By Greis Geata, Riccardo Colombo, Lorenzo Mirone and Federico de Rosa (Bocconi University), Alexander Bergmüller, Fritz von Storch, Huang Haozhe (IE Business School)
Overview of the deal
Acquirer: Panasonic Corporation
Target: Blue Yonder
Implied Equity Value: $8.5B
Total Transaction Size: $7.1B
Closed date: H2 2021
On the 23rd of April, Panasonic Corporation announced the acquisition of Blue Yonder, a leading end-to-end software platform and pioneer company in the AI/ML-Driven Supply Chain. The agreement, reached between Panasonic Corporation and the existing shareholders New Mountain Capital and Blackstone, will enable the bidder company to purchase a majority 80% stake of Blue Yonder. The acquisition is the final step of a strategic relationship Panasonic and Blue Yonder initially established with a partnership in January 2019 and will further Panasonic’s consolidation with a 20% ownership stake acquired in July 2020.
The acquisition of an end-to-end platform driven by artificial intelligence and machine learning strengthens Panasonic’s portfolio and accelerates the digital transformation and the shift to a customer-centric focus strategy. The combination of Panasonic’s experience in Internet of Things and production engineering with Blue Yonder’s innovative “system of intelligence” for its retail and logistics customers will deliver a positive value creation for the stakeholder of both companies, and a competitive and strategic advantage in autonomous and edge-aware supply chains market.
“I’m extremely happy to welcome Blue Yonder and its associates to the Panasonic Group. By merging the two companies, we would like to realize a world where waste is autonomously eliminated from all supply chain operations and the cycle of sustainable improvement continues. ” - Yuki Kusumi, CEO (Panasonic)
Company Details: (Acquirer - Panasonic)
Panasonic Corporation, formerly known as Matsushita Industrial Company, Ltd., is a manufacturer of consumer electronics products and electric appliances. The company, originally an electric lamp socket and plug manufacturer, was founded in 1918 by Konosuke Matsushita and is headquartered in Kadoma, Japan. Panasonic operates through five main business units: appliances, life solutions, connected solutions, automotive, and industrial solutions. The conglomerate has a primary listing on the Tokyo Stock Exchange and a secondary listing on the Nagoya Stock Exchange. It also is part of the Nikkei 225 and TOPIX indices.
Founded in 1918, headquartered in Kadoma, Japan
CEO: Yuki Kusumi
Number of employees: 245,500
Market Cap: $27.86B (as of 23/04/2021)
LTM Revenue: $68.89B
LTM EBITDA: $6.62B
LTM EV/Revenue: 0.3x
LTM EV/EBITDA: 3.8x
Company Details: (Target - Blue Yonder)
Blue Yonder Group, Inc., formerly known as JDA Software Group, is a provider of software solutions for business planning and execution. The company was founded in 1985 and is headquartered in Scottsdale, Arizona. It leverages Artificial Intelligence and Machine Learning to develop supply chain management, manufacturing planning, retail planning, store operations, and category management solutions. With these offerings, Blue Yonder serves the manufacturing, distribution, retail, hospitality, transportation, entertainment, and services industries.
Founded in 1995, headquartered in Scottsdale, Arizona (USA)
CEO: Girish Rishi
Number of employees: 5,500
Market Cap: N/A (privately held company)
LTM Revenue: $245.5M
5Y Average EV/Revenue: 1.8x
5Y Average EV/EBITDA: 7.5x
Projections and Assumptions
A first short-term consequence will be product synergies, i.e. diversification, as the transaction will allow Blue Yonder's software to be combined with Panasonic's traditional business of selling hardware.
This acquisition will immediately facilitate Panasonic's digital transformation process by jointly developing technology for logistics, retail, and production.
The two companies will be able to put the first synergy effects into practice immediately, for example, they will be able to monitor inventory levels in the shop with Panasonic's technology and send the data to Blue Yonder's supply chain software to ensure timely and accurate stock replenishment, providing better customer service.
This will ensure increasingly intelligent and autonomous supply chains, which is exactly what is needed as a reaction to the consequences of Covid-19.
In addition, this operation broadens Panasonic's portfolio of offerings. By combining supply and demand solutions and combining them with advanced technologies such as IoT, Panasonic will be able to achieve in the short term a predictive system to guide business choices in real-time.
The direct consequences are reduced waste and improved operations, resulting in a more sustainable world. This, in turn, leads to the ability to offer a high level of service to customers, thus bringing them value and gaining a strong competitive advantage for itself.
In the long-term, Panasonic’s $7.1B acquisition is expected to yield many advantages both from a strategic and a financial point of view. "The need for more intelligent, autonomous and edge-aware supply chains has been dramatically heightened by the COVID-19 pandemic," Panasonic said. This testifies to expectations of fast growth in the supply-chain automation market leading to large future revenues resulting from the deal.
The transaction will lead to both revenue and costs synergies in the long term. Panasonic will expand its expertise in the software business combining its scale, distribution capacity, and human resources with unique technology developed by the target. This will allow enlarging the customer base leading to synergies revenues.
As for costs Panasonic core business is directly linked to the software produced by the target allowing for synergies not only in the short-term but also in the long term.
The transaction will be crucial for the bidder to consolidate its position in the market acquiring market share and diversifying its technology portfolio ensuring the firm’s long-term sustainability.
Risks and Uncertainties
If approved by regulatory authorities, this will be Panasonic´s largest overseas acquisition, and the first under its new chief executive Yuki Kusumi, who took up the post this month. The hundred-year-old company has long been criticized for its silo and rigid corporate culture, which might cast doubt on its ambition to expand its global business.
The 34.6x EV/EBITDA adjusted (2020) price tag paid needs to be partially justified by the potential synergies between an industrial edge device giant and a leading supply chain software provider. Through the integration with the software, Panasonic hopes to increase the added value of hardware products, which is subject to post-merger integration success. For example, Panasonic’s imaging technology, sensors, barcodes all could be used to capture data to feed Blue Yonder’s software, making inventory management more efficient.
The market is also fiercely competitive. Last November, Coupa Software acquired Llamasoft, another leading player in AI-powered supply chain firm for $1.5B. Bigger ERP vendors such as SAP, Oracle, IBM can leverage their larger customer bases, long-standing customer relationships, ability to offer broader solutions outside the scope of the supply chain, and thus own a bigger market share in the supply chain management vertical. Other vendors such as Manhattan Associates Growth, HighJump, or even new competitors could form alliances to win significant market share. These dynamics might slow down the growth of Blue Yonder and over time force it to lose competitive advantages.