Red Chalk Group

M&A in Access Control: Recent M&A activity across the global access control market suggests a trend to pursue commercial applications, supported by moves focused on software-focused M&A (e.g., facial recognition technology) to bolster access platforms, and hardware-focused M&A (e.g., security cameras) to augment portfolio strategies. Illustratively, Honeywell's acquisition of Carrier's Global Access Solutions (i.e., LenelS2, Onity, and Supra) demonstrates a long-term interest in scaling cloud-based services and capabilities – in contrast, Assa Abloy has primarily pursued hardware-driven acquisitions (e.g., automatic doors) to expand access portfolio applications and end-market participation.

While residential access control M&A has been less notable, Assa Abloy’s divestiture of Emtek, Shaub, and the North American business of Yale and August, completed the $4.3B acquisition of the Hardware and Home Improvement (HHI) division of Spectrum Brands (i.e., smart locks and door / window hardware).

Going forward, M&A for both access solutions and monitoring / surveillance applications are migrating to software-centric deals, as the access control industry migrates from proprietary hardware systems to broader platform strategies, requiring business model shifts (e.g., hardware to software) and new monetization opportunities (e.g., SaaS, API fees).

Cybersecurity Trends: Cybersecurity has become increasingly critical as organizations grapple with a rapidly evolving threat landscape, intensified by advances in artificial intelligence, which is both augmenting defensive capabilities and enabling more sophisticated cyber attacks. Concurrently, growing regulatory and privacy concerns worldwide are compelling businesses to enhance their cybersecurity postures to comply with stringent data protection laws.

This heightened focus is reflected in the strategies of leading players in the cybersecurity ecosystem, who are gaining a competitive edge by integrating advanced AI-driven solutions, offering comprehensive service portfolios, and ensuring regulatory compliance.

These trends are also fueling M&A activity, as companies seek to expand their market presence, combine service offerings, and access new technologies and expertise to stay ahead of threats and meet the expanding requirements of global regulations.

Sports and Media: Across content assets, Live Sports represent a "powerhouse" across the media and entertainment ecosystem -- supported by consistent viewership, underlying asset values (i.e., leagues and teams), and fragmentation of other media assets -- yielding escalating content rights valuations, as evidenced by the upcoming $76B broadcast rights deal.

Consequently, increasing broadcast rights agreements across multiple leagues have been announced across media distribution channels, confirming the sustained appeal of live sports -- and propping up valuations of teams, positioning them as attractive investment targets.

These trends have collectively garnered the attention of institutional investors, including PE funds, that view sports as assets capable of delivering substantial returns. Notably, investors are motivated by an expanding global sports broadcast market, enhancing team revenue and profitability, complemented by trends such as increasing international pe*******on of leagues and the rise of digital platforms enabling alternate monetization strategies.

Membrane technologies have emerged as a significant development in material science, advancing from basic experiments in the early 1900’s to sophisticated applications today. Initially developed for laboratory use, these technologies have evolved through decades of research and development to enable selective separations based on the size, shape, and chemical properties of molecules as well as the efficient transport of ions. This evolution has led membranes to being a key component for a range of industrial, environmental, and energy-related applications. The deployment of these membranes in various sectors enhances operational efficiencies and supports the development of new technological applications that address critical challenges in energy and environmental management.

The role of membrane technologies is underscored by their impact on major global megatrends such as sustainability, energy efficiency, and resource scarcity. Applications for membranes that highlight the impact on these trends include sour gas separation, carbon capture, water desalination, and new energy technologies (e.g., fuel cells, batteries, green hydrogen). Membrane adoption across these applications demonstrates their broad role in shaping future technological landscapes and their significant contributions to critical areas of global development.

Honoring those who sacrificed for our freedom

Long Duration Energy Storage (LDES) technologies, spanning from widely established pumped hydro to new, innovative chemical and mechanical systems, are essential for integrating renewable energy and enhancing grid stability over diverse time frames. As they progress and adapt to global energy needs, their deployment across various applications is pivotal in ensuring a sustainable, reliable energy landscape, making LDES a cornerstone of the renewable energy transition.

Semiconductor Manufacturing Value Chain: Based on the growth of advanced technologies and the rise of AI tools / platforms (e.g., OpenAI), production value chain players (fabs, foundries, IDMs) and equipment suppliers / tool OEMs are driving innovation to support global demand.

AI-related trends such as high-volume production for AI chips, advanced packaging techniques, the growing market for edge AI processors, and increased demand for advanced lithography equipment are key impacts expected to inure to leading players such as Nvidia, TSMC, and ASML.

Exciting times at the UChicago Consulting Symposium! Red Chalk Group was thrilled to participate in presentation of a case simulation, which showcased a growth strategy and M&A engagement our consultants recently completed, and we connected / networked with the next generation of aspiring consultants.

Thank you The University of Chicago for having us!

