Event: Automate 2019, ProMat 2019
Report by: Industrials Group Managing Directors Giles Tucker and Jeff Perkins, and Vice President Jenson Dunn
Event overview: Automate focuses on robotics, vision, motion control, and related technologies primarily for manufacturing applications, while ProMat features innovative distribution and supply chain equipment and systems.
Why is this industry on your radar?
Perkins: Both industrial manufacturing and supply chain automation are attracting significant investment. Major trends such as industry 4.0, artificial intelligence, big data analytics and the internet of things are being made possible by automation solutions. Investors are seeing the long-term growth in companies connected to these macro trends, which are especially relevant given rising global labor costs.
Dunn: Companies around the world are feeling the squeeze in finding and retaining skilled labor, especially in developed economies. As such, continued growth requires higher productivity, and automation is playing an important role. Despite popular rhetoric around robots replacing human labor, technological innovation, particularly in robotics, is steering us toward solutions that require human-to-machine interfaces and collaborative robotics, or cobots, which will continue to lift the economy in both productivity and job quality.
Tucker: The pace of innovation in robotics has been astounding. Advancements in robotic arm tooling, cobots, sensors, and autonomous vehicles, coupled with innovations in machine learning are enabling the automation of tasks previously thought impossible at an attractive ROI. Robotics aren’t only accessible to well-capitalized corporations. There truly is an automation solution within reach for businesses of any size that seek to increase speed and safety while reducing variability.
Which trends, companies or business models were top-of-mind at the event?
Tucker: The theme of cobots was much more prevalent compared to the last show. Start-ups and established manufacturers of large-scale, heavy-duty robots are recognizing the opportunity and have begun developing their own solutions.
Dunn: Cobots are smaller and less expensive, and come equipped with more robust sensors that allow them to work safely alongside humans. Rather than replacing humans, cobots augment them. And as sensors have become more advanced and less expensive, cobots have become much more mainstream.
Perkins: Cobots are now becoming viable to businesses previously under-penetrated by traditional industrial robotics, such as smaller distribution operations, small-batch manufacturing, and even bakeries and fruit-picking operations. They can fit in smaller spaces, work alongside people, and be easily reprogrammed to perform different tasks. In addition, new end-of-arm tooling innovations have emerged for specialty applications like soft grippers capable of picking up fragile items without damaging them. These applications represent a huge part of the economy that robotics have just barely touched.
What opportunities are they creating for strategic buyers and private equity investors?
Perkins: While there are several disruptive start-up companies still in early-stage funding, there have also been a number of more established companies that have been acquired by larger strategics. The persistent re-evaluation of corporate strategy and the need to stay ahead of industry trends will continue to drive corporate M&A in this space. We have seen strategics that don’t have legacy businesses in automation or robotics compete aggressively in an effort to buy into automation megatrends.
Tucker: For private equity, we see substantial opportunity to invest in more established solutions within supply chain and warehousing technology, since these end markets are growing rapidly and should be relatively resilient to potential near-term economic softness. The explosive growth in ecommerce is driving demand for speed, efficiency and accuracy in an environment of increasing variability.
Dunn: There also continues to be significant opportunity in automation integrators in both manufacturing and supply chain applications, since the market is highly fragmented and technology-agnostic, so private equity can play the trends with little risk of obsolescence. The integrator model also lends itself to private equity investment given the significant opportunity to use M&A to achieve scale and end-market and geographic diversification.
Perkins: Along the same lines, there are opportunities for private equity to invest in subcomponents: gears, sensors, and others. Demand for those parts should be strong regardless of which technologies emerge as market leaders going forward.
Published May 2019