Telit recently announced it has entered into a deal to acquire ILS.   On all levels, this deal made a lot of sense for Telit, as the acquisition seems to fit well into their overall strategy of a complete offering for their customer base. 

This got me to thinking......is this just the start of a new wave of Mergers and Acquisitions in our space?  If so, what kinds of companies are looking to enter this space or bolster their current offerings and which types of companies would be a good fit for them?

First, is this the start of a new wave?  Without a doubt.....there simply are too many players wanting to gain traction/knowledge in this space, and there are too few people who fully understand this emerging market.  Quite simply, companies will be willing to pay for knowledge more than anything else. 

Why?  Well, most of the acquirers will have deep pockets, and likely will be companies with strong strengths in many areas of technology (so, they will have existing deep distribution channels, strong financial/accounting teams and likely wide-spread sales coverage).  Their missing link will be the knowledge of M2M....how to position it, how to make it work and quite simply, how to explain it.

The Hunters

1. The first group of acquirers will be obvious......it is the existing Tier 1 players in the world of technology.  This is for a few reasons:

• We ("we" being owners in an M2M company) like to think that we are big companies, as most of us built them from scratch.  However, in the grand scheme of things, it would cost more for some of these companies to buy a $20 Starbucks gift card for each of their employees than it would to acquire our entire companies!  As such, it would simply be cheaper to buy knowledge than to develop it.
• The 2nd reason is growth.  Many of the larger IT companies are now making the transition from growth companies to cash cows.  This means that the stock market assigns them a lower multiple, and this does not sit well with many of the executives, as well as the larger shareholders at these firms.  As such, there is a big push to grow.....but how?  Where does a Fortune 100 Technology company find a new emerging market that can allow them decades of growth, and billions of dollars in potential new services?  While I know that it is not only M2M that can offer this, there can't be many other places to look.
• Finally, M2M fits well into another key theme....the cloud.  M2M allows for a rapid growth prospect in an area that many large IT firms have already moved into.

2. The 2nd group of acquirers will be the "Apple wannabes".....these are companies that want to own every aspect of the solution (from hardware to software to cloud services). These companies are already in the M2M space (for the most part), so they are really looking for tuck-in acquisitions.  As well, they are equally interested in the knowledge that they could be acquiring, as well as the platforms / IP.

The Prey

1. The first group of prey are those offering self-contained, industry specific solutions sold directly to customers today.  While I could see a lot of consolidating happening in the AVL space, I am more talking about companies that offer services that retrieve information from remote devices (such as oil wells and vending machines).  The reason is that this "data" that comes from these devices is very valuable and as such, is often inputted into key Enterprise systems.  This "data" is gold to large IT companies, and I could see them wanting to own the complete solution to keep their customers happy.
    
2. The second group of prey is any platform that makes it easy for the integration of data into ERP systems.  Today, many of the large SI work with these companies to allow for a more streamlined experience to move data from the field into the hands of the employees.  It doesn't take a huge leap to see these large players wanting to own the entire experience.
    
3. Finally, I see some serious consolidating in the making in the module/chipset side of the business.  Large scale players, like TI, probably don't see enough market potential in M2M....yet.  It won't take many more years of growth like it has been to see the large players in this field make a huge splash, and I can see it being done through the acquisition of companies with many years of M2M experience.

Lastly, and what really could be listed as a 6th prediction, I want to say one group is not on this list, and this may surprise some.  This group would be the ones that offer device management services.  The reason they are not on the list is because, in my opinion, this market has already commoditized and there is little to no gain for these companies to be acquired.

Bottom Line

Speculation is fun when it comes to possible M&A activity, and this is all that I am doing here.  I have no inside knowledge of any upcoming activity.  However, like any other market, the early companies, the ones who took the chance to develop a new industry, are often well rewarded when the ones with a lot of cash become interested.  I think we are on the cusp of that happening......I hope so, I have a wife with a large handbag collection to pay for! 

As always, let Novotech know how we can help with your M2M needs, such as antenna selection.  Browse our website at www.novotech.com.  As well, feel free to reach out to me directly ....larry(@)novotech.com.  You can also follow Novotech on Twitter (@NovotechM2M) or me personally (@LBNovotechM2M).