by
Jim Pinto
After a few lean years, most of the
major automation companies have generated respectable growth and profits for several
quarters. You know the expression, "A rising tide floats all boats".
As I've predicted previously, this
signals a period of new mergers and acquisitions; the weak players are vulnerable
to buyout, and the strong are looking for customer-base expansion plus consolidation
of talent and resources.
The strong mid-size players, especially
publicly-held companies, are subject to attractive buyout offers. The recent MTL
acquisition by Cooper Industries is a primary example. Cooper, already $6B, is growing
aggressively through good strategic acquisitions.
The top-10 include Siemens, ABB, Honeywell,
Schneider, Rockwell, Emerson, GE, Yokogawa, Omron, Invensys. Expect this top tier
to be reshuffled soon. So, who will buy whom?
Rule out the Japanese - they are not
acquirable and don't know how to make large acquisitions. There's still some talk
about Siemens buying Honeywell (Process Solutions), but that's unlikely. Emerson
(Process Management) is well managed and more likely to acquire than be acquired
(Foxboro?). The Europeans - Siemens, ABB and Schneider - are indeed looking and
have the wherewithal to buy, though they may simply settle for small fry.
My recent (15 May, 2008) InTech Pinto's
Points discussed growth obstacles for larger companies, at the Phase-5 tier (weblink
below). The two majors remaining in this category are Rockwell and Invensys.
At $5B annual revenue, Rockwell Automation
made questionable UK acquisitions in an effort to grow, but itself is an acquisition
target. ABB has a lot of process systems (via Bailey, Kent Taylor and others) but
not much of the PLC-base that Rockwell brings.
In the May 08 issue of his insightful
UK "Automation Insider", Andrew Bond discussed the intended Rockwell push into Process
Systems via their recent acquisitions - ProsCon, ICS Triplex and Pavilion Tech.
- plus the continuing alliance with Endress+Hauser.
Frankly, Rockwell is flailing; they
simply don't have the depth of understanding of the Process business. "Long time
veteran" Richard Sturt, who is in charge of the Process initiatives, doesn't have
the management clout to achieve any real success. This appears to me to be one of
many Rockwell "toes in the water". The only way they can succeed in the Process
market is through a BIG acquisition. But they are more likely to be acquired.
From the continuing moans and groans
on the Rockwell weblog, especially from the UK (link below) Rockwell still seems
to be somewhat shaky. How much longer can they flail?
At about £2B ($4B) Invensys has recovered
somewhat, but can't hope to get much beyond barely eking out marginal profits to
meet cash-flow demands. Even as they finished the fiscal third quarter with net
cash for the first time in history, Invensys reported only 5% year-over-year sales
growth, lagging the other majors.
Invensys stock is still languishing
at about 318p; market-cap is about $4B. Invensys Process Systems (IPS) is precarious,
and there are those who suggest that Foxboro's instrumentation side is for sale.
Rail Systems is unrelated, and is available if anyone is interested. The crown jewels,
Wonderware and Archestra, are bait for the right whale.
Invensys is dangling in the wind.
GE has GE-Fanuc but no DCS - so that's a possibility. Emerson? No. Schneider, or
Siemens? Maybe. There may be other surprises. Stay tuned.
Cheers,
Jim Pinto
jim@jimpinto.com
San Diego, CA. USA
