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Manufacturing EBITDA & Valuation Multiples – 2024 Report

Business
Manufacturing Activity By Value And Ebitda

This report features average EBITDA and revenue multiples for private manufacturing companies in 2023. Our analysts sourced this data from private equity networks, third-party M&A databases, and interviews with M&A professionals between Q3 2022 – Q1 2024. (Sources)

The tables below break down manufacturing EBITDA and valuation multiples by company type and EBITDA/Revenue range.

Manufacturing EBITDA Multiples [Private Sector] Q3 2022 – Q1 2024 

Company Type  EBITDA Range
$1-3M $3-5M $5-10M
Aerospace 7.3x 9.2x 11x
Automotive 7.1x 8.8x 10.4x
Consumer Products 6.8x 8.2x 9x
Food & Beverage 8x 8.6x 9.3x
Industrial IoT 7.2x 9x 11.1x
Marine & Maritime 6.8x 8.3x 9.3x
Recycling & Waste Management 7.1x 9x 11x
Transportation & Logistics 7.2x 9.1x 10.3x

Manufacturing Revenue Multiples [Private Sector] Q3 2022 – Q1 2024

Company Type  Revenue Range
$3-5M $5-10M $10-50M
Aerospace 2.8x 3.6x 4.4x
Automotive 2.1x 3x 3.9x
Consumer Products 2.5x 3.2x 4.1x
Food & Beverage 2.6x 3.5x 4x
Industrial IoT 2.7x 3.8x 4.2x
Marine & Maritime 2x 3x 3.6x
Recycling & Waste Management 2.5x 3.7x 4.2x
Transportation & Logistics 2.6x 4x 4.6x

In the following sections, we explain how manufacturing companies were valued by acquirers. We also discuss the state of manufacturing M&A in 2024, identifying trends that our analysts believe will impact this M&A marketplace in the future.

How Manufacturing Companies are Valued 

Manufacturing is a capital intensive industry involving assets like factories, machinery, and equipment, which companies often take on debt to acquire. Thus, private manufacturing companies are typically valued using a multiple of EBITDA as well as a debt-to-EBITDA ratio to get a clear picture of cash flow. 

Manufacturing M&A Deals by Valuation Method (2024)

Chart (7)

As the graph above illustrates, a small percentage of deals were conducted using revenue/SDE multiples. These methods are often used to value manufacturing companies that are less capital intensive (e.g. 3D printing, small textile manufacturers). 

In addition to EBITDA and debt-to-EBITDA ratio, M&A buyers in the deals assessed also paid attention to specific performance metrics for manufacturing companies. Based on the data, we found that manufacturing companies were more likely to sell for higher multiples if they met the following benchmarks: 

M&A Metrics for Private Manufacturing Companies

Name  Equation Benchmark
Debt to EBITDA Ratio ≥3:1
Maintenance to Total Expenses Cost of repairing broken machinery over a period of time
vs
Total Expenses
15%-40%
Inventory Turnover Ratio Inventory Turnover Ratio E1688073999619 5:1 – 10:1
Return on Net Assets 5% – 20%+
Manufacturing Costs to Expenses Total cost of production
vs
Total Expenses
≥42%

Manufacturing company valuations also varied substantially based on the seller’s representation or lack thereof; companies that opted to run their own M&A process earned, on average, 31% less from their deal than companies that ran the same process through an M&A advisory firm or investment bank. 
Top Ma Firms In The Us 2024

The State of Manufacturing M&A in 2024

While the private sector manufacturing M&A market saw a substantial dip in 2022, the 2024 outlook is brighter. There was an ~8% increase in the valuation multiple offered by buyers, from 10.2x to 11x, from H1 2022 to H1 2023. The average deal value within the sector also rose substantially, more than doubling in 6 months. Based on this trajectory, our analysts predict average deal value to be three times what it was at the start of 2023 by Q2 2024. 

M&A Activity by Value & EBITDA Multiple

Chart (8)

When compared to 2022, which saw a decline in deal numbers from 754 to 661, 2023 saw a rise. 2023 deal numbers, which are still coming in as of Q1 2024, may even exceed the frothy numbers we saw in 2021. Observing that total deal value in 2023 was lower than it was in 2021, we can conclude that average deal size was lower in 2023 vs 2021 despite the number of deals being similar. 

Manufacturing M&A: Deal Numbers, 2019-2024 

Chart (9)

Despite the increases in # of deals and valuation multiples in 2023, manufacturing is in the middle of a longer downturn which started with the pandemic, in which output fell by 43%, according to the U.S. Bureau of Labor Statistics due to quarantines and subsequent supply chain disruptions. 

Given this context, our analysts made the following predictions for manufacturing M&A in the coming 12-24 months:

  • The manufacturing industry will continue to make modest increases in value and multiples: The current dip in deal value, volume, and multiples is largely due to economic uncertainty. As this uncertainty is resolved in the coming years, manufacturing will continue to see steady, albeit gradual, increases in all three. 
  • Data accuracy will equate to higher multiples: Buyers want to know how capital intensive a manufacturing business is, so it’s in sellers’ best interest to have this information readily available. Similarly, it’s important to be able to articulate, with numbers, where a business stands compared to its competitors.
  • Alternative deal types will be more common: The macroeconomic climate has made buyers in several industries uncertain about the prospect of traditional M&A activity, causing joint ventures and strategic partnerships to be more prevalent. Sellers willing to consider these options are likely to have an easier time selling for a higher multiple. 

Selling Your Manufacturing Company in 2024

The process of selling any business is overwhelming, but the myriad of logistical concerns surrounding manufacturing companies makes it especially daunting. For those seeking advice, I am happy to answer your questions as I’ve gone through this process several times before and am a big believer in transparency in M&A. You can reach me via the link below or through the contact page on this website.

Sources:

Evan Bailyn

Evan Bailyn is a best-selling author and award-winning speaker on the subjects of SEO and thought leadership. Contact Evan here.

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