Market Spotlight: Internet of Things (IoT)
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The Internet of Things is driving tremendous innovation, differentiation, and value. Buyers like Google, Samsung, CISCO, Intel and Qualcomm spent $14B to acquire over 60 IoT-related companies last year, doubling the number of IoT acquisitions, and increasing spending 40-fold. Still, Cisco reports that only 1% of potentially connected devices are actually connected. As the other 99% come online, the opportunities for IoT software are remarkable, and the value of innovative companies building that software is increasing. This Market Spotlight webcast will examine the opportunities for these companies in today’s M&A marketplace, with perspectives from analysts, bankers, investors and CEOs.
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Market Spotlight: Internet of Things (IoT)
- 2. World Financial Symposiums WFS is an international organization dedicated to educating technology leaders through monthly, Market Spotlight webcasts and day-long Growth and Exit Strategies for Software and IT Companies conferences. Upcoming Events: Market Spotlight Webcasts - HCM & Workforce Management, August 27, 2015 Growth and Exit Strategies for Software and IT Companies - New York, October 22, 2015 www.wfs.com
- 3. Rob Schram Rob has over 30 years of executive and entrepreneurial experience in multiple technologies: Integrated circuit testing, industrial process automation and control, communications software, security software, and energy software and services. Rob has founded and sold several companies and engaged in two IPOs. He was most recently CEO of Evergreen Fuel Technologies, Inc. in the energy sector. Rob is a broadly skilled strategic development professional with a proven reputation for targeting, negotiating and developing profitable ventures and a demonstrated ability to successfully analyze an organization's critical business requirements, identify deficiencies and opportunities, and develop innovative and cost- effective solutions for enhancing competitiveness, increasing revenues, and improving customer relationships. Senior Vice President
- 4. Agenda • Welcome • Introduction • M&A Research Report • Yasmin Khodamoradi, Corum Group • IoT Expert Panel • Keith Robinson, Compass Intelligence • Sam Lucero, IHS Technology • Bryan A. Lubel, Integron • Five Keys to a Successful IoT M&A Transaction • Q&A
- 5. Yasmin Khodamoradi Yasmin joined Corum Group in 2015 as a research analyst. Previously she worked as a finance and operations coordinator at a financial technology startup and provided editing services to an institutional investing advisory firm. Yasmin graduated from the Foster School of Business at the University of Washington, specializing in Finance and International Business. Research Analyst
- 6. Source: 451 Research 0 5 10 15 20 25 30 35 40 45 50 $0 $2 $4 $6 $8 $10 $12 $14 $16 H1 H2 H1 H2 H1 H2 H1 2012 2012 2013 2013 2014 2014 2015 Billions IoT M&A Activity (2012-2015) Total Disclosed Deal Value ($B) Total Deal Count
- 7. 0 1 2 3 4 5 6 Sierra Wireless ARM Ltd. ORBCOMM Inc. u-blox AG Google PTC Inc. NXP Semiconductors Intel Top Strategic Buyers by Deal Count (2012-2015) Source: 451 Research
- 8. Source: 451 Research $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 Billions Top Strategic Buyers by Deal Value
- 9. 0 1 2 3 4 5 6 7 8 9 10 <$10M $10-50M $50-100M $100-500M $500M-$1B $1B+ Number of Deals by Transaction Size 2012 2013 2014 2015 (H1) 2015 (H2 – Projected)
- 10. Source: Gartner
- 11. Target: ColdLight Solutions Acquirer: PTC Inc. Date Announced: May 2015 Transaction Value: $100 million - Automated predictive analytics SaaS for retail, manufacturing, and healthcare industries. - Extends PTC’s core data analytics platform and enhances SLM and PLM portfolio Sold to
- 12. Target: Amazon Acquirer: 2lemetry Date Announced: March 2015 - Enterprise platform to track and manage IP-enabled machines - Expands Amazon’s presence in brick-and-mortar retail Sold to
- 13. Target: AlertMe.com [UK] Acquirer: British Gas [UK] Date Announced: February 2015 Transaction Value: $68 million - Sensor-based wireless home energy monitoring software - Builds leadership position in connected homes Sold to
- 14. Sold to Target: Freescale Semiconductor Acquirer: NXP Semiconductors [Netherlands] Date Announced: March 2015 Transaction Value: $11.8 billion - Embedded hardware and software for the automotive, networking, industrial and consumer markets with an emphasis on IoT, SDN, and ADAS. - Establishes NXP as the #1 automotive semiconductor supplier and general purpose MCU supplier
