Happy New Year. We are all hoping for a better year in 2022 than the past two. SARS-CoV-2 has evolved into a faster spreading but less lethal virus. Obviously that’s a survival tactic for it, but hopefully better survival for us. I made two trips at the end of 2021 and am planning to attend the ARC Forum in February if they let me in. We’ll see how travel goes from there.
I have a ton of news left from December. This one includes merger and acquisition news from PwC, Ethernet adapter shipments, Molex acquisition of connector technology, and finally more financial news with Claroty funding and acquisition of Mediagate. 2021 was a financially strong year in our markets. The overall market was stable, though, in the sense of market leaders and potential market disruptions. When I reviewed the ARC Advisory Group/Control Global top 50 Automation Companies, I was struck by the sameness over the years. The only real movement was a move by several companies to follow the conglomerate model of acquiring a disparate covey of companies. More on that later. This is a potpourri of that sort of news.
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Now back to the news
Industrial manufacturing resurgence powers M&A from PwC
This report is from Michelle Ritchie, Industrial Products Deals Leader, PwC US.
Global economies continue to be impacted by the pandemic underscoring the need to be nimble, dynamic and digital in today’s environment. Global M&A saw a strong bounceback in 2021 from the pandemic levels experienced in 2020. Industrial manufacturing M&A followed a similar trend with deal value increasing by 50% in 2021 over 2020, while deal volume remained stable over the same period. Growth in megadeals (transactions exceeding $1 billion in deal value) were driven by the need to access capital to scale up early-stage technology-driven ventures (including from special purpose acquisition companies known as SPACs), as well as by the traditional need for M&A focus on driving scale, product portfolio and geographic expansion. In the second half of 2021, increased volume reflected the investment in strategic focus areas and product and platform expansion.
We expect 2022 deal activity to continue strong. While increasingly elevated deal multiples could potentially temper buyer’s interests, multiples have drawn out more sellers, including private equity firms looking for an earlier exit and corporates hoping to monetize non-core assets.
The pandemic prompted companies to carry out strategic reviews of their portfolios to assess not only critical acquisition needs to buildout capabilities but also divestitures of non-core assets in order to focus on — and invest in — new and existing growth areas. With ample willing buyers with substantial purchasing power, many companies took advantage of robust valuations in 2021 to execute strategic changes. The abundant inventory of assets in the market during this period led some companies to wait — building what is expected to be a full pipeline of assets preparing to come to market as we head into 2022. The rebound in M&A activity in 2021 was fueled by companies investing inorganically through M&A to drive scale, expand product portfolios and extend into new markets. These trends are expected to remain critical as behavior shifts accelerated by COVID-19 are sustained beyond the pandemic.
Ethernet Adapter Shipments Stalled by Supply Constraints in 3Q 2021
In a report by Dell’Oro Group, Ethernet adapter shipments were stalled by supply constraints in 3Q. Ethernet adapter shipments are forecast to return to double-digit growth in 2022, as supply restrictions ease, and as Smart NICs create growth opportunities.
“Ethernet adapter port shipments declined seven percent year-over-year in 3Q 2021, as vendors faced various component sourcing challenges, with lead-times extending beyond 52 weeks in some extreme cases,” said Baron Fung, Research Director at Dell’Oro Group. “In contrast, Ethernet controller shipments have approached record levels, as we believe server vendors are increasing their inventories of controllers in anticipation of stronger cloud and enterprise demand ahead,” added Fung.
Molex Acquires Keyssa Wireless Connector Technology
Molex has acquired core technology and intellectual property (IP) from Keyssa Inc., a pioneer in high-speed contactless connectors. The acquisition of this unique wireless chip-to-chip technology, including over 350 filed patent applications, will accelerate Molex’s strategy to further expand and diversify its micro connector portfolio with highly flexible, cable-free connectors for near-field, device-to-device applications.
“Keyssa’s wireless chip-to-chip technology complements Molex’s developments in mmWave antenna connectivity to meet the growing demands for high data rate transmissions,” said Justin Kerr, vice president and general manager, Micro Solutions Business Unit, Molex.
The acquired technology operates at data rates up to 6 Gbps on the 60 GHz band with no WiFi or Bluetooth interference. The tiny, low-power, low-latency, solid-state contactless connectors can solve critical data transmission needs with minimal overhead. Molex plans to advance these current capabilities by supporting exponentially higher data rates and full-duplex communications. Additionally, Molex will leverage its longstanding signal integrity expertise and mmWave antenna capabilities to speed the commercialization of new contactless connectors while complementing its existing portfolio of products.
Claroty Announces $400 Million Funding and Acquisition of Medigate
Claroty announced raising $400 million in Series E funding and entering an agreement to acquire Medigate Tech Ltd., the leading healthcare IoT security company. The round brings the company’s total funding to $635 million, making it the most well-funded cybersecurity company in the industrial (OT), healthcare (IoMT), and enterprise IoT sectors.
“While connectivity between the cyber and physical systems in manufacturing, healthcare, energy, and other industries is driving significant competitive advantages via increased operational agility and resilience, it also creates greater exposure to risks with serious consequences for patient safety, public safety, and the environment,” said Yaniv Vardi, CEO of Claroty. “By combining Claroty and Medigate’s deep domain expertise and specialized technologies into a single platform, we will take a giant leap forward on our mission to secure the ever-expanding universe of XIoT for every connected organization. We envision a future where cyber and physical worlds safely connect to support our lives, and with such strong financial backing from the most prestigious firms in the world, we have the resources we need to make this vision a reality.”