BGL Industrials Insider - Engineered Components Manufacturers Seeing Uptick and Attracting Capital
July 26 2013
Engineered components and systems suppliers are experiencing upticks in demand as key industrial end markets expand. Automotive OEMs continue to ramp up capacity as consumer confidence solidifies, and sales of specialty vehicles, trucks, and equipment are benefiting from residual pent up demand, restored civil and corporate capital expenditure budgets, an aging civil infrastructure, and increased environmental regulation and compliance. The long-awaited rebound in the housing market has materialized and is expected to be a major driver of growth for building products and construction-related machinery and equipment.
Manufacturers of engineered products are benefiting from renewed downstream demand and reporting healthy growth. Turnkey producers are expanding their role as supplier partners in the value chain as OEM customers have reduced engineering headcount and are relying increasingly on their suppliers for engineering and design support, technology and materials innovation, and automation to reduce product cost, increase functionality, and improve speed to market.
Longer-term, fundamental changes arising from the reshoring of components and systems previously sourced overseas and the impact of low-cost natural gas may stimulate additional demand.
Industrial growth companies remain a focus of investors, underscored by recent private equity investment activity in engineered products manufacturers, suggesting an optimistic outlook on growth prospects for the U.S. manufacturing sector. This June, Wynnchurch Capital purchased Detroit Tool Metal Products, calling the acquisition the first in a series of planned investments to build one of the largest Tier 1 metal fabrication businesses in North America. In March, GenNx360 Capital Partners acquired custom industrial gear and gear drive manufacturer The Horsburgh & Scott Co. Large platform buys include American Securities’ acquisitions of automotive parts suppliers Metaldyne for $820 million last December and HHI Group Holdings in October for $750 million. Norwest Equity Partners acquired precision injection molder Quadion in September.