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Article - November 10, 2024

Flow Control: M&A Opportunity Across End Markets

The flow control sector is vital to the industrial ecosystem, with strong demand from multiple end markets and several appealing segments, including pumps and compressors, valves, flow meters and controls, and more. 

Here, senior professionals in our Industrials Group discuss why flow control dynamics are capturing investor attention, and the key characteristics of leaders in the space.

Diverse Demand 

From growth in infrastructure spending and manufacturing reshoring to the energy transition and technology innovation, there are several dynamics signaling long-term demand for a broad range of flow control solutions. 

For example, the U.S. government has earmarked more than $500 billion in funding for infrastructure projects over the next five years.¹ “Flow control applications will be needed across a wide variety of infrastructure improvement areas, particularly in water-focused infrastructure initiatives,” says John Arendale, a managing director. 

The movement toward improving supply chain resilience and reducing dependence on foreign production is another trend bolstering flow control demand. “The continued build-out of domestic manufacturing capabilities will create steady pull-through demand for many different flow control products,” says Tim Webb, a managing director. 

At the same time, the energy transition is positively affecting the sector. In 2023, publicly traded companies alone invested over $5 billion in energy innovation projects.² “Much like rising infrastructure and manufacturing spending, clean energy investments and the optimization of energy retrieval methods are also generating pull-through demand for new flow control systems and solutions,” adds Webb.  

Finally, companies across industries are rapidly adopting new technologies and digital solutions for improving operations, including innovative flow control applications. “Companies switching to flow control automation solutions are seeing reduced downtime, improved throughput, and better facility utilization,” says Brandt Carr, a director. “These benefits are motivating more companies to implement advanced flow control products, even if their legacy products don’t require replacement.” 

Fragmentation Remains

Flow control’s many long-term demand drivers bode well for both manufacturers and M&A investors. “These tailwinds are creating attractive growth for flow control companies, and significant M&A opportunity in the sector,” says Arendale. 

In fact, between 2019 and 2024, approximately 950 transactions were completed in the space.³ Despite this activity, the flow control market continues to be highly fragmented, offering plentiful opportunities for both new platforms and add-ons. 

As they focus on growth, companies are also increasing profitability through operational improvements. “Many flow control companies could benefit from LEAN implementation, footprint optimization, and technology adoption—all capabilities that investors often bring to their acquisitions,” says Carr. 

Aligning to Market Tailwinds

With long-term demand from several industries, flow control offers many paths to growth. Across these opportunities, investors are prioritizing several common traits of leading companies, including product development, technology, innovation capabilities, mission-critical product applications, and a presence in expanding markets. 

“Investors should also consider how well a company is aligned to take advantage of the sector’s prevailing market tailwinds,” says Arendale. “Businesses that are positioned to capture demand driven by infrastructure, manufacturing, energy, and technology spending have tremendous upside.” 

For our latest report on flow control’s M&A potential or to discuss these opportunities in more detail, please contact our senior bankers. 

  1. EY, Reshoring Initiative, McKinsey & Company 
  2. International Energy Agency 
  3. HW Research