If you look at the market figures for the EMS industry for 2020, you can see that the European EMS industry grew by a total of over 31% in the previous seven years, or an average of 5.2% per year. In comparison, the electrical industry in Germany only grew by 17.3% (source ZVEI), or an average of 2.9% per year. EMS companies have therefore benefited disproportionately from the fact that OEMs have increasingly outsourced the production of their products to EMS service companies.

However, this is only the organic growth of the industry. If you look at individual companies, you can see that the large EMS companies in particular have grown significantly faster through acquisitions.

In the current coronavirus crisis, a relatively large number of companies are sensing the opportunity to grow inorganically through acquisitions. Even individual companies from the Far East are on the lookout for a bargain. There are plenty of problem companies whose independent survival is no longer guaranteed. Some of these companies are already insolvent and the insolvency administrator is now looking for a buyer. Many of these insolvency administrators are completely clueless and believe they can succeed if they are bold enough.

However, talks are stalling at many companies, as sellers are basing their purchase price on their results up to 2019, while prospective buyers are basing their offer on the current 2020 results. Sellers are ignoring the fact that a sudden return to previous times is not in sight and that the EMS industry has been undergoing a paradigm shift since 2019, or is growing up.

The many discussions in the M&A market will therefore only lead to deals if sellers wake up to a greater sense of reality. In this case, the motto is: “Better a bird in the hand than a pigeon on the roof.”