VDC Research: Industrial Sensing, Networking & Control Market Blog

Recent Acquisition of Invensys Rail by Siemens, Is Invensys Operations Management Next on the Block?

Siemens recently announced its plans to acquire Invensys Rail for about $2.8 billion (~$1.7 billion Euro) and the deal is expected to close in Q2 2013 assuming it meets no regulatory obstacles.  In VDC's opininon this deal thereby opens up the possibility that Invensys may also spin off its Invensys Operations Management and Climate Controls businesses as a means of maximizing its value to shareholders, something that was at least speculated based on reading some articles in June and September of this year.

Apparently there were (are?) several interested parties in a possible acquisition of Invensys Operations Management (or perhaps Invensys overall) including Emerson, ABB and GE. An acquisition of IOM by anyone of these companies would definitely represent a major shake-up in the competitive landscape as it would bring in over $1.6 billion in revenues and a great deal of sizeable customer accounts and a pretty strong product portfolio including leading brand names such as Foxboro, Eurotherm, Wonderwre and Triconex, among others. The addition of such a product, solutions and services portfolio to anyone of these rumored acquirers would be a real competitive advantage.

I have written several blogs in the past regarding my analogous use of PAC Man to explain industry consolidation occuring in any number of different product and technology markets. If an acquisition of Invensys overall and/or Invensys Operations Management went down then that would represent a pretty sizeable example of PAC Man in action. You can learn more about several of the key markets in which Invenys and its rumored suitors compete by checking out VDC's Industrial Automation practice homepage.

PAC Man Strikes Again in Level Measurement Markets - MSI Acquires Assets of Cosense

Just having completed the final PowerPoint slides, which includes commentary on M&A activity in the level market segments, in support of the first two of four reports in support of VDC's 2011 Process Level Measurement and Inventory Tank Gauging Market Intelligence program, Measurement Specialties Inc. (MSI) decides to acquires the assets of Cosense, Inc. The purchase price was $11.5 million and the transaction was closed on April 2, 2012.

Cosense is a designer and manufacturer of ultrasonic sensors and systems for highly reliable OEM Fluid measurement and control applications such as liquid level monitoring, air bubble detection, flow sensing, fill verification of liquids and solids for semiconductor, medical, aerospace, and industrial applications. MSI is covered in VDC's level research as a supplier of hydrostatic level measurement devices so the acquisition is a move designed to broaden MSI's reach into the sonic/ultrasonic market segment which represents a >$250 million opportunity worldwide.

Frank Guidone, MSI's CEO commented, "Cosense's ultrasonic sensors are an excellent addition to our current product portfolio and fit nicely within our Piezo product line. Cosense products are used for single-point, multi-point, and continuous liquid level measurement, along with entrained bubble detection. Their innovative solutions are very complementary to our existing product offering, particularly within the high-purity semiconductor, medical infusion pump, and commercial aerospace markets."

MSI did not provide VDC with any advance details on the acquisition but its actions confirm VDC's belief that the market for process level measurement technologies is continuing to consolidate as companies face the omnipresent pressure to achieve their growth objectives through whatever means necessary. Acquisition of new products/technologies is one strategy employed by businesses across all product and/or technology markets across the world and the process level measurement market is no exception.

PAC Man Fever Strikes Level & ITG Markets with Acquisition of King Engineering

Recently I blogged about the likelihood of M&A activity impacting the market for process level measurement and inventory tank gauging solutions. How little did I know that my prophetic blog would be so right on the mark?  Marsh Bellofram has recently acquired the product line assets of King Engineering Corp.

King will likely leverage existing Marsh Bellofram technology and resources to expand beyond King’s own line of hydrostatic, conductive and capacitance level and tank gauging solutions. It is also likely that King will now focus more of its efforts outside its core sanitary market segments such as food, dairy, pharmaceutical, etc.

Okay, so Marsh Bellofram is not a supplier of level measurement devices, although they do provide pressure gauges, and this is not a direct case of one level supplier acquiring another; but it does confirm my belief that more consolidation is coming to the industry.  

If tangentially related companies such as Marsh Bellofram see the benefits of expanding their market coverage by acquiring a level and tank gauging company such as King, then I find it logical that level and/or tank gauging suppliers will see the benefit, both as an offensive and defensive strategy, of acquiring other level and/or tank gauging supplier(s). Such an acquisition should be completed if it would help round out a product/technology portfolio, provide access to new market or customer segments, provide new technology such as network connectivity and/or provide some level of best in class service or support capabilities.

Companies are increasingly facing pressure (internal as well as external) to grow revenues and gain market share in order to survive and thrive in their respective markets.  Mergers and acquisitions, at least intelligent ones, can be seen as an effective tool to meet growth MBOs and help a company to not only survive but thrive.

Wondering When PAC Man Fever Will Strike Level Measurement & ITG Markets

For those that have been following my blogs over the last year or two you will be quite aware of my references to PAC Man to signify the impact previous mergers and acquisitions (M&A) had on markets such as industrial networking and data acquisition products.

After taking over the market intelligence activities in support of VDC’s ongoing 2011 Process Level Measurement and Inventory Tank Gauging Market Intelligence Program combined with just having completed eleven market studies covering data acquisition solutions, and having had several in-depth discussions with suppliers, it became quickly evident that ABB’s acquisition of K-TEK back in the summer of 2010 would likely not be an isolated event.

