Capital Insights
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H1 2016Auto
ambition
Innovation in the automotive sector
pushes M&A into a higher gear
Helping businesses invest,
optimize, preserve and
raise capital
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Allies for growth
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Transaction Advisory Services, EY

If you have any feedback or questions, please email
editor@capitalinsights.ey.com
Businesses around the globe maintain a strong acquisition
appetite and a growing desire to forge new business alliances
to foster innovation and talent.
Persistent low economic growth, digital disruption and
increasing globalization are driving today’s investment decisions and
acquisition strategies. Leading companies are combining dealmaking
with new strategic alliances to help multiply their growth opportunities
and generate higher-returns.
Within this complex environment, digital evolution continues to
challenge current business models. The automotive sector is a good
example, with technology giants and automakers converging around
driverless car innovations. We also see automotive companies joining
forces to buy the mapping technology central to that transformation in
their industry. This issue of Capital Insights highlights both the impact of
FinTech innovation on automotive insurance (p 26) as well as the disruptive
power of the industrial Internet of Things (p 22).
Executives now need to plan for the possibility of multiple futures.
M&A is part of that future-proofing story. It is a transformative option
for re-shaping business, accelerating growth strategies and anticipating
future market trends. Acquisitions offer the prospect of competitive
advantage. Increasingly, we see more strategic acquisitions for talent
(p 38) as companies seek to rapidly boost their skills and innovation to
compete and get ahead of the game.
At the same time, alliances are attractive as companies look for new
sources of revenue and earnings while carefully managing costs and
risk. Alliances can monetize underutilized assets and provide access to
capabilities that are better owned by others. More and more companies
are taking this option to help navigate strategic direction and optimize
capital allocation in an increasingly uncertain business landscape.
Those companies that best achieve commercial advantage through
combining strategic M&A and cooperative responses to new challenges,
will be best positioned to win in this disruptive new world. Buying and
bonding is now a key feature of the corporate growth agenda.
© Karl
Attard
capitalinsights.ey.com | Issue 16 | H1 2016
3
Contents
Regulars
06
Headlines
The latest M&A
news and trends.
11
EY on the US
EY’s Richard
Jeanneret on US
M&A in 2016.
15
EY on EMEIA
EY’s Andrea
Guerzoni explores
the new wave of
digital disruption.
29
EY on
Asia-Pacific
EY’s John Hope
on the impact of
China’s One Belt,
One Road plans.
47
EY on PE
EY’s Jeff
Bunder on how
PE is going
mainstream.
50
The last word
Matthew Syed
on the upside of
making mistakes.
16
Exclusive interview: driving growth
Capital Insights talks to PSA Groupe Peugeot Citroën
CFO Jean-Baptiste de Chatillon.
22
Disruption
in sight
How the
industrial
Internet of
Things is set to
revolutionize
business.
26
Driven by data
FinTech is
blurring the
lines between
the insurance,
tech and
car making
industries.
08
Transaction
insights
Lessons from
private equity.
12
Q&A: Trinity
Consultants
Discussing future
growth and private
equity partnerships.
6.4b
Connected things will
be in use worldwide
in 2016, up 30%
from 2015.
Source: Gartner
Contributors: Steve Allan, Head of Human Capital, M&A, Willis Towers Watson; Andrew Brown-Allan, Marketing Director, Carrot;
Jean-Baptiste de Chatillon, Chief Financial Officer and Executive Vice-President of Information Systems, PSA Groupe; John Drennan,
Director of Corporate Development, Trinity Consultants; Bill Ford, CEO of General Atlantic; Charlotte Halkett, Group Marketing
Actuary, InsureTheBox; Akil Hirani, Managing Partner, Majmudar & Partners; Jay Hofmann, CEO, Trinity Consultants; Leanne Kemp,
CEO, Everledger; Brian Moriarty, Principal, Song Hill Capital; Lisa Moyle, Head of the Financial Services and Payments Program,
techUK; Vaibhav Parikh, Partner at Nishith Desai Associates; Dan Preston, CEO at Metromile; Christopher Sullivan, Senior Associate,
Clifford Chance; Matthew Syed, columnist and writer; Pavlo Tanasyuk, CEO, Blockverify; Simon Taylor, Co-Founder at 11FS;
Mike Wall, Director of Automotive Analysis at IHS; Ian West, Acquisitions Director at Capita; Pete Wilson, Partner at 3i; Neil Wizel,
MD First Reserve.
© Trinity Consultants
© Paul Heartfield© Plan-B/Shutterstock.com ©RedKoala/Shutterstock.com ©aslysun/Shutterstock.com ©Alexandr III/ Shutterstock.com ©stockshoppe/Shutterstock.comCapital Insights from EY Transaction Advisory Services
6.4b
Shutterstock 124024819
Image credits:
Shutterstock 112183571
Shutterstock 251072017
shutterstock_257133193
shutterstock_89619325 [Converted]
shutterstock_215728126
40
Selling off for value
EY Global Corporate
Divestment Study.
48
Mind the gap
How to
navigate price
expectations.
30
Deal drivers
As falling oil
prices boost car
sales, technology
and consumer
habits are set
to push the
accelerator on
automotive M&A.
42
Make in India
At a time of weak
global growth,
India provides
a shining light
for investors.
34
At the
crossroads:
energy and
automotive.
38
People power
Why corporates are
increasingly looking
to M&A for quick
talent recruitment.
deals, worth a total of US$46.2b
were carried out in the global
automotive sector in 2015.
Source: Mergermarket
315
This issue’s theme:
Automotive M&A
How the rapid pace of technology is disrupting
every aspect of this sector.
