The Controls & Automation Market: Preparing for Growth in the Post-Pandemic Era

March 15, 2021

As investment bankers that specialize in representing controls & automation firms in business sales and capital raises, Bundy Group has seen first-hand the resiliency of the industry over the past year. Even in the midst of the pandemic, strategic and financial buyers continue to pay robust valuations for controls & automation providers, including control system integrators. Based on the client engagements that Bundy Group is working on in 2021, we continue to see numerous industry indicators that buyer demand will remain strong.

Key players in the automation community are also eager to understand longer term implications of the pandemic on this essential industry, especially as relates to the impact on valuations of companies. The controls & automation market resides in an influential position as society and business transition through this phase of creative destruction resulting from the pandemic. The manufacturers, technology companies and service providers offering controls & automation solutions will benefit as the international business community evaluates, reviews and redefines progress into the future.

To broaden our perspective, several industry experts and leaders offer their thoughts on the impact of COVID-19 on the automation segment and what the future holds for this important industry.

James Gillespie - Chief Executive Officer, GrayMatter

Founded in 1991 and based in Pittsburgh, GrayMatter curates the best processes and technologies to drive industrial, digital transformations and co-innovate with companies across North America in manufacturing, food and beverage, consumer packaged goods, water/wastewater services and other industries. www.graymattersystems.com

Many of GrayMatter’s clients run essential businesses or operate critical infrastructure, so they experienced a surge in demand for foods and beverages, paper products, cleaning supplies, drinking water and much more. Our priority is always to help organizations find ways to transform their operations and empower their people. COVID-19 focused us on helping clients plan, build and sustain a secure environment for their remote employees.

We expect there to be tailwinds in the manufacturing sector, in particular, as companies evaluate their supply with bias toward the Americas. The next challenge for organizations is to keep making progress on the digital transformation initiatives that they either started or accelerated in 2020-21 as a response to the pandemic. That could mean looking for opportunities to make predictions with data and machine learning through advanced industrial analytics, enhancing plant-floor productivity with high-performance HMI/SCADA or making sure their operational technology networks are truly secure. Organizations will meet with success in doing this if they find the right partners to help, get executive sponsorship and work with experienced team members to build buy-in and find valuable solutions.

Michael Calabrese - President, Control Systems Integrators

Founded in 1992, Control Systems Integrators manages, designs and builds innovative automation solutions to solve the most complex problems facing companies around the world. CSI | (csiadvantage.com)

In the years leading up to the pandemic, we worked with many customers who decided on an automation strategy with a medium-to-long term view. COVID-19 was the catalyst for many clients to accelerate their business plans and condense their timelines to implement automation solutions. CSI has seen a tremendous uptick in our work with logistics and ecommerce companies, each industry experiencing their own explosive growth spurred by stay-at-home restrictions. In those industries, our teams are doing everything from designing brand new facilities to upgrading existing sites. Many of our clients outside of the logistics and ecommerce industries are also accelerating their automation upgrades, but for different reasons. These companies may have faced restrictions on how many people could be on the plant floor at any given time, so they came to us asking for solutions to minimize downtime.

As a result, many project upgrades (PLC firmware upgrades, IT upgrades, PLC upgrades) that had previously been pushed off were scheduled for 2020 and 2021. And of course, work from home policies are forcing companies to decide what may be permanent behavior changes post-pandemic. These clients are investing aggressively in plant-floor IT and business analytics, so that troubleshooting can be done from anywhere.

Gary Mintchell - Founder, The Manufacturing Connection

Gary Mintchell leveraged a career in manufacturing becoming an independent blogger, podcaster, and analyst whose writing can be found at www.themanufacturingconnection.com.

Designing systems considering the safety of personnel has been best practices for many years. A podcast interview on that topic I did some six years ago remains a top-ten download every month. We have learned the hard way about a safety problem beyond the machine. How we can design machine and factory layouts to allow for social distancing and contact tracing to keep personnel safe from each other has become the new discipline. Should these new requirements be programmed into the automation system or the MES? Or where? Integrators must study deeply and determine a new best practice for design and application.

Robots have displaced personnel from dangerous tasks. Perhaps the new dangerous task is proximity to other humans. The new breed of collaborative robots may be the answer to both improving productivity and safety. If integrators have not been exploring this technology, it is time to do so.

Garrett Butcher - Managing Partner, Simply Driven Executive Search

Garrett started and leads the Robotics and Automation Recruiting Group at Simply Driven where he focuses on recruiting robotics and automation talent. https://sanfordrose.com/simplydrivensearch/

At Simply Driven, we focus on recruiting automation talent across a variety of industries. COVID-19 has certainly not eased the challenges of finding and hiring good automation talent and the talent pool remains as competitive as it did pre-pandemic. A key component to this insight is our diverse client portfolio. Essential businesses - food, beverage, consumer goods, packaging, etc. ramped up, which soaked up any excess talent that did hit the market. We don't see it slowing down. Automotive seems to be back in full gear, among other industries that struggled through the early months of the pandemic. In fact, almost all of our clients are back at normal hiring rates besides Oil & Gas. Long story short, finding, qualifying, and winning the best talent in the market remains as challenging, if not more challenging, for our clients than pre-Covid, and we're expecting it to get worse.

There are positives. It means companies are hiring and automation is booming, but two significant changes are underway. One is the consistency of remote work capabilities companies have adopted, which allows them to circumvent previous hiring constraints created by their physical location and talent pool. Unless you're sitting in a plant, most automation jobs can be done, at least in part, remotely. Companies are adopting this approach and easing their hiring pains. The second change that is still evolving, and only the future holds the answer, is the anticipated increase in automation spending. Plants see a need to reduce unreliable labor via automation, industries that once lacked automation now see a need, and the need to increase automation has never been more present. How will this impact actual spend? Only time will tell for the industry.

In summary, the controls & automation market is well positioned to accelerate its growth as a result of the COVID-19 pandemic. The feedback of the above experts validates the attractiveness of the controls & automation segment. In addition, as investment bankers, we continue to receive powerful interest from a deep pool of an industry and financial investor buyers, which are willing to pay attractive valuations, in Bundy Group-led automation business sale engagements. This is further reinforcement that the automation sector is a highly lucrative end-market. Assuming control system integrators can manage the challenges that are inherent with growth, such as finding employee talent, these firms should continue to generate widespread buyer interest.

Clint Bundy is a Managing Director with Bundy Group, a boutique investment bank that specializes in representing controls and automation and internet of things companies in business sales, capital raises and acquisitions. Over the past 32 years, Bundy Group has closed over 250 transactions, which includes numerous controls & automation-related transactions.

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