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U.S. ‘Precision Manufacturing’ Sector Surpasses Pre-Pandemic Levels, Says New Report from Capstone Partners

Capstone Partners Reports: Defensible End Markets Drive Surging Consolidation Activity

Boston, MA – Capstone Partners released its latest Precision Manufacturing Sector Update, reporting that industrial production, total manufacturers’ new orders, and industrial capacity utilization have surpassed pre-pandemic levels, supporting a favorable near-term outlook for manufacturers. In addition, the increasing need for precise equipment in advanced end markets including Commercial Aerospace, Defense, Medical Devices, Automotive, and Electronics, paired with the growing capabilities of precision manufacturers, is expected to drive sector growth in the long-term. The Fourth Industrial Revolution (Industry 4.0) and reshoring have continued to alter the Precision Manufacturing landscape as manufacturers adapt to meet increasingly complex component requirements, enhance supply chain visibility, and fortify margins.

Due to the sector’s defensibility and growth potential, merger and acquisition (M&A) activity has surged, building upon a historic 2021. While the broader middle market recorded a 3.4% year-over-year (YOY) decline in M&A activity, deals announced or closed in the Precision Manufacturing sector increased 77.3% YOY through August 22, 2022. The space represents an attractive consolidation opportunity for competing players and private equity firms due to segment fragmentation and the vast number of small- and medium-sized enterprises (SMEs). As Industry 4.0 accelerates, strategics and private equity-backed platforms will continue to utilize M&A to gain technology, scale, and expand into new segments. While rising interest rates may weigh on transaction valuations, the Precision Manufacturing M&A market remains competitive, teeming with well-capitalized buyers willing to pay a premium for safe growth amid economic uncertainty.

“While the U.S. Industrials space may see some near-term volatility due to macro and political events, the mid-to-longer-term Industrial fundamentals are especially strong in light of European energy concerns and Chinese economic slowing driven by COVID shutdowns and real estate weakness. As metals prices trade down and the U.S. is seen as the stable investment location of choice, precision manufacturers are set for a strong 2023 on the back of expanding margins and robust M&A backdrop,” said Capstone Managing Director Mike Schumacher, a lead contributor in the newly released report.

 

Also included in this report:

  • Key end market conditions and their potential impacts on precision manufacturing demand.
  • Analysis of M&A activity, including what is driving the rampant consolidation in the Precision Manufacturing sector.
  • A private equity highlight on CORE Industrial Partners, a manufacturing and industrials-focused firm that utilizes a buy-and-build strategy to grow its platform companies.

 

To access to full report, click here

 

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