Siemens announced today that it is acquiring eMeter. The purchase price is not being disclosed and, since eMeter is privately held, both parties expect to complete the transaction within the month. Is this a good move for the companies?
You could say that the due diligence for this deal has been ongoing for the past three years. Siemens and eMeter have been strategic partners since 2008, so both know each other well and will have been collaborating under mutual non-disclosure agreements. As an advanced metering infrastructure (AMI) systems integrator, Siemens knows all the AMI and meter data management (MDM) players well. As a strategic partner, Siemens most likely has a good understanding of eMeter’s internal workings.
In July 2011, Siemens sold its enterprise IT operations to IT services provider Atos. This transaction increased the size of Atos (which dropped “Origin” from its name) by about 50%. Atos also took over Siemens’ own in-house enterprise IT business. The transaction was part of Siemens’ effort to focus on its core capabilities while outsourcing non-core activities such as enterprise IT.
Combining these three data points suggests a pretty straightforward rationale for the eMeter acquisition:
- Siemens is focusing on its core capabilities.
- Siemens has significant AMI systems integration business.
- Siemens is now acquiring an MDM vendor.
Could Siemens next acquire an AMI vendor? Perhaps. But selling AMI is quite a bit different from selling MDM. AMI deals are capital intensive, with thousands or millions of smart meter endpoints and a complex communications infrastructure. If home energy management is included, the proposal becomes dizzyingly more complex. MDM is a more traditional software and services play, with typical enterprise components necessary to extract and store data from head-end systems, but very few endpoints to manage. So while Siemens could make a next move directly into AMI, this would require quite a bit more consideration, and would most likely entail acquisition of a publicly traded corporation. So that next move, if it comes, may not happen as quickly.
This looks like a good deal for both parties. For Siemens the deal collapses part of their smart metering supply chain, so that they no longer have to pay eMeter’s margins to install the MDM software. In the Pike Pulse Report: Meter Data Management, we wrote that “eMeter has done the best job of any MDM vendor in terms of developing alliances with other key players in the market. It leads in MDM innovation with features like cloud-based MDM (with Verizon) and an MDM appliance (with IBM).” We ranked eMeter solidly in our “Leaders” category. Now Siemens has taken over that leadership position. It is not necessary that this acquisition should affect either of those alliances with Verizon or IBM.
For eMeter the benefits are significant. In the same report we also wrote, “Perhaps the only noticeable area for improvement for eMeter would be a stronger global presence… Although eMeter will clearly be at a disadvantage to large publicly traded companies when discussing staying power, that should not negatively impact its ability to win new business.” eMeter has just solved both those problems with a single transaction, and gained access to significant financial and sales resources in the process.