Sep 23, 2022

Precision Manufacturing Market Update: Defensible End Markets Drive Surging Consolidation Activity

Demand For Precision Manufacturing Has Surpassed Pre-Pandemic Levels Causing M&A Activity to Surge

Capstone Partners released its September 2022 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.

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.

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