A Chicago-based private equity firm that opened an Austin office last year recently closed $887 million in capital commitments between two funds.
Founded in 2017, Core Industrial Partners raised $685 million for its third flagship fund, Core Industrial Partners Fund III, which will be used to acquire manufacturing and industrial technology businesses. A second recently closed fund, Services Fund I, with $202 million in capital commitments, will be more concentrated on the industrial services sector.
The firm, which also has an office in Cleveland, previously raised $230 million for its first fund in 2019 and $465 million for its second in 2021.
The funds focus on what are projected to be multitrillion-dollar markets — $2.8 trillion for U.S. manufacturing and $3.4 trillion for U.S. industrial services.
Core Industrial Partners invested in several Texas companies between 2019 and 2022. That includes orthopedic maker Centex Machining in Round Rock and laser component maker Laser Manufacturing in Pflugerville. Both are now part of Fathom. It also invested in LED lighting product company Saylite in Carrollton and precision sheet metal services company EPMP in Seguin.
Several of its leaders now live part-time or full-time in Austin, including Managing Partner John May, Partner Matt Puglisi and VP Nick Longtin. Core currently has 33 employees but is planning to add about 20 more over the next couple years, including five new employees in Austin for roles including investor relations and portfolio associates.
May said now is the best time in his lifetime to invest in the industrial sector, citing recent reshoring initiatives, which aim to bring manufacturing jobs back to the United States, as well as the rise of new technology and increased public sector support,.
A record of nearly 344,000 U.S. jobs were announced due to reshoring or foreign direct investment in 2022, according to Reshoring Initiative, with an additional nearly 366,000 jobs projected for 2023. Since the manufacturing low of 2010, an estimated 2 million jobs have been brought back, or about 40% of what was lost to offshoring.
"The Midwest will certainly be a winner (of recent reshoring trends), and we own a number of Illinois-based companies. Our most recent one was a company called General Converting, based in Bolingbrook," May said. "When you look at the Midwest and the state of Illinois, I do think there's a rise of potential manufacturing as a result of reshoring."
May also wants to take advantage of the rise of technology in the industrial sector and what many are dubbing Industry 4.0, or the fourth industrial revolution.
"There's a whole redesign of the supply chain that's happening as a result of these technologies," he said. "We think there's a real effort to expand technologies that are more affordable to operate plants and equipment more efficiently and/or semi- or fully autonomously. So when we look at the impact of technology over the next decade, we're extremely bullish with AI automation, robotics and other types of drivers that interface with that."
May expects Core Industrial Partners' flagship fund to make six to eight investments over its life with an additional 10 to 15 add-ons.
"So anywhere from 10 to 20 investments per year," he said.
The services vehicle fund, which will be largely headquartered in Cleveland, is expected to make five to 10 investments per year.
"You look at where Cleveland is located, it's very much the gateway to the Rust Belt, going all the way up through Upstate New York," he said. "So we've desired to put an office there just because of the connectivity and [we're] bullish on what's happening in that Rust Belt area, that conversion of companies leveraging more technologies."
Austin Inno's Brent Wistrom contributed to this report.
