The Reshoring Revolution: How Private Equity Firms Are Rebuilding American Manufacturing

There has been a notable increase in companies moving their manufacturing operations back to the United States, a phenomenon known as reshoring. Private equity firms have played a crucial role in this trend, investing in businesses shifting their manufacturing base.

Reshoring Process in Private Equity

The reshoring process in private equity encompasses three primary phases:

  1. Assessment
  2. Planning and Strategy Development
  3. Implementation and Integration

Firms initially assess the viability and advantages of relocating previously offshored operations to their home country, considering labor costs, regulatory environment, trade policies, and supply chain dynamics. Upon making the decision, they devise a comprehensive strategy and roadmap for the reshoring process, which involves identifying partners, suppliers, and locations. Ultimately, the system is executed, integrating the newly onshore operations into the existing business framework. This ensures a seamless transition and maintains competitiveness and profitability.

Increase in Job Announcements

In March 2023, it was noted that job announcements related to reshoring and foreign direct investment in 2022 reached a record high of 364,000, which was 53% higher than the previous year [1]. The number of announced jobs since 2010 reached almost 1.6 million, with the electrical equipment industry leading the way due to the rise in demand for electric vehicle batteries. The increase in job announcements was attributed to the implementation of the CHIPS and Science Act and the trend toward deglobalization.

Reshoring Benefits

Private equity firms are drawn to reshoring due to its numerous benefits to their portfolio companies. By relocating manufacturing operations closer to their customers, businesses can minimize transportation costs and lead times and increase their responsiveness to shifting market conditions. Additionally, reshoring can help mitigate supply chain risks, such as natural disasters or political instability in other countries. However, reshoring also presents challenges, including elevated labor costs and a shortage of skilled workers in certain regions. Private equity firms must thoroughly evaluate the advantages and drawbacks of reshoring before making investment decisions.

How Withum Can Help

Firms are poised to remain key drivers of the reshoring trend in the coming years. Withum is positioned to provide value-added services related to strategic acquisitions for private equity firms and their portfolio companies in the manufacturing industry.


[1] https://reshorenow.org/content/pdf/2022_Data_Report.pdf

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