The ubiquitous challenges shaping the current environment for supply chain logistics and manufacturing has highlighted the need for expedient and permeating changes across the Manufacturing industry and the industries tangent to it. With a focus on improving efficiency, productivity, and the agility to respond to changes in operating environments real-time, several key trends are anticipated to emerge in the Industrial Automation and IoT space.

Research has shown that digital transformation has been the primary driver of spending for automation technology across the batch, discrete, and continuous process industries. IoT platform software and data acquisition and analytics are trending as top areas of investment as operators continue to value the agility to respond to real-time changes in manufacturing and operating environments and derive insights that will inform day-to-day decisions. Cybersecurity spending is expected to continue as recent highly pervasive and public cyber attacks have highlighted the importance of strong protection of IT infrastructures across all industries. These spending trends suggest that decision makers are currently prioritizing investment in advanced process automation and data-centric initiatives in the digital transformation journey of their organizations.

As the global economy continues to emerge from the COVID pandemic, organizations who have prioritized strategic investment in the technological capabilities of their processes and operations are realizing significant benefits. Investments in IoT are enabling manufacturers to collect, manage, and analyze data in a manner that is more time and cost-effective than ever before. Many companies have implemented smarter production floor tactics, which has improved the safety of employees and customers in the new work environment, ultimately reducing downtime and improving productivity. Organizations that have invested in e-commerce capabilities, regardless of whether or not their legacy business model leaned heavily on e-commerce, have benefited from an expanded reach and compatibility with an increasingly digital global marketplace. Data has shown that 2021 has had just over two billion digital shoppers globally so far, a trend that is anticipated to continue for the foreseeable future, and expected to see continued growth even as direct impacts from the pandemic subside.

Industrial Automation stock performance measured by 7MA’s sector index has grown approximately 30% over the last twelve months, outperforming the broader market until September of this year. The overall market and the Industrial Automation index both fell in September, but investor concern around the U.S. government debt ceiling have eased, and both indexes have seen a rebound in October. The overall market has slightly outperformed the Industrial Automation index in the past 30 days, which is attributable in part to consumer concerns about the impending supply chain backlogs around the holiday season and not being able to receive needed items in a timely manner. Over the last twelve months, average sector revenue multiples have stayed in between 4.9x – 6.7x, and are currently at 5.8x, slightly below the average over the period of 6.1x. EBITDA multiples have been around 19.4x – 26.6x over the past twelve months, and are currently at 22.5x, also slightly below its average of 23.8x.

7MA provides specialized Investment Banking & Advisory Services to the professional service firms in the Consumer Products & Retail industries. We help our clients determine the right strategic partners for their businesses, transition ownership, raise capital, grow through acquisitions, and evaluate new markets. We advise our clients on M&A and private capital transactions, and provide unique market insights. Our team brings experience and energy to all of our engagements, with a focus on helping our clients navigate a changing marketplace.

To learn more about how 7 Mile Advisors can help you evaluate and execute on strategic M&A or private capital alternatives for your business, please visit our website www.7mileadvisors.com.