Automation mergers, acquisitions, capital markets analysis: November 2022

In this article for Control Engineering Magazine, Bundy Group provides an update on mergers & acquisitions and capital placement activity in the automation market.

As 2022 comes to an end, I, as an investment banker, like to use this opportunity to remind business owners and executives of automation firms of an important action item they should take. That step is to work through an annual evaluation of the company, critically analyzing its fundamentals, strengths and weaknesses. A company should be thought of as an asset, and the foundation of that value is driven by numerous key business fundamentals. If shareholders and executives will commit to evaluating the firm’s business health on an annual basis, then it can have a profound effect on the value of the organization.

Four business health checklist items

1. Financial profile review: The starting point for negotiating an offer with a buyer or investor is the financial performance of the company. That includes assessing the following:

• Revenue: Has the company generated growth over the past year? If not, then what prevented the firm from growing? Does the firm have any recurring revenue? If so, then how much of the firm’s revenues are tied to recurring revenue?
• Margins: Is the firm achieving gross margins of 35% or greater? Is the company achieving adjusted EBITDA margins of 15% or greater? How can the management team enhance gross or adjusted EBITDA margins?
• Technology systems: Is the company utilizing a robust tracking and reporting system, which can provide detailed analytics on financial and operational metrics to the management team? Is the system a standard one for the automation solutions and / or systems integration sectors?

2. Client industries: Is the company overly concentrated in industries that are highly cyclical or volatile? Does the company have sales to one client that are greater than 25% of overall company revenues? Can the firm demonstrate to the market that it has a high degree of repeatability with clients over a multi-year period?
3. Organization: Does the company have a bench of talent at both the senior management level and at the operational/technical levels? Or is the firm heavily reliant on the owner and / or a select few individuals?
4. Investor deck: The management team should have a presentation, maintained on a real-time basis, that highlights key attributes and investment merits of the firm. This document should detail such items as competitive advantages, value proposition, risks/areas for improvement and a company growth plan. If shareholders and management team push themselves to review and update this document on an annual basis, then it could allow them to think more holistically about the firm and its value.

The above represents a sample of business health checklist items, however, it is by no means an exhaustive list. The end goal for any shareholder or executive when working through an annual checklist is to ensure those professionals understand the possible valuation range of their firm and action items they should take to build value. Bundy Group is available to further the conversation with owners who are exploring ways to build value, including in preparation for a sale or capital raise.

November 2022 automation transactions

11/15/22

Roboyo Group, the world’s largest hyperautomation professional services company announces its acquisition of Procensol – a global powerhouse in low-code app development. Learn more.

11/15/22

Banyan Software, Inc., a company focused on acquiring, building, and growing great enterprise software businesses, has acquired Innovatum. Innovatum’s enterprise labeling software solutions enable the automation of product and package labeling and regulatory data upload in the life sciences industry. Learn more.

11/14/22

Tri Tech Automation, a turnkey industrial automation systems integrator in Moscow Mills, Mo., purchased Integrity Control Solutions (ICS), a panel fabrication and installation firm in Broken Arrow, Okla. Learn more.

11/11/22

The Middleby Corporation (NASDAQ: MIDD) acquired Escher Mixers, a designer and manufacturer of highly-engineered spiral and planetary mixers for the industrial baking industry. Learn more.

11/9/22

Krones, a leading manufacturer of filling and packaging solutions, has acquired a majority stake of R+D Custom Automation LLC (R+D). Based in Trevor, Wisconsin, R+D supplies machinery and equipment for the production and filling of containers for the pharmaceutical industry. Learn more.

11/9/22

Zelis, a company modernizing the business of healthcare, acquired Payspan, a leader in healthcare electronic payment and reimbursement automation services. The U.S. healthcare system is complex, with disjointed and often challenging financial processes. Learn more.

10/27/22

AdeptAg, the North American leader in controlled environment production solutions, acquired Bellpark Horticulture. With the addition of Bellpark, AdeptAg expands its product offerings, sales and support further into the automated horticulture systems industry. Learn more.

Bundy Group is a CFE Media and Technology content partner.

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