By Claire Zhong, Zen Suzuki (UPenn Wharton), Hippolyte Meuleau, Mikail Boudouda (Grenoble Ecole de Management)
Overview of the deal
Acquirer: Hyundai Motor Group
Target: Boston Dynamics
Implied Equity Value: $1.1bn
Total Transaction Size: $880m
Closed date: by June 2021
Target advisor: Unknown
Hyundai Motor Group has confirmed its acquisition of an 80% stake in Boston Dynamics as the remaining 20% remains under the control of SoftBank. Half of the transaction will be financed by Hyundai Motor and the remaining amount by subsidiaries of the group like the automotive parts manufacturer Hyundai Mobis Co. The transaction brings the value of Boston Dynamics to $1.1 billion. It takes place after the arrival of CEO Chun Euisun last October and is part of his long term vision to become a Smart Mobility Solution Provider and to develop the robotics sector that will represent 20% of its business by 2025 with the investment of $1 billion.
This deal will bring diverse synergies as both sides share a view of the transformational power of mobility.
"This transaction will combine the capabilities of Hyundai Motor Group and Boston Dynamics to spearhead innovation in future mobility." - Chung Euisun, Hyundai CEO
Company Details: (Acquirer - Hyundai Motor Group)
Based in Seoul, South Korea, Hyundai Motor Company manufactures, sells, and exports passenger cars, trucks, and commercial vehicles. The Company also sells various auto parts and operates auto repair service centers throughout South Korea. With more than 16,000 employees working in 40 facilities in 10 states, including its $1.8 billion Alabama auto plant, Hyundai Motor Group is a well established U.S. investor, manufacturer and innovator. Hyundai Motor provides financial services through its subsidiaries.
Founded in 2000, headquartered in Seoul, South Korea
CEO : Chung Eui-sun
Number of employees : 16,000
Market Cap: $38.99 bn (as of 24/12/2020) (for all conversion, 1KRW = 0,00091 $ as of 25/12/2020)
EV : $82.888bn (as of 25/12/2020)
LTM Revenue: $93.176bn
LTM EBITDA: $5.911bn
LTM EV/Revenue: 0.8895x
LTM EV/EBITDA: 14.02x
Company Details: (Target - Boston Dynamics)
Boston Dynamics is a company specialized in engineering and robotics. It was founded as a spin-off from the Massachusetts Institute of Technology in 1992. The company is known for developing dynamic robots, mainly for military use. However, it launched in 2019 its first marketable robot, Spot. But the company also develops other robots such as Handle, a robot designed for logistics, or Atlas, a humanoid robot. Among all its products, Boston Dynamics and Shark Robotics joined forces in 2020 to market a decontamination robot in the context of the coronavirus pandemic
Founded in 1992, headquartered in Waltham, Massachusetts, USA
CEO: Robert Playter
Number of employees: Between 150 and 200
Market Cap: Not listed
EV: $1.1B considering Hyundai Motor Company bought 80% for $880M and Softbank retained 20% of its stakes
Annual revenue 2020: $43.17 million
LTM EV/Revenue: 25.48 with the EV detailed before
Projections and Assumptions
The purchasing of a majority stake in Boston Dynamics by Hyundai indicates the pace at which automakers are racing to develop their own versions of environmentally friendly, innovative, and autonomous cars. This acquisition will also likely be beneficial for Hyundai’s production processes as they will be able to leverage Boston Dynamics’ robot technology.
Aside from cost synergies and engineering know-how that Boston Dynamics hopes to realize from the partnership, Hyundai will also lend help beyond the manufacturing process. Having recently commercialized Spot and preparing for Handle’s upcoming commercial launch in April, Boston Dynamics has been focused on sales, customer service and quality control – areas that they still lack expertise in as a long-time research firm. Hyundai will be able to offer their extensive experience as a mass market manufacturer to address these shortcomings and increase sales.
The decision to acquire a majority stake in Boston Dynamics by Hyundai Motor Group is focused on its growth potential and broad range of capabilities. For high-performance robots equipped with vision, navigation, and intelligence, Boston Dynamics has numerous main technologies. Hyundai hopes that this advanced research can aid them in their development of products such as the “ultimate mobility vehicle”, a concept vehicle that combines wheels with robotic legs. Boston Dynamics is also based in the two main robot cluster regions of Boston and Silicon Valley, which is useful for sourcing key robotics talents and partnering with competent partners.
Hyundai Motor Group will be a strategic partner for Boston Dynamics to provide access to the in-house manufacturing capabilities of Hyundai Motor Group and cost savings resulting from scale efficiencies. Boston Dynamics will benefit significantly from new resources, technology, associated customers, and the global business presence of Hyundai Motor Group to expand commercialization prospects for its robot products.
The Boston Dynamics investment furthers Hyundai's technology portfolio that explores opportunities for both service robots and logistics robots. Ultimately, the acquisition feeds into Hyundai’s goal to establish itself as a Smart Mobility Solution Provider. In environments where automation has been difficult to introduce, service robots such as Spot have the ability to perform dull, dirty, and dangerous tasks. Boston Dynamics will extend Hyundai's presence in logistics robotics with its computer vision solution, Pick, for depalletization, and its mobile warehouse robot in progress. Research and Markets forecasts the global robotics industry to grow at a CAGR of 13.5% over the next 5 years, and believes the pandemic has had a positive impact by necessitating the increased use of robots to address social distancing and reduced
Risks and Uncertainties
One of the biggest reasons why Hyundai has chosen Boston Dynamics is because of ‘Spot’ which has a growth potential. However, it will be a while before the company sees BD’s technology become profitable as there hasn’t been a sizable niche in the market where ‘Spot’ is used commercially. Although Boston Dynamics began selling the robot at $74,500 earlier this year, their sales figure of 400 units amounted to only about $30 million in revenue, a mere fifth of the $150 million cost Softbank incurred. This lack of profitability has pushed several other robotics companies to cease operations, including home robot manufacturers Mayfield Robotics and Anki in 2018 and 2019 respectively.
Another uncertainty is what the relationship will look like once BD is acquired. Boston Dynamics, through their past 2 acquisitions, have been known to stay quite autonomous from their parent company post-acquisition. This may present as a challenge as the companies work alongside each other. While Hyundai currently shares Boston Dynamics’ vision in biped and quadruped humanoid robots in sectors such as caregiving, this presents a long-term investment that may not align with Hyundai’s obligation to turn annual profits. Frictions may arise from Hyundai’s goal of commercialization and Boston Dynamics’ focus on research and innovation.