Article - September 11, 2024
Industrials: Long-Term Dynamics Drive Investment Opportunity
Despite macroeconomic uncertainty and pockets of softness, the industrial market’s strong fundamentals remain intact. Due to several long-term tailwinds, high-quality industrials businesses continue to drive growth and capture strategic buyer and investor attention.
Below, our senior professionals share the trends generating industrials M&A activity and recent Harris Williams engagements that illustrate the opportunity.
Homefield Advantage
With the settling of global supply chain disruptions, companies are now looking to optimize their manufacturing footprints, lower costs, and guarantee safe and on-time delivery of goods. As a result, substantial onshoring and nearshoring initiatives are creating a wide range of investment opportunities.
Industrial and commercial construction, for instance, is poised for a boost with companies building, expanding, and refurbishing more manufacturing facilities in or near the U.S. This will cause greater demand for building materials as well as various engineered equipment, products, and components that are necessary for the operation of these facilities.
In addition, as more onshore and nearshore commercial factories are built, more labor will be required to run them. In turn, residential and light-commercial construction will be needed to support housing, office space, retail locations, and related infrastructure such as roads, bridges, and public transit. These onshoring demand shocks will also eventually lead to steady maintenance, repair, and operations opportunities throughout this expanded building products landscape.
Within chemicals and specialty materials, sourcing issues disproportionally impacted the segment due to the worldwide complexity of input supply chains. Companies in the sector increased safety stocks, causing an unusually protracted period of destocking. These factors have led to a heightened focus on supply chain diversity, onshoring and nearshoring of supply, and rightsized inventory, all of which support greater industry stability and investor demand in the short and medium term.
Macro Trends, Broad Appeal
The industrials market is also benefiting from many other macro themes that will drive further growth. For example, electrification, investments in outdated infrastructure, and a greater emphasis on environmental factors and workplace safety are all sparking investment appeal across industrial products, services, and technologies.
Given labor market conditions, industrial players are increasingly tackling these opportunities with innovative solutions and technology. Significant growth potential exists in areas like the semiconductor value chain, data centers, automation, and data tools for manufacturing.
At the same time, the packaging sector offers broad investor interest due to its end-market diversity, ubiquitous applications, and nondiscretionary demand. Packaging remains a critical differentiator that integrates brand awareness, technology, product security, automation, and efficiency, and leading packaging companies continue to innovate while striking a balance between performance, functionality, and sustainable practices.
Spotlighting Industrials M&A
The industrials market offers a wealth of M&A potential for a wide range of investors, from private equity groups to strategic buyers and infrastructure funds. Strategic buyers have been particularly active in recent months thanks to their deep understanding of industry complexities and longer-term outlook.
Against this backdrop, investors are finding appealing avenues to put capital to work across the industrials ecosystem.
Mott Corporation designs and manufactures sintered porous material structures and flow control solutions. It solves highly complex engineering challenges by co-innovating with technical brands and OEMs in dynamic markets including semiconductor, energy, water, and space.
Using its expertise in materials science, porous metallurgical techniques, and additive manufacturing, Mott develops and manufactures precision, highly reliable filtration and flow components. The company collaborates with its customers to drive engineering breakthroughs in challenging, mission-critical applications. The extremely tight tolerances of Mott’s products and the semiconsumable nature of its offering made it especially appealing to investors.
Raptor Scientific provides complex test and measurement solutions for advanced defense, space, and aerospace applications. These services related to radio frequency systems, physical property systems, and pressure, air data, and temperature systems are all vital to the technological advancement of the U.S. and its allies.
The company's capabilities meet the needs of diverse and attractive defense, space, and aerospace end markets. It's also recognized for its world-class management team and strategic investments in go-to-market, human capital, and product development.
CONTENUR provides waste storage solutions, including designing and manufacturing containers and litter bins, with market-leading positions in Europe and South America.
Waste containerization is a key element of the circular economy, which is seeing higher demand due to favorable macroeconomic and demographic trends and worldwide regulatory changes intended to increase recycling rates. The company's global footprint and local presence allow it to offer a comprehensive, customizable product portfolio and suite of complementary services that are targeted directly at its customers’ needs.
Marshall Excelsior Company supplies highly engineered flow control components for transportation, storage, and use of liquified petroleum gas and other industrial gases.
Within the broad universe of flow control product providers, MEC is differentiated by its brands, portfolio of innovative products, and customer service model. The company exemplifies the highly attractive investment opportunity in flow control, driven by the confluence of multiple tailwinds including infrastructure spending, energy transition, and technological innovation.
Supreme Cabinetry manufactures premium, semicustom kitchen and bath cabinets and vanities through its two brands, Dura Supreme and Bertch.
With a diversified product portfolio and myriad customization options, Supreme has become a trusted partner to a national network of dealers. Its classic handcrafted cabinetmaking is backed by state-of-the-art technology and vertically integrated manufacturing capabilities. In addition, the company’s team, infrastructure, and capacity investments position Supreme for continued expansion.
Insulation Technology Group offers electrical insulation solutions such as high- and ultra-high-voltage porcelain insulators for substations and transmission infrastructure.
Insulators are crucial components for electric infrastructure, preventing the unintended flow of electricity to grounded elements and ensuring the safety and efficiency of the electrical grid. ITG combines deep customer partnerships across the power grid—including utilities, OEMs, distributors, and contractors—with a value proposition of superior performance, lower lifespan costs, and reliability.
AGR International delivers quality and process control technologies to global beverage packaging customers.
AGR has built an innovative and comprehensive portfolio of proprietary test and inspection equipment for the plastic and glass bottle manufacturing market. The company provides technology and services that support these customers to ensure quality, productivity, and sustainability goals are met. AGR is also well positioned to capitalize on sustainability tailwinds through patented technology that enables recycled materials in manufacturing.
A Landscape of Potential
Several trends are generating growth opportunities throughout industrials, including manufacturing onshoring and nearshoring, infrastructure aging, a heightened focus on operating efficiency, a need for sustainable solutions, and increasing technology adoption.
“Private equity groups, strategic buyers, and infrastructure funds looking to put capital to work in the industrial sector will continue to have multiple options to explore,” says Tim Webb, a managing director in our Industrials Group. “We’re excited to see how worldwide dynamics will create long-term value-creation potential for our clients across building products; engineered equipment, products, and components; chemicals and specialty materials; industrial technology; and packaging.”
To further discuss industrials M&A, please contact our senior professionals.
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Jason Bass
Co-Head of M&A
Group Head
Managing Director
Tim Webb
Group Head
Managing Director
John Arendale
Managing Director
John Lautemann
Managing Director
Eric Logue
Managing Director
