Notes from the trade show floor: Sensors Expo & Conference 2015

Paul Vanstone

Published August 2015

Celebrating its 30th anniversary, the recent Sensors Expo & Conference hosted over 10,000 attendees, representing 45 states and over 40 countries during a three-day event held in California. Engineers, senior level executives and industry professionals from around the world converged at this year’s Sensors Expo in California to discover, collaborate and showcase how the Internet of Things (IoT) is transforming how sensor companies are providing solutions to their customers.
 
Key takeaways

  • Although the global sensor market is currently estimated at $80 billion (growing to $116 billion by 2019), IoT’s value proposition is in its infancy with most of the current data and analytics only being used for test and measurement and anomaly detection purposes rather than prediction and optimisation. Our international Industrials team estimates that IoT’s potential economic impact will surpass $10 trillion a year in 2025 with key industries such as industrial, transportation, medical and oil & gas having the strongest contributions
  • With nine billion connected devices currently in use worldwide and estimates of up to 45 billion connected devices deployed over the next decade, interoperability between IoT systems and the design of next generation hardware/software/cloud services will be the single most important driver of how efficiently and accurately data will be used by companies. This will allow companies to generate operational ROI and improve cost savings, which ultimately will give them a competitive advantage
  • Sensor and actuator technology hardware and component costs (e.g. MEMS sensors, RFID tags, accelerometers, batteries) continue to fall causing IoT adoption rates to increase through affordability of low-cost solutions

M&A activity

  • Large strategic acquirers continue to stay ahead of the curve, paying premium valuation multiples for sensor companies with superior technology, differentiated product/service offerings, strong market segment penetration and a blue chip customer base 
  • A few recent precedent M&A transactions in the sensor segment this year include:
    • Google’s secretive acquisition of early-stage Lumidyne Technologies for $85 million
    • Emerson’s acquisition of Spectronix for $100 million (1.8x revenue, 9.3x EBITDA)
    • CITIC’s acquisition of OmniVision for $1.8 billion (1.0x revenue, 12.0x EBITDA)
  • Last year’s two standout M&A transactions include:
    • Sensata’s acquisition of Schrader for $1 billion (2.2x revenue, 19.5x EBITDA)
    • TE Connectivity’s acquisition of Measurement Specialties for $1.7 billion (3.9x revenue and 22.3x EBITDA)

Key value drivers for acquisition targets include:

  • Seeking sensor product diversification through acquisitions with a specific interest in MEMS, pressure, temperature, force/strain/load, position and accelerometer sensors
  • Value is placed on high margin (15%+ EBITDA margin) industry segments such as industrial automation, medical device and oil & gas
  • Particular interest in sensor products/solutions with smaller footprints

Overall, the pace of mergers and acquisitions activity, management buy-outs, divestitures and growth capital raisings have been strong across the industrial technology segment. In particular, we are bullish on the sensors vertical and anticipate valuations in this segment to remain strong through 2016.

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Paul Vanstone
T: +44 (0) 20 7246 0510
E: paulvanstone@catalystcf.co.uk