Industrials
Q3 2024 QUARTERLY REPORT
Industrial Summary & Outlook
OBSERVATIONS FROM THE INDUSTRIALS TEAM
In September, we published a semi-annual State of the Industrials M&A Market report outlining our observations on M&A activity in the Industrials sector. Our findings concluded that despite the fact that several macro trends were painfully evident (M&A activity was down, private equity firms were slower to deploy capital, lenders had pulled back from the market, sector multiples were off) not all was lost in the industrials sector. PE firms had turned their attention to add-ons, non-backed sellers were increasingly targeted, A-grade assets were never out of favor, and select sell-side processes remained highly competitive.
Those same trends and other compelling factors continued through the end of Q3. Transaction counts across the industrials sector were up and valuations across the industrial services sector remained on the rise. Within our Industrials practice, buyer appetite was strong, valuations were competitive, and buyer quality remained high. Looking to the end of this year and beyond, we view declining interest rates, the completion of the election, pent-up demand, and the need to deploy capital as compelling macro drivers for increased M&A activity. Specific to the Industrials sector, we anticipate a highly active 2025.
ENVIRONMENTAL SERVICES SPOTLIGHT
Environmental services M&A activity surged in Q3 with $1.45B spend from the top five major waste players – Waste Management, Republic Services, Waste Connections, GFL Environmental, and Casella Waste Systems. This spend was up nearly double from a modest Q2 with $835M spend from the same players. North America’s publicly traded waste companies launched 2024 with slow acquisition activity but more significant spend was fueled in Q3 by larger deals getting to a close.
Waste Management is focused on “filling in white spaces” in Arizona, Texas, the Carolinas, Florida, and other areas they see as attractive opportunities for growth. According to COO, John Morris, “The company’s overall spending could include around a billion-plus of tuck in acquisitions this year.”
Waste Connections has signed or closed deals worth $700M+ in annualized revenue which is tracking to be a company record. According to its CEO, Ron Mittelstaedt, they are optimistic about 2025 spending, “We continue to believe that M&A will be elevated.”
Based on historical trends, following the mid-September 0.5% interest rate cut, M&A activity, including that within the environmental services space, should benefit. The reduced cost of debt and continued legislative stimuli bode well for continued activity and acquirer interest. Even so, fueled by non-discretionary demand, real and perceived consumer attention, and increasing regulation, environmental services activity has remained robust amid a tumultuous M&A environment.
Companies are consolidating to expand capabilities, meet compliance requirements, and capitalize on growing opportunities in areas like waste management, recycling, and energy efficiency. As consumers and investors prioritize ESGdriven businesses, the sector is well positioned for continued growth. The combination of regulatory pressures, sustainability trends, and the growing demands for integrated solutions makes environmental services a dynamic sector for continued M&A activity.
Industrial Insights
The Trend
INDUSTRIAL TECHNOLOGY
The Industrial Technology sector saw a decline in valuation, with EBITDA multiples dropping from 11.0x in 2023 to 10.1x in 2024. This suggests a slight correction in the market or a reassessment of growth prospects within this space. Over the past year, the index performance for Industrial Technology has been relatively stable, though underwhelming compared to other sectors, fluctuating in the 100-110 range points. While this suggests resilience, it also highlights slower growth. In terms of transactions, the sector continues to see moderate deal-making activity, with around 30-45 deals per quarter, indicating consistent, though not explosive, activity. Financing trends reflect a tapering off from the peaks of 2021, with Q3 2024 recording $3.08 billion in financing, pointing to a sustained, but cautious, investment environment.
INDUSTRIAL SERVICES
The Industrial Services sector has been the clear outperformer, with EBITDA multiples surging from 11.5x in 2023 to 14.7x in 2024, signaling strong investor confidence and potential for growth. The one-year index performance for Industrial Services has been particularly impressive, significantly outpacing both the S&P 500 and other industrial segments, with the index reaching around 125 range points by Q3 2024. This is likely fueled by ongoing infrastructure investments, the non-discretionary nature of services, and rising consolidation trends driving increased demand for Industrial Services. Transaction activity in the sector has been robust, peaking in 2021 and maintaining strong momentum into 2024, suggesting high deal-making interest. Financing activity, while seeing a dramatic peak in Q4 2021 at $18.48 billion, remains relatively strong, with $4.78 billion in Q3 2024, underscoring sustained investor appetite.
TRADITIONAL INDUSTRIALS
Over the past year, the Traditional Industrials sector has remained steady with EBITDA multiples holding steady at 11.6x from Q3 2023 to the same period in 2024, reflecting the mature nature of the sector. The one-year index performance for this segment has been relatively flat, closely tracking the broader S&P 500, underscoring its role as a dependable and less volatile sector. Transaction counts show Traditional Industrials consistently leading in deal activity, with over 200 transactions in some quarters. This steady flow of transactions highlights the sector’s maturity and ongoing consolidation efforts. Financing activity has mirrored this stability, with Q3 2024 recording $3.08 billion in traditional industrial financing.
