From IIoT and „Industrie 4.0“ to autonomous driving and robotics to face recognition and body motion interpretation – vision technologies change and sometimes disrupt multiple industry sectors and even daily life. It offers highly attractive growth opportunities across all industry sectors, which is why we see long-term interest in M&A transactions in this field.
Competition puts pressure on fragmented market:
10 years ago, it was about image sensors and proprietary processing software, today technologies like neural networks are widely used and it is the combination of camera and software which often wins the game. Besides flexibility in combining hardware and software we observe consolidation within the camera market. This has obviously got a couple of reasons: apart from the issue of succession for a generation of founders, the vision market is characterized by a growing number of 100m+ revenue companies on one side and a high number of small and mid-sized businesses on the other side. If not positioned in a profitable niche, e.g. for customization or specialization capabilities, the latter struggle in competition with larger and international peers. You need to be of a certain size to have resources for an attractive product portfolio, to benefit from economies of scale in sourcing and production and to be able to penetrate different geographical markets. Competition is not decreasing but is rather accelerating due to technological development and internationalization, e.g. by increasing competition from Asian companies. Just growing organically doesn’t provide the pace to catch up.
Different strategies to stay ahead – rise of vision operating systems:
Thus, consolidation is about cleverly combining strengths amongst individual companies to realize an attractive offering and to succeed in an ever-increasing competition. This can be done at the product level (e.g. Lakesight – Tattile, Chromasens, Mikrotron), implementing an umbrella brand strategy or by combining with a larger and stronger partner, which can for e.g. offer tailwind for international marketing and distribution. Interestingly, keeping focus on specific segments and “gaining weight” leaves room for evolution, e.g. if you take a look at Basler. Having reached a visible market position in cameras the company has recently been communicating a strategy oriented towards a “computer vision toolbox”, proving this with a product offering complemented by lenses and cables, acquiring frame grabber competences and addressing markets for embedded vision and time-of-flight applications. Other players have started to introduce vision operating systems to the market. These platforms allow to design and operate systems of mixed sensors and processing algorithms thus allowing for best of breed system architectures.
Transactions in the recent past show different characteristics or strategic rationales: Stemmer Imaging focused on extending its geographical reach (Elvitec -FRA, Infaimon -ESP), whereas ZEISS (Gom), TE Connectivity (First Sensor) and ISRA Vision (Photonfokus) acquired in order to broaden their portfolio of products and technology. Showing promising long-term growth perspectives, it doesn’t come as a surprise that there are also financial sponsors and industrial holdings in the game, e.g. Capvis buying Xovis and TKH Group acquiring Lakesight and SVS-Vistek.
Technology is a catalyst for transactions:
In our view the vision technology & sensors (incl. associated software) sector is one of the most exciting and fast-growing segments within industrial automation, especially within the context of accelerated transformation by digitalization. The universe of companies is still highly fragmented and heterogeneous and is characterized by a high level of internationality.
Is it a good timing for transactions in vision technology & sensors? Sure, it is. Many growing application markets like robotics, navigation, logistics, food & agro or surveillance and security cannot go without vision. The core technologies are mature, at the same time there is an attractive potential for innovation: keywords like embedded vision, deep learning, blockchain and smart factory point to relevant directions and open up exciting applications – and even new business models.
Therefore, we are curious to see how this market is going to develop and we will continue to observe latest trends – like need for advanced software know-how or build-up of system/application competences, further driving consolidation. At the same time, we are expecting the level of transactions to remain high.
Capitalmind Investec has got a senior sector team in Industrial Technology and we are experienced experts in selling, buying and financing businesses. If you have any questions and would like to know more – please get in touch!