The Building Internet of Things (BIoT) is expected to become one of the top five markets for the Internet of Things. It is still in its early stage of development but the investment that it has attracted to develop new products and apply leading edge technology shows that it has the backing of both technology companies and the investment business at large.
In addition Mergers, Acquisitions and particularly Alliances are being transacted on an almost daily basis as companies from the IT Communications, Software and the different branches of the Building Automation Services (BAS) business jockey for position.
Memoori identified some 23 acquisitions ranging in value from $3.7 million to over $3Bn and a 114 investment deals having a spread of $1 million to $126 million for the last 4 years ending 2014. We classified these into 5 categories of which 4 relate to acquisitions defined by the driver and investment deals.
Technology Driven Acquisitions. The vast majority of acquisitions made over the period (13) have been made in order to gain access to a particular technology. Be that in order to gain new IP around connectivity as seen in the Amtel purchase of Newport and ARM’s acquisition of Sensinode, or software giants obtaining device tech to access particular vertical markets, as seen in Google’s acquisition of Nest, and Samsung’s acquisition of SmartThings.
Strategic Acquisitions. The four strategic acquisitions we monitored have been orientated mainly desire for improved market share, and access to a wider customer base, but also by the desire to realize costs savings. They include Vivint’s buyout of Meter Solutions in 2010, and IBM’s acquisition of Tririga in 2011 and Silicon Labs acquisition of Ember in 2012.
Vertical Integration Acquisitions. Such deals have often been motivated by the need to access new application expertise and technology, or close knowledge gaps in respective organizations’ IoT supply chain. The 3 deals tracked were Amtel’s acquisition of Ozmo Devices in 2012, CommScope’s acquisition of Redwood Systems in 2013 and Linear Tech’s deal with Dust Networks in 2011.
Geographical Acquisitions. Due to the fact that the majority of BIoT service provision is largely geographically agnostic and does not rely on complex supply chains, it’s perhaps not surprising that we only picked up 2 deals that were primarily motivate by access to new geographic markets. The major deal in this area was Huawei’s acquisition of Neul, the UK based IoT pioneer, which we see as being as much of a play to access the UK and European markets as a technology play.
Investment Deals. While venture capital financing into the BIoT is heavily concentrated at the seed / Series A stages it is by no means an immature investing concept. Analysis of the investment deals show a growing number of deals are taking place in the latter investment stages, (Series C+), indicating the growing maturing and success of some of those receiving investment. The $50m series F funding by Temasek Holdings into Jasper Wireless indicates the faith being shown by funders, which has been repaid by Cisco's recent acquisition of them.
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We expect this upward investment trend to continue through to 2016 as innovative companies with niche market propositions and vertical market incumbents with sector specific skills and client bases are snapped up by larger IT market players. Investment will continue to be a mix of private and corporate funding in the BIoT market. Intel Capital, and Cisco Investments in particular already have a track record for supporting innovation in the market, with investments in software, cloud, Wi-Fi, sensor and analytics start-ups.
IoT is clearly not only a hot topic, but a hot investment opportunity not only for the venture capital market, but also for the various players across the supply chain. Both existing players and venture capitalists are expecting to capitalize on the projected growth in the market.
Whilst new technology will play an important role our report shows that much will depend upon how fast BAS services will morph into the wider Building Internet of Things. What will be their future role and how will they adjust to operate within the new structure of doing business.