Smart Meters Industry Consolidation Continues with Xylem's Sensus Acquisition

On August 15, Xylem, a global water technology company, announced that it had acquired Sensus in an all-cash transaction worth $1.7 billion. Sensus is a global provider of smart meters (with 80 million metering devices in the field), network technologies, and advanced data analytics, with a focus in North America. The company’s roots lie in the smart water metering business, though it maintains a significant installed base in electric and gas utilities. Some of Sensus’ notable electric advanced metering infrastructure (AMI) deployments include Southern Company, NV Energy, Portland General Electric, Alliant Energy, and Cleco Power LLC.

Industry Consolidation

As markets have matured and smart grid technologies have evolved, new industry motivations such as interoperability and deep integration among technologies have emerged, as evidenced by a string of recent industry consolidation transactions. Aclara made headlines in December 2015 with its acquisition of hardware provider GE Meters. This was quickly followed by another acquisition of Tollgrade communications earlier this month. Additionally, Honeywell completed its acquisition of Elster’s metering business in January of this year. The Xylem/Sensus transaction is just the latest example of industry consolidation, and it sets the company up to be a major player in the smart water market.

Smart Water Market

While smart electric meters have traditionally maintained the lion’s share of smart meter coverage, higher penetration rates and increasing concerns over water security offer growth potential for smart water meters and associated technologies going forward. With the low cost of water that many of us experience today, it’s easy to take this increasingly scarce resource for granted. Yet, the United Nations is expecting a 40% shortfall in water supply by 2030. This alarming prediction is the product of a variety of factors—growth in energy and food consumption, wasteful irrigation practices, inefficient pricing, industrial growth in emerging economies, and pollution and water quality issues, among others. All of this is suffice it to say that responsible water management through the use of smart meters and advanced data analytics among other technologies is going to play an increasingly vital role in global security—an opportunity that Xylem is now primed to take advantage of.

Sensus has traditionally been focused on North America with limited international deployments; nearly 70% of the company’s 2016 revenue was generated in the United States. This may be set to change as Xylem has highlighted its expansive customer relations and ability to extend the reach of Sensus’ technologies to new global markets. Combining the capabilities and scope of these two companies sets Xylem up for strong growth potential and the opportunity to be a global leader in smart water technologies moving forward.