Does it seem like there have been a lot of EMS deals in North American in the past 12 months (June 2019 to May 2020)? From our count, there have been at least 21 deals in the general EMS space (PCB assembly, EMS, etc.) in North America during this time. There have also been five PCB (bareboard manufacturing and distribution) deals that we know of. Most likely, there have been at least 10 EMS and 4–5 PCB smaller deals that we have not heard of, and there are plenty more in the works. Also, there have been a few deals completed in the past 12 months that were not announced publicly, but we know about them because we were involved in some capacity.
The primary reasons for owners to sell have been for retirement. A few were for growth capital, and a few were in distressed situations. The primary reasons for buyers to acquire companies has been geographical expansion, capacity expansion, capability growth, consolidation/synergies, and general revenue growth.
Private equity continues to be a major driver of M&A deals in these sectors. Of the 21 EMS deals, 11 were related to private equity. Of the five PCB deals, just one was PE-related, and three involved public companies. Public companies have been mostly quiet in the EMS sector for a few years, perhaps an indication that a few mega-mergers are about to happen or that those companies will expand into other segments of electronics or services.
Although 26 deals in total in 12 months sounds like a lot, by our count, there were a similar number of deals in the previous 12-month period. For the year-earlier period of June 2018 to May 2019, there were 26 deals—19 in the EMS space and 7 in PCBs.
Some of the more notable deals in the past 12 months were:
- Lindsay Goldberg (private equity firm) acquired Creation Technologies in July 2019, and Creation acquired ATS (May 2020)
- Zentech acquired Trilogy and Camtek (Zentech itself was acquired by PE firm BlackBern from NewSpring Capital May 2019)
- Prime Technologies acquired two CMs, I Technical Services (February 2020) and TeligentEMS (January 2020)
- Bestronics and DataED were acquired by PE group New Water Capital (September 2019)
- SigmaTron International merger with Wagz (June 2020 announced)
On the PCB side, some of the more notable deals in this timeframe included:
- TTM acquired certain PCB assets of i3 Electronics (June 2019)
- Angeles Equity acquired APCT from Saugatuck Capital (June 2019)
- FTG acquired Colonial Circuits (July 2019)
- NCAB acquired BBG (April 2020)
Although the COVID-19 disruption will most likely slow down or sideline a lot of deals, there is a substantial amount of activity at the moment. Many owners are still considering retirement, and both private equity-backed and public companies still have a lot of cash on hand for deals. Interest rates are very low, although banks are certainly quite wary of sellers’ forecasts. In good times and bad, there are always a fair number of distressed deals, and as the virus situation and subsequent economic disruption continue, there may be more distressed deals coming up.
Our firm predicts that the number of North American EMS and PCB deals will jump once the U.S. economy opens up more fully. Despite the disruption in the economy due to COVID-19, there is a lot of M&A activity in these sectors. There are at least 600–700 PCB assembly companies and around 190 PCB fabricators in North America all facing pressure to consolidate for a variety of reasons. Those pressures include a lack of overall sales growth, increased need for technology, difficulty in finding qualified employees, and a lack of available expansion capital for smaller companies. Between the release of deals that are on the back burner, the current activity, and the coming rush of distressed deals, the next 12 months should be very busy.
Tom Kastner is the president of GP Ventures, an M&A advisory services firm focused on the tech and electronics industries. He is a registered representative of StillPoint Capital, LLC—a Tampa, Florida member of FINRA and SIPC—and securities transactions are conducted through it. StillPoint Capital is not affiliated with GP Ventures.