December 7, 2017
By Alastair Rimmer, Partner, PwC’s Deals Practice
The proliferation of connected devices known as the “internet of things” (IoT) is expected to create massive market opportunities around the world in the coming years, driving transformative change across businesses at a remarkable pace. Capital intensive industries and manufacturing will be no exception.
The emerging industrial internet of things (IIoT, sometimes known as the “industrial internet” or “Industry 4.0”) has the potential to dramatically increase productivity, reduce costs and spur the creation of new business models across the manufacturing, transportation, logistics and energy sectors. Industrial companies are increasingly incorporating sensors and networking devices into their equipment, vehicles and facilities. This has allowed them to achieve an unprecedented degree of real-time asset performance management while conducting predictive maintenance analysis and operational optimization.
Not surprisingly, investment in IIoT capabilities and solutions is becoming a growing priority for many leading industrial and technology players. These firms are looking to enhance their capabilities not only through embedded sensor technologies but also with advanced analytics and machine learning software tools that enable them to extract maximum value from the data generated in the course of their (or their clients’) operations.
In a recent report, Lead or lag? What the Industrial Internet of Things means for deals, we argue that mergers and acquisitions (M&A) will be central to industrial and technology firms’ strategies as they seek to tap into opportunities created by the IIoT. For instance, many leading-edge analytical applications and platforms are being developed by software startups or small technology firms, which can present attractive targets for acquisition. There has also been significant IIoT-driven consolidation among larger, more established players in sub-sectors like semiconductors and sensor design.
The report highlights key IIoT deals trends, themes and lessons. It also considers the technologies and solutions that represent the most promising future opportunities for private equity investors and firms looking for new sources of value within the IIoT. Providing a series of illustrative investment playbooks, it suggests that IIoT has, perhaps most importantly, created opportunities for the development of new, innovative, service-based business models.
For example, private equity (PE) investors can identify opportunities to upgrade conventional portfolio companies with IIoT-relevant capabilities while exploring new service- and outcome-based business models. Meanwhile, corporates can aim to acquire assets in adjacent IIoT technology stacks to augment core offerings, as well as create integrated platforms. Ultimately, success in these efforts will determine the difference between those who lead and those who lag in the new industrial economy.
Read the full report, Lead or lag? What the Industrial Internet of Things means for deals, for more information.