© dana-rothstein-dreamstime.com Electronics Production | July 25, 2013
Modest increase in EMS transaction activity
Data on the first quarter GDP growth rate in the US is consistent with the weak manufacturing activity from the first half of 2013.
Despite this, the outlook for the second half of 2013 remains positive. Positive growth signs are reflected in supply chain sales and US new orders for electronic products. Industry revenue for outsourced manufacturing is expected to grow 4.5% to USD 404.5 billion. After stagnating EMS revenues in 2012 and 2013 due to the general recovery from the economic crisis, modest growth is expected in the period 2014 to 2016. The regions of CEE and North Africa are expected to outperform Western Europe. Due to slacking demand from the developed world, resulting from years of overspending in the private and public sector, emerging markets are EMS companies’ best hope for growth. The increase in the usage of electronics in the medical industry is an important source for growth in the electronic manufacturing service industry. The market generated 16 billion of revenue in 2012, a figure that is expected to have an 11% compound annual growth rate to 2019. Valuations of the EMS Peer Group maintained their level during the second quarter 2013 and levelled off at nearly 6.0x EBITDA, or 0.35x revenues. Markets deliver strong signs of stable growth across all indices . The MPCF EMS performs slightly below the major indices during the first half year 2013. Raw material prices have been falling over the last 6 months. While aluminium am copper reported smaller price decreases, nickel and tin experienced more significant price deteriorations. The continued economic and credit market improvements, combined with the general market need to deploy cash, is driving international M&A reports. Moving forward, strategic deals are expected to remain high, due to further consolidating industries and the need to diversify service portfolio into adjacent areas (engineering, human interface solutions, mechatronic services). The largest transaction was the acquisition of Nypro, Inc. by Jabil Circuit Inc. with a transaction value of € 491 million. M&A activity is expected to increase again, as rallies in stocks and bonds in the first half year of 2013 compensate for a prolonged euro-zone recession. Government actions, such as quantitative easing (QE) or bond-buying measures designed to boost economic growth have boosted the availability of capital , which should encourage cash-rich companies to pursue deals.
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