Are automation acquisitions in the air? Consider this – the majors are all flush with cash; is there low-hanging fruit ripe and ready to pluck? After the GE débâcle a decade ago, Honeywell Process Solutions is again in play. Just a month ago, a good source reported that Siemens was again interested. The division head has never reported directly to the CEO and the heads keep switching every couple of years. The most recent chief, Norm Gilsdorf, has now been shunted off to a new position as president of Russia, Central Asia & the Middle East. He was replaced by someone from Metrologic Instruments which was acquired recently. Want to read between the lines?
Invensys has been in a holding pattern since CFO Wayne Edmunds took over after CEO Ulf Hendrickkson was fired. Edmunds let the two primary Divisions (Rail and Process Automation) float, and ignored the third (Building Controls). He immediately got busy trying to offload the company’s albatross pension fund; the cost has jumped to estimates of £1.7B, though analysts do not see this as too much of a poison pill. Sunday Times recently reported that four companies – Siemens, ABB, Emerson and General Electric – have approached Invensys through bankers, either to acquire outright, or breakup. Afterwards Wayne Edmunds dismissed the speculations – clearly he had been approached but could not talk about it.
The other company that is ripe for takeover is Rockwell Automation, still reporting to the clique under CEO Keith Nosbusch. While Rockwell is doing fairly well, my hunch is based on the observation that the company really has nowhere to go – too big to be small, and too small to really compete against the likes of Siemens and ABB.
So, who will buy? Siemens is the largest automation company in the world, with a big war-chest ready for acquisitions. They are the leading possibility and will likely pull the others into joining the bidding.
ABB has earmarked $9-18 billion for acquisitions over the next five years. CEO Joe Hogan says they are still looking to fill blank spots in automation. While he did not name any targets, he flatly ruled out rumours about bidding for Rockwell. One wonders why he was specific.
France-based Schneider Electric keeps making investments in building management, software and smart grid technology – their APC and Square-D dominate power electronics in that arena, and they have been buying worldwide. Is Schneider interested in joining the bidding for Honeywell, Invensys or Rockwell?
Meanwhile, Emerson is divesting $2 billion to $3 billion of under-performing assets. CEO David Farr says they expect to spend $5-6 B on acquisitions in the next 3-5 years, especially in industrial automation and process management. Their Delta V is doing well; they will acquire primarily to expand their customer base and divest unwanted pieces.
Stay tuned for some lively action before the end of this year.
Personal growth and success in automation
The Automation business grows slowly and is dominated by just a handful of large, global corporations with structured management. So, how does an ambitious individual get paid in this stolid environment?
At senior levels, salaries are respectable, though raises are few and far between. The promotions process is mostly bureaucratic; few can really advance by more than a few levels. Bonuses are awarded mostly to high-level managers, but rarely amount to more than about 5%, perhaps up to 20% in good times.
Some companies award stock options, primarily for senior managers. These can generate value only if the company is growing fast and profitably. The values of most automation companies have declined in the past decade, so options are not worth anything.
The usual path to personal advancement is to switch jobs – moving to higher management levels and perhaps finally achieving a VP-level position. But, beyond the titles and salary increments, it is seldom worth the effort.
The usual growth strategy at established automation companies is to acquire smaller companies that have generated some success, which adds complementary product lines and provides resources for more growth. So, if you want to be on the fast track, my advice is to take the entrepreneurial approach – start your own company, or become part of a founding group with significant equity participation.
The primary aim is to find growing customer needs and satisfy them profitably. With a little bit of luck and a lot of hard work, the company will be acquired and the founders will become millionaires. No big company can match that.
In the automation business, the best path to personal growth and success is to break out of the box and be your own boss. Hey, if you fail, you can always retire to the safety of a cubicle in a large corporation.
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.
© Technews Publishing (Pty) Ltd | All Rights Reserved
printer friendly version