M&As: What's Right for You?
Peggy Smedley, Editorial Director
The M&A (merger and acquisition) dealmakers have been pretty busy in the M2M arena. And it looks like what we’ve seen so far is only the tip of the proverbial iceberg. Since we started tracking M&As 10 years ago, we’ve recorded a total of 202.
Since 2003, the landscape has evolved quite a bit. Despite a few hiccups, the market for M2M dealmakers is still very ripe for the picking. But for your company, trying to set up an M2M solution can mean a bumpy road, as vendors play a dangerous game of cat and mouse. Here’s a fact no one can dispute: M&As narrow the value chain of suppliers, which makes for some slim pickings within the M2M ecosystem.
Clearly things are heating up in the connected-devices arena. Competition is increasing. Now, there is a plethora of both good and bad vendors playing in this vast M2M ecosystem. But the question you need to ask yourself is whether you want to get caught up in all the noise as the buyers wax lyrically about merging multiple companies. The real question for you is whether your partner company is continuing to grow its business inorganically through a merger or an acquisition.
There are organizations that are very good at merging companies into the fold, and have mastered the art of a takeover. The past decade was a very good time for dealmakers that followed a repeatable model. We saw this extensively in the construction space. This can prove very successful if a company gains access to new markets, fresh ideas, and increased innovation.
However, being a masterful buyer of firms and translating that into shareholder profits doesn’t necessarily equate to a great M2M ecosystem partner. While some vendors contend a one-stop shop has it merits, rarely does it prove ideal for what needs to be achieved in a connected world when youtake into account all the moving parts and players.
In a fast-growing market some vendors talk a big game, but when you play their game they change the rules. In case after case, we see these vendors getting bigger and bigger, more controlling, less flexible, more threatening, and certainly, more costly. In the end, bigger isn’t always better. The value chain in an M2M ecosystem is key to making a strong M2M solution. This month’s cover story will help you garner a better appreciation of how the M2M ecosystem has played an essential role in the market sector growth. What’s more, you will also see how M2M will continue to play a critical role in the multimillion, if not billion dollar, data market during the next 12-18 months.
But let’s put some context to all this activity. The largest number of M&As occurred in 2006 (32), with the lowest being in 2010 (only nine). In 2011, there was renewed M&A activity with 24. I’m certain you are wondering what influenced the 2011 revival that is most likely sparking the surge in M&As now and into the future? Many attribute the boost as a sign that vendors see improvement in the economy; vendors are looking to burn up their extra cash, and even larger firms continue to see the potential in M2M.
So what’s my advice? Don’t sign a long-term contract with any vendor. Read all the details of a contract. It’s no wonder there’s a lot of fine print. Don’t believe anyone when they tell you it’s coming. Whatever it is, if it’s critical to your business you want to know when, and in writing, or if there is a penalty clause.
Deutsche Telekom covered its collective butt when it drafted a pretty masterful contract that required AT&T to put up money if the T-Mobile acquisition didn’t receive government approval. We all know how that turned out, and AT&T had to put up some pretty serious cash. Today T-Mobile has been using that money to help it compete in the market. The long and the short of this story is that T-Mobile still has a long way to go in M2M, but the U.S.-based carrier is still surviving, and much of it has to do with long-standing partners and a revitalized cash flow that it might not have had otherwise.
M&As have come in waves. Innovation, market changes, government policy, economic uncertainty, and consolidation will influence the ride. I realize it’s a broad swath when I say caveat emptor (buyer beware). But the next 12-24 months are going to be rocky, if history has anything to say about it. So get ready for the most interesting rollercoaster ride yet.