BOSTON — Capstone Partners, a leading middle market investment banking firm, released its annual Industrials M&A Report, which shares insights into merger and acquisition activity, public market valuations and the macroeconomic climate, and provides an outlook for 2023 industry activity.
Consistent with the general economic outlook and overall public market performance, valuations and EBITDA multiples in industrial sectors for 2022 were a tale of two halves. To start the year, valuations remained steady at or near peak levels experienced in the tail end of 2021. However, multiples and average transaction values began to demonstrate weakness in Q1 of 2022. By the late summer, valuations were meaningfully depressed compared to the year before as interest rates began to rise and fears of a recession loomed. By the end of fall, valuations began to rebound as uncertainty around the economic environment began to subside.
Overall, the Industrials industry performed strong in 2022 relative to broader segments of the economy. EBITDA multiples for companies in the Dow Jones Industrial Average ended the year at 13.9x EV/EBITDA, while sectors such as technology, consumer and construction struggled to regain momentum throughout the year. Within industrials, certain sectors fared better than others. Those markets that are more impacted by rising interest rates, lower consumer spending, and the significant volatility in commodity prices in recent years experienced a sharper decline.
Capstone’s Industrials team anticipates continued M&A demand for quality companies operating in the industry.
