As the market for fleet management keeps growing, so too does the pace of M&A (Mergers and Acquisitions) in the space. Industry insiders give their take on what is happening, and look to the future of fleet management and related M&A activity.
The market for fleet management is set for explosive growth. At the same time, the industry is changing gears and moving towards a business model that leverages data and the growing Internet of Things to expand recurring revenue streams.
The fleet management market could reach $50 billion by 2020. As could be expected, this has led to increased M&A activity, which seems to be following several different paths.
As I described in another article here on the techandmediawatch blog, many companies within the industry are pursuing what seems to be similar M&A strategies in order to position themselves to take advantage of the expanding market.
They are far from the only ones making acquisitions, as companies in related verticals, such as the insurance industry, are also stepping up acquisitions of fleet management companies and related technology.
I spoke with Marijan Mumdziev, Advisory Board Member at Amodo, David Rodriguez, Senior Vice President of Marketing at GreenRoad Technologies and Sam Chapman, Innovation Leader and Co-founder at The Floow, about what they are seeing from their position within the industry.
Jakob Sand (JKS): When looking at the fleet management, several of the larger companies seem to be looking to consolidate their market presence. There also seems to be a growth in start-ups offering new services, many based around processing the growing amount of data available. Where do you see the industry at right now?
David Rodriguez: The general fleet management industry, which includes telematics services, can be broken up into several different components. For instance dominant players like FleetMatics and Telogis focus on the traditional legacy needs of most fleet managers, such as tracking, routing and scheduling.
Newer technology firms like GreenRoad and a few others are focused more on approaching fleet and driver management from a change management perspective, helping safety and fleet managers optimize their fleets by focusing on the drivers and their driving habits.
The M&A activity in the telematics industry continues to accelerate with strategic acquisitions happening at a regular pace since 2013.
Overall telematics firms are vying for users – or in-vehicle installations. The more penetration they gain into to total vehicles worldwide, the more ability those same firms have to expand the total wallet with a customer.
This is what drove acquisitions like WABCO buying Transics International, Fleetmatics’ purchase of Ornicar SAS and TomTom acquiring Coordina.
Because newer technologies, like driver behaviour, are continuing to enter the market, we believe that M&A activity will continue in the U.S and Europe markets.
Marijan Mumdziev: I would split the current M&A into two parts. On one hand, we have what is happening within the industry. Here, the driving force is consolidation and acquisition of customer bases, supplemented with acquisitions of relevant technology.
The other trend is that companies from outside the fleet management industry, such as insurance companies, are looking at how companies in the space can help their offerings. This has also led to a number of acquisitions.
Sam Chapman: Telematics is a growing market in the UK, Europe, US, Canada and increasingly Asia – with technology being used through individual insurance premiums and fleet vehicles. Whilst the technology is progressively being used more to lower car insurance premiums and manage risk in driver behaviour through educative insight through smartphone applications, we have found that telematics is becoming integral to studies in air pollution and therefore affecting health research and supporting larger movements in traffic management and vehicle pollution.
There a significant number of mergers and acquisitions that have taken place over the last few years within the industry, mainly led by firms that have not maintained market share that instead taking external investment or making acquisitions to remain competitive. Namely consumer facing organisations wanting their own ‘telematics arm’, so to speak. As the use of telematics increases – especially in emerging markets where the technology is still relatively untested – I cannot see that this slowing in the coming months or years.
Jakob Sand: The market is continually growing, and as you say, new players like insurance companies are entering the space. At the same time, the continual technological development is leading to new solutions and opening new doors for fleet management. Where do you see the industry – as well as M&A in the space – heading over the coming years?
Marijan Mumdziev: I do not think that the overall trend will necessarily be one of consolidation. Perhaps for core services, but not beyond that.
As the market keeps growing, there is likely to be a segmentation with niche ecosystems evolving where companies offer products that are optimised for each specific industry. A construction fleet has different needs than a public transportation fleet, for example.
With regards to the likes of insurance companies who are ‘buying into’ the industry, there is likely to be many companies and start-ups that establish themselves along the value chain.
To put it bluntly, insurance companies are very skilled at looking at demographic data. This is a traditional strength. They are not used to working with the kind of data gathered by fleet management, so at the moment their approach is to save everything.
Finding meaning and business intelligence in that data requires big data analytics. And a marked trend for the industry as a whole will be a marked rise in demand for big data analysts, which in turn leads to a fertile market environment for start-ups who can deliver these kinds of services.
One challenge on the horizon is consumer data and regulation of what companies can gather – and resell. Many parts of fleet management is deeply dependent on this data, and changes to laws and regulations could affect all companies in the space.
David Rodriguez: Despite the growing market maturity, the number of fleet management solution providers continues to grow, including start-ups and new entrants with fleet-related businesses.
As telematics solutions continue to demonstrate value, the number of vehicles being fitted with newer technologies will continue to grow. And fleet managers are not only seeing savings as result but they are also introducing incentives that support better driving habits and adoption of this newer technology.
Technology companies providing driver behaviour and fleet safety solutions will most likely provide industry best tracking, routing, vehicle health, and compliance solutions but will also go further and provide complex driver behaviour solutions including everything from in-vehicle feedback, video integration, hours of service and mobile based solutions for those who are trying to move away from bulky in-vehicle hardware.
Sam Chapman: Telematics is moving towards an increased driver penetration within fleets, heading ever closer towards 100%. Private vehicles using the technology has grown from a minority to now blossoming telematic device penetration. Telematics technology is also being factory fitted by auto companies in new vehicles, which will soon make most cars rolling off the production line readily equipped with telematics.
Telematics is also changing in that it is no longer a straightforward black box gathering data. Instead, it is now a more complex system that can:
1) Bring diversification and grow a number of new data led services.
2) Act as a means to channel feedback information back to drivers.
New business services using anonymous data will help to deliver a range of supplementary services, for example: transport network optimisation, vehicle pollution monitoring, congestion understanding, emergency incident handling, city planning and architecture, locational retail demand and audience.
Feedback will in particular, via education of driving, decrease overall system risks but this can also help to provision customer contact points, provide affiliate deals and cross sell channels. Telematics data capture is also evolving with the advance of technology this will give rise to improved mobility sensor usage such as in car sensors such as radar.
This post is written by Nina Chesterton, Manager, Marketing & Business Development, Global TMT