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110101010101010000001111110101010101010101010101000101010100000111100110101010101010000001111110101
010101010101010101000101010100000111100110101010101010000001111110101010101010101010101000101010100
000111100110101010101010000001111110101010101010101010101000101010100000111100110101010101010000001
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101010100000111100110101010101010000001111110101010101010101010101000101010100000111100110101010101
010000001111110101010101010101010101000101010100000111100110101010101010000001111110101010101010101
010101000101010100000111100110101010101010011000111111010101010101010101010100010101010000011110011
010101010101000000111111010101010101010101010100010101010000011110011010101010101000000111111010101
010101010101010100010101010000011110011010101010101000000111111010101010101010101010100010101010000
011110011010101010101000000111111010101010101010101010100010101010000011110011010101010101000000111
111010101010101010101010100010101010000011110011010101010101000000111111010101010101010101010100010
101010000011110011010101010101000000111111010101010101010101010100010101010000011110011010101010101
000000111111010101010101010101010100010101010000011110011010101010101000000111111010101010101010101
010100010101010000011110011010101010101000000111111010101010101010101010100010101010000011110011010
4%
increase in black box
telematics car
insurance policies
year-on-year
7m
estimated global
insurance telematics
subscriptions by
2018, an increase
from 5.5m at the
end of 2013
4%
drop in crash
risk when a
new driver has
a telematics box
.5m
the number of black
box policies today,
an increase from
12,000 in 2009
up to
25%
the insurance savings
for drivers using
usage-based
insurance (UBI) and
black box policies
Oil price
5
10
15
2
25
3
35 40
45
50
© Don Farrall/Getty Images© Javier Larrea/Getty Images© Punit Paranjpe/AFP/Getty Images capitalinsights.ey.com | Issue 16 | H1 2016
5
As businesses look for new sources of revenue
and earnings amid today’s fast-changing
industrial landscape, alliances are becoming
more attractive as growth vehicles. These
strategic partnerships are being used both in
addition to, and in place of, traditional M&A.
Forty percent of executives in the most
recent EY Global Capital Confidence Barometer
are planning to enter alliances with other
companies, including competitors, to help
create value from underutilized assets and take
advantage of the expertise and reach of others.
This is already being realized in the
automotive industry, as carmakers battle rapid
digital disruption and the changing demands
of consumers for ever more tech-savvy and
connected vehicles.
So far this year we have seen Alphabet
Inc.’s Google team up with Fiat Chrysler
Automobiles to develop a fleet of 100 self-
driving minivans. And General Motors (GM) is
joining forces with rideshare company Lyft in
a test of self-driving Chevrolet Bolts later this
year — after launching a collaborative short-
term rental service Express Drive in March.
Toyota has also found an alliance to help drive
tech development, forging a new company in
partnership with Microsoft. This off-shoot data
analysis company, called Toyota Connect, will
use Microsoft’s cloud computing platform Azure
to help develop new technically-advanced
products and services.
Kurt DelBene, Executive Vice President of
Corporate Strategy and Planning at Microsoft,
Oil and gas deal spree
Low oil prices will spur more M&A
deals in the oil and gas industry
this year with some companies
forced to sell to avoid bankruptcy.
Just 14 M&A deals worth
more than US$1b each were
announced last year, vs. 46 in
2014. But as firms settle into this
new low-price market, strategic
deals are due to boom.
Back in action
Pfizer has announced that it will
buy Anacor Pharmaceuticals
Inc. for US$5.2b, just a month
after scrapping plans to acquire
Allergan Plc. The Anacor
deal will give Pfizer access to
experimental treatments for the
common skin condition, eczema,
and shows a renewed focus on
strengthening its drugs portfolio
ahead of a decision on selling or
spinning off its generic medicines
business by late 2016.
Pharma in front
Pharma, medical and biotech
(PMB) was the most active
sector in April 2016, with 81
deals worth US$40.7b, a value
increase of 392.6% compared
to April 2015. The biggest
PMB deal was the acquisition
of US-based medical device
company St. Jude Medical Inc. by
pharmaceutical company Abbott
Laboratories for US$29.8b.
Resilient dealmakers
A new research report from law
firm Herbert Smith Freehills,
Beyond Borders shows that
companies are increasingly
prioritizing capital for M&A.
Some 39% of respondents in the
initial 2015 survey were using
their capital for acquisitions, with
a rise to 45% after the updated
2016 survey round.
News in brief
M&A: partnerships prevail
said the company will work with
Toyota Connected “to make
driving more personal, intuitive
and safe.”
The company is exploring
developments such as a steering
wheel with in-built heart monitor,
a seat that doubles as a scale,
vehicle to vehicle communication
and virtual driving assistants.
The automotive sector is
not the only area in which
collaboration and relationship
opportunities between customers,
suppliers — and even competitors
are forming. Health care,
industrials, construction and
manufacturing sectors are all ripe
for these strategic partnerships.
Headlines
Forty percent of
executives are planning
to enter alliances with
other companies.
© Kim Kulish/Getty ImagesFor more partnerships forming in the automotive
sector, see page 30.
Capital Insights from EY Transaction Advisory Services
Move over megadeals
While H1 saw the announcement of some huge deals — not
least ChemChina’s US$43b takeover of Syngenta, and the
Johnson Controls/TYCO and Shire/Baxalta deals — volumes
of these megadeals that characterized 2015 deal activity are
due to diminish. Deal focus is shifting to mid-size deals
as businesses reshape portfolios and sell non-core assets.
While falling oil prices, slower growth in China, the US
Presidential election and Brexit talks have slowed activity,
the fundamentals that saw strong dealmaking in 2015
remain. Low interest rates, high levels of corporate cash and
access to finance continue. If current economic worries prove
to be short-lived, we could see transactions, particularly in the
mid-market, pick up toward the end of the year.
GE forms global alliance
GE Digital and EY have joined forces to empower companies
to provide expertise themselves. A strategic alliance
between the companies will include collaborations on
advanced industrial Internet of Things (IoT) solutions to
increase performance and productivity for companies with
underutilized industrial equipment. Using GE’s Digital Predix
cloud platform, collaborative solutions will help businesses
to reduce operating expenses and increase revenue by
improving asset use and streamlining workflows.
EY Global Executive for the GE alliance and Global
Sector Head Technology, Transaction Advisory Services,
Jeff Liu says the alliance combines GE Digital’s industrial
IoT technologies with EY’s IoT, data analytics and cloud
capabilities to co-create solutions to help companies use their
data to realize significant gains in workflows and productivity.
The changing
face of auto
Disruption in the auto sector
is rife. We look at how
disruptive technologies
have altered the face
of the industry.
To read more about the
automotive sector,
see page 30.
50k
The new annual
sales record set by
Tesla in 2015 of its
Model S car.
1b
On Christmas
Eve 2015, Uber
completed its
one billionth ride.
40%
The rate at which
Uber has been
growing each
quarter.
250m
Forecasters predict
that there will be
250m connected
vehicles on the road
by 2020.
740k
The number of
registered electric
vehicles, globally by
year end 2014. 12k
The number of cars
available to over
900,000 members of
Car2Go, the world’s
largest carsharing
network.
China investment set to soar
China outbound investment is pitted to reach
new historical highs in 2016. Outward foreign
direct investment (FDI) grew by 13.3% in
China last year, reaching a historical high of
US$139.5b. EY’s recent China Outbound
Investment Outlook predicts outbound
investment to grow by more than 10% and
maintain high growth for the next five years.
