Posted: 19 / 02 / 2021
Following years of buzz and excitement, Internet of Things (Iot) looks set to continue its growing penetration and progression into mainstream business use over the coming years.
The number of businesses that make use of IoT technology has increased from 13% in 2014 (Mckinsey) to around 30% today (Vodafone) and the number of IoT connected devices is forecast to increase to 43 billion by 2023 (Mckinsey), an almost threefold increase from 2018.
This continued uptake is attributable to the maturing of the underlying technologies that underpin IoT, companies elevating projects from a successful proof-of-concept to commercial implementation and the maturing of business models, with many successful adopters leveraging pools of data from IoT connected sensors to provide valuable commercial insights.
From a B2B perspective, adoption is driven by the cost reductions and productivity improvements that can result. As the technology that powers IoT will continue to become cheaper, this will benefit companies’ ROI and further strengthen the investment case for Finance Directors. With advancements in computing power and AI, outsized benefits can be gained by companies that leverage both IoT and machine learning applications, to generate data-driven insights from connected devices to improve operations and boost productivity.
Applications and use cases of IoT are largely sector agnostic and span a broad range of industries, from asset tracking, to smart metres, to security monitoring. IoT technology is at the forefront of enabling emerging areas such as mHealth, which has played a crucial part in the pandemic response and connected devices are already having an important contribution in tackling some of the world’s major challenges, with climate change and sustainability being notable examples.
IoT Use Cases and Applications
There is growing global recognition of the importance of reducing carbon emissions and a need to quickly transition to cleaner forms of transport. Consequently, Electric Vehicles (EVs) are set to significantly increase in number over the course of the next decade. With this, comes a need to rapidly scale-up the infrastructure required to support the rollout of EVs and an IoT solution is pivotal for EV Charge Point Operators to remotely access and monitor charge points, ensuring that they are always accessible. Within cities, which are responsible for emitting 70% of the world’s greenhouse gases, eBikes and eScooters form part of a growing suite of micro-mobility offerings, which provide a carbon-neutral solution to help change the way people commute and offer a method of electrifying the last mile of delivery – an area that has increased in significance following the surge in penetration of e-commerce in the past year. For micro-mobility players, reliable IoT connectivity is crucial in providing real-time alerts, location services and the ability to track their entire fleet.
IoT applications are having a big impact in a more traditional, long-established industry, agriculture. The world’s population is set to increase by 4billion by 2050 (International Food Policy Research Institute), and when combined with the increasing strain that global warming, and in turn adverse weather conditions can place on crops yields, it is imperative that farming techniques are made as operationally efficient as possible. New technology-enabled farming techniques are being developed to respond to this challenge and utilise inputs from connected sensors, which monitor a range of key variables, such as moisture, pH and temperature.
John Deere, has been at forefront of these developments and the company has spent the past decade leveraging big data amassed from sensors on IoT connected devices, mounted on farming equipment, to power machine learning algorithms to determine, for instance, how best to deploy herbicides. The insights provided have resulted in up to an 80% reduction in herbicide deployment (Blue River).
The pace of adoption of mHealth has increased significantly over the past year and with an ageing UK population, mHealth looks set to play an increasingly important role in meeting the nation’s future healthcare needs. IoT and connected devices are at the centre of these developments. Connected devices enable remote diagnostics and the detection of early warning signs that can be relayed in real-time to medical professionals and family members.
Further use cases will continue to develop as new cellular connectivity offerings such as 5G and low-power, wide-areas technologies, with its low deployment costs and ability to operate in areas with traditionally poor coverage, unlock projects that were previously either impractical or too costly.
IoT centric M&A activity spans the entire IoT stack. Strategic buyers have engaged in both larger horizontal integrations, with a focus on consolidation, as well as vertical integrations to acquire capabilities at both higher and lower layers of the stack. There has also been a flurry of PE investment over recent years and companies that provide both connectivity and platform capabilities are attractive targets, given the expected future growth in the industry and the subscription revenue models that provide a source of recurring revenues.
There are signs that the IoT M&A market is gaining renewed momentum, following the COVID-19 induced slump in H1 2020. Acquirers of quality stories and targets are both willing to engage, although transaction sizes currently appear to be smaller (KPMG). A possible explanation for the smaller deal sizes is that companies, understandably, are currently more measured and restrained with capital deployment and many may be facing tighter restrictions in accessing credit.
One notable trend has been the increase in M&A activity focused on IoT solutions in the healthcare sector. This is likely to continue as events in the past year have served to highlight the importance and significance of such solutions. Huma, a UK based remote patient monitoring company, has been very active and recently acquired BioBeats a provider of AI-based employee mental health monitoring and Tarilian Laser Technologies, a provider of blood pressure monitoring wearable devices (KPMG).
Another focus of investment could be in companies that provide smart building technologies. IoT use cases, such as remote temperature checks, occupancy detectors and air filtration sensors, will be key in helping cities emerge from the pandemic enforced exodus by allowing buildings to reopen safely and to help staff feel comfortable with going back to the office.
Article by James Taylor, Corporate Finance Manager at Sedulo