IoT – A Large and Explosive Market Opportunity
Quarterly Commentary – October 2016 IoT – A Pervasive Technology Trend
This quarter, we take a look at one of the most broad reaching technology trends in the $14.4 Trillion in Value Crea on market today—IoT or Internet of Things. Given that most any “thing” of importance can be connected to the Internet, we expect IoT technologies to become pervasive in our business and personal lives. One measure of the importance of this market comes from Cisco, who es mates that $14.4 trillion in annual value will be created via the deployment of IoT technologies by the year 2022.
IoT refers to the interrelated network of physical objects that feature unique iden fiers (IP addresses) for Internet connec vity, and the communica on that occurs between these objects and other Internet-enabled devices and systems in order to transfer data without requiring human interac on. Examples of “things” that can exist in the IoT realm include trucks/cars, shipping containers, home appliances, water measurement systems, vending machines, pet collars, and a wide array of other connected devices. Some of the largest market segments that IoT technologies will be applied include: transporta on & logis cs, connected cars, fitness/wellness, connected homes, loca on/naviga on, connected buildings, manufacturing & inventory management and health care services.
IoT Ecosystem Source: Cisco, 2015
The market for IoT technology solu ons itself is made up of an interconnected ecosystem of players including: manufacturers of chipsets and sensors that reside in the connected devices; IoT Gateway providers; service providers that provide network connec vity, security, and loca on; and back end systems providers that transform unstructured data being transmi ed into useful business and consumer solu ons.
Source: Eclipse.org, 2015
2 Quarterly Newsletter IoT Market Size
With a market so pervasive and large, it is not surprising to see market growth and size es mates vary widely. Market evangelists such as Cisco and Ericsson expect 50 billion connected devices in 2020. Cisco pegs connected device growth at a 23% CAGR from 14 billion devices in 2014. Leading industry analyst firms such as Gartner and IDC expect a moderately smaller but s ll robust market at 32 billion and 28 billion connected devices by 2020, respec vely, with IDC expec ng a CAGR of 17% from 11 billion units in 2014.
Source: IoT Analy cs
3 Quarterly Newsletter IoT Market Size
From a revenue standpoint as well, the IoT market is expected to be large as IoT permeates our business and personal lives. IDC expects the market to increase at a 21% CAGR from $2.3 trillion in 2014 to $7.0 trillion in 2020. Visiongain has the market increasing at a 13% CAGR from $800 billion to $1.6 trillion. Given that IoT will be so pervasive, we believe differences lie in how the market is measured. Regardless, all market pundits point to a very large and growing opportunity in IoT.
Source: IoT Analy cs
4 Quarterly Newsletter IoT Market Drivers & Challenges
Market Drivers Market Challenges
1. Cheaper Sensors – According to a recent study by Goldman Sachs, 1. Industry Standards – Industry standards and communica on sensor prices have dropped to an average of $0.60 from $1.30 over protocols are yet to be standardized in the IoT industry. As the IoT the past 10 years. industry creates firmer standards, we expect to see incremental 2. Low-power Semiconductor Design – Power sipping chip designs are growth. Without coopera on, the growth of IoT will be slowed. very cri cal to IoT devices in terms of hardware design. As Moore’s 2. IoT Ecosystem – There is a great opportunity for startups to create law comes to an end, chip designers may have to design around this and enable pla orms and services for IoT that bridge the gap hurdle or could eventually even force the search for a replacement between the sensors collec ng data and the servers in the cloud material for silicon such as Graphene. crunching the big data aggregated from the millions of connected devices. Ul mately, coopera on between sensor, devices, networks, 3. Inexpensive and Ubiquitous Wireless Coverage – We expect the adop