May 16, 2020

Attracting the investors: tech in the manufacturing sector

Industry 4.0
Paul Teuten and Rory O’Sulliva...
5 min
Industry 4.0 is inviting new technology to the sector, requiring more funding
Sweeping changes in technology are disrupting nearly all sectors of the global market. In the home, the shop floor, the factory and the hospital, and ev...

Sweeping changes in technology are disrupting nearly all sectors of the global market. In the home, the shop floor, the factory and the hospital, and even our daily commute, technology is leading to huge changes in commercial business models. Why should manufacturing be any different?

This is the new industrial revolution — Industry 4.0 — and as with any rapid change, new opportunities have arisen and new ways of thinking have emerged. However, there are also new hurdles to overcome for businesses large and small.

Naturally, much of the limelight goes to the products themselves, and the innovative manufacturing processes behind them are often overlooked. In the public sphere, news has predictably focused on the high street and the latest consumer gadgets. Concepts like driverless cars and personalised tech from wristwatches to fridges have grabbed headlines and the imagination of consumers and businesses alike.

Manufacturing is arguably where we are seeing the biggest technological innovations, which have attracted investors’ attention. ‘Ransomware’ and ‘crowdfunding’ might be the most recent tech buzzwords for the public, but for manufacturing enterprises and investors, ‘cyber physical systems’, ‘cloud computing’ and ‘artificial intelligence’ are just as exciting.

It is hard to overstate the scalability of this market: growth in the enterprise and industrial software markets is set to continue, with the lion’s share in Europe. In fact, by 2020, the Boston Consulting Group estimates that companies will be spending about €100bn ($123.74bn) a year on such software — more than a six-fold increase on 2015.

And which industry will be leading the way? Manufacturing, of course, with a 22% share of this investment spending, which exceeds both utilities and transport. The adoption of Industry 4.0 themes is incredibly diverse, with far-reaching consequences. Predictive manufacturing, self-optimising production, smart response and automated inventory management are just some of the niche areas that have exploded in recent years.

These developments make the manufacturing space ripe for M&A, with the physical and digital worlds converging rapidly in front of us. Each individual merger and acquisition has a straightforward objective: proximity to the key data, which is likely the real value add to the customer. The ultimate goal is a complete vertical that enhances the solution for the customer. That’s exactly what Industry 4.0 can tap into.

It is relatively early, but business strategies have already changed vastly to accommodate these aims. First and foremost, data has become a central proposition for many companies. It’s no longer enough for firms to offer services or products — it’s the data that customers value.

As the value of data has become apparent, factories and industrial plants have evolved. Companies have embedded a whole solution for data capture, connectivity, interpretation and analysis — often using artificial intelligence to learn from data, pre-empt issues and future-proof business practices. For example, using data, factories across the globe can now ‘communicate’ through their machines — and if an issue occurs in one factory, the other plants can learn from it before the same thing occurs at their location.

Judging by recent trends, manufacturing firms that own and exploit data have set themselves up for success in an increasingly competitive marketplace. For this reason, they are also most likely to be targets of M&A activity. In addition, being technologically driven makes them more aligned by design. By seeking to streamline their processes and becoming more efficient and cost effective, these companies have made themselves even more attractive from an M&A perspective.

Finding such companies can be challenging, but manufacturing investors have two vital acquisition criteria. First, they’re looking for businesses of scale — of which there are few within the technology area. Second, they’re looking for targets whose technology is proven to drive commercial sales. Businesses have been willing to pay a premium to acquire companies that meet these criteria.

The M&A process is not without its pitfalls. The constant evolution of the industry means that joining two companies together can be problematic. Today, very few businesses are simple. Complexity can delay or even derail M&A deals, especially given the overwhelming background of change in the manufacturing models.

Larger companies, by their very design, cannot react as quickly as smaller organisations; these nimble tech firms are not only able to hold their own against larger, more established groups, but are often winning over customers with their solutions. As a result, the larger groups need to address how they compete and whether an acquisition of a smaller tech firm would redress the balance with customers. However, these smaller companies are often owner-managed startups and have a very different ethos and set of values than the acquirer.

But, importantly, they are also likely to have a different opinion on their valuation than established businesses, which can be a substantial hurdle to overcome. Typically, smaller, technology-rich targets expect to be valued in anticipation of the opportunity they represent. This is a hard sell for traditional conservative industrial groups, which are used to paying modest historical multiples of profit rather than future multiples of revenues. This is the area where an experienced financial advisor is most able to help.

