M&A Activity: Keep Your Eye on the Ball

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M&A activity is on the rise and shows no indication of slowing down, even if interest rates climb. In the past two years, there were more than 45 deals. Where does your company fit in? In this interview with Dan Beaulieu, M&A expert Tom Kastner breaks down the market and who benefits most when it comes to buyers, sellers, and where you live.

Dan Beaulieu: Tom, please tell us a little about yourself and your company. 

Tom Kastner: My firm, GP Ventures, is focused on M&A advisory services for tech and electronics companies. I started the firm in 2008. My background is in the PCB and electronics industries, having worked for Hakuto, a manufacturer of cut-sheet laminators. I worked for them in both operations and strategic investments. GP Ventures now has five people—four in Chicago and one in Japan. We work on both sell-side and buy-side projects.

Beaulieu: Tell me about some of the deals you have done in our industry.

Kastner: I have completed over 10 deals in both the PCB and the EMS industries. We are currently working on several sell-side and buy-side deals at the moment.

Beaulieu: What do you see right now when it comes to M&A activity in North America? Why is there so much action?

Kastner: There is a lot of activity in the sector. I believe the main reasons are 1) an abundance of capital available for deals; 2) low interest rates; 3) the average age of owners is at or above retirement; 4) buyer confidence in manufacturing in the U.S. due to reshoring and government policies. This is a lot of activity, especially considering the COVID pandemic and travel restrictions.

According to our records, in North America there were 13 PCB deals in 2021 and nine in 2020. For the EMS sector, there were 24 deals in both 2021 and 2020. I think that the number of deals in the PCB sector will be around the same in 2022; there would be more, but there are fewer and fewer shops to buy. In the EMS sector, I expect the number of deals to be above 30.

Beaulieu: Is there interest in other countries buying in North America? Asian or European companies?

Kastner: Yes, we are seeing a lot of interest from European companies. Not so much from Asian companies yet, mostly due to COVID.  

Beaulieu: How does the current legislation in Congress, which seems to be targeting semiconductor manufacturing, affect the PCB fab and EMS providers? How might governmental investment into our market change the M&A landscape?

Kastner: I've heard from a lot of buyers that they are bullish on the current direction of U.S. manufacturing. My feeling is that if even a small portion of the market comes back to the U.S., that would be a big lift to U.S. manufacturers. As long as the pending legislation and policy changes encourage investment, it would be a positive for both U.S. manufacturers and M&A activity.

To read this entire conversation, which appeared in the March 2022 issue of SMT007 Magazine, click here.

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