Merger and Acquisition (M&A) activity in the industry segment I cover seems to have been hot for some time. I, along with others dependent upon the strength of the industry like say magazine media companies, view market consolidation as having the potential for decreasing revenues. Fewer companies makes for a less vibrant marketplace. Just take a look at the size of the magazines covering controls and automation these days.
Although this report covers a much broader segment than controls and automation, I always study the quarterly PwC M&A report carefully. And here is Q3 2018.
Global industrial manufacturing M&A results for Q3 2018 experienced a significant pull back in deal value from the Q2 2018 historic high with aggregate disclosed value of $11.7 billion, which is a 73% decrease quarter on quarter and a 52% decrease compared to the three-year quarterly average. The most recent quarter is directionally consistent with the 42% decrease seen in global cross-sector M&A deal value from Q2 2018. Since PwC’s last publication, the US administration has taken steps to implement tariffs on imported goods and a trade war has ensued. The uncertainty around how this will affect the M&A landscape more heavily weighed on industrial manufacturing than other sectors this quarter.
Looking at deal volume, there were 477 deals announced in Q3 2018 compared to 612 deals announced in Q2 2018, a 22% decline. The three-year average number of announced deals was 624 to which the 3Q 2018 results represent a 23% decline.
Worldwide cross-sector and industrial manufacturing deal making had been humming along with five and four consecutive quarters of deal value growth, respectively, prior to Q3 2018. The question remains if this contractionary quarter is the beginning of a trend or just a pause in action resulting from uncertainty in the economic, regulatory, and political environments.
- Total aggregate disclosed deal value sank 73% to $11.7 billion in Q3 2018, a 52% drop compared to the three-year quarterly average of $24.2 billion and a 73% decrease from Q2 2018 of $42.9 billion.
- Total deal volume decreased to 477 deals in Q3 2018, a 23% drop compared to the three-year quarterly average of 624 deals and a 22% decrease from the 612 announced deals in Q2 2018.
- There was $78.9 billion of deal value announced for the first nine months of 2018 compared to $60.4 billion for the same period of 2017, a 31% increase.
- There were 1,738 deals announced for the first nine months of 2018 compared to 1,906 deals for the same period 2017, a 9% decrease.
- A $1.2 billion merger was the largest deal announced in the quarter.
Continuous learning is essential for economic survival in this increasingly technological world. However, I believe it is also essential for growth as a human. Sometimes we get so wrapped up in technology and organizational success that we forget that our first duty is to improve ourselves.
Drawing as Thinking
When you take notes or think about a project, what do you write? Do you use pen and paper? Or some sort of notes app or outliner on your computing device?
How about drawing mind maps or sketching ideas? On listening to a recent podcast I jotted this note
Drawing is not an artistic process; it is a thinking process.
Math as Thinking
Reading Peter Diamondis’s newsletter recently, he once again talked about how worthless math was in school—“I have never expanded a polynomial in my life.” I bet he used the logical thinking instilled by working math problems his entire life!
Wishing for Certainty
When I was young I knew old guys who had worked for the same company for many years. There was a certainty about life. I, on the other hand, have never really known that certainty. Here is a thought that once again draws out that idea of clear, logical thinking
The antidote to uncertainty is not certainty—which is impossible—but clarity.
It’s all about passion
Henry Cloud—The fruitfulness of our lives will come from our hearts. Developing our inner selves helps us prioritize our lives. Our hearts will determine the “issues” of our lives.
Your most important resources are time and energy.
Andy Stanley—Leaders who don’t listen will eventually be surrounded by people who have nothing to say.
Why do we do technology?
We are trying to solve problems.
Perhaps we limit ourselves on the problems we are solving. For the past several years, the theme at National Instruments’ annual user conference NI Week has focused on solving some of the world’s biggest problems through technology.
Writing in the Daily Stoic Ryan Holiday quotes Confucius, “Virtue is never solitary; it always has neighbors.” What he meant by that was that good behavior and good thinking is contagious.
If politics is a snake pit of corruption and avarice, then good people should enter it and improve it, not simply denounce it. If capitalism is too selfish, then the caring should start businesses with better cultures (which, when successful, will steal market share from the bad actors). If a group has extreme or offensive views, it shouldn’t be cut off and isolated for fear of “normalizing it.” It should be normalized–by encouraging normal people to interact with it, correct it and prod these misguided people towards the right path.
I’d like to start this week off with a challenge. What problems are we solving? Why do we do what we do? What good are we bringing into the world?
This is an age of entrepreneurship. As the big companies gobble up smaller ones, they always leave gaps for engineers who ask why. Go out and work on a bigger problem. Start a company.
Which companies are leading us into the Fourth Industrial Revolution? The World Economic Forum has completed a study and named nine of the best factories in the world—certainly an audacious task. Dubbed “lighthouses”, they were selected from a survey of over 1,000 manufacturing sites based on a successful track record of implementing technologies of the Fourth Industrial Revolution.
