The value of private equity investment in the global industrial automation industry so far in 2024 has already surpassed the full-year total for 2023 and is closing in on the record capital deployed into the sector in 2021.

Through Sept. 20, private equity and venture capital firms invested $14.87 billion, compared with $7.17 billion in full year 2023. Conversely, deal volume is trending down at 127 through Sept. 20, compared with 227 in the past year, S&P Global Market Intelligence data showed.

Transaction value thus far in the third quarter surged to $11.36 billion across 42 deals. In the third quarter of 2023, the aggregate value was $780.0 million from 57 deals.

Similarly, transaction value was up across geographies, with investments in Asia-Pacific industrial automation companies reaching about $8.39 billion from Jan. 1 through Sept. 20. In 2023, aggregate transaction value in the region was about $4.05 billion.

The US and Canada so far recorded a combined deal value of $4.19 billion in the sector compared with $1.07 billion in all of 2023. European investment in industrial automation was at approximately $2.30 billion compared with the $2.04 billion annual total for the previous year.

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Sector appeal to investors

Increased investments in the industrial automation sector are likely the result of two factors — huge private equity capital that needs to be deployed and the sector's potential for continued growth, according to Wade Aust, managing partner and chairman of Alantra US, which provides investment banking and asset management services.

"The sector tends to generate high returns, significant cash flow. That's very attractive to private equity. ... It's the sector fundamentals, good visibility of growth, and many of the businesses in it generate significant cash flow," Aust told Market Intelligence.

The sector has the potential to see further growth in investments as economies face supply chain challenges and labor shortages.

"AI is being used and technology is being used to manage the supply chain management challenges. ... There's a lot of work being done to create increased automation to deal with the labor shortage, particularly skilled labor shortage problems," Aust said. "It's going to take multiple years and real focused training to develop the employee base or labor base that's required."

Largest deals

Bain Capital LP's $4.10 billion bid made in September to acquire Japan-based software company Fuji Soft Inc. is the largest potential transaction so far in 2024 in the industrial automation space.

This is followed by KKR & Co. Inc.'s offer to acquire the same company for $3.85 billion through FK Co. Ltd., an entity owned by investment funds managed by the US-based private equity firm. FK expects to commence the tender offer in the second half of 2024, pending regulatory approvals. KKR Asian Fund IV will largely finance the transaction.