Industrial Technology
Q2 2022
INDUSTRIAL TECH SUMMARY & OUTLOOK
VIEW’S INDUSTRIAL TECH Q2 2022 REPORT
M&A TRENDS
M&A activity in the Industrial Tech sector remains a tale of two stories. While 2022 M&A activity will fall short of last year’s banner year, dealmakers remain active in their pursuit of high-quality opportunities. Meanwhile, headwinds continue to intensify presenting ongoing challenges to previous momentum.
Ongoing Headwinds: Acting as a perpetuation of what we saw and referenced last quarter, tenacious inflation, climbing interest rates, and recessionary fears persist as the backdrop of our economic environment Hitting a new four-decade peak, US inflation reached a 9 1% year-over-year increase in June(1) In the most aggressive hike since 1994, the Federal Reserve’s 75 bps interest rate increase follows several years of low rates and cheap capital(2) Violent swings in the stock market coupled with surging prices, exacerbated by higher costs of borrowing, cause the prospect of a mild US recession to appear more likely
Resilient Activity: While the macro landscape certainly explains the US private equity deal volume dip of ~21% from Q1(3), M&A activity has not been derailed. Even amid elevated pressures, market demand exists, and strong, high-quality deals are still getting done. Continued activity is supported by ample dry powder in the private equity markets and strategic buyer interest to capitalize on inorganic growth to gain scale, cut costs, or combat the ever-persistent labor shortage.
We expect companies performing well in favorable markets to continue to attract active buyer interest. While advisable for sellers to appease valuation expectations, as we look to the second half of 2022, we expect healthy deal flow in the industrial sector to remain robust.
INDUSTRY COMMENTARY
“In fact, nearly every client I speak to believes that technology serves as a fundamental source of competitive advantage. It serves as both a deflationary force and a force multiplier and is especially critical as clients face challenges on multiple fronts from supply chain bottlenecks to demographic shifts. Given its ability to boost innovation, productivity, resilience, and help organizations scale, IT has become a high priority in our company's budget. As such, there is every reason to believe technology spending in the B2B space will continue to surpass GDP growth.”
– Arvind Krishna, IBM CEO
“Demand in Manufacturing & Distribution continues to be solid as this segment has been largely unaffected by reduced occupancy levels. As a result, our organic revenue growth reflects the health of these end markets”
– Scott Salmirs, ABM CEO
“Strong underlying demand, tight supply chain constraints, even tighter labor constraints, and rapid inflation. All of this is evidenced in public indices such as IP readings, which remain at midsingle digit growth levels”
– Erik Gershwind, MSC Industrial Direct, CEO
HARBOR
INDUSTRIAL INSIGHTS
HARBOR VIEW’S INDUSTRIAL TECH Q2 2022 REPORT
M&A ACTIVITY IN THE FOOD & BEVERAGE ROBOTICS SPACE
Exponential growth in technology, interconnectivity, and machine learning over recent years has resulted in automated machines and robots taking on a larger role in maximizing workplace efficiency As such, robotics have quickly become an integral aspect of various industries, especially that of the food and beverage sector.
The labor shortage is the most critical issue facing restaurants today. A record-high 1 million US workers quit the restaurant industry in 2021 According to the National Restaurant Association, the industry is unlikely to ever completely return to its pre-pandemic state as a recent survey found that nearly 97% of restaurant owners are struggling to hire workers. High profile companies, like Chipotle, have already expressed interest in a food service robotics company. These expressions are likely to heighten throughout the industry as companies work to increase efficiencies and fill the labor gap
The manufacturing industry has also looked to robotics to save time and money. Approximately 26% of food and beverage packaging lines have utilized robotics and as a result food industry manufacturers have reported a 25% increase in productivity While it can seem as though robots will simply take jobs currently held by humans, the reality is that these robots can create positive economic spillovers. In the end, the increasing number of robots in the manufacturing industry yields reduced prices of goods, thus generating shared capital gains, and creating new opportunities. For instance, higher- paying positions have been created for those who can perform tasks beyond the abilities of machines or analytical jobs
The global food robotics market was valued at $2.05 billion in 2020 and is estimated to reach $5.79 billion by 2031, registering a CAGR of 10.4% from 2022 to 2031. Given the early nature of this technology and expected future growth, it is no surprise that we are witnessing a large amount of M&A activity within the food and beverage space.
M&A activity has decreased from Q1 to Q2 primarily due to the broader economic headwinds seen in the market recently such as inflation. Research and Development and VC transactions are ramping up, as the space is expected to grow exponentially in coming quarters with companies looking to further automate their production and service offerings. Further, given that the demand for packaged food is anticipated to increase at a moderate rate during the forecasted period, the demand for food robotics is expected to surge in the near future. This recent trend has sparked particular interest from both VC and PE firms.
NOTABLE FOOD & BEVERAGE ROBOTICS INVESTMENTS
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
INDUSTRIAL TECH PUBLIC MARKETS
HARBOR
VIEW’S INDUSTRIAL TECH Q2 2022 REPORT
Source: Pitchbook, Data as of 6/30/22
Source: Pitchbook
INDUSTRIAL TECH PUBLIC TRADING STATISTICS
HARBOR VIEW’S INDUSTRIAL TECH Q2 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
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
TRADITIONAL INDUSTRIAL
INDUSTRIAL CONGLOMERATES
Note: Privately held companies typically trade at a discount to public companies
Source: Pitchbook
INDUSTRIAL TECH M&A SUMMARY
HARBOR VIEW’S INDUSTRIAL TECH Q2 2022 REPORT
JUN 2022
Note: Deal count represents transactions completed in the U.S. & Canada
Source: Pitchbook
INDUSTRIAL TECH M&A TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q2 2022 REPORT
AUTOMATED SOLUTIONS
INDUSTRIAL & RELATED SERVICES
*Indicates transaction is announced / in progress
Source: Pitchbook
TRADITIONAL INDUSTRIAL M&A TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q2 2022 REPORT
TRADITIONAL INDUSTRIAL
*Indicates transaction is announced / in progress
Source: Pitchbook
INDUSTRIAL TECH FINANCING TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q2 2022 REPORT
$1.7B JUN 2022
$150M MAY 2022
$625M JUN 2022
$80M MAY 2022
$145M JUN 2022
$46M MAY 2022
$60M JUN 2022
$260M APR 2022
Source: Pitchbook Rivian raised $2.5B
$40M JUN 2022
$65M APR 2022
INDUSTRIAL TECH VENTURE CAPITAL ACTIVITY
Source: Pitchbook
BROAD & DEEP INDUSTRIAL TECH INDUSTRY EXPERTISE
Aerospace Component Testing Provider
Acquired by
STRATEGIC BUYER
Property Management Provider
Investment from Automobile Supplier
FINANCIAL SPONSOR
STRATEGIC ADVISORY SERVICES IIOT & RELATED TECHNOLOGIES
Recycling Solutions Provider VALUATION ANALYSIS
Fluid Dynamics & Modeling Provider
Acquired by
FINANCIAL BUYER
Light Industrial Staffing Firm
Acquired by
FINANCIAL BUYER
Acquired by Metal Fabricator
FINANCIAL BUYER
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 Q2 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