Three of the nine “lighthouse” sites are in China, five are in Europe and one is in the United States.
The aim of this effort is to build a network of “manufacturing lighthouses” to address problems confronting industries in both advanced and emerging economies when it comes to investing in advanced technologies. Earlier work by the Forum identified that over 70% of businesses investing in technologies such as big data analytics, artificial intelligence, or 3D printing do not take the projects beyond pilot phase due to unsuccessful implementation strategies. To aid the learning and adoption of technologies by other companies, all nine lighthouses in the network have agreed to open their doors and share their knowledge with other manufacturing businesses.
“The Fourth Industrial Revolution is expected to deliver productivity gains amounting to more than 3.7 trillion USD. But we are still at the beginning of the journey” said Helena Leurent, Head of the Shaping the Future of Production System Initiative and Member of the Executive Committee at the World Economic Forum. “Our efforts to create a learning platform with the lighthouses as the cornerstone are part of the giant leap needed to capture the benefits for the larger manufacturing ecosystem including multinationals, SMEs, start-ups, government and academia”.
“The Fourth Industrial Revolution is real. Workers and management equally get augmented with technology. These pioneers have created factories that have 20-50% higher performance and create a competitive edge,” said Enno de Boer, Partner and Global Head of Manufacturing at McKinsey & Company, which collaborated with the Forum on the project. “They have agile teams with domain, analytics, IoT and software development expertise that are rapidly innovating on the shop floor. They have deployed a common data/IoT platform and have up to 15 use cases in action. They are thinking “scale”, acting “agile” and resetting the benchmark.”
The nine “lighthouses” have comprehensively deployed a wide range of Fourth Industrial Revolution technologies and use cases at scale while keeping humans at the heart of innovation. One example from each of the sites is highlighted below:
- Bayer Biopharmaceutical (Garbagnate, Italy): ‘Using data as an asset’- While most companies use less than 1% of the data they generate, Bayer’s massive data lake has led to a 25% reduction in maintenance costs and 30-40% gains in operational efficiency
- Bosch Automotive (Wuxi, China): ‘Supporting output increase’ – By using advanced data analytics to deeply understand and eliminate output losses, simulate and optimize process settings, and predict machine interruptions before they occur
- Haier (Qingdao, China): ‘User-centric mass customization model’ – Artificial Intelligence led transformations include an ‘order-to-make’ mass customization platform and a remote AI supported, central intelligent service cloud platform to predict maintenance needs before they happen
- Johnson & Johnson Depuy Synthes (Cork, Ireland): ‘Process-driven digital twinning’ – This factory used the internet of things to make old machines talk to one other, resulting in 10% lower operating costs and a 5% reduction in machine downtime
- Phoenix Contact (Bad Pyrmont and Blomberg, Germany): ‘Customer-driven digital twinning’ – By creating digital copies of each customer’s specifications, production time for repairs or replacements has been cut by 30% Procter & Gamble (Rakona, Czech Republic): ‘Production agility’ – A click of a button is all it takes production lines in this factory to instantly change the product being manufactured, which has reduced costs by 20% and increased output by 160%
- Schneider Electric (Vaudreuil, France): ‘Factory integration’ – Sharing knowledge and best practices across sites has helped this company make sure all its factory sites enjoy the highest energy and operational efficiencies, reducing energy costs by 10% and maintenance costs by 30%
- Siemens Industrial Automation Products (Chengdu, China): ‘3D simulated production line optimization’ – Using 3D simulation, augmented reality and other techniques to perfect the design and operations of its factory, employees helped increase output by 300% and reduced cycle time
- UPS Fast Radius (Chicago, USA): ‘Balancing capacity with customer demand’ – Meeting increasing consumer demand for fast-turnaround customized products has been made possible through a combination of globally distributed 3D printing centres with real-time manufacturing analytics
The World Economic Forum, committed to improving the state of the world, is the International Organization for Public-Private Cooperation. The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas.
There was plenty of cool new products unveiled at last week’s Emerson Global Users Exchange. As a former product development manager, I liked the “peanut butter and chocolate” moment when Emerson’s engineers were trying to solve the human location in a plant problem. They realized that many customers already have a WirelessHART mesh network. Why don’t we use location tags with WirelessHART as the communications service? Cool.
Topping the news released during the week was announcement that Emerson has agreed to acquire Intelligent Platforms, a division of General Electric. Intelligent Platforms’ programmable logic controller (PLC) technologies will enable Emerson, a leader in automation for process and industrial applications, to provide its customers broader control and management of their operations.
This is a great acquisition. It reveals Emerson as a company that has its act together. This is the consolidation trend in the industry. Siemens has a complete portfolio (well, mostly). ABB recently acquired B+R Automation in a similar move. Schneider Electric added Foxboro and Triconex from Invensys to its mostly factory automation portfolio. So there are four major companies aligning their competitive offerings. And all are focused on digital transformation for their customers.
