Since its founding more than 35 years ago, Boston-based The Watermill Group has kept an eye on manufacturing companies. Of course, given the ebbs and flows of the market, investing in American manufacturing companies hasn’t always been an easy or even a good strategy. In fact, most companies have been outsourcing their manufacturing needs for the last 20 years to places where the cost of labor has been cheap, thus making it extremely difficult to own a successful manufacturing company in the United States. However, the development of horizontal fracking technology in the energy sector, coupled with increasingly higher costs of outsourced labor and lower quality production from non-North American countries, has caused companies to reassess their manufacturing policies.
As a result, many companies are now bringing their manufacturing operations back to North America. Sensing this shift, Watermill renewed its commitment to manufacturing by purchasing the Dresser, Wis.-based company Tenere Inc. in December 2012.
When assessing the value of a manufacturing company, Watermill outlined three main drivers. “There are three inputs that manufacturers have to look at: the cost of raw materials, labor costs and energy costs,” says Steven E. Karol, managing partner and founder of Watermill, noting that the resulting lower cost of natural gas stateside is translating into lower manufacturing costs domestically. “Energy is a major input, and the cost of it is decreasing. Tenere can do great here and so can many other companies with these favorable factors playing a positive role.”