Private Equity investors typically invest using two basic strategies. They either acquire a company in an entirely new industry, called a “platform investment” or they leverage the investment in a portfolio company they already own by acquiring a complementary or similar company. This is called an “add-on investment”.
Many PE firms have put aside platform acquisitions for the moment and are focused on add-ons. For one, they are having a hard time finding good platform companies to acquire. In addition, the simple fact is that, and no surprise here, many of their platform companies are struggling and could use the help. Finally, add-ons are much easier for the firms to take on since they already know the industry, thus they typically will look at much smaller companies for an acquisition.
What types of companies are PE firms looking for in an add-on?
Well, for any company you can almost always find a PE firm that has a similar portfolio holding. However, I did run across a list of industries that private equity firms are invested in, and are looking for add-on acquisitions in:
Manufacturers of metal parts and assemblies for the aerospace industry
Manufactures of OEM and aftermarket aircraft parts sold to repair stations and airlines
Manufacturers of electrical enclosures, cabinets or consoles for various industrial end markets
Manufacturers of low volume, quick turn printed circuit boards (PCBs) for prototype, R&D, OEMs
Manufacturers of filters, foam media, paneling, system racks, cooling fans etc. utilized for telecom or computer electronics
Manufacturers and/or distributors of products sold into data centers- i.e. transformers, voltage regulators, lithium-ion batteries
Manufacturers of equipment utilized by cable TV operators
LED lighting products serving niche markets
Manufacturers of consumable HVAC and refrigeration parts sold to contractors, revenues
Outsourcers of highly engineered medical injection molded products to OEMs
Manufacturers of less invasive medical devices and components
Manufacturers of niche medical consumables/disposables sold to hospitals, labs, physician offices etc., i.e. consumable plastics, surgery or nursing kits, wound care products, tubing
Manufacturers supplying the wind and solar energy industries
Manufacturer of bridges and bridge components for heavy construction
Manufacturers of corporate identity products- i.e. signage/graphics, marking devices, ink products, logo products
Manufacturers of credit cards, gift cards, and other related financial payment cards
Private label manufacturers of frozen pizzas or appetizers
Manufacturers of salty snack products
SERVICE AND DISTRIBUTION
Direct mail companies producing higher quality materials and having direct contact with end customer
Data storage management services including archiving, digital imaging, destruction etc.
Providers of web hosting, collocation, and data center solutions for businesses
Suppliers of used or refurbished computer networking, storage, server, or telephony equipment to medium and large companies
Providers of video surveillance and security solutions for commercial and/or government/homeland security,
Short-term rental providers of audio/visual, computer, and/or other technology to conventions, tradeshows, and other special event markets
Providers of rental equipment for movie and television industries
Outsource providers of mobile television and/or radio broadcasting, studios, or LED and mobile screens
Outsourced insurance claims services providers
Providers of patient screening and Medicaid eligibility services
Healthcare accounts receivables/revenue cycle management services including billing, coding, collections etc.
Operators of urgent care/walk-in healthcare clinics with ten or more locations
Respiratory therapy services with or without DME
Healthcare services delivered directly to residents in senior care facilities- i.e. physical therapy, mental/behavioral health, dentistry, geriatric medicine etc.
Providers of intraoperative monitoring services to hospitals and physician groups
Distributors of urological products sold into the home market
Providers of laundry equipment/rooms for apartments/condos, colleges, or other institutional venues
Warehouse or logistics companies with a food or food-related customer base, geography open
Providers of corporate and/or consumer incentive programs
Direct to consumer catalogs of home d?cor, gifts etc. aimed at mid to upper income consumers
Emergency response, disaster recovery, site remediation and related services companies
Solid waste collection, portable toilet providers, street sweeping services
Liquid storage and disposal industrial tank rental companies
Providers of technicians, engineers and other outsourced maintenance services to the nuclear power industry
Non-destructive testing (NDT) or inspection companies serving industrial client bases
Sale and service of ATMs, kiosks, and cash dispensers