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The Marriage of Manufacturing & Technology in Entrepreneurship

The Marriage of Manufacturing & Technology in Entrepreneurship

103 years ago this July, one of the premier manufacturing companies in United States history, Boeing, took flight for the first time in Seattle, Washington.  Its Made in Washington products built with pride and skill by generations locally are recognized around the world and have directly impacted billions of lives.  60 years later, Bill Gates & Paul Allen started a technology company in Seattle that would enhance performance & productivity for people from the elementary school classroom to the C Suite in every publicly traded company.   Today, it is difficult to find a person that does not use Microsoft products in their personal or professional lives.  Boeing & Microsoft are iconic symbols of the robust manufacturing & technology industries that exist in the Pacific Northwest.  However, until recently the old economy (manufacturing) and the new economy (technology) frequently cohabitated rather than marrying on the plant floor in manufacturing companies.  This is changing through a process called Industry 4.0 creating opportunities for innovation, entrepreneurship, and increased productivity & profitability.

IBA, as the oldest (Born the same year as Microsoft in 1975) mergers & acquisitions intermediary firm in the Pacific Northwest serving the manufacturing & technology sectors, has a unique vantage point to watch the integration of these industries in the manufacturing process.  This view has witnessed privately held technology companies securing significant contracts in the manufacturing sector and family owned manufacturing companies enhancing their profitability, efficiency, and market values by utilizing technology.

As one of the select M&A firms invited to be a member of CAMPS, The Center for Advanced Manufacturing Puget Sound (www.camps-us.com), I recently attended the organization’s 2019 Manufacturing  Conference on Industry 4.0 in an effort to keep firm knowledge current, enhance our ability to assess and value infrastructure & intangible assets for our “sell-side” clients desiring to achieve premium values for their manufacturing companies in the marketplace, and increase our ability to identify opportunities for increased revenue, profitability, and productivity post acquisition through the incorporation of technology for buyers.

The opportunities that exist for manufacturing companies that embrace Industry 4.0. are significant.  Recognize that many products associated with the integration of manufacturing & technology are in their first or second generation (The following is a video on how PACCAR, another Pacific Northwest manufacturing company, is using Microsoft products to assist with training its personnel on the manufacturing process)

(https://www.bing.com/videos/search?q=Microsoft+Holo+Lens&&view=detail&mid=75328FD8D9B7C8A41BF475328FD8D9B7C8A41BF4&&FORM=VRDGAR)

The cost of technology products is coming down and implementation is becoming easier as technology is targeted for distribution to smaller companies and more applications through off the shelf solutions.  Opportunities also exist for manufacturing companies to beta test products for technology companies if a willingness exists to be a “guinea pig”.  It may take time to find the right solution for specific problems, but the rewards can be significant.  The following were some of the benefits of Industry 4.0 outlined in the conference:

10 – 30% Lower Design & Engineering Cost

30 – 50% Lower Machine Down Time

15 – 30% Increase in Labor Productivity

10 – 20% Quality Improvement

20 – 40% Inventory Reductions

The marriage of manufacturing & technology is in its early stages.  However, like the progression from childhood to adulthood it is not something that can be stopped.  Manufacturing companies looking for increased productivity and profitability will incorporate Industry 4.0 into their processes in the next decade.   Manufacturing companies that defer implementation of Industry 4.0 may be able to compete for a period of time, but ultimately will be at a competitive disadvantage.  The first decision an owner of a privately held company needs to make is when & how to incorporate new technology into their manufacturing processes.  One expert at the conference recommended starting with off the shelf systems for monitoring OEE (Overall Equipment Effectiveness).  The reports generated from direct computer interface with the equipment can help optimize maintenance schedules decreasing downtime and part failure, assess available machine capacity, and mitigate production bottlenecks through identifying equipment & personnel needs in the production process.

The second decision and one I recommend  business owners think about as a 25 year, professional mergers & acquisitions intermediary is whether you want to be the one who manages the 21st century evolution of the manufacturing process or if you want to leave that implementation of technology into your manufacturing process to your ownership successor.  Industry 4.0 implementation is primarily optional at this stage for middle market companies, but it will not stay that way for long.  Once elements of Industry 4.0 become expectations by companies looking to make strategic acquisitions and private equity firms business values will be negatively impacted if they are not in place.  It is always preferred to sell a business when your processes equal or exceed your competition.   Recently, IBA evaluated a CNC machine shop with antiquated machines as a potential representation project.  Unfortunately, the equipment had little or no value to a successor. The value of the company defaulted to its customer list.  The customer list likely has a value in the marketplace, but as a going concern with modern equipment and capacity to grow the company’s valuation would have been significantly higher.

IBA has successfully facilitated the sale of manufacturing companies for 45 years in the Pacific Northwest.  We welcome the opportunity to be a resource to entrepreneurs in the manufacturing sector.   If you are interested in learning about business valuation or the sale process associated with selling a privately held company, we would welcome the opportunity to meet with you and provide an overview of the marketplace for manufacturing companies and our services.  All information shared with IBA is held in strict confidence.  100% of IBA’s fees are paid on performance on completion of the sale.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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