- August 02, 2013
- Schneider Electric
By Bill Lydon, Editor
Schneider Electric is closing in on the purchase of Invensys. This is an unfolding story that looks to be on course to achieve the goals that Invensys and Schneider Electric management believe is good for their combined customer base.
By Bill Lydon, Editor
Schneider Electric is closing in on the purchase of Invensys. The next major milestones are a shareholder vote and regulatory and antitrust approvals (including anti-trust clearances in the EU, US, Brazil, Canada, and China). There is always a chance in these deals for another company to make a higher offer prior to a shareholder vote.
In a news conference in Rueil-Malmaison on July 31, 2013, Jean-Pascal Tricoire, Chairman & CEO of Schneider Electric, described their rationale for making an offer for Invensys stating, “Invensys is a strong strategic fit to drive higher growth and value creation to reinforce Schneider’s industrial automation capabilities, boost their positions in key electro-intensive segments, and strengthen software for customer operational efficiency.” In the news conference, it was noted that major advantages of this purchase would be to signal to existing and future customers that Invensys will be off the table and financially sound. Tricoire also noted the scale of the combined companies would be important for R&D investments. Schneider Electric anticipates closing the deal in the fourth quarter of 2013.
Schneider Electric has a strong offering in electrical products but is a second tier supplier in automation systems relative to other leading suppliers. A Schneider Electric “at a glance” document on the company’s website dated February 2013 illustrated 2012 sales were 15% data centers, 25% utilities & infrastructure, 22% industrial & machines, 9% residential, and 29% non-residential buildings. These markets have some similarities for basic electrical needs but significantly varied control and automation requirements.
CNBC Video Interview: Invensys takeover an 'interesting' offer: Schneider CEO
My Initial Thoughts
In February 2013, Schneider Electric announced the PlantStruxure PES (Process Expert System) as an offering for the process industries describing the architecture as delivering a single global database design and diagnostic features of a Distributed Control System (DCS) within an energy-aware architecture. The initial PlantStruxure PES offering is basically a skeletal architecture that could be developed into a full process offering. It does not have the functions and features that would be sufficient for mainstream process industries including food, chemical, oil and gas. Invensys has a refined process control system and an organization that has “tribal” knowledge and knowhow about process control. (Editor’s Note: You can learn more detail about PlantStruxure PES from my interview with Schneider Electric’s Hatem Mohamed, Product Marketing Manager.)
Schneider Electric, along with other automation supplies, is emphasizing energy conservation/efficiency methods. Invensys has a much broader holistic view and refined software, analytics, and automation solutions for processes to optimize overall plant profits that can also be applied to Schneider Electric’s own discrete automation solutions.
Schneider Electric has the hardware products that will enable Invensys offerings to compete with other major suppliers that offer electrical power products integrated with automation and enterprise systems.
Invensys understands the third-party systems integration business and that can be a great advantage for Schneider Electric.
With Wonderware and the ArchestrA platform, Invensys has a significantly more advanced and refined software architecture. This would be a huge positive if Schneider Electric leverages it throughout the company. Invensys has been a leader in the vision and development of their Enterprise Control System (ECS), initially launched in 2009. The foundation of ECS is an integration framework that ties applications together in an open Services Oriented Architecture (SOA), allowing systems to be deployed with standard components with minimal customization. The open ECS SOA framework enables the Invensys partner ecosystem to add and extend the capability of the software. This extensibility enables the system to meet varying industry and global needs, solve a wide range of customer problems, and improve efficiencies. Invensys believes ECS allows users to implement systems that constantly refine plans and adapt in real-time to highly variable manufacturing factors including raw material cost & quality, energy costs, order sizes, and product mix. The scope of coordination and control encompasses basic control loops for manufacturing business systems including ERP, production control, and process control.
As Schneider Electric management has stated, this deal would eliminate questions about the future of Invensys.
There is a tendency with many acquiring companies to dominate and loose some of the advantages to be gained in an acquisition. When Schneider Electric purchased Modicon, many people in the industry believed Schneider Electric devalued the Modicon position in the market for two reasons. Schneider Electric also offered parallel (competing) Telemecanique products and they moved Modicon distribution to Square D electrical wholesalers. This same pattern was repeated in the building automation industry with the acquisition of multiple companies, i.e. Andover Control and TAC.
The integration of software organizations while retaining talent and independent distribution is a major challenge. Wonderware and ArchestA are significantly more feature rich and refined than Schneider Electric’s current offerings. The Wonderware organization has a stable of talent with knowledge, knowhow, and expertise that is some of the best in the industry. The Wonderware distributor/partners may be the strongest software delivery organization in the industry and is one of the reasons companies like Citect found it difficult to gain major market share.
With Schneider Electric’s recent launch of PlantStruxure PES using PLCs as the core controllers, combined with the well-established DCS offering of Invensys Foxboro, there could be PLC/DCS strategy conflicts and confusion. This in turn could lead to branding, organization and distribution channel conflicts if not managed properly.
It ain't over till the fat lady sings
This is an unfolding story that looks to be on course to achieve the goals that Invensys and Schneider Electric management believe is good. Just like automation projects, the deal is not done until the punch list is complete and everyone has signed off. In order to become effective, the deal must be approved by a majority of Invensys Shareholders representing at least three-quarters in value of the Invensys shares as well as gain regulatory and antitrust approvals.
Hopefully, if the deal is concluded, employees and customers will benefit.
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