Invensys acquisition: rumours abound

16 July 2013

There are rumours circulating of a possible bidding war for the acquisition of Invensys Operations Management (IOM), following the announcement of a bid of around $5 billion from Schneider Electric. The company has until 8th August to say whether it intends to make a firm offer or walk away, under UK rules.

Although Emerson is believed to have called off talks, which allegedly began early in 2012, other automation companies such as ABB, Siemens and GE are also reported to have been showing an interest.

Schneider’s interest, for example, was most likely aroused by the possibility of gaining a greater foothold in the global DCS market. Invensys accounted for 6.5% of this market in 2012 – an estimated $16.8 billion. If successful, the acquisition of IOM would put Schneider Electric into the sixth spot in the DCS market and -more importantly - would enhance its potential to sell its automation goods, including distribution products, into the rapidly growing oil and gas and the refining and petrochemical industries.

Commenting on a possible takeover of IPM by Schneider Electric, Frost & Sullivan industry manager, Konkana Khaund said: "The recent announcement of a possible takeover of Invensys by Schneider Electric could lead to some significant implication on competitive strategy maximization and diversification for Schneider Electric. The immediate industry focus is high on evaluating the outcome on the industrial business of Schneider Electric, which would be the prime beneficiary from such an acquisition, given Invensys’ core competencies in this area. But it is hard to ignore the imminent implications this could have on Schneider Electric’s buildings, residential and datacentre businesses.

“At present, over 50% of Schneider Electric’s current global revenue is accounted for by these businesses. A further boost to these capabilities would be inevitable, given Invensys’ strong position in energy monitoring, controls and software. The immediate impact would certainly result in Schneider Electric’s capitalisation on home and building energy management, a market estimated to be over $20 billion globally, and a significant aspect of Schneider Electric’s increasingly diversified corporate strategy. However, without doubt, the combined portfolio will eventually be optimised by Schneider Electric to strengthen its offering in the datacentre business, particularly software solutions geared towards infrastructure and building operation level supervision, control and monitoring.

“Finally, the company’s underlying interest in lighting and energy/temperature controls, an area that has been in focus through targeted acquisitions, but not fully maximised to its potential, could be a major winner. The market share line up of this segment that Schneider Electric has conspicuously remained out of, but one that is fiercely dominated by some of the company’s major competitors, could witness some healthy competitive reorganisation."

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