FOCUS Investment Banking, LLC
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- Member Since 2017
- Member Since 2017
- Robotic Consultant
With more than three decades of experience, FOCUS Investment Banking is a trusted name in middle market M&A advisory services worldwide. FOCUS works to understand each client’s strategic and financial objectives, craft the best plan to achieve these goals, and deliver success. Whether helping to sell, buy, or raise capital, FOCUS strives to maximize the value of every transaction to the benefit of its clients. FOCUS has established a practice vertical in advanced manufacturing, with multiple transactions completed in precision machining and current activity in robotics and ERP. With the rapid growth in robotic technologies and solutions, we anticipate significant transactional activity, particularly among automation integrators due to increasing capital requirements occasioned by the growth and the increasing interest of outside parties, including private equity and international firms in establishing a bridgehead in the industry.
The U. S. economy drives the world and the dollar is the global currency. Its free market economic system has been adopted globally as has its democratic system of government. Our institutions of higher education are magnets drawing the best and brightest to our shores, many of whom have remained to help lead our dominance in new technologies. Each of those pillars of strength is being challenged and, in response, we are fighting the last war. While we focus on fighting old battles over globalization and world trade, we are at risk of losing a far more important battle, one in which the means of production and distribution will depend on new technologies currently under development to automate and digitize the global supply chain. The critical conflict of the coming decade will be the battle for dominance in the global economy. The winners will be those nations that understand the importance of these new technologies and act to lead in their adoption. This is not the first time American technological superiority has been challenged. In the 1980s the U.S. memory chip industry was decimated by low cost Asian competition and many observers decried the loss of the U.S. tech industry. American ingenuity won the day, as commodity memory chips were eclipsed by the explosion of the microprocessor industry. The application of Moore’s Law enabled increasingly more complex systems to be incorporated into microchips, leading to the explosion of PC based computing power and ultimately to the Internet and its progeny. It was no accident that, during this period of explosive growth, the U.S. tech community attracted many of the world’s brightest engineers and scientists, many of whom stayed to become leaders of the Silicon Valley success story. This time the stakes are even higher as the digital revolution sweeps over every aspect of human activity. The technologies upon which the future of goods production and distribution will be based, including robotics, additive manufacturing, lasers, satellite communications and artificial intelligence, were first developed in the U. S. Yet today Japan and Germany control the robotics industry and build some of the world most advanced production equipment. Germany is at the forefront of introducing Industry 4.0, through which factories will be controlled by digital networks, making production more efficient, potentially by orders of magnitude. China has committed as a matter of national priority to take the lead in all these fields and is investing tens of billions to both acquire and develop the world’s most advanced technologies. Notwithstanding the strength of our technology base, no law of nature assures that the U.S. will again be successful in fending off these challenges. My college major was Economics. Friends in the humanities would engage me in vigorous debate over the source of a nation’s military strength. They fervently believed that economic strength derived from military power. In ROTC we studied military history. There was naturally much focus on the great military tacticians, men like Julius Caesar, Napoleon Bonaparte and in our own country Grant and Lee. Each of these men excelled as warfighters, but history taught us that military power ultimately depends on a nation’s sustained ability to supply its warriors with food, weapons, ammunition, et. al. One of the major reasons the United States won the Civil War was that the northern states had embraced new technologies vital to their success. Advanced communications (telegraph) transportation (railroads) and means of production (steam) enabled the northern states to build and sustain a supply chain that inexorably ground down the South, notwithstanding the brilliance of its military leaders and the valor of its troops. If we are to assure American military dominance in the 21st Century, we must preserve our nation’s role as the world’s technology powerhouse and economic engine. As Team Leader of our investment banking firm’s Advanced Manufacturing & Automation Team, I am privileged daily to witness wonderful things. Throughout our nation, the world’s most brilliant scientists, engineers and entrepreneurs are busy developing technologies that promise to make manufacturing and distribution vastly more productive and that will enable introduction of advanced technologies, including lifesaving medical devices, that would be impossible without the tools of automation. Automation promises to bring manufacturing back to our shores and billions of dollars are being invested to make that happen. Success in this enterprise requires our continuing role as the global technology leader. That depends in great part on our ability to continue attracting and keeping the world’s most talented scientists and engineers. Some of brightest (and most fervently American) individuals I know have come here from places like India, China, Eastern Europe and many others, drawn to our shores as the land of opportunity. Our ability to continue attracting the world’s best and brightest is critical to our success in the battle for global technology and economic dominance. Unfortunately, our national policy seems focused on the last wars, attempting to turn back the tide on globalization, immigration and trade. We live in an increasingly globalized world of free trade and competition for the best talent regardless of national origin. If we turn our back to the world, other powers will take our place, using many of the ideas and technologies originally developed here. This is our battle to lose. Embracing the new technologies promises a future in which the American Heartland can again be a global leader in manufacturing, while the country as a whole benefits from prowess in fields such as biotech, digital intelligence, materials science and others currently unimaginable but sure to come. Winning this battle depends upon our openness to world trade, upon attracting the best and brightest scientists and engineers to our shores and upon America continuing to demonstrate its leadership as the world’s beacon of democracy and freedom.
