Manufacturing Execution Systems (MES) Capital Market Transactions

Between Q1 2020 and Q2 2024, $6.5 billion was deployed in the manufacturing execution systems sector (MES). MES software solutions are designed to manage, monitor, and execute manufacturing operations in real time. They track the entire production process, from raw materials to finished goods, ensuring efficiency, quality control, and regulatory compliance. By optimizing workflows and minimizing downtime, MES helps manufacturers improve product quality, reduce waste, and enhance overall productivity.
Most transactions conducted and capital invested were by US-based investors, with 88% of all capital invested. This shows an appetite to invest in advanced manufacturing technology as demand for onshoring and nearshoring production increases. Chinese investors conducted the second-highest transaction volume in the MES industry. The low average transaction size of under $7 million indicated the early stage nature of the sector in China and the demand for manufacturing innovation.
MES founders and shareholders should be aware of fundraising opportunities presented by US-based investors and possible exit opportunities.
  • Between Q1 2020 and Q2 2024, $6.5 billion was deployed across 232 transactions in the MES sectors. The average transaction value was $28 million, highlighting the volume of transactions conducted in the middle and lower-middle markets.
  • The most significant deployment of capital, $2.7 billion, occurred in Q4 of 2024 across 13 transactions with large private equitytransactions driving investment.
  • The largest deal count occurred in Q2 2022 with 34 transactions. This may have been driven by the demand for manufacturing execution systems at the start of COVID-19 and the related lockdowns. The deal count in the remaining periods fluctuated between 8 and 20 transactions per quarter, indicating strong demand for investment in the sector.
  • Two of the largest transactions conducted in the sector were completed by Aptean.com. Aptean raised $4.7 billion across two debt transactions closed on December 18, 2023, and January 29, 2024.
  • Venture capital transactions saw a high level of transactions, accounting for 28% of deals in the sector. In the sector 65 venture capital transactions occurred, in which $195 million was deployed.
  • Transactions by strategic acquirers were dominated by capital invested. Across 60 transactions, $2.5 billion was deployed. The average transaction size of $40 million indicates an appetite for transactions in the middle and lower-middle markets. 
  • Private equity transactions accounted for 30% of capital deployed in the sector and 27% of the deal count. This shows the abundance of growth-stage companies in the manufacturing execution systems sector.
  • PIPE, IPO, and other transactions accounted for a smaller portion of the capital raised, and the deal count indicated less mature companies in the sector.
  • US-based investors dominated the capital invested in the manufacturing execution systems sector, with over 88% of capital deployed ($5.7 billion). US-based investors conducted a significant portion, 33% of transactions, with 77 complete and announced deals. This could be due to a variety of factors, including the demand for onshore or nearshore manufacturing facilities against the backdrop of rising geopolitical tensions and supply chain concerns. Similarly, the demand could be driven by the need to optimize and automate manufacturing processes in the US to remain cost-competitive with Asian markets.
  • Chinese investors contributed $441 million across 65 transactions with an average deal size of under $7 million. This implies an abundance of smaller transactions indicating the early stage nature of the sector and the demand for manufacturing innovation.
  • Investors in developed nations such as Canada, Germany, and Ireland contributed significantly to the deal count but deployed relatively less capital with no country investing more than $200 million. This shows the early stage nature of the sector outside of the US and the abundance of smaller transactions. 
  • The rest of the world exhibits a noticeable spike in the deal count, but an exceedingly small share of the capital invested. This implies a wide distribution of smaller deals across various countries not individually listed. These smaller markets collectively engage in a considerable number of MES transactions, but each deal tends to be small, reflecting diverse capital market activities.

Deal Spotlight:

APPRENTICE


The Company

Apprentice is a Jersey City-based developer of a manufacturing execution system designed to serve the pharmaceutical industry. The company’s system integrates augmented reality, voice recognition, and artificial intelligence into wearable, mobile, and desktop devices. The lab execution system enables pharma to integrate the data and process to reduce human error and inefficiency in the drug production process.

The company raised $65 million of venture funding through a combination of debt and equity on March 9, 2023. Approximately $63 million of Series C1 was raised through equity sales at a pre-money valuation of $527 million. The round was led by ICONIQ Growth with participation from Insight Partners and Alkeon Capital Management. Approximately $2 million of the debt was provided by undisclosed lenders.

Capital invested in the MES sector is dominated by US-based investors. The demand for onshoring and nearshoring manufacturing is driven by supply chain concerns and rising geopolitical tension. Developed markets have similarly invested in the sector to remain competitive with Asian markets. Chinese investors have focused on early stage transactions, the nascent nature of the sector in China, and the demand for manufacturing innovation.
There is a relatively even distribution of deal count venture capital transactions, private equity transactions, and mergers and acquisitions. This showcases significant capital market opportunities available to MES companies at all stages of growth.

SOURCES