INDUSTRIAL TECH SUMMARY & OUTLOOK
M&A TRENDS
Despite the Federal Reserve's tightening measures of 500 basis points over the past 15 months, June inflation data showed a significant cooling off, providing more encouraging signs and increasing the possibility that the Federal Reserve may cease raising interest rates after its July meeting (1). The Consumer Price Index (CPI) rose by 3% through June, a fraction of its peak of 9% in the summer of 2022 (2). This unexpected slowdown in inflation has been well received, offering relief to consumers and garnering a positive market response; however, policymakers remain cautious, wary of potential lingering effects and uncertain if the moderation is sustainable. As a result of the continued unpredictability, nearly all major deal market metrics were down in the first half of 2023.
The outlook for the global M&A market in the second half of 2023 is promising, driven by developed adaptability to current market conditions. Valuation expectations among sellers and buyers are expected to align, potentially increasing the supply of assets for sale. Financing, although more expensive than a year ago, remains accessible. The upturn in public equity markets and a growing pipeline of backlogged deals are contributing factors to the improved sentiment.
Strong and resilient businesses will remain highly sought after by buyers, while the supply of other assets for sale may increase as sellers and buyers align their valuation expectations. Sellers may also take advantage of the limited availability of desirable targets in the market.
INDUSTRY COMMENTARY
“The manufacturing economy is positioned for whatever happens in the future whether it’s growth or not. I’d classify it as a soft landing – revenue growth is strong; exports have been good and head count is generally stable. Although there’s uncertainty, [manufacturers] are not letting people go…The supply chain is poised for growth once demand picks up, said Fiore. “Material hasn’t flowed this well in many years and lead times have declined. The problem is no new orders and a low backlog. As soon as new orders pick up backlog is likely to expand as well.”
– Tim Fiore, Institute for Supply Management Manufacturing Business Survey Committee Chair, 5/5/2023
“We are finding new ways of using AI and machine learning algorithms to really utilize our capacity and the fleet assets we have, all to offer better solutions to our customer and to reduce carbon dioxide emissions”
– Ingo Paas, Green Cargo CIO, 6/26/2023
“As supply chains have normalized, customers are increasing their focus on achieving competitive prices, just as we are doing with our suppliers. Overall, we would describe the environment, both on the demand and the pricing fronts, as leveling.”
– Erik Gershwind, MSC CEO, 6/30/2023
HARBOR VIEW’S INDUSTRIAL TECH Q2 2023 REPORT
INDUSTRIAL INSIGHTS
ELECTRIFICATION OF THE AUTOMOBILE INDUSTRY
The widespread and rapid adoption of automobile electrification has exceeded expectations. The global electric vehicle (EV) market has become increasingly competitive, with numerous manufacturers, both large and small, vying for market share.
For over 70 years, the U.S. automotive market was dominated by the "Big Three" manufacturers: General Motors, Ford, and Daimler Chrysler. However, the landscape is now evolving, with intense competition emerging both within the U.S. and in the leading EV markets of Asia-Pacific and Europe.
EV companies encounter a significant hurdle in the form of expensive manufacturing facilities. To thrive in the evolving market, these companies must navigate and overcome various manufacturing obstacles related to cost, scalability, and efficiency. Embracing contract manufacturing has emerged as a vital strategy for EV companies to tackle these challenges and maintain competitiveness in the swiftly changing landscape.
Contract manufacturing provides advantages for both traditional automobile original equipment manufacturers (OEMs) transitioning to EVs and early-stage OEMs. It offers cost savings, flexibility, and the ability to avoid capital expenditures associated with building their own factories. However, ensuring quality and safeguarding intellectual property are important considerations.
EV sales are expected to achieve yet another milestone this year, with a significant surge that will propel their market share to nearly one-fifth of the overall automotive industry. This remarkable growth is driving a substantial transformation within the auto sector, impacting various aspects, including the energy industry, notably the oil sector.
Electric vehicles are disrupting the long-standing dominance of the internal combustion engine. By 2030, it is projected that electric vehicles will eliminate the requirement of a minimum of 5 million barrels of oil per day (1). This transformation extends beyond cars, as electric buses and trucks are expected to follow suit. As competition, facility challenges, and contract manufacturing continues to be explored, the trend towards electric vehicle adoption is expected to persist in the near term, marking a significant shift in the automotive industry.
NOTABLE ELECTRIC VEHICLE INVESTMENTS
HARBOR VIEW’S INDUSTRIAL TECH Q2 2023 REPORT
KEY ECONOMIC INDICATORS
INDUSTRIAL TECH PUBLIC MARKETS
HARBOR VIEW’S INDUSTRIAL TECH Q2 2023 REPORT
Source: PitchBook, Data as of 6/30/23
Source: PitchBook, Data as of 6/30/23
INDUSTRIAL TECH PUBLIC TRADING STATISTICS
HARBOR VIEW’S INDUSTRIAL TECH Q2 2023 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 Q2 2023 REPORT
TRADITIONAL INDUSTRIAL
INDUSTRIAL CONGLOMERATES
Note: Privately held companies typically trade at a discount to public companies
Source: PitchBook
INDUSTRIAL TECH M&A SUMMARY
INDUSTRIAL TECH SELECT M&A TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q2 2023 REPORT
AUTOMATED
INDUSTRIAL & RELATED SERVICES
TRADITIONAL INDUSTRIAL SELECT M&A TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q2 2023 REPORT
TRADITIONAL INDUSTRIAL
INDUSTRIAL TECH FINANCING TRANSACTIONS
APR 2023
APR 2023
MAY 2023
MAY 2023
MAY 2023
JUN 2023
JUN 2023
INDUSTRIAL TECH VENTURE CAPITAL ACTIVITY
HARBOR VIEW’S INDUSTRIAL TECH Q2 2023 REPORT
SENSORS & DATA CAPTURE
Industrial Recycling Provider
Acquired by White Glove Transportation & Logistics
Property Management Provider
Aerospace Component Testing Provider
Acquired by
STRATEGIC BUYER
Fluid Dynamics Designer & Engineer
Acquired by
FINANCIAL BUYER
Light Industrial Staffing Provider
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
Wireless Tower Owner & Operator
Acquired by
STRATEGIC BUYER
CONNECT WITH HARBOR VIEW ADVISORS
Nate Shepherd MANAGING DIRECTOR
Acquired by Metal Fabricator FINANCIAL BUYER
Data Capture & Analysis Provider
Acquired by
STRATEGIC BUYER
Building on his more than 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. Suzi Airheart Associate Shaan Patel Analyst
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