As the coronavirus crisis unfolds, its impact on the engineering sector is becoming increasingly clear. While there has been significant short-term disruption as firms move to remote working, the levels of activity and, importantly, longer-term confidence remains high. Many commodity prices are holding up reasonably well, and there is a growing consensus that Governments around the world will increase infrastructure spending as a means to stimulate economic activity.

 

Engineering Firms Remain Steadfast

Many of the engineering companies that we have been speaking to are reporting stronger than expected revenue. Remote working is proving effective, and Governments, miners, and other asset owners are pushing ahead with investment programmes. Some companies are even forecasting record profitability during this period.

Despite this, the crisis has impacted how owners of small to medium-sized businesses view their strategic options. From discussions, many are increasingly seeing the option of joining up with a larger player as a way to manage risk and balance wider life priorities. As a result, new, highly valuable businesses may now be open to discussions.

M&A Activity Integral for Growth

The large public engineering groups have, up to now, been taking a more cautious approach, with many pausing all M&A discussions as they seek to understand the implications of the crisis on their businesses. Will Governments cut capital budgets? What does this mean for cashflow? Will retrenchments be required?

However, given the positive messages coming from the sector, our view is that the global engineering groups will restart their M&A activities. M&A remains an integral part of their growth strategy, particularly now as it allows them to position their firms for a post-corona world and recoup any budget shortfalls resulting from the crisis.

Fair Pricing To Influence the Quality of Deals

While it is true that some acquirers will be looking for ‘bargains’, particularly with publicly listed targets, our view is that ‘fair’ pricing will predominate with the major groups paying for quality companies. Any short-term impact on profitability is likely to be explainable and increasingly normalised away as the impact of the virus on the economy is better understood.

There is no question that the coronavirus will continue to disrupt the economy. However, we believe that the engineering sector will fare better than most and will result in transaction opportunities for both buyers and sellers.

 

If you would like to discuss your plans for your Engineering firm, we are offering a one-hour complimentary call with any of our experts. You may book a call here.


Roger Collins Woolcock

罗杰·柯林斯 - 伍尔沃克
总监

作为伊顿咨询的总监,罗杰专注于并购交易项目,尤其是工程、规划、景观设计和数量测量等专业服务。 在其30年的职业生涯中,罗杰的大部分时间献给了澳大利亚证券交易所上市公司Cardno;在公司里他担任了澳大利亚和新西兰地区的总经理,管理着旗下2000位职员。

[email protected]
Ph: +61 412 778 807

Mark Goodwin is the Managing Principal of Eaton Square’s Engineering Practice. He brings extensive M&A experience having led a large number of successful transactions in Australia, Asia, UK and the US. Over the last 15 years, Mark has led transactions both as an advisor with KPMG and Ernst & Young, and as head of the in-house M&A team at Clough Limited.

[email protected] +61 1800 332 866 eatonsq.com