How technology bolsters industrial companies’ M&A outlook

Industrial companies keen on use of RPA, AI, big data and analytics

Many industrial companies have been in the forefront of adopting technologies such as automation in manufacturing. In general, industrials are ahead of the global pack when it comes to considering newer, digitally driven technologies such as robotic process automation (RPA) and artificial intelligence (AI). In fact, industrial companies are significantly more likely to identify AI and RPA as priority technologies than the global average (57% vs. 46% of global companies). These technologies are affecting manufacturing processes profoundly as leaders implement automation to make operations more efficient and to stay competitive, and are becoming more scalable, with solutions available at lower price points. Meanwhile, a quarter of industrial companies (24%) identified cloud computing and big data as top technology priorities.

M&A outlook remains positive in spite of increased competition for deals

However, industrial companies continue to have a confident outlook on the M&A market, with 87% describing it as improving. This confidence is holding strong, even in the face of growing challenges such as increased competition from private equity funds and corporate buyers. When industrials have chosen to walk away from deals, as 74% have in the past year, competition and disagreement on price have been the leading reasons (cited by 53%), followed by regulatory and antitrust concerns (25%). In spite of these challenges, a majority of industrials expect their deal pipelines and deal completion rates to increase. Sophisticated methodologies to source potential targets will support this growth, along with evolving due diligence techniques and analytics to assess planned acquisitions.

Appeal of cross-border deals to increase in response to uncertainty

Industrial executives predict a rise in cross-border M&A over the next 12 months. Political uncertainty and geopolitical tensions, cited by 93% as the greatest near-term risk to the growth of their business, may be fueling interest. Cross-border deals allow industrial companies to operate in multiple countries, providing flexibility when trade policies become restrictive. They can also support co-location of manufacturing closer to key customers.