Fortive Acquisition Of Intelex For US$570 Million Turns The EHSQ Software Amplifier Up To 11/10
EHSQ software provider Intelex announced on June 6 that it had agreed to be acquired by the Industrial Scientific business unit of Fortive, a firm listed on the New York Stock Exchange with 24,000 employees. Reflecting an intense bidding war between corporate and private equity buyers, Intelex achieved a valuation of $570 million which is the highest purchase price of any EHSQ software vendor. The closest comparable deal with a disclosed value was for Enablon, which was bought by Wolters Kluwer in 2016 for EUR 250 million (presently $277 million). The 2017 CVC Growth Fund buy-out of VelocityEHS was close to the Enablon valuation and the purchase of Cority by Thoma Bravo, valued the firm at approximately US$400 million, according to Verdantix analysis, although terms were not disclosed and the value could be up to $75 million higher. In the last 2 years, EBITDA multiples have moved from low 20s to more than 30x.
The decision by the Intelex Board to sell to Fortive reflects a shift in the vision of EHSQ vendors from providing a rock-solid system of record and workflow support for historical events to mitigating EHS risk in real-time. Rather than providing software and mobile apps to report on an employee being injured by a forklift truck, EHSQ software vendors now have the ambition to monitor in real-time the risks posed by forklift trucks to workers and intervene before the incident occurs. The same logic applies to many other hazards such as fatigued drivers, gas leaks or equipment failure. Fortive has a number of businesses that offer real-time sensing and monitoring devices. In 2017, Fortive bought Industrial Scientific, a gas detection solution provider, for $600 million. What Fortive lacked was enterprise software. Intelex has recently launched an Internet of Things data processing platform which will provide the basis for an exciting industrial IoT value proposition.
This deal transcends the boundaries of the historical EHS software market and grows the Intelex total addressable market from $3-4 billion to more than $10 billion. It reflects the potential for cloud computing, internet-connected devices and IT/OT systems to revolutionize industrial business models; just as warehouse robotics from Amazon has transformed the retail sector. Whilst tech marketing about Industry 4.0 is at least five years ahead of what customers are actually doing, a vision built around real-time risk management which improves EHS and operational output is shared by all incoming CEOs at large industrial firms. Before demand for Industry 4.0 kicks in, the EHS software market will continue to grow at 7% to 10% per annum. The recent Verdantix benchmark of 23 EHS software providers ranked Intelex highly in the Leaders’ Quadrant and it is well positioned to continue to succeed in this segment.