Industrial IoT refers to the connection of industrial machinery allowing for machine-to-machine communication, resulting in increased data insights and subsequently improved decision-making, efficiency and safety. The industrial IoT market comprises businesses that engage in the development and/or manufacturing of hardware and software, as well as players that provide related services (e.g. consultancy and implementation). In this research report, we segmented the European market into: (i) hardware, (ii) software and (iii) services.

The emerging European industrial IoT market is still highly fragmented across all segments, with several industrial technology (e.g. Siemens Group, Bosch Group) and software (e.g. Microsoft (US), SAP Group) giants leading in front of a long tail of start- and scale-ups. Industry executives (interviews by Gain.pro) see the need for consolidation and standardisation to boost adoption across the board.

Sponsor-led interest has been present but considerable, with >40% of identified assets being backed by a financial sponsor (October 2022). Interest is mainly driven by the market’s vast growth expectations (i.e. +12% global market CAGR 2020-2025), recurring sales nature (e.g. IoT SaaS), high degree of client lock-in (i.e. high switching costs) and open playing field to become a market leader (e.g. through buy-and-build in a fragmented landscape). As of July 2021, industrial technology companies were valued at ~14.4x EV/EBITDA, with industrial software businesses seeing the highest valuations at ~27.0x EV/EBITDA.

ESG topics primarily relate to environmental and social issues. The environmental impact of the hardware segment mainly relates to the energy-intensive manufacturing process, the pollution associated with the mining of raw materials and the increase in e-waste. However, from a customer’s perspective, the introduction of industrial IoT comes with significant efficiency improvements and decreased raw materials waste. Potential breaches of human rights throughout the supply chain constitute a key social topic. The mining of key raw materials (e.g. mica, cobalt) is notorious for the use of child labour. However, industrial IoT improves safety in customers’ factories, resulting in fewer work-related injuries.