“The North American industrial base is probably the best time I’ve seen in my lifetime to invest in” is a bold statement. It’s worth listening to when it comes from the man behind a company wielding $1.6 billion in capital.
I spoke with John May, Managing Partner at CORE Industrial Partners, a private equity firm with a strategic focus on advanced technologies and industrial services. CORE’s investment philosophy is aligned with broader economic and technological trends, like the rise of Industry 4.0, automation, and what some view as a transition to a multi-polar world.
May is bullish on the additive manufacturing sector, where “longer-term dynamics and demand signals” point towards prolonged outperformance in the coming years.
May, who splits his time between Chicago and Austin, outlined how CORE Industrial Partners has rapidly expanded since its establishment. “I founded CORE, putting together the original thesis back in 2016, and we opened our first office in early 2017,” May shared. This ambitious start was quickly followed by the firm’s first investment in December 2017.
May’s background as a seven-time CEO and an experienced private equity investor has been instrumental in CORE’s growth trajectory. From an initial team of eight, the firm has expanded to 36 members, bolstered by a recent hire of three new employees. In a short span of five and a half years, CORE has acquired 50 companies and raised over one and half billion dollar.
Portfolio companies include Fathom, Re3dtech, 3Dxtech and GPI Prototype and Manufacturing Services.
CORE Industrial Partners: Pioneering Industrial Sector Investment with a Unique Approach
May outlined the firm’s distinctive approach in the competitive private equity (PE) market, particularly in the manufacturing and industrial sectors. The firm’s investment thesis is divided into three macro-segments: manufacturing, industrial technology, and industrial services. Highlighting their dynamic approach, May explained, “We invest in manufacturing, industrial technology like 3D printing and AI, and industrial services.”
“We’ve invested in and operated in every single industrial vertical in North America,” May said. Domain expertise, combined with the founding partners’ backgrounds as former operators, gives CORE a unique edge in connecting with business owners, entrepreneurs, and management teams. “Three of the four founding partners are former operators,” he noted, underscoring the practical experience driving the firm’s strategy.
The ability to empathize with and understand the challenges of growing a business sets CORE apart in the PE landscape. “We’ve built companies, scaled them, and done it through multiple economic cycles,” May explained, emphasizing CORE’s track record.
The firm recently raised two funds to support these sectors, reflecting a targeted investment strategy. A flagship fund of $685 million was raised earlier in the year, alongside a separate $202 million fund dedicated to industrial services. “In the technology sector, we range from 3D printing to applications around machine learning and AI automation, and we’ve been recently focused on aerospace in the services sector.”
CORE Industrial Partners’ Strategy in a Multipolar World: Emphasizing North American Investment
The pandemic illuminated how fragile our frictionless world is and how susceptible nations are to supply chain disruption. Amid the geopolitical shift towards a multipolar world, May emphasized the growing importance of North American industrial assets, underscoring the unique opportunities presented by the current geopolitical dynamics. He pointed out the reshoring of supply chains back to North America, as a critical trend.
May highlighted driving factors such as macro trends around mass customization and on-demand manufacturing, which necessitate production closer to the point of consumption. Advanced technologies like 3D printing, which streamline manufacturing processes, and the evolution of smart factories leveraging data in novel ways, are also pivotal.
He also noted the changing cost dynamics with China, mentioning that “China’s [costs have] become much more on par from an overall cost perspective,” citing factors like rising energy and labor costs, transportation expenses, and commodity prices. This shift has made North American manufacturing more competitive.
Moreover, May touched on the intersection of public and private sectors in securing critical supply chains, especially in light of dependencies on semi-hostile countries. He referred to semiconductors as a prime example, highlighting recent legislative efforts to boost semiconductor production in the U.S. “I think we manufacture roughly, you know, less than 15% of the chips that we consume in the U.S.,” May remarked, pointing out the critical need for increased domestic production.
The discussion extended beyond semiconductors, encompassing other sectors like aerospace, defense, medical, and food, all impacted by global supply chain dynamics. The Russia-Ukraine conflict, May noted, has had significant effects on the global wheat supply, further stressing the importance of localized supply chains.
Strategizing Investments in 3D Printing and Automation
Addressing the concern of market saturation in the 3D printing industry, May revealed CORE’s preference for investing in non-monopolistic markets. “We like to invest in fragmented markets, where there are multiple ways to play the value chain,” he stated.
May highlighted the long-term momentum and growth tailwinds of the 3D printing industry as key indicators of its viability. He emphasized the industry’s early-stage adoption of new technologies and the gradual reduction of price points as significant demand signals. “There are strong longer-term dynamics and demand signals that we think are going to be favorable for some period of time,” May remarked, signaling confidence in the ongoing transformation of the industry.
Further expanding the discussion to automation, May noted CORE’s involvement in this sector as well. One of CORE’s companies is a significant manufacturer of robotic parts and assemblies, focusing on automating warehouses and logistics processes. This investment aligns with the firm’s strategy to tap into industries with strong, long-term growth prospects.
