“This transaction marks a true milestone for ABB as we are finally closing the historic gap in machine and factory automation that has existed since ABB was founded,” says its CEO, Ulrich Spiesshofer.
“ABB was born with a birth defect – it did not have much in the way of PLCs and industrial PCs,” he explains. “This is our answer to the PLC question that has been open for decades.
“Strategically,” he continues, “this is probably the most important deal that ABB has ever done”. It is “a transformational acquisition that will firmly position ABB as global number two in industrial automation [behind Siemens] as we will be mastering the control loop not only in process automation – where we are currently number one – but also in machine and factory automation.
Spiesshofer hails B&R as being “truly unique” and “a gem in the world of machine and factory automation”, and he describes it as the Microsoft of the world of machine and factory automation. It is “the largest independent player focused on machine and factory automation,” he says.
“This combination is a once-in-a-lifetime opportunity,” Spiesshofer adds. It is “truly a perfect fit and will make us the only industrial automation provider offering customers the entire spectrum of technology and software solutions around measurement, control, actuation, robotics, digitalisation and electrification.”
B&R, founded in 1979, employs more than 3,000 people, including about 1,000 r&d and application engineers. The company has delivered a revenue CAGR of 11% over past two decades, and in 2015/16 recorded sales of more than $600m in the $20bn machine and factory automation market, which has been expanding at a rate of 4–5% per year. B&R’s revenues have increased five-fold since 2000.
When the transaction closes, B&R will form the basis for a new global business – Machine & Factory Automation – in ABB’s Industrial Automation division, headed by B&R’s managing director, Hans Wimmer, and located at B&R’s headquarters, near Salzburg. The Austrian company’s co-founders, Erwin Bernecker and Josef Rainer, will act as advisors during the integration phase. ABB says it is committed to investing to expand B&R’s operations and to build on its brand.
ABB existing PLC and servodrives activities will be reverse-engineered into the new business. Spiesshofer expects “significant synergies”, amounting to more than 8% of standalone revenues by year four of the integration process. He stresses, however, that he sees the combination as “a growth and job-creating machine”, rather than being driven by the need for restructuring.
Initially, the two operations will “coexist”, followed by “a very careful migration over time”. ABB’s mid-term target is for the Machine & Factory Automation business to deliver revenues of more than $1bn.
Spiesshofer reveals that ABB “looked at other alternatives, but none would have been such a strategic perfect fit without significant overlaps”. He does not expect ABB to make any further PLC acquisitions: “We are nicely set up in that space now.”
Spiesshofer describes the two partners' digital presence as “impressive”, with B&R's software and Internet of Things (IoT) products strengthening the existing ABB Ability digital portfolio. “With our unique digital offering and our installed base of more than 70 million connected devices, 70,000 control systems and now more than 3 million automated machines, and 27,000 factory installations around the world, we will be uniquely positioned to seize growth opportunities resulting from the fourth industrial revolution,” Spiesshofer says.
♦ Commenting on the deal, David Humphrey from the ARC Advisory Group suggests that it could turn ABB into “a truly all-round industrial supplier on the scale of its arch-rival Siemens”. On the surface, he adds, “it looks like ABB is simply acquiring a small PLC company with 4% market share, but the implications are much greater”. While ABB’s share of the PLC market has been around 1% for the past two decades, B&R has grown its PLC business by about 11% annually to quadruple its PLC market share in the same time.
According to Humphrey, the acquisition may result in B&R losing its “renegade” status. Although relatively small, it has used that size deficit to its advantage. While larger suppliers were selling standardised, off-the-shelf systems, B&R developed a reputation for offering customised, engineered solutions, even in low-volume projects. It later honed a reputation for product innovation, often going its own developmental way rather than following the mainstream. Humphrey wonders whether some of that passion could get lost as two company cultures are merged.
The intriguing aspect of this acquisition, he says, is not so much the volume of business that B&R will bring to ABB, as the potential for ABB to reach industrial customers for which its offering until now has been incomplete and less integrated than rivals. “It wasn’t the case the ABB had no PLCs, it’s just that the company didn’t seem to be very keen on selling them,” Humphrey comments. By closing the gap, ABB “is well on its way to creating the most complete industrial offering of any supplier on the market”.