Internet of Things newsletter Q4 - 2019

2019 year in review: Internet of Things (“IoT”) M&A

IoT deal value and volume¹

Overall IoT transaction activity has continued its stong upward trend through FY2019.  M&A volume is up 38% over the same period in FY2018 as large strategic players eagerly acquire IoT technology to address customer demand for an end-to-end IoT solution and security across IoT end markets.  We continue to believe that we are in the early stages of the M&A cycle in IoT and expect continued strength in deal volumes through 2020.

Year in review: Key themes from the 2019 IoT M&A deal list

While deal volumes across IoT subsectors grew in 2019, two areas lead the pack in terms of number of transactions closed. – IoT Sensor IP and IoT Security/Cyber.

Sensor-enabled technologies are the starting point for any IoT application. As IoT infrastructure is built out, a massive capital investment will be required to collect insights from the physical world and move them into the digital world, and sensors are where it all begins. There are several reasons behind the increase in M&A activity, and the first is costs. It is far more cost-effective to deliver in-house systems rather than purchase off-the-shelf units. Aurora Innovation’s acquisition of Blackmore Sensors and Analytics in May 2019 is a prime example. In addition to Aurora, other IoT leaders, including Google, Uber and Aptiv, have been acquiring sensor technologies, such as LiDAR, in order to build sensor IP, and embed that technology into their solutions at a lower cost rather than purchasing from third parties.

An additional driver for sensor M&A has been companies’ desire to control the end-to-end IoT solution. In October 2019, Procurant, a Silicon Valley-based mobile food safety solution company, announced the acquisition of SureCheck’s mobile food safety solutions and monitoring business from PAR Technology. SureCheck’s system hardware and remote monitoring will enable Procurant to have proprietary sensor data collection technology, allowing it to collect critical food safety data, upon which its customers can act. By acquiring SureCheck, it improves Procurant’s end-to-end IoT food supply chain solution, beginning with sensing and collecting data, and to then layer in safety and monitoring software solutions.

Companies have continued to find more innovative uses around sensing technologies in 2019. As sensors and sensor processing advances continue, they are being deployed on an increasing number of devices such as robots, drones, manufacturing equipment, smartphones, tools and remote monitoring and control – to name just a few, in end markets including industrial, consumer, smart city, smart home, connected vehicle, smart grid…the list goes on and on. An example highlighting this trend was the CEVA, a licensor of signal processing, sensor fusion and artificial intelligence processors, acquisition of Hillcrest Labs Intelligent Sensor Technologies Business from InterDigital in July 2019. Hillcrest Laboratories engages in the supply of software, components, and intellectual property to enable the intelligent use of sensors in consumer electronics, robotics, and IoT devices. The acquisition complements CEVA’s sensor processing technology by acquiring Hillcrest’s leading technology in the fusion of data from multiple sensors to enable intelligent devices and systems.

In addition to Sensor IP, IoT Security/Cyber transactions where prominent in 2019.

IoT continues to transform the way companies operate and how consumers understand the world around them, it has become an integrated part of our technological society. While this has led to greater efficiencies, companies are recognizing the threats security breaches pose. IoT players are increasingly identifying security as the first barrier to adoption and the number one concern among end users. Interestingly, much of the growth in security M&A in recent years has been driven by non-financial buyers whose businesses do not generate revenue from security but recognize its importance. This includes telecomm providers, technology providers and financial services firms. The proliferation of IoT solutions, and their inherent security weaknesses, have created a security blind spot. As a result, 2019 saw a significant increase in IoT focused security M&A.

Select examples of IoT security deal announcements include:
In June 2019, Accenture (NYSE: ACN) announced the acquisition of Deja vu Security, a privately held company that specializes in security design and testing of enterprise software platforms and IoT technologies. Accenture recognized that many technology companies are behind in IoT security controls. The acquisition will improve Accenture’s end-to-end security offering to its clients, including many financial service and telecomm firms.

In February 2019, Zebi Data acquired Element42. Zebi is a blockchain and big data provider serving the government, hospitality, education and telecomm verticals. Element42 uses blockchain, IoT and analytics to provide protection against fraud and counterfeiting. The acquisition allows Zebi to improve its in-house engineering talent around security and provide more secure solutions to its clients.

For more information on IoT industry trends, recent transactions, and subsector M&A activity download the newsletter.