This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.

According to our recently published Startups Report, M&A continues to be a significant growth strategy for many incumbents providing solutions and services in the smart buildings space, as they seek to augment their portfolio offerings.

Startup companies are becoming increasingly attractive targets for a range of stakeholders operating across all stages of the building lifecycle.

Our analysis revealed that 2019 and 2020 accounted for over 52% of these emerging player deals in the last nine years, confirming the consolidation trend and increasing recognition by potential acquirers of the benefits of closer collaboration with startups through minority investments and majority stakes.

Examples over the last 2 years include:

Nordomatic, the leading BMS system integrator in Scandinavia, announced a significant minority investment in Altacogni AB, the smart buildings startup which purchased the IoT platform and hardware assets of Stockholm-based Yanzi Networks, following its bankruptcy.

YIT, Finland’s largest construction company, operating in ten countries, acquired a 20% share in Nuuka Solutions, a Finnish software company specializing in solutions for the real estate industry. Nuuka’s platform is implemented in 3,000 buildings in six countries.

IoT connectivity and networking technology in buildings attracted strategic acquisitions by IT and telecommunications firms. For example, Vodacom Group, based in South Africa, a subsidiary of Vodafone, acquired a 51% stake in IoT.nxt, a South African startup founded in 2015.

Another example was Wireless Logic, a leading UK based IoT connectivity platform provider, with estimated group revenues for 2019/20 in the region of €100m, which completed 3 add-on startup acquisitions to consolidate their European market position and diversify the geographic profile of the group. Matooma in France, SIMPoint and M2MBlue in the Netherlands were new entrants acquired in 2019. Private equity backed Wireless Logic continued its acquisition spree in January 2021 with its purchase of Com4, a Norwegian based startup with experience in smart metering and industrial IoT.

Cyber security new entrants, particularly those which provided visibility, security
and control across operational technology (OT) environments were also targeted. Microsoft acquired CyberX, Tenable purchased Indegy and Palo Alto Networks acquired Zingbox.

In the proptech sector, the major facilities management software and service companies (eg. FM:Systems, iOffice, Archibus Serraview, SmartSpace Software, Sodexo) are leading the drive to acquire workplace technologies. Indoor mapping and navigation technology startups were also targets for a range of incumbent providers augmenting their offerings with indoor location solutions.

Our research identified 23 acquisitions in the physical security products and solutions sector in the last two years, mainly driven by incumbent players augmenting their portfolio with innovation from startups in the visitor management, smart intercom systems, cloud-based access control and video analytics sectors. Alarm.com acquired smart intercom provider, Doorport and indoor gunshot technology provider, Shooter Detection Systems; Honeywell acquired Australian based visitor management system provider, Sine; ACRE, Vanderbilt’s parent company acquired Razberi Technologies and Halma acquired Australian based FireMate Software.

Utility companies, oil and gas majors and energy service providers have been particularly focused on building relationships with new entrants in the building energy management and building to grid sectors through acquisitions as they adjust their business models towards energy efficiency, renewable and distributed energy solutions, aimed at differentiating themselves in tomorrow’s energy market.

For example, Saft, a subsidiary of Total acquired Go Electric Inc., a US-based developer of distributed energy resiliency solutions for microgrids; Shell acquired UK virtual power plant startup, Limejump and Octopus Energy acquired Upside Energy, a provider of a cloud-based platform to manage distributed energy resources.

Our Startups Report concludes that this M&A trend is set to continue for the next 2 to 3 years as more and more companies look to add IoT capabilities to their offerings and incumbents look to redefine their business models and attempt to remain competitive in the light of new market entrants.