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With more than three decades of experience, FOCUS Investment Banking is a trusted name in middle market M&A advisory services worldwide. FOCUS works to understand each client’s strategic and financial objectives, craft the best plan to achieve these goals, and deliver success. Whether helping to sell, buy, or raise capital, FOCUS strives to maximize the value of every transaction to the benefit of its clients. FOCUS has established a practice vertical in advanced manufacturing, with multiple transactions completed in precision machining and current activity in robotics and ERP. With the rapid growth in robotic technologies and solutions, we anticipate significant transactional activity, particularly among automation integrators due to increasing capital requirements occasioned by the growth and the increasing interest of outside parties, including private equity and international firms in establishing a bridgehead in the industry.

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Is Industry 4.0 the New DotCom Boom?

POSTED 04/03/2017  | By: John Slater, Partner and Team Leader - Advanced Manufacturing and Automation - FOCUS Investment Banking

Fear stalks the land.  The Robot Apocalypse is nigh, destined to steal our jobs and our future.  Worse yet the machines are made elsewhere (Germany, Japan, even China) and America is being left behind in the race for manufacturing prowess.

We’ve heard this story before.  In the late 1980s, the U. S. computer memory industry had been decimated by Japanese and Korean competition.  To the Cassandras, this meant that the U.S. had forever lost the global economic race and was destined to become a second-rate power.  

Nothing could have been further from the truth.  The prerequisites for U.S. global dominance of the technology world were already in place.  Within a few years, U.S. prowess in personal computers, microprocessors, and digital networking would lead to a capital investment boom and a stock market bubble not experienced since the 1920s.  Stock market fluctuations notwithstanding, the global growth of the Internet has not abated since.

For all its impact, the Internet has touched only a relatively small portion of human existence, focused primarily on media, entertainment, telecom and more recently retailing and finance.  The larger world in which we live, the world of things and physical interactions has, until now, been only lightly touched.  But that is going to change – and change in a huge way. 

Imagine Amazon on Steroids
Today Amazon utilizes highly advanced predictive analytics and automation tools that plan and track the flow of merchandise from product sourcing, to the logistics of fulfillment and shipment, to the reorder and stocking of replacement items.  In Amazon’s warehouses, robots stock the shelves, pick the orders and load the trucks.  Even the human workers are guided by systems that plan their routes, tell them where to go, and dictate what products to pick and the order in which to pick them.  

Increasingly these advances have very real consequences for the financial markets.  Brick and mortar retailing is under siege, with thousands of stores and scores, if not hundreds, of malls destined to shut their doors.  For retailers, it’s do or die, even for industry leaders like Macy’s and Sears.  They will either learn to adapt to the new digital reality or they will follow others that failed to do so – think Kodak and Blockbuster.

Now look ahead to a time when every step in the global production and distribution cycle is similarly digitized.  Software systems will monitor retail demand through information networks directly linking retailers to their sources of supply on a real-time basis.  Digital purchasing agents will assure that the supply chain responds to changing demand, arranging just in time delivery of components and raw materials, often without the intervention of human actors.  Production scheduling will be done by robotic agents utilizing sophisticated artificial intelligence systems that assure the most efficient use of available resources, including increasingly automated production lines operated by robots and other digitally controlled systems instead of human workers.  Companies that fail to keep up will not survive.

The technologies that will make this possible already exist.  While industrial robots currently get a great deal of press attention because of the fear they engender, robots are old tech.  The first industrial robot was deployed in 1961 and robots have been common in the auto industry for decades.  Like the Internet before it, the automation boom is gaining steam as costs come down and the technologies become more approachable for the average business.

Here are just a few of the rapidly advancing technologies that have primed the coming explosion in automation:

  • • Additive Manufacturing
  • • Artificial Intelligence
  • • Augmented Reality
  • • Autonomous Vehicles
  • • Collaborative Robots (Cobots) 
  • • Cybersecurity
  • • Industrial Internet of Things
  • • Machine Learning
  • • Robotic Process Automation
  • • Sensors
  • • Vision Systems

The stage is set.  Interest is building.  The world of automation is ripe for a spark to catch the imagination of the financial community, like the 1995 Netscape IPO which marked the start of the Dotcom boom.   Soon we will witness a major capital investment boom that transforms the economy in ways we cannot yet foresee.

In the meantime, the entrepreneurs are not waiting.  In April 2017 tens of thousands of business owners, engineers, plant managers, consultants and prospective entrepreneurs will converge on McCormick Place in Chicago to attend Automate 2017.  More than 1700 exhibitors will present their wares.  They sense a Gold Rush coming and want to be part of it.

While it would be foolish to predict a repeat of the 1990s stock market bubble, it seems clear that the coming decade will witness explosive growth in many of the products and services needed to support the automation of a wide range of endeavors, creating vast new wealth for the successful innovators.  At the same time, it’s reasonable to assume that many companies and even whole industries will be left in the dust by the introduction of these transformative technologies, just as the record companies were upended by the introduction of digital downloads and music streaming.  It’s going to be a wild ride that will leave few aspects of human activity untouched.

The author, John Slater, is a Partner and Team Leader – Advanced Manufacturing & Automation of FOCUS Investment Banking and a Chartered Financial Analyst.  FOCUS, headquartered in Washington, DC, provides merger and acquisition and capital raising advisory services to middle market companies nationwide and globally through its membership in M&A Worldwide.