It’s no secret that industrial companies have elevated software from a chief information officer–led initiative aimed at improving efficiency to a CEO- and board-level opportunity to use digital capabilities to reinvent business models and generate long-term growth. Across the globe, machinery and equipment companies have increased their share of strategy-led software acquisitions at a greater rate than other industrial sectors, according to Bain analysis (see Figures 1 and 2).

Figure 1

Figure 2

The best companies are getting ahead of this curve by strategically acquiring digital assets that provide faster access to software IP, digital talent, and scalable platforms.

Hilti first developed its in-house ON!Track solution, then acquired Fieldwire in 2021 and 4PS in 2023, deliberately building a software business that complements, but does not depend on, its tools and fastening and protection business. Hilti's new business unit, construction software, increases productivity, improves quality, and reduces risk for its customers.

When Emerson Electric bought AspenTech in 2022, it gained a leading position in industrial software by integrating AspenTech's process simulation, asset optimization, and AI-driven operational intelligence capabilities with its own hardware and software offerings, substantially expanding Emerson’s offerings and market. The move has helped Emerson transition to a higher-growth, more diversified software portfolio.

The influx of AI and other digital capabilities has accelerated since 2022, and we are witnessing companies step up their strategic thinking and diligence in the use of M&A to incorporate the new technology.

But this is new territory. The most successful machinery and equipment companies pursuing M&A to create their digital future will focus on building new muscles in three key areas.

• Start with a clear value objective—standalone or integrated. Winners will define exactly how the acquisition will create value. Will it operate as a standalone software business sold to the same (or adjacent) customer base with its own brand, cadence, and profits and losses? Or will it be fully integrated to enhance and differentiate the core hardware or services offer? This choice should shape target selection—everything from product models to pricing and packaging fit—and predetermine the organizational changes required to make the deal successful, covering governance, operating rhythm, talent profiles, incentives, and key performance indicators.
• Fortify diligence and strategic fit. The best companies will run code and architecture reviews, conducting cloud scalability and security assessments, as well as IP/open-source scans. They’ll pressure test strategic alignment to the defined software thesis, including roadmap fit, cross-sell logic, and unit economics, among other factors. If they lack the internal resources, they’ll pull in specialists to help ensure that the appropriate targets are chosen and that diligence goes beyond EBITDA to validate the product, platform, and data assets they’re actually buying.
• Plan integration around go-to-market, talent, and incentives. Success often hinges on an acquirer’s ability to use integration as an opportunity to revisit the go-to-market fundamentals: routes to market, segmentation, who sells what, and the customer success/renewals motion. It’s also critical to address compensation and career differences and to ensure that within the combined company, sales readiness requires a skill in selling subscriptions and outcomes, not just equipment. And acquirers that create the most value will balance software autonomy in areas such as release cadence, pricing, and roadmap with access to industrial channels. They’ll address design enablement, territories, and quotas up front to de-risk the first year of integration and guarantee traction.

With technology advancing from an enabler to a growth engine for industrial companies, those that take a strategic approach to acquisitions and focus on these three areas will find themselves outpacing the competition.