ABB Surprises with Acquisition of B&R

Today ABB announced the acquisition of B&R. B&R is the Austrian automation firm Bernecker + Rainer Industrie-Elektronik GmbH.  Color me surprised.  I’m not at all surprised that ABB would covet B&R. Many firms certainly did.  The surprise (to me) is that they have landed them.  B&R is one of the European automation firms that are usually considered impossible acquisition targets.

First, some background. “B&R is a gem in the world of machine and factory automation” said ABB CEO Ulrich Spiesshofer.  One always hears these kinds of quotes at an acquisition.  But B&R is one of a very small set of European middle-sized (“Mittelstand” in German) companies that have grown a successful factory automation business over several decades.  B&R top line revenues are roughly $600 million.  Its headcount is 3,000, and its business is mainly machine control. 

It is doubtless not easy to grow a machine control business to that size, especially in Europe which is the home of the factory automation giant Siemens. To grow, the Mittelstand automation companies need to sustain a very high level of innovation.  Rather than competing head-to-head, Mittelstands like B&R must differentiate themselves in market segments where their products offer a business advantage to customers.  Usually this advantage comes down to production speed and/or production quality.  Automation equipment that can deliver higher machine speed and better quality leverages the machine builder’s investments and helps them to compete and differentiate.

But it’s challenging for a middle-sized firm to deliver this kind of solution.  B&R provides PLCs, servo drives and motors, IPCs, HMIs, machine safety equipment, and PLC programming software.  On top of that, B&R has cultivated a large partner ecosystem through the Ethernet POWERLINK Standardization Group.  This is a lot to bite off for a company of this size.  My impression is that greater customer intimacy is the root cause of this kind of innovative success.   Companies like B&R often work in problems that demand more innovative automation solutions.  The garden variety automation customer has no need to look beyond the advantages that major suppliers offer. The customers that need extra performance or extra features are the ones who end up working with suppliers like B&R.

Second, is the lesson I’ve learned from this acquisition; Under the right circumstances Mittelstand companies CAN be acquired. Usually they are considered as unapproachable.  But within the last year, both Germany’s Kuka and now B&R have been acquired.  To quote Ecclesiastes, “To everything there is a season and a time for every purpose.” Indeed.

Finally, on ARC’s European blog my Munich-based colleague David Humphrey makes some excellent points about the way that a “small” B&R fills a big gap within ABB’s factory automation portfolio. It’s been quite a day in the automation world!