A Perspective on the Internet of Things | FTI Consulting

A Perspective on the Internet of Things

Corporate Finance & Restructuring | Telecom, Media & Technology (TMT)

October 8, 2018


The Internet of Things (IoT) is widely regarded as the next industrial revolution, combining hardware with software, connectivity and data to create new levels of value for customers. Management guru Michael Porter believes IoT is the “Third Wave of IT-Driven Competition” unleashing “another leap in productivity.” According to a survey conducted by Verizon, 73% of executives are either researching or currently deploying IoT solutions.

Over the past couple of years there has been a lot of buzz around IoT. The M&A values and volumes indicate that the hype cycle is over and companies now see IoT as a mainstream commercial value creator for the future. The lines between traditional technology companies and non-tech players are fading as new business models emerge.

The evolution of technologies such as cloud and big data create multiple opportunities to develop new revenue streams. Companies are looking to expand across the stack using M&A, and the competition for IoT M&A targets has intensified, with traditional tech companies and Original Equipment Manufacturers (OEMs) bidding for targets driving valuations high. During H1 2018, M&A valuations for IoT related transactions were among the highest (~ 5.3x revenue).

The IoT stack is getting crowded with a number of established and emerging companies playing across the spectrum, ranging from embedding chips into manufactured products, creating firmware, platforms, connectivity, analytics and services, while also finding niche vertical and horizontal plays. It is widely believed that value realization will be higher with business models playing higher up the stack.

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