The changing landscape for buyers and investors in growing technology markets
The past four years have seen a rapidly changing landscape for potential buyers and investors in the controls and automation and Internet of Things (IoT)) industry segments. The business world continues to focus on methods to improve productivity through the adoption of software, robotics and monitoring tools. The result has been rapid growth in the controls and automation and IoT markets, which is attracting a new group of private equity and growth equity investors, as well as industry, or strategic, buyers focused on taking advantage of this growth.
Whether a company is a pure control systems integrator, a controls and automation product manufacturer, or offers a technology-focused application, the options available to business owners for growth capital and/or selling a business have increased substantially over the past few years.
Private and growth equity
Private equity groups are private pools of capital, managed by investment professionals, which typically acquire a majority equity percentage, but not 100%, of a company. Growth equity groups are similar in profile, but usually are focused on completing minority equity investments, or a combination of debt and minority equity, in high-growth companies. Private and growth equity groups are focused on investing in growth markets and finding ways to help management expand through organic growth opportunities and add-on acquisitions. Within the past few years, a wave of private and growth equity groups have entered the market, validating the controls and automation segment as an attractive segment.
In addition, a critical mass of other private and growth equity groups are eager to break into the controls and automation market through a platform investment.
Classical versus new strategic buyers
Strategic buyers have been active and continue to be very relevant players in the controls and automation segment. The legacy, or classical, strategic buyers maintain a relatively consistent acquisition strategy that focuses on obtaining new market share and augmenting existing capabilities.
The rapidly evolving demand for quality technology offerings and engineering-driven technical services segment is producing a non-traditional, aggressive class of strategic buyers. These groups are using acquisitions to redefine their overall strategy.
The enormous opportunities that the controls and automation segment offers are motivating strategic buyers to redefine their strategy and consider any number of acquisitions, so they can stay ahead of the competitive business curve.
Internet of Things
The IoT emergence is driven by the market demand for more information, gathered through any manner of sensors, with the primary purpose of maintaining and improving productivity at the most basic level of a machine or piece of equipment. Plamen Nedelrchev, IT engineer with Cisco, stated that there were "1,000 internet devices in 1984, 1 million internet devices in 1992, and 10 billion in 2008. Fifty billion devices are expected to be connected by 2020."
Furthermore, Nedelrchev highlighted that in 2011, the number of new things connected to the internet exceeded the number of new users connected to the internet. The IoT explosion also has been driven by cloud computing and the technological ability to store, access, and interpret data at any given time. Recognizing that we are still in the early stages of the IoT market expansion, strategic buyers and growth equity investors are the key suitors for the burgeoning IoT technologies and companies currently in the market.
As the IoT market continues to grow and mature, there will likely be an acceleration of strategic buyer and investor activity.
Increased strategic, private equity and growth equity demand for acquisitions and investments in the controls and automation and IoT markets lead to stronger business valuations, which plays to the advantage of shareholders and managers active within these segments.
Clint Bundy is a managing director with Bundy Group, a boutique investment bank that specializes in representing controls and automation and IoT companies in business sales, capital raises and acquisitions. Edited by Emily Guenther, associate content manager, Control Engineering, CFE Media, email@example.com.
- Buying and investing in growing markets.
- A business owner’s options for selling the business.
- What the growth in technology means for business owners in the control and automation and Internet of Things (IoT) industry segments.
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