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Q4 2017 Business Products and Services Industry Spotlight

INSIGHT ARTICLE  | 

Spotlight

B2B's Digital Revolution

Technology and manufacturing are converging at a rapid rate. General Electric, for example, is no longer a manufacturing company, nor is Tesla a pure tech company. General Electric launched FirstBuild, a digitally enabled network, in 2014, and it has become the home for a global community of innovators to prototype, iterate and refine existing GE products as well as surface new designs. Tesla, meanwhile, considered an archetypal Silicon Valley company, recently acquired an automated manufacturing equipment provider, Perbix, founded all the way back in 1976. The deal was made to help Tesla boost its yield rates for its Model 3 vehicle line, which is struggling with production capacity.

Key findings

  • PE investors increased their focus on SaaS and digitally focused services business in 2017, as B2B continues to shift its attention to tech advances in the sector
  • Private equity has played a larger role in M&A more generally, largely due to a downswing in strategic acquisitions since early 2016
  • Global B2B purchase price multiples were more modest last year, and global businesses that are reasonably priced with their growth trajectories are garnering attention from PE funds
  • Barring any major macroeconomic or geopolitical developments, expect multiples and buy-side activity to stay consistent

Looking ahead

Global growth is expected to be strong in 2018, and a relatively weaker dollar should help the manufacturing sector this year, as well. Any improvements in GDP should also positively impact US manufacturing production, which has shown modest increases in recent months. Investors are expected to be active again this year. PE firms are picking up where they left off in 2017, and B2B companies large and small are recognizing the imperative embracing of technological advances. We expect strength across the sector, with particular focus on acquisitions that help accelerate innovation.

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