Critical Manufacturing Sectors – Exempt from Closure During COVID-19 Crisis

critical manufacturing
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The US government recognizes some sectors as being critical to our security and infrastructure.

There are 16 critical infrastructure sectors whose assets, systems, and networks, whether physical or virtual, are considered so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof. Presidential Policy Directive 21 (PPD-21): PPD-21 identifies 16 critical infrastructure sectors.

Chemical Sector
Commercial Facilities Sector
Communications Sector
Critical Manufacturing Sector
Dams Sector
Defense Industrial Base Sector
Emergency Services Sector
Energy Sector
Financial Services Sector
Food and Agriculture Sector
Government Facilities Sector
Healthcare and Public Health Sector
Information Technology Sector
Nuclear Reactors, Materials, and Waste Sector
Transportation Systems Sector
Water and Wastewater Systems Sector

The “Critical Manufacturing Sector” Profile, As Defined By The Federal Government:

The Critical Manufacturing Sector processes raw materials and produces highly specialized parts and equipment that are essential to primary operations in several U.S. industries, particularly transportation, defense, electricity, and major construction. In 2013, the U.S. manufacturing industry contributed $2.08 trillion to the economy, representing 12.5 percent of the Gross Domestic Product. On its own, manufacturing in the United States would be the eighth-largest economy in the world.

Critical Manufacturing Sector products form the backbone of energy and transportation infrastructure in the United States. Many Critical Manufacturing Sector facilities also produce key elements or products for defense and are a part of the Defense Industrial Base Sector. A major failure or disruption in the sector could result in significant national economic impact and lengthy disruptions that cascade across multiple critical infrastructure sectors or regions. This Sector Profile describes key characteristics of the Critical Manufacturing Sector that influence its security and resilience.

What Types of Manufacturing Companies Are Included in the “Critical” Category?

Primary Metals Manufacturing Including:

Iron and Steel Mills & Ferro-alloy Manufacturing
Alumina and Aluminum Production
Processing Non-ferrous Metal Production & Processing

The 4,556 manufacturers in this component area were responsible for $270.9 billion in U.S. shipments in 2012

Machinery Manufacturing Including:

Engine & Turbine Manufacturing
Power Transmission Equipment Manufacturing
Earth Moving, Mining, Agricultural, & Construction Equipment

The 24,124 manufacturers in this component area were responsible for $407.6 billion in U.S. shipments in 2012

Electrical Equipment Manufacturing Including:

Appliance and Component Manufacturing
Electric Motor Manufacturing
Transformer Manufacturing & Generator Manufacturing

The 5,765 manufacturers in this component area were responsible for $123.9 billion in U.S. shipments in 2012

Transportation Manufacturing Including:

Vehicles & Commercial Ships
Aerospace Products & Parts
Locomotives, Railroad and Transit Cars, & Rail Track Equipment

The 11,814 manufacturers in this component area were responsible for $792.9 billion in U.S. shipments in 2012

How will COVID-19 Affect the Sale of Manufacturing Companies

Many clients and potential clients are asking how the COVID-19 crisis will affect the sale of their companies.

In the near term, deal flow will slow because of limits on travel and the closure of hotels and restaurants. Most buyers of small manufacturing companies in the lower middle market come from out of state and relocate to make the acquisition. Even if people can travel now, they don’t want to.

This crisis will cause a resurgence of reshoring and the Made in America movement. We’ve learned that in some critical areas, our supply chain is dependent too much on other countries. While the current supply chain issues don’t necessarily relate to every sector in the “Critical Manufacturing” category, here’s what does.

When the stock market is on a roller coaster ride, like it has been for the last few weeks, smart people seek to put their money elsewhere. Manufacturing has been the darling of lower middle-market M&A for the last few years. That’s about to explode exponentially.

Manufacturers who are exempt from closure because they are in certain sectors that are crucial to the security and infrastructure of the United States will be some of the most sought-after acquisitions in the United States. People will seek to acquire in these sectors first.

If you’re in a critical manufacturing sector and have been considering retirement, there may never be a better time to start the process.  Schedule a call for an informal conversation to determine your best path forward.

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