on of IoT to greatly benefit from declining networks costs and and backend systems will be key for the IoT industry to grow. ubiquitous wireless coverage. Over the past decade the cost of 3. Security and Privacy – Data privacy of connected personal devices wireless data has drama cally dropped. The ITU expects that by 2019 and poten al data misuse could become a major hindrance to IoT 57% of the global popula on will be connected to the Internet, up development. Therefore, IoT companies need to con nue to make from 40% currently. investments and acquisi ons in the security space to help ease data security concerns and drive faster adop on of IoT devices across 4. Produc vity and Cost Savings – Businesses are embracing IoT to various sectors. Highligh ng this was the recent Internet a ack that improve produc vity and efficiency, while also saving on costs such as caused outages and network conges on launched with the help of capex and labor. hacked IoT devices such as CCTV video cameras and digital video 5. Big Data & Analy cs – IoT is expected to generate vast amounts of recorders. unstructured data, which historically was difficult to comb through 4. Lack of Privacy – IoT providers gather a wealth of informa on about and use efficiently. However, the evolu on of data and analy cs pla orms that allow companies to quickly digest, view, and take those who use it. Smart phones can already be tracked, but smart devices point to a future where governments supplement census ac on on the data is leading to new use cases for IoT. informa on with the output of smart devices, and manufacturers can 6. IPv6 – IPv4 supports ~4.3 billion addresses, which is insufficient for effec vely and accurately harvest informa on about your habits. the 50 billion connected devices with unique iden fiers (IP addresses) Ul mately, we can expect IoT to produce dozens of legal precedents expected by 2020. IPv6 in comparison is expected to support a and class ac on suits as countries debate just what rights to privacy limitless number of IP addresses, paving the way for the billions of the users of smart devices retain and which they forfeit. devices expected.
5 Quarterly Newsletter IoT Financing and M&A
IoT Financing and M&A Emerging growth IoT companies have garnered a tremendous amount of new investment over the past five years, especially those working on industrial IoT applica ons, which saw 83% funding growth in 2015. Health & Wellness, Business Intelligence, Green Tech, Networking and Healthcare were the top 5 sectors by deal volume. The largest up ck in deal count in 2015 went to “Robo cs”, a subindustry that includes drones and warehouse automa on systems. According to CB Insights, there were 70 deals with $846 million of financing in Q1 2016. The $846 million was up YoY and QoQ and represented the second highest quarter of IoT financing to date. M&A ac vity also remains robust, highlighted by the large pure-play IoT acquisi on: Jasper
Wireless by Cisco for $1.4 billion, at a valua on of 7.5x EV/Revenue. There has also been mul ple large deals in the semiconductor market with IoT being a central case for those deals such as So Bank’s $32 billion acquisi on of ARM. Other recent notable deals include Nokia’s $190 million acquisi on of Withings in the wellness market, Brocade’s $1.5 billion acquisi on of Ruckus Wireless for enterprise networking, and Verizon’s recent $2.4 billion acquisi on of Fleetma cs in the telema cs space that builds upon its recent acquisi ons of Telogis and Hughes Telema cs.
THA’s Take on Funding and M&A Ac vity in IoT The IoT market is becoming pervasive in our lives and thus we expect very solid funding and M&A ac vity in the sector. Given the size of the market, we expect tech giants to be the most acquisi ve, including Cisco, IBM, Verizon, Nokia, Microso , Google, Amazon and many others. We also expect to see robust funding trends to con nue. While we are excited in specific ver cal markets such as Supply Chain & Logis cs, Connected Home/Car/ Building, and Health & Wellness, we are most excited by horizontal and value-add connec vity pla orms, highlighted by the recent acquisi on of Jasper Wireless by Cisco Systems.
