The recent softening in some developed economies and a slowdown in China and India have created challenges for companies to pursue strategic investments within the EMS sector, writes analytics firm Lincoln International.

EMS consolidations represented two transactions, or 50% of total activity in Q2 2012, down from five in Q1 2012. There were two transactions classified as vertical / horizontal convergences in Q2 2012, unchanged from the previous quarter.

"The continued high level of EMS consolidations and vertical/horizontal convergences suggests electronics companies remain focused on using available cash to build on their core competencies and expand their overall business portfolio."

One transaction occurred within the U.S. / Canada in Q2 2012, or 25% of total transactions, representing a decrease from four transactions in the U.S. / Canada in the previous quarter. There were two European deals, up from zero in Q1 2012. There was a cross-border transaction between high and low cost regions (China and Canada), down from two in this classification during Q1 2012.

Transactions by size for the quarter were divided evenly between the Mid Tier and Small Tier. Flextronics’ acquisition of Stellar Microelectronics, which closed in Q2 2012, was announced and included in the previous quarter. As a result, there were no Large Tier acquisitions in Q2 2012.