Industrial Technology
Q1 2022
INDUSTRIAL TECH SUMMARY & OUTLOOK
M&A TRENDS
Following the banner year of M&A activity in 2021, dealmakers were optimistic that tailwinds would carry over into 2022. While that sentiment remains intact, mounting headwinds are being carefully watched.
• Geopolitical Turbulence: According to Bloomberg, 100+ companies globally have postponed or pulled financing deals totaling more than $45 billion after the Russian invasion of Ukraine.(1) Geopolitical pressures are affecting deals in earlier stages, prompting some acquirers to stay on the sidelines as they assess the impact of rising energy prices or conduct additional fact-finding about a target’s operations.
• Inflationary Pressures: To combat surging inflation (which hit a 40 -year high in March 2022), the Federal Reserve has signaled interest rate hikes and further policy tightening – threatening the availability of cheap capital.
• Supply Chain Considerations: While COVID-19 has not been the forefront of conversation recently, its ongoing impact leading to the prolonged shutdowns in many of China’s major cities only exacerbates existing supply chain issues as factories remain shuttered
• Labor Challenges: U.S. companies continue to grapple with a historically tight labor market, low unemployment, and a rising wage inflation.
Despite these challenges and others, we expect industrial M&A activity to remain near historical levels for the remainder of 2022 – underscored by the high level of dry powder in the private equity market and strategic buyers’ continued focus on M&A to expand business, achieve synergies, and alleviate supply chain pains and labor challenges.
INDUSTRY COMMENTARY
“On any given day, our global sourcing, manufacturing, and supply chain teams continue to navigate a number of items, including raw material and logistics availability, evolving COVID-related impacts, including mandated lockdowns, employee absenteeism in our US factories in January and February, and now in China, the continued shutdown of certain operations in our plant in Belgium, and recently, the impacts on the geopolitical crisis in the Ukraine.”
– Mike Roman, 3M Company CEO
“The quarter was marked by pronounced volatility as Russia's invasion of Ukraine impacted commodity markets and the supply chains of nearly every industry.”
Leon J. Topalian, Nucor Corporation CEO
“The $440 billion total addressable truckload market in North America is shifting towards brokers in part because companies are rethinking their supply chains and want flexible capacity with lower risk.”
Drew Wilkerson, XPO Logistics President
INDUSTRIAL INSIGHTS
M&A ACTIVITY IN THE TELECOMMUNICATIONS SPACE
The telecommunications space has gained momentum with the initial rollout of 5G driving interest. Unlike its predecessors, this network relies on both the implementation of a new technology, small cell towers, and necessary updates to existing macro towers. It is estimated an additional 250,000 to 1,000,000 new small sites will need to be constructed during the rollout.(1)
To understand the impact this network will have, it is important to look at the technological innovations spurred by the implementation of 4G. 4G is the foundation on which the smartphone revolution was built, leading to the development and rollout of apps such as Uber, Instagram, Netflix, and Snapchat.(2)
5G networks aim to provide higher speed, lower latency, and greater capacity than 4G LTE networks. Nearly every industry is exploring the potential of 5G to fundamentally transform their business; the network will allow technology such as self-driving vehicles and autonomous manufacturing to run more efficiently and on a much larger scale. And while this network seems to be all the rage now, the rollout has just only begun, 4G is still expected to be the standard network until 2030. With an average network lifespan of about 20 years, we are just scratching the surface of the expected impact that 5G will have in the long run.(3)
The infrastructure to fully rollout 5G is in initial stages, and the M&A activity surrounding this space has taken notice. With the North America telecommunications market estimated at $245M in 2020 and expected to grow to $830M by 2025 at a CARG of 26.8% over the forecast period, it makes sense that there has been an increased number of deals surrounding this space.(4)
More specifically, we are seeing M&A activity that addresses both the challenges and the benefits of 5G in the telecommunications industry. For one, we are seeing a shift of digital infrastructure assets, that include towers, fiber optics and data centers, from teleco players to infrastructure investors. Secondly, we are seeing investments and acquisitions of telecommunications infrastructure builders by companies trying to get ahead of the boom in carrier investment in the construction of the necessary 5G infrastructure.
