0Acuity Advisors | Semiconductor Industry Market Review | Jan 2018
Acuity Market ReviewIIoT Industry – 2018
Confidential | March 2019
©Acuity Advisors LLP
1Acuity Advisors | Semiconductor Industry Market Review | Jan 2018Acuity Advisors | IIoT Industry Market Review | March 2019 1
50.0
100.0
150.0
200.0
Automotives Healthcare Industrials
Transportation Smart Buildings Smart City
Others S&P 500 Index
1
1.0x
1.2x
1.2x
2.4x
4.8x
2.2x
1.3x
1.0x
1.2x
1.4x
3.2x
3.5x
2.2x
1.5x
Introduction
Market Dynamics
IIoT Share Price by Sub-Sector (2017-2018, Rebased to 100)
Acuity Market Review: IIoT Industry – 2018
Sub-Sectors
IIoT Trading Comparables (2017-2018)
Median EV/Revenue
Median EV/EBITDA
Q3 2018 YoY Rev Growth
3%Automotive11.3x
14.9x
12.1x
26.7x
25.6x
17.6x
11.5x
19.8x
21.6x
11.3x
21.4x
22.0x
18.9x
13.7x
LTM Q3 2018 EBITDA Margin
▪ Over the last 24 months, IIoT industry
has underperformed in comparison
with the S&P 500 index. In 2018, listed
IIoT companies have seen an overall
decline in share prices, giving an
average return of -5.6% while the index
stood at 11.0%.
▪ The IIoT industry’s trading multiples
remain robust with EV/revenue
multiples of 1–4x and EV/EBITDA
multiples of 11–22x. IIoT companies in
smart cities, smart buildings,
Transportation and Healthcare are
trading at the higher end of the range.
▪ Performance across subsectors and by
individual companies has varied widely.
▪ Those with a continuing value story
(e.g. ORBCOMM) driven by organic
growth and M&A continued to see
strong share price momentum to the
point of the wider tech sector
downturn in Q4.
▪ Subscale businesses, those failing to
gain traction and those focused on a
predominately hardware driven model
saw weaker performance throughout
the year as some of the “buzz” around
the IoT sector was replaced with a
sharper focus from investors on
winners and potential losers in the
sector.
▪ Automotive, Healthcare and
Transportation all saw positive multiple
growth.
▪ The Industrial Internet of Things (IIoT) and the fourth industrial revolution (Industry 4.0) continue to dramaticallyimpact business and economic models globally across each and every sector.
▪ The global IIoT market was valued at $157.6bn in 2018 and is expected to grow at a CAGR of 8.06% to $232.15bnby 2023. Core trends in connectivity, the availability and power of cloud computing, visualisation and analytics,machine learning and AI – coupled with global financing and deployment of smart hardware – continue to driveinnovative use cases and digital disruption across cities, transport, manufacturing and beyond.
▪ 2018 saw record levels of M&A across the global IIoT sector as strategic corporates and investors looked to enter,and further establish, their technology propositions and investments in across the sector.
-19.5%
11.5%-5.1%-9.3%
-12.4%
7.2%
1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18 3Q 18 4Q 18
Industrials
Smart Buildings
Smart City
Transportation
Others
Healthcare 13%
6%
1%
8%
9%
8%
6%
4%
9%
4%
11%
8%
9%
-11.6%
11.0%
12 Months ended 30th Sept 1712 Months ended 30th Sept 18 Source: Capital IQ, Acuity Intelligence
2Acuity Advisors | Semiconductor Industry Market Review | Jan 2018Acuity Advisors | IIoT Industry Market Review | March 2019 2
$3.8bn
$5.1bn
Global Mid-Market1 M&A Deal Values by Sub-Sector (2017-2018)
Transactions Analysis
Source: Capital IQ, Company Websites, Acuity IntelligenceNote: 1Mid Market – Deals with transaction values up to $1.0b
2017
2018
Deal Volume ($USDmm)
Acuity Market Review: IIoT Industry – 2018
Global Mid-Market M&A Deal Volumes (2017-2018)
Top Mid-Market1 Deals (2018)
47%
32%
7%
14%
31%
42%
23%
4%
Date: 15/02/18Value: $50m
Acquired By
Date: 04/09/18Value: $300m
EV/Revenue: 10x
Acquired By
▪ Deal activity in the mid-market grew to record levels again in 2018, with global deal volumes over 80 ($5.1bn in
disclosed deal value), a volume increase of 32% on 2017. Activity continued across smart Transportation, Industrials
and platforms as technology acquisitions by larger tech and non-tech players, consolidation and Private Equity
investment drove activity: 70 different strategic buyers made acquisitions in 2018.
