Industrials Insights from Clearwater International...
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clearthought Industrials Insights from Clearwater International Automation Driven by cost efficiencies and increased flexibility automation is a fast-growing industry Although around two-thirds of the automation industry is directly related to industrial markets, automation concepts are now rapidly taking hold in consumer industries too amid rapid technological advances, and especially as software becomes a key aspect of data generation and analysis. Automation involves a deep reorganisation of the work process, and is typically analysed by products such as sensors, drives, and SCADA (supervisory control and data acquisition) systems, and by services such as design, installation, integration, maintenance, and management. Latest data 1 shows the global market is worth ¤453bn with the largest markets China, the US and Germany respectively. The market continued to grow strongly last year with 2016 revenues in the German automation sector alone rising to ¤50.2bn, an increase of 1.8% on the previous year 1 . With around a quarter of the world’s robots in China, the Asia-Pacific region is seeing particularly strong growth with the industrial robotics market forecast to grow at a CAGR of 8.7% between 2016 and 2020 2 . M&A activity Against this backdrop of huge change we have seen vibrant M&A activity in recent years amid increasing recognition of the practical everyday benefits that automation can bring across a range of sectors. The food and beverage, packaging, automotive, and security industries are just some of the many sectors which have seen notable M&A in recent times. The majority of deals over the past year have involved strategic buyers with companies providing products and solutions related to automation, connectivity and sensing generating the most interest. We expect to see continued strong transaction activity in the future, in particular as product businesses increasingly acquire solutions companies. A good example of this trend was the sale of MacDonald Humfrey, the UK’s largest independent automation, control and IT solutions systems integrator, to L-3 Communications, a US provider of communications and electronic systems products used on military and commercial platforms. Clearwater International advised MacDonald Humfrey on the deal. 1 ZVEI 2 Business Wire Vibrant market The accelerating rate of automation - the conversion of a process, procedure or equipment from human to automatic control – is transforming virtually every industry.
Transcript of Industrials Insights from Clearwater International...
clearthoughtIndustrials Insights from Clearwater International
AutomationDriven by cost effi ciencies and increased fl exibility automation is a fast-growing industry
Although around two-thirds of the automation industry is directly related to industrial markets, automation concepts are now rapidly taking hold in consumer industries too amid rapid technological advances, and especially as software becomes a key aspect of data generation and analysis.
Automation involves a deep reorganisation of the work process, and is typically analysed by products such as sensors, drives, and SCADA (supervisory control and data acquisition) systems, and by services such as design, installation, integration, maintenance, and management.
Latest data1 shows the global market is worth ¤453bn with the largest markets China, the US and Germany respectively. The market continued to grow strongly last year with 2016 revenues in the German automation sector alone rising to ¤50.2bn, an increase of 1.8% on the previous year1.
With around a quarter of the world’s robots in China, the Asia-Pacifi c region is seeing particularly strong growth with
the industrial robotics market forecast to grow at a CAGR of 8.7% between 2016 and 20202.
M&A activity
Against this backdrop of huge change we have seen vibrant M&A activity in recent years amid increasing recognition of the practical everyday benefi ts that automation can bring across a range of sectors. The food and beverage, packaging, automotive, and security industries are just some of the many sectors which have seen notable M&A in recent times. The majority of deals over the past year have involved strategic buyers with companies providing products and solutions related to automation, connectivity and sensing generating the most interest.
We expect to see continued strong transaction activity in the future, in particular as product businesses increasingly acquire solutions companies. A good example of this trend was the sale of MacDonald Humfrey, the UK’s
largest independent automation, control and IT solutions systems integrator, to L-3 Communications, a US provider of communications and electronic systems products used on military and commercial platforms. Clearwater International advised MacDonald Humfrey on the deal.
1 ZVEI2 Business Wire
Vibrant marketThe accelerating rate of automation - the conversion of a process, procedure or equipment from human to automatic control – is transforming virtually every industry.
clearthought | 2017 Industrials Insights from Clearwater International
Robotics
The share of manufacturing tasks performed by automated robotics is forecast to rise from a global average of 10% today to c. 25% by 20251.