In 2015, China implemented the One Belt, One
Road national strategy, stimulating overseas
investment. China invested US$14.8b in
countries along the Belt and Road in 2015,
up 18.2% from 2014. Simultaneously,
outward FDI from the machinery
manufacturing industry grew by
154.2% in the same period.
This year has already seen large
deals by Chinese enterprises
including ChemChina’s acquisition
of the Swiss giant Syngenta for
more than US$43b and Tianjin
Tianhai Investment (a subsidiary of
HNA Group)’s acquisition of Ingram
Micro, for US$6b. Mergermarket
data values China’s Q1 deals at a
total of US$81.7b.
(Sources:
Tesla,
Fortune,
Gartner,
Centre
for Solar
Energy and
Hydrogen
Research,
Car2Go.)
To read more about the impact of the industrial IoT on the future
way of doing business, read page 22.
capitalinsights.ey.com | Issue 16 | H1 2016
7
PE exit strategies
2010- 2016 YTD by value



A lesson in
dealmaking
Focus: private equity
Investor returns from private equity have
never been healthier: what can businesses
learn from these serial dealmakers?
0
1,000
2,000
3,000
Q1
2016
2015
2014
2013
2012
2011
2010
0 100 200 300 400 500
Value US$(b)
Volume
Volume
Value US$b
0
1,000
2,000
3,000
Q1
2016
2015
2014
2013
2012
2011
2010
Value US$(b)
Volume
Volume
Value US$b
0
200
400
600
1
2
3
4
5
Keurig Green Mountain
consortium to buy Keurig
Green Mountain, Inc. for
US$14.3b
A consortium led by Hunt
Consolidated, Inc. has
announced its intention to
buy Energy Future Holdings
Corporation for US$12.5b
Apollo Global Management,
LLC to buy The ADT
Corporation for US$12.3b
A consortium for Qihoo 360
Technology Co. Ltd. to
buy Qihoo 360 Technology
Co. Ltd. (76.6% stake)
for US$7.5b
The Carlyle Group; GIC
Special Investments Pte Ltd
to buy Veritas Technologies
Corporation for US$7.4b
Top five
announced
buyouts 2015–
Q1 2016
Buyouts 2010–
Q1 2016
Exits 2010–
Q1 2016
Top five buyout sectors
by value 2010–Q1 2016
shutterstock_67341394
TMT
US$380.2b,
2,434 deals
Consumer
US$283.6b,
2,175 deals
Industrials and
chemicals
US$281.0b,
3,124 deals
Business
services
US$215.8b,
2,145 deals
Energy, mining
and utilities
US$200.9b,
856 deals
Capital Insights from EY Transaction Advisory Services
PE exit strategies
2010- 2016 YTD by value



P rivate equity (PE) has been keeping
its investors very happy over the past
couple of years. Rising stock markets
and deal-hungry corporates have
meant that firms have had no trouble selling
assets, often at eye-watering multiples.
You only have to look at exit activity for
evidence of PE’s recent ability to return cash.
A total of US$438.8b was made from the sale
of portfolio companies in 2015. In the last six
years, this was only beaten by the US$521.1b
earned from divestments in 2014, and puts last
year more than US$100b ahead of any year
between 2010—13 in terms of total exit value.
“PE has really been delivering for its
investors,” says Julie Hood, Deputy Global Vice
Chair, Transaction Advisory Services at EY.
“We saw M&A markets come to life in 2014
and 2015, and financial sponsors have taken
advantage of rising markets and the high price
environment. Corporate megadeals took center
stage in 2015 and, while this didn’t result in
PE’s strongest year for exits, it’s clear that
conditions had rarely been better for funds to
sell down their assets.”
Exit strategies
A breakdown of exit strategies reveals how
strong trade sales have been for PE firms, while
initial public offerings (IPOs) have dwindled
from the highs of 2014. In 2015, trade sales
were 69% of total exit volumes (up one percent
on 2014). Meanwhile, secondary buyouts
slipped four points to 26% and IPOs were 4%.
Conversely, high prices have made it a
challenging market in which to seal new deals.
In 2014 and 2015 combined, exits outstripped
new money invested by US$507b as funds
capitalized on the seller’s market. However,
this trend appears to be reversing. A fall in
valuations and greater risk-aversion in debt
capital markets at the start of 2016 is expected
to filter through to the PE market, resulting
in fewer company sales but more investment.
“There’s a general belief in the industry that
there will be fewer exits over the coming years,
both because the deployment pace has been
relatively low over the past years due to how
high the asset prices are, but also because
valuations are going to come off a bit,” says
Gordon Pan, President of Baird Capital, the PE
arm of Baird investment bank.
Top five PE sectors by
value 2010–Q1 2016
207.2
253.9
226.9
201.9
386.3
341.4
68.0
114.3
140.4
80.4
36.0
9.3
1.4
83.0
27.8
91.7
25.5
81.4
32.8
75.4
24.3
Trade sales
Secondary
buyouts
IPOs
PE exit strategies
2010–2016 YTD by value
(US$b)
TMT
US$910.9b,
5,544 deals
Industrials and
chemicals
US$655.8b,
5,349 deals
Consumer
US$565.3b,
3,530 deals
Business
services
US$477.9b,
3,665 deals
Pharma, medical
and biotech
US$444.2b,
2,425 deals
© Vector Forever/Shutterstock.com © Kapreski/Shutterstock.com © liskus/Shutterstock.com © Honza Hruby/Shutterstock.com ©katerinarspb/Shutterstock.com © Hein Nouwens/Shutterstock.com capitalinsights.ey.com | Issue 16 | H1 2016
9
5
PE exit strategies
2010- 2016 YTD by value



1,009
1,149
1,118
1,244
1,596
1,621
354
635
624
128
96
111
8
514
73
486
52
498
67
399
110
Trade sales
Secondary buyouts
IPOs
1
2
3
4
EY’s Julie Hood considers
five tips for navigating
the near future.
Move before the market does
There are signs of a shift, but we’re still
in a seller’s market for now. If there
is anything in your portfolio due for
realization or firms are coming to the
end of a fund’s life cycle, now is the time
to divest.
Understand what you do best
Identify your competitive advantage.
Some funds are sector focused, some
buy smaller businesses, some do buy
and build. Work out what sets you
apart and then maintain discipline in
executing that strategy.
Less debt, more value-add
Debt will be harder to obtain if
conditions continue. It will come at a
higher cost and leverage levels will drop.
This will mean genuinely adding value
will be crucial to delivering returns,
whether by breaking new geographies,
building platform investments with add-
ons or optimizing existing operations.
