Lincoln International outlines some additional safety workwear trends that are attractive to investors, including subsectors poised to grow and key mergers and acquisitions (M&A) considerations.

The safety workwear industry largely benefits from regulations that require many companies to provide protective equipment for their employees. By law, companies must not only provide protective equipment but must also maintain certain quality levels to adequately protect employees. Failure to do so does not only hurt the reputation of the brand but may result in a high cost of failure including fines and wrongful injury lawsuits. Furthermore, products must be replaced within a certain timeline to keep employees protected from worn-out equipment. For example, studies show that safety shoes must be replaced every seven to eight months to ensure maximum functionality and approximately 85% of all male safety footwear are in fact replaced within 18 months of usage. Additionally, the regulatory environment requires an increasing number of workers to be covered by PPE and a growing number of products for each employee. Given this, demand for safety workwear continues to grow in all economic conditions.

Safety regulation is a key topic that is becoming more established in emerging markets such as Southeast Asia. While the U.S. and Germany are set to continue their strong growth and dominate the market, the Southeast Asian countries are forecasted to have the strongest year-over-year growth on average by 2030. As regulations become more stringent and these countries increase their focus on the health and wellness of workers, demand for safety workwear in those geographies will expand exponentially.

New innovations are also driving change in the market. Some items are inspired by sports and are driven by comfort and functionality, leading companies to innovate their products. For example, the safety footwear market has followed the athletic shoe industry in making safety footwear lighter, more breathable and more fashionable. In general, safety workwear is worn by individuals for up to 12 hours a day, so it is important that the items are not only functional and protective, but also comfortable and attractive.

While the safety workwear market is comprised of products that some would consider less fashionable, protective equipment is a high-margin product that does not run the risk of obsolescence. In addition, there are rarely issues with write-offs or significant overstock as the shelf life of protective equipment is quite long.

Many safety workwear companies are family-owned businesses that evolved successfully over generations within a market with a high and increasing barrier to entry for newcomers. Since there are ample local regulations that apply to the market, the companies that can distribute products internationally and comply with country-specific standards, are of great value to investors.

Number of Transactions in the PPE Market in Europe and U.S.⁴

New Business Development Process: Companies should look at their new product development processes including the share sales from new products. Companies with a strong innovation cycle will give investors comfort in the business’ ability to consistently drive growth through new products. As such, it is vital that companies have strong R&D capabilities as well as trademark-protected design, technologies and components (own intellectual property) to ensure their products cannot be copied by a competitor.

Sales Volume Analysis: Following the current inflationary environment, performing a sales volume analysis continues to gain more importance as it determines whether a company’s growth is driven through numerous recent price increases or actual higher volume sold. Additionally, companies may examine the potential exposure of each SKU to aggressive price pressures. By focusing on thought-through price increases, robust SKU growth as well as continuous product development and innovation, leading companies will be able to mitigate the current market environment.