Emerson Plans Growth into Industrial Automation through Seeking Greater Sensor Data Acquisition Capabilities

Over the past four months, Emerson has significantly shifted the course of its business. Alongside a number of smaller acquisitions and divestitures, two principal stages should be highlighted. First, in October 2022, Emerson announced the divestiture of its Climate Technologies business, selling a majority share to private equity company Blackstone. Climate Technologies is an umbrella term covering the company’s products and services in residential/commercial heating and air conditioning on the one hand, and commercial and industrial refrigeration on the other hand. The commercial and industrial refrigeration business unit includes the company’s transport and cargo monitoring systems (including its data loggers and cargo monitors), a field in which the company is a global leader. Emerson retains a 45% share in the Climate Technologies business, showing its confidence in the newly-divested company’s portfolio and target markets.

This transaction was valued at US$14 billion, from which Emerson received an upfront US$9.5 billion. Emerson announced that these new funds would allow it to invest the second stage, namely refocusing the business on its core industrial automation market with Emerson management noting in the company’s Q4 2022 investor’s call that its Merger and Acquisitions funnel was ‘very active’ in this respect. Speculation on target companies to help Emerson grow this automation business was at least in part assuaged in January 2023 as Emerson announced a hostile takeover bid (worth US$7.6 billion) for National Instruments, a leader in data acquisition hardware and software. This follows multiple private rejections of Emerson’s advances, beginning in May 2022. Negotiations are still underway.

In its explanation of the bid for National Instruments, Emerson cited its desire to increase its margins (in particular through greater software capabilities), diversification into new markets (in particular the discrete manufacturing markets of semiconductors, aerospace/defense, and automotive), and the complementarity of National Instruments’ portfolio to Emerson’s, among other factors. This last point is key to showing how Emerson sees its future markets. Emerson already has strengths in software for control and automation, especially around process control and digital twins, as well as in edge data acquisition instruments, such as sensors on valves, pumps, and many other types of manufacturing and production equipment. This latter strength is supported by its Plantweb Digital Ecosystem, a portfolio of wireless sensors, infrastructure (e.g., gateways), and software. Emerson sees sensing and data analysis as a key part of its growth into a pureplay automation company, as its customers spend more on data acquisition and advanced control systems to ‘See’, ‘Decide’, ‘Act’, and ‘Optimize’ manufacturing processes.

Within the Internet of Things (IoT) Condition-Based Monitoring (CBM) market, some of the areas of greatest focus currently are on sensor fusion, expanded control, and automation software. It is in this context that the National Instruments bid comes into play. National Instruments has its primary strengths in data acquisition systems, namely larger gateway-type devices and accompanying software for aggregating and analyzing multiple different sensor sources. National Instruments’ portfolio allows it to collect data from a large variety of manufacturing equipment and analog or digital inputs, as well as to integrate with a large range of third-party hardware and software systems. This equipment provides a flexible middle layer of data collection and intelligence, which would greatly expand the end-to-end product portfolio which Emerson is looking to build. The goal is to complement Emerson’s more limited strengths in data acquisition hardware and software systems by expanding its abilities to collect data on all parts of the manufacturing process, which will allow it to further demonstrate its strengths in control and automation software.

Emerson’s bid for National Instruments highlights the growing importance of sensorization and connectivity at all levels within an industrial setting. Simultaneously, it shows the complexity of data acquisition within the CBM market; this is not a market dominated by wireless sensors, but one in which wireless sensors plays a supporting role alongside a large range of device types. One of the most important of these is the data aggregation hardware that collects wired and wireless data, converts analog sensor data to digital signals, and provides an additional layer of intelligence between the sensor equipment and the server or cloud. Emerson is looking to own the full solution stack to facilitate how companies adopt and integrate digital capabilities within these industrial settings, expanding its in-facility hardware/software strengths as a way of bolstering its enterprise-wide process and software systems. In so doing, the company will be competing more directly with existing industrial automation leaders such as Siemens or ABB. While much of the interest and talk in the industrial automation market has been around the process, control, and automation systems themselves, companies must continue to consider what feeds these systems and who owns that part of the solution stack. What happens on the edge sensor and sensor data acquisition system front remains as important for building a competitive position.