Although countries with high-wage rates have the highest rate of adoption of automation technologies, the use of robotics in emerging economies has surged in recent years as upward pressure on wages begins to erode competitive advantage and fi rms look to counter rising labour costs.
However the use of robots and other types of automation is not only driven by these cost effi ciencies, but also by higher quality requirements and the need to increase fl exibility. In particular companies can realise impressive gains in labour productivity due to the increased use of robotics for manufacturing tasks. This will lead to shifts in competitiveness among economies as fast adopters reap signifi cant gains.
Human-robot collaboration will also be a signifi cant trend over the next few years. Robots will increasingly collaborate with humans in areas such as electronic
products and other small parts assembly. Higher deployment of robotics will enable signifi cant savings in labour costs, and higher robotics utilisation will also result in freeing skilled workers to focus more on higher-value tasks.
Internet of Things (IoT)
The concept of using sensors and other technologies to link products and services to the Internet has become a powerful force for business transformation as the drive to connect devices, and then share and transmit the collected data and information, accelerates.
The digital shift instigated by cloud and mobile technology threatens many existing businesses which urgently need to pursue strategies built around IoT concepts. Many ordinary objects are being reinvented with digital sensing, computing and communications capabilities. For instance, in factories this can include sensors installed inside equipment to monitor whether parts have exceeded their useful life or safety thresholds.
It is estimated that IoT will support total services spending of ¤239bn by 20202,
Worldwide annual supply of industrial robots
SOURCE: International Federation of Robotics
while c. 13 billion connected things will be in use across the consumer sector alone by 2020.
Industry 4.0
The vision of future manufacturing in which ‘intelligent’ factories, machines and products all communicate with each other, is fast becoming reality. For instance, by 2020 German industry is planning to invest approx. ¤40bn annually in Industry 4.0 applications.
Industry 4.0 technology results in signifi cant economic benefi ts. It has been estimated3 that in Western Europe alone the technology could be worth as much as ¤420bn in net profi ts, and also increase return on capital employed from 18% today to 28% in 2035, raising overall plant utilisation from 65% to 90%. It is also forecast that output per worker in manufacturing industries will be 10-30% higher in 2025 than today.
This vision becomes even more attractive as manufacturing switches from mass production to mass customisation, no longer based on scale and volume but on fl exible and localised production.
2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E
Market drivers
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0 U
nits
100
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500CAGR 14.6%
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166 159178
221254
290322
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clearthought | 2017 Industrials Insights from Clearwater International
Complete customer solutions
Manufacturers are looking to acquire businesses which allow them to provide complete customer solutions. This has recently included manufacturers buying systems integrators which have historically been viewed as a distribution channel rather than as an area for M&A appetite.
This strategy then links into manufacturers also seeing opportunities to provide operational services akin to a rental payments model. For instance, instead of selling operational IT such as SCADA – a control system that uses computers and networked data communications for process management – manufacturers sell a complete platform of a process line automation package (hardware and software). This may ultimately lead to industrial outsourcing where data - and possibly people - are also managed by the supplier to provide a service.
A good example was the recent acquisition of systems integrator Maverick Technologies by Rockwell Automation. The deal strengthens Rockwell’s expertise in key process and batch applications to help its customers realise greater productivity and improved global competitiveness through contemporary process control and information management solutions.
The acquisition supports Rockwell’s strategy of helping customers increase competitiveness by adopting ‘The Connected Enterprise’ - a vision that connects information across the plant floor with the entire enterprise to drive new business value.
E-commerce and warehouse systems
Retailers, manufacturers and logistics providers around the world are continually looking for ways of improving productivity and lowering costs, and developments in supply chain and warehouse solutions are helping to meet these needs. In particular, automated material handling solutions are today facilitating the vision of the smart warehouse and factory.
Related to this is the exponential growth of e-commerce. Customer demand for faster delivery times creates the need for warehouse, logistics and fulfilment solutions that can increase productivity and lower costs for consumers. This in turn leads to customised solutions for the automation of logistics in warehouses.
