Harbor View Advisors Q3 2022 Industrial Technology Report

INDUSTRIAL TECH SUMMARY & OUTLOOK

HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT

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 pre pandemic 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

INDUSTRIAL INSIGHTS

HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT

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

12.0%

8.0%

4.0%

0.0%

1.2%

0.8%

0.4%

0.0%

(0.4%)

2.0%

1.5%

1.0%

16.0% (0.8%)

2.5% $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000

1.6% 0.0%

0.5%

•

29.1 7.4 1.4 3.9x 20.7x Roper 42.7 5.6 2.2 7.7x 19.7x Zebra Technologies 15.8 5.8 1.2 2.7x 13.4x Median: 3.1x 13.8x Company

TRADITIONAL INDUSTRIAL

HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT

AUTOMATED SOLUTIONS

Sep

Sep

Sep

Sep

Aug

Aug

Aug 22

Aug

Aug

Aug

Aug

Jul

Jul

Jul

INDUSTRIAL & RELATED SERVICES

Sep

Sep

n/m

Aug

Jul

Jul

n/m

n/m n/m

TRADITIONAL INDUSTRIAL SELECT M&A TRANSACTIONS

HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT

TRADITIONAL INDUSTRIALS

Deal Date Target Company

Sep 22 Avail Infrastructure Partners

Acquirer / Investor Enterprise Value ($M) EV / LTM Revenue EV / LTM EBITDA

Fernweh Group $180.0 n/m n/m

Sep 22 TriGlobal Energy Enbridge $270.0 n/m n/m

Sep 22 Standard Solar Brookfield Renewable Corp. $540.0 n/m n/m

Sep 22 SmartSign Sentinel Capital Partners n/m n/m n/m

Sep 22 Bulldog Factory Service

Sep 22 MacKenzie Childs

Huizenga Automation Group n/m n/m n/m

EagleTree Capital n/m n/m n/m

Sep 22 WindsorONE Brightstar Capital Partners n/m n/m n/m

Sep 22 Radix Wire & Cable Windjammer Capital Investors n/m n/m n/m

Sep 22 Techmer PM

Sep 22 Williams Machinery

Gryphon Investors n/m n/m n/m

Northpoint Capital Group n/m n/m n/m

Aug 22 Parallel Infrastructure Harmoni Towers n/m n/m n/m

Aug 22 Identi Graphics Fortis Solutions Group (Harvest Partners) n/m n/m n/m

Aug 22 Evident Bain Capital n/m n/m n/m

Aug 22 Viking Sales

High Bar Brands (Heartwood) n/m n/m n/m

Aug 22 CALco Pallets 48forty n/m n/m n/m

Aug 22 Globe Telecom Towers Stonepeak $472.0 n/m n/m

Aug 22 InSinkErator Whirlpool $3,000.0 n/m n/m

Aug 22 Meritor Cummins $3,700.0 0.9x 8.3x

Aug 22 Minnesota Rubber and Plastics Trelleborg Group $950.0 n/m n/m

Aug 22 Black Swan Graphene Dragonfly Capital n/m n/m n/m

Aug 22 HLC MiddleGround Capital n/m n/m n/m

Aug 22 Ohio Heat Transfer LDR Growth Partners n/m n/m n/m

Aug 22 Rensa Filtration Audax Group n/m n/m n/m

Aug 22 Valtris Specialty Chemicals

SK Capital Partners $505.0 n/m n/m

Jul 22 Burke E. Porter Machinery AEA Investors n/m n/m n/m

Jul 22 Wellman Dynamics TRM Equity n/m n/m n/m

Jul 22 BBB Industries

Clearlake Capital Group n/m n/m n/m

Jul 22 Molded Devices TruArc Partners n/m n/m n/m

Jul 22 Watchfire Signs H.I.G. Capital n/m n/m n/m

Jul 22 FCA Packaging Products Wynnchurch Capital n/m n/m n/m

Jul 22 Cornerstone Building Brands Clayton, Dubilier & Rice $5,800.0 1.8x 5.7x

Jul 22 CMC Materials Entegris $6,500.0 5.2x 20.3x

Jul 22 Neenah Mativ Holdings $3,000.0 2.8x 95.2x

Jul 22 Benteler Steel & Tube Tenaris $460.0 n/m n/m

Jul 22 Bright Plastics Thunderbird n/m n/m n/m

Jul 22 Comtec Manufacturing Continuim Equity Partners n/m n/m n/m

Jul 22 The Rubber Group River Associates Investments n/m n/m n/m *Indicates transaction is announced / in progress Source: PitchBook