6 Quarterly Newsletter
Merger & Acquisi on Transac ons
Date Acquirer Target Target Description EV ($M) EV/Rev Announced 10/4/16 Continental AG Zonar Systems Provides fleet management systems and SaaS for the pupil transportation, commercial and vocational trucking NA NA sectors. 10/4/16 BSM Technologies Mobi Provides GPS-based fleet management and route optimization SaaS, and related SCM, logistics and analytics $8.0 NA SaaS for businesses. 10/3/16 Silicon Labs Micrium Provides embedded, IoT real-time operating systems primarily for the aerospace, industrial and medical device NA NA industries. 9/28/16 SAP PLAT.ONE Provides cloud-based and on-premise IoT and M2M provisioning software for businesses. Software enables the NA NA creation, deployment and management of IoT applications, devices and smart city infrastructure. 9/12/16 Verizon Sensity Systems Provides sensing systems that are embedded with LED lighting structures to enable the physical monitoring and NA NA security of various locations. Also provides related management SaaS. 9/7/16 Fleetmatics Inosat Consultoria Provides GPS-based fleet management SaaS for the construction, insurance, oil and gas, transport, waste NA NA Informatica collection, emergency services sectors in Portugal, Spain and South America. 8/16/16 BullGuard Limited Dojo-Labs Provides mobile IoT security devices and related management software to enable consumers to monitor the NA NA security of connected devices within their homes. 8/4/16 Sierra Wireless GenX Mobile Manufactures and sells in-vehicle wireless communications and tracking systems for transportation and fleet- $6.0 NA management companies in North America and Europe. 8/1/16 Verizon Fleetmatics Provides GPS-based vehicle tracking and mobile workforce management SaaS for service-based businesses and $2,237.0 7.5x the construction industry globally. 7/7/16 Acuity Brands DGLogik Provides enterprise IoT application development software that enables and visualization, connectivity, NA NA management and monitoring of M2M devices, facilities, industrial and building automation systems. 7/6/16 Costain Group Simulation Systems Provides real-time remote highway traffic control, monitoring and management systems. $22.6 NA
7/5/16 Caterpillar M2M Data Corp. Provides sensor-based machine-to-machine (M2M) remote monitoring systems and software-as-a-service (SaaS) NA NA that enables equipment monitoring, machinery analysis and real-time remote asset management. 6/23/16 Alarm.com Icontrol Networks Inc. Provides smart home automation, remote control and security monitoring systems. Systems are Wi-Fi-enabled for $140.0 NA (Connect and Piper BUs) homeowners and SMBs. 6/23/16 Comcast Icontrol Networks Provides smart home automation control and remote monitoring software, that enables smart home touch-screen NA NA (Converge software BU) panel controls and manages security, camera and thermostat sensors. 6/21/16 Verizon Telogis Provides enterprise GPS-based fleet tracking, dispatch management, driver monitoring, mobile workforce $900.0 6.9x management, route mapping and mobile navigation software-as-a-service (SaaS). 6/16/16 ABRY Partners MSI Holding Provides security application M2M communications systems that automate the secure network access, control and NA NA remote monitoring and management of sensors, alarms and other M2M connected devices. 6/14/16 Cyan Holdings Connode Provides smart metering and related wireless communications mesh networks for energy and other utilities $9.7 2.8x providers globally. 5/3/16 Microsoft Solair Provides IoT platform-as-a-service (PaaS) to enable enterprises to develop Web-based applications for M2M NA NA connectivity, data gateway, edge computing and remote M2M monitoring and analytics. 4/26/16 Nokia Withings Provides wearable health and activity trackers, connected weighing scales, thermometers, blood pressure $190.7 NA monitors, home security and baby monitors for consumers globally. 4/21/16 Cryptosoft DeviceAuthority Provides IoT device-based identity and access management (IAM) and machine-to-machine (M2M) multi-factor NA NA authentication software for businesses, device and gateway manufacturers and IoT service platforms.