Another key issue to contend with for M&A is the drive to automation as a replacement for human workers. A recent report from the UK think tank, Centre for Cities, indicated that a total of 3.6mn UK jobs could be replaced by machines. In fact, it predicted that jobs at the highest risk of replacement included retail sales, customer services, administration and warehouse work.

As key players seek to solidify their strategic positioning, span value chains and create growth opportunities for unique value propositions, the pace of investing and M&A activity is expected to accelerate. The sheer diversity of Industry 4.0 is opening up a myriad of opportunities. However, it also produces hurdles that must be overcome for M&A in manufacturing to be successful.

The ultimate Industry 4.0 takeaway is this: Companies across the manufacturing spectrum can’t afford to stand still. If you want to be at the forefront, you must embrace technological change and seek to integrate new technologies with your traditional practices.

Paul Teuten and Rory O’Sullivan are the respective Managing Directors at Duff & Phelps and Pagemill Partners, a division of Duff & Phelps 

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Jun 17, 2021

Siemens: Providing the First Industrial 5G Router

3 min
Siemens’ first industrial 5G router, the Scalancer MUM856-1, is now available and will revolutionise the concept of remote control in industry

Across a number of industry sectors, there’s a growing need for both local wireless connectivity and remote access to machines and plants. In both of these cases, communication is, more often than not, over a long distance. Public wireless data networks can be used to enable this connectivity, both nationally and internationally, which makes the new 5G network mainframe an absolutely vital element of remote access and remote servicing solutions as we move into the interconnected age. 


Siemens Enables 5G IIoT

The eagerly awaited Scalance MUM856-1, Siemens’ very first industrial 5G router, is officially available to organisations. The device has the ability to connect all local industrial applications to the public 5G, 4G (LTE), and 3G (UMTS) mobile wireless networks ─ allowing companies to embrace the long-awaited Industrial Internet of Things (IIoT). 

Siemens presents its first industrial 5G router.
Siemens presents the Scalance MUM856-1.

The router can be used to remotely monitor and service plants, machines, as well as control elements and other industrial devices via a public 5G network ─ flexibly and with high data rates. Something that has been in incredibly high demand after being teased by the leading network providers for years.


Scalance MUM856-1 at a Glance


  • Scalance MUM856-1 connects local industrial applications to public 5G, 4G, and 3G mobile wireless networks
  • The router supports future-oriented applications such as remote access via public 5G networks or the connection of mobile devices such as automated guided vehicles in industry
  • A robust version in IP65 housing for use outside the control cabinet
  • Prototypes of Siemens 5G infrastructure for private networks already in use at several sites


5G Now

“To ensure the powerful connection of Ethernet-based subnetworks and automation devices, the Scalance MUM856-1 supports Release 15 of the 5G standard. The device offers high bandwidths of up to 1000 Mbps for the downlink and up to 500 Mbps for the uplink – providing high data rates for data-intensive applications such as the remote implementation of firmware updates. Thanks to IPv6 support, the devices can also be implemented in modern communication networks.


Various security functions are included to monitor data traffic and protect against unauthorised access: for example, an integrated firewall and authentication of communication devices and encryption of data transmission via VPN. If there is no available 5G network, the device switches automatically to 4G or 3G networks. The first release version of the router has an EU radio license; other versions with different licenses are in preparation. With the Sinema Remote Connect management platform for VPN connections, users can access remote plants or machines easily and securely – even if they are integrated in other networks. The software also offers easy management and autoconfiguration of the devices,” Siemens said. 


Preparing for a 5G-oriented Future

Siemens has announced that the new router can also be integrated into private 5G networks. This means that the Scalance MUM856-1 is, essentially, future-proofed when it comes to 5G adaptability; it supports future-oriented applications, including ‘mobile robots in manufacturing, autonomous vehicles in logistics or augmented reality applications for service technicians.’ 


And, for use on sites where conditions are a little harsher, Siemens has given the router robust IP65 housing ─ it’s “dust tight”, waterproof, and immersion-proofed.


The first release version of the router has an EU radio license; other versions with different licenses are in preparation. “With the Sinema Remote Connect management platform for VPN connections, users can access remote plants or machines easily and securely – even if they are integrated in other networks. The software also offers easy management and auto-configuration of the devices,” Siemens added.


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