by Mark Fontecchio
A series of tentative steps into telematics turns into a plunge as I.D. Systems prints its largest deal to date, continuing to move its business beyond trucking asset management. The $140m purchase of Pointer Telocation gets the buyer telematics systems and software for freight, automotive and insurance industries, and marks its third telematics acquisition. Still, the scale of today’s bet outweighs any previous wagers, as the addition of Pointer more than doubles I.D.’s annual revenue.
According to 451 Research’s M&A KnowledgeBase, the pickup of Pointer eclipses I.D.’s combined spending for all other tech targets by 5x. And it’s paying a premium as well. The median enterprise value multiple for fleet management and telematics transactions has been 1x trailing revenue, according to the M&A KnowledgeBase. I.D. is valuing Pointer nearly a full turn above that – continuing a rise in valuations among telematics targets.
To illustrate that, in the past three months Bridgestone bought TomTom’s telematics business for $1bn at a 6.5x multiple on trailing revenue, while Volkswagen inked a telematics deal of its own with the $121m purchase of WirelessCar from Volvo, which went off at a 2.9x multiple. According to a 451 Research Voice of the Enterprise: Internet of Things survey from last year, three-quarters of respondents in the transportation sector cited fleet tracking and telematics as an existing or future IoT use case, more than any other.
Today’s move also increases I.D. Systems’ international reach: Most of its sales are in North America, while Pointer Telocation’s revenue is concentrated in its home country of Israel as well as South America. In addition, nearly two-thirds of Pointer’s revenue is recurring, compared with less than 40% for I.D. And finally, not only does I.D. more than double its revenue with the acquisition, it also adds a profitable company compared with its own balance sheet awash in red ink. Canaccord Genuity advised I.D., while ROTH Capital Partners banked Pointer.