Life Sciences Trends & R&D Expansions: The R&D pipeline for pharmaceuticals (i.e., small molecule) and biologics (i.e., large molecule), driven by several macro trends in Life Sciences (e.g., IoT, emerging economies), has significantly expanded over the past decade (e.g., ~$262B in R&D pharmaceutical spend in 2023).

Expansion is further augmented by increased demand for biosimilars, generics, and personalized medicine (e.g., CAGT), and efforts to mitigate the forthcoming "patent cliff," which is expected to result in ~$300B in drug and therapy revenue expiration over the next five years. Expansion efforts will have ripple effects across the ecosystem extending to providers, payers, and patients.

To minimize costs and improve efficiency of the development process, LS companies have increasingly digitized and adapted various processes (e.g., modular drug design, outsourced trials, CDMOs) and implemented new forms of products & software (e.g., MES, simulation software, single-use equipment) across the development lifecycle.

In the future, LS companies that adopt "modernized" approaches to development and production will be better equipped to navigate these macro trends / shifts, enabling them to effectively serve patients and enhance health outcomes.

Warehouse Automation Ecosystem: Based on the rapid growth / expansion of e-commerce and logistics, software has become a critical enabler and nexus for the automation of warehousing. Given the data-centric environment of the warehouse efficiency, accuracy, and real-time tracking are important inputs to Warehouse Management Software (WMS) and Enterprise Resource Planning Systems (ERP) to manage complex workflows, drive efficiency, and achieve optimization.

As the environment has evolved, companies have invested significantly across the landscape, including Software leaders expanding their coverage of workflows (e.g., Oracle / NetSuite), warehouse operators vertically integrating technology capabilities (e.g., Amazon / Kiva, Pegasus), and adjacent Automation providers entering the warehouse space (e.g., Honeywell / Intelligrated).

Going forward, the landscape is likely to evolve / mature based on continued integration of technology and data flows, convergence across categories, and potential M&A consolidation activities.

Vehicle OS and Smartphone Projection Systems: The in-vehicle dashboard ecosystem has evolved, driven by technology advancements in the connected car landscape, resulting in development in the infotainment system via vehicle operating systems (e.g., Automotive Grade Linux, Android Automotive) as well as smartphone projection systems (e.g., Apple CarPlay, Android Auto).

Competition among the two groups of players (i.e., Vehicle OS, Smartphone Manufacturers) has led to interesting collaborations such as Google and Mercedes driving functionality and capability within the in-vehicle dashboard – Google's positioning in both the smartphone projection systems and the vehicle OS indicates a multifaceted approach to this concept providing them with a strategic edge.

While OEMs have taken different approaches to infotainment (e.g., in-housing, preventing projection system integrations to the vehicle), consumer preferences will drive demand making it critical for application providers to keep up to date within the everchanging landscape through partnerships and collaborations.

Red Chalk Group wishes you peace and prosperity this Presidents’ Day

Evolution of Credentialing and Access: has experienced an evolution across applications and sectors, shifting from traditional physical keys / credentials, and driving technology / digital enhancements towards mobile-enhanced credentials and biometric solutions.

Across applications, credentialing has evolved in varying manners – in Residential and Commercial settings, the growth of and mobile-integrated access systems has enabled remote and secure management of entrances, and similarly, the Travel and Mobility sector is embracing digital keys and mobile passes, streamlining travel and hospitality experiences.

As credentialing continues to evolve, credentialing is expected to be a key enhancement that is garnering investment and exploration by suppliers – applications such as Airport access (e.g., Clear) are exemplary of how biometrics can drive enhanced security and convenience to end-users. hashtag

Commercial Net Zero Emission Solutions and Sustainability: Based on the significant emissions profile of commercial buildings (35% of US emissions) and energy-intensive systems usage (e.g., large-scale refrigeration and HVAC units), commercial building operators are leading initiatives to reach Net Zero emissions targets, driven by organizational CSR goals or policy / regulation deadlines (2040 Net Zero goal in New York).

To achieve these targets, a range of Carbon Mitigation, Offset, and Removal initiatives are being pursued – initiatives include 1) energy efficiency improvements (heat pumps, low-GWP refrigerants, LED lighting), 2) Demand Response programs (Microsoft partnership with Enel X and Eaton), 3) On-Site Renewable Generation (distributed energy resources such as solar and battery storage), 4) renewable energy credits (Google has purchased 2.6 GW of renewable energy credit offsets), 5) Reforestation (which provide carbon credits for offsetting), and 6) Direct Air Carbon Capture / DACC (emerging strategy for carbon removal).

Going forward, organizations are likely to continue aggressive Net Zero targets, which will require a multi-faceted strategy of several Carbon reduction strategies, enabling significant opportunity for suppliers that can provide robust solutions to manage these initiatives, in addition to accurate Carbon tracking / management to simplify reporting from building-level to enterprise / corporate level and regulators.