Double check capital structures
Firms’ existing companies may be able
to service current debt loads today,
but could struggle in the event of cash
flows dropping. With high macro and
geopolitical uncertainty and market
volatility, it’s necessary to check that
capital is structured appropriately
in portfolios.

Board level contingency plans
Use your board seat wisely to confirm
that portfolio companies have
contingency plans. Just because a
business is thriving now, that does not
mean it will fare well in a down-market.
PE lessons
EY’s Hood agrees. “At some point, the
market has got to change because of the
amount of capital that’s been raised over the
past few years. There’s been really robust exit
activity and that has translated into a record
amount of dry powder. Over the next couple of
years, we should see more invested capital vs.
distributions back to limited partners.”
Sector split
Between 2015—16 (year-to-date) the top
five sectors for PE, in terms of value, were:
technology, media and telecomms; industrials
and chemicals; consumer; business services;
and energy, mining and utilities.
Neil Wizel, Managing Director at PE firm
First Reserve, believes that 2016 will be
another challenging year. “Ultimately, our view
is that the long-term average oil price will be
somewhere around US$60 and US$70.” With
the oil price still down, now is the opportunity
to realize more invested capital.
“There wasn’t much pressure on corporates
to sell assets to buy-out firms last year. But
now, prices have been lower for longer, hedges
are rolling off and capital markets are less
cooperative, so there will be opportunities for
asset sales.”
The other end of the scale is
technology. Following Facebook’s
IPO in 2012, technology stocks
rallied and excitement spread
to unicorns (private technology
companies valued above US$1b).
However, recent volatility
has taken the froth out of
technology stocks.
Bill Ford, CEO of General
Atlantic, a global growth equity
firm managing US$18b says:
“Over the past six months we have
seen a meaningful adjustment in
private market values that reflect
a lower outlook for global growth.”
Ford is also optimistic about
emerging markets. “Of course,
these markets have significant
challenges. But growth
companies with staying power in
those geographies will present
very attractive investment
opportunities.”
And with a record US$1.3t
in global dry powder at their
disposal, funds will be grateful
for the opportunity to invest.
PE exit strategies
2010–2016 (US$b) YTD
by value
Capital Insights from EY Transaction Advisory Services
Strong and
steady
The most recent
EY Global Capital
Confidence
Barometer
results show that
US executives’
appetite for deals
has continued into
2016, albeit at
a steadier pace.
A fter a year that saw US
M&A boom to record
value, our 14th Global
Capital Confidence
Barometer (CCB) shows that
US executives are continuing to
transact at a steady pace.
The previous CCB results saw
the highest level of deal intentions,
with nearly 75% of US executives
saying that they were planning
deals. While new Barometer results
slipped to 57% — this is still the
third-highest percentage in the
survey’s history.
While trends suggest that after
the highs of 2015 we are headed
for a corresponding downturn,
there are still signs of optimism
as the first quarter of 2016
maintained the strong transaction
pace of the previous year. Survey
results show executives remain
enthusiastic about M&A and are
reshaping their growth strategies
for a world of muted macro growth
and competitive disruption.
Companies have accepted the
reality of a prolonged low-growth
environment, as reflected in our
respondents’ expectations of only
modest or stable economic growth.
But despite this, deal markets
drive on as companies continue to
pursue innovation through acquisitions. Nearly
two-thirds of US respondents say access to
new technologies is driving acquisitions across
sectors. Other deal drivers include the ongoing
demand for market share to generate return;
commodity volatility and a strengthening dollar;
and a PE-driven wave of divestitures that is
multiplying assets for sale.
Acquisition is not companies’ only means of
acquiring innovation. They are also pursuing
alliances to gain access to technologies. Almost
50% of US executives are forging such alliances.
These partnerships have not reduced the
appetite for traditional M&A, however. Half
of US respondents say acquisitions are a top
boardroom priority, more than double the rate of
their global counterparts. And while shareholder
activism has eased as a major boardroom
priority, it has not slipped from the agenda, as
nearly 75% of US respondents expect hostile bids
to become more prominent.
Several Barometers ago, we noted that the
US was “ahead of the curve” with dealmaking.
US companies emerged from the post-crisis
M&A mindset sooner and began transacting
earlier, ushering in this current global wave. In
this Barometer, we find US boards and C-suites
continuing this clairvoyant role and helping
to forge a modern, two-track deal market.
They are nimbly responding to the “digital-
everything” wave by both forging alliances
and making deals. And they are reimagining
their capital agendas to anticipate a new
competitive landscape.
Richard Jeanneret
is the Americas Vice
Chair of Transaction
Advisory Services, EY.
View from the US
© Matt Greenslade
capitalinsights.ey.com | Issue 16 | H1 2016
11
“Everything
starts with
a strategic
plan.”
Jay Hofmann and John Drennan discuss the
unique ownership structure at Trinity Consultants
and its future growth strategy.
In May, Dallas-based
environmental consulting
company Trinity Consultants
celebrated 42 years of
business. Over four decades, the
company has grown to almost 600
employees in 48 offices globally,
helping organizations comply
with environmental regulatory
requirements and optimize
environmental performance for
long-term sustainability.
Trinity Consultants performs
more than 2,000 environmental
consulting projects every
year, primarily focusing on
Jay Hofmann (JH) is
President and CEO of Trinity
Consultants, based in the
firm’s Dallas office. Previously
serving as the company’s
COO, Hofmann has been with
the company for more than
30 years.
John Drennan (JD) is
Director of Corporate
Development at Trinity
Consultants, overseeing all
M&A activity for the firm.
permitting and compliance, as well as broader
sustainability goals. Trinity has a diverse client
base in highly regulated industries, including
chemicals, oil and gas, electricity, cement,
forest products, and general manufacturing.
These are based across a number of
jurisdictions, including the US, the UK, Canada,
China and the Middle East.
A lot has changed since the company’s
founding in 1974, including its ownership
structure: today, the firm has approximately
360 employee shareholders, who collectively
own 44% of the company.
In 2007, Trinity first recapitalized with
private equity (PE), a process that was repeated
in 2011 and 2015. This process involves a PE
firm buying a majority ownership stake in the
company, along with the employees.
In August 2015, Trinity completed its third
recapitalization, partnering with California-
based PE firm, Levine Leichtman Capital
Partners (LLCP). LLCP has managed about
US$7b of institutional capital since its inception
and invests widely in middle market companies
in the US and Europe. The transaction saw
LLCP purchase controlling interest from
Gryphon Investors, who first partnered with
Trinity Consultants in 2011.
