One set of questions popping up frequently over the past few years among corporate executives of industrial technology supplier companies concerns response to the Industrial Internet of Things regarding industrial merger and acquisition.
Are we in the IIoT market? What acquisitions should we search out to further exploit the IIoT? Should we look at expanding into other aspects of the IIoT market?
Executives analyzing the IIoT system check out networking products plus sensor products plus analysis products. Should I buy into an adjacent area?
One of my favorite new media sites is The Information. It is subscription only. Maybe a model I might morph to someday. Jessica Lessin and her team have assembled a top quality news site covering Silicon Valley entrepreneurs and start ups.
Jessica wrote recently about Yahoo and all the vultures, er companies, circling around to see what sort of deals they may get picking over the various parts of the company that is obviously for sale.
She made this point, “But these two reasons reflect the biggest mistake companies make when it comes to M&A. Executives focus on how a potential deal would help the company get into a new business. But those type of deals, while attractive in theory, often fail miserably. On the other hand, deals that help companies double down on a core business do much better.”
She offers some examples such as AT&T’s purchase of John Malone’s TCI cable company in the late 1990s and News Corp’s $580 million acquisition of MySpace in 2005.
Her advice to those itching to make a deal—just like Pilates, look to your core.
“But the best deals strengthen a company’s core business. The reason is simple: Organizations act in their self-interest; it is how they make money and keep growing. That’s their DNA, more than wishy-washy things like whether employees wear suits or hoodies or work out of a loft or a high-rise.”
Example? “Google pulled that off when it spent $3 billion for DoubleClick in 2007, for example. It was a steep sum but Google already knew search advertising. DoubleClick helped it grow further by selling the similar products to similar customers with display.”
If I’m advising a company again today, I’d pretty much stay with what I thought three years ago—be wary of buying into adjacent or new market areas. To do so requires a clear strategy—and a lot of money.
The only one in the IIoT space of which I’m aware right now is the effort by PTC to enter that space entirely through acquisition. See my post. PTC has acquired at least four companies in the space. A couple it bought for technology. Two it paid huge premiums for. I’m guessing they see such an upside revenue stream that the premium looked small in comparison.
Do you see any other major IIoT plays? I mean other than the German companies focusing on Industrie 4.0 (sort of IIoT plus)—Siemens, Bosch, and others. Rockwell Automation with Connected Enterprise. ABB, GE, and Schneider Electric on IIoT. The big companies are simply focusing efforts they’ve made for years into the new paradigm.
But are there startups to watch? Mid-level acquisitions? Any excitement out there at all? Let me know.