Acquiring innovative start-ups in the smart building space

Large incumbent vendors in the smart building space are increasingly acquiring innovative start-ups in order to consolidate their position – but is this a positive trend for the market?

Our connected world is increasingly moving towards structures that monitor the usage of resources and the habits of their occupants in real time, while tracking sustainability performance. These smart buildings work in tandem with the connected city in which they sit – the true building blocks of smart cities.

The signs of consolidation across the smart building industry have been accelerating in recent times amid heightened merger and acquisition activity and an increased maturation of the market.

Simultaneously, a shift has taken place in the perception of buildings as merely bricks-and-mortar to instead encompass a wide spectrum of efficient possibilities.

Likely to enhance that is the Internet of Things (IoT), allowing buildings to exchange information with Industrial Control System (ICS) platforms from which insights can be made to assist in smarter decision-making.

Many commentators called 2018 a record year for the smart buildings market, citing increased investor confidence and the positive response companies are receiving for their products and services. And incumbent vendors are striking while the iron is hot with consolidation set to continue for the next two or three years.

Leading the charge, the likes of Siemens and Trane are now seeing acquisitions as a low-risk way to bolster their internal innovation efforts. Indeed, with such companies typically being multi-million-dollar entities, acquisitions of small start-ups are not considered big purchases – but the benefits are significant.

I believe the trend is a very positive one, helping to fuel potentially huge growth and development with a stronger sense of market momentum, while also demonstrating how large corporate players are increasingly recognising smart buildings as a key market sector.

For those that own and operate buildings, consolidation is also to be welcomed. It significantly lowers the complexity of the procurement process through a reduction in potential vendors.

Seen from another point of view, an acquisitive market also offers greater security to start-ups which are more vulnerable to downturns and short-lived market fluctuations.

These start-ups may look to see how much they can grow before seeking an exit, while others will merge with peers in order to fast-track their growth.

However, the competition is also heating up with many customers looking to consolidate vendor relationships in order to reduce complexity. The providers that are able to introduce a wider offering will be the winners in that scenario.

Consolidation is also opening the door to others. Smart building innovators will be closely followed by software suppliers, facilities management, IT, telecommunications, energy services, and much more.

Ultimately, there’s never been a better time to be in the smart building space with the market continuing to mature and the benefits being enjoyed by all. Where previously the adoption of new technologies was slow, consolidation will provide a crucial springboard to heightened innovation.

Tom Sime

Tom Sime