Industrial companies have historically looked to M&A for growth and value creation, and they have undertaken multiple deals over the past decade. Many have taken a programmatic approach to M&A, conducting several deals as part of a systematic M&A program sustained throughout economic cycles.
We regard programmatic M&A as a tried-and-true technique for creating surplus value over numerous time horizons across industrial enterprises. During industry-consolidation cycles (vertical or horizontal), large-deal strategies with strong underlying industrial logic have outperformed, but execution and integration rigour become key.
- We predict that many industrial companies will find M&A crucial to their quests for value creation as they rethink their growth strategy for the post-pandemic environment. To cut fixed costs, acquire competitive scale, boost downturn resilience, and strengthen supply chains, companies will combine at the OEM and supply-chain levels.
- Companies will exit noncore enterprises and underperforming geographic areas as they focus on the strategic assets in their portfolios. They’ll diversify into new goods based on their core competencies, relying more heavily on autonomous processes and electrification. Maintenance and other services will be provided by businesses (such as mobility as a service and fleet management). They’ll work in the maintenance, repair, and operations, as well as the aftermarket and parts industries.
- Companies will use data analytics to enhance the consumer experience and provide value-added services. They’ll also take advantage of next-generation software, telematics, and digital capabilities to better their products and operations. Artificial intelligence and machine learning, the IIoT, and the future of mobility will all be appealing market segments for companies to invest in early. Businesses will restructure their supplier chains (for example, through onshoring and export control).