Most of the smaller to mid size suppliers I spoke with noted an increasing trend involving larger industry players such as Emerson, Endress + Hauser, Invensys and Honeywell deciding to move away from private labeling agreements. This trend does not favor some of these smaller players, since larger players are either developing a new product or technology in-house and/or considering acquiring a company that can help fill a gap in that supplier’s product or technology portfolio. Conversely it seems a few of the suppliers that are based in Europe or Asia-Pacific that to until now been supplying these larger (or even smaller) suppliers are starting to desire making inroads by marketing their products under their own brand.

It makes sound business sense, given that our research indicates that more level measurements customers are seeking out partnerships with suppliers that can not only provide “one-stop shopping” but also best in class and world-wide technical and application level support. Suppliers naturally have a vested interest to not create a situation in which a customer has to look somewhere else to meet their needs, since an overall market opportunity likely totaling over $2 billion in 2011 shipments is not chicken feed.

Industrial Sensing Market - Problems With Doing More With Less

Recently, I have been making a lot of channel and OEM interviews supporting multiple projects we have running. There have been many interesting insights I have learned as part of this work but several conversations have correlated with recent demand side survey results we have provided to our clients.

The quick takeaway is that it is likely that some suppliers are losing business they could have easily won. Several distributors have griped that it takes a long time to get responses for quotations and delivery times. As a result, the customer who might have been attracted to a particular product goes another way with respect to product, brand, or channel. This latter is obviously irksome to the distributor who might have invested sales and even technical expertise in problem solving and product selection.

As I mentioned previously, this is a theme I picked up previously in our demand-side surveys. In fact, one vendor was repeatedly called out for not providing timely quotations to customers that attempted to buy from them directly. If the channel partners that deal with suppliers constantly are similarly being ignored this is significant. It is not a business strategy of driving low volume direct sales to distributors for aggregation, it means that suppliers are just not being responsive.

My theory is that suppliers may be asking their employees to do too much for too long and, as a result, things like responsiveness break down particularly during any uptick in business. Too many things are automated and/or being done by fewer people and some of the personal touches and details are being lost. In project management, you have three general pillars to any project that are applicable to this situation. They are Time, Scope/Quality, and Resources. Basically, if you reduce resources, time and/or quality suffer.

I'm kind of interested in what other sensor product distributors, OEMs, and Systems Integrators are seeing and what opinions they have about it. If you would like to chat about it, drop me a line.

Industrial Supplier Business Strategy Options Employed During Downturn

We have a Process Level and Inventory Tank Gauging (ITG) supplier strategy survey that is still open for more participation but, even so, we took a few moments to tabulate the preliminary results and send them to our sponsors last month.One of the questions centered on what companies did during 2009 - 2010.

When the downturn started at the end of 2008 it was clear by the start 0f 2009 it was going to be long and ugly. Leaving out the Mil/Aero segments, most suppliers were left with several likely business levers they could select including outsourcing, downsizing, and reorganizing. I was a bit surprised when I saw that ~65% of the survey respondents indicated doing no such thing.

I was a little surprised by this until I remembered a key difference. Although publicly traded companies are under pressure to maintain profitability in the short term, a good portion of industrial process product suppliers are privately held. This is particularly true for many sensing companies. Being privately held, can allow many of these companies to take the longer business view and avoid the drastic cost cutting measures that can hold them back during recovery cycles. That is of course assuming they have enough cash flow and reserves to survive. In some cases, these well positioned but potentially low on cash entities can be attractive nuggets for larger conglomerates and some of them could be scooped up which could be the case for machine safety equipment supplier Jacob Safety which was recently acquired by ABB group.

Would you like to see more of the results from our survey? If you are a supplier of process level and/or ITG products there are 2 options. You can purchase some volumes from the report, or you can take the short 5-10 minute survey at the following link: http://www.surveymonkey.com/s/5DFMYXJ

We are also offering you 1 chance in our iPad raffle for completing the survey. If you have already taken the survey, please stand by for the aggregated results which we will send you in 3Q. We will also alert the winner at that time.

Wireless Charging Could Empower Sensing in Industrial Applications

I saw an interesting article this morning about wireless charging that got me thinking about its possible use in industrial sensing. This technology is being developed by a MIT spin-off WiTricity and it's new partner MediaTek. The wireless charging they are working with is a big step beyond the inductive type charging plates that are currently on the market but, instead can charge devices at a distance. Obviously a cell phone that never needs charging and, perhaps, a much smaller battery geography would be a big deal on the consumer market but I'm thinking it could be a game changer in industrial settings.

Using wireless data transmission solves a lot of sensing problems particularly in equipment that has a lot of moving parts but that still leaves the problem of powering the device. Newer sensors with ultra low power demand and advanced long-life batteries solve some of this but, I suspect that they still leave some sense of concern that a dead sensor battery could idle an entire production line. Some of this concern could be alleviated by energy harvesting and/or solar technology but these are not ideal in all cases. But, if you could eliminate much of the battery size, combine energy harvesting and WiFi type power, you could have a really small wireless sensor that would be ultra-reliable. To me that's a pretty big deal.