“I’ve been in this business for almost 20 years
and private equity, in my opinion, has
become the preferred method of generating
shareholder equity liquidity, at least for
companies of our size. ”
© Courtesy of Trinity Consultants
Capital Insights from EY Transaction Advisory Services
| Investing | Optimizing | Preserving | Raising | Q: Why has Trinity chosen that ownership
structure and does it give employees more
impetus from that point of view?
JH: Ever since our founder started offering
stock up for sale in 1990, I felt — certainly as
one of those employees buying shares — that
it was a strong motivator to weather the good
times and the lean times. And it also helped
motivate employees to do what we could to
grow the company. However, I will say that it
didn’t come easily. Not everyone is in a position
to invest. And, after only a short period of time
the stock was valued at a price that was not
insignificant. But, we got enough folks who
bought in and then people began to realize the
value of the opportunity.

JD: The early investors bought in before
they had any certainty of a liquidity event,
based solely on their belief in the company.
Since then, we’ve had two successful PE
transactions and we’re hoping the third will be
just as successful. It’s been a great story so
far, one that has benefited the shareholders
tremendously. I’ve been involved in M&A for
almost 20 years and PE in my opinion, has
become the preferred method of generating
shareholder equity liquidity, at least for
companies of our size.

JH: It’s not easy in the early days, trying to
convince people that it’s worth writing out a
cheque. That was the hardest part of the whole
thing, I think. Like John said, once
there were some success stories,
you’re not just the founder making
money, but others as well — then
it became easier. Part and parcel
of the success of this company
is that employees are material
owners, and they benefit from
value creation.
Q: How does Trinity Consultants
differ from its competitors?
JH: I think the differentiator has
been that we have grown the
business but largely maintained
our scope. A majority of our
business is in air quality, however,
we are quite large now for such
a company with a narrow scope.
We have great brand name
recognition in our vertical and
“Not everybody is mentally prepared
to buy into a company ... but, we got
enough folks who bought in and things
started to snowball.”
600
Over four decades,
the company has
grown to almost
600 employees in
48 offices globally.
© Courtesy of Trinity Consultants
© Courtesy of Trinity Consultants
capitalinsights.ey.com | Issue 16 | H1 2016
13
that sets us apart. Most target customers know
us as a reliable “go to” resource if they have a
Clean Air Act problem.
Once you’ve developed a brand that is known
somewhat nationally, it’s relatively easy to put
dots on the map. It’s important, because at the
end of the day, the work is sold primarily on a
local basis.
Q: How important do corporates consider
sustainability, environmental and clean
air issues?
JH: Certainly at the site level, there is
enormous attention on compliance issues.
Federal and state regulatory programs are
complex and have significant enforcement
implications, both for companies and their
responsible officials.
It’s a monetary fine, it’s an inability to
operate, or not getting your permits. From an
operations standpoint, companies can’t afford
noncompliance.
My general assessment would be that not
all companies think about sustainability in
the same way. Certainly there is a marketing
component in sustainability. Companies that
sell directly to the public are naturally more
sensitive to public perception issues and you
see that in their advertising. We see that a
little bit in our business in terms of the kinds
of assistance those companies need from us.
Q: How do you go about the dealmaking
process? What is your acquisition strategy?
JD: Everything starts with a strategic
plan. That strategic plan has three or four
main elements:
First and foremost, we want to protect our
home court — to continue to maintain market
share and grow market share in our core
business, which is air quality consulting. Four
years ago, part of our strategic plan was to
analyze where we were under-penetrated. We
were under-penetrated in California, the ninth
largest economy in the world, with revenues at
3%—4% of our total revenues. We strategically
invested there and now, in the air market,
California is about 15% of our revenue.
We also look for acquisitions that compete
with one of our existing offices. We bought
great firms in Atlanta; Baton
Rouge, LA; Irvine, CA; and in
St. Louis.
We’re looking internationally as
well and studying markets — in the
UK, Germany, and South Africa,
for example. We’re trying to find
markets and companies with
similarities to our US business.
There are other niches that we
are looking into and have invested
in. We acquired a firm in air quality
and meteorological monitoring; an
industrial hygiene and toxicology
firm based in San Francisco, which
was a very successful acquisition;
and an aquatic science firm in
Canada with two offices.
Q: What are the things you
look for in terms of business
partnerships and acquisitions?
JD: There’s got to be a highly
technical component; either
environmental or scientific. In
conjunction with our PE sponsors,
we’ve hired outside consulting
“... not all companies think about sustainability
in the same way.”
firms to help us to fine-tune our
strategic plan.
If you say, “I want to buy one
of these five firms,” you may
be waiting forever. You have to
understand in general what
you’re looking for, whether it
be in our core business, or in
adjacencies, and be willing to
act if it comes across your desk.
Many of our acquisitions are
not represented by investment
bankers or business brokers. We
reach out to people directly or
through our network of people.
We have almost 600 employees
who are telling me frequently
about a firm they ran into that’s
pretty good. Then we reach out
to them. It may take three to five
months, or it may take three to
five years to get a transaction
negotiated. It just depends
where they are in the life cycle
of their company.
For further insight, please email
editor@capitalinsights.info
Trinity
Consultants
has
approximately
360 employee
shareholders,
who
collectively
own about
44% of the
company.
44%
© Courtesy of Trinity Consultants
Capital Insights from EY Transaction Advisory Services
Introducing
digital
disruption 2.0
The newest wave
of digital disruption
has the potential
to revolutionize
business models
across a range
of industries.
The fact that streaming
has overtaken digital
music downloads in
the US should be no
surprise. Music was central in the
initial wave of digital disruption.
This was about the distribution of
intangible digital assets. The old
industry itself, the record labels
and music publishers, have been
dominated by companies like
Apple and Spotify.
The latest wave of digital
disruption is centered on
connectivity of physical assets.
Digital disruption 2.0 is about
the Internet of Things (IoT) and
has the potential to revolutionize
business models across a wide
range of industries that produce
the underlying physical apparatus.
Non-tech companies acquired
US$148b of technology and digital
assets in 2015, more than the
previous three years combined.
There was also a 23% increase in
the number of such deals. Major
players include the industrials and
automotive sectors, which account
for nearly 20% of these deals.
Industrials are in the midst
of a technological revolution.
Accelerating industrial automation
and robotics are combining with
sophisticated design software to disrupt the
value chain and challenge the fundamental
business model of many subsectors.
