How might Covid-19 affect the industrials sector?

Armstrong is working with PE investors and management teams to understand the new normal, identify risks and opportunities, and support management teams navigating this crisis.

This note looks at key themes for investors to consider in the industrials sector during this downturn, and the recovery to come. This note follows ones already published on Technology, Business Services, Financial Services and on ‘Covid-19 - impact, support, and opportunities’. Our next note will look at the events sector.


  • As a sector, industrials is one of the hardest hit by COVID-19 and is likely to be one of the slowest to return to normal.

  • Despite this, there will continue to be opportunities both in resilient (e.g. medical devices, critical supply chain, precision engineering) and snap-back (health & safety, innovation and procurement consultancies) sub-sectors.

  • Investors should make distinctions between target companies which have grown despite COVID-19, or because of COVID-19.

  • There may be opportunities for some portfolio companies to pivot into supplying new products and services, provided they have agile and proactive management teams & flexible supply chains.

  • Interest in Industry 4.0 is likely to increase both during and following the crisis, and genuinely tech-enabled industrials businesses should either be resilient or snap-back, depending on their end market.

Key themes – how investors can generate value from industrials during/after Covid-19

  • Taken as a whole, industrials is one of the worst affected sectors from COVID-19 in the short term, given the difficulties in transferring most operations to a remote working environment, long international supply chains, and reduced end market vertical demand.

  • The likelihood of staggered stoppages and restarts which differ across countries and regions will mean that sub-sectors which are reliant on global supply chains (e.g. automotive, aerospace) will likely be destabilised for some time.

  • However, some sub-sectors will have remained resilient or even grown during the crisis e.g. defence, medical devices/pharma, critical supply chain, suppliers into supermarkets.

  • For investors analysing potential targets, distinctions should be made between short-term resilience and long-term opportunity i.e. has the target grown despite COVID-19, or because of it? If the latter, then how well placed is the company to grow when we return to normal, or the ‘new normal’?

  • Potential snap-back sub-sectors include health & safety (both products and services), critical repair & maintenance services, innovation & supply chain/procurement consultancies, customs/import consultancies, and just in case (as opposed to just in time) supply chains. High mix/low volume precision engineering, a sub-sector in which the UK has a comparative advantage, is also likely to be either resilient or snap-back, depending on the verticals served.

  • For portfolio companies, where possible management teams should be considering how they can pivot (permanently or temporarily) to supplying adjacent products and services using existing capabilities, to open new opportunities during the crisis and beyond.

  • As in other sectors, but possibly more so in industrials, COVID-19 is also an opportunity for a thorough review of internal systems (e.g. ERP, CRM), working practices and operations with the aim of increasing efficiencies and reducing costs, which may lead to long term benefits, especially if technology can be leveraged.

  • Supply chains are likely to shift from a just in time philosophy to a just in case mindset. This will be characterised by dual supply, re-shoring, and repatriation of critical component supply.

  • For the future, in-depth analysis of end market drivers and likely impact of both the current situation and expected stop-start return to normal should be key to any investment thesis. Distinctions should be made between short-term COVID-19 impact and long-term attractive market & business fundamentals. There may well be opportunities to invest in currently struggling companies (either independently or as part of a buy-and-build) which operate in markets which are fundamentally attractive over the longer term.

  • Despite the hype around Industry 4.0, Armstrong is yet to see more than a handful of genuinely tech-enabled industrials businesses. COVID-19 may offer a litmus test as to whether some targets are genuinely tech-enabled (e.g. can continue manufacturing at volume due to automation), or not.

Analytical framework - how we modelled the likely impact of Covid-19

The Armstrong Framework model accounts for the likely impact of Covid-19 by grading a sector (and then subsector or company or a portfolio) across a range of key metrics. This allows us to generate an initial categorisation of pressured, resilient, or snap-back. From there, we take a more detailed look at a sub-sector or a company’s dynamics, to generate recommendations which maximise opportunities and minimise risks. For the industrials sector the key metrics are:

Risks and opportunities - how selected subsectors might respond to the challenges

The results of this analysis for selected industrials sub-sectors are as below. Note that this is an aggregate view and specific cases will depend significantly on verticals served;


1 block/red is likely most affected (“underweight”).

3 blocks/mid green is likely most resilient (“neutral”).

5 blocks/dark green is most likely to snapback quickly (“overweight”).

Note: we are happy to run specific subsectors and companies through our model and share the output and our insight with you. Please get in touch with our industrials sector experts below.

Next steps – how Armstrong can help you and your portfolio companies

If you would like to discuss specific companies or subsectors with our industrials sector experts, then please contact:

Matt McNally, Head of Industrials, +44 7894 736523,