The conversation also touched on the integration of machine learning and AI in hardware, which May views as another promising long-term trend. “We also do a fair amount tied to machine learning AI on the hardware side,” he mentioned, highlighting CORE’s forward-looking investment philosophy that targets sectors with significant growth potential.
Navigating Consolidation and Profitability in the 3D Printing Industry: CORE Industrial Partners’ Perspective
But what about the current state of consolidation and profitability within the 3D printing industry?
Addressing the industry’s consolidation phase, as previously highlighted, there is a significant level of fragmentation, especially on the hardware side, where early consolidation is evident. He noted the interesting trend of some original equipment manufacturers (OEMs) exiting the space, suggesting ongoing changes in the industry. “The hardware side seems to be the early consolidators,” May commented, indicating a dynamic phase of change. The service bureau side, while experiencing consolidation, remains fragmented. May predicted multiple consolidation cycles, underlined by long-term favorable growth trends, which he believes will create larger players in the space.
On the question of who is making money in additive manufacturing, May, focusing on CORE’s role as a private investor, “That’s not one of the things I can opine on with our portfolio,” preferred to reference public companies for insights into profitability. Despite the mixed profitability landscape, May remains optimistic about the future. He suggested that the profitability of technology manufacturers might improve as material science advances, enabling larger-scale production and better equipment utilization. “Our belief is this conversion from subtractive to additive is still in its very early innings,” May reflected, signaling a long-term view of the industry’s evolution.
May expressed that it is too early to pinpoint a definitive state-of-the-art technology in additive manufacturing, given the industry’s dynamic nature and the diversity of applications. “Our take [on state of the art]… is still evolving,” May explained. He emphasized the ongoing development and potential of various technologies to establish themselves in key industrial applications. With the industry still in its early stages, particularly outside of prototyping, he noted the absence of a single dominant use case or technology.
May highlighted areas like medical and aerospace as sectors where additive manufacturing is making significant advances. However, he also pointed out that there is a substantial amount of ‘whitespace’ or untapped potential in the industry.
Identifying Gaps in Additive Manufacturing: CORE Industrial Partners’ Analysis
May highlighted several key areas where the additive manufacturing industry is still developing. One significant area is the underutilization of toolmaking and fabrication operations for reducing time to market. He believes that this aspect has not yet scaled effectively. Another area May pointed out is the growing but still limited use of on-demand production of replacement parts from digital files, particularly in the aerospace sector. This approach aims to reduce spare parts inventory and simplify maintenance, but broader application is still forthcoming. “There is still a long way to go to create mass-scale customization and to do it in a cost-efficient way,” he noted, emphasizing the challenges in achieving widespread, cost-effective customization.
May also discussed the critical role of material science, which he views as an area ripe with opportunities for advancement. He mentioned the need for greater flexibility in creating 3D shapes without reliance on molds or tools, indicating an area where significant evolution is still needed.
Summing up, May stressed that while there are promising developments in the additive manufacturing industry, certain processes, particularly those involving time-consuming and costly steps, are yet to evolve fully. “It’s still evolving. It’s still not there yet,” he said, acknowledging the ongoing development in the sector.
CORE Industrial Partners on the Inflation Reduction Act and Uncertainty in US Politics
May, Managing Partner at CORE Industrial Partners, shared his perspectives on the implications of the Inflation Reduction Act for manufacturing and the uncertainty surrounding the upcoming 2024 United States presidential election.
Regarding the Inflation Reduction Act, May expressed a positive outlook, highlighting its potential benefits for industrial production in the US. “There’s a number of favorable things from manufacturers that were adopted… that will boost industrial production in the US,” he commented, signaling optimism about the legislation’s impact on the manufacturing sector. He also noted the importance of ongoing needs in the industrial sector, particularly regarding technical training and advanced technology training.
When asked about the forthcoming North American election and the possibility of a change in political power, May refrained from making predictions. He acknowledged the complexity and unpredictability of the current political landscape. “I have no prediction. It’s tough to understand on either side of the aisle, what’s happening,” May stated, indicating a non-partisan and cautious approach to the political climate.
May sees the Inflation Reduction Act as a positive development for US manufacturing, citing several aspects of the legislation that could boost the industry. However, when it comes to the political scenario and its implications for manufacturing, in our conversation, May chooses to remain neutral, avoiding speculation.
May paints a compelling picture of an industrial renaissance unfolding across North America. Amidst global shifts and technological advancements, May’s insights underscore a strategic alignment with macroeconomic trends and a keen focus on emerging sectors like additive manufacturing and automation. CORE’s proactive approach in capitalizing on fragmented markets, coupled with its robust investment in advanced technologies, positions it uniquely within the private equity landscape. CORE Industrial Partners is actively shaping the future of industrial services with a strategic blend of deep operational expertise and a progressive investment outlook. As the global economy shifts, CORE stands as a key player, propelling innovation and reinforcing North America’s role as an industrial leader into the 21st century. The firm’s dedicated approach to understanding and adapting to industrial changes represents a crucial move towards maintaining economic growth and technological edge in a competitive global landscape.
Featured image shows The CORE Industrial Partners Lobby. Photo via CORE Industrial Partners.
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