Last year turned out to be a fairly slow year for mergers and acquisitions (M&A) in the North American PCB and EMS sectors. We counted just seven completed or announced deals in the PCB sector last year, compared to 13 in 2021, nine in 2020, and eight in 2019. Firan Technology Group announced two of 2022’s seven deals with a 2023 target for completion for both. On the EMS side, only 13 deals were completed in 2022, down from 24 in 2021, 24 in 2020, and 23 in 2019.
Some of 2022’s most notable deals included:
- Summit Interconnect acquired both Royal Circuits (PCBs) and Advanced Assembly (EMS)
- Ampel acquired two PCB companies: U.S. Circuit and Rocky Mountain Circuits
- Firan Technology Group announced two PCB deals: the acquisitions of IMI and Holaday Circuits
- CCK Automation, owned by PE firm Foxhole Group, acquired two EMS companies: OSDA and Argo EMS
- East-West Manufacturing acquired Compass Electronics’ Mexico and Texas operations and was itself then acquired by PE firm MSD Partners (“M” as in “Michael,” and “D” as in “Dell Computers”)
- Naprotek, owned by PE firm Edgewater Capital Partners, acquired two EMS companies: NexLogic and Microfab
- Katek (Sweden) acquired EMS company SigmaPoint Technologies (Canada)
- Zollner (Germany) acquired the EMS division of EIT
- Intervala acquired EMS company EPE
- American Pacific Group (PE) acquired EMS company Concisys
One notable transaction was Tempo Automation’s IPO, which was the first IPO in the PCB sector in quite some time. The merger of APCT and Advanced Circuits was also announced this month with an expected close date sometime in February 2023. Both APCT and Advanced Circuits are owned by PE firms.
As in previous years, private equity was a major player in M&A in 2022, and this trend is expected to continue in 2023. PE firms raise a tremendous amount of capital, which they can continually deploy as long as U.S. citizens keep saving, investing, and donating money to university endowments.
European companies continued to make acquisitions in the U.S. per the Katek and Zollner deals. With the dollar gaining strength in 2022, whether European companies will continue to make acquisitions in the U.S. remains to be seen. Asian companies have been notably absent from the list for years, likely due to the fallout from COVID-19 as well as real or perceived anti-China investment/security policies. I believe Asian companies are very interested in making acquisitions in the U.S., so perhaps 2023 will be a rebound year for Asian acquisitions.
In line with the past few years, larger international players in the PCB and EMS markets like Foxconn, Sanmina, Jabil, etc., have not been involved in deals in North America. I expect them to be active at some point, but for now, they probably have their hands full with COVID, component shortages, labor shortages, material price increases, and other headwinds.
A limiting factor in the number of North American PCB deals, though, is simply the declining number of PCB shops in this region. In other words, there are just not many shops available to acquire. Our database puts the total at about 170 PCB manufacturers in North America, but the true number is probably closer to 150. Of these, about 120 have revenues under $10 million. Five to 10 acquisitions will probably still be announced per year with an equal number of deals under the radar. There may be a few greenfield announcements as well, but nowhere near the amount necessary to replace the number of shops that have been acquired and/or have closed. The number of PCB companies in North America will probably drop to around 50 over the next 10 to 20 years, but on the bright side, these remaining shops will be larger and will have the capital to invest in new technology.
On the EMS side, the decline in deals in 2022 was probably due to the multiple headaches currently plaguing EMS owners. If the component shortage and other contributing factors ease up in 2023, maybe we will see the deal count climb back to the 20+ level. Unlike in the PCB sector, there are still a sizeable number of EMS companies in North America; the total is estimated to be around 800 to 1,100 companies, so there are plenty of targets available. Plus, many EMS companies will branch out into wire harness/cable assembly, design, plastics, machining, or other aspects of contract manufacturing, which helps increase their longevity in the market.
Remember: A good buyer could come calling at any time, so it’s important to be prepared. Last year may have been a slow year for M&A, but if you’re an owner who is thinking of selling in 2023, preparing yourself and getting your affairs in order is an important first step in the process.
Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures.