Mid-Market Industries We Are Watching

As we mentioned in our last post, we believe most middle market companies fall somewhere on a spectrum between playing defense and playing offense. They are either trying to survive, or they are on the other side, doing business (perhaps even a lot of business) and cautiously trying to grow. No company is doing things the way they always have.

Right now, we are watching a few specific industries that may be closer to playing offense than defense.

Essential product manufacturing

Our government has deemed certain manufactured goods as “essential,” including:

– Chemicals

– Medical equipment/instruments

– Pharmaceuticals

– Sanitary products

– Telecommunications

– Microelectronics/semi-conductor

– Agriculture/farms

– Household paper products

The demand for these products is high and many facilities are working hard to keep up while also protecting their own workers. We do not expect demand to lower anytime soon and plan to keep an eye on these businesses as we transition through the next year. Winners in this space will keep their product quality high, while being nimble in the ways they address employee and customer safety.

eCommerce tools

For the time being, retail as we know it has been dramatically disrupted. eCommerce platforms are a key part of connecting retailers with their customers, to varying degrees of success. We believe this period in history will weed out the less effective eCommerce platforms and provide opportunities for the winners to shine. Online shopping is not going to drop any time soon. We’re keeping an eye on this industry to see how it evolves and innovates to meet the needs of consumers and retailers.

“Work from home” supporters

Perhaps even more than online retail, the demand for work-from-home tools skyrocketed in mid-March. Despite being relatively common since the late 1990s, more people than ever before are considering working from home to be a long-term option. We see their “support team” as a broad range of products and services that enable the home office to be more effective, efficient and comfortable. Think everything from virtual meeting technology and collaboration tools, to standing desks and ergonomic chairs. In addition, we are seeing a lot of activity with IT consulting and infrastructure firms as well as AV integration firms. We would expect the demand for these products and services to remain high over the six to twelve months, with innovators soaring above the pack.

Healthcare

Rightfully dubbed the heroes of the pandemic, the entire healthcare industry is working at breakneck speed right now to come up with the solutions the public needs to stay well. Those directly working on the pandemic response have been busy. Those who provide more routine or elective care will be returning to work in the coming weeks to see patients who have been waiting for support.

We’ve written in the past about changes and consolidation in the specialty medical practice space. In the coming months, we may still see those trends hold as practices look for solutions to grow and survive.

Construction

There is no question that demand for construction is changing, but it is still there. Experts expect the industry to evolve in many different ways, from slower timelines and recalibrated supply chains, to increased union involvement and a deeper focus on worker safety. As mid-market companies respond to these changes, we’ll be watching the space for new opportunities and consolidation. Like so many other industries, the winning companies will be nimble and able to respond effectively and creatively to the changing times. Companies with significant service components (i.e. HVAC, plumbing, etc.) will weather the storm better than others and continue to be attractive acquisition targets once the dust settles.

Business continues to evolve

Did you know that Paycheck Protection Program (PPP) loans under $2m will be deemed to have made the required certification concerning the necessity of the loan request in good faith and will be safe from review by the Small Business Administration (SBA)? Or that the rules are changing not only for when you may file your taxes, but also for how you manage your company’s 401(k) plan? We’re right there with you, working with firms like Stephano Slack LLC to stay on top of this new and evolving landscape. Contact us for a confidential discussion of how to think about and take advantage of opportunities appropriate to your specific situation.