▪ Our selected deals illustrate several key, different M&A trends: Rockwell Automation’s significant investment in
PTC illustrated the value PTC has created through their own IoT and M&A fueled transformation; Siemens foray
into “Digital Factories” with the acquisition of Mendix; Montagu’s investment in Wireless Logic (the third PE backed
buy-out of WL) demonstrates private equity’s continued appetite in backing attractive IoT growth models; Munich
RE’s strategic acquisition of relayr for a rumoured 10x revenues shows how traditional buyers are embracing and
valuing the transformational power of IoT platforms and Google’s acquisition of Xively highlighting how global tech
giants continue to build out their IoT stacks via strategic M&A.
Date: 01/08/18Value: $730m
EV/Revenue: 8x
Acquired By
Date: 27/06/18Value: $510.1m
EV/Revenue: 7.1xEV/EBITDA: 21.6x
Acquired By
Date: 11/06/2018Value: $1bn
EV/Revenue: 3.4xEV/EBITDA: 16.8x
Acquired By
11
18
14
8
19
21
24
18
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Industrials Others Smart City Transportation/Automotive
3Acuity Advisors | Semiconductor Industry Market Review | Jan 2018Acuity Advisors | IIoT Industry Market Review | March 2019 3
Global M&A Mid Market1 Deal Volumes by Geography (2017)
Transactions Analysis (Cont.)
Source: Capital IQ, Company Websites, Acuity IntelligenceNote: 1Mid Market – Deals with transaction values up to $1.0bn
Acuity Market Review: IIoT Industry – 2018
▪ North America and Europe continue to dominate acquisition activity in 2018 with c80%+ of the total deals being
carried out in these two regions.
▪ The level of cross-border acquisitions, and cross-continent acquisitions, continues to grow as companies have
moved out of their home geographies to break into new markets (acquiring technology and market access). In
addition, we are starting to see some examples of companies in the West moving towards Asia whilst European
players continue to be acquired by larger Asian technology companies.
Europe AsiaNorth AmericaRoW
Headquarters of IIoT Targets
90% 10%
Headquarters of acquirers of North American Targets
40%60%
North America
Headquarters of acquirers of European Targets
42%58%
Europe
Headquarters of acquirers of Asian Targets
15%85%
Asia
9%82%
5%5%
25%
25%
50%
Headquarters of IIoT Targets
Headquarters of acquirers of North American Targets
North America
Headquarters of acquirers of European Targets
Europe
Headquarters of acquirers of Asian Targets
Asia
Global M&A Mid Market1 Deal Volumes by Geography (2018)
13%
87%
46%54%
37%
63%
72%
11%
17%
2%
85%
11%
2%
2%
14%
80%
4%
4Acuity Advisors | Semiconductor Industry Market Review | Jan 2018Acuity Advisors | IIoT Industry Market Review | March 2019 4
▪ Overall revenue multiples have been
materially impacted by a number of
“Platform” and software deals undertaken
at high multiples within our “Industrial” and
“Other” categories e.g. Relayr / Munich Re,
Medix / Siemens, Wireless Logic / Montagu
and a number of others.
▪ These standout platforms have traded for
between 7x to 10x revenues.
▪ Our view on the market norm is more 3x to
5x revenues for strong businesses, in part
driven by their growth/level of recurring
revenue and mix of SaaS to hardware
revenues.
▪ EBITDA multiples continue to vary
significantly by sub-sector and deal: in part
because many businesses have focused on
growth and revenue rather than margin.
▪ The data shows a wide range of low double
digit EBITDA multiples up to 20x+ with
valuation very much driven by sector and
company specifics.
Acuity Market Review: IIoT Industry – 2018
Valuation Analysis
Source: Capital IQ, Acuity Intelligence
About Acuity
IIoT Precedent Transactions (2017) –EV/Revenue Multiples
IIoT Precedent Transactions (2018) –EV/Revenue Multiples
IIoT Precedent Transactions (2017) –EV/EBITDA Multiples
IIoT Precedent Transactions (2018) –EV/EBITDA Multiples
Type: Divestment
Acquired by
▪ We know IIoT industry – that’s why we’re the trusted
M&A advisors for the industry. We are the most
active and successful European Mid-Market
Investment Bank specialising in the IIoT market
having completed more deals than any other firm.
▪ We are skilled at getting to the heart of every
technology business, understanding what will attract
buyers and investors NS building long-lasting client
relationships. We have an extensive network across
the global IIoT industry.
▪ We have an unrivalled understanding of the
industry’s complexities and personalities – our track
record and client feedback are compelling evidence
of that.
▪ We’re an international firm – our deals are cross-
border, from offices in London, Munich, Shanghai and
Silicon Valley – but we’re grounded in our approach.
We move quickly when it’s needed, and we’re around
for the long haul when patience is a virtue.
24 People4 Offices 10 IIoT Projects
CY16–18
5-Year Track
Record Type: Divestment
Acquired by
Type: Divestment
Acquired by
Type: Buy Side
Acquired by
Max
Median
Min
Max
Median
Min
Max
Median
Min
5Acuity Advisors | Semiconductor Industry Market Review | Jan 2018
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