- 15. Target: Elektrobit Automotive Oyj [Finland] Acquirer: Continental AG [Germany] Date Announced: March 2015 Transaction Value: $668 million - Embedded standard software solutions for the automotive sector - Expands Continental’s capabilities in automated driving Sold to
- 16. • Commodity: Hardware and Services driven • Commercial Execution: Software and IP driven • Breakout: Breakthrough Technologies 0 2 4 6 8 10 12 14 <2.1x 3.0x-5.0x >9.0x Frequency EV/S Breakout Commercial Execution Commodity IoT Sales Multiple Clusters
- 17. Sam Lucero Sam Lucero is a seasoned industry analyst with nearly 14 years of experience analyzing telecommunications and networking technology markets. He has spent the last ten years assessing the markets for machine-to-machine (M2M) and Internet of Things (IoT) applications. Sam has established leading M2M market research programs and managed international teams of industry analysts. He has authored numerous reports, forecast databases, and topical articles covering various aspects of the M2M/IoT market opportunity and has been widely quoted in news and trade journals, from the New York Times and the Economist to CNET and Wireless Week. Furthermore, Sam has moderated, presented, and judged at a number of industry events, including CTIA and Connected World. In 2014 Sam was named one of six “Augural Analysts” for M2M by Connected World Magazine. Senior Principal Analyst, M2M
- 18. Bryan A. Lubel Bryan A. Lubel is President of Integron, an IoT / M2M managed services company. He was appointed to this position in January 2008. Mr. Lubel has over 25 years of general management, sales, marketing; product and services marketing channel marketing, operations and systems design experience. Integron specializes in helping clients design, deploy and support IoT / M2M solutions. Integron has developed M2M (Machine-to-Machine) practice specialization in remote patient monitoring, critical asset monitoring, remote service, fleet tracking, telematics and billing solutions. Prior to his current assignment, Mr. Lubel served as President and Chief Executive Officer for Gyricon LLC – a wholly owned subsidiary of Xerox Corp. Gyricon LLC was a technology spin-out company of Xerox’s famed Palo Alto Research Center (PARC), which focused on commercialization efforts around Xerox’s electronic paper (SmartPaper) technology. The technology offering is now part of Xerox’s intellectual property catalogue available for license. President
- 19. Keith Robinson Mr. Robinson is a Sr. Strategist & Consultant and the M2M Practice Lead at Compass Intelligence. Mr. Robinson directs the syndicated and consulting content for the M2M practice. His experience in monitoring several industries includes: M2M, telecom, retail, electronic manufacturing, transportation, industrial process control, medical devices, building automation, consumer electronics and the connected home. Mr. Robinson’s expertise in evaluating market opportunities by the size of business, vertical market trends, customer purchasing behavior and demographics allows his customers to develop strategic plans to win in a competitive market environment. Mr. Robinson's work has been cited by several leading publications such as: Wall Street Journal, Investor Business Daily News, Circuit Assembly, SMT magazine to name a few. He has also been a guest speaker at several industry conferences around the world. He holds a B.A. from Fisk University and currently resides in Atlanta, GA with his wife and two children. Sr. Strategist & Consultant, Head of M2M
- 20. IoT Panelists
- 21. Five Keys to a Successful IoT M&A Transaction 1. Run a Smart Process • Rapidly evolving market • Be prepared 2. Yesterday's Skills Won’t Win Tomorrow’s Battles • Dynamic market • New challenges 3. Understand Your Value • IP • Domain Expertise • Customers • M&A metrics 4. Be Realistic 5. Know Your Buyers • Initially: Strategics • Financial Buyers
- 22. Q&A We welcome your questions! • Use Q&A window on left side • Submit to queue at any time • If your questions in not answered, we will attempt to follow up after the event
- 23. Contact Us For further information or copies of today’s presentation: Visit www.wfs.com -or- Email robs@corumgroup.com
Hinweis der Redaktion
- Thanks Rob, Looking at IoT M&A Activity over the past three years, 2014 was a record breaking year both in terms of deal count and deal value, which is an indication that the once nascent industry has finally started to take shape and major exits are taking place. M&A seems to be on an upswing- as first half 2015 deal value has already surpassed both halves of 2014.