1 BCG2 Gartner3 Roland Berger
Number of multi-purpose industrial robots per 10,000 employees in the manufacturing industry
SOURCE: International Federation of Robotics
0
South Korea
Germany
Singapore
Sweden
Japan
Taiwan
Denmark
US
Belgium
Italy
100 200
160
169
176
188
190
212
301
305
398
531
300 400 500 600
Worldwide production in the automation sector
42.7%
10.6%8.8%
7.2%
21.1%
SOURCE: ZVEI
US
FranceGermany
Japan
South Korea
UK
Italy
RoW
China
3.3%
2.2%
2.1%
2.0%
clearthought | 2017 Industrials Insights from Clearwater International
M&A activity across the automation market in recent years has been very strong, driven both by corporates looking to widen their product offering and institutional investors wanting to gain a foothold in such a fast-growing sector.
Larger players are in a rush to acquire capabilities that can work across the dominant technologies of the smart, connected world – namely IT, electronics, robotics and process automation – and are prepared to pay healthy multiples to gain the IP and technological knowledge they require.
For the time being the market remains dominated by strategic acquirers, although
financial investors are expected to enter the market in greater numbers once business models become more income-recurring.
For instance, instead of companies providing a fixed price automation 'project' solution - which can result in irregular cashflows - the model is likely to evolve into one where clients are charged on a recurring 'pay as you use' basis for the same solution.
Automation allows for this transformation as data capture and credibility is vastly improved, which in turn enables suppliers to understand future risk and how, therefore, to charge clients.
Meanwhile, in terms of deal activity the US continues to lead the way with a number of blockbuster deals. A good example was the acquisition by Honeywell International Inc, the technology and manufacturing company, of Intelligrated Inc, a provider of intelligent automated material handling solutions. The $1.5bn (c. ¤1.3bn) acquisition helps Honeywell leverage Intelligrated’s warehouse systems, order fulfilment technologies and software solutions, which complements Honeywell’s own scanning and mobility business.
M&A activity
Target Country Description Acquirer EV (¤m)
Machine Pages France High speed robotics and machines MBO n.a
Intelligrated, Inc. US Intelligent automated material handling solutions Honeywell International Inc. 1316
Dematic Group US Integrated automated technology, software and services Kion Group AG 2875
KUKA AG Germany Industrial automation company Midea Group Co., Ltd 3778
Svensk Industri-automation Sweden Supplier of robot automation cells for machine tending ABB n.a
JOT Automation Ltd Finland Automation equipment, systems and solutions for electronics industry
Global Equipment Services and Manufacturing, Inc.
n.a
System Logistics S.p.A Italy Manufacturer of automated material handling systems Krones AG n.a
The Paslin Company US Manufacturing and marketing industrial equipment and automation solutions
Wanfeng Auto Holding Group Co Ltd
n.a
NDC Automation Pty.Ltd Australia Manufacturer of automated vehicles for industry Dematic Group n.a
Retrotech Inc US Design, installation and support of automated material handling systems
Kion Group AG 36.0
Bernecker + Rainer Industrie-Elektronik Ges.m.b.H.
Austria Automation software and solutions ABB Ltd n.a
Maverick Technologies LLC US Industrial automation, enterprise integration Rockwell Automation, Inc n.a
Braas Company US Distribution of products and services for industrial automation and control
Motion Industries, Inc. n.a
Grohmann Engineering GmbH
Germany Production lines for industrial automation Tesla Motors Inc 99.0
NHL-Automation ApS Denmark Automation solutions primarily for wastewater treatment and water treatment
Logimatic Holdings AS n.a
M&R Automation GmbH Germany Automation solutions in the field of assembly, measurement and testing technology
PIA Automation Holding GmbH
n.a
Recent deal activity
clearthought | 2017 Industrials Insights from Clearwater International
Cross-border activity
The past 12 months has continued the trend of increasing cross-border activity.
For instance, Swiss engineering group ABB expanded its robotics and industrial automation portfolio by acquiring B&R, an independent Austrian provider with annual sales of over ¤500m. The deal allows ABB to offer the entire spectrum of technology and software solutions around measurement, control, actuation, robotics, digitalisation and electrification. B&R has a global customer base of more than 4,000 machine manufacturers, and offers automation software and solutions for customers in the machine and factory automation market segment.
Another deal saw the Midea Group, a China-based industrial products and services company, acquire KUKA AG, the German industrial automation company and world-leading manufacturer of industrial robots which has had a factory in China since 2013. The deal enables Midea, best known for its air conditioners and washing machines, to enhance its industrial robotics business and third party logistics services.
