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Improving Economy Drives EMS M&A Activity in Q1
May 13, 2011 |Estimated reading time: 1 minute
There were 11 completed transactions in Q1 2011. As displayed in Chart A, the 11 transactions are on par with the M&A activity from the last quarter as the industry is still exhibiting higher transaction activity as compared to 2009. The continued economic and credit market improvements combined with the general market need to deploy cash is driving further M&A.
As shown in Chart B, both EMS consolidation and private equity investment represented four transactions each, or 36% of total activity in Q1 2011, respectively. While EMS consolidations remained relatively steady this number of private equity investment transactions is double the amount exhibited in either of the previous two quarters. This highlights the current focus of private equity firms to deploy capital and a renewed desire to invest in the EMS industry. There were two vertical/horizontal convergences in Q1 2011 down from three transactions in Q4 2010. While the level of vertical/horizontal convergences was down for the quarter there still seems to be motivation within the industry to acquire outside of the “pure play” EMS model with companies looking to improve margins through a more diversified business portfolio. There was also one EMS divestiture in Q1 2011, which is equivalent to the level exhibited in Q4 2010.
As illustrated in Chart C, six transactions occurred within the U.S. and Canada in Q1 2011, or 55% of total transactions. This also highlights the trend of continued increasing M&A activity in the U.S. and Canada since this same time last year. There were three European deals, equivalent to the level exhibited in each of the last two quarters. There were also two cross-border transactions for this quarter, which is the highest amount for the industry in over two years.
As shown in Chart D, transactions by size for the quarter were led by the Small Tier, totaling nine, or 82% of all transactions. There was one transaction in each of the Large and Mid Tiers, or approximately 9% of the total, respectively.
For the full report, click here.