CHICAGO – Despite economic pressures, the EMS industry demonstrated increased deal activity and resilience during the fourth quarter of 2022, and the year as a whole saw one fewer transaction than in 2021, according to data gathered by Lincoln International. 

The 12 EMS transactions in the fourth quarter is the highest number within a quarter since the first quarter of 2014, and the 34 total EMS transactions recorded in 2022 is the second highest on a yearly basis since 2010, behind 2021’s 35 recorded transactions.

In terms of transaction types, 2022 showed more diversification than 2021, with more companies pursuing vertical/horizontal and divestiture strategies. EMS consolidations were the most common type of transaction with 21 in 2022, or 62% of total activity.

In 2022, there were six vertical/horizontal convergences, a 50% increase from the four recorded in 2021. This represented 18% of the total transactions in 2022 and was a much higher percentage of the total than in 2021.

Private equity investments accounted for four transactions in 2022, representing a similar number of investments than those recorded for 2021. This type of transaction represented 12% of the total transactions for 2022, which is approximately the same percentage mix of the total for 2021.

There was one EMS divestiture during 2022, which is an increase from the zero recorded in 2021. There were two transactions categorized as diversification into EMS during 2022, which is consistent with the two transactions (6% of total activity) in this category for 2021. There were no original equipment manufacturer (OEM) divestitures in 2022.

In terms of geography, 10 of the transactions were completed in North America – representing 29% of total transaction activity in 2022. In Europe, 16 transactions were completed in 2022, representing 47% of total activity. There were three transactions recorded within Asia in 2022, and three cross-border (High/High) transactions and two cross-border (High/Low) transactions were recorded in 2022, representing 9% and 6% of total transaction activity respectively.

Small tier (below $300 million) EMS providers accounted for 62% of the 2022 transaction volume with 21 acquisitions. Mid tier ($300 million to $3 billion) providers accounted for 10 acquisitions, representing approximately 29% of total activity and a large increase compared to the four transactions recorded in 2021. Large tier (greater than $3 billion) EMS providers accounted for three transactions, a slight increase from the two transactions in 2021.

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