industrial tech m&a overview - vc for iot · 2020-02-14 · industrial iot adoption by...

Industrial Tech M&A OverviewKBCM Technology GroupDave Kalez – Managing Director, Energy & Industrial Technology

1KBCM Technology Group

Table of Contents

Section I: Trends in Industrial IoT M&A

Section II: Trends within IIoT

Section III: Maximizing Value in an M&A Situation

Section IV: IIoT: A Critical Business Strategy

Section ITrends in Industrial IoT M&A


$176B$223B

$284B$360B

$457B

$580B

$736B

$934B

2018 2019 2020 2021 2022 2023 2024 2025

The Global IIoT Opportunity

Source: PTC “State of the Industrial Internet of Things” – February 2018, Grand View Research – April 2018

Industrial IoT Adoption by Industry

Industrial IoT Market Value: 2018 – 2025

27% CAGR

Industrial IoT Adoption by Region

45%

33%

22%

0%

10%

20%

30%

40%

50%

Americas EMEA Asia Pacific

25%23%

13%11%

8% 7% 6%3% 2% 3%

0%

10%

20%

30%

IndustrialProducts

Electronics &High Tech

Automotive Federal,Aerospace &

Defense

Retail &Consumer

Medical Devices Software Utilities / Oil &Gas

Communications Other

The market value of IIoT is estimated at $176B for 2018, growing to $934B by 2025


Industrial IoT Investment Activity Remains Strong

Source: PitchBookNote: Excludes M&A transactions with deal value greater than $5B; capital invested includes disclosed figures only

IIoT is transitioning from a nascent technology into a critical business investment for organizations in 2018

However, many traditional industrial players lack core competencies in software engineering and data science, making it more efficient to acquire IIoT capabilities

Quarterly IIoT Private Placement Activity (2016 – Present)

$294M

$444M$305M

$714M

$278M

$446M$470M $457M

$586M151

125105 107

157

111

143

10285

0

50

100

150

200

$0M$100M$200M$300M$400M$500M$600M$700M$800M

2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1

Deal

Coun

t

Capit

al Inv

ested

($M)

Capital Invested Deal Count

Quarterly IIoT M&A Activity (2016 – Present)

$230M

$1.2B

$612M

$211M$126M $68M

$465M$288M

$1.1B

16

27

13

18 17

13

21

16 17

0

5

10

15

20

25

30

$0M

$250M

$500M

$750M

$1B

$1B

$2B

2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1

Deal

Coun

t

Capit

al Inv

ested

($M)

Capital Invested Deal Count


Industrial Leaders Transition to Software

DARIUS ADAMCZYK – CEO“Second, we will build a software / sensor strategy

into everything we develop. Third we will take even bolder bets in our new product development and leverage the latest technologies to deliver superior value to customers. […] all Honeywell businesses will emphasize software along with other innovations in order to stay ahead in providing leading solutions” Honeywell 2017 annual report

JIM HEPPELMANN – CEO“If there will be billions of connected things in the world, every company will be affected in many ways, so we’ll need millions of new applications to address all of the different settings and role players. Creating new applications is the key, and PTC’s focus has been to make all of this easy so that domain experts coming from the business rather than from IT can quickly develop the applications that unlock the tremendous value opportunity of the IoT” Jim Heppelmann on the Future of Smart, Connected Products

JEAN-PASCAL TRICOIRE – CEO“We are bringing our customers integrated and digitized solutions, based on EcoStruxure, to help them navigate 2 growing trends: “energy transition” - the shift towards more sustainable and more efficient power; and “digital transformation” - the adoption of increasingly automated and data-driven technologies.” Schneider Electric 2017 Annual Report

JOE KAESER – CEO “Worldwide, Siemens the recognized shaper, knowledge leader and market leader in the area of industrial digitalization. Like no other company, we can combine the virtual world of software with the real world of production. Innovation and digitalization are now inseparable. Innovation drives digitalization and digitalization drives innovation.”Annual Shareholders’ Meeting of Siemens AG (January 2018)

Industry leaders continue to communicate their commitment to a software-driven strategy

ANTONIO PIETRI – CEO “Historically, it has been advanced applications sitting on hardware that have created value for customers. Similarly, we believe it will be the applications on top of IoTplatforms that will capture the value to drive optimal reliability for these customers.” Q3 2018 Earnings Call (April 2018)


Digital Transformation Reshaping the Global Economy

Source: 451 Research, CapIQIIoT / IIoT-Enabling Technology

BLUE IRON SYSTEMS

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BLOWDOWN(SULSIM 7 ASSET)PSVPLUS



Industrial Tech and Traditional Industrial Acquisitions by Financial Sponsors

Section IITrends Within IIoT


Trends in Vertical Software M&A

Sources: IDC Worldwide, 451 Research

The M&A market for software companies remains robust, supported by the high growth profile and positive outlook for the industry as software applications become increasingly integrated into traditional industries