7 Quarterly Newsletter Merger & Acquisi on Transac ons
Date Acquirer Target Target Description EV ($M) EV/Rev Announced 4/21/16 Current [General Daintree Networks Provides enterprise smart energy efficiency systems, including wireless thermostats that enable automatic NA NA Electric] temperature control as well as Internet of Things (IoT) enabled HVAC building control sensors. 4/11/16 Telit Communications Novatel Wireless The cellular module product lines, related IP and related assets of Novatel Wireless, which manufactures and $11.0 NA provides wireless M2M hardware, PCIs and embedded modules and related M2M software and SaaS. 3/9/16 KORE Wireless Wyless Provides M2M connectivity and network and device management software for wireless telecommunications service $190.0 3.2x providers, device manufacturers and businesses globally. 2/11/16 Weber-Stephen iDevices (iGrill product The iGrill product line from iDevices, which provides a connected home grilling thermometer and related iOS NA NA Products line) mobile remote monitoring and control application for consumers. 2/3/16 Cisco Jasper Technologies Provides IoT service lifecycle management SaaS to enable the launch, management, and monetization of IoT $1,400.0 11.7x services for businesses globally. 2/1/16 CalAmp LoJack Provides on-board GPS vehicle tracking, recovery and telematic systems for consumers and businesses, enabling $134.0 1.0x the recovery of stolen assets 12/23/16 PTC Kepware Provides communication drivers connectivity software for use in industrial automation applications in the $100.0 5.0x manufacturing, oil and gas, building automation, and power and utilities sectors globally. 12/23/15 Truphone CoSwitched (IoT Provides IoT connectivity management SaaS for telecoms, mobile virtual network operators (MVNO), IT services NA NA Connectivity Platform) and M2M businesses. 12/18/16 Laird Novero Manufactures and provides mobile in-car connectivity, vehicle communication and mobile device integration NA NA systems, as well as related car monitoring, tracking and sensing software, for car manufacturers. 11/23/15 Silicon Labs Telegesis Provides wireless ZigBee modules, communications gateways and firmware that enable smart metering, smart $20.0 NA energy, home automation and Internet-of-Things (IoT) applications, for computer and electronics manufacturers. 11/16/15 Advantech B+B SmartWorx Designs, manufactures and supports networking and connectivity equipment and embedded software targeting $99.9 NA mission-critical industrial applications in the M2M/IoT markets. 10/26/15 Cisco ParStream Offers a big-data analytics platform that includes a specialized database designed to handle large volumes of real- NA NA time queries. Positioned to analyze data produced by the Internet of Things. 11/16/15 Flextronics Wink Provides a wireless smart home systems touch-screen controller and related M2M mobile application that $15.0 NA programs, synchronizes and automates multiple third-party smart home devices. 11/11/15 Sigma Designs Bretelon Provides mobile Internet-of-things (IoT) application-specific integrated circuit (ASIC) systems design and $22.0 NA engineering services, as well as mobile IoT SaaS application development services. 11/9/15 Aclara Technologies GE (Grid Solutions' Manufactures and provides electricity smart metering systems and related energy grid satellite machine-to- NA NA electricity meters assets) machine (M2M) communications infrastructure for electric utilities providers. 10/29/15 Delphi Automotive Control-Tec Provides automotive M2M-enabled data mining, big data analytics SaaS and mobile apps that aggregate data from NA NA on-board sensors to enable vehicle product development, testing, engineering and fleet management. 10/8/15 Thermo King Celtrak Provides wireless GPS fleet tracking systems, as well as fleet routing, management and driver logging SaaS and NA NA for businesses in the shipping and transportation sector globally. 10/6/15 Digi International bluenica Provides remote temperature monitoring SaaS, mobile apps and wireless sensors to track the temperature of NA NA perishable foods during shipping, in cold storage and in stores, for grocery stores, restaurants, and shippers. 10/6/15 ORBCOMM WAM Technologies Provides refrigerated container wireless asset tracking, location management, control and temperature monitoring NA NA SaaS, software and GPS-based asset tracking hardware, for rail, shipping and trucking. 9/17/15 Alcatel-Lucent Mformation Software Provides mobile device management (MDM) and M2M software to enable carriers and network operators to NA NA manage and provision mobile and IoT-connected devices. Mean 5.4x Median 5.0x 8 Quarterly Newsletter Select IoT Transac ons by TeleHill Professionals
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9 Quarterly Newsletter Addi onal Tech Transac on Successes By THA Professionals
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10 Quarterly Newsletter Contact Us
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