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2015 was another respectable year for M&A in manufacturing Automation, running ahead of the second half of 2014 from Q2 through Q4, but overall finishing behind the 2014 pace. For tracked companies Mirus identified 46 acquisitions in 2015 as compared to 50 in 2014 and 59 in 2013. Mirus continues to attribute this overall adjustment in the pace of acquisitions to 4 things:
- An overall scarcity of quality acquisition candidates;
- A need for buyers to digest recent acquisitions,
- A growing valuation gap between buyer and sellers, and
- A growing apprehension regarding slowing of the global economy.
Manufacturing Automation Public Company Deal Volume 2013 – 2015
In 2015, PLM and System Integrators were the most acquisitive of the sectors with 27 and 14 acquisitions respectively. This is a bit misleading however as half (7) System Integration acquisitions were done by a single company, Accenture, and almost half of PLM acquisitions done by the combination of Synopsis (8) and Ansys (5). SCM companies continued to concentrate on growing their business organically and made only three acquisitions. Conversely, ERP companies also made only three acquisitions, a reversal from their 2013 and 2014 rates. Noting their low revenue growth rate (internally or through acquisition), this continues to appear to be an industry segment in transition.
Top acquiring companies has also shifted significantly. Traditional large buyers; Autodesk, Dassault, Descartes and Oracle slowed their pace of acquisition noticeably leading us to believe they are in digestion mode. The single largest consistent, year in and year out, standout buyer being Accenture, who completed more manufacturing automation acquisitions in 2015 than they did in 2014, many of these in H1.
Given the above analysis, combined with our recent experience around the industry consulting and selling to a number of these organizations, we have come across what we believe to be the current hot buttons in the industry:
- Internet of Things momentum continues to grow. Some analysts have opined that IoT is just the latest buzzword, but we at Mirus see it differently. We believe IoT to be the next wave of what is the natural evolution of products in the market; from mechanical to electromechanical and electronics, to mechatronic (software enabled), and now internet connected devices; and thus is more than a buzzword and in fact, will have legs well beyond a few years, perhaps into decades. For more information on this exciting trend see our recent blog on the topic at http://merger.com/internet-manufacturing-automation/.
- Hard core technology companies stick to their knitting. As mentioned mid-year: Once a geek always a geek and there is nothing wrong with that. Just see acquisitions by Mentor, Ansys, and Synopsis and you have over half of all PLM acquisitions going toward software development, EDA and analysis and simulation tools. Nice to see folks who know what they are and are making an effort to stay on the cutting edge and support their customer bases.
- Technology cross-pollination. Yes, we know this is directly contrary to #2 above, but so goes the state of Manufacturing Automation as those companies lacking organic growth look outside of their core market for next wave of growth opportunities. EDA to Mechanical Companies. Software development tools to Analysis companies; SCM and CRM to ERP companies; Applications to Systems Integrators. All of these activities have been brought on by a need to grow and customer demand for more comprehensive solutions from fewer suppliers.
2015 was another solid year for M&A in Manufacturing Automation, and Software in general but with the current economic climate becoming increasingly volatile we expect we are coming closer to the end, than the beginning, of the current M&A cycle. Nevertheless, barring some substantial change in the economic climate, Mirus believes M&A in manufacturing automation will continue at roughly the same pace as 2015 throughout 2016.
From the sell side, we have never been busier including the recent sale of IdeaPoint to Anaqua to provide breakthrough end-to-end IP management. Increasing scarcity of quality targets combined with economic uncertainty makes this an ideal time for owners to consider this time as ripe for exit. If you believe your company is ready for market or if you would like an independent opinion on your readiness and market timing, it may be worth a discussion on how you can take advantage of the current trends in M&A for Manufacturing Automation. For more detail behind Mergers and Acquisitions in Manufacturing Automation please download a copy of the complete white paper.