Contact: Scott Denne
Buoyed by a strong automotive business, Harman International Industries makes a pair of acquisitions that both augment and diversify its position in the car market. The two purchases – Symphony Teleca and Red Bend Software – are among the highest prices Harman has paid for tech businesses.
At $780m, Symphony Teleca is Harman’s largest tech buy on record. Prior to that, last year’s pickup of AMX (another attempt to diversify beyond the automotive segment) for $365m was the record holder and, at the time, that was only the second time we had tracked Harman breaking the $100m barrier in a tech deal. With today’s additional announcement that it’s also paying $170m for Red Bend, it’s now broken that barrier four times.
Harman has long been a supplier of audio equipment, GPS, climate control and other hardware to car manufacturers. That part of its business accelerated to 24% year-over-year growth in its most recent fiscal year. While the burgeoning connected car market is driving more opportunity for growth, the automotive industry is a bumpy road. For example, a weak automotive economy pushed Harman’s automotive sales down 5% from a year earlier.
Its reach for Symphony Teleca brings Harman an outsourced software development vendor that’s already doing some business within the automotive segment at a time when software is gaining significance as vehicles add more connected devices. Today, about 50% of Symphony’s revenue comes from mobile or automotive software projects, the remainder from areas including home and enterprise, as well as sectors well outside Harman’s current scope, such as healthcare. That exposure will help Harman diversify beyond the automotive vertical (more than 50% of its revenue today) and into a platform for other parts of the connected device ecosystem.
Likewise, Red Bend both amplifies Harman’s auto opportunities and extends the business beyond those. The target builds firmware for managing connected devices and sending over-the-air software updates. Currently, its revenue (less than $50m annually) is concentrated on mobile devices. On its own, Red Bend has not infiltrated the automotive market, something that Harman obviously plans to change.
For more real-time information on tech M&A, follow us on Twitter @451TechMnA.