Automation Trends and M&A Insights

Despite initial concerns and varied opinions, 2023 proved to be a strong year with GDP reaching record highs. Based on this, Alex urged MCAA members to focus on the business investment category, particularly in assessing U.S. industrial production. Though a potential decline in the industrial sector is expected over the next few quarters, he expressed optimism for a recovery by the latter part of 2024 and into 2025.

Alex noted that strategic opportunities exist in specific sectors, such as electric vehicles and batteries, semiconductors, food and beverage, life sciences and renewable energy. He advised businesses to leverage this period to prepare for the next growth phase, emphasizing the need for resilience in supply chains and strategic planning.

Other issues addressed in our presentation included:

Insights into the automation M&A market: In 2023, nearly 200 closed transactions were tracked, showcasing a consistent monthly deal flow. This robust activity highlights a high demand for automation companies from both strategic buyers and financial sponsors, making it an opportune time for owners contemplating sales or capital raises. With more $3 trillion in capital seeking investment opportunities in privately held companies, owners have the flexibility to explore a full sale, a majority equity sale, a minority equity sale, or a debt capital raise. The current buyer demand-seller supply imbalance is driving valuations for quality automation firms into a positive direction.

From a buyer's standpoint, there is an attraction towards value-added service providers in the automation sector. The fragmented nature of the automation market provides buyers with opportunities to acquire and consolidate firms by leveraging scale benefits and generating synergies. This will ultimately help investment-minded groups achieve their returns objectives when they eventually sell their automation platforms.

Workforce shortages and the role of automation: Regardless of the sector, a scarcity of talent is a universal concern for business owners. Automation emerges as a key solution to tackle this challenge, with increased digitization and the incorporation of Internet of Things (IoT) technologies playing a corresponding role for resolving this business dilemma. These underlying demand drivers are helping to accelerate the growth of the automation market.

The Bundy Group at 2024 CSIA Conference

2024 is expected to be a mix of predictable uncertainty with the presidential election and the ongoing maneuvering by the Fed for a post pandemic soft landing. While these factors are likely to have a cooling effect on businesses, investor interest in industrial automation businesses will continue to drive M&A activity. These conflicting drivers make strategic planning more difficult and critically important to the success of your business.

The session “Building and Realizing Business Value: Headwinds and Opportunities Ahead”—to be held at the Control System Integrators Association 2024 Conference in Dallas, TX, April 15-19—will combine insights from a team of experts who have advised numerous system integration business owners on growing and realizing the maximum value from their business with the hands-on experience of other system integrator owners and business leaders.

Topics to be addressed include:

How to set up your business for growth?
Should I focus on organic growth or growth through acquisition?
How do I determine the right timing for a transaction?
How do I marry the current economic situation with my strategy?

Attendees will walk away from the session with the following actionable insights:

Time-sensitive economic events of public concern such as inflation, interest rates, labor ?market conditions, consumer spending and business investment.
Practical advice on an increasingly complex labor market.
Tools that company leadership can use to become better data-driven decision makers in running their businesses.
Update on the mergers and acquisitions and capital placement markets, with a focus on the automation and control system integration industry.
An understanding of how valuations are connected to the economic cycle.
Summary of key transactions and active buyers and investors for the industry.
Overview of strategic options available to companies with exit planning or capital needs.
An improved and applied understanding of the various business valuation methodologies. Understand when each is appropriate and why businesses have more than one value.

Register at https://na.eventscloud.com/ereg/newreg.php?eventid=778474&

Bundy Group is a boutique investment bank that specializes in representing controls and automation, Internet of Things, and cybersecurity companies in business sales, capital raises, and acquisitions. Over the past 35 years, Bundy Group has advised and closed on over 250 transactions, which includes numerous automation-related transactions. You can learn more at www.bundygroup.com or by contacting Clint Bundy at [email protected]. Bundy Group Securities, LLC, is a registered broker-dealer and member of FINRA and SIPC. This content is for informational purposes only and is not intended as investment advice or a recommendation to buy or sell any security.