The automotive sector is also experiencing
a shift. The smart or connected car is now
with us, as many automotive companies strive
to be at the heart of tech advances. They
have been acquiring start-ups that augment
the interaction between drivers and their
increasingly software enabled cars. And they
are not alone. We see major tech companies
such as Alphabet eyeing the automotive sector
as the next field for their own disruption.
One of the high profile deals in the auto-
technology space was the acquisition of Nokia’s
HERE digital mapping and location services
business by a consortium of automotive leaders
comprising AUDI AG, BMW Group and Daimler
AG, for €2.8b (US$3.1b) in August 2015.
Most major auto companies learned the
lesson from digital disruption 1.0. Companies
must understand how digital changes the
direction of their industry.
The next stage in the digital revolution will
be driven by emerging technologies, including
quantum computing, real time analytics,
artificial intelligence and industrialized virtual
reality. These will build on digital disruption
1.0 and 2.0 and manifest as the joining of the
intangible and physical worlds. What sectors
are most at risk of disruption? All of them.
Companies should now be searching for the
next wave of disrupters to secure their own
future. Then plot their course accordingly.
Andrea Guerzoni
Europe, Middle East,
India and Africa
(EMEIA) Transaction
Advisory Services
Leader, EY.
View from EMEIA
© Tom Campbell capitalinsights.ey.com | Issue 16 | H1 2016
15
From sleeping
giant to roaring lion
In 2012, PSA Groupe Peugeot Citroën was at its
lowest ebb. But in the past four years, the company
has turned its fortunes around. CFO Jean-Baptiste
de Chatillon reveals how the French auto giant got
back in the race, and outlines its plans for the future.
Capital Insights from EY Transaction Advisory Services
© Paul Heartfield
capitalinsights.ey.com | Issue 16 | H1 2016
17
The headquarters of PSA Groupe
Peugeot Citroën, Europe’s second-
largest carmaker, resides on the same
tree-lined boulevard as the famed
Parisian landmark the Arc de Triomphe, an
evocative symbol of victory over adversity.
The monument also provides a perfect
metaphor for the fortunes of the French
automobile giant. Over the past year, CFO
Jean-Baptiste de Chatillon has engineered
a spectacular turnaround, which saw the
company move from posting a €555m
(US$624.7m) loss in 2014 to a net profit of
€1.2b (US$1.35b) in
2015. The outlook for the
future is just as positive:
the company has targeted
a 10% increase in revenue
by 2018, with additional
growth of 15% by 2021.
However, such
optimism seemed little
more than a pipe dream
when de Chatillon became
CFO in 2012. “I guess
that nobody wanted
the job when I took
it,” he jokes. “We had
accumulated losses for
2012—13 of €7b (US$7.8b). The priority at
that time was to fix the holes in the boat and
to keep it afloat, and to get some money inside
the company as quickly as possible.”
In order to “fix the boat,” the company
undertook a number of capital-raising
measures, including selling real estate for
approximately €1b (US$1.1b), and divesting
its logistics unit for €900m (US$1b).
Driving change
However, the CFO says that even after
raising this capital, the situation remained
unsustainable. To improve its fortunes, the
company had to take a more radical approach.
Peugeot needed to regain the trust of its
shareholders, suppliers and clients. “In this
industry, you cannot exist if you don’t have
enough cash on your balance sheet,” says de
Chatillon. “The stakeholders and suppliers are
the key to reducing costs in this industry.”
In 2014, the company built a new
shareholder base as a way of moving forward.
The French Government and the Chinese carmaker Dongfeng
each invested €800m (US$900m) in the then-ailing
manufacturer, while a further €1.4b (US$1.58b) was raised
from existing shareholders. “[With this investment], we
would effectively be at the right side of cash on the balance
sheet to be able to restructure the business and regain the
trust of all the stakeholders.”
The company also de-risked its financing division by
partnering with Banco Santander, allowing the Spanish
banking group to provide car finance for the company in 11
European countries. “We had to cut the risk in our financing
division to give comfort to the new shareholders. That was
the trigger for the deal,” says de Chatillon. “In addition,
it freed up a lot of capital to refinance the auto business.
Santander is doing the financing and the risk analysis, and
we are doing the business. So we have the best of both
worlds. And this laid the groundwork for us to become
competitive again in terms of financing.”
Back in the race
With financing in place, Peugeot set about implementing a
radical program of change, which would return the company
to its position as one of Europe’s leading car manufacturers.
“There was an understanding [among] all the teams, from
upper management to the production line, that what we had
been doing for years was not a solution anymore,” says the
CFO. “We needed to start a new culture.” This was the Back
in the Race initiative, which was built on three distinct pillars:
an increased focus on cash management, the excising of
loss-making divisions and a revision of pricing.
For years, Peugeot was driven by engineering and
technical performance. But, according to the CFO, there was
no real culture of cash management. De Chatillon sought to
address this in 2014. “We set up Back in the Race to save
€1b (US$1.1b) in working capital requirements in three
years,” he says. “We managed to achieve €1.2b (US$1.36b)
in one year, because we had extremely precise targets for
each division.”
As part of the plan, the company targeted divisions that
were losing money. “There is no [license] for any business in
this company to be loss-making. Either you fix it, you sell it
to someone who can fix it, or you shut it down.”
With this new laser-targeted approach to savings, the
company sold its motorcycle division to Indian company
Mahindra, and its football team FC Sochaux to Chinese
investors Ledus.
The final piece of the puzzle was to change their pricing
structure in line with those of their rivals. “We have cars
that are as good as our competitors’,” says de Chatillon.
“So we have to price them accordingly. You cannot survive in
this industry if you are not effectively valuing your product.
We increased our pricing power significantly across all three
Capital Insights from EY Transaction Advisory Services
Peugeot employs over 184,000 people
worldwide. Around 75% of them are based in
Europe and 25% in the rest of the world.
1929
Peugeot unveils its first
mass-produced car —
the 201.
1810
Peugeot is founded as a
manufacturer of coffee
mills and bicycles.
 Pre-1900
1890
First petrol car is
manufactured by Peugeot.
“There is no [license]
for any business in
this company to be
loss-making. Either
you fix it, you sell it to
someone who can fix it,
or you shut it down.”
1900
brands [Peugeot, Citroën, and DS] in all the
regions and that, of course, goes directly to
the bottom line.”
And the Back in the Race initiative has paid
off early. In February, the company announced
that its auto division had hit its 2019–2023
target of 5% operating margin. Peugeot also
reported free cash flows of €3.8b (US$4.3b)
for 2015 and net cash of €4.6b (US$5.2b).
