The Earnout | SKF Takes Predictive AI for a Spin
With Presenso, SKF acquires machine learning capabilities and industrial AI expertise.
“Together we will change the way industry looks at reliability and make AI an integrated part of production.” –Victoria Van Camp, SKF CTO
Traditional industrial manufacturing companies are rapidly joining the digital age in a race to dominate a future where digitally delivered services, AI and big data become defining differentiators to achieve higher productivity, efficiency and agility.
The promise of “zero downtime” in industrial production has been at the center of recent developments in predictive maintenance technology, built on top of a nascent IoT infrastructure ecosystem and breakthroughs in applied machine learning. Some storied industrial brands are choosing to use digital M&A as a way to acquire critical digital and software capabilities to fulfill that promise for their customers.
In October 2019, one such companies, global precision manufacturing leader SKF Group, acquired Presenso, a startup that develops AI-powered predictive maintenance software.
Who is SKF Group?
SKF Group is a bearing and seal manufacturer based in Gothenburg. The company was founded in 1907 by Sven Wingqvist, the inventor who first patented the self-aligning radial ball bearing.
Today, as the world’s largest bearing manufacturer, SKF Group also controls the top industrial distributor network within their industry and commercializes platforms in bearings and units, seals, mechatronics, services and lubrication systems.
SKF operates globally 150 subsidiaries in 32 countries with 44,000 employees worldwide and revenues of nearly 80 billion SEK (8.3 billion USD). SKFs customers include household names such as Tesla, Volvo and Volkswagen, as well as industrial customers in aerospace, transportation, automotive, construction, wind power and equipment manufacturing.
Facing slowing sales, the company, under the leadership of CEO Alrik Danielson, is pushing to accelerate the restructuring of its manufacturing footprint and is investing heavily in advanced automation.
Although SKF allocates a 2.6 billion SEK to R&D investments and it prioritizes digitalization as a key strategic enabler for higher efficiency and better performance applications, historically, it does not have an acquisition track record in the digital space.
Who is Presenso?
Based in Haifa, Israel, Presenso was founded in 2014. The company has raised $3million in several rounds of funding from Israeli investors as well as from EDP Ventures, the corporate venture arm of EDP Group.
Presenso predictive analytics software analyzes streaming performance and vibration data from motors and rotating machines to predict failures before they occur. It uses unsupervised machine learning and Automated Machine Learning (Auto-ML) techniques to analyze sensor data and identify patterns that correlate with failures. Such an approach is highly flexible and can be theoretically applied to a variety of applications, machines and sensors regardless of whether the system has encountered similar setups before.
While the base technology is complex and presents implementation challenges that many in the industry have struggled to address, Presenso’s value proposition is quite straightforward.
Its capabilities could enable equipment manufacturers, customers and operators to prevent unplanned downtime and take preventive action, increasing overall availability of production lines and reducing risk and maintenance costs.
Presenso customers and partners include leading industrial equipment manufacturers and operators in Europe and the US, such as Siemens, MAN, ABB and EDP.
The Deal
On October 7th, 2019, SKF Group acquired Presenso for an undisclosed sum. Some sources estimated the deal value in the $30-$40 million range. The acquisition is expected to be completed by Q4 2019.
Presenso’s technology will be used to strengthen SKF’s rotating equipment performance offer. At the same time, SKF brought in house valuable AI and machine learning expertise that it can nurture and redeploy to support digitization initiatives in its segments, applications and product categories.
Victoria Van Camp, SKF’s CTO said of the acquisition: “SKF is all about reliable rotation, technology leadership and solving real world challenges. Today, we are welcoming a team of world-class AI developers, with a production-ready analytics solution into SKF. Together we will change the way industry looks at reliability and make AI an integrated part of production.”
Why it Matters
SKF does not have an established history of Digital M&A dealmaking. The acquisition of Presenso represents an interesting data point, as it may indicate a strategic shift to digital on the part of SKF, one which requires the acquisition of digital capabilities that are somewhat distant from the industrial DNA of the company.
Will we see more such deals from SKF? It is impossible to say, but if the integration of Presenso and its commercial offering are successful, SKF may determine that it is better off shopping for technology and products in the startup ecosystem, rather than invest internally in the development of new digital capabilities.
The predictive maintenance field is crowded. A variety of startups have developed point solutions for predictive failure maintenance, while several “Digital Twin” startups use “virtual” digital models of sensors, machines and lines to create bottom-up and train simulations of complex industrial systems. Startups competing in predictive analytics for industrial applications include Petasense, Augury, C3.ai, Sight Machine, Swim.ai, Reliability Solutions, Falkonry and many others.
While some startups in the space boast valuations and a trajectory that makes it very unlikely that they will be acquired by industrial companies of the size of SKF, industrial vendors’ appetite for Industry 4.0 technologies and inevitable maturation of the technologies themselves mean that a consolidation in the space should be expected.
TL;DR
- SKF Group acquired Presenso in October 2019.
- Presenso is an Israeli predictive maintenance startup.
- SKF will integrate the analytics technology in its rotating equipment performance offering.
- The acquisition stands out, as SKF does not have a history of buying software companies.
- Expect more acquisitions and consolidation in the “maintenance 4.0” space.
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