Emerson Electric’s Acquisition of NI

On April 12, 2023, technology and software company Emerson Electric Co. officially announced that it was acquiring National Instruments (NI) for $60 in cash per share (a value of $8.2 billion). This announcement comes almost a year after Emerson’s first bid and after multiple delays in the final bid deadline. Emerson beat out industrial technology company Fortive in an incredibly close bidding competition, so what made Emerson the perfect choice for this agreement?

A Company Built on Innovation

Founded in 1890, Emerson has over 130 years of experience in the industrial, consumer, and commercial marketplaces. The company focuses on two distinct yet complementary business platforms- commercial & residential solutions and automation solutions. 

When it comes to commercial & residential solutions, Emerson offers energy-saving technologies to construct environmentally friendly infrastructure and improve operational efficiency. The technological tools and solutions developed by the company include tools for refrigeration, heating and AC, professional vacuums, commercial building thermostats, and more. 

Emerson also partners with businesses and corporations across multiple industries to create individualized automation solutions. The company has automation experience ranging from projects to operations, and its goal is to assist its partners in achieving specified goals and increasing overall performance. 

Emerson’s product and software portfolio is an excellent complement to NI, whose own modular hardware, software, and services for automated test and measurement systems have quickly become regarded as the industry standard. In fact, the test and measurement market was one of the four priority adjacencies that Emerson outlined at its 2022 Investor Conference.

In a statement, Lal Karsanbhai (president and CEO of Emerson) said “We are pleased to reach an agreement with NI, whose best-in-class test and measurement product and software offerings accelerate Emerson’s progress toward a cohesive, higher growth and higher margin automation portfolio”.

Closeup side view two laptops on a table with two men having a business meeting

Benefits of the Acquisition

Collaborative Innovation. As mentioned previously, NI’s technology infrastructure complements Emerson’s own. NI’s open and interoperable software platform, paired with its versatile modular testing systems, enables users to take full advantage of the configurability and scalability of the system. In a complex and changing test and measurement market, this is incredibly advantageous. Both Emerson and NI emphasize innovation, and the two companies combined will be able to expedite and expand the development of innovative products for customers by using their complementary skills. By accounting for 20% of revenue, NI will introduce Emerson to more high-growth industrial software prospects. Additionally, expanded professional development and promotion possibilities will be available to company employees, allowing them to truly #engineerambitiously.

Mutual Growth. Through this acquisition, Emerson will broaden and extend its client base in the quickly growing test and measurement market. With a diverse end-market mix that includes industries such as aerospace, defense, semiconductor, and transportation, NI is anticipated to be well-positioned to take advantage of megatrends that lead to growth. Additionally, NI will broaden Emerson’s reach into the design and validation phase of the product lifecycle- giving clients early access to areas including semiconductor and electric car production.

Financial Benefits. Emerson’s 2022 Investor Conference discussed that a deal with NI was anticipated to immediately contribute to Emerson’s long-term financial goals, with strong market positions held by NI anticipated to produce consistent underlying growth. With the companies combined, NI will increase Emerson’s immediate gross margin and sizeable recurrent revenue. Strong growth, appealing gross margins, and the potential for operating margin expansion through synergies will all work together to provide satisfactory returns. Emerson reportedly plans to use its size to boost efficiency and eliminate redundant expenses across multiple departments. Previously successful productivity levers will provide opportunities to improve NI’s free cash flow generation.

So, when does this deal go through? The deal is anticipated to close during the first half of Emerson’s 2024 fiscal year. In accordance with the terms of the deal, NI shareholders would get $60 in cash for each share they own, which is a 49% premium to the stock’s closing price on January 12, 2023.

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