Industrial Technology
2021 ANNUAL REPORT
INDUSTRIAL TECH SUMMARY & OUTLOOK
As we continue to adjust to a world reshaped by the pandemic, venture investment and M&A activity continues at a brisk pace across the industrial technology sector. Venture capital investments reached record-breaking levels in 2021 as investors piled into start-ups and late-stage industrial companies that offer solutions to ease supply chain fallout and labor shortages. Nontraditional VC investors – including VC arms of corporations, sovereign wealth funds, and others –are driving a significant portion of VC investment activity. Specifically, corporate VC remains a hotspot as corporations look to learn from and partner with entrepreneurs that are developing new technologies and business models.
Non-Traditional VC Investments in Industrial Technology
Source: PitchBook
Industrial Technology M&A activity remained robust in 2021 as industrial companies looked to acquisitions as a tool to diversify supplier exposure and target high-margin end markets We expect momentum to continue after a banner 2021 , given the enormous amount of transaction demand from both private equity and strategic buyer groups.
Several themes will play a key role in 2022 deal activity:
• Capital Availability: Heaps of private equity dry powder and large cash balances sitting on corporate balance sheets are fueling buyer appetite and driving higher valuations. However, the prospects for capital availability in 2022 will depend largely on how tailwinds and developing headwinds play out To combat surging inflation, the Federal Reserve has signaled interest rate hikes and further policy tightening in 2022 – threatening the availability of cheap capital.
• Infrastructure Spend: President Biden’s American Jobs Plan allocates $ 56 billion of capital to upgrade aging water systems, roads, and bridges. Another significant piece of the infrastructure bill is funding in nascent areas, such as EV charging and broadband access. The government’s commitment to upgrading and advancing infrastructure presents attractive opportunities for private equity investors and strategic acquirers
• Economic Uncertainty: While labor shortages and supply chain disruptions haven’t derailed M&A activity, companies have started to price both in and consider how prolonged issues will impact their businesses in the long term
• Strategic M&A: Corporations are aggressively using M&A to gain scale, advance technology, and cut costs.
• ESG: Environmental, Social and Corporate Governance (ESG) factors continue to emerge as significant drivers in deal activity.
INDUSTRIAL INSIGHTS
SUPPLY CHAIN FIASCO TO CONTINUE IN 2022
Looking to 2022, shippers will face new concerns that will impact plans to trim cargo backlog. On the heels of the worst port congestion in history, the private shippers that operate West Coast ports are slated to talk with the International Longshore and Warehouse Union regarding the expiration of ~20,000 dockworkers’ contracts this summer. Historically, the negotiations, taking place every six years, have led to significant labor disruptions and shipping delays. Additionally, China will deal a few more blows to global supply chains this year amid its zero-COVID policy and imposed factory shutdowns for the Beijing Winter Olympics.
Experts remain bearish on the timeline for resolving existing supply chain challenges due to the severity and length of the bottlenecks. According to Alan Murphy of Sea-Intelligence, “Once the port congestion is unclogged, we have a massive amount of retail inventory restocking goods to move, that have not been moving at the present freight rates. The latest U.S. Census Bureau data shows no signs that we’re seeing any slowdown in US consumer spending on durable goods, so we're maintaining our outlook that we will continue to see a shortage of supply throughout 2022 , with a possible resolution in 2023.” 1
As supply chain concerns mount, organizations are diversifying suppliers, investing in technology to enhance network optimization, and reshoring operations to improve stability and visibility. Companies are also using acquisitions as a vehicle to minimize capacity constraints and alleviate supply chain pressures, as opposed to recreating the wheel internally. Recent examples include the following:
• A.P. Moller - Maersk’s acquisition of warehouse giant LF Logistics to expand into inland logistics
• AIT Worldwide's purchase of Express & Logistics to provide a truly global glass pipeline
• American Eagle Outfitters’ acquisition of Quiet Logistics to reduce delivery costs amid rising inflation and create a supply chain platform with significant long-term growth potential
NOTABLE SUPPLY CHAIN INVESTMENT TRENDS
Venture investments have accelerated as investors respond to the intensified need for automation and digitalization to strengthen supply chains. Investors are targeting companies that offer solutions to managing warehouses, matching freight loads to transportation capacity, and mapping out cost-effective routes to move goods 2
VC Investments in Warehousing Technology
Source: PitchBook
KEY ECONOMIC INDICATORS
Source: Board of Governors of the Federal Reserve System
Source: U.S. Bureau of Labor Statistics
Source: U.S. Bureau of Labor Statistics
Source: U.S. Census Bureau
Source: Board of Governors of the Federal Reserve System
$300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000
Source: U.S. Census Bureau
INDUSTRIAL TECH PUBLIC MARKETS
Source: PitchBook, Data as of FYE 2021
Source: PitchBook
Indices comprised of relevant companies on the following pages and based on equal weighted prices. Indices are tracked relative to the starting price to compare performance.
INDUSTRIAL TECH PUBLIC TRADING STATISTICS
• Robotics
HARBOR VIEW’S INDUSTRIAL TECH SUB-SECTORS
INDUSTRIAL & RELATED SERVICES
• D&E / T&M
• Specialty Equipment & Devices
• Sensors & Controls
• IIoT / Related Technologies AUTOMATED SOLUTIONS
• Logistics Services
• Facility & Site Services
• Staffing & Workplace Safety
AUTOMATED SOLUTIONS
INDUSTRIAL & RELATED SERVICES
TRADITIONAL INDUSTRIAL
• Manufacturing
• Value-Added Distribution
• Warehousing
• Installation & Construction
INDUSTRIAL TECH PUBLIC TRADING STATISTICS
TRADITIONAL INDUSTRIAL
INDUSTRIAL CONGLOMERATES
INDUSTRIAL TECH M&A TRANSACTIONS
AUTOMATED SOLUTIONS
INDUSTRIAL & RELATED SERVICES
TRADITIONAL INDUSTRIAL M&A TRANSACTIONS
TRADITIONAL INDUSTRIAL
RECORD FINANCING YEAR
Investments in Industrial Tech start-ups reached record levels in 2021
INDUSTRIAL TECH EXPERTISE
STRATEGIC BUYER
Note: Unless displayed with the Harbor View logo, the transactions documented were executed in previous roles Acquired by
Fluid Dynamics & Modeling Provider
Light Industrial Staffing Firm
FINANCIAL BUYER Seeking acquisition
INDUSTRIAL TECH TEAM
Nate Shepherd MANAGING DIRECTOR
Erica Richardson ASSOCIATE
The material in this report is for information purposes only and is not intended to be relied upon as financial, accounting, tax, legal or other professional advice. This report does not constitute and should not be construed as soliciting or offering any investment or other transaction, identifying securities for you to purchase or offer to purchase, or recommending the acquisition or disposition of any investment Harbor view advisors does not guarantee the accuracy or reliability of any data provided from third party resources Although we endeavor to provide accurate information from third party sources, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future