A possible acquisition of Invensys Operations Management (IOM), for a proposed $5.0 billion by the French company Schneider Electric, has led to speculation of a potential bidding war for the U.K. engineering company.
“IOM long has been viewed as a potential takeover target, with Emerson calling off initial talks regarding an acquisition in the first half of 2012,” said Alex West, associate director, process, machinery & instrumentation for information and analytics provider IHS Inc. (NYSE: IHS). “However, other industrial automation giants, including European firms ABB and Siemens as well as the U.S.-based General Electric, also have all reportedly made preliminary contact previously. With its offer, Schneider Electric has taken control of what could break out into a full-scale bidding war for IOM.”
While IOM has a presence in the energy controls and appliance market, and is a leading industrial software supplier, more than half of its business is from its Industrial Automation business segment. This includes measurement and instrumentation products, but primarily consists of control products, including distributed control systems (DCS) and process safety systems. In particular, the company has established a long-standing presence in the growing power, oil, gas and refining sectors.
In addition to being the leading supplier of process safety systems, Invensys accounted for 6.5 percent of the global DCS market in 2012, which was estimated at $16.8 billion, according to IHS. If successful, this acquisition would catapult Schneider Electric into the sixth spot in the DCS market and—more importantly—would enhance the company’s opportunities in selling its automation goods, including distribution products, into the rapidly growing oil and gas and the refining and petrochemical industries.
Two of the other candidates considering a bid for Invensys—ABB and Siemens—are also leading suppliers to the DCS market. These companies occupy the top two spots in the industry and account for more than 30 percent of global market revenue. Both firms would also be keen to inherit IOM’s customer base in the upstream and downstream markets.
The final contender for IOM, General Electric, is a leading industrial automation equipment supplier. And while General Electric is comparatively small in the process control market, an acquisition by GE would certainly add to its capability to address the process automation market.