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Digitalization can benefit owners looking to sell operations

June 9, 2022
Digitalized factories become more attractive to buyers

Mergers and acquisitions (M&A) in the manufacturing industry are expected to continue at a rapid pace, and a digitalized factory floor will be a sought-after asset.

M&A activity in the industrial manufacturing (IM) sector soared to a record 10,173 deals worth $806 billion in 2021, 88% higher than in 2020, according to KPMG’s report on “M&A trends in the industrial manufacturing sector,” authored by Donald L. Zambarano.

More is to come. President Biden’s infrastructure bill will benefit construction, engineering, and equipment and auto manufacturing. At the same time, supply-chain bottlenecks, an outgrowth of the pandemic, continue to drive product shortages and increased M&A activity among component suppliers. Overall, 61% of IM executives plan to step up M&A activities in 2022, Zambarano’s KPMG report notes.

Whether companies are looking to be pursued or they’re the ones doing the acquiring, digitalization will play into the equation.

Also read: Is 5G the answer to Wi-Fi and LTE limitations?

Factory operations become table stakes

For manufacturing groups looking to grow their base of facilities, or businesses looking to be acquired, digitalization of the factory floor before heading into the M&A process is a must.

The Industrial Internet of Things (IIoT)—sensors and devices that collect data and share it via network to a cloud-based solution for collaboration and analysis—is driving instant connectivity and real-time data to support decisions. The number of Internet of Things (IoT) connections, which includes consumer devices, as well as industrial components, will reach 83 billion by 2024, up from 35 billion in 2020, according to “The Internet of Things: Consumer, Industrial & Public Services 2020-2024,” a report from Juniper Research. The industrial sector, which includes manufacturing, will be a key driver of this growth, accounting for 60 billion (70%) of those connections, according to the Juniper report.

Many manufacturers are still at the very beginning of this journey. The good news is technology makes it possible for any factory, of any size and age, to digitalize without huge investments that would take decades to recoup.

Low-lift, high-impact

With sensors manufacturers are starting to gain visibility into key areas such as machine utilization. For example, sensors clipped on the power draw of a machine can show when and how machines are running. Teams can be alerted if a motor is drawing excess power, which could indicate a need for maintenance. They’ll see instantly if a machine stops too soon, which may indicate unplanned downtime, or a changeover runs long.

Using these kinds of sensors to track the heartbeat of the factory is a low-lift, high-impact IIoT implementation that enables teams, from operators to leadership, to course-correct production in real time and constantly improve productivity.

Such factory-operation solutions enable real-time visibility and continuous-improvement workflows for factory operations. Because the information flows to the cloud, plant operators can access the data remotely or on-site.

Beyond providing the ability to course-correct in real time on the factory floor, holistic visibility also enables more informed decision-making regarding how to best match sales to capacity, improve production over the long term and improve supply-chain flow. For a manufacturer looking to be acquired, having key metrics in the cloud ahead of an M&A deal means it’ll take less time for buyers to assess operations.

The right fit

For the manufacturing company looking to expand via acquisition, digitalization is equally important. Here are three key considerations.

  1. It is easier to scale an already digitally advanced operation. Digitalizing your existing plants will not only help you get the most from the plants and equipment you already have but also make it much easier for you to add more.
  2. Onboarding and integrating a new plant into your group is much easier when you have strong digital workflows already in place, so you can easily share and replicate those best practices without travel as a constraint. A cloud-based solution makes onboarding easier because information and processes are available in one place and can be visually referenced on video calls in addition to in-person visits.
  3. Using sensors makes it much more straightforward to add any type of machine to an existing data stream. When choosing which sensor type to use, consider sensors that scale in a straightforward way for both your existing and future equipment.

Manufacturing in the Digital Age

Digital transformation makes sense as rising labor costs and employee shortages impact manufacturers large and small. While factories of the past may have needed much larger teams dedicated to checking in on each machine, the IIoT allows manufacturers to make more efficient use of employees’ time on the factory floor.

Investments that make manufacturers more efficient and productive can make a difference in an M&A deal-making environment that isn’t just about adding scale or new customers, but also about making the most of what exists.

About the author

Lauren Dunford is CEO and co-founder of Guidewheel. Contact her at [email protected].

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