Manufacturing M&A rebounds despite economic challenges
After several difficult years, the number of deals in the UK M&A market has accelerated. The manufacturing sector in particular enjoyed a year of solid investment – with major infrastructural projects driving interest in the second half of 2025.
UK manufacturing M&A activity grew by 11% in 2024, rebounding to levels last recorded in 2022, according to BDO’s Manufacturing Deals Review. The report found that 782 UK manufacturing deals were completed in 2024, up from 707 deals reported in 2023.
Amid the uncertainty of an election year, analysis found that deal activity slowed somewhat in the first half of 2024, but gained momentum following the Autumn Budget. In total, 475 deals were completed in the latter six months. Driving forces behind the trend included an urgency for deal completions, in view of anticipated changes to Capital Gains Tax and Business Asset Disposal Relief.
With a number of landmark infrastructure changes on the horizon – most notably the UK Government’s determination to fast-track data centre creation across the UK – there was plenty of demand for those looking to offload their assets. Businesses in the engineering services subsector were the most prolific deal doers seeing a 26% increase in activity and representing almost a third (32%) of all completed transactions for the year. This was followed by businesses in the packaging & materials sector which saw deal volumes increased by 18%, and accounting for 11% of all completed transactions.
The figures will make encouraging reading for a sector which has been grappling with rising costs, labour shortages and geopolitical tensions. However, despite this buoyancy, the sector is not without its challenges as businesses look to implement the rises to employer’s NI costs and minimum wage levels and prepare for the proposed employment law changes. As a result, separate research from BDO and Make UK revealed that 26% of UK manufacturing business are considering a sale of all or part of their business within the next two years.
Roger Buckley, UK industrials M&A partner at BDO, commented, “Last year proved to be a busy year for manufacturing deals but upcoming policy changes are now weighing heavily on business confidence, recruitment plans and growth intentions. Many businesses will be hoping for a boost in sentiment when the Industrial Strategy is announced later this year.”
Looking ahead, Buckley added BDO expected another solid year of M&A activity for 2025, with valuations holding firm. As “there remains a large cohort of cash-rich investors who believe in the long-term prospects and broad opportunities for growth within the sector”, however, he added that to make the most of that, those businesses “now need government to offer incentives that will support their investment in new technologies and onshoring or reshoring operations.”
