BlueTech Tracker Analysis
2016 Innovation Insights: View the Full Document here
Where is the money going? An analysis of 2013-2014 water technology investments and acquisitions.
An analysis performed by BlueTech Research on investments and acquisitions taking place in the water industry data from January 2013 to December 2014 reveals several hot spots in water technology investments and acquisitions.
As can be seen in Figure 2, the focus is around technology providers. Physical treatment stands out as the area with the greatest activity in terms of both investment and acquisitions. The main area of focus within physical treatment is membranes, which continues to be a hotbed of activity both in terms of investments and acquisitions. This is followed by investments in thermal sludge treatment, and reverse osmosis and forward osmosis, and acquisitions in non- membrane filtration and vortex separation.
Figure 2: Investment and acquisition trends by place in the value chain and technology offered
The analysis also shows there is significant acquisition activity around sensors and control systems (18%) and distribution technologies (15%) – i.e. pumps and pipe repair technologies. This indicates that there is a strong acquisition market and exit opportunities for companies active in these sectors.
Patents, Innovation, Investments and Acquisitions Trackers cross analysis – what does it all mean?
A recent cross-analysis performed by BlueTech® Research across the Patent, Innovation, and Investments and Acquisitions Trackers revealed membranes are the most disruptive category, based on the number of technology providers. Figure 3 shows the breakdown of disruptive technologies followed in the Innovation Tracker.
Looking within the highly disruptive segment, we identified that around one fifth of the highly disruptive technologies are membrane technologies, forming the largest group, followed by biological treatment and thermal sludge treatment. Markets for membrane technologies, such as membrane bio-reactors in wastewater applications, and seawater reverse osmosis for desalination applications, are bullish markets that are currently showing 10-15% yearly increases.
Interestingly, non-membrane filtration technologies are not represented in the highly disruptive section. Figure 4 shows the analysis of the Patent Tracker, Highly Disruptive Innovation Tracker companies, and the Investments and Acquisitions Tracker.
Although non-membrane filtration indicates no high disruptivity and no investments, there are acquisitions identified in these technologies. This shows that non-membrane filtration is overlooked from an investment perspective, as it is not found as attractive as membranes – perhaps unfairly so.
Recent research in membrane technologies has led to the creation of companies such as Nagare, a company that offers carbon nanotube membranes, or Nano Sun, which claims to offer a flexible membrane manufactured through 3D printing. The appetite for investing in membrane companies was re-ignited in early 2014, when LG Chem acquired NanoH2O for $200 million, in one of the largest deals in the water sector in recent years. The future of investments in membrane companies will be interesting to track, as the hype around these technologies might lead to an investment bubble in the following years.
Thermal sludge treatment is an area where we might expect to see acquisitions in the future, as we identified a number of investments in these technologies, and is also an area which shows a highly disruptive character. This category features companies such as SCFI, offering a supercritical water oxidation process, or Outotec, which offers a technology that allows for phosphorus and metals recovery from sludge ash.
The lack of investments and acquisitions in thermal desalination technologies indicates that although this area benefits from intellectual property activity and shows a degree of high disruptivity, it is currently not seen as a hot area for investments and acquisitions. An interesting find is the high degree of acquisitions tracked in sensors and control systems, which indicates a good field for investments, although there are less highly disruptive technologies identified in this area than in thermal desalination and thermal sludge treatment. Table 2 shows a summary of the cross analysis performed on the tracker data sets.
Table 2: Summary of the trackers cross analysis
The strong interest in sensors and control systems is based on the size of the perceived market opportunity – in the US alone, investment needs in water and wastewater transport infrastructure exceeds $600 bn, according to reports by the AWWA and the EPA.
Although the acquisition rate of membrane providers is not as high as that seen in sensors and control systems, it is not to say that there is no interest in acquiring such companies – we will probably see more acquisitions as the highly and moderately disruptive technologies mature.