CHICAGO – In the third quarter of 2019, large-tier EMS providers’ revenue increased 5.4% year-over-year, compared to an increase of 8.1% in the third quarter of 2018, says Lincoln International. Mid-tier EMS providers’ revenue was up 1.9% in the third quarter, compared to 9% in the third quarter of 2018. Small-tier EMS providers experienced the largest growth, representing 11.6%, versus 9.6% in the third quarter of 2018.
EMS industry revenue increased 18% in 2018, compared to a 10.7% increase in 2017.
During the third quarter, there were six EMS transactions, consistent with the six recorded in the same period of 2018, as well as six transactions in the prior quarter, according to Lincoln. EMS consolidations accounted for two transactions in the third quarter of 2019, or 33.3% of total activity, consistent with the second quarter of 2019.
Private equity investments accounted for two transactions, representing 33.3% of total activity, slightly less than the previous quarter, despite the overall number of transactions remaining the same. The seven private equity transactions in 2019 through the third quarter, compared to the four private equity transactions during the same period in 2018, highlight the trend Lincoln is witnessing of increased private equity interest in growing platforms in the EMS space.
During the third quarter, two transactions were categorized as a vertical/horizontal convergence. There were no OEM or EMS divestitures, nor were there any transactions categorized as diversification into EMS for the period.
In terms of geography, the US/Canada had two transactions, and Europe completed four transactions, representing 33.3% and 66.6% of total transaction activity, respectively.
In terms of transaction size, small-tier EMS providers accounted for 90%, and mid-tier EMS providers accounted for 10% of the transaction volume.
The communications segment is expected to exhibit the most significant growth within the EMS industry over the next five years, with a CAGR of 9.2% from 2018 to 2023. The automotive and computer segments are also expected to show strong growth, with CAGRs of 8.4% and 7.9%, respectively, over the next five years. Also anticipating strong growth are the medical and industrial segments, with expected CAGRs of 6.2% and 5.9%, respectively, through 2023. Overall, the global EMS market is expected to grow 7.5% annually from a $430 billion market in 2018 to a $617+ billion market in 2023.
The EMS IoT market is expected to explode over the next five years almost quadrupling in size, according to the research firm. The ongoing focus of data communication, data transfer and data analysis across the network in real time will only drive additional applications in this space and further growth.