A Non-Executive Viewpoint: Growth and Transformation in Industrials

Duncan Cooper, Non-Executive Chair of two LDC portfolio companies – lift maintenance and repair specialist Deltron Group, and Texecom, a manufacturer of electronic security products and services – has a wealth of experience in the industrials sector, in both other non-executive and executive roles. This includes nearly two decades in senior positions at Grundfos Pumps, a global water pump manufacturer with an aftermarket pump repair division, including as its Managing Director for Western Europe and the Americas.

Throughout his career, he has supported a range of management teams to deliver growth, both organically and through acquisition. Here, he shares his view on what makes a successful industrials business, how the sector is responding to opportunity in technology and ESG and the areas where Non-Executives can add significant value.

Common characteristics of successful industrials businesses

“ The two key areas for all industrials businesses are people and focus. You can have a great product and great ideas, but having the right team of highly motivated people in place with their attention focused on the right areas is what’s really key to a business’ success.

“An important part of achieving this is having great leadership. In a sector marked by constant offering, process and technological innovation, management teams need vision to position their businesses on the right path for long-term growth, and clarity to avoid getting distracted by the ‘next new thing’.

“Part of this vision needs to involve preparing for ongoing challenges. Building resilient supply chains is one: many parts of the sector are still being buffeted by post-Covid disruption. Others include considering how to attract and retain staff, particularly in areas like production lines where traditional ways of operating are having to be rethought amid a new focus on flexible work and better work-life balance, and forging cyber resilience in a world where digital threats are becoming more common and more sophisticated.

“The good news is there’s real opportunity for businesses that can get this right. They’re likely to find themselves pulling ahead of their competitors.”

Thriving amid technological and ESG progression

“ While not getting distracted by fads, it’s important that management teams are able to embrace new technology and stay abreast of new developments. If they don’t, they risk getting left behind.

“This includes making the most of new technology. Here, different parts of the sector are moving at different speeds and taking different focuses. I’m seeing a trend in businesses – particularly at the larger end of industrials – that have traditionally been hardware manufacturers pivoting to, or launching, complementary digital or software propositions. For them, this is a real value-creator.

“That being said, there’s not been a step change in businesses applying new technology to their own operations, yet. Part is of this is because digital transformation projects can be expensive and complex to implement, particularly where it might require integrating with extensive legacy infrastructure – for example, machinery and systems that are decades old. But the right investments, made for the right reasons with the right backing and support, can really pay off.

Industrials sector M&A

“ The industrials sector is home to thousands of owner-managed businesses that are run as lifestyle operations. This creates significant opportunity for businesses to consolidate through M&A. Deltron is a great example of this, having made four acquisitions in the first two months of their partnership with LDC.

How a private equity partner adds value

“ Having a private equity partner on board can be transformative for an industrials business. It often means management teams have far more autonomy to own their decision-making, and it can come with a significant injection of resource and experience.

For example, its backing comes with access to its Value Creation Partners – dedicated experts who help management teams identify new ways to grow their businesses. This is something that I’ve already seen the power of first-hand in my experience with Deltron, and is particularly helpful in a sector that is so rich with M&A opportunity, but where effectively analysing and assessing that opportunity can take significant time and energy.”

“Importantly, LDC doesn’t push these resources on management. It’s very much there as something they can access as and when they need to, which is a reflection of LDC’s broader style of working with management teams, not dictating to them. This is an important point, as identifying working style is one of my top pieces of advice for any industrials business considering a private equity partner – you need to know who you’re sitting across the table from, and that how they operate can complement you.”

The role of the Non-Executive Director

“ To me, the real value – and skill – of a Non-Executive is being a great sounding board for the management team. This means being available to debate, discuss and support on strategy, all while allowing the management team to take the lead. Critically, they should be independent of both the investor and the management, not a conduit between the two.

“Non-Executives should also bring considerable ‘seen this before’ experience to a business, and skills to help navigate some of those big changes that industrials businesses are facing.

“The role of a CEO can be an incredibly lonely position. But it’s made all the less so with experienced support to hand.