NOTABLE TELECOMMUNICATIONS INVESTMENTS
ACQUIRED BY
HARBOR VIEW’S INDUSTRIAL TECH Q1 2022 REPORT
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: Board of Governors of the Federal Reserve System
Source: U.S. Census Bureau
Source: U.S. Census Bureau
HARBOR VIEW’S INDUSTRIAL TECH Q1 2022 REPORT
INDUSTRIAL TECH PUBLIC MARKETS
HARBOR VIEW’S INDUSTRIAL TECH Q1 2022 REPORT
MULTIPLES
Source: Pitchbook, Data as of 3/31/22
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
HARBOR VIEW’S INDUSTRIAL TECH Q1 2022 REPORT
HARBOR VIEW’S INDUSTRIAL TECH SUB-SECTORS
AUTOMATED SOLUTIONS
• Robotics
• Specialty Equipment & Devices
• Sensors & Data Capture
• IIoT / Related Technologies
INDUSTRIAL & RELATED SERVICES
• D&E / T&M
• Logistics Services
• Facility & Site Services
• Staffing & Workplace Safety
AUTOMATED SOLUTIONS
TRADITIONAL INDUSTRIAL
• Manufacturing
• Value-Added Distribution
• Coating / Material Processing
• Installation & Construction
INDUSTRIAL & RELATED
SERVICES
Note: Privately held companies typically trade at a discount to public companies Source: Pitchbook
INDUSTRIAL TECH PUBLIC TRADING STATISTICS
HARBOR VIEW’S INDUSTRIAL TECH Q1 2022 REPORT
TRADITIONAL INDUSTRIAL
INDUSTRIAL CONGLOMERATES
Note: Privately held companies typically trade at a discount to public companies
Source: Pitchbook
INDUSTRIAL TECH M&A SUMMARY
MAR 2022
$1.9B FEB 2022
$185M MAR 2022
$950M MAR 2022
(SEMICONDUCTOR SOLUTIONS)
$3B FEB 2022
Source: Pitchbook RECENT NOTABLE TRANSACTIONS
$2.5B FEB 2022
$768M FEB 2022 UNDISCLOSED JAN 2022
$1B FEB 2022
$845M JAN 2022
Note: Deal count represents transactions completed in the U.S. & Canada
INDUSTRIAL TECH M&A TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q1 2022 REPORT
AUTOMATED SOLUTIONS
*Indicates transaction is announced / in progress
Source: Pitchbook
INDUSTRIAL & RELATED SERVICES
TRADITIONAL INDUSTRIAL M&A TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q1 2022 REPORT
TRADITIONAL INDUSTRIAL
*Indicates transaction is announced / in progress
INDUSTRIAL TECH FINANCING TRANSACTIONS
RECENT NOTABLE FINANCINGS
$75M MAR 2022
$250M FEB 2022
$73M MAR 2022
$200M JAN 2022
$105M MAR 2022
$62M JAN 2022
RECORD FINANCING YEAR
$90M MAR 2022
$27M JAN 2022
$100M FEB 2022
$33M JAN 2022
Note: Deal count represents transactions completed in the U.S. & Canada
Source: Pitchbook
INDUSTRIAL TECH VENTURE CAPITAL ACTIVITY
HARBOR VIEW’S INDUSTRIAL TECH Q1 2022 REPORT
Source: Pitchbook
SPECIALTY EQUIPMENT & DEVICES D&E / T&M LOGISTICS SERVICES
Aerospace Component Testing Provider
Acquired by
STRATEGIC BUYER
Property Management Provider
STRATEGIC ADVISORY SERVICES
Investment from Automobile Supplier
FINANCIAL SPONSOR
Fluid Dynamics & Modeling Provider
Acquired by
FINANCIAL BUYER
Light Industrial Staffing Firm
Acquired by
FINANCIAL BUYER
Acquired by Metal Fabricator
FINANCIAL BUYER
Recycling Solutions Provider VALUATION ANALYSIS
Rewards & Recognition
Manufacturing
Acquired by
FINANCIAL BUYER
Solar Lighting Designer & Integrator
Acquired by
STRATEGIC BUYER
Note: Unless displayed with the Harbor View logo, the transactions documented were executed in previous roles
Acquired by Telecommunications Provider
STRATEGIC BUYER
CONNECT WITH HARBOR VIEW ADVISORS
Nate Shepherd MANAGING DIRECTOR
Acquired by Metal Processor
FINANCIAL BUYER
Utilities Data Analysis Provider
Acquired by
STRATEGIC BUYER
Building on his nearly 25 years of Investment Banking and Private Equity experience, Nate leads Harbor View’s Industrial Tech practice. In his role, Nate advises clients in the Automated Solutions, Industrial & Related Services, and Traditional Industrial sectors helping business owners navigate the company sale, acquisition, and capital raise process.
HARBOR VIEW’S INDUSTRIAL TECH Q1 2022 REPORT
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