Gareth Mobley – CEO at DW3 Products Group and composite door manufacturer, Solidor – discusses the appetite for investment in manufacturing companies, and the growth potential of the sector in the coming years.
British manufacturing is widely acknowledged as among the highest quality in the world, with companies finding considerable appetite from across the globe for their products, and many running successful export businesses.
However, it’s also true that the UK plays host to some of the most innovative manufacturers, constantly pushing the boundaries and challenging the status quo.
Having a background in the fenestration industry, I have witnessed this first hand.
As CEO of composite door manufacturer, Solidor, our sole purpose was to provide an alternative to the boring front doors we had become accustomed to, utilising new technologies and designs.
With innovation comes interest from investors, and last November, we entered a partnership with private equity firm, NorthEdge Capital.
As part of the deal, DW3 Products Group was formed, an investment vehicle designed to provide investment and support to innovative businesses within the fenestration industry.
This is part of a wider trend currently sweeping the sector. In a recent survey by Deloitte, 77% of manufacturing companies said that they continue to look for acquisitions, with 60% expecting further activity in the next 12 months.
With confidence in the economy currently on the rise, businesses are looking to access capital and maximise growth, either through acquisitions or investment.
In particular, the British manufacturing sector is becoming increasingly attractive to investors. HL Plastics, the UK’s fastest growing vinyl profile extruder, was acquired by building products manufacturer Quanex for $145m in June 2015, while Masonite made the double acquisition of door manufacturers Performance Doorset Solutions and Door Stop to bolster its offering.
With the return of the public markets, we have also seen an increasing number of manufacturers listing on the stock exchange, beginning with the £78m IPO of Safestyle UK in December 2013.
We’ve also seen listings for manufacturers including Eurocell, Epwin and Entu; further underlining the appetite for businesses in the sector.
Having had experience of investment from both the business owners’ and investors’ perspectives, it has become clear that both sides are now actively seeking opportunities to partner with.
However, in order to attract the attention of backers, companies need to ensure they can offer something original, making innovation in manufacturing all the more important.
Here, it’s worth noting that the fenestration industry has been highly successful, with many of the high profile deals of the past couple of years coming from innovative businesses within the sector.
As a result, companies like Safestyle and Performance Doorset Solutions have gone for a premium, as investors recognise the potential for future growth.
In a marketplace revolving around such small items, product development is essential to ensure continued sales, and inevitably attracts interest from investors.
With this in mind, there are many manufacturing companies that require a change of mindset when looking to unlock growth through accessing finance.
While playing it safe with a tried and trusted business model may deliver slow but continuous growth, investors are now looking to back companies with a new and exciting approach.
When looking for an investment, business owners must also ensure that they pick a management team that not only understands the business, but has the same strategic aims for the future.
Many private equity firms say that they invest in management teams, but it is equally important for the management team to understand their investors, and realise what value they will add.
The manufacturing sector has been one of the UK’s economic strongholds for decades, and businesses must continue to reinvent themselves if they want to attract investment, and solidify the sector’s future.