The company can now focus on the future
with renewed vigor. “We are looking at a new
profitable growth plan, which will capitalize
on the efforts of Back in the Race to build
the business,” says de Chatillon. “This will be
a standalone plan, but we are open to any
opportunity that would create value for
the shareholders.”
A spin around the regions
A major part of the future plan is to build on
international growth in order to become less
reliant on European sales, which accounted
for around 60% of total sales in 2015. The
company’s second-largest market is China,
where sales were slightly down in 2015 (-0.9%)
as a result of the country’s slowing growth.
Although fierce price competition means the
market is challenging, Peugeot’s partnership
with Dongfeng has helped the company maintain a strong
position in the country. “It’s quite a piece of luck for us to
have two senior executives [from Dongfeng] on the board
who are specialists in the Chinese car industry,” says
de Chatillon. “They help us to find the right local suppliers
with the right cost structure.”
The company’s third-largest market is the Middle East and
Africa, where it saw a 6.4% increase in sales for 2014—15.
“We have a strong name and very good base in a
number of countries in the region, and we are looking
to develop further,” says de Chatillon. To that end,
Peugeot is embarking on a new joint venture with Tehran-
headquartered manufacturer Iran Khodro to produce
vehicles in Iran.
“We are the first with this level of agreement [in Iran],”
says de Chatillon. “The deal is important for us and for
Iran.” Peugeot has been a leading auto brand in the country
for many years. “In Iran, if you see your father driving a
Peugeot, then the children also want to drive a Peugeot,”
he says. “But they want a good one, and during the
sanctions period, we were not able to produce them to the
right level of quality.
“The investment that we are going to do together in the
months to come is very promising because we have a very
strong name, a lot of recognition in Iran, and we are looking
to increase market share further.”
One particularly challenging region in the past few years
is Latin America. To make efficiency savings, Peugeot
capitalinsights.ey.com | Issue 16 | H1 2016
19
Peugeot is the second-largest carmaker in Europe
with 11.5% of the market.
Peugeot’s CFO explains how the drop in oil prices has affected the company
The oil question
1978
Peugeot acquires
Chrysler Europe.
1976
The PSA Peugeot Citroën
Group is created by the
merger of Citroën and
Peugeot.
1980
Peugeot merges
with UK car
manufacturer
Talbot.
1992
Citroën sets up joint venture
with Dongfeng Motors to
assemble Citroën ZX models
in China.
European car sales continue to
grow in 2016, despite worries
about slow economic growth
and the potential of a UK exit
from the EU. Improved sales
in Europe and the US have
coincided with record falls in
oil prices. In the first quarter
of 2016, car sales in Western
Europe were up almost 8%
from 2015, while the oil price
was stuck at around US$40 a
barrel. Tumbling oil prices are
not the only cause of the surge
in sales. Pent-up demand and
cheap financing are also a big
part of the equation. But de
Chatillon acknowledges that
falling oil prices have played a
key role in promoting sales and
cutting costs for Peugeot.
“In Europe, the demand for
cars is up. It is costing people
less to drive, so we are seeing
strong demand in Europe,
which is not directly linked
to the vitality of the region,”
says the CFO. “And the fall has
promoted significant savings
for companies like Peugeot, in
terms of the costs of logistics
and plastic. One barrel of petrol
[is used in the making of] each
car, so [the fall in oil prices] is
directly linked to the cost of
production. That improves our
profit and loss significantly.”
However, the drop in oil
prices can be something of
a two-edged sword, because
it adversely affects regions
that are reliant on energy
production. “When the falls
become too pronounced, it
can trigger a series of
incidents, which depress
countries such as Algeria,
which is a very big market for
us,” says de Chatillon. “[Algeria
is] closing its market, which
has recently [introduced]
quotas, and is not a free
market anymore. This reduces
our export capacity and
distorts some exchange rates,
which is not helpful for us.”
1950
Capital Insights from EY Transaction Advisory Services
2000
Chief Financial Officer and Executive Vice-President of
Information Systems, PSA Groupe
Age: 50
CFO since: January 2012
Educated: Université Paris-Dauphine and Lancaster
University
Previous positions:
De Chatillon first joined Peugeot in 1989 and has since
held positions in management, finance, marketing and
commercial management in France and abroad. His
most recent positions at PSA Peugeot Citroën include
Director of Warranties and Group Financial Controller —
the latter post he held from May 2007 to January 2012.
Since 2003, he has also served as Chief Executive of
Citroën Belgium Luxemburg.
Jean-Baptiste de
Chatillon’s CV
Peugeot CFO Jean-Baptiste de
Chatillon explains how Peugeot
is meeting the two fundamental
challenges facing the industry
“The industry has a number of challenges, but the
main ones are changing consumer needs and regulation.
Mobility is a basic human need, and the industry is
heavily impacted by changes in the way people live.
For example, we currently face the issue of how
people are looking at mobility in terms of owning a
car vs. using a car to be mobile. To ensure we are well
positioned in this [new mobility] market, we signed a
deal last year with the Bolloré Group [which runs the
Autolib car-sharing scheme in Paris] to offer mobility
solutions using electric cars.
We have also been heavily impacted by the
regulations around the car industry — particularly in
recent years, with the growing demand for security and
for low-carbon cars.
In terms of reducing CO2 emissions, Peugeot is the
leader in Europe. This is [thanks] to the high level of R&D
that has been done on a range of engines. In addition,
we are in a very good position on diesel, which is very
much in the spotlight at the moment. Four years ago,
we made the decision to move all diesel vehicles to
selective catalytic reduction (SCR), which is the best
technology for diesel, in terms of low emission of
nitrogen oxides (NOx).”
The state of the market
“All the data [we have gathered] is a great
way to transform the way we serve our
clients. The industry is obviously obsessed
with cars, but now we have a great
opportunity to become obsessed with clients.”
1998
Peugeot car parts subsidiary ECIA
completes a friendly acquisition of
equipment manufacturer Bertrand Faure.
The new company is named Faurecia.
1998
Peugeot acquires
car manufacturer
Sevel Argentina.
2002
Joint-venture Dongfeng Peugeot Citroën
Automobile (DPCA) created with Dongfeng
Motors to expand cooperative production of
Peugeot and Citroën models in China.
2005
Joint PSA Peugeot
Citroën - Toyota
production plant
inaugurated in Kolín,
Czech Republic.
implemented its Back in the Race
program in the region. “There was
a large factory with a lot of fixed
costs and very few sales,” says
de Chatillon. “That’s a recipe for
disaster. So the first thing we did
was to manage the region with its
own break-even point, because we
can’t have a loss-making region.
