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Back to blog June 17, 2018 No Comments Author: Andy Jones

Industries Ripe for an Exit from Private Equity Firms

Portfolio companies currently held 5 – 7 years are likely ripe for an exit from their private equity owners. Industry concentrations within this aged group of portfolio companies might provide leading deal flow indicators. These industries, and certain sub-sectors within them, may have tidal changes of ownership as private equity firms convert equity to liquidity to provide returns to limited partners.

Using our database of private equity portfolio companies, I identified four industry sectors that are thematic in the U.S. portfolio companies currently held between 5 and 7 years:

  1. Manufacturing
  2. Technology
  3. Medical / Health
  4. Oil & Gas

No surprise really, since these are large industry categories. Consequently, for each industry above, I looked for sub-sector concentrations, discussed below.

(Note – I chose 5 – 7 years as the holding period because I reasoned that portfolio companies held longer than 7 years are often owned by PE firms without a typical investment time horizon, sometimes investing from their own funds with a buy-and-hold-forever strategy.)

Manufacturing

Manufacturing tops the list because this is such a broad category.

Reviewing the portfolio companies within the manufacturing category, I thought I might see certain recurring sub-sector themes, but I did not. This group of manufacturing portfolio companies are very diverse and include companies that manufacture a variety of products for a wide range of industries. A few examples to illustrate:

Archery Equipment: BowTech held by Norwest Equity Partners

Composites: C-K Composites Co held by Stonewood Capital Management

Connectors & Cable Assemblies: Quick Cable held by Tonka Bay Equity Partners

Dental Implants: Mainstay Medical held by Seventure Partners

High Pressure Laminates: Wilsonart held by Clayton, Dubilier & Rice

Ignition Components: Channel Products held by Weinberg Capital Group

Irrigation Equipment: Irrigation Components International held by Prospect Partners

Material Handling: ACCO Material Handling Solutions held by KKR & Co.

Medical Imaging Equipment: Gamma Medica-Ideas held by Psilos Group

Mineral Supplements: Delavau held by HBM Holdings

Non-woven Fabrics: Foss Manufacturing Company held by Kingfish Group

Outdoor Canopies: ShelterLogic held by Charter Oak Equity

Personal Protection Products: Apex Microtechnology Corporation held by Alerion Capital Group

Pet Treats: Phelps Industries held by Wafra Investment Advisory Group

Power Supplies: Dynapower held by Pfingsten Partners

Piston Rings: Hastings Holdings Corp. held by RFE Investment Partners

Precision Engineered Products: H-D Advanced Manufacturing held by The Riverside Company

Reagents: Immucor held by TPG

Salty Snacks: Shearer’s Foods held by Ontario Teachers’ Private Capital

Spas: Four Winds Spas held by IVC Group

Thermoplastic Compounds: Epolin held by Polymathes Capital

Titanium Investment Castings: Selmet held by Blue Point Capital Partners

Trailers: Triton Trailers held by Jacsten Holdings

Vales & Pumps: QCC held by Promus Equity Partners

Window Coverings: Springs Window Fashions held by Golden Gate Capital

The full list is considerably more varied than the examples provided above.

Technology

Unlike the manufacturing portfolio companies, the technology private equity investments of 5 –7 years ago did center around a few key sub-sectors. These are shown below with a few sample companies for illustrative purposes:

Software

Medical/Healthcare Tech

Marketing Tech Tools

Information Technology

Human Resources Tech Solutions

Education Tech

It’s interesting to note that technology investments used to mean chips, circuits and hardware like computers and printers. Very few (perhaps none) of those traditional technology companies are on this list as the private equity firms pushed into higher margin, higher growth, more scalable, less capital-intensive businesses in the tech space.

Medical / Healthcare

Within the medical sector, the predominant themes seem to be Medical Devices (offering specific technical devices to the healthcare industry) and Medical Equipment (offering general, more basic operational equipment to hospitals).

Medical Devices

Medical Equipment

Oil & Gas

Within the oil & gas sector, these aged portfolio companies group into four sub-sectors (Exploration & Production being the largest):

Exploration & Production

Oilfield Services

Oilfield Products

Oilfield Acquisition Companies

Conclusion

It stands to reason that these sectors will have a flux in ownership in the not-too-distant future as private equity firms sell to close out the life-cycle of their funds and return capital to limited partners.

You may search for any of these portfolio companies from the “Start Searching Now” section of our homepage.

Learn more about how to search our database of private equity firms.