The News: Honeywell (NYSE: HON) today announced it has agreed to acquire privately held Sparta Systems for $1.3 billion in an all-cash transaction from New Mountain Capital. Sparta Systems is a leading provider of enterprise quality management software (QMS), including a next-generation SaaS platform, for the life sciences industry. The acquisition further strengthens Honeywell’s leadership in industrial automation, digital transformation solutions and enterprise performance management software. Read the full release.
Analyst Take: While the year may be coming to a close, the deal-making hasn’t paused. Honeywell’s move is a great example of a company that’s strategy is increasingly crystallized, leading to investments like this one in Sparta Systems.
Honeywell’s market leadership in industrial technology has seen an important and notable swing in the past 24 months with the company making greater investments in playing a role in more traditional IT. This has been evident with the company’s development of its Forge Platform, but also key R&D in areas like Quantum Computing, where the company is competing for leadership in this fast-emerging space.
Another trend that has picked up momentum as we see the edge to cloud drive massive technology overhauls in every industry is vertical based solutions and capabilities. Honeywell has long been committed to this strategy in markets from manufacturing to aerospace to building management. However, IT has only more recently shown a propensity to build software and solution stacks with deep vertical integration. If 2020 has shown us anything, it is the need for rapid transformation, but it has also demonstrated the importance of life sciences.
Sparta Systems Adds Life Sciences Credibility to Honeywell
Sparta isn’t a household name, but its software and technology play an important part in the life sciences supply chain dealing extensively with quality and safety. Sparta has SaaS capabilities for quality, and its QMS solutions will be able to help life sciences companies proactively achieve better quality, which will lead to improved new therapies, faster time to market, better business and patient outcomes, and effective regulatory compliance. This is a great example of how a vertical solution can shorten the time for a company to accomplish several key challenges and objectives. Honeywell, with its global footprint, should be able to scale what Sparta Systems has built effectively.
The important item of note is the integration of Honeywell Forge and Sparta’s Trackwise Digital, which is an end-to-end QMS designed specifically for life sciences AND it can work in on-prem, hybid, and pure cloud (SaaS) environments. This must not be understated, as it makes the marriage of these two companies more powerful.
As I see it, Sparta and Honeywell’s combined offerings will enable customers to gain critical insights more quickly from manufacturing and utilize higher quality data to improve their manufacturing processes while managing product quality, patient safety, and supply chain continuity.
Overall Impressions of Honeywell Deal to Acquire Sparta Systems
Honeywell is aggressively expanding its role in IT, and most notably, is taking a leadership role in defining the category of Enterprise Performance Management. Sparta is another puzzle piece that deepens Honeywell’s capabilities to deliver vertical-based solutions tying to the substantial investment that the company has made in its Forge Platform.
While industrial technology is still deep in Honeywell’s roots, it is increasingly clear that it is migrating to become highly capable and competitive in software and IT. This will come through continued acquisitions like this one, but also through partnerships and the efficient leveraging of partnerships that take Honeywell’s strong industrial capabilities and edge data and the importance of unifying it with traditional datacenter and cloud architectures.
I’m optimistic this move will be an important example of the company’s commitment to making this evolution to meet IT and OT’s converging forces.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice
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