A new crop of connected “smart-home” products is attracting a growing swath of strategic acquirers. Unlike the smartphone industry, which quickly became a playing field for big-name buyers such as Verizon Communications (NYSE: VZ) and Microsoft Corp. (Nasdaq: MSFT), the middle market is home to many of these fresh deals, including Nest Labs’ recent $555 million purchase of Dropcam.
More deals are expected to follow.
Samsung Electronics Co. Ltd., for example, is expanding its smart-home segment, located in Ridgefield Park, New Jersey. According to Samsung chief executive Yoon Boo-Keun, “there is a lot of anticipation, interest, investment and M&A in this field.”
“The process in which each company tries to figure out home automation technology will be different. The goal is still the same,” Yoon told reporters at a recent showcase for Samsung appliances, including smart dishwashers and refrigerators.
Nest, a home automation company headquartered in Palo Alto, California, is likely to continue buying. The company designs thermostats and smoke detectors that are sensor-driven and Wi-Fi-enabled. The June acquisition of Dropcam, which makes Web-connected home security cameras, is expected to usher the company into home security and video monitoring.
Google Inc. (Nasdaq: GOOG), which purchased Nest Labs earlier in 2014 for roughly $3.2 billion, has allowed the company to oversee its own growth efforts. San Francisco-based Dropcam will be folded into Nest’s existing line of products, which includes the Learning Thermostat.
Other recent deals in the space include home automation company iControl Networks’ April purchase of Blacksumac Inc., the company behind Piper—a device that enables users to monitor the lights and devices of their home from afar. Other startups such as Boulder, Colorado-based Revolv Inc. and Austin, Texas-based WigWag Inc., which are geared toward automating home devices, are likely targets.
Meanwhile, many companies are in the venture capital stage. In March, Khosla Ventures invested $10 million in Canary, a home-security service that syncs motion detectors and air quality sensors with a high-definition camera so users can monitor their home from a remote location. Before that, Greylock Partners and Highland Capital made a $12.5 million investment in SmartThings, a company that lets people connect to a variety of home devices.
For middle-market companies, there’s a long list of potential acquirers privy to the trend, including AT&T Inc. (NYSE: T), which made a foray into home automation in 2010 when it bought Xanboo, a service that enables home owners to monitor security, energy consumption and digital media across devices. Schneider Electric SA (EPA: SU) and Johnson Controls Inc. (NYSE: JCI) are also eager to buy.