Industrials Sector Update

Overall, the outlook for the industrial sector remains positive as post-COVID-19 pandemic effects continue to diminish. Companies, their inventories, and their supply chains are returning to normal when manufacturing becomes so advanced that there are ample opportunities for growth and investment in the multi-trillion dollar industry.

KEY MARKET TRENDS

The most significant driver of change and opportunity for the industrial sector, in broad terms, is essentially the health of the economy and GDP growth. Among the most significant positive drivers of growth in today’s industrial sector will likely include:

• Supply chain adaptations
• A trend toward on-shoring and near-shoring
• The increasing use of artificial intelligence, automation, and robotics
• A transition toward more clean energy and sustainability practices
• Key pieces of government legislation

The sector has remained a pioneer in adopting intelligent automation, embracing various innovations, and working to build a more sustainable future. In a world of ongoing digital transformation, smart factories are becoming increasingly intuitive, with predictive maintenance becoming a key area of focus. Artificial intelligence (AI), robotics, and the Internet of Things (IoT) play major roles in achieving synergistic goals with a purposeful future.

Among the top technology adoptions for manufacturers are generative AI, data analytics, new verticals for zero-emission products, product decarbonization, electronic vehicles, robotics and automation, additive manufacturing, blockchain, cloud computing, edge computing, advanced materials, augmented reality, and virtual reality. As these technologies evolve, so does the threat of cybersecurity risks, which opens up another critical area for investment.

Supply chain management is a massive priority for industrial companies, especially following the shakeups that occurred after the COVID-19 pandemic. Areas of increased focus include supplier and vendor relationship management; increased local capacity through reshoring and near-shoring to cut down on distance, remediation, and time travel; advances in manufacturing technology; and circular supply chains that embrace more recycling processes.

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It is important to note that there are always levels of macroeconomic precariousness that impact the industrial sector in a dynamic, globalized society, such as political uncertainty, fluctuating material costs, supply chain issues, and labor shortages. While labor shortages have appeared to ease slightly in certain areas, they are not uniform. Skilled tradespeople are still in tight supply as experienced workers are aging out of the workforce and younger generations are uninterested in many of these vocations.

M&A

Businesses operating in the industrial sector are focusing on investments that create new paths to innovation while emphasizing value and growth opportunities.

Mergers and acquisitions will remain an important growth strategy for industrial companies of all sizes, with both vertical and horizontal integration as priorities. Key investment areas will be digitization, robotics, AI, sensors, and automation to boost efficiency in operations.

Sustainability, energy efficiency, reduced emissions, and decarbonization drive the need to replace infrastructure and equipment, which is driving companies' need to find creative solutions that include M&A strategies to achieve their goals.

Macroeconomic factors always influence deal activity, such as tariff impositions, customer buying behavior, inflation, supply chain costs, regulations, interest rates, and changes in government investment. These issues impact the cost of capital and financing structures, which are key to all M&A activity.

Our Recent Success Stories in the Sector

Some of Benchmark International’s more recent successful deals in the industrial space include:

• The acquisition of Worldwide Technologies, LLC by Quad Capital Partners
• The sale of EZ Fabricating Inc. to House Rock Capital Partners
• The deal between PS International, Inc. and Rockford Separators
• The purchase of Summit Trailer Sales, Inc. by Jorden Industries
• The transaction between Quantum3 Aluminium Limited and Burke Porter Group
• The sale of Precision Metal Works, Inc. and a high-net-worth individual
• The transaction between Lightning Packaging and Bunzl
• The acquisition of Insight Vision Cameras by The Heico Companies
• The deal between Square One Coating Systems, LLC and Lionheart Industrial Group
• The purchase of QT Industries by KB Components

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