On the April 23, Honeywell International Inc. announced that it had sold its Warehouse & Workflow Solutions, or WWS, division – consisting of Intelligrated and Transnorm – to private equity firm American Industrial Partners.
This came just three days after Honeywell announced the sale of Productivity Solutions and Services – its automatic identification and data capture (AIDC) arm – to Brady Corp. for $1.4 billion. For the Charlotte, N.C.-based company, this represents a 1.3x revenue multiple and 8x trailing EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple.
Honeywell acquired Intelligrated in 2016 for $1.5 billion, representing a 12x EBITDA multiple and a 1.6x revenue multiple. A few months earlier, KION acquired Dematic for $3.25 billion. This represents a 19x EBITDA multiple and a 1.8x revenue multiple, suggesting a higher valuation for Dematic.
Fast forward to today: Honeywell’s WWS group has grown just 3.9%, from approximately $0.9 billion to $0.93 billion.
Meanwhile, Dematic’s revenue has increased 86%, from roughly $1.8 billion to $3.3 billion. Adjusting for approximately 35% inflation between 2016 and 2025 — and considering that a portion of Honeywell’s WWS growth came through acquisitions such as Transnorm — Honeywell’s Intelligrated business is effectively generating less revenue in real terms than it was at the time of the 2016 acquisition.
The COVID-19 boom and bust
However, to analyze the group on such a long time horizon misses the bigger picture. As the chart below shows, Honeywell was caught squarely in the COVID-19 boom versus bust cycle.
Our analysis shows that Honeywell’s strong vendor concentration with a small number of major e-commerce retailers (such as Amazon) was the main catalyst for the boom-bust cycle. As e-commerce sales cooled, so too did Honeywell’s WWS revenue growth.
Therefore, Honeywell provides a cautionary tale for over-reliance on key customers. Amazon has historically been one of the key customers for large conveyor companies, presenting both risks and opportunities.
With Amazon’s One Material Handling System (One MHS) initiative, aimed at standardizing the hardware, software, and controls used in its fulfillment centers, automation vendors face even heavier commoditization. This approach eliminates lock-ins, proprietary software, and service opportunities, as Amazon trains technicians on a single operating standard, making it far easier to service in-house.
It’s not precisely clear what AIP paid for Honeywell’s WWS group. However, we can assume that AIP likely bought the WWS group at a discount given the significant growth contraction.
In addition, the operating group was publicly stated as an “asset held for sale,” increasing AIP’s negotiating power. Furthermore, Honeywell reported an impairment charge related to the PSS and WWS to the tune of about $350 million (although it’s unclear how much was attributed to WWS).
Intelligrated, TREW come full circle
AIP’s acquisition of TREW Automation was likely a key driver for the decision to acquire Intelligrated and Transnorm. Ironically, ex-Intelligrated employees founded TREW, and we’ve heard that many Intelligrated employees have since jumped ship to join TREW.
TREW was founded in 2019. It quickly acquired Hilmot, a motorized roller conveyor manufacturer, and Tech King Operations, a warehouse software and controls specialist. The company positions itself as a pure-play system integrator, bringing together third-party equipment (along with its in-house conveyors) using its proprietary software.
The merger of Intelligrated and TREW won’t necessarily fill portfolio gaps. Indeed, Intelligrated’s key offerings are its conveyor and sortation products, along with its Momentum software suite, mirroring both Hilmot and TKO’s core offerings, respectively. Therefore, the key synergy is likely to be scale, particularly around the installed base, conveyor production, and integration capabilities.
How can AIP be successful?
For AIP to be successful, it can’t fall into the same trap that Honeywell did. This is particularly true around customer concentration, which we’ve heard anecdotally was a key issue for Honeywell Intelligrated.
For example, Amazon has significantly increased its spending on automation since 2024, but its spending volatility, coupled with its increased pricing pressure from the One MHS initiative, will be a significant risk to future growth and profitability.
Furthermore, with more plug-and-play equipment, integration is becoming commoditized as it becomes easier to install equipment, lowering the barrier to entry. Therefore, software is going to be the key differentiator. How well AIP is able to bring together TREW’s software and controls with Intelligrated’s Momentum suite is going to dictate the success of the synergy.
AIP could go one step further by acquiring or developing a pure-play/stand-alone WES solution that has a true resource-agnostic/multi-agent approach. This would hedge against a future driven more by robotics than by mechatronics.
Dematic, for instance, recently partnered with GreyOrange, integrating GreyOrange’s GreyMatter software into its portfolio. While this is a collaboration rather than a merger, it nonetheless highlights the direction of travel.
To this end, we believe AIP should separate software and steel for its go-to-market strategy. One of TREW’s core competitive advantages is its pure-play integrator model, with the ability to “stitch” together multiple systems from different OEMs (illustrated by the diagram below).
The acquisition of Intelligrated has the potential to effectively dilute TREW’s agnosticism towards hardware. Through a separate go-to-market strategy (and potentially branding) for both its integration and software capabilities, as well as its hardware OEM business, the company could avoid any value proposition ambiguity.
As an example, Momentum could transition to TREW, while Hilmot’s conveyor offering could be brought under the Intelligrated banner.
Intelligrated deal a signpost to success
Over the past three months, we’ve seen a flurry of M&A activity as the market recalibrates ahead of its next phase of growth. Understanding where the opportunities lie and where the traps exist is paramount for success.