Over the past several years I have predicted, and despite the naysayers continued to predict, that Invensys would be sold off sooner or later. Now it is happening, here is a brief sequence of events.
UK-based Siebe and BTR merged to form Invensys. CEO Allen Yurko, who orchestrated the ill-fated combination, put the company into a tail-spin and was booted out. The next CEO, Rick Haythornthwaite, was clueless and fizzled, handing over to ‘hired-gun’ Ulf Henricksson.
Ulf caused chaos in the process automation group by hiring an ex-EDC manager, who foolishly transferred the HQ of crown-jewel Foxboro to Dallas, and was then fired with no explanation. This resulted in Ulf himself leaving not long after. Invensys shares fell to rock bottom at 215p – the company was worth £1.7 B.
The débâcle of several unstable management transitions brought a new board of directors, with Sir Nigel Rudd as chairman and financial director, Wayne Edmunds, as CEO. Clearly Invensys was being financially tailored for sale.
I predicted that Invensys could not survive independently and would inevitably be sold off sooner or later. But a succession of new managers soldiered on bravely. The shuffling continued, with the financially oriented CEO focused on minimising the impact of the under-funded pension plan and selling off pieces unrelated to the core industrial controls business.
The rail division was sold off to Siemens last year for £1.74bn, more than the total value of all of Invensys. This allowed the sorting out of the pension deficit and the return of 77p per share to shareholders, finally getting the market to revalue the business.
This left the crown-jewels, Foxboro and Wonderware, as acquisition bait with the increased value of the grossly depressed stock. C’mon now, clearly the end result was inevitable.
In mid July Invensys ‘breaks’ the news that Schneider Electric made an offer of £3.3, ($5); under UK takeover rules they have a deadline of 10 August to confirm or walk away.
Invensys solicited Schneider, whose response to the news implied that they did not appreciate the premature announcement. Clearly, the Invensys board was trying to provoke a bidding war with the other possible contenders: Emerson, Siemens, ABB, and GE. The bidding is unlikely to start until just before or after Schneider makes its formal offer.
It is doubtful that Schneider wants most of the company. Gary Mintchell, now running his own, independent new business blog, TheManufacturingConnection.com, commented: “Schneider’s record of integrating acquired companies is less than stellar. It buried Citect. What would it do with Wonderware? Its release said the company wanted a foothold in the industrial market, but Schneider does not promote automation, it promotes energy. Will that change?”
Emerson may enter the bidding. CEO David Farr did say last year that they considered buying Invensys on and off for 15 years and would continue to look at its process automation business. Emerson does not want software; they want Foxboro’s customer list – and one less competitor. They will wait for the announcement of Schneider’s offer before deciding whether or not to counter. It could sell off the appliance unit to Schneider, which would help pay for the acquisition; this is probably the better option for the Invensys employees.
GE, now focused on its long-term objective, the industrial Internet, quickly declined. Others are waiting and watching.
The question remains: If Invensys is sold, who wins? Shareholders, buyers and investment bankers, maybe, but what about employees and customers?
Automation technology futures
Digital technology continues to permeate the world at large and several growth inflection points are brewing in the new digital automation world.
Over the past decade, we have been discussing the concept of Internet connected machines that collect data and communicate, often called IoT or machine-to-machine. Now several leading companies have identified this as a strategic market with enormous potential. GE calls this the industrial Internet, emphasising focus on industrial applications.
McKinsey Global Institute ranks IoT as ‘one of the most disruptive technologies to 2025.’ It suggests that much of the growth will be at the expense of older technologies, with entire industries falling into obsolescence.
Since the 1970s, automation technology has had only incremental developments around core technologies like PLCs, DCS and scada. A lot of hardware is slipping into commodity status and most of the automation majors are moving to services to keep growing – it is more like survival.
McKinsey cautions that by the time these disruptive technologies are exerting their influence on the economy in 2025, it will be too late for businesses to plan their responses. Nobody can afford to be last.
For almost two decades, PLC inventor Dick Morley and I have been preaching peer-to-peer control systems – suggesting that major new benefits would emerge through distributed architectures. Vastly improved performance can be achieved at a fraction of the cost. The huge investments in the industrial Internet back this point of view.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant towards technology trends.
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