The latest report from PwC reveals that the Industrials and Services (I&S) sector is not affected by market fluctuations, especially through the increase in M&A activities. This is so because this trend is caused by various factors, including the use of M&A as a strategic tool for portfolio rebalancing and technology acquisition.
On the one hand, I&S companies are likely to undertake a detailed scrutiny of their asset base. The non-strategic businesses are being sold to free up capital which can be utilized in areas that offer a better return on investment. This has created a need for innovation and is also unearthing internal shortcomings in terms of technological integration within the portfolio.
In order to overcome these capability gaps and be ready for the disruption that is imminent in the industry, I&S companies are now leaning towards M&A in order to develop new technologies like AI and automation. It enables them to close these gaps quickly and advance their digital transformations effectively.
In addition, the trend of industry consolidation is gradually becoming another major motive for I&S M&A. New patterns of business attraction are emerging where smaller companies, which may be more vulnerable to macro or microeconomic conditions, are becoming acquisition candidates. It also facilitates the acquisition of new technologies and capabilities by the larger players hence improving their market standings.
