Deal #21 Since July … Applied Industrial Enters Automation
Electrical industry deal #21 since July was announced – Applied Industrial Technologies acquired Automation Inc., based in Minneapolis.
While some don’t think of automation distributors as part of the “electrical” industry, automation and high-tech products are an integral need for industrial companies and this sector is part of electrical (just ask a Rockwell Automation distributor or Graybar about some of their recent acquisitions. In fact, a number of industrially-oriented electrical distributors are seeking to acquire these AHTD Association for High Technology Distribution distributors (especially Rockwell distributors who can’t expand beyond their APR.)
According to the press release:
“Applied Industrial Technologies (NYSE: AIT) today announced the acquisition of Automation, Inc., a provider of automation products, services, and engineered solutions focused on machine vision, collaborative and mobile robotics, motion control, intelligent sensors, pneumatics, and other related products and solutions. Terms of the transaction were not disclosed.
Neil A. Schrimsher, President & Chief Executive Officer for Applied, commented “Today’s announcement represents another key step in the continued expansion of our next generation automation offering. Automation, Inc. is a leading provider of emerging automation technologies across the U.S. Upper Midwest with advanced capabilities in machine vision, pneumatic automation, and value-added assembly services and engineered solutions. They bring established customer and supplier relationships, along with an experienced team highly regarded for their technical and application expertise that aligns with our growth strategy, market focus, and value proposition.”
Automation, Inc. is based in Minneapolis, Minnesota, and operates with a team of more than 50 associates from one location. The Company serves customers primarily across pharmaceutical, manufacturing, life sciences, consumer products, and other various industrial industries.
Mr. Schrimsher added, “Our automation platform is gaining notable traction within our served markets. Secular demand tailwinds are building as customers manage through structural labor constraints and evolving production considerations to support long-term growth and supply chain initiatives. We are well positioned to capitalize on this opportunity given our application and engineering expertise, as well as accelerated adoption of advanced technologies aligned with our product focus including collaborative and mobile robots, machine vision, and digital solutions. The addition of Automation, Inc. will further optimize this position, including expanding our footprint across key verticals and geographies, while supplementing our value-added services and cross-selling efforts. Overall, we see significant potential and synergies building across our automation platform that stand to enhance our growth and earnings potential long term. We welcome Automation, Inc. to Applied, and look forward to leveraging their capabilities going forward.
Observations
- For those with long memories, the name “Neil Schrimsher” may be familiar as he used to be with Cooper Industries.
- While Applied is known for the power transmission and fluid power industry, they do sell electric motors (part of the typical PT offering) and, like Motion Industries, and especially with their acquisition of Kaman, see expansion into the high-tech / automation industry as a natural fit … it’s pursuing more share of wallet within their existing customer.
- Applied, and Motion for that matter, are used to technical sales and will probably make the applicable investments to expand their share in this space. Suppliers will need to consider their authorization strategies.
- Speaking of authorization strategy, Automation Inc is a Schneider Electric industrial automation distributor so it could be an interesting opportunity for Schneider even thought Graybar is a Schneider industrial automation distributor.
- Don’t forget that Graybar has already made two automation acquisitions this year, purchased Shingle & Gibb (a Siemens distributor) and a few more, which means they see potential in this space albeit with and without Schneider.
- Thinking of automation? Automation, Inc. is involved in industrial controls, material handling, vision, robotics, pneumatics, motion, fencing, extrusion and selling / providing value-added services inclusive of design / engineering services. In other words, a prototypical high-tech distributor and, presumably, good margins as they are not seeking to be transaction in nature.
The industrial sector is projected to continue to be a growth market, and we’d expect more consolidation among automation distributors.
Applied’s acquisition is another example of a company getting into a complementary market. In this case they will be seeking to enhance existing relationships within Applied by bringing Automation, Inc’s capabilities to customers (which could be significant competition to Rockwell distributors in the upper Midwest) and bring Applied’s capabilities to Automation, Inc’s. customers.
Expect more of these types of deals.