Industrial Technology
Q3 2022
INDUSTRIAL TECH SUMMARY & OUTLOOK
M&A TRENDS
Conservatism in M&A activity is driven by the uncertainty of the macroeconomic environment, but strategic and financial buyers are still poised for M&A action. Given the rising cost of capital, brought on by inflation and increasing interest rates, a less forgiving margin for error is not lost on investors. Conversely, private equity investors are still equipped with $1.2 trillion in dry powder(1), and strategic buyers with strong cash flows and balance sheets continue to execute deals.
Deglobalization: More M&A transactions are domestically focused, within the same country or among ally countries, as broader ally-shoring gains traction. The shift in focus, from optimizing efficiency to insulating supply chains, is fueled by a sought-after greater sense of protectionism. Since multinational companies require augmented supply chains to avoid indebtedness to specific regions, company diversification is expected to largely occur through M&A.
Workforce Shortage: Although still significantly elevated compared to pre-pandemic levels, the number of Americans quitting their jobs is gradually declining. Still, lingering insufficiencies in the workforce fuel M&A activity motivated by the need to acquire human capital capabilities.
Activity in the M&A markets is frequently compared to frenzied 2021 numbers, which do not hold long term sustainability. As 2022 nears a close, activity continues to significantly outpace the average prepandemic years, 2015-2019. Despite recessionary fears and headwinds in the market, healthy M&A fundamentals continue to exist.
INDUSTRY COMMENTARY
“And what we're finding is that there's a number of nonchip suppliers that are struggling to ramp production as the chip crisis eases. And it's not easing tremendously, it's easing slightly. We're starting to see that. But then we're seeing issues in nonchip suppliers. It has to do with the tight labor market, but it also has to do refining with many of the suppliers during the COVID time frame had not invested in maintenance or in their facilities and tooling. And so, they're not able to ramp as we expected.”
– John Lawler, Ford CFO
“Technicians in the marketplace are very valuable across the transportation space. Making sure we are the preferred employer, it has been a priority. We have made investments there and we’ll continue to invest in the future.”
– Devina Rankin, Waste Management CFO
“Even though the environment remains challenging, we are realizing benefits from our efforts as we leverage the use of data and data analytics to reduce inventory levels through better demand planning and optimized customer payment terms.”
– Monish Patolawala, 3M CFO
HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT
INDUSTRIAL INSIGHTS
M&A ACTIVITY IN THE LOGISTICS AND TRANSPORTATION SPACE
The transportation and logistics space can be segmented into two main buckets, asset-based and asset-light carriers. While the business models of the two counterparts differ, both sides face tailwinds that promote longevity in the industry, despite mounting headwinds presenting challenges in the current economic climate.
In the short term, carriers can look forward to Q4 during which peak shipping and consumer spending take place. As such, companies can apply “peak season” surcharges to expedited shipping to drive topline growth. As for long term strategies, companies implementing technology-backed solutions into their business models continue to stay ahead of the curve. Technology enabled solutions help companies combat headwinds in the space while simultaneously optimizing efficiency.
Labor and semi-truck shortages are two of the core challenges that carriers have faced in 2022. According to the U.S. Chamber of Commerce, labor force participation has declined by just over 100 basis-points since the beginning of the pandemic(1). As a result, the operationally intense nature of the labor which the transportation industry requires, specifically from truck drivers and set-up crews, has created meaningful challenges. Separately, the average truck driver puts 80-100K miles on their truck per year, and trucks are removed from the over-the-road market after 800-1,000K miles. Truck manufacturers would have to produce ~230K trucks(2) per year to keep up with demand; this mark was missed in both 2020 and 2021.
The global logistics market was valued at approximately $7.6B in 2017 and is expected to grow to $13.0B in 2027, implying a CAGR of 6.5%(3). Given the intensity of the headwinds, it is difficult for the market to forecast a robust growth rate to the industry. However, transportation and logistics support the backbone of the economy, therefore the industry’s upside is undying demand.
As companies work to find solutions to the ongoing labor shortage and unpredictable supply chain, investors offering technology-driven solutions to manage costs and improve efficiencies are highly sought after. At the end of Q3, a potential acquisition of Ryder System, one of the world’s largest transportation and logistics companies, by Apollo Global was announced, showing that regardless of the challenges that the industry faces, buyers are continuing to show interest in the space.
NOTABLE LOGISTICS AND TRANSPORTATION INVESTMENTS
HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT
KEY ECONOMIC INDICATORS
INDUSTRIAL TECH PUBLIC MARKETS
COMPARATIVE MEDIAN EBITDA MULTIPLES
Source: PitchBook, Data as of 9/30/22
ONE-YEAR HISTORICAL INDEX PERFORMANCE
Source: PitchBook, Data as of 9/30/22
INDUSTRIAL TECH PUBLIC TRADING STATISTICS
HARBOR VIEW’S INDUSTRIAL TECH Q3 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 Q3 2022 REPORT
TRADITIONAL INDUSTRIAL
Note:
INDUSTRIAL CONGLOMERATES
INDUSTRIAL TECH M&A SUMMARY
Note: MicroCloud Hologram transaction was a reverse merger; SWM/Neenah merged to create Mativ
INDUSTRIAL TECH SELECT M&A TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT
INDUSTRIAL & RELATED SERVICES
TRADITIONAL INDUSTRIAL SELECT M&A TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT
TRADITIONAL INDUSTRIALS
INDUSTRIAL TECH FINANCING TRANSACTIONS
HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT
$25M SEP 2022
SEP
INDUSTRIAL TECH SELECT VENTURE CAPITAL ACTIVITY
HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT
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
Acquired by Metal Processor
FINANCIAL BUYER
Rewards & Recognition Manufacturing
Solar Lighting Designer & Integrator
Acquired by Utilities Data Analysis Provider
FINANCIAL BUYER
Acquired by
STRATEGIC BUYER
Note: Unless displayed with the Harbor View logo, the transactions documented were executed in previous roles
Acquired by Telecommunications Provider
FINANCIAL BUYER
CONNECT WITH HARBOR VIEW ADVISORS
Nate Shepherd
MANAGING DIRECTOR
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. Suzi Airheart Analyst Shaan Patel Analyst
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