Industrials Industry Commentary
“We grew profitably in the third quarter, continuing to benefit from the high demand in electrification. Another growth driver was our particularly strong industrial software business, which won several large license contracts. The industrial automation business remains challenging. We confirm our company’s full-year outlook.”
– Roland Busch, Siemens AG; President and CEO
"Our strong performance in the third quarter triggers an upgrade of full year margin guidance… On a high level, I would summarize it by saying that the very strong development in our Electrification business more than offset weakness in the areas of Robotics & Discrete Automation and E-mobility.”
– Morten Wierod,
ABB; CEO
“Additionally, our aerospace coatings business delivered record quarterly sales… ended the quarter with an order backlog of approximately $290 million. This backlog demonstrates the strong demand for our technologyadvantaged products and excellent industry dynamics. We had sustained growth in architectural coatings Americas and Asia Pacific driven by the professional contractor channel in the U.S.”
– Timothy M. Knavish, PPG Industries; Chairman and CEO
Key Economic Indicators
Index
Source: Board of Governors of the Federal Reserve System
Source: U.S. Bureau of Labor Statistics
$600,000 $700,000 $800,000 $900,000 $1,000,000 $1,100,000 $1,200,000 $1,300,000
Rate Total Construction Spending (Non-Residential)
Source: U.S. Bureau of Labor Statistics
Source: U.S. Census Bureau
Source: Board of Governors of the Federal Reserve System
Total Construction Spending (Residential)
$300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 $1,100,000
Source: U.S. Census Bureau
Industrial Public Trading Statistics
Harbor View’s Industrial Sub-Sectors
• Specialty Equipment & Devices
• Data Capture & Analysis
• Technology Enabled Solutions
• IIoT / Robotics
Source: PitchBook, Data as of 9/30/24
• Design & Engineering
• Environmental Solutions
• Testing, Inspection & Certification
• Facility & Site Services
• Manufacturing
• Distribution / Logistics
• Installation & Construction • Utilities & Telecommunications
Source: PitchBook, Data as of 9/30/24
Select Industrial Public Trading Statistics
INDUSTRIAL TECHNOLOGY
Note: Privately held companies typically trade at a discount to public companies Source: PitchBook, Data as of 10/14/24
Select Industrial Public Trading Statistics
INDUSTRIAL SERVICES
Note: Privately held companies typically trade at a discount to public companies
Source: PitchBook, Data as of 10/14/24
Select Industrial Public Trading Statistics
TRADITIONAL INDUSTRIALS
Note: Privately held companies typically trade at a discount to public companies
Source: PitchBook, Data as of 10/14/24
Select Industrial Public Trading Statistics
CONGLOMERATES
Note: Privately held companies typically trade at a discount to public companies
Source: PitchBook, Data as of 10/14/24
Industrial M&A Summary
Industrial M&A Transactions
INDUSTRIAL SERVICES
Industrial M&A Transactions
Industrial Financing Transactions
Recent Notable Financings
SEP 2024
Financing Activity
Note: Historical values retrospectively adjusted per source
Source: PitchBook
Select Industrial Venture Capital Activity
EARLY-STAGE VENTURE CAPITAL
LATE-STAGE VENTURE CAPITAL
Industrial Expertise
Broad & Deep Industrial Expertise
TECHNOLOGY
Industrial Recycling Provider
Acquired by
STRATEGIC BUYER
White Glove
Transportation & Logistics
Acquired by
FINANCIAL BUYER
Metal Processor
Acquired by
FINANCIAL BUYER
Property Management Provider
STRATEGIC ADVISORY SERVICES
Aerospace Component Testing
Provider
Acquired by
STRATEGIC BUYER
Telecommunications Infrastructure Provider
Acquired by
FINANCIAL BUYER
Fluid Dynamics
Designer & Engineer
Acquired by
FINANCIAL BUYER
Light Industrial Staffing Provider
Acquired by
FINANCIAL BUYER
Solar Lighting Designer & Integrator
Acquired by
STRATEGIC BUYER
Note: Unless displayed with the Harbor View logo, the transactions documented were executed in previous roles
Wireless Tower Owner & Operator
Acquired by
STRATEGIC BUYER
Connect with Our Industrials Team
Nate Shepherd
Managing Director
nshepherd@hvadvisors.com
978 835 0258
Building on his 27 years of Investment Banking and Private Equity experience, Nate leads Harbor View’s Industrials practice. In its role, the Industrials team advises clients in the Industrial Technology, Industrial Services, and Traditional Industrial sectors helping business owners navigate the company sale, acquisition, and capital raise processes.
Metal Fabricator
Acquired by
FINANCIAL BUYER
Data Capture & Analysis Provider
Acquired by
STRATEGIC BUYER
Suzi Felix Associate
Carson Lubin Analyst
About Harbor View Advisors
Operating at the intersection of investment banking and management consulting, we partner with inspiring companies and private equity firms to help them design and execute their strategies for growth or exit. With decades of successful client outcomes, we help growing teams improve their opportunities for success. We provide Sell-side advisory, Buy-side advisory and Strategic Consulting to innovative companies and financial sponsors.
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.