HARBOR VIEW’S INDUSTRIAL TECH Q3 2022 REPORT

EARLY

CAPITAL

Deal Date Company Name Broad Category Deal Size ($M) Pre Money Valuation ($M) Lead/ Sole Investors

Sep 22 Nubis Communications Industrial and Related Services $25.0 $50.0 Matrix Partners

Sep 22 Osom Products Traditional Industrials $25.0 $45.0 Solana Labs

Sep 22 Oxford Ionics Traditional Industrials $29.5 $67.0 Undisclosed

Sep 22 TeraWatt Infrastructure Traditional Industrials $1,000 n/m Vision Ridge Partners

Sep 22 Longpath Technologies Automated Solutions $23.5 n/m Undisclosed

Aug 22 Utility Global Traditional Industrials $21.0 n/m Ara Partners

Aug 22 CurbWaste Industrial and Related Services $29.6 n/m B Capital Group

Aug 22 Nano Core Chip Automated Solutions $29.6 n/m Addor Capital

Jul 22 C3Nano Traditional Industrials $35.0 n/m Element Solutions Inc, PIUS

Jul 22 Nexii Industrial and Related Services $50.2 $1,547.5 Horizon Technology Finance BDC, Trinity Capital

Jul 22 GCLSemi Traditional Industrials $266.8 n/m TCL Venture Capital

Jul 22 Morpheus Space Traditional Industrials $28.0 n/m Airbus Ventures

Jul 22 Venus Aerospace Traditional Industrials $29.2 $55.0 Prime Movers Lab

Sep

Sep 22 Ascend Elements Industrial and Related Services $300.0 n/m Alumni Ventures

Sep 22 MyCarrier Industrial and Related Services $22.0 n/m NewRoad Capital Partners

Sep 22 Xeneta Traditional Industrials $80.0 n/m Apax Digital

Sep 22 Kojo Traditional Industrials $39.0 n/m Battery Ventures

Aug 22 Liquid Instruments Traditional Industrials $28.5 n/m Acorn Capital

Aug 22 6K Traditional Industrials $122.7 $580.0 Koch Strategic Platforms

Aug 22 Sofar Ocean Automated Solutions $39.4 $115.0 Foundry Group

Aug 22 SpaceX Traditional Industrials $1,900.0 $125,275.0 Fidelity Investments

Aug 22 Glass Partners Solutions Traditional Industrials $57.0 n/m Arkéa Capital

Jul 22 Boston Micro Fabrication Automated Solutions $43.0 n/m Shenzhen Capital Group

Jul 22 Nanosys Automated Solutions $50.0 n/m Centerbridge Partners

INDUSTRIAL TECH EXPERTISE

Aerospace Component Testing Provider

STRATEGIC BUYER Acquired by

Property Management Provider

STRATEGIC ADVISORY SERVICES

Investment from Automobile Supplier FINANCIAL SPONSOR

Fluid Dynamics & Modeling Provider

FINANCIAL BUYER Acquired by

Light Industrial Staffing Firm

FINANCIAL BUYER Acquired by

Acquired by Metal Fabricator FINANCIAL BUYER

Acquired by Metal Processor FINANCIAL BUYER

Recycling Solutions Provider VALUATION ANALYSIS

Rewards & Recognition Manufacturing

FINANCIAL BUYER Acquired by

Solar Lighting Designer & Integrator

STRATEGIC BUYER Acquired by

Acquired by

Telecommunications Provider FINANCIAL BUYER

Utilities Data Analysis Provider

STRATEGIC BUYER Acquired by

CONNECT WITH HARBOR VIEW ADVISORS

Nate Shepherd

MANAGING DIRECTOR

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

The material in this report is for information purposes only and is not intended to be relied upon as financial, accounting, tax, legal or other professional advice. This report does not constitute and should not be construed as soliciting or offering any investment or other transaction, identifying securities for you to purchase or offer to purchase, or recommending the acquisition or disposition of any investment Harbor view advisors does not guarantee the accuracy or reliability of any data provided from third party resources Although we endeavor to provide accurate information from third party sources, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future