Retooling for what’s next: The reinvention of industrial businesses
AI, digitisation and shifting corporate priorities are creating new opportunities to modernise established industrial businesses
At Chemelex’s main manufacturing plant, precision heat-tracing cable has long been made through processes that rely heavily on manual skill and the human eye. Now, AI-guided machinery is helping to make that work more precise and less wasteful.
When Brookfield acquired Chemelex in 2025, it bought a business that had spent more than a decade as a non-core asset for three different owners. “It was a carve-out of a carve-out of a carve-out,” observes Dave Gregory, chief investment officer of Brookfield’s private equity group. “A great fundamental business, but it had been non-core and run for cash.”
Chemelex makes electrically heated cables that run alongside pipes, beneath floors and through industrial equipment, preventing pipes from freezing and keeping liquids at the temperatures needed to flow safely. Its systems are used in factories, energy infrastructure, data centres and commercial buildings. Brookfield saw an important product, but also a business that had received relatively little investment and still relied heavily on third parties to reach its customers.
Since taking ownership, Brookfield has backed what Chemelex says is the largest manufacturing investment in its more than 30-year history. AI-guided braiding machines that weave the filament providing electrical grounding for its cables have sharply reduced waste. Chemelex has also invested in industrial-AI company Algo8, whose software uses factory data to identify problems, improve productivity and reduce downtime. Its acquisition of EHT Group adds technology that can monitor heat-tracing systems across entire plants and flag problems before they can cause disruption.
“We have invested a lot of money, probably the most ever, in our main manufacturing facility,” says David Prystash, Chemelex’s chief executive. “That was a sign of positive investment, not the paradigm a lot of people have around private equity, which is just cut, cut, cut.”
The business is now growing faster and earning higher margins. The original plan had Chemelex growing by US$100m, on an EBITDA basis, by 2030. The goal is now to reach this target next year, three years earlier than planned. The pipeline of further initiatives identified to improve the business has grown to US$250m, Mr Prystash says.
The timing is noteworthy. Brookfield sees a growing role for private capital in funding the modernisation that established industrial businesses require.
Chemelex was a carve-out of a carve-out of a carve-out. A great fundamental business, but it had been non-core and run for cash.”
Dave Gregory, chief investment officer of Brookfield’s private equity group
A backlog of transformation Chemelex points to a wider opportunity across industrials. Many established businesses have been slower to adopt technologies that have already transformed other parts of the economy.
Adrian Letts, managing partner in Brookfield’s Private Equity Group and head of business operations, says many industrial companies have been “left behind” in terms of technology transformation. That creates scope to modernise everything from factory processes and procurement to pricing, inventory and customer service. Catching up, however, takes time. The businesses Brookfield backs usually need 12 to 18 months of disruption and reinvestment before numbers improve. Few listed companies can easily accommodate that period of upheaval while answering to investors every quarter. At the same time, the AI investment boom is changing which businesses come onto the market. Listed companies are directing more capital towards businesses that fit their AI strategies and reassessing those that do not, according to Dave Nowak, president of Brookfield’s Private Equity Group. Some are selling non-core assets to help fund that investment. That is bringing high-quality industrial businesses onto the market that sit outside the “strike zone” of their owners’ AI strategies. For Brookfield, Mr Nowak says, the attraction is not AI exposure itself, but the opportunity to buy businesses it understands and improve them through better operations.
A repeatable playbook Industrials have been central to Brookfield’s private equity strategy for 25 years. Roughly 60% of its investments in the sector have been carve-outs from public companies and take-privates, while more than 50% of returns have come from operational improvements made under its ownership.
Brookfield looks for market leaders selling products that customers depend on but that account for a relatively small share of their overall costs. This can give these businesses lasting demand and room to improve margins through better operations, rather than relying simply on market growth.
Scale also shapes how Brookfield finds these businesses. Sitting inside a group managing around US$1trn across real estate, power and infrastructure gives the private equity business access to specialists operating across markets. Mr Nowak cites the example of Westinghouse (now majority-owned by Brookfield), a deal in which insight from Brookfield’s power business provided a key information advantage, helping it to assess the long-term need for nuclear capacity.
What has changed in recent years, Mr Nowak says, is the toolkit, rather than the strategy itself. AI has become another way to improve businesses alongside more established levers such as procurement, manufacturing efficiency and supply-chain management. It can provide faster access to information and ensure better-informed decisions.
At the Brookfield-owned Clarios, which accounts for about one-third of global car battery production, sensors track machine uptime, while data on demand and weather help to determine where inventory will be needed. Brookfield has also worked with global software and technology firm [MT1] Palantir to optimise the Clarios supply chain, helping to lift on-time delivery from 50-60% at acquisition to more than 90% at present.
Once-in-a-generation forces such as reshoring, broad digitisation and AI are converging just as more established industrial businesses are coming onto the market as carve-outs.
The opportunity ahead Once-in-a-generation forces such as reshoring, broad digitisation and AI are converging just as an increasing number of established industrial businesses are coming on to the market as carve-outs.
Brookfield seeks out businesses that have become non-core to larger organisations, providing the long-term capital and operational expertise to support them as independent companies.
The appeal lies in businesses whose market positions remain defensible, but with considerable scope for Brookfield to transform their operations. A car battery is still a car battery, Mr Letts notes, even in the age of AI. How it is made, stocked and delivered, however, is being rewritten.
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