Navigating the Storm: Opportunities for Restructuring in Industrials

Brandon Mavleos, Sr. Director, Product Marketing - Investment Banking

The Industrials sector enjoyed a relatively healthy 2019, despite trade wars, slowed job growth, and other headwinds. Deal value in Asia Pacific’s industrial, manufacturing & engineering sector reached a 10-year high last year. While industrials proved resilient in EMEA, deals in the Americas were up just over a fifth in 2019 year-on-year. The year saw several high-profile spin-offs (e.g., Dupont) and a continued trend for many players to carve out non-core assets. Unfortunately, the market conditions of 2020 have not been so kind. Airlines are not the only entities hurting, as many industrial conglomerates, construction companies, and manufacturers make the conscious (or required) decision to shut down facilities. These actions, coupled with broken supply chains, and decreased commercial and consumer demand for product, paint a grim picture… at least in the short term.  

With all the economic volatility, it is crucial to step back and recognize where there are longer-term opportunities within the sector to engage with customers and react to a changing marketplace.  

• Sustainability:  Firms that can master sustainable or carbon-friendly products have an opportunity to set themselves up as attractive investment options. With the rise of e-commerce, the packaging industry is ripe for disruption as industry players continuously refine best practices. Likewise, the emergence of electric motors over the past decade will slowly become table stakes for commercial and agricultural vehicles. 
• Digital Transformation: The emergence of the Industrial Internet of Things (IoT) will have an immense impact on the sector, enabling the real-time monitoring of equipment performance and manufacturing efficiency. In fact, 56% of dealmakers say that the top reason behind industrial tech buys is to add complementary technology-enabled products and services to their businesses.  
• Focus on the Core: As the market continues to seesaw, many companies will likely wrestle with potential working capital issues. Some firms may start to think about selling off non-core assets or refinancing debt. Now might be a good time to focus on core business lines as the economy weathers the storm. 

Charting the Course Forward 

In volatile, emotionally charged times like the present, dealmakers should resist the urge to bunker down and take a wait-and-see approach. Better to evaluate practical options to weather the storm and, ideally, emerge stronger. For many companies, present circumstances offer a perfect opportunity for restructuring. That can mean divesting underperforming assets or winding them down until conditions change. It could mean refinancing debt—securing loan tranches differently, reevaluating maturities or yields, renegotiating repayment privileges. 

Regardless of the strategy you pursue, technology can play a role in enabling it. Consider our Datasite platform, which has supported Industrials through its VDR offering and superior 24/7 industry support for decades. Organizations preparing for an exit, for example, often lean on the auto-categorization and redaction capabilities of Datasite Prepare. In times when markets are volatile and emotions are high, industrials also lean on Datasite Diligence to avoid costly errors, allowing external and internal stakeholders to participate with ease in this process. Companies exploring their options often turn to Datasite Outreach to prospect market interest.  

If you do restructure, let Datasite help you automate manual effort and simplify the end-to-end process. Regardless of the strategy you choose, wise technology decisions can smooth the path forward.