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)