Recently my colleague Marco Chan shared an extraordinary story that puts a new slant on the public discussion about robotics, China, outsourcing and the future of jobs. According to this Bloomberg Business Week story, a Chinese manufacturer, Tianyuan Garments Co., is investing $20 million to open a plant in Little Rock that will utilize robots developed by a Georgia company, SoftWear Automation, to manufacture T-Shirts at a cost of 33 cents per shirt. Each SEWBOT™ workline is capable of spitting out a T-Shirt every 26 seconds. Human workers don’t stand a chance against such competition, no matter how low a wage rate they are willing to accept. We’re in a period of profound change as digital technologies promise to transform virtually every industry globally. In manufacturing this rapidly accelerating transformation will impact employers and employees alike. PWC recently estimated that 38% of U.S. jobs could be taken by robots by 2030. Futurists like Martin Ford and even well-known industrialists like Elon Musk have begun to argue that we need to consider adoption of a Universal Basic Income to address a world in which machines and artificial intelligence have replaced human beings in a large part of the economy. For those that fear the consequences of automation, the connection has been broken between technological advance and the creation of new higher skilled jobs categories to replace the old lower skilled jobs. I have more confidence that a dynamic economy will continue to provide opportunities for our citizens, creating currently unimaginable job categories for those willing and able to adapt. Lifetime learning has become a survival skill in our society, opening up new business opportunities in education and training and likely creating hundreds of thousands of jobs in the process. At the FOCUS Investment Banking Advanced Manufacturing & Automation Team we spend our time addressing the impact of automation on businesses worldwide. We help both those companies that create the technologies powering change and those whose industries are being transformed by new tools like those created by the bright engineers at Software Automation. Workforce issues are paramount for these firms. While labor cost is undoubtedly a factor, our conversations with multiple business owners have led us to conclude that other factors may be as or more important. The machining industry provides a prime example. Milling machines remove metal from rods or bars of steel, aluminum and a variety of other increasingly exotic and expensive materials and alloys. The customers demand near perfection at tolerances down to a few ten thousandths of an inch and increasingly even in the micron scale. This level of precision cannot be accomplished by even the highest skilled machinist; only with the use of robotic tools, sometimes referred to as CNC in the industry, can the parts be built to support such critical technologies as aerospace and defense, medical devices and our wireless communications infrastructure. Increasingly we will find that an ever-wider range of industries will require the tools of automation – robots, optical sensing, AI and motion control to name a few – to meet the exacting quality and performance required by their customers and to meet the demanding delivery schedules required by product life cycles increasingly measured in months, not years. Equally important for the machining industry, even where humans can do the work, skilled workers are not to be found. Despite wages well above national and regional averages, there are serious shortages of skilled machinists and even less skilled jobs like machine loaders are hard to fill. The average welder in the U.S. is in his or her late fifties and more skilled welders are retiring than new welders are joining the workforce. Owners have increasingly turned to robots, not to replace workers, but to fill jobs for which there are not enough qualified applicants. In future posts, we’ll talk more about how automation is primed to impact specific industries. Catch our full interview with Palaniswamy “Raj” Rajan, and CEO of Softwear Automation in our next post. The author, John Slater, is a Partner and Team Leader – Advanced Manufacturing & Automation of FOCUS Investment Banking and a Chartered Financial Analyst. FOCUS, headquartered in Washington, DC, provides merger and acquisition and capital raising advisory services to middle market companies nationwide and globally through its membership in M&A Worldwide.