- Looking at the top strategic acquirers, Sierra Wireless takes the lead with its acquisition of 5 companies that expand their M2M solutions while ARM most recently acquired Bluetooth Smart stack provider Wicentric and Bluetooth radio IP provider Sunrise Micro Devices Orbcomm was busy acquiring sensor based supply chain monitoring systems and GPS based logistics management software while U-Blox has made acquisitions in wireless and Bluetooth module designers, kicking off their streak with Corum Client Fastrax in 2012. Google’s streak includes their most prominent IoT acquisition, Nest Labs for $3.2B and its subsequent purchase of DropCam
- When we look at who’s spending the most money on IoT, we see that the list is dominated by companies that have made one very large acquisition, with NXP, Zebra, and Qualcomm coming to mind. The size of these deals tells us that companies are putting their chips on the table and making strategic investments in scaling quickly- Accordingly, we haven’t seen much in the way of PE buyouts at this point. Also it’s important to note that even though many of the IoT deals we hear about are quite substantial, there is still plenty of opportunity for smaller companies…
- In fact, many sub $10M deals have taken place and continue to take place even as the proportion of large deals increases. And even though we only have data for the first half of 2015, the numbers so far have kept pace with 2014 full year numbers and at the rate things are going we can expect to see many more exits this year.
- At the same time acquisitions are peaking, Gartner’s Hype Cycle indicates that IoT is at the Peak of Inflated Expectations, meaning that a dip in IoT M&A is possible in a few years time. Looking at Enterprise 3D Printing, which recently hit the the Slope of Enlightenment, we see that the “mark of maturity” for new technologies is the ability of companies to first understand, and then monetize it. So even though we’re seeing many deals in the hardware and connected device space, it’s the companies that are able to analyze and monetize the insights produced by these devices, that will ultimately get the best valuations and become leaders in their space.
- For example PTC, one of the top IoT buyers, recently acquired ColdLight Solutions, a provider of machine learning and predictive analytics SaaS for $100 million. ColdLight’s analytics applications, which are used for things like predictive maintenance and system monitoring in the retail, manufacturing and healthcare industries, complement PTC’s existing Service and Product Lifecycle Management solution portfolio. This acquisition brings PTC’s total investment in IoT up to $400 million, and is a great example of tech that is creating value from the mountains of data generated by connected devices.
- Back in Seattle, Amazon recently acquired Denver startup 2lemetry, which provides an enterprise platform that tracks and manages connected devices and IP-enabled machines. Amazon’s interest in 2lemetry’s facial recognition tech and beacon networks for retail reflects their desire to expand their presence in physical commerce.
- In the UK, British Gas, one of the largest UK energy and home services companies, jumped into the home automation market by purchasing smart home pioneer AlertMe, which provides a platform for users to remotely control and monitor their energy use. This acquisition is the first step British Gas, like many utility companies, is taking to to transform itself into a service provider.
- On the hardware side, The Freescale Semiconductor mega deal gave NXP the “majority share of the worldwide market for computers used in automotive applications”. Longer term, the merged entity intends to become a leader in automotive security and advanced driver assistance systems.
- And another deal in this vertical, was Continental’s acquisition of Elektrobit’s automotive unit for $668 million. The Finnish developer of advanced driver assistance systems should provide a boost to Continental’s development of automated driving systems, a market which could be worth $40 billion in the next decade.
- So to summarize, IoT encompasses a wide variety of technologies and as such, draws a wide range of valuations. Looking at all disclosed sales multiples, we noticed three distinct clusters. Companies in the first cluster, 2.1x and below, tend to offer commodity technologies and are primarily hardware and services driven- Bluetooth and wireless modules would be one example of this. In the middle range, valuations are driven largely by software and intellectual property, for instance many semiconductor designers have fallen into a tight range of 3-4x. And in the high range, you see companies that provide breakthrough technologies. The acquisitions with the two highest sales multiples, Sensor Platforms and Movea, were announced within a week of one another and both happen to be major players in the sensor fusion ecosystem, which serves as the foundation for motion tracking, navigation, and context awareness technologies.- And what this indicates is that buyers are not afraid to pay high multiples to stay ahead of their competition by investing in strategic IP and establishing their positions as early movers and thought leaders. And that concludes our Research Report, back to you Rob.