Investment strategy and mapping the Machine Condition Monitoring opportunity

An emerging digital disrupter in machine condition monitoring

Our client needed a clear understanding of a new market segment, potential strategic entry points and what to expect if it was to acquire a leading analytics player, Spectro Scientific. Plural’s expertise in digital technology and unique approach to market mapping and commercial due diligence informed our client’s investment strategy.

Our client engaged us to map the broader machine condition monitoring opportunity and assess the attractiveness of Spectro.

Client challenge

  • Assessing the potential for a new type of offering to disrupt well established alternatives
  • Validating management forecasts: Plural had minimal access to the business and the underlying assumptions behind the forecast
  • Providing strategic direction on whether Spectro Scientific was the most suitable entry point for our client

Our approach

  • Through assimilating primary and secondary research, Plural was able to map the various forms of oil and fluid based machine condition monitoring and assess the relative attractiveness of each.
  • Plural also conducted both an in-depth, interview program and a higher volume survey with end users to understand evolving needs and the ability for onsite solutions to disrupt lab-based service providers.
  • From this, we modelled the likely adoption by end market which then allowed us to conduct a comprehensive assessment of Spectro’s forecast plan.

Key insights

  • Oil condition monitoring will be the fastest growth segment of MCM as companies look to improve efficiency and reduce down time. Onsite will outperform as it can now provide a similar quality to lab-based testing but with a shorter turnaround time.
  • Spectro Scientific is best placed to take advantage of the immediate opportunity, although longer term investment is focused on in-line solutions: Inline technology is so far unable to access and interpret the large data sets available to lab-based providers and therefore lacks the ability to produce 100% reliable analytics. Lab-based providers are unable to produce the analytics
    in real time.
  • Accessing the entire opportunity may take time due to high switching barriers. As a result, management forecasts appeared optimistic in the short term.

The outcome

  • Plural’s work was used to inform our client’s valuation of Spectro Scientific, but the company was eventually acquired by AMETEK, a company with an existing presence in the space allowing it to benefit from obvious synergies.
  • Our client continues to use Plural’s market map and assessment of attractive entry points to identify and pursue other potential opportunities.