As the global economy experiences a deep and rapid transformation, companies across the general industrial sector are refreshing their business models. From chemicals and aerospace through to transport and engineering, businesses are finding new paths to competitive advantage in a world where trade is increasingly international and success belongs to fit, lean operators with distinct market positions.
With a wide view across the sector, and a presence in three continents, 3i is well-placed to work in active partnership with fast-growing businesses that thrive on change. The companies we support increase their scale, efficiency and profitability by streamlining operations and making strategic acquisitions. In many cases, Asia and Eastern Europe are critical to their plans, not simply as centres for lower-cost production but also as increasingly wealthy and attractive markets. The companies of greatest interest to 3i operate in eight areas:
- Aerospace and defence: In a sector traditionally affected by political risk and cyclicality, market fundamentals appear favourable, driven by strong demand from emerging economies, and a keen appetite for technical innovation and greener technologies.
- Automotive: As the prices of raw materials rise, and growth in European and American demand slows, successful operators will be those who focus on specialised capabilities, critical components and the opportunities offered by buoyant emerging markets.
- Chemicals: Pressure on margins is driving industry consolidation. The companies that succeed in this environment benefit from high barriers to entry, producing sophisticated products that are well-differentiated and reflect high levels of specialist know-how.
- Construction and building materials: The infrastructure boom continues in emerging economies. In the developed world, prospects are more subdued but opportunities remain in specialist sectors and for one-off events, such as the 2012 Olympics.
- Electronic and electrical equipment: 3i will focus on niche manufacturers, in a sector where there is a clear differentiation between ‘commodity’ producers and players who sell highly-specialised products to automotive, military and medical buyers.
- Industrial engineering: In this broad sector, sustainable advantage is typically held by manufacturers who have innovative technologies and compelling brands, and can achieve a strong cross-border presence through organic and acquisitive growth.
- Paper, packaging and print: Growth rates are modest as many markets mature and the sector faces overcapacity and raw material cost increases. However, selective opportunities remain in niche areas, such as supplies to the medical community.
- Transport and logistics: Ranging from aviation and shipping to mass transportation and logistics, this sector contains a number of attractive investment opportunities in well-protected and niche businesses, including ferry lines and airport ground handling.
