The sector Industrials is the main sector to a variety of subsectors that include businesses engaged in the manufacturing and maintenance of products.
Within the CFI group, Industrials are a major strategic focus where the member firms have been able to build a strong knowledge base and significant relationships within the industry, banks, private equity firms, and insolvency administrators.
Industrials include the following subsectors: Aerospace & Defense, Automotive, Chemicals, Energy, Machinery, Metals, Paper, Plastics & Packaging, Printing, as well as Transport & Logistics.
Aerospace & Defense
The Aerospace & Defense sectors are global sectors, with the key companies originating from the US, UK and France. The Indian market has recently undergone significant structural changes, which represents a major opportunity. In addition to the Original Equipment Manufacturers, the sectors encompass vast and complex supply chains, extensive research and development, and maintenance and service organizations which support the sector.
The Defense sector includes military armored vehicle, tank and tank component manufacturing, warships, submarines and underwater systems manufacturing as well as missile, weapon and auxiliary equipment manufacturing and distribution. The share of Electronics and C4I systems (Command, Control, Communications, Computers & Information) has dramatically increased in defense spending over the last 10 years. Global Defense spending amounted to USD1,473 billion in 2008, having increased significantly in recent years to reflect war spending. Defense spending budgets are being constrained by governments as they seek to reduce fiscal deficits, creating an uncertain outlook for defense firms.
Aerospace includes the development and manufacturing of a broad range of products: civil and military aircraft, aero-engines, helicopters, unmanned aerial vehicles, space launchers and satellites as well as systems and equipment. It also comprises maintenance and service companies which carry out repair, training or other activities linked to the different products. The Aerospace sector was estimated to be worth USD 183 billion in 2008. The aviation industry is forecasting a reversal of air traffic declines in recent years with 5.5% growth in 2010, although overcapacity remains an issue within the industry.
The CFI group has extensive relationships with companies operating in and serving the Aerospace and Defense sectors, and with the private equity firms interested in these sectors.
The CFI group’s profound knowledge and vast relationships in the automotive industry is based on many years of transaction advisory services within the sector, which comprises the complete value chain of transportation equipment manufacturing. Key markets covered are Germany, the USA and India, where the automotive industry historically is an important economic factor.
OEMs and suppliers face major changes due to several reasons: the economic crisis, legal impacts linked to emissions regulations, the necessity for technological changes, as well as shifting sales markets leading to overcapacity in Germany and the US.
OEMs and suppliers meet these challenges by co-operations, joint-ventures and other intensified M&A-activity. Reaching the critical size and closing technological gaps will be key measures in this situation, both for OEMs and suppliers.
While consolidation for OEMs has been going on in both the passenger cars and the commercial vehicles segment, the M&A-activity in the respective supplier industry is expected to gain in volume. Distressed transactions will be playing a major role.
The CFI group has been active in M&A advisory and restructuring projects in the chemicals sector (base chemicals, active pharmaceutical ingredients, and specialty and fine chemicals) for over two decades. With one member firm having a dedicated team focusing exclusively on the specialty chemicals sector, The CFI group incorporates a unique combination of expertise:
Deep insider knowledge of the specialty chemicals industry + international M&A experience.
The chemicals industry, especially in the traditionally strong markets of Europe and North America, is facing pressures towards consolidation mainly due to four factors: Price erosion due to increased competition, mainly from the Far East; increasing “commoditization” of once highly specialized products; growing customers’ negotiation power, mainly due to consolidation in the end markets; last but not least, continuously increasing raw material prices, driven by the demand for crude oil in the developing countries.
Even though particularly the European specialty chemicals sector is still characterized by small- and medium-sized enterprises, consolidation will continue. The CFI group is ready to contribute its share to this consolidation process and the future well-being of the chemicals and specialty chemicals industry in the world.
The energy industry comprises all kinds of business models in the utility sector in general, such as power generation, power transmission and power distribution, including all structures that are integral parts of power networks.
While the renewable energy sector consists of a wide range of global industries and business models, The CFI group’s renewable energy group specifically has experience with operators and producers, equipment and component manufacturers and distributors, as well as business service providers focused on a variety of renewable energy sources, including wind energy, photovoltaic and thermal energy, biomass energy, marine and hydropower and geothermal energy, as well as biodiesel and bio-ethanol.
The machinery sector is cyclical. It tends to follow the path of the general economy. During the recent global economic downturn, capital investment levels decreased significantly, negatively impacting machinery manufacturers. As a result, many companies were forced to close, sell, or implement turnaround plans to improve their operations. With an improved economic landscape, the machinery sector is once again ripe with activity triggered by new capital investment. In addition to improving economic outlooks in most developed regions, demand in emerging markets also will contribute to a general industry recovery.
