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 motives (defence) and economic cyclicality (aerospace), long term market fundamentals are favourable, driven by strong demand from globalisation, and a keen appetite for technical innovation and greener technologies.
- Automotive: In the current economic environment the automotive industry is faced with an unprecedented decline in demand combined with a significant shift in consumer preferences. Amongst the most successful operators in this environment will be functional specialists and those businesses who focus on critical components around fuel efficiency and solutions for lowering gas emissions.
- Chemicals: The companies that succeed in this challenging environment benefit from high barriers to entry, a differentiated product offering difficult to substitute, a partner approach to customers, and are well-differentiated through high levels of specialist know-how.
- Construction and building materials: Whilst investment in infrastructure in emerging economies continues, albeit at a slower rate, there is increasing confidence in the likelihood of the USA upping infrastructure investment levels to help boost the economy. In the developed world, construction prospects are generally much 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 specialised products to automotive, military and medical buyers.
- Industrial manufacturing: In this broad sector, sustainable advantage is typically held by businesses with innovative technologies and compelling brands, who can achieve a strong international presence through organic growth or acquisition.
- Paper, packaging and print: Growth rates are modest as many markets mature and the sector faces overcapacity and volatile raw material pricing. 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.
