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Invensys engaged in takeover talks with Schneider Electric, offer price of $5.03 Bn

12 Jul 2013 | by Konkana Khaund
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Schneider Electric's proposal to take over British manufacturing company Invensys has been the key focus of several business media outlets this morning. Links below from the Wall Street Journal and The Telegraph (U.K.) state that Invensys is considering the offer in a bid to strengthen its industrial automation and software businesses primarily for better competitive edge:

 

http://online.wsj.com/article/SB10001424127887323740804578601062283305942.html

 

http://www.telegraph.co.uk/finance/newsbysector/industry/10175123/Invensys-in-talks-with-Frances-Schneider-Electric.html

 

The announcement could lead to some significant implication on competitive strategy maximization and diversification for Schneider Electric. The immediate industry focus is high on evaluating the outcome on the industrial business of Schneider Electric, which would be the prime beneficiary from such an acquisition, given Invensys’ core competencies in this area. But it is hard to ignore the imminent implications this could have on Schneider Electric’s buildings, residential and data center businesses. Though Invensys' early statements emphasize this as a bid to strengthen its industrial business, and move away from energy controls and monitoring, it is highly unlikely that the outcome may be limited to just that. Schneider Electric will most certainly not bypass the opportunity to bolster its energy management and software businesses further - an initiative that has been consistently invigorated with every targeted acquisition the company has made in recent times.

 

At present, more than 50 percent of Schneider Electric’s current global revenue is accounted for by these businesses. In particular, the buildings and residential energy management business lines are expected to gain further impetus from the company strategic repositioning efforts to be recognized as a global leader in energy management, security, high performance buildings, smart homes and smart cities. A strong line up of acquisitions in the last decade (Square D, T.A.C., Andovar, Kavlico, Lee Technologies, APC, Vizelia, Uniflair, Pelco, Juno Lighting), and continued innovation to vertically and horizontally integrate capabilities, supported by the company’s robust software framework – StruxureWare, has already helped create a strong value proposition for these market segments. A further boost to these capabilities is inevitable, given Invensys’ strong position in energy monitoring, controls and software.

 

The immediate impact would certainly result in Schneider Electric’s capitalization on home and building energy management, a market estimated to be more than $20 billion globally, and a significant aspect of Schneider Electric’s increasingly diversified corporate strategy. However, without doubt, the combined portfolio will eventually be optimized by Schneider Electric to potentially strengthen its offering in the data center business, particularly software solutions geared towards infrastructure and building operation level supervision, control and monitoring. Finally, the company’s underlying interest in lighting and energy/temperature controls, an area that has been in focus through past acquisitions, but not fully maximized to its potential, could be a major winner. The market share line up of this segment that Schneider Electric has conspicuously remained out of, but one that is fiercely dominated by some of the company’s major competitors, could witness some healthy competitive reorganization.

 

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