Cleantech Market Intelligence
With Invensys Deal, Schneider Surfs the Industrial Automation Wave
After a high-profile initial announcement in mid-July (and following a few weeks of speculation about counter-offers and a bidding war that never materialized), Schneider Electric, the French power systems and automation giant, agreed to buy Invensys, the United Kingdom-based engineering company, for £3.4 billion ($5.2 billion). On August 2, Invensys accepted the offer, making it Schneider Electric’s largest acquisition since its 2006 purchase of American Power Conversion for $6.1 billion.
The agreement will add Invensys’ software and control systems to Schneider Electric’s arsenal, bolstering one of its highest-profit businesses and placing it on more equal footing with other industrial automation giants such as Siemens and Mitsubishi. Schneider Electric has been expanding its focus from sales of industrial automation products to broader solutions that consist of hardware, software, and recurring services. Invensys, which provides engineering services to integrate processes for large industrial sites, will complement Schneider Electric’s product offerings. Schneider says the acquisition will also create €140 million in cost reductions and generate an additional €400 million in revenues by 2018.
This move also marks a notable end to the British tenure of Invensys, one of the largest tech and engineering companies in the United Kingdom, though that may be more a symbolic fact than reality. As Sir Nigel Rudd, chairman of Invensys, pointed out in the Financial Times, “Basically this is an American company – 95% of sales are outside the U.K. … this is not a U.K. company.”
The driving force behind the acquisition, however, is the expectation that demand for smarter industrial automation and energy management systems will grow in the long term, particularly in Asia Pacific. As Navigant Research concluded in our report, Industrial Energy Management Systems, the global market for industrial energy management systems will reach $11.3 billion in 2013 and grow to $22.5 billion by 2020 at a combined annual growth rate (CAGR) of 10.3%. The market in the Asia Pacific region will grow even faster, at a CAGR of 13.4%. Adding Invensys’ deep expertise in industrial automation should enable Schneider Electric to take advantage of this growing market.