Why did PTC pay an $80 million premium for Kepware?

By Ralph Rio

Industry Trends

PTC to Acquire Kepware

You may have missed this: on December 23rd, PTC announced an agreement to acquire Kepware. The $118 million total price is nearly 6X Kepware’s $20 million sales. Many acquisitions for inorganic revenue growth occur at around 2X sales. One thing I’ve learned through experience is to never assume the other guy is stupid. Both Kepware and PTC have bright executives – ARC has consulted with them. With the high price, PTC and Kepware must have their sights on considerable additional strategic value.

Convergence of IIoT with Automation

The announcement states, “Kepware’s KEPServerEX will become a strategic component of the PTC ThingWorx® IoT technology platform.” Kepware’s library contains more than 150 device drivers for a wide variety of intelligent devices used in industrial equipment, i.e. things like PLCs, RTUs, instruments, and much more. Now, ThingWorx can collect time-stamped process data from industrial equipment - which is also done with an historian.

Image removed.


PTC’s New Revenue Opportunity

OEMs provide an area of success for ThingWorx. Here, the equipment manufacturer sells value-added aftermarket services for health monitoring, diagnostics and predictive maintenance (PdM) to prevent failures before they can occur. The device drivers are not an issue since the OEM usually has a driver that it developed for its intelligent equipment.

The acquisition of Kepware opens new revenue opportunities for PTC among owner/operators of industrial plants – likely a much larger market than with OEMs. For example, the announcement specifically mentions building on the strategic alliance with GE Digital to target GE's industrial facilities.  Plants nearly always have a wide variety devices, and a platform that supports this diversity becomes a necessity to create a high-value, plant wide solution.


With Kepware, two key strategic moves occur for PTC:

  • Enter a huge market for collecting time-stamped process data for analysis, perturbation recovery, and process optimization

  • Thwart competitors since Kepware has the largest library of proven device drivers

The executives at the suppliers of historians are also good – ARC has consulted with them too. They see these technology innovations, and have corresponding product strategies. Cloud, analytics and IIoT are enabling a market discontinuity for historians, and the corresponding market dynamics will make for an interesting 2016.

Engage with ARC Advisory Group