Fear stalks the land. The Robot Apocalypse is nigh, destined to steal our jobs and our future. Worse yet the machines are made elsewhere (Germany, Japan, even China) and America is being left behind in the race for manufacturing prowess. We’ve heard this story before. In the late 1980s, the U. S. computer memory industry had been decimated by Japanese and Korean competition. To the Cassandras, this meant that the U.S. had forever lost the global economic race and was destined to become a second-rate power. Nothing could have been further from the truth. The prerequisites for U.S. global dominance of the technology world were already in place. Within a few years, U.S. prowess in personal computers, microprocessors, and digital networking would lead to a capital investment boom and a stock market bubble not experienced since the 1920s. Stock market fluctuations notwithstanding, the global growth of the Internet has not abated since. . For all its impact, the Internet has touched only a relatively small portion of human existence, focused primarily on media, entertainment, telecom and more recently retailing and finance. The larger world in which we live, the world of things and physical interactions has, until now, been only lightly touched. But that is going to change – and change in a huge way. Imagine Amazon on Steroids Today Amazon utilizes highly advanced predictive analytics and automation tools that plan and track the flow of merchandise from product sourcing, to the logistics of fulfillment and shipment, to the reorder and stocking of replacement items. In Amazon’s warehouses, robots stock the shelves, pick the orders and load the trucks. Even the human workers are guided by systems that plan their routes, tell them where to go, and dictate what products to pick and the order in which to pick them. Increasingly these advances have very real consequences for the financial markets. Brick and mortar retailing is under siege, with thousands of stores and scores, if not hundreds, of malls destined to shut their doors. For retailers, it’s do or die, even for industry leaders like Macy’s and Sears. They will either learn to adapt to the new digital reality or they will follow others that failed to do so – think Kodak and Blockbuster. Now look ahead to a time when every step in the global production and distribution cycle is similarly digitized. Software systems will monitor retail demand through information networks directly linking retailers to their sources of supply on a real-time basis. Digital purchasing agents will assure that the supply chain responds to changing demand, arranging just in time delivery of components and raw materials, often without the intervention of human actors. Production scheduling will be done by robotic agents utilizing sophisticated artificial intelligence systems that assure the most efficient use of available resources, including increasingly automated production lines operated by robots and other digitally controlled systems instead of human workers. Companies that fail to keep up will not survive. The technologies that will make this possible already exist. While industrial robots currently get a great deal of press attention because of the fear they engender, robots are old tech. The first industrial robot was deployed in 1961 and robots have been common in the auto industry for decades. Like the Internet before it, the automation boom is gaining steam as costs come down and the technologies become more approachable for the average business. Here are just a few of the rapidly advancing technologies that have primed the coming explosion in automation: • Additive Manufacturing • Artificial Intelligence • Augmented Reality • Autonomous Vehicles • Collaborative Robots (Cobots) • Cybersecurity • Industrial Internet of Things • Machine Learning • Robotic Process Automation • Sensors • Vision Systems The stage is set. Interest is building. The world of automation is ripe for a spark to catch the imagination of the financial community, like the 1995 Netscape IPO which marked the start of the Dotcom boom. Soon we will witness a major capital investment boom that transforms the economy in ways we cannot yet foresee. In the meantime, the entrepreneurs are not waiting. In April 2017 tens of thousands of business owners, engineers, plant managers, consultants and prospective entrepreneurs will converge on McCormick Place in Chicago to attend Automate 2017. More than 1700 exhibitors will present their wares. They sense a Gold Rush coming and want to be part of it. While it would be foolish to predict a repeat of the 1990s stock market bubble, it seems clear that the coming decade will witness explosive growth in many of the products and services needed to support the automation of a wide range of endeavors, creating vast new wealth for the successful innovators. At the same time, it’s reasonable to assume that many companies and even whole industries will be left in the dust by the introduction of these transformative technologies, just as the record companies were upended by the introduction of digital downloads and music streaming. It’s going to be a wild ride that will leave few aspects of human activity untouched. The author, John Slater, is a Partner and Team Leader – Advanced Manufacturing & Automation of FOCUS Investment Banking and a Chartered Financial Analyst. FOCUS, headquartered in Washington, DC, provides merger and acquisition and capital raising advisory services to middle market companies nationwide and globally through its membership in M&A Worldwide.