United States

Business products and services industry is manufacturing a comeback

2Q 2015 Business Products and Services Industry Spotlight

INSIGHT ARTICLE  | 

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The U.S. business products and services (B2B) industry is in an in-between period. Lower energy prices are cushioning bottom lines and revenues continue to grow, but momentum has slowed. Manufacturing is showing signs of fragility, and some wonder whether B2B could withstand a major macro or geopolitical event. Barring an imminent shock to the system, the B2B sector is still grappling with the aftershocks of the financial crisis. Future growth will come from companies that can adopt new methods of organization and adapt to the changing landscape. Companies need to rely less on costlier brick-and-mortar assets and instead optimize their online strategies, which require marketing efforts.

Although M&A activity in the first quarter was a slightly stronger than expected, high multiples continue to plague the B2B industry and could derail future activity if they don’t subside. Due diligence is heightened today, as companies seek out detailed assessments and more granularity around their deals. Broken deals remain an integral part of the landscape, often because of valuations, but also due to a lack of seller preparation.

Private equity (PE) deal flow remained robust in the first quarter, though total value continues to drop on a quarterly basis. $30 billion was invested in U.S. B2B in the first quarter through 302 transactions; both figures are down from Q4 2014 and Q1 2014 levels.

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