The Earnout | 2019 in Review
Our curated list of the year’s most notable digital M&A deals.
In 2019, over a thousand digital M&A deals took place worldwide. Digital M&A — the acquisition of technology startups by established corporations in traditional industry sectors —is becoming a growing slice of global M&A activity. While today it still accounts for less than 2% of all M&A deals globally, its share of technology and software startup acquisitions is close to 20%.
With the mega-trends of digitization, connectivity and convergence taking hold of all industries, digital M&A activity will likely continue to accelerate in 2020. As we step into the new decade, let’s take a look at some of the most notable deals from the past year.
ForeFlight acquired by Boeing
In March 2019, Boeing acquired Houston-based electronic flight data app developer ForeFlight. ForeFlight started in 2007 as an iOS-based weather planning app for general aviation, but rapidly expanded into subscription-based digital flight planning and documentation. For the last three years, ForeFlight has partnered with Jeppesen, a Boeing company with a large catalog of digital airport and route chart data, to integrate them into the ForeFlight app.
Why it matters
Boeing and its competitors are expanding their portfolios to tap into the aviation-related digital services market, a fast growing global market that some estimate at $250 billion a year.
2GetThere acquired by ZF Friedrichshafen
ZF Friedrichshafen AG, one of Europe’s largest automotive parts and systems suppliers with nearly 40 billion EUR in worldwide sales, announced in March 2019 that it had acquired a majority stake of Utrecht-based automated vehicle maker 2GetThere. Founded in 1984 and a relatively mature business, compared to most acquisition targets in digital M&A transactions, 2GetThere has offices in San Francisco, Dubai and Singapore. It delivers complete systems and autonomous vehicles targeting transportation solutions for airports, theme parks and urban people movement.
Why it matters
ZF Group announced in 2018 its Next Generation Mobility strategy and its intention to become a global player in the emerging autonomous and electrified mobility future. Global automotive suppliers are edging their bets in a dynamic and rapidly evolving market alongside automakers.
Dynamic Yield acquired by McDonald’s
Fast-food giant McDonald’s purchased New York-based, Israel-founded AI platform Dynamic Yield in March of 2019, for a total of $300 million. Dynamic Yield uses machine learning and automation to create personalized experiences for customers in a wide range of businesses, from internet-based to physical locations. Founded in 2011, Dynamic Yield started out focused on online retail recommendations and personalization technology, essentially building an Amazon-like layer of consumer intelligence software to improve online sales. QSR and fast casual are low-margin, high-throughput operations, where personalization and prediction can bring obvious operational gains. If Dynamic Yield can help restaurants know in advance what a customer is likely to order and when, that can be worked back into the restaurant inventory management and, ultimately, the supply chain.
Why it matters
With Dynamic Yield, McDonald’s brings in a team that has spent the best part of a decade developing AI software applied to commerce. If the future battles for consumers’ wallet will be fought and won over data, convenience and customer insights, then it makes strategic sense for a company like McDonald’s to build out its digital capabilities through acquisitions.
DariX acquired by Bullard
Kentucky-based Bullard, a leading manufacturer of protective equipment for the industrial, fire service and law enforcement markets, acquired DariX last April. DariX is a university spin-off born out of research conducted at the EPFL School of Computer and Communication Sciences in Lausanne, Switzerland. Darix focuses on developing smart-glass augmented reality technology for industrial, commercial and emergency responder safety applications, joining a number of startups introducing AR technology in a whole range of industrial, safety, handling, training and logistics applications, developing solutions that represents a potentially disruptive force in markets where traditional industrial incumbent have enjoyed long-standing leadership.
Why it matters
Bullard had no history of digital M&A before DariX. The investment signals that AR technology has real, industry-relevant applications in the safety market and in industrial applications in general.
LeanHeat acquired by Danfoss A/S
LeanHeat, a Finnish startup developing AI-based control, monitoring and efficiency solutions for building heating sold almost half of its ownership stakes to Danfoss in 2016. To date, LeanHeat has been commercially deployed in Finland, Denmark, Sweden, Germany, Poland, Norway and China. In May 2019, Danfoss announced the acquisition of all remaining shares of LeanHeat. Denmark-based Danfoss is a diversified global manufacturer (nearly 30,000 employees) of equipment for cooling, refrigeration, heating, air conditioning, compression and power generation.
Why it matters
A wave of consolidations in the HVAC, cooling and heating equipment industry continues, now focused on acquiring new-generation digital and analytics capabilities for energy efficiency and remote monitoring applications.
EcoFactor acquired by Trane
In June 2019, Irish manufacturing company Trane took a step toward the future with their acquisition of Silicon Valley-based AI-analytics platform EcoFactor. Founded in 1913, Trane was acquired by Ingersoll Rand, a $15 billion global industrial manufacturing conglomerate based in Ireland, in an industry-shaking deal. Known well for its HVAC systems for both residential and commercial applications, Trane represents the main pillar of IR’s climate segment, which accounts for three-quarters of IR’s revenue. EcoFactor’s AI-analytics platform is programmed into home thermostats, providing its users with proactive energy efficiency, optimized demand response, and HVAC performance monitoring. In EcoFactor, Trane saw a synergistic opportunity to add unique analytics capabilities to its Nexia digital platform.
