Honeywell targets $2B-$4B deals, eyes industrial automation M&A

Created at 11 Jun · 7:02 PM1 source↑ Market-relevant

IN SHORT

Honeywell is targeting mergers and acquisitions valued between $2 billion and $4 billion, with a particular focus on its industrial automation business. The company sees significant opportunities in this sector, which operates in a roughly $35 billion market, while prioritizing organic growth and software solutions.

Key Numbers

$2 billion-$4 billiontarget deal range

$35 billionindustrial automation market size

3.0xtarget gross leverage ratio

35%target dividend payout ratio

1%target annual share count reduction

8%second quarter year-over-year sales growth

5%second quarter organic sales growth

$2.4 billionsecond quarter segment profit

22.9%second quarter segment margin

$2.75second quarter adjusted EPS

$1.0 billionsecond quarter free cash flow

Who's Involved

Honeywell

company targeting M&A deals and focusing on automation

Peter Lau

President of Honeywell's Industrial Automation unit

Sabrina Valle

Reuters correspondent reporting on the deal

Chizu Nomiyama

Reuters editor

Vimal Kapur

Chairman and CEO of Honeywell

Honeywell targets $2B-$4B deals, eyes industrial automation M&A

↳ Why This Matters

Honeywell's strategic shift towards automation and its aggressive M&A targets signal a significant transformation, aiming to capitalize on growth opportunities in software and industrial solutions, which could reshape its market position and financial performance.

Key facts

Honeywell is targeting M&A deals valued between $2 billion and $4 billion.
The company is specifically looking at acquisitions within its industrial automation business.
Honeywell's industrial automation unit operates in a market estimated at $35 billion.
The company plans to prioritize bolt-on acquisitions focusing on automation and mission-critical segments.
Honeywell reported 8% year-over-year sales growth and 5% organic sales growth in the second quarter.
The company raised its full-year guidance for organic growth and adjusted earnings per share.

Honeywell is actively seeking mergers and acquisitions, targeting deals in the $2 billion to $4 billion range, with a strategic focus on expanding its industrial automation business. The company views this sector, estimated at $35 billion, as significantly underpenetrated in solutions and software, presenting substantial growth opportunities.

During its investor day, Honeywell signaled its intention to pursue bolt-on acquisitions that offer clear commercial synergies and strong return potential, particularly in automation and other mission-critical segments. While M&A is a priority, organic growth remains key, with the company aiming for 4% to 6% organic growth and over 10% annual adjusted EPS growth over a three-year financial framework. Honeywell also plans to maintain gross leverage below 3.0x, prioritize debt repayment, and target a 35% dividend payout ratio.

In its second quarter, Honeywell reported strong financial results, with 8% year-over-year sales growth and 5% organic sales growth. The company exceeded its guidance for organic growth and adjusted earnings per share, further bolstering its strategy. The planned spin-off of its aerospace business is set to position Honeywell as a pure-play global automation business, with a significant bet on software and its industrial IoT platform, Honeywell Forge.

Analysts generally hold a positive view on Honeywell's transformation, with a consensus 'Buy' rating and an average price target of $254.00, though some technical indicators suggest near-term caution.

Frequently asked questions

Honeywell is targeting bolt-on acquisitions valued between $2 billion and $4 billion, focusing on its industrial automation business and other mission-critical segments with strong synergy and return potential.

The industrial automation business operates in a market estimated to be worth approximately $35 billion.

Honeywell targets 4% to 6% organic growth, more than 10% annual adjusted EPS growth, and free cash flow conversion above 90% over a three-year framework. By 2029, it expects segment margins of roughly 24% and adjusted EPS of about $6.00.

Honeywell is investing heavily in software, targeting about 15% annual recurring software revenue growth and aiming to increase services and software to more than 45% of its revenue mix within five years, notably through its Honeywell Forge IoT platform.

What Happens Next

01Honeywell plans to complete the spin-off of its aerospace business on June 29.

02The company will continue to pursue bolt-on acquisitions within its preferred range.

03Honeywell aims to increase services and software to over 45% of its revenue mix within five years.

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How It Developed

Honeywell announced it is targeting deals valued at $2 billion to $4 billion.

The company sees scope for acquisitions in its industrial automation business.

Peter Lau stated the industrial automation business operates in a roughly $35 billion market.

Honeywell signaled it will pursue bolt-on deals within its preferred $2 billion to $4 billion range.

Honeywell plans to prioritize near-term debt repayment to keep gross leverage below 3.0x.

Honeywell targets a 35% dividend payout ratio and a 1% annual reduction in share count.

Honeywell reported second-quarter year-over-year sales growth of 8% and organic sales growth of 5%.

The company raised its full-year organic growth and adjusted earnings per share guidance ranges.

Sources

Honeywell targets $2 billion-$4 billion deals, eyes industrial automation M&AReuters via PiQSuite

Honeywell targets $2 bln-$4 bln deals, eyes industrial automation M&Areuters.com

Honeywell Reports Second Quarter Results; Updates 2025 Guidancehoneywell.com

Honeywell Maps Out Its Future as a Pure-Play Automation Giantmarketdash.com