Sustainable Manufacturing and Private Equity Synergies: A Lucrative Investment Trend

The convergence of private equity and sustainable manufacturing is reshaping industrial landscapes, offering investors a unique opportunity to capitalize on long-term value creation while aligning with global environmental priorities. San Francisco Equity Partners’ (SFEP) recent acquisition of Formula Corp—a leading manufacturer of eco-friendly cleaning solutions—exemplifies this trend. Backed by O2 Sponsor Finance’s senior secured credit facilities, the deal underscores how private equity is leveraging its expertise to scale sustainable industrial firms in the lower middle market. With the global sustainable manufacturing market projected to grow at a compound annual growth rate (CAGR) of 11% through 2030 [2], investors are increasingly prioritizing sectors where environmental impact and profitability intersect.

Strategic Acquisition: SFEP and Formula Corp

SFEP’s acquisition of a majority stake in Formula Corp highlights the private equity sector’s focus on sustainability-driven industrial plays. Founded in 1983, Formula Corp specializes in custom-blended cleaning products, offering end-to-end services from R&D to fulfillment while emphasizing eco-friendly packaging and formulations [2]. By acquiring this firm, SFEP—a private equity firm targeting the consumer value chain—positions itself to capitalize on the rising demand for green products. This move aligns with broader market dynamics: the global sustainable manufacturing market was valued at $215.43 billion in 2024 and is expected to reach $367.18 billion by 2029 [1].

O2 Sponsor Finance’s role in providing senior secured credit facilities further illustrates the financial infrastructure enabling such transactions. As a division of Old Second National Bank, O2 specializes in financing lower middle-market companies, typically in the $10 million to $100 million revenue range [1]. This partnership reflects a strategic alignment between private equity sponsors and specialized lenders, ensuring capital is efficiently allocated to firms with scalable sustainability models.

Industry Tailwinds: Green Manufacturing’s Growth Drivers

The Formula Corp/SFEP deal is not an isolated event but part of a larger shift in industrial investment. Several factors are accelerating growth in sustainable manufacturing:

1. Regulatory and Consumer Pressures: Stricter environmental regulations and consumer demand for eco-friendly products are pushing manufacturers to adopt sustainable practices. For instance, the recycled plastics segment has gained traction due to bans on single-use plastics, while green hydrogen is projected to see the highest CAGR in the sector [2].
2. Technological Innovation: Companies like Siemens and IBM are leveraging AI to optimize energy use and reduce carbon footprints, setting benchmarks for efficiency [3]. These advancements are critical for manufacturers aiming to meet sustainability targets without compromising profitability.
3. Energy Transition Investments: Global investment in the energy transition hit a record $2.1 trillion in 2024, with clean technology manufacturing emerging as a key focus area [3]. In the U.S. alone, over $31 billion in clean-tech manufacturing investments have been announced, poised to create nearly 27,000 jobs [1].

Investment Implications: A Win-Win for Capital and the Planet

For investors, the synergy between private equity and sustainable manufacturing offers dual benefits: financial returns and environmental impact. The lower middle market, where firms like Formula Corp operate, is particularly attractive due to its scalability and untapped potential. Private equity’s ability to inject capital, streamline operations, and scale sustainable practices positions these firms for outsized growth.

Moreover, the alignment of private equity strategies with global sustainability goals is creating a virtuous cycle. As governments and corporations commit to net-zero targets, demand for eco-conscious products will continue to rise. This trend is already evident in sectors like cosmetics, where natural ingredients and green chemistry are driving innovation [5], and in the baby formula market, where organic and sustainable products are projected to grow at a 9.8% CAGR through 2032 [4].

Conclusion

The acquisition of Formula Corp by SFEP, facilitated by O2 Sponsor Finance, is emblematic of a broader transformation in industrial investing. As sustainable manufacturing gains momentum, private equity firms are uniquely positioned to identify, finance, and scale companies that meet both market demands and environmental imperatives. For investors, this represents a compelling opportunity to participate in a sector poised for exponential growth—driven by regulatory tailwinds, technological innovation, and a global shift toward sustainability.

Source:
[1] Sustainable Manufacturing Market Size & Share Report 2030, [https://www.grandviewresearch.com/industry-analysis/sustainable-manufacturing-market-report]
[2] 2025 Manufacturing Industry Outlook, [https://www.deloitte.com/us/en/insights/industry/manufacturing-industrial-products/manufacturing-industry-outlook.html]
[3] Energy Transition Investment Trends, [https://about.bnef.com/insights/finance/energy-transition-investment-trends/]
[4] Global Baby Infant Formula Market Size, Trends, Share 2032, [https://www.custommarketinsights.com/report/baby-infant-formula-market/]
[5] Evolving beauty: The rise of sustainable cosmetics, [https://www.cas.org/resources/cas-insights/the-rise-of-natural-ingredients-for-cosmetics]