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2014 is well underway, and after years of head fakes from the economy and political uncertainty in Washington, the year finally brings with it some semblance of medium-term stability. With policies like the most recent budget deal and Obamacare in place, the stage is set for the next couple of years. Companies are emerging from safe mode and starting to take steps toward revenue growth. As we look at what this means in terms of the Data Acquisition space, we find that the larger companies like Agilent, National Instruments, and Honeywell boast balance sheets that are stronger than ever with ample cash reserves and low amounts of debt. One solution for these businesses to add to their top line is through acquisition. Rather than investing capital and time into developing new products and training new people, larger corporations should look toward their smaller, profitable counterparts for opportunity.
Several companies within the market appear to be primed for takeover, with strong product portfolios, increasing cash flows, and long-term, top-tier customers. The best organizations to acquire would have exposure to growing vertical markets such as aerospace, automotive, and oil & gas. All three of these markets exhibit underlying long-term secular growth trends. Exposure to OEM Machine Builders, Semiconductor, and Laboratory vertical markets would be something to avoid as the effects of budget cutting and technological consolidation take their course.
VDC recommends exploring smaller niche companies with strong customer bases as potential targets. Companies like an Opto-22, with its emphasis on mobile operator interfaces, or a Data Translation, with its modular Ethernet DAQ systems, both have strong portfolios with an eye on future trends. Other companies with favorable characteristics for acquisition by a larger company include AD Instruments, Dynamic Signals, Pacific Instruments or VTI.
There are many other companies that would fit the criteria of being a strong acquisition target and as 2014 develops, VDC expects it to be a year of increased M&A activity in the DAQ market.