Evolution by acquisition

A rash of M&A announcements begs the question: why is materials handling so hot all of a sudden?

JDA Software Group Inc. announces plans to acquire i2 Technologies. Nova-Tech announces it will assume most of Transbotics’ assets. IBM announced plans to acquire ILOG.  These recent acquisition announcements have one thing in common: materials handling.

Materials handling is key to a healthy supply chain, and investors are bringing new visibility to that fact. Of course, the strategic importance of our field is nothing new to us, but after seeing this rash of acquisitions hit the wires, I wanted to find out if the business world at large is suddenly seeing materials handling in a new light.

“Private equity groups are identifying materials handling as a very interesting area,” acknowledges Jim Lavelle, managing director and co-head of the Industrial & Environmental Technologies group for the investment banking firm Houlihan Lokey.  “We’re seeing flows of capital into this sector, a lot of innovation, and competition among the players to be relevant again with their customer base. When we worked on the sale of JB Webb to Daifuku, they saw Webb as being extremely important for their growth because the Japanese marketplace is not long term expected to be a very good growth market with its declining population.”

At one time materials handling was seen as nothing more than a way to lift and transfer products with hooks and chains. Now even the Columbus McKinnons of the world are diversifying into more sophisticated offerings. The company’s Solutions segment has taken the company beyond hoists to more integrated workstation and facility-wide material handling systems. Eugene Bazemore, senior vice president in Lavelle’s group, agrees that materials handling is evolving to meet higher expectations.

“There’s a convergence of automation with controls that were traditionally embedded into the control room on the process side for a plant,” he told me. “As they start to be used for supply chain management you’re seeing higher technologies being employed including on the AGV side. Even in conveyors it’s not just chain any more, it’s power and free and automated movement, with higher end tracking technologies such as RFID. There’s more precision in the sensors used on the plant floor. As these technologies converge we’re seeing a lot of the materials handling players, with their knowledge of the plant floor and of material flow, being more successful than others in performing the integration needed in each of these vertical industry silos.”

It will be interesting to watch how these mergers and acquisitions shape materials handling state of the art on a global scale. We’ve already seen a growing European influence with the Mecalux acquisition of Interlake, and Daifuku’s Asian technology knowhow is sure to shape the Webb product line going forward. Have you noticed a difference in the products and services you’re getting from materials handling vendors? Tell me how. Either post a blog entry or e-mail me at tom.andel@reedbusiness.com.