General Characteristics

  • Non-commodity
  • Strong barriers to entry
  • Often some engineering content
  • Typically diverse and esoteric channels of distribution
  • Minimally cyclical
  • Less subject to commodity price swings
  • Strong, defensible market share

Industrial Product Manufacturing

  • Mission critical (got to have vs. want to have)
  • Typically not solely tied to major capital expenditures
  • Positive to have a service component or potential thereof
  • Often products with higher levels of engineering content and/or customization
  • Examples:
    • Test & measurement equipment
    • High margin consumables & disposables
    • Specialty chemicals or formulated products
    • Defense (not closely tied to headcount)
    • Aerospace (for stable platforms)

Consumer Product Manufacturing

  • Enthusiast driven customer base
  • Non-commodity orientation
  • Diverse customer base (low concentration to big box retailers)
  • Not fad or fashion oriented
  • Examples:
    • Performance automotive aftermarket
    • Hunting, fishing, etc.
    • Health and fitness products
    • Adventure related sporting goods (camping, kayaking, climbing, etc.)
    • Medical related products (not tied to Medicare/Medicaid)
    • Other esoteric enthusiast sport niches

Industrial Services

  • Mission critical
  • Often services that preserve or maintain valuable fixed assets and/or improve the efficiency or quality of customers operations
  • Often performed in the field
  • Strong safety record is often a requirement
  • Technical know-how required (not everybody with a truck can compete)
  • Examples:
    • Erosion and corrosion prevention
    • Non-disruptive testing
    • Technical cleaning in industrial environments
    • Maintenance and repair services
    • Other service niches with high value-add, saving customers time and money

Distribution

  • Higher than average margins evidencing strong value-add (typically > 10% EBITDA margins)