Omron Corporation, the listed Japan-based manufacturer and seller of electric components, industrial automation products and automotive electronics, acquired Delta Tau Data Systems Inc, the US-based manufacturer of motion controllers. The acquisition allows Omron to develop its engineering capabilities in the field of motion control, as well as deliver motion control solutions globally.
A landmark deal, which closed in early 2017, saw US carmaker Tesla acquire German company Grohmann, a specialist in building automated factories such as battery assembly lines for electric cars.
A particularly notable deal over the past year saw Clearwater International advise MacDonald Humfrey, the UK’s largest independent automation, control and IT solutions systems integrator, on its cross-border sale to L-3 Communications (L-3), the New York headquartered provider of communications and electronic systems products used on military and commercial platforms.
The acquisition enables L-3 to leverage MacDonald Humfrey’s market leading checkpoint management systems and security efficiency software to enhance its scalable, operationally based networked security systems.
MacDonald Humfrey is a globally recognised leader in the deployment of effective and efficient checkpoint security and wider aviation solutions, as well as in the development of state-of-the-art process automation and collaborative robotic capabilities supporting aviation and other end markets.
Its aviation solutions have been deployed throughout Europe, the Middle East and Canada, and most recently in the US where the company has engaged with airlines and airports to help reduce lengthy checkpoint delays. MacDonald Humfrey is also a key supplier to other high-end process automation markets including aerospace and automotive where it has automated the assembly of cars and aircraft engines.
Industrial ICT providers like MacDonald Humfrey possess all of the capabilities to work across the dominant technologies of the smart, connected world, and L-3 provides MacDonald Humfrey with the global footprint and network to support the continued roll-out of its airport and checkpoint security solutions. MacDonald Humfrey also provides L-3 with the opportunity to realise the enormous potential offered by macro themes such as Industry 4.0, IoT, big data and smart manufacturing.
Case study: MacDonald Humfrey
ConclusionAutomation concepts are rapidly taking hold across virtually every market amid ever-increasing recognition of the benefits that such technologies can bring.
Against this backdrop we expect to see continued strong M&A activity for the foreseeable future as manufacturers rush to acquire capabilities that can work across the dominant technologies of the smart, connected world, and which allow them to provide complete customer solutions.
Industrials Insights from Clearwater International clearthought | 2017
www.clearwaterinternational.com
Deal highlightsSome of our recent deals
Meet the team
Engineering services and systems integration specialist
Clearwater International advised the shareholders of Imtech, including Endless LLP, on its sale to EDF Energy Services
Imtech
Automation, control and IT solutions systems integrator
Clearwater International advised MacDonald Humfrey (Automation) Limited on its cross-border sale to L-3 Communications for a purchase price of approx. ¤300m
MacDonald Humfrey
Leading Nordic automation group
Clearwater International advised on the sale of BV Electronic to Via Venture Partners
BV Electronic
Electronics production equipment manufacturer
Clearwater International advised Mycronic on its acquisition of dispensing equipment manufacturer, Shenzhen Axxon Automation Co., Ltd
Mycronic
Leading provider of Field Force Automation solutions
Clearwater International provided Debt Advisory services for Newco in this secondary buyout transaction
Kirona Solutions
CHINA • DENMARK • FRANCE • GERMANY • IRELAND • PORTUGAL • SPAIN • UK • US
Leading automation software company
Clearwater International advised Azbil on the acquisition of 80% of the share capital of Telstar from the shareholders (Capella family)
Azbil
Constantine BillerInternational Head of Industrials, UK+44 845 052 [email protected]
Simon ZhangPartner, China+ 86 21 6341 0699 x [email protected]
Philippe CroppiPartner, France+33 1 53 89 [email protected]
Markus OttoPartner, Germany+49 611 360 39 [email protected]
Rui MirandaPartner, Portugal+351 918 766 [email protected]
Francisco GomezPartner, Spain +34 699 446 [email protected]
Paul JonesPartner, UK +44 845 052 [email protected]
Jon HustlerPartner, UK +44 845 052 [email protected]
Carsten RydahlAssociate Partner, Denmark+45 27 62 03 [email protected]