Even Rockwell Automation has built a process automation business over time. It recently shunned acquisition with its money and instead invested $1 billion for a little over 8% of PTC in order to achieve a closer partnership with ThingWorx (and a seat on the board). Maybe having an executive on the board, it can learn how Jim Hepplemann managed to build a company through acquisition.
Back to Emerson. GE IP (formerly know as GE Fanuc) has a line of PLCs, motion control, and HMIs. It hasn’t promoted its products for years, but they are still alive and well in Charlottesville, VA. This is a great strategic move.
As for GE? Well, we know that it is having a fire sale. I’d wondered about this part of the business. Now we all wonder about what’s left of GE Digital. We know from a Wall Street Journal article that it’s for sale. And also we know that the board just replaced the CEO evidently for not moving quickly enough. But…will anyone want GE Digital? I’m sure everyone has looked. Here’s a thought. What if it wound up with an IT company to complement these burgeoning IoT practices?
Dreamforce, the Salesforce annual customer conference, was this week in San Francisco. I should have been there. Along with 100,000 of my closest IT friends. But, my project hit a crisis and I didn’t travel. All is not lost, however, since I received this information about ABB and Salesforce partnering.
The first item of interest is that I went to Salesforce’s “small” summer conference in Chicago with 3x-5x the attendees of a typical industrial technology conference. Then there is the big one with 30x or more the size. It blows the mind.
Then I consider the strategic moves that the largest industrial players are making. Siemens nailed a couple of acquisitions to bolster its MindSphere IoT platform. Schneider takes a majority stake in AVEVA to integrate design to process. ABB aligns with Salesforce (see below). And Rockwell Automation spends major dollars for a small stake in PTC evidently for a tighter integration with ThingWorx and Kepware.
Although there was a lot of marketing buzz to sort through, what ABB gets with a partnership with Salesforce is substantial. The company under the leadership of Ulrich Spiesshofer for the past five years has staged a remarkable turnaround. Don’t forget it also bolstered its machine control / discrete manufacturing portfolio with the acquisition of B+R Automation.
You can see more by watching this Fireside Chat with ABB CEO Ulrich Spiesshofer and Salesforce chairman and co-CEO Marc Benioff on the future of work and Fourth Industrial Revolution.
The stated objective of the partnership is for Salesforce to provide a single view of customers across ABB’s global sales, service and marketing operations.
The partnership will combine the power of Salesforce IoT, Einstein artificial intelligence, and ABB Ability, the cross-industry digital offering supporting an installed base of 70 million connected devices worldwide, to drive enhanced service and faster solutions for customers
Explaining Industry 4.0, otherwise known as The Fourth Industrial Revolution, Salesforce states it is a wave of innovation and technology that is radically transforming every business and industry. It’s no longer enough for manufacturers to differentiate on product—they must also predict customer needs and deliver smarter, more personalized customer experiences. With Salesforce, ABB is unifying its CRM globally, across every region, brand and department, to embrace the opportunities created by the Fourth Industrial Revolution and help its customers pursue important, new openings for service, innovation and growth.
“The Fourth Industrial Revolution is creating massive opportunities for our customers, making the work we do with them to drive innovation and create value more important than ever,” said Ulrich Spiesshofer, CEO of ABB. “That’s why we’re growing our relationship with Salesforce. The wealth of information we’ll get by unifying our data on Salesforce and combining it with our ABB Ability digital offering will allow us to use artificial intelligence and IoT more effectively, so we can anticipate our customer’s needs and write the future together.”
“ABB is undergoing incredible digital transformation and connecting with their customers in revolutionary ways,” said Marc Benioff, Chairman and co-CEO of Salesforce. “Our relationship with ABB is another example of the extraordinary power of artificial intelligence and IoT technologies to drive customer success.”
ABB’s expansion of Salesforce includes Einstein, Salesforce IoT, Sales Cloud, Service Cloud, Marketing Cloud, Community Cloud and Success Cloud advisory services.
Einstein will enable ABB to drive smarter sales and service with artificial intelligence. For example, ABB will use Sales Cloud Einstein for intelligence-driven decision making, automated data entry, identification of potential opportunities and predictive forecasting. Einstein Vision, used with Service Cloud Field Service Lightning, will be used to give ABB’s 15,000 field service technicians the ability to take a photo of an ABB product or component when they arrive onsite to automatically surface information about the product on their screens, resulting in faster, more accurate service.
Salesforce IoT will allow ABB to make data from its connected devices actionable and measurable. The company’s vision is to combine Salesforce IoT with ABB Ability so that its installed base of 70 million connected devices can use predictive intelligence, powered by Einstein, to generate and trigger actions directly into Salesforce. With Salesforce IoT and ABB Ability together, ABB will be able to improve customer experiences by getting ahead of performance and maintenance needs.