Acquisitions of ‘Internet of Things’ start-ups accelerating rapidly in 2014

Likely near-term acquirers include Intel, AT&T, Johnson Controls, Texas Instruments and Juniper Networks as European targets command Silicon Valley-level price premiums
By: Hampleton Partners
 
Nov. 27, 2014 - PRLog -- LONDON, 27 November 2014:  M&A activity for tech companies within the ‘Internet of Things’ market is accelerating rapidly and, in some cases, European acquisition targets are commanding Silicon Valley-level price premiums, according to new analysis by specialist M&A and corporate finance advisory firm Hampleton Partners.

The report released today analyses the $7.7bn of publicly disclosed acquisitions within the much hyped ‘Internet of Things’ sector since 2012. More than half of that deal activity – some $5bn worth – has taken place in 2014 alone, the findings show. Since 2012, the overall median transaction value was $112m, with a median disclosed revenue multiple of 11.2x.

28 billion Internet-connected devices online by 2020

The rapid increase in M&A activity is being driven by dramatically accelerating consumer interest in areas such as the connected home, health monitoring and GPS-based information services. According to market research firm IDC, an estimated 28 billion internet-connected devices will be online by 2020*.

As a result, global technology giants such as Google, Cisco, Samsung and Huawei – among many others – are getting in the game of the ‘Internet of Everything’, a term coined by IT research firm Gartner.  In particular, many larger players are rapidly acquiring companies focused on core technologies such as semiconductors and chipsets, emphasising the competition to acquire the building blocks of future infrastructure and applications. In addition, venture capitalists have pumped more than $1 billion into start-ups in this market last year alone.

Looking ahead, likely acquirers in this arena over the near-term include companies such as Intel, AT&T, Johnson Controls, Texas Instruments and Juniper Networks, which are under pressure to compete in the huge emerging market.  However, as the market expands and new players compete to be acquired, valuations are likely to drop over the next couple of years, Hampleton predicts.

Commenting on the findings, Hampleton Partners Principal Partner Miro Parizek said:

“Market appetite for companies in the ‘Internet of Things’ space has clearly heated up significantly this year, not least because of interest from venture capitalists and many of the world’s leading global technology players.  Increased numbers of acquiring firms coming into the market have resulted in a flurry of high value M&A activity as the buyers plug holes in their infrastructure, applications and services portfolios, a trend likely to continue for the foreseeable future. European technology companies have historically traded at a discount to their Silicon Valley peers, but this does not appear to be the case when it comes to companies in the ‘Internet of Things’ arena thus far.

“Going forward, the high multiples we have seen in recent transactions will not be sustainable over the mid- to long-term. As time marches on, buyers will have placed their bets and the numbers of firms putting themselves on the market will grow, increasing competition and driving down valuations over the next couple years. However, some of the bigger telco and technology firms have yet to get into the game when it comes to this market, and we are likely to see a ramp up from the likes of Intel, AT&T and Broadcom to ensure they are not left behind in this globally competitive technology race.”

Copies of the full report and analysis of several key sub-sectors can be downloaded from http://www.hampletonpartners.com/report/internet-of-things-ma/

* Source: IDC - Worldwide and Regional Internet of Things (IoT) 2014–2020 Forecast: A Virtuous Circle of Proven Value and Demand

ENDS

Notes to Editors:

About Hampleton Partners


With offices in London and San Francisco, Hampleton Partners provides merger & acquisition and corporate finance advisory services to owners of Internet, IT Services and Software companies worldwide. For more information, please visit www.hampletonpartners.com.

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