“We divided the fixed-cost base
in half. It was then that people
discovered that they could do just
as well with half of the resources
they had before, because decision-
making is quicker and more
efficient. Once you’ve taken out
hundreds of millions in costs, then
you see that you can reinvest
differently, with maximum
frugality and a very high rate of
localization. You need to have
local suppliers [to] build a
business that is effectively
protected from the exchange
rate’s erratic movements.”
A regional recession saw 2015
sales in Latin America drop 21%
compared with 2014. However,
the CFO is bullish about facing
the challenges. “The region is
in bad shape economically,” he
says. “Markets are down, and
this doesn’t make things easy
for us. But it’s very stimulating
to look for solutions and to work
on new efficiency measures. The
investments that we are preparing
in these regions will be profitable.”
It was also revealed in April that
Peugeot anticipates a return to
the US market after more than
two decades’ absence. Peugeot’s
10-year plan to re-enter the
world’s largest car market will
begin in 2017, with a car-sharing
scheme. If this proves successful,
the company will look to relaunch
its retail operations in the country.
Deals on wheels
The dramatic turnaround in
Peugeot’s fortunes has led to
speculation about acquisitions. “We are open to more M&A
now that we have a very strong balance sheet again,” says
de Chatillon.
In 2015, the company acquired Mister Auto, an
e-merchant that deals in spare parts. Peugeot has chosen
to keep the company completely autonomous. But the CFO
says that it nonetheless is “a very good enabler of profitable
growth” because it enlarges the automaker’s client base.
De Chatillon is also keen to talk to other auto giants,
including Fiat Chrysler, General Motors and Toyota, about
potential collaboration. “These partnerships stimulate us to
improve the way we do things,” he says. “However, the main
criteria for these partnerships is whether they improve [our]
profitability or not. Of course, you have to have the vision to
see how these partnerships will work out over time, because
they are long lasting. But globally, the way we allocate cash
is strictly on the criteria of value creation. Our collaborations
save us money and create value for our shareholders.”
Full speed ahead
The Back in the Race plan has enabled the company to drive
itself forward with renewed optimism. And for Peugeot, that
future will be built around cutting-edge technology, stringent
cost control and a focus on customer needs.
The company looks to review the future needs of drivers
and to anticipate changes in car usage patterns. “All the
data [we have gathered] is a great way to transform the way
we serve our clients,” says de Chatillon. “The automobile
industry is obviously obsessed with cars but now we have a
great opportunity to become obsessed with clients.
“I see a bright future if we manage this properly. We have
millions of people using our cars and going through our
websites. We don’t currently use as much of the data we
receive as we should and we need to make the most of it.
The future of this industry will be centered on giving clients
much more than just a car.”
This focus on the changing needs of customers and
advanced technology is all part of the company’s new Push
to Pass plan, announced at the start of April. This project for
the 2016–2021 period is set to build on the efficiency and
agility that characterized the Back in the Race era. At the
same time, the new plan will also differentiate the company’s
brands and ensure profitable growth in all operating regions.
The CFO is excited by the prospect of entering a new era.
“Push to Pass is our future. It is named after a small button
in competition cars that releases a reserve of power to
[help you] overtake your competitors,” he says. “We think
that with the culture we are developing in terms of overall
performance and financial management, we have this
reserve of power. The team spirit is there [for us] to push
and get this extra boost to develop more performance for
our shareholders.”
capitalinsights.ey.com | Issue 16 | H1 2016
21
2010
The role of
the CFO
PSA Peugeot Citroën Groupe
CFO Jean-Baptiste de
Chatillon shares his top
four fundamental traits for
C-suite success.
Be individual.
“I think what makes a CFO
is the person. If it were just
a role based on standard
criteria, then it wouldn’t be
fun. You make the role with
your input into the team.”
Be an enabler.
“The CFO today is there,
first, to enable things, not to
prevent them. That’s a big
challenge, because you need
to evolve how you control the
company every month. You
need a deep understanding of
the business to be an enabler,
not a blocker.”
Be a protector.
“Of course, you need
to protect the company
financially. You need to make
sure that there is enough
cash in the company to
protect it from the ups and
downs. And then, depending
on the capacity of the
incumbent, you can also
participate in the strategy of
the company.”
Serve the company.
“A CFO needs to be
transparent and needs
to serve the company.
We are there to serve,
rather than to try to be
the main protagonist.”
2016
Peugeot introduces
new "Push to Pass"
strategic plan for the
2016—21 period.
2010
Peugeot marks
its bicentenary
with a new, more
dynamic logo.
2011
BMW and PSA Peugeot
Citroën invest €100m
euros in a new hybrid
technologies joint venture.
2014
Final agreements are signed
between PSA Peugeot Citroën,
Dongfeng Motor Group and the
French State.
2012
PSA Peugeot Citroën
and General Motors
create a long-term
global strategic alliance.
2013
PSA Peugeot Citroën inaugurates
new plant in Shenzhen (China) in
joint venture with China Changan
Automobile Group.
2014
CEO Carlos Tavares introduces
"Back in the Race"; the PSA
Peugeot Citroën strategic plan
for 2014— 18.
Disruption
in sight
The industrial Internet of Things is on
course to revolutionize the way the
world does business.
What do a bulldozer and a hospital
MRI scanner have in common?
Both are high-value assets and
both are utilized to a fraction of
their potential. But that is about to change.
The rise of the industrial Internet of Things
(IoT) — technology that allows objects to send
and receive data — promises to increase hugely
the shareability of such assets, triggering a
surge in utilization rates.
The idea of connecting industrial assets to
digital networks is not new, but according to Paul
Brody, EY Technology Sector Strategy Leader:
”We’re now shifting from older, proprietary
models of interconnection that tend to be limited
to a factory or occasionally an enterprise toward
more of a standardized, internet-accessible
mode of connectivity and collaboration.”
The GE Foundation predicts that the collision
of machines, data and analytics will become a
US$200b global industry from 2015—17. And
Research firm Gartner predicts that 6.4 billion
connected things will be in use worldwide in
2016, up 30% from 2015.
This explosion of all-pervasive connectivity
is set to boost shareability, making it easier to
generate new revenue streams from industrial
assets that have traditionally lain idle between
jobs. This paves the way for industrial-sharing
apps built along similar lines to consumer
offerings such as those of transport network
company Uber and accommodation-sharing site
Airbnb. It allows companies to provide access to
assets without needing to own them.
6.4b
connected things will
be in use worldwide
in 2016, up 30%
from 2015.
Source: Gartner
Capital Insights from EY Transacti