M&A activity in the PCB and EMS sectors in North America continues to be strong despite the COVID pandemic. According to our research, there were 23 M&A deals in the EMS sector in 2021 (compared to 24 in 2020) and 13 deals in the PCB sector (compared to nine in 2020).
Some of the positive trends for the M&A environment are the availability of capital for deals, low interest rates, a strong overall economy, the retirement age of many owners, and a general move toward reshoring. On the negative side, one of the biggest obstacles for EMS deals is the continuing headaches of the component shortage and labor shortage.
On the PCB side, one limiting factor is that there are fewer and fewer North American PCB shops to buy; our count is 175 companies, but frankly, probably only 150 are active, and of those, around 100 have less than $10 million in annual revenue. For many buyers who are PE-backed or based overseas, the field of potential targets is becoming more limited.
We expect that the actual number of deals is somewhat higher, but many deals among smaller shops are never announced and are hard to track.
Here are some of the significant M&A deals in the North American EMS sector in 2021:
- SMTC taken private by HIG Capital (January 2021)
- Spartronics (One Equity) acquired Primus (January 2021)
- East West Manufacturing (Heritage) acquired Varitron (Montreal, March 2021)
- Virtex (Insight) acquired Altron (March 2021)
- Intervala acquired Neotech’s business in Mason, Ohio (May 2021)
- Creation Technologies (Cerberus) acquired IEC Electronics (public) (August 2021)
- Compal Electronics (HQ = Taiwan) acquired CalComp’s US division in Indiana (August 2021)
- Volex (Public, UK) acquired Irvine Electronics (August 2021)
- Spartronics (One Equity Partners) acquired Inovar (September 2021)
- Creation Technologies (Lyndsey Goldberg) acquired Computrol (September 2021)
- Naprotek (Edgewater) acquired SemiGen (October 2021)
- SERO (Germany) acquired SyncronEMS (November 2021)
- Lacroix (France) acquired Firstronics (December 2021)
- CCK Automation acquired by Foxhole Group (December 2021)
- (Announced) Tempo/ACI/Whizz SPAC deal (December 2021)
- EmeraldEMS (owned by NewWater Capital) sold to Crestview (December 2021)
- And in the first week of 2022, East-West Manufacturing announced the acquisition of Compass Group Electronics’ TX and Mexico facilities. Both East-West and Compass are owned by PE firms.
It is noteworthy that several of the deals in the EMS sector were completed by European buyers such as Volex, Lacroix, and SERO; one was completed by Compal from Taiwan. Non-U.S. companies have not participated much in North American acquisitions for years, so there is plenty of pent-up demand for more deals. Also, private equity-related deals continue to be prominent. Interestingly, there were two take-private deals, Creation-IEC and SMTC-HIG. We suspect that there will be more take-private deals in the future due to the low public market multiples in the sector. On the other hand, the SPAC IPO proposed by Tempo Automation, Advanced Circuits, and Whizz Systems is an exciting development as well as a cross-over deal between EMS and PCBs.
Here are a few of the notable deals in the PCB sector in 2021:
- Lenthor acquired by Fralock (backed by Arsenal Capital) (May 2021)
- Summit (HCI) acquired Eagle Electronics (June 2021)
- American Standard Circuits acquired by Gemini Investors (July 2021)
- NCAB (Sweden) acquired RedBoard (PCB distributor September 2021)
- Summit Technologies acquired by Lyndsey Goldberg (September 2021)
- APCT acquired by Industrial Growth Partners (October 2021)
- Advantest (Japan) acquired R&D Altanova (Riverside) (October 2021)
Like previous periods, most of the PCB deals in 2021 involved private equity. Also, none of the deals involved U.S. public companies. However, there were two deals involving non-North American buyers, NCAB and Advantest. Just like the EMS sector, the capital available for the sector and the pent-up demand with foreign buyers should fuel more deals in the future.
Moving into 2022, we feel that the M&A activity for both sectors should continue to be strong. The EMS sector should continue to see a lot of private equity-driven consolidation. Hopefully, the component shortage will improve, which will allow owners who wish to retire to stop pulling their hair out and focus more on selling. The PCB sector will also see mostly PE-driven deals and perhaps more foreign and/or public company deals.
Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures.