Pittsburgh Deal Activity: The economic impact of a manufacturing resurgence

 

The United States manufacturing industry has been resilient since the start of the decade, despite ongoing hindrances stemming from the COVID-19 pandemic such as supply chain disruptions, inflation and workforce shortages, as well as geopolitical uncertainties. Accounting for 11 percent of the U.S. Gross Domestic Product and 8 percent of the U.S. workforce, a robust manufacturing industry plays a vital role in powering domestic production and employment, as well as the overall global economy.

According to research performed by McKinsey & Co., the resurgence of U.S. manufacturing could result in roughly 1.5 million new jobs, primarily among middle-class workers residing throughout the Midwest region. While this influx of jobs would provide various economic benefits to hundreds of communities, the true economic impact would be realized across the U.S. through employment multipliers, which are indirect jobs created through manufacturers’ presence within a community. As employment multipliers consider industry linkages, consumer discretionary spending and tax revenue, the Economic Policy Institute estimates an additional 9.5 million jobs would be created as a result of 1.5 million manufacturing jobs.

In addition to the aforementioned labor benefits, the resurgence of U.S. manufacturing could help mitigate the reliance on imported materials, which have historically fueled domestic supply chains. As a result of the urgency created by the COVID-19 pandemic, U.S. manufacturers took immediate action to strengthen supply chains by increasing critical inventory, diversifying suppliers and localizing production and supply networks. Although residual risk will always be present, U.S. manufacturers remain confident that the improvements made as a result of the COVID-19 pandemic will pay dividends in future years.

M&A Market Activity

Domestic deal activity continued to slow in August 2022, as M&A activity reverted to near pre-pandemic levels. U.S. M&A deal volume for the eight months ended Aug. 31, 2022, declined 13.4 percent when compared to the same period in 2021, while disclosed deal value for the eight months ended Aug. 31, 2022, declined 16.7 percent when compared to the same period in 2021.

The Greater Pittsburgh M&A market has exhibited a similar trend as the broader domestic market, as deal volume for the eight months ended August 2022 was 26.7 percent lower than the prior year. Meanwhile, Greater Pittsburgh deal volume fell by 29.2 percent in August 2022 relative to August 2021.

With that being said, August 2022 saw the closing of several noteworthy transactions in Greater Pittsburgh, both from strategic and private equity acquirers. Incline Management LP., a Pittsburgh-based private equity firm, completed four disclosed acquisitions within the month, while Continuim Equity Partners, Matthews International Corp., CONSOL Energy Inc. and Vendilli Digital Group, among others, also made an acquisition during the month.

Deal Of  The Month

On Aug., 30, 2022, the Pittsburgh-based private equity firm, Continuim Equity Partners, successfully acquired COMTEC Mfg. Inc. Headquartered in St. Marys, Pennsylvania, COMTEC manufactures highly engineered production components from ferrous and nonferrous materials utilizing the powdered and sintered metallurgy processes. According to George Pilafas, a managing partner on Continuim’s investment team, “We are excited to partner with Dave DeLullo and the team at COMTEC. COMTEC is an ideal fit for Continuim’s mission, which is to acquire and support the growth of successful, family-owned manufacturing businesses in our region. COMTEC’s facility, modern equipment and talented team are a perfect platform for Continuim’s growth strategy in the powdered metal sector.” ●

Mike Kostandaras is an Analyst with MelCap Partners, LLC, a middle-market investment banking advisory firm. For more information on MelCap Partners, please visit www.melcap.com or email [email protected]