Automation is helping businesses grapple with labor shortages and supply chain challenges. For private equity firms, it’s a good time to be an investor in the space. Crestview Partners recently backed automation systems integrator JMP Solutions. Alex Rose, co-president and partner at Crestview, gave us some thoughts on deal trends in the space.

“Automation is a large and fast growing part of the economy as industrial, consumer and distribution customers in both developed and developing economies alike seek to improve quality, combat labor shortages and create efficiencies,” Rose told us. “Most businesses are still in their early stages of adopting automated manufacturing or warehouse operations, but all are dealing with labor shortages and the need for more consistent quality and throughput.”

Businesses have been gradually adding automation to their operation processes to fulfill more orders quickly and accurately. The combination of e-commerce sales soaring from the pandemic and labor shortages has created problems in logistics and accelerated the need for automation. That will drive deals in the private equity space. For instance, Core Industrial Partners acquired metal fabrication provider CGI Automated Manufacturing.

We’ve seen many disruptions in the supply chain over the last 18 months, from factory shutdowns during the pandemic to ships getting stuck in the Suez Canal.

“As customers begin to demand global fulfillment and the highest level of service from this supply base, consolidation will naturally occur,” Rose said. “Our plan with our investment in JMP is to be on the front end of that wave of consolidation.”

I’ll have more of my interview with Rose soon.

Demitri Diakantonis