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
- 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.
- 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
- 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.
- 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.
- 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).