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Back to blog October 17, 2017 5 Comments Author: Andy Jones

Private Equity Investment Trends in Manufacturing

I ran some analytics on our private equity portfolio company data to view changes in how PE firms invest in various industries over time. The graph below shows the historical investment trend for manufacturing portfolio companies by year.

Investments in manufacturing companies, as a share of the overall private equity investment pool, has decreased, but seems to have settled around 15 – 17%.

Private Equity Investment Trend: Manufacturing

While the absolute number of PE investments in Manufacturing has increased over time, this is largely because the private equity industry has grown considerably in recent years (more investors & larger funds). To isolate changes within a specific industry from the growth of the private equity industry as a whole, I looked at investments within an industry as a percentage of the total number of private equity portfolio company investments for each year.

Macro-economic cycles clearly effect the PE firms’ relative interest in the manufacturing sector compared to other industries. During the boom years, private equity firms invested less (as a percentage) in manufacturing companies, presumably to invest more heavily in technology and other faster-growing sectors. Conversely, during recessionary periods, there’s an uptick in manufacturing investments again.

I plan to look at other industries in the future. If you have a specific industry of interest for this type of analysis, send me an email with your request and I’ll add it to the list.

5 Comments:

Valerie McKinley 4 years ago

Good information — particularly the chart. I prepare Opinions of Value for companies at the very lower end of the middle market and, consequently, can use “visuals” in my work.

Andy Jones 4 years ago

Valerie – thanks for the feedback. Let us know if there’s a particular industry of interest to you to produce a similar chart.

Greg 4 years ago

Hi Andy,

Interesting analysis. I was wondering if you have data on PE investment in the food processing sector as well as in pharmaceutical manufacturing. I doubt it gets that granular, but perhaps there are specific areas within general manufacturing where there are increasing levels of PE investment (IE aerospace, automotive, etc).

Andy Jones 4 years ago

Greg,

Thanks for your message. We do have PE-owned portfolio companies in the “food processing” (~20) and “pharmaceuticals manufacturing” (~50) sectors in the database. That said, there are likely not enough data points when you get this granular to show a similar trend line as I showed for manufacturing. Feel free to call us directly to discuss further. 512-777-1010.

Andy Jones 4 years ago

Greg – also have a look at some of our follow-on studies, like this one on the Food sector.
http://blog.privateequityinfo.com/index.php/2017/11/29/private-equity-investment-trends-in-food-companies/