Technology and innovation are fundamental driving forces in the industrial and manufacturing sector and recent M&A trends in the sector has been significantly influenced by disruptive technology.
The increasing importance of technological advancement and the risk involved in developing entirely new products internally (versus buying smaller companies with proven tech) mean industrial businesses have developed a serious acquisitive streak. As a result, over 90% of UK-listed industrial and manufacturing companies describe themselves as acquisitive. On top of this, there are increasingly new players on each side of transactions.
Traditional lines between manufacturing and technology are becoming blurred, as businesses from each side pursue inorganic growth in the industrial space. For example, additive manufacturing and machine learning sit at the junction between technology and manufacturing and each has seen significant recent M&A activity from buyers in both fields.
Additive manufacturing describes technologies that build 3D objects based on computer-aided designs. In the last year, General Electric alone has snapped up three businesses – with significant price tags – to enhance its additive manufacturing capabilities. These include Arcam AB (implied EV: £499m), SLM Solutions Group AG (implied EV: £555m) and Concept Laser GmbH (implied EV: £656m).
Machine learning is artificial intelligence that allows software to become more accurate in predicting requirements outcomes without being explicitly programmed to. Recently, it has attracted the interest of several technology giants – such as Intel, which acquired Nervana in August 2016 and Movidius in September 2016.
This race to acquire technology is creating a highly competitive M&A environment. Looking forward, higher prices and higher transactions volumes can be expected in the increasingly shared space between manufacturing and technology.