Industry Research: April 2025
This article provides an update on Netropy Partners’ ongoing research into industries that are attractive for investment.
Within these industries we will source potential acquisition targets that score well against the following criteria, making them suitable for further analysis and outreach to owners.
Financial | Business |
▪ Recurring, re-occurring and contractual revenue ▪ Annual revenues over £5M ▪ Annual EBITDA over £1M ▪ Cash flow positive for multiple years ▪ Low cyclicality ▪ Low ongoing capital expenditure requirement | ▪ Strong middle management ▪ Private and concentrated ownership ▪ Motivated seller ▪ Opportunity to add value ▪ Low customer concentration and churn |
Case studies are based on actual companies; however these are not all actively being marketed for sale. While some of the companies described are being approached, the aim of this document is to provoke discussion about compelling industries to further this research.
Specialist electrical components
Why I like this: Highly scalable business with opportunities in high-growth industries (electrical energy transition, automation, AI & data centres).
Analog electronic components remain critically important even in today's software- and AI-driven world as without reliable physical connections, the transmission of data and power between devices (and ultimately, the operation of any software or AI system)is impossible.
Connectors are critical to the function of data centres, autonomous vehicles, industrial automation and aerospace and defence - all rapidly growing industry sectors.
Connector manufacturers and suppliers are routinely acquired by larger groups such as Amphenol (acquired Positronic and 30+ others), Trexon (acquired multiple companies) and TE Connectivity (27+ companies).
Example company (proprietary search)
A company established in 1983 and majority owned for 40+ years by a family, with no obvious family successors. With EBITDA of £1M (est.) and 30-40 employees, it has shown stable performance for many years. The company distributes connectors for a wide range of industries (aerospace, automation, machine vision, medical) and also has its own line of OEM products made in Asia.
Strengths | Weaknesses |
▪ Niche industry with knowledge barrier to entry ▪ Longstanding customer relations ▪ Elderly majority founder/owner with no obvious succession plan. ▪ Managing Director at retirement age with no obvious successor. ▪ Diverse customer base, mostly repeat revenue ▪ IP in connector design | ▪ Proportion of recurring revenue unclear ▪ May carry significant inventory |
Opportunities | Threats |
▪ Invest in better marketing of products and services ▪ Secure preferred supplier status / key component specification ▪ Rationalise & focus product range | ▪ Trade tariffs reducing competitiveness ▪ Competition from global suppliers |
Industrial automation
Why I like this: niche industry serving multiple market sectors with a focus on quality and innovation over cost.
Specialist services and equipment necessary to scale-up chemical and biological processes from R&D through to manufacturing.
Industry growth is driven by the increased importance of biological pharmaceuticals and speciality chemicals to the UK's future economy. Barriers to entry can be high due to specialist knowledge and long sales cycles. Customers are typically well-funded pharma and industrial companies that are not price-sensitive, supporting high margins.
Example company #1 (proprietary search)
A company established in 1989 providing automation equipment to chemistry labs. Products include batch reactors, robotic assistance equipment and continuous-flow chemical reactor vessels, all designed to scale-up the manufacture of high-value chemical products.
FY2024 revenue £10.0M (est), EBITDA £0.8M (est), 10 employees including management team. The company founder, aged 65, is the majority shareholder.
Strengths | Weaknesses |
▪ Longstanding customer relations ▪ High-value, high-margin products ▪ Proximity to major scientific hub of Cambridge/London ▪ Niche industry with high barrier to entry and few direct competitors | ▪ Mostly project-based revenue ▪ Limited international reach ▪ Small team, some owner-dependency ▪ Requires highly skilled staff |
Opportunities | Threats |
▪ Develop recurring revenue streams, eg calibration/maintenance, ▪ Expand geographic reach via overseas marketing & distribution | ▪ Rapid technology changes could lead to obsolescence of products/services ▪ R&D cost of capital could affect customer purchasing decisions |
Example company #2 (proprietary search)
A company established in 1998 providing process instrumentation to industry customers. Products include gas analysers, data loggers and control software, leading to a mix of project-based (system design) and repeat (maintenance & calibration) revenues.
FY2024 revenue £8.0M (est), EBITDA £2M (est), 12 employees including management team. The company founder, aged 65, is the sole shareholder.
Strengths | Weaknesses |
▪ Management team in place ▪ Provider of business-critical products & systems ▪ Strong & sometimes exclusive supplier relationships ▪ Recognised leader in industrial instrumentation | ▪ Mostly project-based revenue ▪ Limited international reach ▪ Substantial inventory |
Opportunities | Threats |
▪ Make more of recurring revenue streams, eg calibration/maintenance ▪ Expand geographic reach via overseas marketing & distribution | ▪ Competition from lower-priced online sellers ▪ Growth dependent on growth of customers' industries |
Data analytics
Why I like this: niche industry with a highly scalable platform and huge growth potential.
A rapidly growing industry focused on turning raw data into actionable insights for businesses. Examples include healthcare providers for analysis of patient needs and service economics; logistics companies for demand forecasting and operational efficiency; and financial services for risk modelling and fraud detection. The industry is growing because businesses are generating more data than ever and harnessing AI to exploit this data for operational efficiency and/or to enable new services.
Data analytics companies are typically tech-focused, offering a platform or service under a SaaS subscription model. Their competitive advantage comes from their individual domain focus.
Example company (from broker)
A specialised geoanalytics company serving global clients in energy, transport and renewables. They enable monitoring of critical infrastructure from satellite images, using their proprietary AI platform to detect significant events remotely rather than requiring costly regular physical inspections.
FY2025 revenue £1M with 76% gross profit and revenues doubling annually. 15 employees in the UK and, mostly, EU.
Strengths | Weaknesses |
▪ Subscription service with recurring revenues ▪ Proprietary IP ▪ Customers from multiple industries ▪ Highly scalable as a software platform | ▪ Overseas development team requires management ▪ Likely to require investment beyond purely working capital to continue growth ▪ Dependence on third party satellite data ▪ Need for continuous platform development |
Opportunities | Threats |
▪ Develop specialism in key profitable markets ▪ Shift resources from development to sales ▪ Move towards subscription model | ▪ Competition from larger players |