Emerson has recently moved to enter into a definitive agreement with NI. Accordingly, this move will further strengthen Emerson’s bid to further advance global automation leadership.

Emerson will acquire NI for US$60 per share in cash at an equity value of US$8.2 billion. Emerson already owns approximately 2.3 million shares of NI, representing approximately 2% of shares outstanding, acquired at a weighted average price of US$36.84. As a result, Emerson’s effective per share purchase price is US$59.61.

NI provides software-connected automated test and measurement systems that enable enterprises to bring products to market faster and at a lower cost. In addition, NI’s solutions help customers solve current and future test challenges and improve speed and efficiency in their product development cycles. NI had US$1.66 billion in 2022 revenue and operates in more than 40 countries. Hence, serving approximately 35,000 customers across semiconductor and electronics, transportation, and aerospace and defense markets. 

Enhances Automation Capabilities

Lal Karsanbhai, President and Chief Executive Officer of Emerson, expressed elation with the agreement with NI. In addition, Karsanbhai said, “With this expansion into test and measurement, Emerson will enhance its automation capabilities and gain a broader set of customers that relies on NI’s solutions at critical points along the product development cycle. These capabilities provide Emerson industry diversification into attractive and growing discrete markets like semiconductor and electronics, transportation and electric vehicles, and aerospace and defense that are poised to benefit from secular growth trends.”

Meanwhile, Eric Starkloff, NI’s Chief Executive Officer, said the deal was a product of months of evaluating strategic options. Furthermore, Starkloff said, “We ran a robust and comprehensive process, considered a range of potential options, and believe this represents the best outcome for all NI stakeholders. This transaction is a strong testament to the improvements and initiatives we’ve implemented in recent years.”

Compelling Strategic, Financial Rationale

Balanced and Diversified End Markets

With an estimated addressable market of US$35 billion, the test and measurement market is fast-growing, highly complementary and one of the four priority adjacencies of Emerson.

Most importantly, the company expects the transaction to drive value creation and advance Emerson’s position as a global automation leader. Thus, expanding and diversifying its customer base within highly attractive end markets.

With a diversified end market mix including semiconductor and electronics, transportation, and aerospace and defense, NI is likely to be well positioned to capitalize on megatrends that offer attractive growth opportunities. In markets like semiconductor and electric vehicle manufacturing, NI expands Emerson’s reach into the design and validation phase of the lifecycle, providing early access to customers.

Overall, NI will increase Emerson’s end market exposure in discrete markets to 18% of sales, which will be Emerson’s second largest industry segment.

Complementary Software and Innovation Capabilities 

NI’s technology stack of industry-leading intelligent devices, controls and software complements Emerson’s own technology stack and will accelerate Emerson’s efforts to create a higher value, cohesive industrial technology portfolio. NI’s flexible and modular system-level test solutions have an open and interoperable software platform, a key differentiator that enables customers to continually evolve and automate their test processes in increasingly complex and fast-changing end markets.

With 20% of sales in software, NI also increases Emerson’s exposure to high-growth industrial software opportunities. Moreover, both Emerson and NI share innovation-focused engineering cultures. With Emerson’s proven track record of innovation and successful new product launches, the combined company will be able to accelerate and expand the development of innovative offerings for customers leveraging the complementary expertise of both organizations.

Delivers Substantial Synergies 

Emerson has identified US$165 million of cost synergy opportunities by the end of year 5 through application of best practices from the Emerson Management System. Moreover, Emerson intends to drive productivity improvements and streamline duplicative costs across general and administrative, sales and marketing, and research and development functions. At the same time, while leveraging Emerson’s scale in manufacturing and supply chain. Additional opportunities to enhance NI’s free cash flow generation will be pursued through proven operational excellence and productivity levers.