Industrial Automation Services: Regional Consolidation Strategy
Platform acquisition in industrial automation services, building scale through tuck-in acquisitions and operational standardization across regional markets.
Situation
The platform company was a well-managed industrial automation services provider serving manufacturing clients in the Midwest. Management sought capital to execute a regional consolidation strategy in a fragmented market where most competitors were family-owned businesses nearing succession.
Investment Thesis
We identified an opportunity to consolidate a fragmented services market through disciplined M&A and operational best practices. The sector benefited from tailwinds including reshoring, factory automation, and aging infrastructure requiring upgrades and maintenance.
Value Creation
- Acquired four regional competitors within 18 months, expanding geographic footprint and service capabilities
- Implemented standardized operating procedures, safety protocols, and project management systems across all locations
- Centralized back-office functions (accounting, HR, procurement) to drive overhead efficiency
- Cross-trained technicians on multiple automation platforms, improving utilization and customer flexibility
- Built national account sales capability to serve multi-site manufacturing customers
Outcome
The platform achieved significant scale through both organic growth and acquisitions. Standardization initiatives drove margin expansion while maintaining the local relationships and technical expertise that customers valued. The business successfully expanded its service offerings and became the go-to provider for several large manufacturing customers with multi-state operations.
Investment Rationale
Industrial automation services represent a mission-critical category for manufacturing customers. These services—system design, installation, programming, and maintenance—require deep technical expertise and local presence. The market was highly fragmented, with most providers operating in single metro areas.
Our platform company had strong management, excellent safety record, and loyal customer base. Leadership articulated a clear vision for regional consolidation but lacked the capital and M&A experience to execute at scale.
Build-Up Strategy
Platform Strengths
The platform business had several characteristics that made it ideal for a consolidation strategy:
- Experienced management team with track record of organic growth
- Strong financial performance with predictable recurring maintenance revenue
- Excellent safety culture (critical in industrial services)
- Diversified customer base across end markets (automotive, food & beverage, pharma)
- Modern systems for project management and customer relationship management
Target Identification
We developed a systematic approach to identifying and evaluating acquisition targets:
- Market mapping: Identified competitors in adjacent geographies with overlapping capabilities
- Succession screening: Prioritized owners approaching retirement with no family succession plan
- Technical assessment: Evaluated technical capabilities and brand/automation platform expertise
- Cultural fit: Assessed compatibility with platform company's values and operating philosophy
Transaction Execution
Over 18 months, we completed four tuck-in acquisitions ranging from $5M to $15M in revenue. Each followed a similar playbook:
Pre-Close:
- Management team meets with seller and key employees
- Technical assessment of capabilities and equipment
- Customer reference calls to validate reputation
- Financial and legal diligence
Post-Close (Days 1-30):
- Communicate transaction to customers and reassure continuity
- Retain key technical staff with retention bonuses and clear career paths
- Maintain local brand and leadership in near term
- Assess immediate operational needs
Integration (Months 1-12):
- Migrate to platform company's project management and financial systems
- Standardize safety protocols and training programs
- Consolidate purchasing and negotiate volume discounts with vendors
- Cross-train technicians across automation platforms
- Gradually transition back-office functions to shared services
Operational Excellence
Beyond M&A, we focused on operational improvements across the combined business:
Talent Development
Industrial automation requires highly skilled technicians with expertise in specific platforms (Rockwell, Siemens, etc.). We invested in:
- Structured apprenticeship programs for entry-level technicians
- Manufacturer-led training on new automation technologies
- Cross-training to increase technician versatility
- Career progression frameworks tied to certifications and experience
Safety & Quality
In industrial services, safety record is paramount. We:
- Implemented consistent safety protocols across all locations
- Invested in modern PPE and safety equipment
- Conducted regular safety audits and near-miss reviews
- Celebrated safety milestones and recognized safety leaders
Customer Experience
We enhanced customer service through:
- 24/7 emergency response capabilities across expanded footprint
- Proactive maintenance programs to reduce unplanned downtime
- Quarterly business reviews with key accounts
- Faster response times due to increased technician density
Financial Performance
The consolidation strategy delivered strong results:
- Revenue grew through both acquisitions and organic expansion
- EBITDA margins improved as overhead was spread across larger revenue base
- Recurring maintenance revenue increased as percentage of total revenue
- Customer concentration decreased as business diversified geographically
Lessons Learned
- Cultural integration matters: Technical skills can be taught; cultural fit cannot be fixed
- Retain key people: In services businesses, top technicians are the asset—retention is critical
- Move deliberately: Integration takes time; rushing it risks losing customers or employees
- Maintain local identity: Customers value local relationships even as business scales
- Systems enable scale: Standardized processes and modern systems are prerequisites for growth
Outlook
The business continues to build density in existing markets while selectively pursuing new geographic expansion. The pipeline of potential acquisitions remains robust as more owners reach retirement age. The company is well-positioned as a leading regional player with the scale and capabilities to serve large national accounts.
This case study is provided for illustrative purposes only. Results are not indicative of future performance, and individual experiences may vary.
Information provided is for illustrative and educational purposes only and does not constitute an offer to sell or a solicitation to buy any security or investment product. Past performance is not indicative of future results. Nothing contained herein should be construed as investment, legal, or tax advice. Prospective investors should consult with their own advisors before making any investment decisions.