Strategic acquisitions are enabling leading players across the smart buildings market to augment their technology offerings with bolt-on startup acquisitions in several areas and increase their focus on software solutions. This forms part of a 2 pronged strategy to mitigate the risk of market disruption, with leading players (and increasingly private equity firms) taking majority stakes in new entrants to provide growth capital.
Our new research shows that startup acquisition activity remained resilient in 2022, despite strong economic headwinds. This is in keeping with general market trends. PitchBook analysts noted a decline in M&A value by 13.7% in 2022, however "M&A held strong even as global markets ran off the rails. Mountains of dry powder, shifting strategies and well-capitalized strategic investors propelled deal value above pre-pandemic levels."
The demand for technology and digitization in commercial real estate accelerated during and after the COVID-19 pandemic in an effort to react to potential structural shifts in how real estate is utilized and managed, which in turn has had a downstream impact on startup M&A activity.
Since 2015, we have recorded 338 startup acquisitions in the smart commercial buildings sector. There is a continuing consolidation trend which has intensified from 2020 onwards, with 215 acquisitions, over 63% of the total occurring in the last 3 years.
The number of startup acquisitions in 2021 was 78 - the highest level of consolidation activity recorded in the last 10 years - while in 2022 there were 76.
7 Key Technology Areas for Startup Acquisition Activity
We identified 7 key technology segments in the smart buildings space where startup companies have been acquired:
- Commercial Building IoT Platforms
- Sustainability and Carbon Management
- Renewable Energy Management
- Digital Workplace Management
- Workplace Experience Apps
- Visitor Management
- Video Analytics and Access Control
Corporate stakeholders and strategic investors across the built environment are playing an increasingly significant role in supporting startups in the smart buildings space. Our new research details the major market players interacting with startups.
JLL is investing heavily in startup technology for their occupier facilities management services and ranks as the number 1 investor in the space. Johnson Controls and Schneider Electric make up the top 3 ranking for investors in the smart buildings space.