Precision Manufacturing Industry Update – August 2024

Precision Manufacturing Industry Extends Advancements Through Acquisitions

Capstone latest Precision Manufacturing Industry Update reports that industrial expansion has remained at the forefront of the Precision Manufacturing industry and supports future merger and acquisition (M&A) activity as technology advances.

The Precision Manufacturing industry has undergone significant transformation due to the integration of advanced technologies such as automation, additive manufacturing, and the Internet of Things (IoT). These innovations have not only created high-speed machining (HSM) but also opened new avenues for customization and complexity in manufacturing processes. Industrial expansion has remained at the forefront of the Precision Manufacturing sector. Current players in the space have found themselves in an arms race to offer lights out manufacturing and to provide an automated suite of manufacturing capabilities (including advanced equipment) that can serve diversified end markets. Demand for precise components has grown through the process of reshoring and subsequent legislation like the Inflation Reduction Act (IRA), Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act, Science Act, and the Infrastructure Investment and Jobs Act (IIJA) which have targeted China’s development of critical technologies.

Precision Manufacturing M&A volume has softened as a result of a broader slowdown in manufacturing through year-to-date (YTD). However, as a provider of essential components in growing end markets, the Precision Manufacturing industry has demonstrated resilient demand. Strategic acquirers have led M&A activity through YTD, comprising 61% of deals. Private strategic deal activity has fallen 30.4% year-over-year (YOY) but has been mostly offset by a 50% increase in public strategic transactions. Private equity players have continued to view the space as ripe for consolidation and roll up activity. Sector sponsors have deployed add-on transactions as private equity firms build sector platforms. Private equity firms have continued to build their suite of Manufacturing industry investments amid advanced manufacturing and reshoring trends. This has been evidenced by firms like MiddleGround Capital, who completed 21 acquisitions from 2019 through YTD.

Competing players and private equity firms have accelerated M&A utilization to gain technology, scale, and expand into new segments. Of note, the market for Precision Manufactured Fasteners has seen significant growth and consolidation. The global Industrial Fasteners market was valued at $85.8 billion in 2023 and is projected to grow from $89.3 billion in 2024 to $125.9 billion by 2032, according to a report by Fortune Business Insights.1 While M&A has bolstered product diversification and global expansion, it has also increased competition in the industry, driving innovation and improved customer offerings.

Also included in this report:

• Which end markets players in the space are targeting for recurring and defensible demand.
• A deep dive into acquisitions made by private equity firm, MiddleGround Capital.
• A detailed analysis of deal volume, notable transactions YTD, and purchase multiples that sector players have garnered.

Capstone Partners’ Industrials Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the Precision Manufacturing Industry. Our team partners with leading mid-to-large sized businesses that serve growing end-markets.

For more information on the Precision Manufacturing Industry trends featured in this report or to speak with one of our Industrial M&A Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today.