Reshoring and the Impact on the Metals M&A Market in 2023
Metals manufacturing is seeing strong secular demand in major end markets and stands to be an important beneficiary of the reshoring movement—with significant growth accelerators for fabricators. Private equity funds are taking notice by driving a highly active metals M&A environment.
Domestic manufacturers have identified long global supply chains as a risk because of political uncertainty, intellectual property protection, erosion of comparative cost advantages, global health, and geopolitical tensions/risks. With increasingly similar manufacturing costs across countries, companies cannot afford to focus purely on costs and must consider the flexibility benefits of local production. As a result, construction of new manufacturing facilities in the U.S. has soared 116% over the past year, dwarfing the 10% gain on all building projects combined. Government incentives like the Inflation Reduction Act and CHIPS Act are also encouraging investment.
“We are witnessing the wholesale reexamination of supply chain relationships, which will realign global manufacturing for decades to come. With North American businesses accelerating reshoring and replacing some of their overseas suppliers with domestic alternatives, U.S. manufacturers are being presented with an unprecedented opportunity,” said Tony Uphoff, Thomas CEO. According to Thomas’ 2021 State of North American Manufacturing Annual Report, 83% of North American manufacturers are likely or extremely likely to reshore — up from 54% in March 2020. COVID accelerated the prioritization of reshoring, which can translate into significant economic benefits. According to the survey, if these manufacturers with plans to reshore bring on just one single-contract domestic supplier, the shift would drive as much as $443 billion in U.S. economic value. Uphoff continued, “The insights from this year’s State of North American Annual Report further underscore the need for increased investment in skilled labor and manufacturing technologies to ultimately improve the trade deficit and future-proof supply chains to protect against potential disruptions.”
The Reshoring Initiative expects reshoring will continue to be key to U.S. manufacturing and economic recovery. According to the 2021 Reshoring Initiative Data Report, the number of companies reporting new reshoring and foreign direct investment (FDI) by foreign companies that have shifted production sourcing from offshore to the U.S.) set a new record of over 1,800 companies. “We’re inundated with companies coming to us realizing that they need to reshore,” remarked Harry Moser, founder and president of the Reshoring Initiative. Reshoring and FDI set a new quarterly record in Q3 2022, with a projected 350,000 reshoring jobs announced for 2022, and if achieved, bringing total jobs announced since 2010 to over 1.6 million.
Results from a recent nationwide survey of CEOs conducted by Chief Executive, in partnership with the Indiana Economic Development Corporation (IDEC), support the reshoring trend:
- 58% of CEOs whose companies have had recent operations outside of the U.S. are now considering reshoring, with 18% pondering the repatriation of three-quarters or more of their operations
- 72% of respondents said they’re planning to fully reshore operations within three years
- 74% said the decisions to reshore had taken shape in the last three years
Looking for a more in-depth analysis of M&A activity in the metals market? We invite you to review the full 22-page Metals industry Insider Report compiled by the Metals investment banking team at BGL.
If you are interested in discussing the impact reshoring is having on the metals industry and how it may impact your future strategic planning, please contact us using the form provided below. Our Metals and Metals Processing team welcomes the opportunity to learn how we can assist you in navigating today’s M&A climate and maximizing your strategic objectives.