Consolidation Is Key: Why Hexagon’s Massive $1.2 Billion Acquisition Of ETQ Epitomises Industrial Software Trends

Consolidation Is Key: Why Hexagon’s Massive $1.2 Billion Acquisition Of ETQ Epitomises Industrial Software Trends

On February 25th, 2022, Hexagon, a provider of connected sensors and industrial software, announced the $1.2 Billion acquisition of the SaaS EHSQ management software vendor, ETQ. Hexagon, which is headquartered in the United Stated with over 3,000 employees, has been active with M&A, acquiring operational risk management (ORM) firm j5 international in 2019. The vendor has a well-established background in industrial operations management, with offerings in the asset management and operational risk that leverage burgeoning technology such as digital twins to support remote and connected operations. ETQ’s enormous valuation of around 16 times their estimated 2022 revenue can be attributed to numerous factors, namely its impressive trailing 3-year CAGR of 60% and the highly competitive market for SaaS vendor acquisitions. Hexagon’s investment makes a statement of its strategy to diversifying their solution portfolio, pushing further into the EHS, quality, compliance and ESG markets.

Verdantix has well documented the benefits firms can realise by using technology to break down internal silos between EHS and other business units. Many corporates have bought into this, with their digitization roadmaps building towards holistic, integrated technology ecosystems. The growing prominence of sophisticated software solutions and real-time IoT devices is making the idea of highly interconnected operating platforms a practical reality for technology frontrunners. Consolidating EHS and operational process in a single software platform does not just reduce admin but transforms the interactions between separate stakeholders groups and the environment around them to drive safety, quality, productivity gains and operational resilience. Verdantix predicts that this digital evolution will transform traditional EHS approach to complete dynamic management of all operational risk. 

Corporates are realising the benefits of consolidating multiple processes together, causing vendors to dedicate large resources to differentiate their solutions. Consequently, Hexagon's acquisition is just one in a sea of M&A activity hitting the industrial software market. Leading EHS vendors with PE funding, such as Enablon and Cority, have looked to diversify into both ORM and ESG space, with the aim of offering enterprise level risk and compliance management solutions. This expansive focus is shared by many large asset management software vendors, such as Hexagon, Yokagowa and Prometheus Group all differentiating their solutions with the acquisitions or ORM and process safety management (PSM) software providers. 

If you would like to learn more about some of the most prominent software vendors in this space vendors, please consider reading our Report Green Quadrant: Process Safety Management Software 2021.