Top trends in M&A: increased deal activity, growth within A&D and automation

Despite the high levels of economic uncertainty in the first half of 2023, the Charles Aris Corporate Development Practice has seen a search volume that largely mirrors the first six months of 2022. That said, while certain industries within the corporate development space are actually seeing major upticks in M&A search volume, other industries have had a quieter handful of months.

With high interest rates, inflation and concern over the ability to forecast long-term earnings, the industrial manufacturing deal volume saw a downward trend for the first five months of 2023. However, this could be changing.

In the last two weeks, the Charles Aris Corporate Development Practice has kicked off more searches (six) than in the prior six weeks combined (five). Recent conversations with leading deal professionals and top private equity firms tell us there is growing optimism about the second half of 2023 for an increased amount of deal activity in this space.

Two areas to watch: A&D and automation

• Aerospace & Defense: As business and personal travel demand continues to rise, the commercial aerospace sector has started to heat up and there is a lot of M&A energy in this sub-industry. While there is still a lot of uncertainty about sustained growth in this space, there has certainly been an uptick in conversation about deal activity in the near future.
• Automation: While we’re seeing fewer traditional “heavy manufacturing” roll-ups, we are seeing a big push for corporate development talent in more highly engineered / automation-driven businesses across the spectrum of our private equity clients (from lower-middle market to work we’ve recently done with one of the largest and most reputable private equity firms in the world).

To conclude, the high-interest rates and challenges raising financing have certainly slowed private equity deal flow within certain industries in the first half of 2023. However, with growing pressure to deploy dry powder and monetize investments held beyond their typical holding period, there is reason to believe the second half of the year will see a return in activity for the diversified industrial space.