The CFI group relies on its long and profound track record in both the machinery and engineering sector in order to support the consolidation and the need for financial advisory services.
The CFI group metals sector covers the entire value chain of metal producing and processing companies. Both ferrous and non-ferrous metals companies are seeing improvements in demand patterns as a result of most developed regions emerging from economic recessions. North American automotive production volume forecasts suggest robust demand for automobiles through at least 2015, for example. However, continued trepidation in Europe has caused foundries and steel manufacturers serving the automotive and machinery industries to lag behind.
The need for financing measures will continue to be a major undertaking for most businesses in this sector as companies seek to pursue growth opportunities coming out of the recession. The metals expertise across The CFI group has the capabilities and resources to assist companies and business owners navigate their M&A and financing needs.
The paper industry is in transition with increasing adoption of electronic and digital media. Traditional buyers, such as print media, are evolving into a primarily online presence; this lessens demand for paper products. While advertising has rebounded from the global economic crisis in 2008 and 2009, marketers are less focused on traditional paper advertising and concentrating on social media, social networking, and consumer brands’ online presence.
New opportunities exist for paper manufactures in emerging markets. Eastern Europe and Asia are drivers of growth through their consumption of paper products. In mature economies, paper has also seen a resurgence in packaging. With consumers increasingly environmentally conscious, renewable paper packaging is a major trend for several significant end markets such as food and agribusiness, health and beauty, and industrials.
Plastics & Packaging
Plastic products, whether utilized in industrial applications, consumer goods, packaging, or other areas, continue to experience growth as they replace legacy materials. More specifically plastic packaging businesses, particularly those serving food, medical, and other recession resistant end markets, have proven their stability through the most recent global recession and are highly valued businesses today. Overall, plastic is chosen for its low cost, performance characteristics, manufacturing flexibility, recyclability, and sanitation qualities versus materials such as paper, glass, and metal. Today, plastic and plastic packaging is used in nearly every industry with a supply chain of businesses that include USD 1 million molders to multi-billion dollar global resin suppliers.
As the industry has matured, from a base of thousands of private businesses founded after World War II, the need for consolidation has driven mergers and acquisitions. These acquisitions have been driven by aggressive private equity investors building platforms and strategic parties seeking to deploy cash reserves built from growth out of the recession. While this consolidation has created strong industry leaders in certain market segments, plastics remains fragmented both on a global and country specific basis.
The CFI group has been a part of this consolidation for over 10 years assisting thermo formers, injection molders, blow molders, blown and cast film manufacturers, sheet and profile extruders, resin providers, and other plastic processors with their strategic goals. M&A in the plastic and packaging industry will continue to expand via positive drivers including steady growth in packaging, product innovation in medical applications, and on-going customer demand for supplier consolidation among part and component manufacturers.
The printing market is very disperse and over-equipped, featuring a strong level of Capex Investment. As with many other industries, the present downturn will change the very nature of the business. Going forward, companies must focus on and improve the quality/price binomial, and that will only be possible if entrepreneurs recognize the urgent need for consolidation and buy, sell, and merge companies in order to optimize the present industrial structure. The printing industry covers all activities and business models with regard to making or publishing printed media like newspapers, magazines, books, labels, and in general visual communication materials in small, medium and large size formats. Technologies include offset, digital, flexography, screen printing, and letterpress.
Transport & Logistics
The global Transportation & Logistics (T&L) industry, which includes in-house and outsourced transportation by air, road, rail and sea; warehousing; distribution as well as third party logistics, has been extremely challenged by the volatile economic developments in many major economies as well as world trade. The industry remains massively fragmented and there is perpetual price pressure as contracts are retendered, concentrated and renegotiated. In a currently declining or at best no-growth environment, this means volumes become more hotly contested, which adds further pricing pressure. Alternatively T&L businesses have to seek growth in higher-growth trade lanes such as Intra-Asia. As a result of these trends, the successful players in T&L industry has been subject to are depending on significant international expansion and consolidation. To remain competitive and distinctive in changing markets, T&L businesses are expected to build specialist expertise, improve their information technology systems as well as provide solutions tailored to specific client needs. In the quest for growth, M&A has proven to be a successful mean to T&L businesses for securing their business objectives.
As a result of these trends, the T&L industry has been subject to significant international expansion and consolidation. To remain competitive and distinctive in changing markets, T&L businesses are expected to build specialist expertise, improve their information technology systems as well as provide solutions tailored to specific client needs. In the quest for growth, M&A has proven to be a successful mean to T&L businesses for securing their business objectives.