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Punching Out: 2023 Mid-Year North American PCB and EMS M&A Update

The M&A market for North American PCB and EMS companies was quite active in the first half of 2023.  In the PCB sector, our records show seven deals were completed in the first six months of 2023, compared to only five in all of 2022. In addition, two deals have been announced in July. In the EMS sector, eight deals were announced or completed, compared to 13 deals in all of 2022. One additional deal was announced in July.

The active M&A markets are a stark contrast to the overall M&A market, which is down significantly, compared to 2022. According to Bloomberg, global M&A in the first half of 2023 was $1.3 trillion, down from $2.2 trillion in H12022 and $2.6 trillion in H12021. The main factors for the slowdown in global M&A are higher interest rates and economic uncertainty. For the second half of 2023, North American deals may pick up as interest rates have stabilized, the U.S. economy continues to move forward at low growth levels, and buyers continue to hold plenty of cash.

Some of the notable PCB deals in North America were:

• APCT (Industrial Growth Partners) acquired Advanced Circuits (Compass Diversified) (February 2023)
• Ampel (IL) acquired Multilayer (Texas) (March 2023)
• APCT (IGP) Acquired San Diego PCB Design from Milwaukee Electronics (April 2023)
• Infinitum (TX) acquired Circuit Connect (New Hampshire) (April 2023)
• FTG (public, Canada) completed the acquisition of IMI (Massachusetts) (announced in November 2022, completed April 2023)
• FTG (public, Canada) completed the acquisition of Holaday Circuits (Minnesota) (announced in December 2022, completed April 2023)
• NCAB (Sweden, public) acquired Phase 3 Technologies (California, distributor) (May 2023)
• And two more deals have been announced in July:
• Technoprobe (Italy) acquired Harbor Electronics (California) (July 2023)
• Sunstone Circuits (Oregon) acquired by American Standard Circuits (Gemini Investors, Illinois, July 2023)

Some of the notable deals in the EMS sector were:

• Artaflex (Canada) acquired Custom Rapid Solutions (Canada)  (January 2023)
• Niche Electronics (Summit Equity Partners) acquired L-Tronics (Massachusetts) (January 2023)
• TJM Electronics (Pennsylvania) merged with ThermOmegaTech (February 2023)
• Lorom Holdings (China) acquired Segue Manufacturing (Massachusetts) (February 2023)
• Interconnect Solutions Company (Tide Rock Holdings) acquired Santa Ana division of MX Electronics (April 2023)
• East West Manufacturing (MSD Partners) acquired Eastprint Inc (April 2023)
• Incap (pubco Finland) acquired Pennatronics (Pennsylvania) (July 2023)

It is interesting that non-North American companies completed several of these deals, including the Lorom/Segue, Incap/Pennatronics, Technoprobe/Harbor, and NCAB/Phase 3 deals. During COVID, foreign buyers were naturally absent from the M&A markets. Many foreign buyers are interested in the large U.S. market and the trend toward re-shoring should help maintain a strong level of interest. The relatively strong dollar may continue to make acquisitions more expensive for non-U.S. companies, although that did not keep FTG (Canada) from making two acquisitions. Also, real or perceived anti-China sentiment may keep Chinese companies from doing deals, especially in the defense sector.

Most of the deals in 2023 have involved private equity-backed or publicly-traded buyers, and almost all were add-on deals. According to S&P Global, global private equity dry powder (raised capital that has not been invested) hit almost $2.5 trillion in July, up from $2.2 trillion at the end of 2022. Private equity-backed companies should continue to be a source of liquidity for company owners in the PCB and EMS sector.

Although several public companies were involved in North American deals in the first half of 2023, notably absent were any of the large public companies in the sector. Most likely, on the EMS side, companies were focused mostly on navigating the component crisis, material price increases, COVID, labor shortage, and other headaches in the industry. Put simply, instead of 1 + 1 = 3 in terms of M&A synergies; any acquisition would have just tripled their headaches. Perhaps once these issues have abated and there is more clarity on orders there will be a flood of big deals.

One trend that will most likely continue is the decline in the number of North American PCB and EMS companies, which has been going on for over 20 years. A few new PCB shops have been established in the last few years, however, it is a drop in the bucket compared to the number of shops that have been consolidated or closed. Due to demographics and a slow market growth rate, this trend is expected to continue. This will result in fewer companies in these sectors, but most of those that remain will be in a better position to invest, compete, and grow. For company owners, stay prepared for a good second half for the M&A markets in 2023.

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.