SCDigest Editorial Staff
Developing and applying material handling technology beyond the manual picking and automatic sorting of products into fully automated case pricking [ACP] systems requires the technical and financial strength to assume the associated risk involved in dramatically changing the way material handling logistics is performed in a client’s operation.
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In the second major merger in the US material handling industry in the last 14 months, Wisconsin-based HK Systems, itself a product in part of acquisitions, agreed to be acquired by its larger European-based rival Dematic, bringing further consolidation to the US materials handling market amid continue soft spending by manufacturers and distributors and the growing need for large scale to succeed as a system provider.
In May of 2009, Intelligrated acquired the North American materials handling business of the much larger FKI Logistex. (See Holste on the Merger of Intelligrated and FKI Logistex.)
Now, the two other largest conveyor and materials handling system providers in the US are combining, illustrating several major trends in the materials handling automation market.
“There is a growing need for materials handling companies to become global players and to have the resources required to develop and support highly automated distribution systems,” says Cliff Holste, SCDigest and Distribution Digest’s materials handling editor. “This deal happened in part to enable HK Systems to participate in those trends.”
Holste says that as automated case picking (ACP) and other highly advanced areas of automation start to be adopted by materials handling customers, considerably more R&D and implementation resources are required from vendors versus the typical batch picking systems that have been the mainstay of DC automation for more than two decades.
“These very highly automated systems will provide big benefits but also come with high risk,” says Holste. “Once they are implemented, there really is no turning back. Failure would be a major disaster that could severely injure a company. So you need a automation partner that has substantially proven the technology through research and development and has the resources to throw at the project to make sure it is a success.”
Global MHA Thinking
Even as a $200 million company, HK Systems may not have been large enough to provide the level of R&D and system support increasingly required, Holste says. He adds that the other major factor in the deal from HK’s perspective is the need to go global
For really the first time, Holste says, US companies are now looking for automation suppliers that can support them across the world while they pursue their global market development and distribution strategies. HK Systems, while a leading US player, did relatively little business outside of North America.
“This really provides a lot of opportunity for HK. They've got great technology, and this will give them reach," said Michael Howell, a partner at C.W. Downer & Co., a Boston investment banking firm, who leads the company’s material handling and logistics transaction group.
Adds Holste: “There can be no denying that the competitive landscape for MHA projects in the U.S. has changed dramatically in just the last few years with the infusion of international companies HK is a $200 million range company trying to compete domestically and internationally with much larger companies like Schaefer ($2.36 billion), Daifuku ($1.76 billion), Dematic ($1 billion before this deal), and Vanderlande Industries, Swisslog AG, TGW-Ermanco and Intelligrated-FKI, all of which are in the $500 million to $750 million range. By joining forces with Dematic, HK will become a player in the global MHA market.”
Holste said users can expect to see still more mergers down the road.
(Distribution Article - Continued Below)