Andy Lister, Partner at Acuity Advisors, has a view on Samsung’s $8bn acquisition of HARMAN, announced this week.
This is a landmark deal in the connected vehicle space and a nicely timed “good news” story for Samsung after their recent battery troubles.
The deal marks the end in HARMAN’s journey from audio player to car tech specialist, a journey that started in the late 90s; HARMAN has spent over 600,000 development hours building infotainment software for BMW and Mercedes. This software development pivoted HARMAN’s business and they became the defacto provider for in-car infotainment systems and grew to a multi-billion business via these relationships.
Samsung are buying into the connected car via their area of specialism: consumer electronics, the heritage of Harman’s business model. This is a genuinely exciting, high growth market – 700m cars will be connected in 2024 vs 70m this year (source: Analysys Mason). But at a 28% premium to their share price, is it a knock-out blow in such a high growth industry for a $7bn turnover business with a $24bn order book? There are plenty of other cash rich consumer electronics players, Apple for example, that wish to play a lead role in the connected car world.
A final thought – what happens to Samsung’s investment case if driverless cars lead to a large reduction in car ownership as some predict? We will be watching with interest.