ABB’s Acquisition of B&R - The Making of an Industry Powerhouse

By David Humphrey

Acquisition or Partnership

ABB announced the acquisition of B&R, a supplier of factory automation solutions for machinery.  Founded in 1979, B&R is headquartered in Eggelsberg, Austria, and employs more than 3,000 people, including about 1,000 R&D and application engineers.  It operates across 70 countries, generating sales of more than $600 million (2015/16) in the market for machine and factory automation.

B&R has grown with an average CAGR of 11 percent over the last two decades. The company has a rapidly growing global customer base of more than 4,000 machine manufacturers, a proven track record in automation software and solutions, and extensive application expertise for customers in the machine and factory automation market segment.

On closing of the transaction, B&R will become part of ABB’s Industrial Automation division as a new global business unit – Machine & Factory Automation – headed by the current Managing Director, Hans Wimmer.  Both companies consider B&R's management and employees as a key driver of future growth and the business integration together with their counterparts from ABB. B&R’s co-founders, Erwin Bernecker and Josef Rainer, will act as advisors during the integration phase to ensure continuity.

David Humphrey, ARC Advisory Group, commented, "With this acquisition, ABB closes a long-standing gap in its industrial solutions portfolio, potentially turning the company into a truly all-round industrial supplier on the scale of its arch rival Siemens."

On the surface, it looks like ABB is simply acquiring a small PLC company with four percent market share, but the implications are much greater.  While ABB’s market share for PLC has languished at around one percent for the past two decades, B&R has grown its PLC business at about 11 percent annually to quadruple its PLC market share in that same time, according to ARC studies.

For B&R, this acquisition may result in the loss of its ‘renegade’ status among industry observers.  The company is relatively small among its peers, but B&R always has known how to use that size deficit to its advantage.  While larger suppliers were selling standardized, off-the-shelf solutions, B&R developed a reputation in the 1980s and 1990s for going the extra mile to offer customized, engineered solutions, even in low volume projects. Later, the company honed a reputation for product innovation, often going its own developmental way rather than following the mainstream. As B&R’s Austrian headquarters now becomes the seat of an ABB business unit, some of that passion for automation could get lost as two company cultures are merged.

The intriguing aspect of this acquisition is not so much the volume of factory automation business that B&R brings to the table as is the potential for ABB to reach industrial customers for which its offering up to now has been incomplete and less integrated than that of competing suppliers. Like many of its peers, ABB’s portfolio has had an obvious gap in the area of factory automation.  It wasn’t the case the ABB had no PLCs, it’s just that the company didn’t seem to be very keen on selling them.  This gap was further accentuated by ABB’s broad offering in industrial robots – a staple of the factory floor.  By closing that gap with B&R’s compelling factory automation portfolio, ABB is well on its way to creating the most complete industrial offering of any supplier on the market.

Keywords: Machine Automation, Factory Automation, Machine Manufacturers, Industrial Automation, Internet of Things (IoT), ARC Advisory Group.

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