Punching Out! 2021 Mid-Year PCB/EMS M&A Update


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M&A activity is booming in the U.S. as the nation emerges from the COVID pandemic. Thanks to video conferencing and adjustments in procedures, M&A was also pretty busy in 2020. Now that the economy has opened and everyone is traveling, more deals are being discussed.

The tailwinds for increased activity are certainly present. Many private owners in the PCB and EMS industries are of retirement age, and the possibility of increased capital gains taxes is making them anxious. There is a tremendous amount of capital available for deals, whether held by private equity firms and public companies (including SPACs), or in the form of low interest rates and SBA loans. As the U.S. economic stimulus programs start to wind down, many owners are turning their attention to their exit plans.

The EMS industry continues to do well. The IPC reported that book-to-bill ratio is at 1.48 as of June. Many firms have very large backlogs, partially due to a recovering economy and partially due to the on-going component shortage. The component shortage has also led to an increase in inventory-on-hand for most EMS companies. The pursuant increase in working capital can make deals a little more complicated, but increased financial performance helps to smooth out any deal issues. If the stew tastes good, you don’t mind how many potatoes you had to put into it.

Other issues facing manufacturers are labor shortages, wage increases, job hopping, and material price increases. These are all symptoms of a good economy, but they are all exacerbated by the effects of COVID on the international economy. It would be great if this situation could be rectified soon, but it seems like this will go on for a while. At least, most owners we talk to do not think it is getting worse.

Most PCB and EMS manufacturers are seeing some benefits of re-shoring and/or a focus on made-in-America products. The U.S. focus on strengthening the semiconductor supply chain as well as the proposed infrastructure bill could provide strong market demand for years to come. Although many in the M&A industry thought that we would see a wave of distressed deals, that has not occurred. As long as the industry is doing well, the economy continues to recover, and capital is available, we think that the overall environment for M&A will continue to be strong.

One situation that we have seen emerge is the lack of strong buyers for sub-$10 million revenue companies. Many of these are too small for most public or PE-owned buyers, but too large for individuals or teams of industry executives.  For most large or international buyers, the amount of effort and expense to acquire a $10 million revenue company is similar to the amount needed to acquire a $50–$100 million company, so they do not have much interest in acquiring smaller companies. The SBA has stepped into this gap by providing low-cost loans for acquisition with generous terms, but there are only so many buyers who can take advantage of these opportunities. As the M&A market and the economy return to somewhat more normal conditions, the market for smaller companies may improve, but that will take time.

Here are some of the deals so far in the North American EMS sector in 2021: 

  • SMTC taken private by HIG Capital (Jan 2021)
  • Spartronics (One Equity) acquired Primus (Jan 2021)
  • East West Manufacturing (Heritage) acquired Varitron (Montreal, March 2021)
  • Virtex (Insight) acquired Altron (March 2021)
  • Intervala acquired Neotech’s business in Mason, OH (May 2021)
  • Silicon Forest, ESAM, and Bay Computer Associates merged, backed by VergePoint Capital (May 2021)
  • Angeles Partners acquired Primus Aerospace (June 2021)
  • ACDi acquired Enhanced Manufacturing Solutions (July 2021)

And a few deals in the PCB sector:

  • 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)
  • Royal Circuit Solutions acquired South Coast Circuits (August 2021)

It is notable that most of the deals so far in 2021 have involved private equity, and there have been no deals among public companies or international (non-North American) companies. We feel that consolidation will continue in both the PCB and EMS industries; there have been very few new shops established for years. Also, there will most likely be more deals involving public and international companies, but perhaps they will be more interested in expanding into new product areas in electronics rather than doubling down in the same sector. We expect the rest of 2021 to be very active in the world of PCB and EMS M&A. 

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. 

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