competitive advantages to seize assets that would have historically been out of their reach. As a result they instantly gain access to innovative products, strong customer relationships and new routes to market.”


Notes to Editors:

Clearwater Corporate Finance is the leading independent corporate finance house in the UK with an exceptional track record of over 300 completed transactions. We advise on all aspects of corporate finance transactions from mergers and acquisitions (M&As) and company sales to management buy-outs (MBOs). Our clients include management teams, owner-managers, private equity firms and large corporates. We differentiate our service through our:

Independence – as we aren't linked to any larger financial institution or consulting firm, we can provide objective advice without any potential conflict of interest.

Cross-border capability - the close communication between our four UK offices and the 60 member firms in IMAP, our exclusive network of international M&A firms, makes us a natural choice for cross-border transactions.

Sector expertise - our global sector teams offer clients a unique insight into M&A opportunities across the world.
Research and origination - with 25 per cent of staff focussed on these activities, we offer a market-leading capability to identify strategic opportunities for clients.

Excellence - we are committed to excellence in our service delivery and each client project is managed in a bespoke manner.
Commitment - as an owner-managed, partner-led firm, we guarantee a high level of partner involvement. We take a long-term view to build trust and lasting relationships.

The size of our team and the deals we advise on make us the most active independent corporate finance house in the markets in which we operate.

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