Worldwide spending on public cloud services and infrastructure is projected to reach $160B in 2018 (+23.2% Y/Y), with SaaS-related spending capturing nearly 2/3 of that total

The industry that is forecast to spend the most on public cloud services in 2018 is discrete manufacturing ($19.7B)

Vertical-specific software companies have become increasingly more attractive targets as companies are realizing the increased benefits of specialization

Tends to be a highly sticky solution – once a well-executed offer becomes available, referrals and a high rate of adoptability can result in quick scaling

Non-traditional software companies have become acquisitive in the space in order to promote cross-selling opportunities and realize cost synergies with their existing business lines

Precedent Transaction LTM EV/Revenue Multiples: Mean = 7.7x / Median = 5.3x


Trends in Communications / Networking M&A

The advent of the boom in networking technologies and mobile devices and applications has changed the fundamental nature of legacy communications companies’ business in terms of operations management, customer acquisition/retention and new revenue streams

This sea change in how users interact with information, entertainment and each other has led to strong consolidation and increased M&A activity within the communications software industry

Large telecoms infrastructure vendors as well as smaller players have been active in plugging gaps through M&A

Expanding into adjacent industries such as software, IT services, digital media, IoT and analytics

Further consolidation is expected in the near term as the communications industry continues the transition towards 5G, the virtualization of networks, cloud communication, IoT and Big Data

Precedent Transaction LTM EV/Revenue Multiples: Mean = 4.1x / Median = 3.9x

Section IVMaximizing Value in an M&A Situation


Maximizing Value in an M&A Process – Best Practices Company Preparedness

― Critical to have all financial and legal information well organized internally to prepare for the due diligence process― Best accomplished through the use of a virtual data room that allows for a current, easily accessed snapshot of the

company― Identifying “Business Owner” at potential acquirers in advance― Select team members who will be part of process and make sure they understand process objectives and company

positioning

Keeping the Eye on the Ball― The M&A process can be hugely distracting for a company and its employees― Buyers will closely monitor the financial performance of the company during the due diligence period and compare it with

the company’s projections― Timing is critical – balance company performance, state of the market and team availability

Negotiation Process― Purchase price isn’t everything – terms of an offer matter as well― Important factors can include: consideration, purchase price adjustments, earn-outs, tax structure and time to close― Buyer’s sincerity / motivation is a significant factor― Leverage previous business relationship and “optionality” (you always have it)

Hiring a Competent Advisor― Retaining a qualified and experienced advisor enables management to keep their focus on what matters – running the

business― Don’t wait until it is too late


The Company’s Role in Effecting Valuation

Communications

Due DiligenceOperations

Alignment with Board

Maintain or improve performance during the process Set reasonable projections (better to

hit a conservative forecast than to miss an aggressive forecast) Management to maintain focus on

the business Team alignment

Stay aligned with advisors at all times Maintain one point of contact unless

otherwise determined Work closely with advisor before

dialogue with potential buyers Limit the number of individuals with

knowledge of the transaction

Be prepared with data room in advance of process High degree of organization

signals a real process Adds to the “fear factor” and drives

deal momentum Expect highly detailed requests

later in the process

Prevent attempts by buyer to split Board / management relationship Negotiate any management carve-

outs (if any) prior to M&A process Agree upon a communication protocol

for transaction Determine whether entire Board,

committee or single member will report on routine matters

Section IVIIoT: A Critical Business Strategy


IIoT: A Critical Business Strategy

Transaction Background Premier platform for handling complex data integration, data analysis, and predictive automation for connected devices

on the IIoT

Purpose-built for the IIoT, Bit Stew’s MIx Core data intelligence platform solves the data integration challenge at scale for complex industrial data environments

Prior to the acquisition, the Company was in a transitional phase from an on-premise perpetual license model to a cloud-based subscription model

Integration of Bit Stew will help GE to accelerate its industrial offerings, providing customers with contextual understanding of their assets and operations

has been acquired by

$153,000,000

November 2016

Develops and markets industrial analytics software that provides operational intelligence and sophisticated cloud and edge processing capabilities throughout the entire organization

RtTech’s Cipher is a non-intrusive approach to IIoT, which leverages any existing infrastructure using edge device technology

RtTech also offers two industrial apps: RtDUET, a real-time OEE, downtime tracking, and asset management app to boost production performance, and RtEMIS, an energy management app to help reduce energy consumption

Acquisition strengthens AspenTech’s asset optimization strategy by providing sophisticated cloud and edge processing technology that captures and aggregates critical data from assets throughout the plant and across the enterprise

Transaction Background

has been acquired by

Undisclosed

December 2017


Disclosure

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industrial tech m&a overview - vc for iot · 2020-02-14 · industrial iot adoption by...

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