Insight

Internet of things: Summer 2020 M&A newsletter

IoT M&A in a COVID-19 Environment

Joseph Radecki

Joseph Radecki

Managing Director, KPMG Corporate Finance LLC

+1 312-665-4401

Summer 2020: IoT M&A in a COVID-19 Environment

IoT Deal Value and Volume1

After a massive, COVID-19-related slowdown earlier this year, we are seeing signs that the broader M&A markets, and the IoT M&A market in particular, are gaining renewed momentum. As we indicated in our Spring 2020 Newsletter, large deals (i.e., those with transaction values above $1 billion) were nearly universally put on hold or scuttled - we did not see a single large IoT transaction close in Q2 2020 in the face of the absence of debt capital support for such larger transactions. That said, Q2 saw a meaningful increase in IoT M&A with value  below $500 million, which we believe to be consistent with conversations we are having with strategic and PE buyers in the space. While momentum in IoT M&A is nowhere near the levels we saw through 2019, we believe acquirers of quality stories (not distress) are back and targets are willing to engage.

We are seeing three prevailing trends in this new COVID-19 environment. First, smaller transactions are becoming the new norm, as companies look to place smaller bets regarding capital deployment and face more limited access to credit. Second, acquisition activity around IoT solutions applicable to healthcare end-markets has increased and is expected to continue as companies increasingly see the importance of such solutions. Third, smart building technologies will be critical as businesses reopen and IoT use cases such as remote temperature checks, occupancy detectors, and air filtration sensors, among others, help buildings reopen safely.


Q2 2020 saw a rebound in the volume of IoT transactions as companies began to adjust to the new environment


Last Four Years - IoT M&A Activity
 


Last Four Quarters – IoT M&A Activity
 


 

Total global deal volume in Q2'20
41

The IoT sector saw 41 deal announcements in Q2’20, significantly higher than 25 deals announced in Q1’20

$0.5bn
Aggregate deal value in Q2’20

The aggregate deal value in Q2’20 was $0.5bn, largely comprising of small-size deals with undisclosed values


 


We are seeing a dramatic increase in the number of acquisitions of healthcare IoT targets as COVID-19 has highlighted the importance of IoT in improving safety, automation, and contactless work


 

IoT M&A Activity (By Sector) – Deal Volume

IoT M&A Activity (By Sector) – Deal Volume

Footnotes

  1. M&A analysis is based on the deals announced during the respective periods. Deal value represents aggregate value for disclosed transactions
  2. Includes all IoT M&A deals except Healthcare IoT M&A deals during the respective periods


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