Why it matters
HVAC systems, equipment and controllers are becoming data sources for AI analytics platforms. The transition to high-margin, service-oriented and digital-enabled business models is an attractive proposition for traditional industrial companies.
Celect acquired by Nike
Last August, Nike, the Portland-based global sports apparel and footwear brand, announced it had acquired Celect, a cloud-based demand prediction platform, focused on retailer inventory optimization. Founded in 2013 by researchers at MIT, Boston-based Celect raised $30 million in several rounds of venture capital financing, amid growing interest in the potential of its AI to reduce working capital costs and optimize inventory portfolios across a trillion-dollar global retail industry.
Why it matters
Leading brands like Nike are investing in data science and digital solutions to bolster their direct-to-consumer channels and build out their analytics capabilities to more intimately understand end customers.
Kurbo Health acquired by Weight Watchers International
Health and wellness company Weight Watchers purchased Californian mobile health app Kurbo for $3 million in August, 2019. Weight Watchers’ ability to adapt to changing consumer habits, new technology, and the media landscape has kept the almost 60-year-old company relevant throughout cultural and demographic shifts. In 2017, Weight Watchers hired former HSN’s CEO Mindy Grossman as its new CEO to reposition the company and transform it into a multi-platform wellness-focused commerce and entertainment brand. Started in 2013 and based in Silicon Valley, Kurbo Health is a mobile weight loss solution with an original target audience of children, now expanded to children, teens, and families. The app offers unique and personalized ways to teach kids and young adults how to eat healthy and stay active.
Why it matters
Fitness, health and wellness are becoming digital, personalized and mobile at an accelerated pace. Weight Watchers did not have a significant M&A history until 2014 when it began to seek acquisitions to enhance its digital offering. Digital M&A helps incumbents tap into new demographics and consumer habits.
Presenso acquired by SKF Group
In October 2019, Israeli predictive analytics software company Presenso was acquired by SKF Group, a global bearing and seal manufacturer based in Gothenburg, for an estimated $30 to $40 million. SKF operates globally, with revenues of nearly 80 billion SEK (8.3 billion USD) and household-name customers like Tesla, Volvo and Volkswagen, as well as industrial customers in aerospace, transportation, automotive, construction, wind power and equipment manufacturing. Based in Haifa, Israel, and founded in 2014, Presenso developed predictive analytics software to analyze streaming performance and vibration data from motors and rotating machines to predict failures before they occur.
Why it matters
The predictive maintenance field is crowded with startups taking different approaches to the problem. Industrial vendors’ appetite for Industry 4.0 technologies and the inevitable maturation of the underlying technologies mean that consolidation in the space should be expected.
Vivify Health acquired by UnitedHealthcare
In October 2019, Minnetonka-based insurance giant UnitedHealthcare, and the the world’s largest health care company by revenue, announced that Optum, its Information and technology-enabled health services subsidiary, had acquired patient-monitoring start-up Vivify Health. Founded in 2009 and based in Plano, Texas, Vivify Health is a leading operator of connected and remote care services. Vivify’s mobile, cloud-based platform delivers personalized care plans, remote monitoring, workflow management and remote care applications. Created in 2011, Optum is the the pharmacy benefit manager and care services brand of UnitedHealthcare and accounts for nearly half of the company’s revenues.
Why it matters:
The global market for remote patient monitoring services is growing faster than the healthcare industry as a whole and could reach more than $30 billion by 2023.
Race Roster acquired by Asics
In November 2019, Japanese sports apparel company Asics acquired running event marketing platform Race Roster for $28 million. Located in both London Ontario, Canada, and Florida, Race Roster provides sports event organizers with digital event management tools, like ticketing, merchandise sales, fundraising, payments, timing tools, CRM and analytics. Asics will integrate Race Roster in Asics Digital, the digital platform it created following its $85 million acquisition of Runkeeper in 2016, extending its reach from personal sport performance tracking to running event organization and, with it, the range of data it aggregates.
Why it matters
Sports apparel and footwear companies are investing aggressively in digital M&A, e.g. Runtastic by Adidas and MyFitnessPal by Under Armour. As Runkeeper’s CEO Jason Jacobs said: “The fitness brands of the future will not just make physical products, but will be embedded in the consumer journey.”
Sculpteo acquired by BASF
German specialty chemical and materials giant BASF announced, in late November 2019, that it had acquired French cloud-based 3D printing platform, and long-time business partner, Sculpteo. Founded in Paris in 2009, Sculpteo offers an online 3D printing service, using rapid prototyping and a manufacturing process that provides access to a number of materials and finishes, in addition to optimization tools and workflow software. BASF is the largest chemical producer in the world. In 2001, BASF created BASF New Business, a wholly-owned subsidiary focused on research, development, and investment in new materials, technologies, and system solutions. The company’s additive manufacturing business unit and new home of Sculpteo’s team, BASF 3D Printing Solutions, was spun off from BASF New Business in 2011.
Why it matters
Additive manufacturing technologies have reached a level of maturity and a spectrum of applications that warrant the creation of full-lifecycle solution offerings. Forward AM, BASF’s new additive manufacturing brand, aims to do just that.
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